PIHA Pty Ltd v Vinidex Tubemakers Pty Ltd

Other Matters Relevant to the Transfer Motion 9 Affidavit evidence was put before the Court upon the hearing of the motion for transfer which was said to be relevant to its disposition. 10 There is a question whether PIHA's standard terms and conditions apply and, in particular, that term which provides for the application of Western Australian laws and the subjection of the parties to the jurisdiction of the courts of Western Australia. There was evidence that Vinidex never received nor was referred to PIHA's standard terms and conditions. And the terms of the "Master Contract" between Pasminco and Transfield which were incorporated to the extent of their consistency with the Vinidex and PIHA contract, provided that the laws of the State of Victoria should be the proper law of the contract. The Heads of Agreement between PIHA and Transfield contained a clause providing that the agreement should be governed by and construed in accordance with the laws of Queensland. 11 No doubt the question of the proper law of the contract would require some factual inquiry. I accept, however, the submission for Vinidex that there is no real suggestion that the laws of Western Australia are relevantly different to the laws of Queensland in so far as they apply to this litigation. Certainly no material differences were identified by counsel for PIHA. 12 The dispute was well established when these proceedings were issued. There had been problems with the performance of the pipeliner in 1998. They seem to have involved leakage during hydrostatic testing. PIHA had not met payments claimed by Vinidex for pipeliner material supplied in 1998 and on 17 December 1998 Vinidex's solicitors wrote to PIHA's solicitors demanding immediate payment of $1,995,994.60 they said was then owing. It was stated in the letter that if payment were not received by close of business on 22 December 1998 Vinidex would take immediate steps to recover the money. In a letter dated 23 December 1998 from PIHA's solicitors reference was made to an agreement between officers of the two companies that until 20 January 1999 they would "jointly focus their energies upon resolving the issues relating to the polyethylene pipe rather than pursue claims against one another". The letter referred to a management meeting between all parties which had been scheduled for 20 January 1999 and confirmed agreement that Vinidex would not pursue its claim for payment against PIHA until after 20 January 1999. This agreement was confirmed by a letter from Vinidex's solicitors of 24 December 1998 accompanied by the threat that if a satisfactory arrangement for payment were not forthcoming by 20 January Vinidex would "vigorously pursue the matter". 13 PIHA and Vinidex and other participants in the project established a technical committee to try to ascertain the reasons for the problems experienced with the pipe. An independent expert report by Dr R.W. Truss was commissioned to review the technical committee's findings. That report was presented on 21 January 1999. It appears from the report that the leakage failure under hydrostatic testing was attributed to inappropriate welding of sections of the pipeliner. It appears also however that the pipeliner may not complied with current Australian standards in relation to a notch fracture pressure test which tests slow crack growth resistance. It is suggested in the report however that this was not a matter relevant to leakage under hydrostatic pressure testing. A further draft report prepared by Dr Truss to similar effect was also put before the Court. 14 The observations I make about these reports are not based upon any close analysis of them nor have they been tested in cross-examination or by reference to any other expert assessment. Suffice it to say that they indicate that technical investigation of the pipeliner difficulties was well underway in January 1999 and that pending the outcome of that investigation there was a temporary delay in the initiation of enforcement action by Vinidex against PIHA in relation to unpaid invoices for pipeliner supplied. On the other hand, the technical reports appear to have provided the inspiration for PIHA's claim that the pipeliner supplied did not comply with relevant standards albeit there may be a question whether the non-compliance played any part in the difficulties observed which, on Vinidex's case, would seem to be attributable to welding practices applied by PIHA. 15 In the event these proceedings were issued by PIHA out of the Western Australian District Registry of the Federal Court on 3 February 1999. On 17 February Vinidex commenced action by writ issued out of the Supreme Court of Queensland. By its writ Vinidex claimed the sum of $3,191,795 as the price of goods sold and delivered to PIHA. The amount is said to represent the balance owing from invoices issued between July and November 1998 for a total sum of $4,568,295.02. I accept that the outcome of the present motion does not depend upon any consideration of priority in time. Each party has chosen, to all intents and purposes contemporaneously, to institute proceedings in the court which it regards as most convenient to it. 16 In an affidavit sworn in these proceedings on 15 March, Christopher James Ellison, the Managing Director of PIHA, said that his company would instruct its solicitors to engage Queensland agents to enter a conditional appearance in the Queensland Supreme Court action and apply to strike out that action as an abuse of process and, in the alternative, apply to transfer the action to the Federal Court to be heard with this action. 17 A conditional appearance was entered in the Supreme Court of Queensland on 24 March 1999. On 30 March the solicitors for Vinidex advised PIHA's solicitors that if their client failed to file and serve an unconditional appearance by 31 March Vinidex would take out a summons to set aside the conditional appearance. On 6 April such a summons was filed in the Supreme Court and on 8 April PIHA took out a summons in the Supreme Court seeking a stay of the Vinidex action. The application to set aside the conditional appearance and the application for a stay were heard at the same time before Wilson J on 12 April 1999. In the event PIHA did not persist with its conditional appearance and undertook to file an unconditional appearance by 4pm on 12 April. It did not apply for a transfer of the Supreme Court of Queensland proceedings at that hearing but pursued its application for a stay of proceedings. It was submitted by counsel for Vinidex in the Supreme Court of Queensland that it would have been proper for PIHA to apply to the Supreme Court of Queensland for an order under the Jurisdiction of Courts (Cross-vesting) Act 1987 (Qld) transferring the proceedings to the Western Australian District Registry of the Federal Court rather than to seek a stay. No such application was made. 18 On 19 April 1999, Wilson J dismissed PIHA's summons for a stay. The Vinidex summons became academic upon PIHA's undertaking to file an unconditional appearance. 19 PIHA submitted to Wilson J that the action in the Supreme Court of Queensland ought to be stayed as vexatious and as an abuse of process of that court. That submission was evidently made on the basis that Vinidex, having by that time filed a full defence in the Federal Court together with a motion for security for costs and transfer of the action and having foreshadowed a motion for summary judgment, had made an election that the Federal Court should decide where the case would be tried. Wilson J did not accept that argument. Vinidex had not cross-claimed in the Federal Court. Wilson J therefore held that the action in the Supreme Court of Queensland was not a duplication of proceedings pending the Federal Court notwithstanding that there was a common substratum of fact. Her Honour said: "This is not a case of the plaintiff (Vinidex) having elected to take action in the Federal Court; rather it took steps necessary to defend proceedings brought against it there. Its application for removal or transfer of the proceedings and for security for costs can hardly be described as an election to litigate in the Federal Court." In the event Wilson J was not persuaded that the Vinidex action in the Supreme Court should be stayed. 20 The position at present therefore is that there are two actions on foot in different courts dealing with what is undoubtedly one matter in dispute.

Principles Governing Transfer 21 Vinidex's motion for transfer of the proceedings to the Supreme Court of Queensland relies upon s 5(4) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) which provides: "5(4) Where: (a) a proceeding (in this sub-section referred to as the "relevant proceeding") is pending in the Federal Court or the Family Court (in this sub-section referred to as the "first court"); and (b) it appears to the first court that - (i) the relevant proceeding arises out of, or is related to, another proceeding pending in the Supreme Court of a State or Territory and it is more appropriate that the relevant proceeding be determined by that Supreme Court; (ii) having regard to - (A) whether, in the opinion of the first court, apart from this Act and any law of a State relating to cross-vesting of jurisdiction, the relevant proceeding or a substantial part of the relevant proceeding would have been incapable of being instituted in the first court and capable of being instituted in the Supreme Court of a State or Territory; (B) the extent to which, in the opinion of the first court, the matters for determination in the relevant proceeding are matters arising under or involving questions as to the application, interpretation or validity of a law of the State or Territory referred to in sub-sub-paragraph (A) and not within the jurisdiction of the first court apart from this Act and any law of a State relating to cross-vesting of jurisdiction; and (C) the interests of justice, it is more appropriate that the relevant proceeding be determined by that Supreme Court; or (iii) it is otherwise in the interests of justice that the relevant proceeding be determined by the Supreme Court of a State or Territory, the first court shall transfer the relevant proceeding to that Supreme Court." 22 The language of s 5(4) reflects the wider legislative policy that cross-vesting of jurisdiction should not involve any significant departure from the patterns of litigation in the various courts. In particular it contemplates that the courts will exercise restraint and mutual respect for each others responsibilities in deciding whether or not to exercise a jurisdiction conferred by virtue of the cross-vesting laws. 23 Beyond recognition of that principle of mutual respect the judgment whether to transfer proceedings to another court is a practical one, "a "nuts and bolts" management decision" - Bankinvest AG v Seabrook (1988) 14 NSWLR 711 at 714. 24 It was said at one time that the Federal Court has special expertise in applications involving the provisions of Part V of the Trade Practices Act. Reference has been made to the "substantial body of doctrines and principles which give guidance as to how the Division, particularly section 52, is to be interpreted and applied" - Cascade Group Ltd v Carlton and United Breweries Ltd (1992) ATPR 41-172 at 40,365 per Sheppard J. 25 But with the cloning of the Trade Practices Act into State Fair Trading Acts in the late 1980s and the extensive invocation of s 52 in misrepresentation cases brought in State courts it can no longer be said that the Federal Court has a special claim to exercise jurisdiction in relation to such applications, certainly not a claim that would provide a ground for preferring the Federal Court to State Supreme Courts where such actions may be brought. Both Branson and Spender JJ have observed in different cases that the Federal Court is no longer to be regarded as necessarily a more appropriate court than a State or Territory Supreme Court to hear a claim pursuant to Part V of the Trade Practices Act - Teserioro v Matstar Pty Ltd (1990) 93 ALR 607 at 608 and T. O'Connor and Sons Pty Ltd v Clough Pty Ltd (Federal Court, Unreported No. SG89 of 1995, Branson J). On the other hand it can also be said that the spread of Federal Court jurisdiction through some 125 federal statutes as at 1998 illustrates its evolution from an initial conception as a specialist body dealing with a narrow band of federal statutes to one which has attracted characterisation as effectively "…a superior court of general jurisdiction in Australia" - Crawford, Australian Courts of Law 3rd Edition OUP 1995 at p 168. This is subject to the qualification that the jurisdiction is predominantly civil. 26 Where a claim is largely based upon breach of contract or other causes of action arising under State law, and particularly where it involves the construction of laws peculiar to the State in question, then the State court may be the more appropriate forum. That is so notwithstanding that such State claims can be heard within the accrued jurisdiction of the Federal Court where the primary claim is based, for example, on Part V of the Trade Practices Act 1974 (Cth). Tamberlin J observed in National Dairies WA Ltd v Wesfarmers Ltd (Unreported, Federal Court No NG 509 of 1996, Tamberlin J), that where likely questions for determination in the proceedings involve the application and interpretation of State regulatory statutes that is a task best suited to a State court. 27 The instant case presents largely as a contract case with the supportive invocation of s 53 of the Trade Practices Act. That is a factor which weighs in favour of a transfer to the Supreme Court of Queensland. On the other hand a significant element of the claim arises under Federal jurisdiction and plainly the case has a national character. One party is based in Perth, the other is based in New South Wales. The relevant production facility is in Queensland. There are witnesses in three States of Australia and overseas witnesses. No doubt the Supreme Court of Queensland has the facilities to hear the evidence of such witnesses in a reasonably convenient way. The Federal Court, being a national court, does have the facility for splitting trials so that they may be conducted partly in one centre and partly in another. 28 There are strong Queensland elements in this case, that State being the location of the project and the production, supply and installation of the pipeliner in question. 29 In considering the application of s 5(4) of the Jurisdiction of Courts (Cross-vesting) Act it is important to have regard to the various factors which that section requires the Court to weigh up. The first question is whether the proceeding in this Court arises out of or is related to the proceeding pending in the State Supreme Court. There can be no real debate against an affirmative answer to that question. 30 In deciding whether it is more appropriate that the proceeding in this Court be determined by the Supreme Court of Queensland it is necessary to have regard to whether the proceeding in this Court or a substantial part of it would have been incapable of being instituted in this Court and capable of being instituted in the Supreme Court of the State. Cross-vesting legislation apart, the contract claims appear on the face of it to be cognisable by this Court pursuant to its accrued jurisdiction. This is not therefore a proceeding which would have been incapable of being instituted in this Court apart from State cross-vesting legislation. 31 The Court is also required to have regard to the extent to which the matters for determination in the proceeding are matters arising under or involving questions as to the application, interpretation or validity of a law of the State. There is however no real indication that the proceedings in this Court would involve questions as to the application, interpretation or validity of the laws of the State of Queensland. 32 In the event I am influenced by the national character of this litigation and the fact that a significant element of the claim does arise under federal legislation albeit the common law elements are able to be encompassed by the accrued jurisdiction. While it may be said that the Federal Court can no longer be regarded as possessing any special claim as a preferred forum in relation to Part V of the Act, it may also be said, as I have observed, that the jurisdiction of the Federal Court generally has been so far widened as to take it well beyond the category of a specialist statutory court. This is a national claim and the Federal Court, in my opinion, is particularly suited to deal with its multi-state aspects in a way that is convenient to the parties. Having said that, I do not accept that the Perth Registry is necessarily the most convenient Registry through which the case should be conducted. I propose therefore to accede to the alternative proposal in the motion for transfer of the action to the Brisbane District Registry of the Court. 33 This requires consideration of the other element of the motion which seeks an order for security for costs. In my opinion the proceedings commenced in this Court by PIHA involve more than simply a defensive response to the threatened recovery action on the part of Vinidex. There is a major attack upon Vinidex's entitlement to receive any money which does not stop at a challenge to that entitlement but seeks consequential losses. PIHA is a trustee company with a limited issued capital. On the face of it PIHA itself may be unable to meet an order for costs made against it were it to be unsuccessful in pursuing its claim at the hearing. The estimated cost of the proceedings on the part of Vinidex is said to exceed $300,000. I accept that such estimates are difficult but plainly this is going to be an expensive piece of litigation. In my opinion it is appropriate that Vinidex have some partial protection in respect of the costs of the action initiated in this Court by PIHA. On the material presently before me, Vinidex has a reasonable chance of success in its defence to PIHA's claims. That is not to say that PIHA's claim is weak. However the basis for it and its linkage to claimed loss and damage will undoubtedly benefit from refinement and clarification. I therefore propose to order that PIHA provide security for costs in the sum of $50,000 within one month of the date of this order. The form of the security may be as agreed between the parties or by lodgment of a bank guarantee with the Court in a form approved by the Registrar. The proceedings will be stayed if after one month the security has not been provided. There will be liberty to Vinidex to apply to increase the security after this matter is listed for trial. I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French.

Counsel for the Respondent: Mr H. Fraser QC with Mr P.G. Mead