Plaintiff v Defendants

2 The second and third defendants (Mr and Mrs Powell), who control the other 50 per cent of the shares, incorporated CHP on 3 May 2000 to carry on in Queensland a natural health products distribution business founded by Mrs Powell in about May 1994.[1] Mr and Mrs Powell are directors of CHP.

3 The defendants make application to transfer the proceeding to the Supreme Court of Queensland pursuant to s 1337H(2) of the Corporations Act 2010 (Cth).

4 On 22 February 2002, the parties executed a Share Purchase and Shareholders Agreement,[2] pursuant to which:

(a) Kadac invested $150,000 in CHP for 50 per cent of its shares and loaned it a further $100,000 on terms (cl 2);

(b) CHP's board was to comprise the Powells and two Kadac representatives, initially Mr Dick and Mr Pitt (cl 4.1);

(c) the Powells continued as fulltime employees, each on an annual salary of $70,000 (including super) and a $17,000 car allowance (agreed salary) (cl 3);

(d) from the 2004 financial year, unless otherwise unanimously agreed by the board, CHP would declare and pay annual dividends of 40 per cent of its after tax net profit, provided that the directors were satisfied that it could do so from working capital without adversely affecting its ongoing business (cl 4.4).

5 In November 2009, Mr Dick and Mr Pitt resigned as directors to enable CHP to accept an offer of refinance from the CBA, which required that they either resign or provide personal guarantees, which they were not willing to provide.[3]

6 Since 22 November 2012, Kadac has repeatedly requested that the Powells reappoint two Kadac representatives to the board but, despite initially agreeing to, they have subsequently refused.[4]

7 For some time, the Powells have caused CHP to pay them each a salary that is more than the agreed salary. Despite repeated requests, the defendants have not provided documents that record what CHP is paying the Powells.[5] CHP has never declared or paid a dividend.[6]

8 None of the facts referred to above are in dispute. Kadac alleges that the Powells are conducting the affairs of CHP oppressively, and they seek specific appropriate relief.

9 The principles to be applied in determining an application under s 1337H(2), which were not in dispute, are the same as those that apply to s 5(2)(b)(iii) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Vic), subject to one difference. Under s 5(2)(b)(iii), the transferor court must transfer the proceedings if it is satisfied that another court is the more appropriate court whereas under s 1337H(2) even if another court is the more appropriate venue, the transferor court retains a discretion whether to transfer the proceedings.[7]

... if it appears to the transferor court that, having regard to the interests of justice, it is more appropriate for:

(a) the relevant proceeding; or

(b) an application in the relevant proceeding;

to be determined by another court that has jurisdiction in the matters for determination in the relevant proceeding or application, the transferor court may transfer the relevant proceeding or application to that other court.

11 The threshold question posed by s 1337H(2) is whether the Queensland Supreme Court is more appropriate than this Court for the determination of the proceeding, having regard to the interests of justice.[8]

12 In considering that question, the following principles are to be applied:

(a) It is not necessary that the transferor court be a 'clearly inappropriate' forum but only that, in the interests of justice, the transferee court is 'more appropriate';[9]

(b) Which court is more appropriate to hear and determine the substantive dispute is a 'nuts and bolts' management decision;[10]

(c) The most appropriate court is the natural forum, as determined by factors connecting the proceeding to that forum including matters of convenience and expense, the places where the parties respectively reside or carry on business, and the law covering the relevant transaction;[11]

(d) The list of connecting factors is impossible to state exhaustively and the weight to be given to any particular factor will vary from case to case;[12]

13 Section 1337L requires the Court, in deciding whether to transfer the proceeding, to have regard to (i) the principal place of business of any body corporate concerned in the proceeding or application; (ii) the place or places where the events that are the subject of the proceeding or application took place; and (iii) the other courts that have jurisdiction to deal with the proceeding or application.

14 The phrase, 'interests of justice' is to be read widely,[13] and includes the availability of procedures with the capacity to assist both parties in the efficient and economical resolution of disputes and therefore serve the public interest.[14]

15 In Resource Equities Ltd (Subject to Deed of Company Management) v Carr,[15] Martin CJ regarded as critical the fact that much of the evidence was to come from the defendants and that the plaintiff's evidence would probably be restricted to the tender of documents. The Chief Justice transferred the case to the Supreme Court of New South Wales, the jurisdiction in which the defendants resided. His Honour said -

The point made by the applicants for transfer in this case, which I accept, is that it will be a rare case in which the difference between the mandatory and the discretionary language will have any practical application, because it is difficult to conceive of a circumstance in which having concluded that it is in the interest of justice to transfer a case it would be appropriate to nevertheless exercise a discretion to decline transfer.

...

The principles that govern applications of this kind have recently been enunciated conveniently by the High Court in the case of BHP Billiton Ltd v Schultz [2004] HCA 61; (2004) 211 ALR 523; (2004) 221 CLR 400. I will adopt without restating the principles enunciated in that case as a guide to me in the determination of these transfer applications. Succinctly put, that case establishes that the decision to be taken under transfer application is a 'nuts and bolts' management decision as to which court in the pursuit of the interests of justice is the more appropriate forum to hear and determine the substantive dispute.

That decision is to be made as much as a matter of impression rather than, as in the words of Street CJ in Bankinvest AG v Seabrook (1988) 14 NSWLR 711 at 714, to be overly 'encumbered by an encrustation of judge-made pronouncements of principles'.

...

The authorities also establish that applications for transfer of this kind are not to be approached on the basis that the forum in which the proceedings are commenced has any significance in terms of creating an onus on the other party to show that some other forum is manifestly more convenient. Rather, the application to transfer is to be approached without a presumption that the forum in which the proceedings are commenced is presumptively the more appropriate and that therefore there is some onus to be overcome in order to sustain the applications for transfer.

...

Therefore it seems to me that the primary focus of the preparation of the case will be upon the defendants and that extensive liaison between them and their legal advisers will be a pre-requisite for the proper trial and resolution of these issues. Conversely the case for the plaintiff, I think, will most likely be made out by the tender of documents. That being so, there does not seem to me to be any significant prejudice to the plaintiff if it is required to make out its case in Sydney with its legal representatives of choice, who may well be Mr Bennett and Mr Shepherd, both of whom could easily appear in New South Wales.

...

Because it seems to me that the focus of this case is upon the conduct of the defendants, and because the defendants are resident in New South Wales, and because the plaintiff will, I think, suffer little inconvenience or prejudice by being required to conduct its case in New South Wales, it seems to me that the 'nuts and bolts' case management decision favours transfer of these proceedings to New South Wales.[16]

16 The defendants submitted in essence that this is clearly a Queensland case. The company was incorporated in Queensland and its operations are based in that State. Its books and records are in Queensland, and its directors reside and make decisions (including the decisions sought to be impugned) in that State. The only connection to Victoria, it was submitted, is the location of a shareholder.

17 The plaintiffs submitted that the nature of the relief sought, and the context of the case and the issues raised, were such that the factors relied on by the defendants were of little relevance. The issues, namely excessive directors' fees, failure to declare dividends and failure to appoint two directors to the board of CHP were all matters that involved no more than reference to and a consideration and analysis of the Share Purchase and Shareholders Agreement between the parties.

18 The further more detailed submissions of the parties will be referred to as and where appropriate.

19 As pointed out, the relevant principles are not in dispute. The question is whether it is in the interests of justice to transfer the proceeding in the Supreme Court of Queensland. Of course there is a discretion. The authorities are clear that in exercising the discretion the Court is not required to engage in a clinical and detailed forensic analysis of the matter. Rather, what is required is a higher level assessment. The discretion that is exercised relies more on impression. It has correctly, with respect, been described as a nuts and bolts management decision. Of course there are always factors each way. Further, of great importance and relevance is the fact that applications of this kind are usually made at a very early stage where it may be difficult to predict with any accuracy the likely shape of the proceeding, the issues involved and the evidence to be called.

20 The Court has to do the best it can in the circumstances and on the available evidence at the time of the hearing. It is in the nature of these applications that one side will suffer some disadvantage. In my opinion, for the reasons that follow, the interests of justice require the proceeding to be transferred to the Supreme Court of Queensland.

21 First, despite the limited form of relief claimed by the plaintiffs, it is in the nature of matters of this kind that the issues are not always so confined. Further, parties invariably, in the Court's experience, adduce evidence that goes beyond the strict legal issues raised. Unless pleadings are ordered, the precise ambit of the case is not always easy to identify both in respect of fact and law. Accordingly, I am not confident that the issues are as narrow as that contended for by the plaintiff. Only a narrow document or construction of documents type case would be suitable for the proceeding to remain in this jurisdiction. This is unlikely to be the case, and much of the evidence will come from the defendants as to why they acted as they did in relation to the three matters raised.[17] This may of course include expert evidence. All of this points to Queensland.[18] The plaintiffs have not contended that they would be unable to deal with the case if it was transferred.

22 Secondly, given the undertakings proffered by the defendants' counsel,[19] the suggested procedural advantages of retaining the matter in this Court are of far less relevance. The benefits of case management and the Pilot programme dealing with oppression cases were referred to, as was the substantial obligations of litigants and their advisors under the Civil Procedure Act 2010 (Vic).[20] However, the position in the Supreme Court of Queensland is not entirely dissimilar.[21] Further, I am not entirely satisfied, having read the affidavits and submissions and having heard the oral argument of counsel, that this proceeding is necessarily the small private company type proceeding suitable for continuation in the Pilot programme.

23 Thirdly, all of the factors referred to in s 1337(L),[22] which I am obliged to take into account, are met. The principal place of business is Queensland. The events, essentially comprising the conduct and decision of the directors of CHP took place in Queensland. Queensland it is.

24 Finally, in all of the circumstances and in the exercise of my discretion, having read the affidavits filed and the written submissions of the parties, and having heard their helpful oral submissions, I am of the opinion that this case belongs in Queensland, and it is accordingly in the interests of justice to transfer the proceeding to the Supreme Court of Queensland on the basis of the undertakings referred to.

[1] Affidavit of Stephen James Powell dated 8 October 2015, [9]-[11] (Powell affidavit).

[2] Ibid, [21]; Exhibit SJP-4 to Powell affidavit; Affidavit of James Dick dated 15 September 2015, [4] (Dick affidavit).

[3] Dick affidavit, [7]-[8]; Powell affidavit, [30]-[32].

[4] Dick affidavit, [10], [11], [15]-[16].

[7] Dwyer v Hindal Corporate Pty Ltd [2005] SASC 24; (2005) 52 ACSR 335, [13]-[14] (Debelle J).

[9] BHP Billiton Limited v Schultz [2004] HCA 61; (2004) 221 CLR 400, [7]-[11] (Gleeson CJ, McHugh and Heydon JJ) (Schultz); Irwin v State of Queensland [2011] VSC 291, [14(b)].

[10] Schultz, [13]; Irwin v State of Queensland [2011] VSC 291, [14(g)].

[13] Bourke v State Bank of New South Wales (1988) 22 FCR 378, 394 (Wilcox J).

[14] Schultz, [21]; James Hardie & Coy Pty Ltd v Barry [2000] NSWCA 353; (2000) 50 NSWLR 357, [15]-[20](Spigelman CJ) and [112] (Mason JA).

[15] [2007] WASC 246 (Resource Equities).

[17] In this respect the case has similarities with Resource Equities and the consideration of Martin CJ referred to above is with respect helpful and appropriate.

[18] A further and not irrelevant consideration is that if the plaintiff obtains the relief sought any further disputation (including a not unlikely deadlock) would best be dealt with in Queensland.

[19] Namely (1) To seek, as soon as practicable, orders 1-8 and 11-12 of the proposed orders exhibited to the affidavit of William Timothy Fitzgerald sworn 23 October 2015 as exhibit WTF1, and an order that the proceeding be entered into the Commercial List; and (2) To disclose critical documents to the plaintiff pursuant to section 26 of the Civil Procedure Act 2010 (Vic) within 14 days of this order.

[20] Including the disclosure of critical documents under s 26 of the Civil Procedure Act.

[21] The position was described in the affidavit of William Timothy Fitzgerald sworn 23 October 2015.

[22] See [13] above.