Morningstar Research Pty Ltd v Fiduciary Ltd

REASONS FOR JUDGMENT 1 Morningstar Research Pty Ltd ('the company') is a vehicle for the conduct of a joint venture between Morningstar Inc on the one hand and the interests associated with Mr Rich on the other. When the joint venture was formed in April 1999 Mr Rich was the managing director and chief executive officer of the company. 2 Relations between the joint venturers broke down, and on 1 November 2001 proceedings no 5308 of 2001 were instituted in the Equity Division of the Supreme Court of NSW. There are a number of parties to those proceedings, but it is sufficient for present purposes to describe the plaintiffs as Mr Rich and interests associated with him ('the Rich interests') and the defendants as the company, and interests associated with Morningstar Inc ('the Morningstar interests'). Again, it is sufficient for present purposes to describe the proceedings as being in the nature of an oppression suit. 3 The Rich interests applied for interlocutory relief, which was refused by Barrett J on 23 November 2001 essentially on the balance of convenience grounds. On 24 November 2001 Mr Rich was removed as managing director and chief executive officer of the company. 4 On 19 March 2002 the Rich interests filed a statement of claim in the Supreme Court proceedings. The statement of claim extends over some 115 pages. On 11 November 2002 the Morningstar interests filed a defence to that statement of claim. 5 On 22 November 2002 the Rich interests commenced proceedings against the Morningstar interests in the Industrial Relations Commission of NSW ('the IRC'), proceedings No IRC 6661 of 2002, seeking relief under s 106 of the Industrial Relations Act 1996 (NSW). In these proceedings relief is sought based on the same facts as are relied upon by the Rich interests in the Supreme Court proceedings. Morningstar was not served with the summons for relief under s 106 until its solicitors, Clayton Utz, were asked to accept service of the summons on behalf of the Morningstar interests on 25 February 2003. This was the first occasion on which the Morningstar interests became aware of the IRC proceedings. 6 In the meantime, on 18 December 2002, the Morningstar interests filed a cross claim in the Supreme Court proceedings against the Rich interests making various complaints in relation to the joint venture. Mr Wang, a partner in Clayton Utz, has sworn that had he been aware on 18 December 2002 that the IRC's proceedings had been commenced, he would not have prepared and filed a cross claim. Instead, he would have commenced proceedings in the Federal Court in order to establish the jurisdictional transit point referred to by the Full Federal Court in par [30] of its judgment in Palm Springs Ltd v Darling (2002) 192 ALR 763. I accept Mr Wang's evidence in this respect. 7 On 24 April 2003 the Morningstar interests commenced proceedings in this Court against the Rich interests. The statement of claim in these proceedings propounds substantially the same claims as are propounded in the cross claim in the Supreme Court proceedings, and relies upon the same facts. There are only minor and immaterial differences between the two documents. 8 On 30 April 2003 the Morningstar interests filed a notice of motion in the Supreme Court proceedings seeking orders that the IRC proceedings be removed into the Supreme Court and that the IRC proceedings be consolidated with the Supreme Court proceedings. The Supreme Court was informed that the Morningstar interests intended to file a notice of motion in the Federal Court proceedings seeking orders that the Federal Court proceedings be transferred to the Supreme Court and that thereafter the Federal Court proceedings be consolidated with the Supreme Court proceedings. An undertaking was given not to prosecute the cross claim in the Supreme Court proceedings pending the transfer and consolidation of the IRC proceedings. 9 On 2 May 2003 the Morningstar interests filed a notice of motion in these proceedings seeking an order pursuant to s 5(4) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) that the Federal Court proceedings be transferred to the Supreme Court of NSW for consolidation with the proceedings pending in that Court. That motion has not been heard. 10 On 17 June 2003 the Rich interests filed a notice of motion seeking dismissal of the Federal Court proceedings pursuant to Order 20 rule 2 of the Federal Court Rules ('the Rules') on the ground that the Federal Court proceedings are an abuse of process, as the claims made in them are in substance the same as the claims made by the Morningstar interests in the cross claim in the Supreme Court proceedings. The Rich interests contend that the Federal Court proceedings were commenced with no intention of prosecuting them to a conclusion, and for the illegitimate purpose of conferring jurisdiction on the Supreme Court of NSW to entertain the IRC proceedings, a jurisdiction which the Supreme Court does not otherwise have. 11 On 21 July 2003 the Morningstar interests changed tack. They filed an amended notice of motion in the Supreme Court proceedings seeking that the IRC proceedings be removed into the Supreme Court and consolidated with the Supreme Court proceedings and that the consolidated proceeding thereafter be transferred to the Federal Court and consolidated with the Federal Court proceedings. 12 On 24 July 2003 I was informed by counsel that there was a general, but tentative consensus that the IRC proceedings should be removed into the Supreme Court and consolidated with the Supreme Court proceedings, and that the consolidated proceedings should thereafter be transferred to the Federal Court. However, concern was expressed by counsel, and in particular by counsel for the Rich interests, that there might be a constitutional difficulty in this Court determining the IRC proceedings. Once this potential problem emerged, counsel for the Morningstar interests reverted to the course originally chartered by the Morningstar interests, namely that the IRC proceedings should be removed into the Supreme Court and consolidated with the Supreme Court proceedings, and that the Federal Court proceedings should be cross-vested to the Supreme Court. Counsel for the Rich interests indicated that he opposed that course because his clients wished to retain what was perceived to be a forensic advantage if the IRC proceedings stayed in the IRC. Reference was made to the judgment of Spiegleman CJ in Resarta Pty Ltd v Finemore (2002) 55 NSWLR 320 at [32] where the Chief Justice described this as a 'legitimate forensic advantage', at least in the circumstances of that case. 13 On 25 July 2003 the solicitors for the Rich interests put a proposal to Clayton Utz which, if agreed to by the Morningstar interests, would allow the matter to be pursued in the Federal Court. In very general terms, the proposal involved the Rich interests pleading their s 106 case by way of defence and cross claim in the Federal Court proceedings on the basis that the Morningstar interests would take no point as to the jurisdiction of the Federal Court to entertain the s 106 claim, but if the Court itself declined to entertain the claim, then the Rich interests would be free to pursue it thereafter in the IRC. Clayton Utz did not agree to that course. 14 Accordingly, I proceeded to hear the dismissal motion. On the hearing of that motion the Morningstar interests proffered an undertaking to the Court not to prosecute these proceedings and the cross claim in the Supreme Court proceedings in both Courts at the same time. That undertaking was proffered in lieu of an undertaking earlier offered not to litigate the cross claim in the Supreme Court proceedings for so long as the Federal Court proceedings are on foot and have not been determined. An undertaking in those terms became inappropriate once the option of seeking to transfer the consolidated IRC and Supreme Court proceedings to this Court was abandoned by reason of potential constitutional problems which were perceived by counsel.