Mahmood v Abdul Wahid and Sons Pty Ltd, in the matter of Abdul Wahid and... [2020] FCA 1689 | Case summary

WHITE J: 1 Following the hearing of the defendants' application for an order transferring of these proceedings to the New South Wales Registry of the Court, I announced by decision refusing the application and said that I would publish my reasons later. The following are my reasons. 2 At their heart, these proceedings involve a dispute between two brothers arising out of the conduct of service station businesses in New South Wales from 1996. The businesses were conducted, at least initially, by the first defendant Abdul Wahid and Sons Pty Ltd (AWS). The plaintiff (to whom I will refer as Zahid) managed the businesses with the second defendant (to whom I will refer as Mohammad) and a third brother (to whom I will refer as Zieb). Both Zahid and Mohammad were actively involved in the business and participated as equal shareholders and joint directors of AWS. In 2003, Zahid moved to Malaysia to take up University teaching and thereby ceased day to day hands on involvement in the conduct of the businesses. Mohammad continued the day to day conduct of the businesses. 3 Zahid alleges claims that, between 2003 and August 2019, he continued to have involvement (sometimes by remote means and sometimes on his returns to Australia) in the management of AWS. He also claims that, between 1996 and 2019, AWS purchased, developed and disposed of substantial assets. 4 In 2019 a dispute arose between the brothers as to whether Zahid had any continuing entitlement to income from the businesses or an interest in AWS. Zahid alleges that since at least September 2019, he has been excluded from participation in the management of AWS. He also alleges that in April 2020, Mohammad wrongfully lodged a Change of Company Details document with the Australian Securities and Investments Commission (ASIC) by which it was asserted that he had ceased to be a director of AWS as and from 1 January 2009. Zahid alleges that this document was lodged without reference to him and without any proper authorisation. 5 In the proceedings, Zahid seeks numerous forms of relief including orders giving him access to the books of AWS and relief pursuant to s 233 of the Corporations Act 2001 (Cth). He also asserts breaches of Mohammad's duties as director of AWS and indicates a wish to bring a derivative action pursuant to s 236 of the Corporations Act with respect to such breaches. 6 Despite a direction at the case management hearing on 16 September 2020 that the defendants file and serve a defence to Zahid's Statement of Claim by 28 October 2020, they have not done so. 7 The Court listed two interlocutory processes for hearing on 16 November 2020. The first was an amended interlocutory process filed by Zahid by which he sought orders permitting him to have access to the books and financial records of AWS and an order for the rectification of the register kept by ASIC concerning AWS. However, by reason of concessions made by the defendants, it was not necessary for the Court to hear submissions concerning that interlocutory process and the Court made orders which, other than that concerning costs, were by consent. 8 The second interlocutory process was filed by the defendants. They sought an order pursuant to s 48(1) of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) transferring the proceeding to the New South Wales Registry of the Court. 9 Zahid commenced the proceedings in the South Australian District Registry of the Court on 25 August 2020. The defendants lodged their present interlocutory application on 16 October 2020 (and had foreshadowed it previously). 10 Section 48(1) of the FCA Act provides: The Court or a Judge may, at any stage of a proceeding in the Court, direct that the proceeding or a part of the proceeding be conducted or continued at a place specified in the order, subject to such conditions (if any) as the Court or Judge imposes. 11 Rule 2.02 of the Federal Court Rules 2011 (Cth) (the FCR) provides that a party may apply "at the proper place" for an order that the proceeding be transferred to another place. The term "proper place" is defined in the dictionary in Sch 1 to the FCR as (relevantly) "the place where the proceeding is started". 12 The principles on which the Court acts on applications for transfer of the present kind are settled and have been applied in a number of recent decisions. These include Comeau v Libbesson [2019] FCA 1577; Australasian Jet Pty Ltd v Air Affairs (Australia) Pty Ltd [2017] FCA 452 at [5]-[8]; Custance v SC Admin Pty Ltd [2017] FCA 511 at [3]-[6]; Plankton Australia Pty Limited v Rainstorm Dust Control Pty Limited [2017] FCA 1616 at [9]-[11]; TCL Airconditioner (Zhongshan) Co Ltd v Castel Electronic Pty Ltd, in the matter of TCL Airconditioner (Zhongshan) Co Ltd [2017] FCA 1015 at [5]-[6]; Walsh, Liquidator of D&R Community Services Pty Ltd (Receivers & Managers Appointed) (In Liq) v Commissioner of Taxation [2018] FCA 1739 at [32]-[33]; and Auschem Pacific Group Pty Ltd v Tismor Health & Wellness Pty Limited [2019] FCA 1216 at [13]-[18]. 13 In National Mutual Holdings Pty Ltd v The Sentry Corporation (1988) 19 FCR 155 at 162, the Full Court said: The Court must, however, be satisfied, after considering all relevant matters, that there is sound reason to direct that the proceeding be conducted or continued elsewhere. Its starting point is that the proceeding has been commenced at a particular place. Why should it be changed? On the one hand, if the party who commenced the proceeding chose that place capriciously, the Court will be justified in giving no weight to the choice of place. At the other end of the scale, a proceeding may have continued for some time at the place of commencement with many steps having been taken there, for example, filing of pleadings and affidavits, discovery and inspection. Due weight will be given to the Court to such matters before directing that the proceeding should continue at a different place. The balance of convenience is important, but its weight must vary from case to case. Ultimately the test is: where can the case be conducted or continued most suitably bearing in mind the interests of all the parties, the ends of justice in the determination of issues between them, and the most efficient administration of the Court? It cannot and should not, in our opinion, be defined more closely or precisely. 14 The cases since Sentry Corporation indicate the variety of matters which may bear on the determination of whether there is "sound reason" to order the transfer of the proceedings. Given the various circumstances in which applications for transfer are made, it is unsurprising that the considerations which are given prominence vary from case to case. 15 In Australian Competition and Consumer Commission v Australian Egg Corporation Limited [2014] FCA 1010, I noted a number of the matters bearing upon the exercise of the Court's power under s 48. It is convenient to repeat them presently: (a) there is no onus of proof in the strict sense to be discharged by the party seeking to have the proceedings continued elsewhere: Sentry at 162; (b) the national character of the Court, including its capacity to put in place flexible arrangements for the taking of evidence and the receipt of submissions, is pertinent: Australian Competition and Consumer Commission v Virgin Mobile Australia Pty Ltd [2002] FCA 1239 at [16], [20]; Mortimer v Opes Prime Stockbroking Ltd (Administrators Appointed) (in liq) [2009] FCA 227 at [15]. As French J observed in Lamb v Hogs Breath Company Pty Ltd (No 1) [2007] FCA 49 at [9]: So far as the interlocutory processes are concerned, unless some unusual circumstance occurs, it matters little whether the proceeding is in the Perth or Brisbane Registry because in either event the party not in the home Registry will be able to participate by way of video-link or even teleconference. The Court also has the facility for the electronic filing of submissions and the like and the conduct of litigation, in part, through that. (c) the place of residence of the parties and their witnesses, the expense to the parties, the place where the events giving rise to the plaintiff's cause of action, and the convenience of the Court itself are relevant matters: Sentry at 162; (d) the balance of convenience is a very relevant, but not decisive, consideration: Sentry at 162. (e) any difference in the rights of the parties under the relevant law of different States or Territories, to the extent that these can be identified and assessed at the time the Court considers the application, may be material: Sentry at 163; (f) ultimately, the discretion is to be exercised "having regard to considerations of sound case management, the national character of the court and practical considerations including the convenience of the parties": Virgin Mobile at [16]. 16 Two further matters may be mentioned. The first is the overarching purpose of the Court's civil practice and procedure provisions for which ss 37M and 37N of the FCA Act provide. It may be taken that the discretion under s 48 is to be exercised with regard to that purpose, part of which is the just resolution of disputes "as quickly, inexpensively and efficiently as possible". 17 The second is that it is not uncommon in this Court, it being a national Court, for the legal practitioners of the litigants to be based in different States. The Court takes account of that circumstance by allowing parties to appear by videolink, or in the particular circumstance prevailing presently, by the use of remote hearing platforms. Such circumstances are commonplace. Experience has shown that it is possible for the interlocutory processes in litigation to be conducted justly and efficiently by such means. 18 Counsel for the defendants emphasised several matters which indicate that the proceedings have a closer connection with New South Wales than with South Australia. The only matters supporting the latter are that Zahid and his wife have (subject to one matter to which I will return) resided in Adelaide since 2014 and Zahid's solicitors and counsel are Adelaide based. The qualification concerning Zahid's residence in Adelaide is that he has recently travelled to Saudi Arabia to take up a lectureship at the King Saud University. The period of his appointment at the King Saud University has not been disclosed. Zahid's wife will continue to reside in Adelaide. Zahid's solicitor has deposed to Zahid's intention to return to Adelaide during term breaks, as has been his custom in the past when he has had lectureships at overseas universities. He also deposes that Zahid will return to Adelaide for the trial, should the trial be conducted in Adelaide. 19 Against those connections with South Australia, the affidavits of the defendants' solicitor indicate that the proceedings have a number of "connections" with New South Wales. These include: (a) AWS was registered in New South Wales on 2 July 1996 and at all times since 1996 has maintained its registered office at addresses in New South Wales; (b) the principal businesses conducted by AWS (being several service stations) have all been in New South Wales; (c) Mohammad and his wife have resided in New South Wales since 1996; (d) the accountants and financial advisors retained by AWS since 1996 are New South Wales based; (e) the lawyers retained by AWS, both in connection with its business activities and in connection with the current proceedings, are New South Wales based; (f) the books and records of AWS are located in New South Wales; and (g) Zahid seeks relief in respect of other entities, including the Rana Family Trust, the activities of which were conducted in New South Wales. 20 The defendants' solicitor has also noted that Zahid's proposed derivative action seeks orders against the New South Wales Registrar General and adduced evidence that the Registrar General is New South Wales based. Respectfully, I regard the defendants' reliance on that circumstance as of a "make weight" character in the present context. 21 The defendants' solicitor has deposed to his view that the likely lay witnesses who may be required to give evidence at trial are (in addition to Zahid): (a) Mohammad; (b) Mohammad's wife; (c) Mr Shakil Khan, a director of Dallat Pty Ltd; and (d) Ms Anees Zia Rana. 22 The solicitor deposes that each of these witnesses resides in New South Wales. He considers that Mr Khan and Ms Rana may be required to give evidence because of the plaintiff's allegation that Mohammad either sold assets of AWS to Dallat or Ms Rana, or applied its assets to the purchase of assets for their benefit. 23 In addition to referring to the saving of expense and of inconvenience for these witnesses, counsel for the defendants emphasised that, if Zahid does have to return to Australia to participate in the trial, there would be relatively little difference between a return to Sydney and a return to Adelaide. He submitted that, when all of these circumstances are considered, the balance of convenience favours the conduct of the proceedings in the New South Wales Registry. 24 I accept that the location of the witnesses who will, or who are likely, to give evidence in the trial is an important consideration. However, there are a number of other matters which bear on the balance of convenience. 25 As already noted, it is commonplace now in this Court for case management hearings and interlocutory applications to be heard by videolink. This was occurring even before the onset of the restrictions created by the COVID-19 pandemic. There is no reason to suppose that that cannot continue to be the case if the proceedings remain in the South Australian District Registry. This suggests that, whether the proceedings be transferred to New South Wales or are retained in South Australia, there is likely to be relatively little effect on the efficient management of the proceedings during the interlocutory stages. 26 Zahid's solicitors are based in Adelaide. If that continues to be the case then, whether or not the proceedings remain in the South Australian Registry or be transferred to the New South Wales Registry, one set of legal practitioners will probably wish to appear by online means. There is no reason for the Court to prefer the convenience of one set of practitioners over another, especially given that the defendants made their choice of counsel with the knowledge that the proceedings had been commenced in the South Australian Registry. 27 In any event, the location of the parties' legal representatives is generally regarded as a matter of limited significance on applications of the present kind: BWK Elders (Australia) Pty Ltd v Westgate Wool Co Pty Ltd (No 6) [2002] FCA 807 at [22]-[25]; Virgin Mobile at [18]; Australian Competition and Consumer Commission v Fila Sport Oceania Pty Ltd [2003] FCA 430 at [8]; and Wepar Nominees Pty Ltd v Schofield [2013] FCA 920 at [12]. As I noted in the Australian Egg Corporation case, ordinarily parties select the solicitors and counsel to represent them in proceedings with knowledge of the Registry in which the proceedings have been commenced, with the consequence that that selection does not, at least generally, create a circumstance capable of having much significance on a transfer application. 28 I note a submission made on Zahid's behalf regarding his limited pecuniary circumstances and to the potential for his to be "deep pocketed" by the defendants. I am unable to attach weight to that submission given the absence of evidence on the interlocutory process concerning Zahid's financial circumstances and pecuniary resources. 29 There appears to be some uncertainty at this stage as to the witnesses who will in fact be necessary to give evidence in the trial. They will not necessarily be all those to whom the defendants' solicitor has deposed. As previously noted, the defendants have not complied with the Court order as to the time by which they should file their defence. This means that there has not yet been a joinder of issues. Moreover, Zahid has foreshadowed seeking leave pursuant to s 237 of the Corporations Act to bring a derivative action. The precise context of that application and the scope of the proposed proceedings by AWS in the event leave is granted have not been finalised. This adds to the difficulty for the Court presently in making an assessment of the witnesses who will be necessary at trial. 30 Further, the "shape" and likely duration of the trial in the proceedings (if a trial is required) cannot be anticipated with confidence at this stage. 31 If a trial be required and it be more appropriate for it to be conducted in Sydney, then that can be ordered. That is to say, a decision on the defendants' transfer application does not foreclose a decision as to the place of the trial. 32 For these reasons, I am not satisfied at this stage that an order transferring the proceedings to the New South Wales Registry is appropriate. The defendants' interlocutory process of 16 October 2020 is accordingly dismissed. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice White.

Mahmood v Abdul Wahid and Sons Pty Ltd, in the matter of Abdul Wahid and Sons Pty Ltd

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