Moss v Contracoin Pty Ltd

Introduction 1 This is a contested application for an order transferring this proceeding from the New South Wales Registry of the Court to the Queensland Registry pursuant to s 48 of the Federal Court of Australia Act 1976 (Cth) and r 2.02 of the Federal Court Rules 2011 (Cth). The application is brought by the respondents, Contracoin Pty Ltd (ACN 626 613 812) and Barry Stephen Lipscombe, a director of Contracoin. 2 The interlocutory application originally included a prayer for an order that the applicants provide certain further and better particulars which has since fallen away. 3 For the reasons which follow, the application to transfer the proceedings to the Queensland Registry is dismissed. Costs should follow the event. The application is premature. It is based on matters that are speculative at this stage. It is not appropriate to accede to the respondents' request to simply adjourn the interlocutory application with a view to the application perhaps being revived at a later stage depending on whether the speculative matters relied upon crystallise. The respondents are not precluded from bringing a further application to transfer the proceedings to the Queensland Registry at a later stage, if so instructed.

Background 4 The proceedings are at a relatively early stage in that the pleadings have not yet closed. A timetable for the filing of an amended defence and reply is in place and time is still running on that timetable. 5 The applicants are Stephen Moss, Daniel Murray Harden, Christopher John Dutton, Christopher Ashman and Julio De Laffitte e Freitas. In the substantive proceedings, the applicants seek relief in relation to alleged misleading and deceptive conduct by the respondents which is alleged to have induced the applicants to acquire certain cryptocurrency tokens known as CTCN Tokens. The applicants contend, inter alia, that the respondents have contravened various provisions of Sch 2 to the Competition and Consumer Act 2010 (Cth). 6 By their statement of claim the applicants allege that, in about April 2021, the following representations were "expressly conveyed to each Applicant by Contracoin's sales agent" and were "conveyed orally and in writing": (1) That the CTCN Token was a valuable token that could be leveraged to purchase real property; (2) That the CTCN Token had been approved for listing on the Binance blockchain trading platform; (3) That Contracoin had received written confirmation from Binance in respect of the approval of CTCN for listing on the Binance platform; (4) That there was a liquid market for CTCN Tokens on a blockchain trading platform referred to in the statement of claim as Probit; and (5) That CTCN Tokens traded at prices in excess of US$0.80 per token on the Probit platform at an unspecified time period. 7 The applicants allege that each representation was false and misleading, and that the respondents "authorised and procured" Contracoin's sales agent to make each of the abovementioned representations to the applicants. Contracoin's sales agent is not identified in the material filed by the applicants to date. The applicants further allege that, in around April 2021, Contracoin's sales agent provided each applicant with a letter purportedly from the "Binance Charity Foundation" dated 20 April 2021 which stated that the CTCN Token had been approved for listing on the Binance exchange. 8 The applicants allege that, on about 1 June 2022, Mr Lipscombe and Mr Moss participated in a Zoom conference call for the purpose of discussing the applicants' purchase of CTCN Tokens and the value of the tokens. The applicants allege that Mr Lipscombe said that the price of CTCN Tokens would increase to over $2 per token, and that Mr Lipscombe would cause the price of CTCN Tokens to increase by freezing sales on exchanges and using a small sum of money to "pump" the price (the price pump allegation). 9 Between 27 April 2021 and 2 August 2021, the applicants acquired a total of 1,347,915 CTCN Tokens for $0.10 per token, for a combined price of $134,791.50. The applicants contend that they would not have acquired any CTCN Tokens but for misleading representations allegedly made by the respondents. 10 The respondents, in substance, deny the allegations made against them. The respondents say that "if it be, and to the extent that it is, alleged that Mr Brad Bilbie of the Valint Group" was Contracoin's "sales agent", then he was not authorised to act as a sales or other agent of Contracoin, and that Contracoin did not hold him out as its agent in any capacity. The respondents admit that a Zoom conference call took place (but on 2 June 2022, not 1 June 2022) and "admit, and allege that [Mr] Lipscombe stated words in substance or effect that: Contracoin hopes that the CTCN Token would increase to above two dollars per token", but otherwise deny the allegations therein, which include the price pump allegation.

The respondents' reasons for seeking the transfer 11 The respondents submit that the fact the proceedings were commenced in the New South Wales Registry of this Court (and not the Queensland Registry) is "nonsensical" and that it is more appropriate that the proceedings be heard and determined in Queensland for the following reasons: (1) Contracoin is a corporation registered in the state of Queensland. Its principal place of business is situated in Southport, Queensland. Mr Lipscombe's principal place of residence is in Surfers Paradise, Queensland. (2) The respondents' solicitors' legal practice is located in Bundall, Queensland and does not have an office in Sydney. The respondents' solicitors contend that they will only be participating in appearances by telephone. At the time of filing their interlocutory application, the respondents' solicitors had not formally retained counsel, however were instructed to brief counsel with chambers located in Brisbane, Queensland. (3) Although the witnesses that the respondents intend to call are not yet finalised (pending the pleadings closing and evidence being filed and served), the respondents' present expectation is that "a great majority" of persons called to provide evidence in the proceeding will be based in Queensland. (4) Comparatively, the respondents contend that the applicants' only connection to New South Wales is their office and their solicitors' office is located in the greater Sydney region. The respondents accept that they do not know the principal residences of the applicants, however "presume that one or all of them reside in" New South Wales due to the appointment of solicitors and counsel based in Sydney. The respondents contend that "it is hard to see" how the applicants could rely on any witnesses other than themselves, who are based in New South Wales. (5) The respondents say that because they ordinarily operate or reside in Queensland, any transaction or interaction that occurred between the parties (if any) would have been generated from Queensland and therefore the alleged cause of action in the applicants' statement of claim was likely to have arisen in Queensland. (6) Finally, the respondents submit that they will be prejudiced if the proceedings remain in the New South Wales Registry because: (a) The respondents' solicitors, counsel and certain witnesses will be required to travel to Sydney for the duration of the hearing, which will result in additional costs. (b) Any argument that the applicants may comparably be burdened with additional costs if the proceedings are transferred raises questions as to their capacity to satisfy any costs order if they are unsuccessful in the proceedings. (c) In the material filed by the applicants to date, the applicants have not expressly consented to the respondents' appearances before the Court being by way of audio-visual link (AVL), which is a further reason that the proceedings should be transferred. The respondents submit that the applicants have instead chosen "to burden the Respondents with the added costs and expense of having, on each occasion, to make application…to the Court to appear by way of" AVL.

The applicants' reasons opposing the transfer 12 The applicants submit that there is no reason for the Court to exercise its discretion to transfer the proceedings to the Queensland Registry, and in addition there are positive reasons why the proceedings should be heard and determined in the New South Wales Registry. 13 The applicants emphasise the fact that the respondents concede in their submissions that "the balance of convenience is more or less even". I interpolate to observe that the concession is appropriately made and is borne out by the material I have before me. 14 Included in the applicants' evidence is a screenshot taken from Contracoin's website. The screenshot lists, under the heading "Headquarters", three physical business addresses: first, an address in Southport, Queensland; second, an address in Pyrmont, New South Wales; and third, an address in Double Bay, New South Wales. The applicants submit two of the three locations are proximal to the Court in Sydney, and would enable the respondents to attend Court in Sydney without undue inconvenience. 15 The applicants' submit that, contrary to the respondents' contention that the cause of action sued upon arose in Queensland, a number of the alleged representations were made at a meeting that occurred in Sydney. The applicants submit that, having regard to pleadings, there is a sufficient connection to New South Wales. 16 Finally, the applicants submit that the Court has the technological capabilities to facilitate the respondents' appearing remotely at case management hearings and interlocutory hearings. I note that the respondents' solicitor has appeared via Microsoft Teams at the three case management hearings that have occurred to date. In response to the respondents' submission in relation to the respondents appearing remotely, the applicants submit that it is not appropriate for them to provide an advance, blanket consent because it is a matter for the Court to determine. The applicants acknowledge that they are obliged to conduct the proceedings in accordance with the overarching purpose of facilitating the just resolution of the dispute according to law and as quickly, inexpensively and efficiently as possible: ss 37M and 37N of the Act. Further, that they are obliged not to make spurious objections to reasonable and appropriate requests for appearances to be remote using the technology available to the Court and the parties.

Applicable principles - TRANSFER OF PROCEEDING 17 There was no dispute between the parties as to the applicable principles in relation to making an order to transfer proceedings under s 48(1) of the Act. 18 The relevant principles concerning the transfer of a proceeding were authoritatively stated by the Full Court in National Mutual Holdings Pty Ltd v Sentry Corporation (1988) 19 FCR 155 at 162: …There is no onus of proof in the strict sense to be discharged by the party seeking to conduct or continue the proceedings elsewhere… 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 the 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. 19 There must be sound reason to make an order to transfer proceedings. No one factor is determinative of whether an order to transfer the proceedings should be made. The decision falls to be made in the context of the national character of the Court and taking into account the capacity of the Court to make arrangements to facilitate case management, interlocutory hearings and, where appropriate, aspects of the final hearing being conducted via electronic platforms which enable remote appearances or attendances. It is well recognised that the Court should be flexible in exercising its discretion under s 48 of the Act and that it may be appropriate depending on the particular circumstances and context for one Registry to conduct pre-trial management while allocating the trial to a judge in another Registry: National Mutual at 162; Lamb v Hog's Breath Company Pty Ltd (No 1) [2007] FCA 49 at [10].

Consideration 20 Having regard to the applicable principles and the submissions of the parties, I am not satisfied that there are sound reasons to transfer the proceedings for the following reasons. The proceedings are at an early stage. The parties acknowledge that the balance of convenience is more or less even. I do not find the respondents' submissions in relation to prejudice persuasive. The only substantive point raised in relation to prejudice is with respect to the location of the respondents' solicitors, potential counsel and some potential witnesses. The prejudice said to flow from these matters is counterbalanced by that the applicants would face by reference to the same matters if the proceedings were transferred to Queensland. Many of the matters advanced in support of the application are necessarily speculative given the stage at which the application is made. The respondents' pursuit of the application is, at this stage, premature. 21 Another feature of the application at this time which militates against granting the relief sought is that it is made without appropriate regard to the capacity of the Court to manage the proceedings using the technology available to it to promote the overarching purpose. For these reasons, the application to transfer the proceedings is dismissed. At this time I am satisfied that the continuance of the proceedings in the New South Wales Registry is the most suitable venue having regard to the relevant matters identified by the Full Court in National Mutual. 22 To be clear, it may be appropriate at a later stage of the proceedings for the parties to bring a further application seeking to transfer the proceedings. Any such application will be determined on the evidence available at that time. The respondents sought to have their application adjourned if it was considered to be premature. I do not think it is appropriate to accede to that course. The application has been determined. In my view, there is no reason why costs should not follow the event.

Conclusion 23 I will order that the respondents' application to transfer the proceedings to the Queensland Registry be dismissed with costs. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman.

SCHEDULE OF PARTIES NSD 676 of 2022 Applicants Fourth Applicant: CHRISTOPHER ASHMAN Fifth Applicant: JULIO DE LAFFITTE E FREITAS