Matyear v Prismex Technologies Pty Ltd [2006] NSWSC 1350 | Case summary

(c) the other courts that have jurisdiction to deal with the proceeding or application." 6 The matters to which a court is to have regard in making a decision upon a transfer application are otherwise unconstrained by the Act - except, of course, the directive to decide which forum is the "more appropriate" "having regard to the interests of justice". 7 I turn now to the circumstances in which the winding up proceedings in respect of Prismex have arisen. 8 Prismex has five shareholders. It is accepted, for present purposes, that the real owners of the share capital are the three directors, being the first plaintiff Mr Matyear, Mr Taggert and Mr Ashall. By virtue of arrangements made a decade or so ago, Prismex became the assignee of letters patent 647834 and granted (or arguably granted) a licence under that patent to a company called Interium. Earlier this year, according to Mr Matyear's account, the directors of Prismex other than Mr Matyear caused to be formed a company called X-Position and purportedly caused Prismex to licence the patent to X-Position. These events involving a purported licence to X-Position occurred shortly after Interium had gone into liquidation and its liquidator had purported to assign all the property of Interium, including its intellectual property, to a company called Keller. 9 Proceedings were initiated in the Federal Court at Melbourne arising from disputes over entitlements to the patent. Prismex, X-Position and Keller were all parties to those proceedings. In a judgment delivered on 14 November 2006 (Prismex Technologies Pty Ltd v Keller Industries Pty Ltd [2006] FCA 1504) Jessup J in essence upheld the entitlement of Prismex to the patent and to certain physical items embodying details of the relevant method of manufacture. There were also findings regarding rights (or absence of rights) of others. In particular there was a finding that Interium did not have any licence and therefore had nothing to assign to Keller. Those proceedings have been adjourned so that questions of remedies may be addressed, the questions of liability having been already determined. 10 The concerns that prompted Mr Matyear and his company to seek winding up of Prismex and, as an immediate measure, the appointment of a provisional liquidator were concerns going to the security of Prismex's rights in respect of the patent, including concerns about alleged actions of the other two directors (Mr Taggert and Mr Ashall) to cause Prismex to act in certain ways in relation to the patent, to the exclusion of Mr Matyear. It must, I think, be accepted that the Federal Court judgment of 14 November 2006 has probably gone a significant way towards allaying those concerns or, at least, the immediate concerns about the rights in respect of the patent. In saying that, I do not intend to suggest any possible outcome of the winding up application or the application for the appointment of a provisional liquidator. My real purpose is to provide a brief description of the outcome in the Federal Court to this point and therefore an indication of what is still to come in those proceedings. 11 Against that background, I turn to the s.1337H(2) application and, in the first instance, to the criteria in s.1337L to which the court is positively required to have regard. 12 The first of the s.1337L criteria (referred to in s.1337L(a)) is "the principal place of business of any body corporate concerned in the proceeding or application". This aspect was approached on the footing that the body corporate so identified is Prismex itself. There is somewhat scanty evidence about the location of its principal place of business. In the first place, there is evidence, which I do not understand to be contradicted, that Prismex was formed for the purpose of becoming assignee of the patent - which it did shortly after incorporation - and that its only activities since then have been to hold and exploit the patent. I quote from the judgment of Jessup J (at [20]) to which I have already referred: "From its incorporation in 1995 until the dispute which gave rise to the present proceeding, it seems, Prismex Technologies did virtually nothing. It did not even have a bank account." 13 It cannot be suggested that minimal activity means that there was no business. As Lord Sumner said in South Behar Railway Co Ltd v Inland Revenue Commissioners [1925] AC 476 at 488, "in many businesses long intervals of inactivity occur". But there are difficulties, in the particular context, in associating the business with a particular place. I do, however, note that an ASIC search in evidence records the principal place of business of Prismex as Unit 14, 26-28 Burgess Road, Bayswater, Victoria. The fact that this address appears on search as the principal place of business is presumably a result of some lodgment in conformity with s.146(1) of the Act or some predecessor legislation. The fact that the Act requires notification of a change in a company's principal place of business and that there is currently recorded in ASIC records the address in Bayswater, Victoria, means that, under s.1274B, that record is prima facie evidence of the location of the principal place of business. 14 While that is so, the evidence also suggests that the circumstances are not such that the business consists of sustained or regular activity involving physical presence concentrated in one place. The indications are that the three directors (one of whom is also the secretary) deal with business matters by consultation among them - or, at least, that this was the process in more harmonious times - without reference to any physical premises or place. The business activities are confined to matters of decision-making to do with the single item of intellectual property. There is, it seems, no physical property such as stock in trade or raw materials, no factory or office or shop or showroom or workshop. The nature of the Bayswater address - by which I mean whether it is a home unit, an office unit, a factory unit or some other kind of unit - is unexplained. 15 In respect of the s.1337L(a) matter, therefore, I conclude, on the basis of the prima facie evidence created by s.1274B, that the principal place of business of Prismex is at Bayswater in Victoria but I infer that that place is not the scene of concentrated and ongoing business activity. While I am bound by s.1337L to have regard to the location of the principal place of business in Victoria, that factor really leads to no conclusion of any significance at all to the decision to be made upon this application. 16 I turn next to s.1337L(b). It directs attention, as a mandatory matter, to the place or places "where the events that are the subject of the proceedings or application took place". The relevant events, it seems to me, are those at the heart of the contention that there has been an irretrievable breakdown in relationships and in the trust and confidence between the shareholders. The matters Mr Matyear and his co-plaintiff put forward under that heading are matters associated with decisions regarding the exploitation of the patent and the initiation and conduct of the Federal Court proceedings, being decisions from which he in effect says he was improperly excluded. 17 Again and for the reasons stated, it is not really meaningful to view those matters in a territorially confined way. I do not consider that I have any evidence that would allow me to pinpoint any precise location at which the relevant acts of decision and implementation occurred, beyond the obvious point that the Federal Court proceedings in which Prismex became a moving party were initiated, argued and concluded in Melbourne. 18 Looking beyond the matters to which s.1337L directs compulsory attention, it is submitted that I should have regard to the places of residence in three relevant natural persons, namely, Mr Matyear, Mr Taggert and Mr Ashall. 19 According to the ASIC search, Mr Taggert and Mr Ashall both have addresses in suburbs of Melbourne while Mr Matyear has an address at Jamberoo in New South Wales. The affidavits Mr Matyear has sworn, however, all give an address at Toorak in Melbourne. The plaintiffs' solicitor says in an affidavit that Mr Matyear commutes between Sydney and Melbourne; also that Mr Ashall lives in Queensland. No doubt all three directors are likely witnesses. In addition, affidavits have been sworn by the respective solicitors, one of whom is based in Sydney, and the other in Melbourne. Considerations of logistics and expense related to the matters mentioned in this paragraph are relevant upon an application: see, for example, the observations of Lord Goff of Chieveley in Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460 at p.478 (held relevant to s.1337H by Debelle J in Re Dstore Ltd; Dwyer v Hindal Corporate Pty Ltd (2005) 52 ACSR 335) and those of Black CJ in Acton Engineering Pty Ltd v Campbell (1991) 31 FCR 1 (likewise regarded as relevant by Debelle J). 20 It must be said, however, that considerations of efficiency and convenience related to the places of residence or centre of activities of relevant individuals are equivocal in this case. There is probably a slight predominance towards Victoria (or Melbourne in particular) rather than Sydney but it cannot be said to be in any way compelling. 21 Prismex also says, however, that the fact that the patent protection proceedings are extant in the Federal Court at Melbourne represents a strong consideration in favour of transfer of this present proceeding to that court. That is the matter to which Prismex says most weight should be given. 22 It has been recognised in many cases that there may be good reasons, in the interests of justice, to transfer a pending Corporations Act application to another court before which other relevant proceedings are pending. In Rabsnead Pty Ltd v Schmierer [2002] FCA 304, an application under the Corporations Act for the removal of voluntary administrators was transferred by the Federal Court of Australia to the Supreme Court of Queensland where proceedings against the administrators alleging professional negligence in the particular administration were pending. In Morton v Young [2003] NSWSC 989, an application calling in question the validity of the appointment of a liquidator in a voluntary winding up and challenging a decision on a proof of debt was transferred by this court to the Family Court of Australia in circumstances where the parties to a marriage, being the directors and shareholders of the company, had been ordered by the Family Court to cause the company to be wound up and the matrimonial proceedings had some distance to go to their conclusion. 23 There are instances in which pending winding up applications have been transferred on a similar basis. I refer in particular to the decision of Gyles J in Zhu v Tech Universal (HK-Macau) Development Pty Ltd (2005) 53 ACSR 704. In that case, the directors and shareholders were husband and wife and one of them moved the Federal Court for a winding up order on the basis of deadlock within the company. Family Court proceedings had been in progress since 2000 and that court had made orders about the way in which the parties were to operate the company. In determining to transfer the winding up application to the Family Court, Gyles J said (at [8] and [9]): "[8] As might be expected the respective interests of these parties in the company are expressly in issue in the Family Law proceedings by virtue of the various orders that are sought and will need to be resolved by that court. Adapting the reasons of Merkel J in the similar case of Roff v Aqua Distributors Pty Ltd (1996) 22 ACSR 248; 21 Fam LR 138; 14 ACLC 1769: • Although the issues in each proceeding are not identical there will be a substantial overlap. • It will be more efficient, less time consuming and less costly for the issues arising to be resolved in the one court. • The risk of inconsistent findings will be removed if the proceedings are heard and determined in the one court. • The Family Court, with its wide powers under the Family Law Act 1975 (Cth) in respect of property settlements, is well-equipped to resolve the ultimate dispute between the parties being the future conduct, ownership and control of the company; the resolution of that issue will be a critical element in determining matters arising under the Corporations Law. (See also Fox Enterprises Pty Ltd v Fox (1995) 123 FLR 445 ; 13 ACLC 573; Mattock v Mattock (1989) 97 FLR 112 ; 13 Fam LR 288 ; FLC 92-038; and Mourd v Atlantis Nominees Pty Ltd (1990) 100 FLR 478 ; 14 Fam LR 222.) [9] As Merkel J indicated in Roff , where the interests of third party shareholders or creditors are involved, it is necessary to take into account the circumstance that this court is accustomed to dealing with the winding up of corporations whereas the Family Court is not. Where a company is trading actively on a substantial scale or where a real question of insolvency arises serious consideration would be required before a winding-up proceeding would be transferred to the Family Court." 24 It is thus clear that where another court is seised of a particular dispute on an ongoing basis and a Corporations Act application is, in a realistic sense, an aspect of that dispute, the court in which the Corporations Act application is commenced may well think that that aspect of the wider dispute should be dealt with as part of the composite whole already before the other court. The rationale is, clearly enough, an expectation that efficiencies will be realised by having common issues resolved in a single forum by a single judge. The aim must be, if not wholly then substantially, to avoid repetition of evidence and the risk of inconsistent findings. 25 It may follow, as an important practical consideration, that transfer will be appropriate only if the judge of the transferee court who is hearing or is to hear the proceedings already on foot in that court will also hear the transferred proceeding. That is a matter referred to by Allsop J in Winpar Holdings Ltd v National Consolidated Ltd [2001] FCA 1663. In both that case and Nationwide Produce Holdings Pty Ltd v Davies [2003] NSWSC 653 (Gzell J), final consideration of a transfer application was deferred pending an inquiry of the judge of the transferee court seised of the overlapping proceeding to see whether the proceeding potentially to be transferred could be heard with it. 26 The question on the present application is whether efficiencies and avoidance of duplication (together with avoidance of the possibility of conflicting findings) are likely to be realised if the present winding up proceeding is transferred to the Federal Court, Victoria Registry where the proceedings involving the patent remain unconcluded. I am not persuaded that transfer would produce any such positive effect, even if the judge hearing the patent case were also to deal with the winding up proceeding. I say this because of the stage the patent proceeding has reached. Jessup J has already determined all issues of ownership and entitlement arising in that litigation. Questions of damages and other remedies alone remain. It is by no means clear that questions about the internal decision-making processes and relationships within Prismex (being the matters at the centre of the winding up application) arose before Jessup J. To the extent that they may have done so, they would have been relevant (if at all) only to matters of contract and entitlement relevant to the liability aspect of his Honour's decision. They could not be relevant to issues of damages and other relief, with the result that, as things now appear, Jessup J will have no occasion to be concerned with them in the uncompleted proceeding over which he is presiding. 27 There was speculation in the course of submissions - it could be no more - whether listing arrangements within the Federal Court could result in the transferred winding up proceeding being heard by Jessup J. I do not consider that matter relevant. As I view the current state of the patent proceedings, efficient determination of the winding up proceeding would be in no way enhanced by its being somehow consolidated with the balance of the patent proceeding. And it is, of course, misguided to think that any form of "background knowledge" that his Honour had gained through the patent proceeding could somehow be deployed upon a hearing of the winding up application. That application would be determined on the evidence adduced. 28 My conclusion on the application under s.1337H of the Corporations Act is that, while there are, in a formal sense, some indicators of a slightly closer connection with Melbourne than with Sydney, the kind of geographical preponderance that I found in Global Realty Development Corporation v Dominion Wines Ltd (2005) 56 ACSR 474 has not been shown to exist. No compelling case has been made in support of the proposition that, having regard to the interests of justice, it is "more appropriate" that the winding up proceeding be determined by the Federal Court sitting in Melbourne. When the alternatives of continuation in this court and removal to the Federal Court in Melbourne are viewed side by side, neither emerges as obviously more compatible with the interests of justice. It follows that the defendant has not made out the positive case for transfer to the Federal Court in Melbourne that s.1337H requires be shown. 29 The defendant's interlocutory process of 23 November 2006 is dismissed with costs. **********

Matyear v Prismex Technologies Pty Ltd

At a glance

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Judgment (14 paragraphs)

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Legislation Cited (4)

Cases Cited (9)

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