Quadrant Private Equity No. 1 LP & Ors v Hewlett Packard Emea Holdings II BV

LEGISLATION CITED : Jurisdiction of Courts (Cross-Vesting) Act 1987

Bankinvest AG v Seabrook (1988) 90 ALR 407 BHP Billiton Ltd v Schultz (2004) 221 CLR 400 CASES CITED : Erg Transit Systems Ltd v Keane Australia Micropayment Consortium Pty Ltd [2009] NSWSC 1296 James Hardie & Coy Pty Ltd v Barry (2000) 50 NSWLR 357 Valceski v Valceski (2007) 70 NSWLR 36

Quadrant Private Equity No. 1 LP (First Plaintiff) PARTIES : Hoff Company No. 1 Pty Limited (Second Plaintiff) Berend John Phillip Hoff (Third Plaintiff) Hewlett Packard Emea Holdings II BV (Defendant)

COUNSEL : Mr T Marskell (Plaintiffs) Mr P Corbett (Defendant)

SOLICITORS : Baker & McKenzie (Plaintiffs) Norton Rose (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

2010/00212464 Quadrant Private Equity No. 1 LP & Ors v Hewlett Packard Emea Holdings II BV

The notice of motion 1 The defendants in these proceedings, Hewlett Packard EMEA Holdings, II BV ("HP"), move on a notice of motion dated 19 July 2010 to have the proceedings transferred to the Commercial and Equity Division of the Supreme Court of Victoria, pursuant to Section 5(2) of the Jurisdiction of Courts (Cross-Vesting) Act 1987. 2 The plaintiffs - Quadrant Private Equity No. 1, LP, Hoff Company No 1 Pty Ltd, and Berend John Phillip Hoff (''Quadrant and Hoff')- oppose the motion to have the proceedings so transferred. 3 There is a subsidiary issue regarding whether the Court should, as the defendants suggested, order the parties to attempt mediation. The plaintiffs indicated that they would not oppose such an order to mediate if the motion to transfer the proceedings was dismissed, and a relatively early hearing date was set for these proceedings. In the circumstances, the Court had indicated that it was appropriate that the motion to transfer the proceedings first be dealt with. However, the parties were invited to address as to the appropriate steps for future case management in light of this judgment. 4 HP seeks to have the proceedings transferred to Victoria so that they can be combined with proceedings the HP has issued in that State against Quadrant and Hoff. HP contended that the New South Wales proceedings had a subject matter that was inseparably linked to the Victorian proceedings it had issued. Quadrant and Hoff contended that there was no overlap between the subject matter of the New South Wales and Victorian proceedings. Relevant background 5 The contracts in question between the parties were entered into in 2008, and concerned the takeover by HP of a company in which Quadrant and Hoff parties were shareholders. 6 The relevant contracts contained a dispute resolution mechanism which provided that if there were disputes regarding warranties given by the Quadrant and Hoff parties, HP would notify the Quadrant and Hoff parties. 7 8 May 2010 was the cut off date for all such contractual claims. 8 On 4 May and 7 May 2010 HP gave notice to Quadrant and Hoff of claims relating to breach of warranties given by Quadrant and Hoff. On 7 May 2010 HP issued proceedings to vindicate these claims in the Supreme Court of Victoria. 9 On 11 June 2010, after the cut-off date, HP sent a letter to Quadrant and Hoff claiming substantial additional amounts for claims that were notified within the above-mentioned time limit for notices of dispute. 10 Under the relevant contracts there is a mechanism by which Quadrant and Hoff provided bank guarantees in order to secure claims made under the agreements. Some $20 million was provided between the Quadrant and Hoff parties. 11 Under the relevant contractual provisions, there was an arrangement whereby depending on the amounts claimed in disputes such as the present, the bank guarantees provided by Quadrant and Hoff would be returned and replaced with bank guarantees covering the amount in dispute. 12 Quadrant and Hoff commenced proceedings in this Court on 1 July 2010 seeking that the original bank guarantee be returned and replaced with guarantees sufficient to cover the claims made by HP before the above outlined cut-off date. In other words, Quadrant and Hoff's proceedings seek to enforce their alleged right not to provide security for the additional sums claimed on 11 June by HP.

13 The difference between the parties in relation to the bank guarantee is that Quadrant and Hoff, through the New South Wales proceedings, seeks a declaration that it only needs to provide $2.4 million of new bank guarantees in order to cover HP's claims. In contrast, HP - because it insists the additional sums notified on 11 June are valid claims under the relevant contractual provisions - contends that Quadrant and Hoff must provide new bank guarantees of $7.4 million. 14 Both parties initially contended that they had commenced proceedings first, suggesting this as a consideration in determining the motion to transfer the proceedings. However eventually both parties conceded that this was not a major factor in determining the ultimate issue: cf BHP Billiton Ltd v Schultz (2004) 221 CLR 400 discussed below. 15 As stated above, HP commenced the Victorian proceedings on 7 May 2010. 16 However, Quadrant and Hoff contended the Victorian proceedings had only been served on 20 July 2010. 17 Quadrant and Hoff conceded that it had been aware of the Victorian proceedings before they had been served, but contended that there was no evidence it had been aware before its proceedings were filed in New South Wales. 18 Ultimately, this issue, concerning as it does where proceedings were first commenced, is of little relevance. 19 Quadrant and Hoff conceded that if the motion to transfer failed and its New South Wales proceedings were allowed to proceed, it would not seek damages and thus the suit would be a purely declaratory matter in relation to the bank guarantee issue. 20 As stated above, the parties disagreed as to whether the New South Wales and Victorian proceedings had a subject matter that crossed-over (with HP contending they did and Quadrant and Hoff contending they did not). Quadrant and Hoff's main proposition was that its New South Wales proceedings were confined to the bank guarantee issue, whereas HP's Victorian proceedings constituted a full blown breach of warranty case. Here Quadrant and Hoff contended that the relevant contractual provision for its bank guarantee case did not feature in HP's Victorian proceedings. However, as I understood it, Quadrant and Hoff conceded that in determining the bank guarantee case it would be necessary to determine which of HP's claims were valid under the relevant contractual provisions. HP drew on this factor, contending that this was a substantial overlap between the proceedings. 21 In my view there is real substance in the submission of HP that both the New South Wales and Victorian proceedings inherently require determination of the validity of HP's claims under the relevant contractual provisions. Therefore, as HP contended, there is a major and unavoidable overlap between the two sets of proceedings. An examination of the relevant pleadings shows this to be true. For example, Quadrant and Hoff, in its summons, in summary claims a declaration that the additional amounts claimed by HP on 11 June 2010 are not valid contractual claims, such that Quadrant and Hoff is correct as to the amount of the replacement bank guarantee that it must provide. Similarly, HP in the Victorian proceedings pleads a breach of warranty case and it is a prerequisite to establishing such a case that the claim is permitted under the contractual regime. The relevant principles 22 In Erg Transit Systems Ltd v Keane Australia Micropayment Consortium Pty Ltd [2009] NSWSC 1296 I summarised the relevant principles in determining whether to transfer proceedings under the Jurisdiction of Courts (Cross-Vesting) Act 1987:

[8] This requires a "management decision as to which court, in the pursuit of the interests of justice, is the more appropriate to hear and determine the substantive dispute": see Bankinvest AG v Seabrook (1988) 90 ALR 407 at 409, James Hardie & Coy Pty Ltd v Barry (2000) 50 NSWLR 357 at [87] per Mason P, BHP Billiton Ltd v Schultz (2004) 221 CLR 400 at 421 [14], 434 [63].

[9] An applicant for a transfer bears no burden of persuasion or onus of proof : BHP v Schultz (above) at 437 [71]; and no particular significance attends the plaintiff's original choice of forum: see BHP v Schultz (above) at 425 [26]-[27], 439 [77].

[10] The interests of justice concern those of both parties, and rather than the selection of the most advantageous, or least disadvantageous, forum for one of them, the "interests of justice" are to be judged by more objective factors, such as to facilitate identification of the "natural forum", in which objectively judged it might be expected that the dispute would fall to be resolved, with its concomitant juridical advantages and disadvantages for each party, whatever they may be: see Valceski v Valceski (2007) 70 NSWLR 36 at 60 [69] per Brereton J.

[11] In James Hardie & Coy Pty Ltd v Barry (2000) 50 NSWLR 357, Mason P at [95] endorsed the following useful checklist of factors, namely: application of substantive law; forensic advantage or detriment conferred by procedural law; the choice made by a plaintiff or a forum and the reasons for that choice; substantive connections with the forum; balance of convenience to parties and witnesses; and convenience to the Court system.

[12] In light of the decision of the High Court in BHP v Schultz , care must be taken in relation to the third bullet point. No particular significance is now attached to the original choice of forum. 23 The parties were in agreement that in relation to the above factors listed by Mason P, factors one, two, and five were entirely neutral. 24 In relation to factor three, as has been explained above, the fact that the Victorian proceedings were started first is of limited weight. Also in relation to factor three, HP placed weight on the fact that the relevant agreements between the parties contained a clause in which the parties agreed to submit disputes to the non-exclusive jurisdiction of the Victorian courts. Quadrant and Hoff, in response to this point, drew on several authorities which were said to support the proposition that a non-exclusive jurisdiction clause is but one factor in deciding cross-vesting applications. 25 In relation to factor four, one of the Quadrant and Hoff parties is resident in New South Wales. [The relevant underlying assets were spread throughout other jurisdictions, both domestic and international].

26 In relation to factor five, HP did submit that many of the legal representatives are based in Victoria. The correspondence between the parties put before the Court shows that one parties' solicitors appear to be based in Sydney and the other parties' in Melbourne. Both of the parties are represented by relatively large firms of solicitors with offices in both States. Although HP acknowledged in the context of the mediation issue that it was indifferent as to a location, this could not be construed as in any way constituting a concession in relation to the proper venue for any litigation.

27 Finally, the proceedings are at too early a stage to have regard to the location of potential witnesses. Decision 28 In my view the relevant management decision as to which Court, in the pursuit of the interests of justice, is the more appropriate to hear and determine the substantial dispute in all the circumstances is the Supreme Court of Victoria. ******************

02/08/2010 - In paragraph 8, 6 May changed to 4 and 7 May 2010; In paragraphs 9, 12 and 13, 11 May changed to 11 June. In paragraph 15, 11 May changed to 7 May 2010. - Paragraph(s) 8, 9, 12, 13 and 15

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.