Plaintiffs v Defendants

Supreme Court of Victoria|2008-04-04|Before: Hollingworth J

Courts - Cross-vesting - Application for transfer to South Australia - Interests of justice -Transfer ordered - Jurisdiction of Courts (Cross-vesting) Act 1987 s5(2)(b)(iii).

1 On 4 March 2008, the plaintiffs commenced this proceeding in the Commercial List. It concerns an agreement between the plaintiff companies and the defendants, two of their former senior executives. The plaintiffs allege that the defendants have failed to comply with certain terms of the agreement by which their employment was terminated, and have also invalidly purported to exercise certain rights granted by that agreement.

2 The defendants filed their appearance on 11 March 2008, together with a summons seeking to transfer the proceeding to the Supreme Court of South Australia. The application is supported by two affidavits of Jonathan Charles Clarke, sworn 7 and 13 March 2008, respectively. Mr Clarke is a partner of Cowell Clarke, a firm of solicitors based in South Australia. In opposing the application, the plaintiffs rely upon the affidavit of David Neil Gerber, sworn 13 March 2008. Mr Gerber is a senior legal associate at the Melbourne office of Freehills, the solicitors for the plaintiffs.

3 The application is made pursuant to s5(2) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Vic) ("the Act"), which relevantly provides:

(a) a proceeding ... is pending in the Supreme Court (in this subsection referred to as the first court); and

(iii) it is otherwise in the interests of justice that the relevant proceeding be determined by the Supreme Court of another State or of a Territory -

the first court shall transfer the relevant proceeding to that other Supreme Court.

4 The general principles to be applied to such an application are not disputed, having been considered in detail by the High Court in BHP Billiton Limited v Schultz.[1]

5 In deciding the application, the court must consider whether it is in the interests of justice that the proceeding be heard in the Supreme Court of another state. This involves the court undertaking a "nuts and bolts management decision",[2] to decide which court is the "more appropriate" forum,[3] in the sense that it has the most real and substantial connection with the subject matter of the proceeding. It is not necessary to conclude that the proceeding has been issued in a "clearly inappropriate" forum.[4]

6 The possible connecting factors have been described as "legion"[5]. Factors which may be relevant include, but are not limited to: the connection between the parties, the alleged conduct and the jurisdiction; the governing law of the dispute; any choice of jurisdiction clause; and issues of cost and convenience to the parties, including where the parties and witnesses live and carry on business. Not all of these factors appear in each case, and those present will adopt varying degrees of relevance in different cases.

7 If it appears that it is in the interests of justice that the proceeding be determined by another Supreme Court, then s5(2) obliges the court to transfer it; the legislation does not afford a discretion not to make such an order.[6]

8 Between January 2005 and August 2007, the first defendant was employed as the chief executive officer, and the second defendant as strategic manager, of the second plaintiff. The terms of their employment were governed by service agreements dated 17 December 2005. The defendants were also directors of subsidiary companies in the Beston Parks group of companies, of which the plaintiffs are members, and held units in various trusts pursuant to a subscription agreement.

9 On 9 August 2007, the defendants signed a letter which recorded the terms on which they were to resign, including as directors of various group companies ("the separation letter"). Pursuant to that letter, the defendants were to receive a number of warrants for shares and units, which had to be exercised by certain dates.

10 The plaintiffs plead that it was a "fundamental term" of the separation letter that the defendants would agree to all amendments to the subscription agreement reasonably required to give effect to the terms of the separation letter.

11 The plaintiffs' lawyers provided the defendants with proposed amendments to the subscription agreement, however the defendants have refused their consent to the amendments. The plaintiffs plead that the refusal of consent is unreasonable. The plaintiffs seek injunctive relief compelling the defendants to execute all documents necessary to amend the subscription agreement.

12 Although a defence has not been filed, the defendants' solicitors have asserted in correspondence that the proposed amendments are not necessary, because the separation letter itself operates to amend the subscription agreement in the manner provided for by the agreements which the plaintiffs wish the defendants to sign.

13 On 8 November 2007, the defendants purported to exercise the warrants. The plaintiffs allege that the exercise of the warrants is not valid, and that the warrants have since lapsed. The plaintiffs seek declarations to that effect.

Connection between the relevant conduct and the jurisdiction

14 The plaintiffs' case concerns the meaning and effect of the separation letter, which was negotiated and agreed in Adelaide. Tender of payment on the purported exercise of the warrants also occurred in South Australia.

15 Apart from some alleged communications between the plaintiffs' solicitors in Melbourne and the defendants' solicitors in Adelaide, the subject matter of the proceeding otherwise has no connection with Victoria.

16 The separation letter contains a clause in the following terms:

This letter ... is governed by the laws of South Australia and the parties submit to the non-exclusive jurisdiction of the courts of South Australia.

17 This case essentially involves the construction of the separation letter. The only matters so far pleaded are based on the common law of contract. There is no dispute that the legal principles to be applied will be the same, or substantially the same, in Victoria and South Australia. I regard the choice of law clause as a neutral factor here.

18 A contractual clause requiring parties to litigate in a particular jurisdiction can be a critical factor in an application under s5(2) of the Act, where, for example, it can be said that the existence of the clause demonstrates the parties turned their mind to where the proceeding would be litigated and agreed upon a single exclusive venue, cognisant of the potential inconvenience of litigating in a particular location.[7] However, the jurisdiction clause in this case is non-exclusive and does not compel the parties to litigate in South Australia. It is, nevertheless, a factor in favour of transfer.

19 The plaintiffs point out that the subscription and service agreements are both governed by the law of NSW and contain non-exclusive submissions to the jurisdiction of the NSW courts. Although those agreements are mentioned in the statement of claim, and are likely to be in evidence at trial, they are not being sued upon here; their choice of law and jurisdiction clauses are therefore not directly relevant. The most that might be said about them is that in the original agreements governing their relationship, the parties agreed that it would not be inconvenient or inappropriate for disputes between them to be litigated outside South Australia and in NSW.

20 The first plaintiff was incorporated in Victoria[8] and the second and third plaintiffs in South Australia. All plaintiffs have their registered offices and principal places of business in South Australia.

21 The plaintiffs' directors live in NSW and the ACT. If any of those directors wish to be present during the trial, they would need to travel interstate, whether the trial is heard in Melbourne or Adelaide. There is no evidence as to who is actually providing instructions to the plaintiffs' solicitors, and where such persons live.

22 The business of the Beston Parks group involves the management of many caravan parks located throughout Australia, including Victoria and South Australia. However, as this case is not concerned with the conduct of those businesses, that fact has little, if any, relevance to this application. Similarly, the fact that the third plaintiff has assets in Victoria has no apparent relevance to this application.

23 The plaintiffs currently anticipate that they will call little, if any, oral evidence at trial. They perceive the case as essentially involving the construction of a written document, to be determined by reference to documentary evidence. However, if the plaintiffs do call evidence in relation to the subscription agreement, they only intend to call one witness, who lives in Victoria. That witness was not identified by name or position. Nor was there evidence of any particular inconvenience, were the witness required to give evidence in Adelaide.

24 The defendants are natural persons who live in Adelaide. Although it is said that they conduct "their principal business" in Adelaide, there is no evidence before me as to what that business is. It is said that the defendants will give evidence of the negotiations leading to the separation letter, comprising discussions which took place in Adelaide on 8 and 9 August 2007. They will also give evidence of the reasonableness of the proposed amendments to the subscription agreement, having regard to the negotiations. There is no material before me to suggest that their evidence in relation to those matters would be particularly lengthy. Nevertheless, as parties, I assume that they may need or wish to be present throughout the trial.

25 The plaintiffs argue that the nature of the defendants' evidence may be appropriate for video-link facilities. That may be so. But, not yet having seen a defence (or any counterclaim), it is too early to determine whether or not there are likely to be issues of credit, which might best be assessed by seeing the witnesses in person.

26 The plaintiffs also argue that, as Victoria is located between South Australia and NSW, it is equally convenient to the defendants and the directors of the plaintiffs to travel to Victoria. This is a rather curious submission, as it is not apparent why the interest of justice would require that both sides be inconvenienced by having to travel interstate for a trial.

27 Neither side led evidence that they or their witnesses would be unable to attend court to give evidence or instruct lawyers - whether the proceeding was held in Victoria, South Australia or elsewhere in Australia - or that there are reasons why doing so would pose inconvenience out of the ordinary. Nevertheless, I infer that the likely inconvenience to the defendants, as natural persons, of conducting litigation interstate would be greater than the inconvenience to the corporate plaintiffs, which own or conduct substantial businesses on a national scale.

28 Finally, all documents in the defendants' possession which are relevant to the proceeding are located in Adelaide. There is no evidence about the type or volume of such documents. However, given the nature of the plaintiffs' case, it seems unlikely that they would be so voluminous as to make their transportation to Melbourne expensive or impracticable.

29 Both parties sought to place weight on the location of their solicitors.

30 The plaintiffs' firm of solicitors, Freehills, is a national firm. However, the lawyer with the conduct of the plaintiffs' file, Nick Wormald, works from Freehills' Melbourne office. Freehills does not have an office in South Australia, and would have to engage Adelaide agents were it to continue to act. Freehills has been retained by companies in the Beston Parks group since 2004, and was responsible for drafting the subscription agreement, the proposed amendments to it and the separation letter.

31 The defendants' firm of solicitors, Cowell Clarke, has represented the defendants in relation to the matters the subject of this proceeding since the middle of last year. Cowell Clarke is a South Australian firm, which does not have an office in Victoria. It has engaged Norton Gledhill as its Victorian agent in this proceeding.

32 On the material before me, it seems likely that each side will continue to use its current solicitors as the principal solicitors, whatever the outcome of the transfer application. One side or the other will therefore have to engage a local agent, as well as their principal solicitors, whether the proceeding is transferred or not. There may be some additional costs incurred through that process, but neither side has led evidence that the engagement of a local agent would cause serious inconvenience or prevent them from properly conducting the proceeding.

33 The practice of a firm engaging an interstate agent is not uncommon, and the majority of the expense of obtaining instructions and preparing documents is likely to remain with the principal solicitors. The prospect of travel between Victoria and South Australia by members of the principal firm is less difficult and costly a prospect than it once was.[9]

34 I therefore regard the location of the individual solicitors who are currently handling the proceeding as a neutral factor.

35 The plaintiffs argue it is in the interests of justice that the proceeding remain in Victoria, because they have chosen to commence the proceeding in the Commercial List, have incurred the cost of issuing in that List, and wish to take advantage of the expeditious processes of the List.

36 The concept that a plaintiffs' choice of forum should not lightly be disregarded is important in considering an application for a stay on the basis of forum non conveniens principles. But the High Court has affirmed that it is inappropriate to start from a presumption, in determining the interests of justice under s5(2), that a plaintiff's initial choice of forum carries independent weight.[10]

37 It may, however, be relevant to consider whether a particular court or jurisdiction has a relevant specialist expertise, or procedures which are particularly suited to the type of case. The Commercial List procedures are designed to ensure the expeditious determination of commercial disputes. However, the Supreme Court of South Australia is also experienced in determining contractual disputes such as this. There is no reason to believe that it could not determine this proceeding with reasonable expedition, particularly if, as appears to be the case, both parties have a commercial interest in ensuring the matter is dealt with relatively expeditiously.

38 It is true that the plaintiffs have incurred the additional expense of the Commercial List filing fee, which will not be recoverable if the proceeding is transferred to South Australia. However, I do not consider the expenditure of approximately $3,000 to outweigh the likely additional expense and inconvenience to the defendants if the proceeding remains in this court.

39 The plaintiffs argue that the transfer should be refused because of delay on the part of the defendants. The plaintiffs also complain that, if the proceeding is transferred, they will incur the expense, inconvenience and delay of "starting again".

40 On 25 January 2008, the plaintiffs' solicitors sent Cowell Clarke a letter enclosing a proposed statement of claim, which was headed with the court header of this court. Cowell Clarke did not respond to that letter. In particular, the solicitors did not communicate any objection to the issuing of the proceeding outside South Australia.

41 The defendants' first objection to this forum came by way of a letter from Cowell Clarke to Freehills dated 5 March 2008, in which Cowell Clarke sought the plaintiffs' consent to a transfer of the proceeding, which had been issued and served the previous day.

42 I am not persuaded that there has been any relevant delay here. The defendants objected to the plaintiffs' chosen forum as soon as practicable after service, and before the plaintiffs took any substantial steps in the proceeding. If the proceeding is transferred, it will continue from the point reached in the proceeding, which is a very early stage.

43 In cases such as these, it will often be clear, after taking into account relevant connecting factors, which of the "competing" courts is the more appropriate to hear the case, and orders are made (or refused) accordingly. By and large, it has not been necessary for courts to positively determine whether the party seeking the transfer has to satisfy any onus of proof.

44 There has been an apparent divergence of judicial opinion on the question of onus, starting with the judgment of Rogers AJA in Bankinvest v Seabrook & Ors. His Honour stated that, in applications such as these:

The only lodestar that a judge may steer by is, what do the interests of justice dictate should be done? It is inapt to speak in terms of onus. Bearing in mind that the Court may make an order of its own motion [pursuant to s5(7) of the Act] the language of onus being discharged is inappropriate.[11]

45 Following Bankinvest, judges who expressed dissatisfaction with Rogers AJA's views largely sought to characterise his comments either as limiting the absence of onus to transfers made on the court's own motion under s5(7), rather than applications made by a party under s5(2),[12] or sought to split the question of onus into two, stating the applicant for transfer has the burden of placing before the court sufficient evidence to enable the court to determine it is in the interests of justice to transfer the proceeding, and limiting the effect of the comments to the court's exercise in determining, based on the evidence so tendered, which course of action is in fact in the interests of justice. Kearney J in the Northern Territory Supreme Court characterised this as a forensic onus, as opposed to a legal one.[13]

46 In Schulz, Gummow J referred to the judgment of Rogers AJA, confirming that s5(7) of the Act indicates "it is inapt to speak of the applicant for an order of transfer bearing a burden of persuasion analogous to onus of proof." His Honour went on to comment, "it would be inaccurate to describe the decision upon a transfer application as administrative, by some analogy to the orders made with no lis inter parties in the administration of assets or of trusts by courts of equity".[14] That view was not expressly endorsed by the other members of the court, although no other judges expressly disagreed with His Honour's view.[15]

47 The views of Gummow J have subsequently been embraced by courts with varying degrees of enthusiasm.

48 Gillard J rejected the comments of Gummow J, preferring instead to limit the "no onus" approach to applications under s5(7),[16] asserting that the applicant for transfer carries a burden. Although acknowledging the question of that burden is often beside the point, because the interests of justice will usually clearly favour one court over another, His Honour said, "nevertheless, where the factors favouring a transfer and those against are equal, the burden of proof will have a part to play".[17]

49 Dodds-Streeton J and Whelan J have subsequently stated that, of the positions espoused by Gummow J and Gillard J, Gummow J's view was the more persuasive,[18] Whelan J conceding that, if there is any onus, it has a very limited role.[19] However the question of onus was of limited relevance to the cases before their Honours.

50 In Holt v Forehan,[20] Harper J stated:

I respectfully agree with Gummow J that it is inapt to speak of an applicant for an order for transfer as bearing a burden of persuasion analogous to an onus of proof. In so far, however, as Rogers AJA held that such an applicant bears no burden at all, I respectfully disagree. Unless the court decides that it is in the interests of justice that the proceeding be determined elsewhere, it will stay where it is. There are two inter-related reasons why this must be so. First, an application for transfer must fail if the considerations in favour of transfer are no more persuasive than the considerations in favour of retention - as, likewise, any court-initiated steps towards a transfer [pursuant to s5(7)] must in those circumstance cease... Secondly, and of more importance, the legislation only allows the transfer of a proceeding if it appears to the court to be in the interests of justice that the proceeding be determined elsewhere. This is the other side of the cross-vesting scheme: where the interests of justice do point to a transfer, the first court has no discretion. The proceeding must be determined by the other court.[21]

51 His Honour described this "burden of persuasion" not as analogous to the onus of proof such as that which faces an application seeking transfer on the basis of forum non conveniens. In such cases, if the (first) court's jurisdiction has been regularly invoked, the applicant for transfer must convince the court it is a clearly inappropriate forum. Rather, in His Honour's view, applicants for transfer under s5(2) "need to no more than make it appear to the court that, in the interests of justice, the proceeding should be determined elsewhere; and will not face any kind of presumption about where the interests of justice might come down".[22]

52 In Eden v Amaca Pty Ltd & Ors,[23] Kaye J cited Harper J's comments in Holt v Forehan, however determined it was not necessary for him to decide the issue of onus of proof. However, His Honour considered the express terms of s5(2) to impose an "onus of persuasion" whereby the applicant for transfer must persuade the court that it is in the interests of justice that the Supreme Court of another state determine the case.[24]

53 During the course of oral submissions, I was concerned at the absence of the type of evidence which one often sees in cases such as these, addressing the particular inconvenience or prejudice of litigating in the competing fora. I was concerned that this might end up being a case in which the competing factors were so evenly balanced that the court would have to make a decision in which the question of onus played a part. Accordingly, I asked the parties to provide me with written submissions on the question of onus. Both sides provided very helpful submissions.

54 However, on further reflection, I have decided that this is not as finely balanced a case as I first thought. I am satisfied that South Australia is the more appropriate forum, for a number of reasons. The parties are essentially South Australian parties. The events in question largely occurred in Adelaide. The proceeding is based on a contract, under which the parties have agreed to submit to the jurisdiction of the South Australian courts. There is little to connect the proceeding with Victoria. The proceeding is at a very early stage and the defendants have not delayed in making the application. There is no reason to believe the Supreme Court of South Australia would not be able to manage and determine this proceeding with reasonable expedition.

55 In coming to that decision I reject the plaintiffs' alternative submission that, if the court concludes that the proceeding ought to be transferred from Victoria, then it would be more appropriate to transfer it to NSW than South Australia. The plaintiffs made no such application for transfer to NSW, they simply pointed out that the court could do so on its own motion under s5(7) of the Act. But the connecting factors with NSW are not much stronger than the connecting factors with Victoria.

56 For these reasons, I am satisfied that the interests of justice require that the proceeding be transferred to the Supreme Court of South Australia.

[1] [2004] HCA 61 ("Schultz").

[2] Schultz per Gleeson CJ, McHugh and Heydon JJ at [13] citing with approval Bankinvest v Seabrook (1988) 14 NSWLR 711 per Street CJ at 713-714.

[3] Schultz per Gleeson CJ, McHugh and Heydon JJ at [14].

[4] Schultz per Gleeson CJ, McHugh and Heydon JJ at [14].

[5] Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460 at 465 per Templeman LJ, cited in Bankinvest AG v Seabrook (1988) op cit at 728 per Rogers AJA.

[6] Schultz per Gleeson CJ, McHugh and Heydon JJ at [14].

[7] Slater & Gordon v Porteous [2005] VSC 398, particularly [26] and [34].

[8] In paragraph 4 of his first affidavit, Mr Clarke deposed that the first plaintiff was incorporated in South Australia. In paragraph 7(b) of his affidavit, Mr Gerber deposed that the first plaintiff was incorporated in Victoria. The company search confirms Mr Gerber's evidence that the first plaintiff was indeed incorporated in Victoria.

[9] Contract Media Sales (Aust) Pty Ltd v Roads & Traffic Authority of NSW [1999] VSC 391 per Beach J; Ross Mollison Group Pty Ltd v The Really Useful Co (Aust) Pty Ltd [2000] VSC 256 per Warren J; Toll (FHL) Ltd v Finemore [2001] VSC 467 per Warren J; Internet Business Systems Australia Pty Ltd v Webb & ors [2007] VSC 347 at [34] per Hollingworth J. See also Ewins v BHP Billiton Ltd [2005] VSC 4 per Gillard J at [38].

[10] Schultz, op cit per Gleeson CJ, McHugh and Heydon JJ at [25].

[11] Bankinvest v Seabrook & Ors, op cit at 727.

[12] See, for example, Mason P in James Hardie & Co Pty Ltd v Barry [2000] NSWCA 353; (2000) 50 NSWLR 357 at 380.

[13] Toren Fishing & Trading Pty Ltd v McKenzie Family Nominees Pty Ltd & Ors [1995] NTSC 57; [1995] 4 NTLR 195 at 211.

[15] See Schultz per Hayne J at [177] (who expressly agrees with the reasons of Gummow J), per Gleeson CJ, McHugh and Heydon JJ at [25], per Kirby J at [168] and per Callinan J at [258]. A useful explanation of the decision in Schulz is found in McLeod v Munro [2005] VSC 375 at [37].

[16] See Ewins v BHP Billiton op cit at [19]-[21]. Gillard J cites, amongst others, another of his decisions, McKee v Rudy Van Haften & Anor [2001] VSC 251, where he also cited with approval the comments of Mason P in James Hardie & Co Pty Ltd v Barry (see footnote 12 above).

[17] Ewins v BHP Billiton op cit at [23].

[18] In McLeod v Munro op cit at [37] and Slater & Gordon v Porteous op cit at [21] respectively.

[19] Slater & Gordon v Porteous, ibid at [22].

Courts (Cross-vesting) Act 1987

At a glance

Court

Decision date

Before

Source

Judgment (85 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (2)