Rothwells Ltd (in liq) v Connell [1995] QSC 30

A. Connell is a creditor of the Company in the sum of $51,700,000.00 ("Connell's Admitted Claim") being made up of:-

B. Connell claims but the company denies that Connell is a creditor of the Company in a further sum of $63,500,000.00 ("Connell's Disputed Claim") being made up in the manner appearing in the First Schedule.

C. Lenoc, being a company associated with Connell, is a creditor of the Company in the sum of $25,000,000.00 ("Lenoc's Claim").

D. The Company claims to be a creditor of Connell and/or Oakhill and/or Dalleagles (which they deny) in the sum of $112,800,000.00 (the "Company's Guaranteed Claims") being claims arising under guarantees given either directly or indirectly by Connell to the Company on account of the following companies ...

J. The Provisional Liquidators intend to propose a scheme of arrangement between the Company and its ordinary unsecured creditors the essential features of which are that:-

(1) the depositors with the Company receive 100c in the dollar on their claims as at 3rd November 1988;

(2) the other ordinary unsecured creditors of the Company receive such dividend as is capable of being paid on their claims after the payment of the dividend to the depositors;

(3) the depositors be entitled to the payment of their dividend prior in time to the payment of any dividend to the other ordinary unsecured creditors of the Company

K. Subject to the conditions herein contained the parties have agreed to compromise their respective claims in the manner and upon the terms herein contained."

Clause 1 of the agreement was later varied. As varied, it provided:

"1. Connell hereby covenants and agrees with the Company and the Provisional Liquidators that he will forthwith upon service on him of a written direction from the Provisional Liquidators or either of them (which direction shall only be given in the event that the Scheme is approved by the Supreme Court of Queensland and that Court or the Supreme Court of Western Australia declares that it is proper for the Company to make an allotment of ordinary shares in its issued capital to Connell) apply for the allotment to him of the remainder of the unissued shares of $0.50 each in the capital of the Company (the "Shares") at such premium as the Provisional Liquidators or either of them may direct and the Company hereby agrees that it will upon receipt of that application for the allotment of the Shares allot the Shares to Connell PROVIDING that the total allotment value shall not exceed $50 million."

"2. Connell and the Company agree that the allotment price of the Shares shall be satisfied by Connell hereby releasing and discharging the Company from all of its liabilities and obligations to Connell in respect of the Subordinated Loan.

3. Connell hereby covenants and agrees with the Company to pay to it the sum of $12,000,000.00 on the third anniversary of the date upon which the Supreme Court of Queensland (the "Court") approves the Scheme.

6. Lenoc hereby releases and forever discharges the Company from any and all liabilities and obligations which it may have in respect of Lenoc's Claim or any part thereof and hereby indemnifies and agrees to hold the Company harmless in respect of any action claim or demand which may be made against the Company in respect of Lenoc's claim or any part thereof.

7. Each of Connell, Mrs Connell, Dalleagles and Oakhill hereby release and forever discharge the Company from any and all liabilities and obligations they or any of them or any two or more of them may have against the Company including any claims which Connell may have in respect of the deposit of $1,700,000.00 made by Connell with the Company or any part of that deposit and in respect of Connell's Disputed Claim and they and each of them hereby indemnify and agree to hold the Company harmless in respect of any action claim or demand which may be made against the Company either in respect of that deposit or any part thereof or in respect of Connell's Disputed Claim or any of them or any other claim which they or any of them may have against the Company ...

8. The Company in consideration of the covenants on the part of Connell, Dalleagles and Lenoc which are herein contained hereby releases and forever discharges each of Connell and Mrs Connell from all actions claims and demands which it may have against them or any of them and ...

13. This Deed shall be of no effect until it is approved by an order of the Supreme Court of Queensland and the Company and the Provisional Liquidators will use their best endeavours to obtain such approval.

15. This Deed shall operate to bind the parties hereto who have executed the same notwithstanding that Katanning may not have executed it or a counterpart copy of the same."

A scheme of arrangement was approved by this Court on 19 July 1989 and, it seems, on the same day the Court authorised Rothwells and the provisional liquidators to enter into and perform the deed. It is unnecessary to refer in detail to the provisions of the scheme for present purposes.

On 22 September 1989, the Court ordered that Rothwells be wound up on its own application, and Messrs Tuckey and Ferrier were appointed liquidators.

Despite demand from Rothwells, Connell did not pay the sum of $12 million when it fell due under clause 3 of the deed in July 1992. Thereupon, Rothwells brought the present claim for that amount. Connell responded with a defence and counterclaim against not only Rothwells but also other corporate parties to the deed[2], who were joined in the proceedings as defendants by counterclaim. Those companies have not entered appearances.

The deed was executed by Connell and those companies which executed it on 17th January 1989. Connell alleges without contradiction that it was not executed by Mr. Ferrier nor by Amazone Pty Ltd, both of whom are named in it as parties. The liquidators apparently retained the executed copy but they did not lodge it for stamping in Western Australia until 2nd August 1989. An assessment was issued under the hand of the Assistant Commissioner (Stamp Duties) to the solicitors for the liquidators on 14th January 1991, assessing the amount of stamp duty due at $2,107,150.50. Late lodgment fines at the rate of 40% brought the total payable to $2,950,010.50. The notice of assessment did not identify who was liable to pay the duty, and this is apparently in accordance with the Stamp Act 1921 (W.A.). On 25th January 1991, Rothwells' solicitors forwarded a copy of the notice of assessment to Connell's solicitors. The latter objected to the assessment on behalf of Connell and those associated with him on 21st February 1991. By a letter dated 28th May 1991, the Assistant Commissioner (Stamp Duties) notified those solicitors that their objection had been allowed in part. The duty was reassessed in the sum of $731,339.50 and the fine was reduced to 20%, making a total payable of $877,606.50. Of this, $36,000.00 was assessed under clause 3 and $841,606.50 under clauses 6 and 7. The duty was payable within 14 days of the date of the letter.

Both Rothwells and Connell remained dissatisfied. By letter from its solicitors dated 26th June 1991 to the Assistant Commissioner (Stamp Duties) Rothwells sought an extension of time in which to object to the amended assessment. I have not been told the outcome of that application, nor whether if it was successful, any objection was pursued. By letter dated 28th June 1991 from their solicitors to the Assistant Commissioner (Stamp Duties), Connell and Lenoc asked the Commissioner of State Taxation to treat their objection as an appeal and to forward it to the Supreme Court in accordance with the Rules. That was done on 3rd March 1992, thereby initiating proceedings in that court No 1034 of 1992 between Connell and Lenoc as appellants and the Commissioner of State Taxation as respondent. Since that time no step has been taken in those proceedings.

Under the Stamp Act 1921, the person liable to pay duty is prescribed in respect of each dutiable item in the schedule. Lodging an appeal does not extend time for payment. On 20th June 1991, Connell paid the $36,000.00 assessed in respect of clause 3[3]. Neither he nor Lenoc paid anything toward the assessment in respect of clauses 6 and 7. On 28th June 1991 Connell's solicitors asserted to Rothwells' solicitors, despite the payment by Connell, that all duty under the deed was payable by the liquidators. They advised the liquidators on 17th July that the duty imposed upon Lenoc had not been paid and would not be paid, at least pending determination of the appeal against assessment. It seems they overlooked the fact that the duty assessed under clauses 6 and 7 of the deed was based not only on the $25,000,000.00 released by Lenoc but also on the $1,700,000.00 released by Connell. The mistake would be understandable since the assessment did not itemise the duty assessed.

The continued non-payment of the balance of the assessment led the Commissioner to institute recovery proceedings, in the Supreme Court against Lenoc and in the District Court against Connell. He obtained summary judgment against Lenoc on 15th July 1994 for nearly $1.2 million dollars (including interest) and there is no suggestion of any appeal. An application for deregistration of Lenoc as a defunct company has been filed with the Australian Securities Commission. Against Connell the Commissioner claimed $44,654.55 as the amount of the assessment, $8,930.00 as the amount of the fine for late lodgment and a further $8,930.00 for late payment, a total of about $62,515.00. That amount apparently is in respect of clauses 6 and 7 of the deed, although how it is calculated is unclear. The Commissioner's application for summary judgment was refused.

All duty payable in Queensland has, I was told, been paid.

The action commenced with a specially indorsed writ issued by Rothwells on 21st July 1992. That writ was also indorsed for service in Western Australia. Connell promptly entered a conditional appearance and applied to have the action stayed on two bases: first, that the action was not one in which the writ could be served out of the jurisdiction; and second, that the deed referred to in the indorsement was on its face void. The first basis depended upon whether payment under clause 3 of the deed was required to be made in Queensland; the second was said to be the consequence of the failure to stamp the deed pursuant to the Stamp Act 1921. At the same time, Rothwells applied for liberty to proceed and for summary judgment. Those applications were heard by Moynihan J. on 1st September 1992. On 2nd October, he ordered that the proceedings be stayed[4].

From that order, Rothwells appealed to the Court of Appeal. The appeal came on for hearing on 26th May 1993 but was adjourned because notices had not been given to the Attorneys-General pursuant to s. 78B of the Judiciary Act 1903. The material before me does not disclose which party was then proposing to raise arguments requiring the giving of such notices. However on the following day Rothwells took out a summons returnable before the chamber judge seeking orders that the stay be lifted and the writ be amended, and liberty to proceed. Before that application was heard Connell's solicitors, in response to a query from Rothwells' solicitors, advised the latter that they did not then hold instructions to make "a cross-vesting application", but that one might be made in the future.

That application was heard by Thomas J. on 10th June 1993. It proceeded on the basis that the order made by Moynihan J. had been correct on the evidence before him; but that (as was the fact), the duty owing in respect of clause 3 of the deed (the clause upon which Rothwells relied) had been paid. It was argued that this allowed the admission into evidence of (and validated) the deed so far as relevant to the proceedings. On 1st July 1993, Thomas J. dismissed that application[5]. His Honour held that the case did not permit the piecemeal approach contended for by Rothwells. From that decision also Rothwells appealed.

The two appeals came on for hearing together on 15th November 1993 . On 30th November 1993 the Court of Appeal allowed both appeals and removed the stay[6]. Perhaps through inadvertence, no order was made in relation to the amendments sought in the application to Thomas J., nor was Rothwells granted liberty to proceed.

Following the allowance of the appeal Connell made two responses. First, he took out the summons containing the present application ("the cross-vesting application") on 7th December 1993. Second, on 21st December 1993 he applied for special leave to appeal to the High Court. Thereupon, the cross-vesting application was adjourned to a date to be fixed. In the meantime, Connell delivered a defence and counterclaim in draft form. Presumably this enabled Rothwells to get on with the action while the High Court proceedings were pending. The High Court refused special leave on 13th May 1994 and Connell forthwith entered an unconditional appearance and delivered his defence and counterclaim[7].

Rothwells did not deliver a reply and answer immediately, but proceeded to have the cross-vesting application brought on for hearing. That occurred on 3rd June 1994. However the hearing was adjourned due to late delivery of material on behalf of Connell[8]. The reply and answer was not delivered until 30th June 1994. Connell showed no anxiety to relist it and it was again relisted by Rothwells for hearing on 14th October 1994. When the application came before me on that date, Connell sought a further substantial adjournment which I refused. However I did allow an adjournment of one week. The application finally came on for hearing on 21st October, and I then reserved my decision.

That however was not the end of the skirmishing. On 11th November, Rothwells applied to me for the matter to be relisted, an application opposed by Connell but to which I acceded. It was relisted on 12th December, and I then permitted Rothwells to reopen its case and adduce further evidence. I ordered Rothwells to pay the costs of the additional hearings and again reserved my decision.

Although the defence does not admit the execution by Connell of the deed sued on by Rothwells, the affidavits filed on his behalf make it plain that there is no contest on this point. Rather, the defence seeks to avoid the apparent effect of the deed in several ways. First, there are a number of grounds of defence asserting invalidity as a result of defects relating to the execution of the deed. Second, there are a number of grounds relating to clause 1 of the deed as originally executed. These may variously be characterised as mistake, failure of consideration and failure of conditions subsequent. Third, there is the assertion of a right to have the deed set aside pursuant to s. 87 of the Trade Practices Act 1974. This is based on alleged misleading and deceptive conduct by the provisional liquidators prior to the making of the deed. Finally, various discrepancies between the deed and the scheme of arrangement are alleged as (speaking loosely) unfulfilled conditions subsequent. The counterclaim propounds the claim for misleading and deceptive conduct and also asserts a claim for debt which I find incomprehensible.

By its reply, Rothwells traverses a number of the allegations in the defence and counterclaim; raises alleged estoppels; pleads adoption and affirmation of the deed by Connell; asserts that the Trade Practices Act claim is time barred; and asserts that any rights which Connell might have against it are limited to proof in the winding-up.

Connell's application is brought under s. 5(2) of the Jurisdiction of Courts (Cross-vesting) Act 1987. That subsection provides for the transfer of proceedings pending in this court to the Supreme Court of another State or a Territory. Paragraph (b) of that subsection describes three alternative situations in which such a transfer may be ordered. In the present case, Connell relies upon all three[9].

(i) the relevant proceeding arises out of, or is related to, another proceeding pending in the Supreme Court of another State or of a Territory and it is more appropriate that the relevant proceeding be determined by that other Supreme Court: or

(A) whether, in the opinion of the first court, apart from this Act and any law of the Commonwealth or another 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 another State or Territory; and

(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-subparagraph (A) and not within the jurisdiction of the first court apart from this Act and any law of the Commonwealth or another State relating to cross-vesting of jurisdiction; and

it is more appropriate that the relevant proceeding be determined by that other Supreme Court; or

(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 function of the subparagraphs is to set out conditions upon the appearance of which the court must transfer the proceeding. Subparagraph (i) contains two conditions which for shortness I shall refer to as "related proceedings" and "greater appropriateness". Subparagraphs (ii) and (iii) each contain only one condition: greater appropriateness in the former case and "otherwise in the interests of justice" in the latter. The language is general and there is obviously considerable overlap among the paragraphs. Vagueness is caused by the indeterminate content of the words "more appropriate" and "interests of justice". The former suggests a very wide discretion; the latter seems to operate as a collective noun[10] for a wide-ranging class of considerations. With the greatest respect to those who have expressed a different view[11], in my judgment the terms are not synonymous, nor are their connotations coextensive. That much said however, it will be a rare case in which the course which is in the interests of justice is not also the one which is more appropriate.

The most obvious case where it might be more appropriate to transfer or not transfer proceedings notwithstanding that the contrary course be indicated by the interests of justice would arise under paragraph (ii). That paragraph requires the court, when judging appropriateness, to take into account what may be called its "natural jurisdiction". That obligation seems intended to give effect to recital (b) of the Act and perhaps to recital (a) which declare respectively the desirability of structuring the system in such a way as to ensure as far as practicable that proceedings concerning matters entirely or substantially within the jurisdiction of a Supreme Court are instituted and determined in that court and to establish a system of cross-vesting jurisdiction without detracting from the existing jurisdiction of any court.

I say all of this because the submissions made to me do not really distinguish among the three subparagraphs. As will appear, that is perfectly understandable in the context of the present case. However it is an approach which tends to obscure the focus of the argument to a degree and in my view it is one which preferably is to be avoided.

Section 5(2)(b)(ii).

Since subparagraph (ii) refers both to the interests of justice and to "more appropriate", it is convenient to begin with a short discussion of it. The subparagraph sets out three factors to which regard must be had in ascertaining appropriateness. Clause (A) directs attention to whether the proceeding or a substantial part of it would have been both incapable of being instituted in this court and capable of being instituted in the Supreme Court of Western Australia apart from the cross-vesting legislation. Given Connell's residence in Western Australia there seems no doubt that the action could have been instituted there.

In my view the question whether the action could have been instituted in this court apart from the cross-vesting legislation is concluded by the judgment of the Court of Appeal already referred to. By that judgment, the court held that the debt due under clause 3 of the deed was payable in Queensland and that therefore the writ could properly be served in Western Australia under the Service and Execution of Process Act 1901. In my view, that is sufficient for the action to amount to a proceeding which would have been capable of being instituted in this court apart from the cross-vesting legislation[12]. It follows that the present proceeding is not within the description in clause (A).

On the material before me, the only law of Western Australia which could conceivably answer the description in clause (B) is the Stamp Act 1921. If the action is tried here it is most unlikely that any question will arise under that Act. In the decision already referred to, a majority of the Court of Appeal held that the proper law of the deed is the law of Queensland[13]. On the other hand if the matter is transferred to the Supreme Court of Western Australia, a question of the interpretation of s. 27 of the Stamp Act 1921 is likely to arise. That section provides:-

"27(1) Except as otherwise provided by this Act no instrument chargeable with duty executed in Western Australia, or relating, wheresoever executed, to any property situate or deemed to be situate or to any matter or thing done or to be done in Western Australia, shall, except in criminal proceedings, be pleaded or given in evidence or admitted to be good, useful, or available in law or equity, unless it is duly stamped in accordance with the law in force at the time when it was first executed."

Even if it be assumed that the Supreme Court of Western Australia will accept the majority finding in the Court of Appeal of this court as to the proper law of the deed (so that no question of substantive invalidity could arise), the procedural prohibition on pleading the deed or giving it in evidence would still bind that court. In those circumstances it is likely that Rothwells would again agitate the question argued before Thomas J., viz. whether the section is satisfied by payment of the duty assessed in respect of the clause upon which the action is brought[14]. The status of Thomas J.'s decision is unclear, since the appeal from it was allowed without dealing with the issue argued before him.

Thus, the curious conclusion is reached that there will be a matter for determination in the proceedings involving a question as to the interpretation of a law of Western Australia only if proceedings are transferred to Western Australia. In my judgment that is not a circumstance to which clause (B) is intended to be applied. As I read it, that clause is intended to be taken into account only where it is likely to some extent at least that the court in which the matter is pending would have to decide a question of interstate law not otherwise within its jurisdiction. That is not this case. Consequently, in my judgment, nothing arises under clause (B) to which I must have regard.

There being nothing arising under either clause (A) or clause (B) to which I need have regard in the circumstances of the present case I am left to consider the interests of justice. Under subparagraph (ii) I must have regard to that matter in determining the issue of greater appropriateness. Under subparagraph (iii) I must decide simply whether it is "otherwise" in the interests of justice that the relevant proceeding be determined by the Supreme Court of Western Australia. In the circumstances of the present case at least, the same factors must surely operate under each subparagraph.

The interests of justice: s. 5(2)(b)(ii) and (iii)

Numerous matters are capable of being taken into account under this heading in the present context. I shall not essay an exhaustive list. Some were categorised in Dawson v. Baker[15]. That is a decision which I should follow unless it be plainly wrong[16], and in my respectful judgment, it is plainly right. I proceed therefore to an examination of the matters which seem to me of significance in determining whether it is in the interests of justice that the action be determined by the Supreme Court of Western Australia.

It will nearly always be necessary in cases under this part of the cross-vesting legislation to consider with which court the proceedings have the more real and substantial connection[17].

A number of factors connect the proceedings with Queensland. Rothwells was incorporated in this State and its registered office has at all material times been in Brisbane. The winding-up order was made here by this court and this is the locus of the scheme of the arrangement, also approved by this court. Relevant court documents may be assumed to be in Brisbane.

On the other hand, Rothwells' principal place of business was in Perth. The larger part of the winding-up work seems to have been carried out there, although this is contentious. Many of its records are with the Australian Securities Commission, the Director of Prosecutions and the Office of the Royal Commission in Perth. These records include correspondence and notes of negotiations immediately before the execution of the deed made by Mr. Ferrier and by Mr. G.F. Totterdell who acted for Connell. In the light of the alleged misrepresentations and alleged improper execution of the deed, these documents may be most material. The original deed (which Connell alleges was not signed by Mr. Ferrier) is held by the Commissioner of State Taxation in Perth. In these circumstances, getting documents to Queensland may involve more than simply conveying them[18].

Not only were the negotiations leading up to the deed conducted in Perth, but a number of the witnesses to them reside in Perth. They include Mr. Totterdell and Mr. Gentilli, Connell's solicitor who was present during the negotiations, as well as Connell himself who is presently imprisoned in Perth[19]. Those who took part in the negotiations on behalf of Rothwells were Mr. Ferrier and a Mr. Fisher, apparently one of Mr. Ferrier's subordinates. They both live in Sydney, although Mr. Fisher was living in Perth at the time of the negotiations. Mr. Tuckey, who lives in Brisbane, conceivably could be a witness, but only in relation to the question of execution of the deed, since he was not present during the negotiations.

One question to which a considerable amount of evidence was devoted was whether Connell would be able to attend a trial in Brisbane at all. He is presently serving a term of imprisonment of five years which began on 11th May 1994 at Casuarina Prison, some 55km from Perth. He is permitted to see visitors and I presume can talk confidentially to his solicitor, but he is not permitted to make confidential telephone calls. He could not therefore discuss the case with counsel or solicitors appearing in Brisbane unless they travelled to Perth. It seems that at the time he was sentenced a recommendation for parole was made but the material before me does not disclose when that might occur, nor whether thereafter he would be permitted to leave the jurisdiction of Western Australia.

On behalf of Rothwells evidence was put before me to show that the Western Australian authorities would bring him to Brisbane if he received a subpoena from this court. It was submitted that he could procure this result by subpoenaing himself, or procuring one of the companies, defendants to the counterclaim, to subpoena him: cf. Mulligan v. Lancaster[20]. It would be necessary to provide a two person escort and to arrange for lodging him at a Brisbane prison. Rothwells is willing to undertake to pay the cost of these steps.

For Connell, it was argued that these procedures still require the consent of the Attorney-General for Western Australia, and that it has not been demonstrated that such consent would be forthcoming. In my judgment it is unlikely that consent would be refused without good reason (having regard to the terms of the Service and Execution of Process Act 1992). I am satisfied that the procedure suggested is such as would permit Connell to attend a trial held here.

On the other hand, it can hardly be said that such a procedure is convenient. It is unclear whether any substantial period in Brisbane would be permitted for the purpose of preparation for trial; and even if it would be, it would have to be in the days immediately preceding trial. Inevitably that would expose the process to poor preparation and the risk of an adjournment application. The prejudice to Connell would be significant. The additional cost of the procedure would be borne by the creditors of Rothwells. It was not suggested to me that the action should be delayed until Connell's release - indeed, Rothwells seeks an order for a speedy trial. In these circumstances, Connell's imprisonment is a substantial factor in favour of transferring the action. I reject the submission that this in some way allows Connell to benefit from his imprisonment.

Another factor which Mr. Keane QC, for Rothwells, submitted favoured Queensland as the more appropriate jurisdiction was the finding of the Court of Appeal that the proper law of the deed was that of Queensland. Whether the same finding will be made at trial, when the full circumstances are known, may be uncertain. However, assuming that it would be, what is the relevance of this consideration? Mr. Keane did not point to any material difference between the law of Queensland and the law of Western Australia in this regard. It was submitted that the law of Queensland would be relied upon in order to establish the authority of the provisional liquidators to execute the deed, and that seems correct[21]. However I would assume that there are parallel provisions regarding the authority of provisional liquidators in the law of Western Australia. I certainly would not be prepared to assume that any differences would impose a significant disadvantage upon a judge of the Supreme Court of Western Australia. Wherever the matter is heard, there is of course no need for witnesses to be called to establish the law of the other State[22].

For the sake of completeness, I should add that equally I do not think the fact that the alleged cause of action under the Trade Practices Act arose in Western Australia is of any weight. Even if the lex locus delicti can be characterised as that of Western Australia when the statute creating the right of action is one of the Commonwealth, no practical consequence follows. Mr. Derrington, counsel for Connell, did not contend otherwise.

Mr. Derrington did however submit that the proper law of the deed was, or was likely at trial to be found to be, that of Western Australia. I do not propose to essay a second interlocutory attempt at this issue. One consequence of such a finding would be that wherever the matter is tried, the substantive validity of the deed would be affected by s. 27 of the Stamp Act 1921. It might be thought that this would favour a transfer to Western Australia. However every state of Australia has stamp duty legislation and while there are differences between the Queensland and Western Australian acts, the issues at stake do not seem to me to be any more difficult for a Queensland judge than for a Western Australian judge. Thus even if Western Australia provides the proper law of the deed, that fact is in my judgment of little importance.

In short, I do not think questions of choice of law of much weight in this application.

That brings me to the major issue which was argued in the application, the matter of Western Australian stamp duty said to be payable on the deed. For Rothwells, it was contended that if the action is transferred to Western Australia there is a real danger that it could be stultified; even if it were not, Rothwells would incur the considerable burden of paying the duty in order to tender the deed; and this would enable Connell to profit from his own default. For Connell it was argued that there was no satisfactory evidence that the action would be stultified on transfer. It was said that the argument of burden wrongly assumed that the plaintiff would be successful in relation to the points raised in the defence regarding proper execution of the deed and/or wrongly assumed that the plaintiff would be unable to obtain a refund of duty paid. Finally, it was argued that Connell was not liable for the duty (or for most of it) and that Rothwells itself was so liable.

In support of his contention that the impact of stamp duty was a relevant consideration Mr. Keane relied upon S.P. Investments Pty Ltd v. Commissioner of Taxation[23]. That was an application for change of venue of an income tax appeal pending in the Western Australian Registry of the Federal Court. The appeal required a document executed and kept in the A.C.T. to be tendered at the hearing. If the document were brought into Western Australia, it would attract stamp duty. Liability for the duty was not in contest and duty had been paid in the jurisdiction where the document was executed. French J. ordered a change of venue on the basis that not to do so would impose a burden upon access to the national court.

From that summary it will be seen that the case is easily distinguishable from the present. However despite that fact, I accept the proposition for which Mr. Keane cited the case, viz. that in an application under the cross-vesting legislation for transfer to another State, stamp duty considerations may be relevant.

The evidence of stultification is contained in a subparagraph in one of Mr. Tuckey's affidavits:-

"22(f) the financial position of both Lenoc Pty Ltd and the defendant as set out in the earlier paragraphs of this affidavit may make the issue of proceedings by the liquidator in Western Australia in relation to this matter impractical from a commercial view point if the deed is required to be wholly stamped in Western Australia before it can be relied on in proceedings, as it is most unlikely that the stamp duty will be paid by Lenoc Pty Limited."

Even assuming that the action cannot proceed unless the duty is paid in full, this is weak evidence of stultification. One would expect that by now Mr. Tuckey would be in as good a position to judge the commercial realities as he is ever likely to be. The outstanding duty is some $1.2 million. The claim is for $12 million. The plaintiff's costs so far incurred are substantially in excess of $100,000.00, and the action has not got past the stage of pleadings. Connell claimed a deficiency of liabilities over assets (as of 1989) of more than $270 million. Rothwells has assets of $73.5 million.

In my judgment, the argument that transfer to the Supreme Court of Western Australia would stultify the action is not made good.

On the other hand, the de facto imposition of a liability for some $1.2 million would in my view impose a significant burden on Rothwells. For Connell, Mr. Derrington argued that this would be but a temporary situation, since in fact no duty was payable; and therefore, Rothwells would be entitled to a refund. Mr. Keane's response to that argument was first, that I should not go behind the Commissioner's assessment; and second, that the refund provisions of the legislation did not apply.

In support of the first submission, Mr. Keane cited a passage from the judgment of Thomas J. already referred to[24]:-

"In the course of litigation between civil litigants it is not appropriate in my view that a court should go behind the official acts of the Commissioner in assessing and stamping an instrument. The notion that the court should act as a Court of Appeal in relation to transactions between one or other of the parties and the Commissioner of Stamps, and determine in the absence of the Commissioner that his decision is wrong, not only impedes the course of litigation; it is prone to error. I accept the view of Tadgell J. in Backstop Nominees Pty Ltd v. Goscor Pty Ltd [1990] VicRp 41; (1989) 20 A.T.R. 1104, 1107 that it would be startling if an instrument stamped in accordance with the assessment of the Comptroller were not to be regarded as duly stamped. However his Honour took the view that the stamp was only prima facie evidence of due stamping and examined the question whether, in effect, the assessment was correct. For my part I would draw the line on the state of the instrument and would not interrupt civil litigation by potentially vexatious examinations of extraneous issues of this kind. I am fortified in this view by the fact that it is always available to either party to overcome the problem by paying the duty, (and in some jurisdictions by giving an undertaking to pay such duty as may lawfully be assessed). Accordingly I accept that cl. 3 of the deed has been duly stamped."

Several observations may be made about Mr. Keane's submission. First, Thomas J. was explaining why he accepted that clause 3 of the deed was duly stamped. As he observed, it would be startling if an instrument stamped in accordance with the assessment were not to be regarded as duly stamped. I am concerned with the converse situation. I am considering whether I should as between the present parties go behind an unpaid assessment, which is still under challenge in the Supreme Court of Western Australia, in order to determine a fact material to an application before me. I cannot "draw the line" on the state of the instrument, for relevantly the instrument is unstamped. The question is whether it ought to be stamped. I do not think I can simply say, as did His Honour, that it is always available to either party to overcome the problem by paying the duty. That is precisely the injustice of which Rothwells complains.

On the other hand, I am conscious of the fact that this is a collateral issue which arises very much in an incidental way in interlocutory proceedings. The consequence of this is that it has not been the central focus of the proceedings, and the evidence and arguments before me have to a degree reflected that fact. Moreover, the Commissioner is unrepresented, and I do not know what other evidence or arguments might have been addressed to me by him. For these reasons, I should and do express any view which I form tentatively. Such a view is sufficient for the purposes of an application for transfer.

Mr. Keane's second argument was that Rothwells would be unduly burdened if it had to pay the duty because no refund would be available to it. I was referred to s. 15A(2) of the Stamp Act 1921 and to evidence that the scheme of arrangement (of which the deed was an integral part) has resulted in a considerable number of persons being paid a large amount of money. I am not sure that the question ought not to be considered under s. 15A(1) or (3). It does not matter. I simply do not think the evidence is sufficient to enable me to draw a conclusion on whether or not s. 15A would apply.

Paying the duty would not be the only option open to Rothwells. It could attempt to enter into an agreement with the Commissioner for a contractual refund in the event of a successful objection[25]. It might be able to bring declaratory proceedings against the Commissioner and try to have them resolved before the trial of the present action[26]. It might pursue objection proceedings itself. Indeed, for all I know, it may be doing so already. These options would assist Rothwells only if Connell's contention that duty is not payable is correct. I turn to that question.

The submissions on behalf of Connell seem to assume that I should start from the premise that duty was not in fact payable on the deed. In part at least this seemed to be because to do otherwise would require an investigation of some of the issues to be resolved at trial in the present case. I am not prepared to make any such assumption. Quite the reverse: in the absence of evidence to the contrary, I would assume the Commissioner's assessment to be correct.

The evidence before me of the events surrounding the execution of the deed is scanty. It is unnecessary to rehearse it, for it consists of little more than supposition. It does not establish the invalidity of the deed. It does not persuade me that the Commissioner was wrong.

However another matter was argued at greater length. That arose out of the submission on behalf of Rothwells that to transfer the proceedings to Western Australia would enable Connell to benefit from his own default. This raised the question whether and to what extent Connell was indeed in default. For Connell it was submitted that in fact Rothwells was liable for stamp duty under the deed; or that at least, I should not penalise Connell for Lenoc's failure to pay stamp duty.

Section 39 of the Stamp Act 1921 provides, so far as relevant:-

"39(1) The person in that behalf specified in the Second Schedule in respect of any instrument, or in subsection (4), is liable to pay the amount of duty charged on that instrument.

39(4) Except where otherwise provided by this Act, the person liable under this section in respect of the instrument concerned is the party to that instrument by whom or on whose behalf it is held."

The outstanding duty was assessed by the Commissioner as a release of debt pursuant to item 17 of the second schedule to the Act. That item provides as follows:-

In his reasons for disallowing the objection (in part), the Commissioner said:-

"The release of a debt is dutiable under item 17 of the Second Schedule to the Act. Item 17(b) provides that a release by way of gift shall be assessed at the rates of duty set out in item 19. Even if the debt was released for a consideration the same duty would be chargeable under item 17(a).

I consider that at the date of execution of the deed the debt was dutiable property."

That was said in relation to the Lenoc release, but was incorporated by reference into the Commissioner's reasons in respect of the release by Connell of the $1.7 million.

For Connell it was argued that the release was not by way of gift because it was given for the consideration set out in clause 8. Therefore, ran the argument, it must have been by way of sale, or not dutiable at all. In the former case it would be payable by Rothwells; in the latter, there would be no default by Connell.

For Rothwells the submissions on this aspect of the matter focussed on the question whether the release was indeed by way of sale. Mr. Keane submitted that it was not by way of sale because the supposed consideration was not money, and because there was no transfer of property. He made further submissions in relation to clause 8 of the deed to which it is unnecessary for me to refer.

Does the absence of pecuniary consideration preclude the operation of item 17(a)? In John Foster & Sons Ltd v. Commissioners of Inland Revenue[27] the question was whether a transfer of property by a deed for a stated consideration was a conveyance on sale within the meaning of the Stamp Act 1891. Lindley L.J. said:-

"I do not know what is necessary to constitute a sale, except a transfer of property from one person to another for money, or for the purposes of the Stamp Act, for stock or marketable securities."[28]

In J. & P. Coates Ltd v. Commissioners of Inland Revenue[29], Wills L.J. said:-

"Now, 'sale' undoubtedly in our law generally imports the exchange of some commodity or some article of property for money, and it will be found so defined in Mr. Benjamin's book on Sale, and I think in Lord Blackburn's book also. That is obviously the general meaning of the word; and therefore, if that section stood alone and was not qualified by the subsequent section, it would be necessary to see whether the transaction in question was a sale for money."[30]

There is no definition of "sale" in the Stamp Act 1921 and I see no reason why the general meaning of the term should not be applied in the context of item 17[31]. In my judgment, Rothwells was not liable for the stamp duty because there was no pecuniary consideration for the releases.

The second reason why it was submitted that the transaction was not a sale was that a sale requires a transfer of property, something which does not occur in the case of a release. I do not accept that argument, for it would apply equally in the case of a gift. That would leave no scope for a release ever to fall within item 17, which seems an unlikely result. As the cases cited by Derrington J. in Tokenhouse Enterprises Pty Ltd v. Commissioner of Stamp Duties[32] show, a wide meaning can be ascribed to the concept of gift which does not necessitate a transfer of property.

That leaves two possibilities: either Connell and Lenoc were liable, or no duty was payable under item 17. For Connell, Mr. Derrington argued that item 17(b) did not cover the situation because the concept of a gift is inconsistent with the existence of consideration; and it is plain from clause 8 that the releases in clauses 6 and 7 were given for consideration.

I am not prepared to resolve this issue in the present proceedings. It is clearly one where argument on behalf of the Commissioner would be appropriate. It was not addressed by Mr. Keane. The mere fact that clause 8 is expressed to be in consideration of (inter alia) clauses 6 and 7 is not conclusive[33], particularly when, as here, the evidence suggests that the consideration supplied by clause 8 was of no commercial value. The fact is that Connell could have had this issue resolved in his appeal to the Supreme Court of Western Australia. He has not explained his failure to bring those proceedings on for hearing. There is a substantial argument against that advanced on Connell's behalf. In those circumstances I think the proper thing to do as between the present parties is to assume the correctness of the Commissioner's view as to liability.

I am fortified in this by the fact that the vast bulk of the duty claimed is claimed from Lenoc and that claim has been pursued to the stage of judgment.

What then follows from this conclusion? In my judgment, to the extent that Connell has not paid the duty payable by him, it would not accord with the interests of justice as between him and Rothwells to transfer the matter to the Supreme Court of Western Australia. For Rothwells it was argued that this conclusion applied not only to the duty payable by Connell, but also to that payable by Lenoc. This followed, it was argued, because Lenoc was in effect the creature of Connell. For Connell, it was argued that to adopt such an approach would involve an illegitimate lifting of the corporate veil.

In an appropriate case, I would be quite prepared to go behind the corporate structure and deal with an application for transfer in accordance with the substance of the matter. In the present case, the inference is strong that Lenoc has no assets. Indeed, there is no evidence that (apart from the debt released in the deed) it ever had any assets. The deed is silent on the question of stamp duty, but I cannot imagine that those involved at the time it was drawn overlooked the question. However, while Connell has not pressed his appeal, there is no evidence that Rothwells has pursued its rights in this regard either. That litigation has been necessary in order to enforce the provisions of the deed can hardly have come as a surprise to the liquidators. I do not think that it is in the interests of justice in the present application to proceed as though Connell was fixed with Lenoc's liability for the duty.

Mr. Keane submitted that a factor mitigating against the application was Connell's delay in pursuing it. As a result of the delay, he submitted, Rothwells has incurred over $100,000.00 of costs on a party and party basis alone in respect of proceedings already heard in this court which would have been unnecessary if the proceedings were being heard in Western Australia. He submitted that Rothwells has had to press to have the application heard and that it should have been made at the outset.

I accept that Connell was tardy from June to October 1994, but I do not think that Rothwells has suffered any significant detriment in consequence of that. The more important question is whether Rothwells has been prejudiced as a result of an unreasonable failure by Connell to make the application before applying for the stay in September 1992. The position is complicated by the way in which the application for a stay arose. It was described by Moynihan J. thus:-

"The writ having been served in Western Australia, the defendant entered a conditional appearance denying the jurisdiction of this court to entertain the action against him without his consent. He then moved to set aside service on the grounds that the writ did not comply with O 11, r 1 of the rules of this court. Upon it emerging that the defendant [sic; semble plaintiff] relied not on the provisions of O 11, r 1 but on the provisions of the Service and Execution of Process Act, 1901 (Cth) to found this court's jurisdiction the parties agreed to proceed on the basis that the defendant's application was for a stay of the action. This was on the ground that the plaintiff was incapable of satisfying the provisions of s 11(1)(c) of the Service and Execution of Process Act and that the deed referred to in the endorsement was 'void'.

The plaintiff thereupon sought declarations to the effect that this court was entitled to exercise the original and appellate jurisdictions of the Supreme Court of Western Australia and that, pursuant to s 11 of the Jurisdiction of Courts (Cross-Vesting Act), 1987, (Qld) it should apply the law in force in Queensland and the rules of evidence and procedure applicable in Queensland. Declarations are also sought as to the admission into evidence validity, effectiveness or enforceability of the deed of 17 January 1989 referred to in the endorsement on the writ."[34]

There is no material before me to indicate the basis of the agreement referred to by His Honour nor does it appear whether the possibility of transferring the proceedings to the Supreme Court of Western Australia was discussed. Doubtless had such an application then been made it would have been opposed. I find it difficult to assess whether it would have been successful, particularly since a major factor now relevant to the application (Connell's imprisonment in May 1994) did not then exist.

The subject of transfer was raised in 1993 in correspondence between solicitors. On 8th June 1993 Rothwells' solicitors wrote:-

"We put you on notice that any application to cross-vest these proceedings to Western Australia will be opposed. For our part, even if the court was to permit such an application, it seems to us that, having regard to the fact that appeals are pending in this action, an application to cross-vest will be unsuccessful."

At that time, Connell's solicitors held no instructions to make the cross-vesting application, but they could hardly then have made it while the stay was in force. The application was made only three weeks after the Court of Appeal removed the stay.

Mr. Keane submitted that the stamp duty point has involved three applications in chambers and two appearances before the Court of Appeal, as well as an application for special leave to the High Court. However there is no explanation of why Rothwells failed to raise the point taken in the application to Thomas J. when the matter was before Moynihan J.[35]. On the material before me, I cannot determine which party was responsible for failure of the appeal to proceed when first called on by the Court of Appeal. I note that Rothwells caused the present application to be listed for hearing in June 1994 before delivering its reply and answer, notwithstanding that its solicitors had been in possession of a draft defence and counterclaim for some months, and the time for delivering a reply and answer had almost expired.

In all the circumstances, I do not think that Connell has been guilty of such delay as would mitigate against his application.

Connell presently faces numerous criminal charges in Western Australia in relation to the affairs of Rothwells. It seems from the material that he is to be tried on five of them in the Supreme Court with two co-accused at a hearing which in October 1994 was expected to commence in March 1995. According to the evidence advanced on behalf of Rothwells, estimates of its likely duration ranged from six to 18 months. Connell has offered no undertaking that, if the present action is transferred to the Supreme Court of Western Australia, he will not apply for it to be stayed pending the determination of the criminal proceedings. Rothwells submits that any such application would unreasonably delay the action and should be avoided by retaining the proceedings in Queensland.

I have some difficulty seeing how the action could go ahead in Queensland while Connell is required in Western Australia for his trial. Indeed, I doubt whether the consent of the Attorney-General for Western Australia to his lodgment in Brisbane would be forthcoming in such circumstances. Prima facie, it would be unfair for the present action to proceed to trial in his absence. However it is difficult to estimate whether the present action will in fact be ready for trial before the completion of the criminal proceedings. It is still at an early stage and has progressed remarkably slowly so far. I do think that if it is transferred to the Supreme Court of Western Australia, there will exist greater flexibility for the setting of a trial date conformably with what is happening to the criminal proceedings.

There is no evidence before me of the precise nature of the criminal proceedings. In particular, I cannot determine whether the present action involves evidence which, if publicised might prejudice the criminal trial. I note also that the evidence put forward on behalf of Rothwells suggests that there are potentially many thousands of documents which may be involved in the criminal proceedings. I cannot determine whether any of these would be relevant in the present proceedings.

My conclusion is that if anything, the existence of the criminal proceedings favours transferring the action to the Supreme Court of Western Australia.

The assessment of the weight to be given to the foregoing factors is a matter of judgment, and views may differ. In my judgment, it is in the interests of justice that provided Connell promptly remedies his default in payment of the amount of stamp duty due from him, the action should be transferred. I do not think he should be required to remedy the default of Lenoc. On the other hand, if he does not remedy his own default, I do not think having the proceedings determined by the Supreme Court of Western Australia would be either in the interests of justice or more appropriate. It was not suggested that the court does not have power to impose conditions upon an order under s. 5(2) and I note that a condition was imposed in Matula v. Monadelphous Engineering Associates Pty Ltd[36]. To avoid delaying the action, the period for payment should be relatively short - say 14 or 21 days. I will hear further submissions on the terms of the condition.

Section 5(2)(b)(i)

Having regard to the foregoing conclusion it is unnecessary to discuss subparagraph (i) at any length[37]. I should however note that that provision requires that the action here arise out of or be related to another proceeding pending in the Supreme Court of Western Australia. The action certainly does not arise out of any such proceeding. It was argued that it is related to the stamp duty appeal. As the pleadings presently stand in both proceedings, the common questions of law and fact are very narrow indeed. Whether they are sufficient to permit a finding that the proceedings are related in the way referred to in paragraph (i) need not be determined, nor need it be determined whether potential amendments may be taken into account in resolving this issue. I have some doubt whether the words of the paragraph are satisfied. I also have some doubt whether the requirement for greater appropriateness, which is cumulative upon the existence of related proceedings, has been satisfied. The weight to be accorded to the various matters which affect appropriateness under this paragraph is not necessarily the same as the weight which the same factors bear under paragraph (ii). In particular, delay by Connell in pursuing the stamp duty appeal may assume a greater significance in the present context. Again, it is unnecessary to decide this point.

Subject to the submissions of counsel, I propose to order:-

(a) Provided that the applicant pays $62,514.00 (or such lesser sum as the Commissioner may accept) to the Commissioner of State Taxation for Western Australia in satisfaction of the Commissioner's claim for stamp duty and fines assessed in relation to the deed dated 17th January 1989 on or before a certain date and files an affidavit deposing to such payment and exhibiting a receipt for it on or before a later date, this action be transferred to the Supreme Court of Western Australia.

I will hear the parties on the wording of the order, costs, and on the proper order for disposition of Rothwells' application.

[ ]1 Lenoc is a defendant to Connell's counterclaim.

[ ]3 He also paid $3,600.00 as the fine for late payment.

[ ]4 Rothwells Ltd (in liq.) v. Connell (1992) 25 A.T.R. 123.

[ ]5 Rothwells Ltd (in liq.) v. Connell (1993) 26 A.T.R. 157.

[ ]6 Rothwells Ltd (in liq.) v. Connell (1993) 119 A.L.R. 538.

[ ]7 The defence and counterclaim appears to be drawn on the basis that the amendments sought from Thomas J. were allowed.

[ ]8 It is unclear whether the hearing could in any event have proceeded before the close of pleadings.

[ ]9 It is undoubted that the requirements of paragraph (a) of the subsection are satisfied.

[ ]10 Wilcox J. described it as a "rubric": Bourke v. State Bank of New South Wales (1988) 22 F.C.R. 378 at p. 394.

[ ]11 Compare Pegasus Leasing Ltd v. Tieco International (Australia) Pty Ltd (1993) 61 S.A.S.R. 195 at pp. 199-200; Matula v. Monadelphous Engineering Associates Pty Ltd, (unreported, Supreme Court of Queensland, No. 1496/92, 22.10.93) p. 8.

[ ]12 The corollary of this view may be that at least since the commencement of the Service and Execution of Process Act 1992 the elements of clause (A) can never be satisfied, because under that Act initiating process issued in a State may be served in any other State without restriction. This seems to have been the intention of the latter Act: see s. 21. It may be that the same position also existed under the Service and Execution of Process Act 1901, since that Act did not place any restriction on the institution of proceedings. It is unnecessary to explore the implications of that argument in the present case.

[ ]13 Technically it may be that the question is not res judicata, since it was decided in an interlocutory application which the court said was on "scanty materials". However it was not argued before me that a trial in Queensland would proceed on any other basis.

[ ]14 Indeed, for Rothwells it was contended that if the matter is transferred to the Supreme Court of Western Australia and the stamp duty objection is raised by Connell, then perhaps another 12 months will be lost litigating that issue.

[ ]16 Australian Securities Commission v. Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 C.L.R. 485.

[ ]17 Dawson v. Baker (above) at pp. 19-20; Erbamere Pty Ltd v. Campbell's Formal Wear Pty Ltd, (unreported, Supreme Court of Queensland, No. 1159/91, 16.9.91).

[ ]18 Compare Linter Group Ltd (in liq.) v. Price Waterhouse (1992) 9 A.C.S.R. 346 at p. 359.

[ ]19 I have not overlooked that the affidavits filed on Connell's behalf do not indicate which witnesses will actually depose to the alleged misrepresentations.

[ ]21 Although this has nothing to do with the proper law of the deed.

[ ]22 State and Territorial Laws and Records Recognition Act 1901.

[ ]25 Compare Precision Pools Pty Ltd v. Commissioner of Taxation [1992] FCA 445; (1992) 37 F.C.R. 554.

[ ]26 But see Commissioner of State Taxation v. Bayswater Hire Cars Pty Ltd (1989) 20 A.T.R. 1606.

[ ]27 [1894] 1 Q.B. 516.

[ ]28 [1894] 1 Q.B. at p. 528. The English Act expressly provided that the consideration could consist of stock or marketable securities.

[ ]29 [1897] 1 Q.B. 778; affirmed on appeal [1897] 2 Q.B. 423.

[ ]31 See also Simpson v. Connolly [1953] 1 W.L.R. 911 and In Re: Westminster Property Group P.L.C. [1985] 1 W.L.R. 676.

[ ]32 (1985) 16 A.T.R. 967.

[ ]33 Compare Collector of Imposts (Victoria) v. Cuming Campbell Investments Pty Ltd [1940] HCA 17; (1940) 63 C.L.R. 619 at pp. 640, 641, Collector of Imposts (Victoria) v. Peers [1921] ArgusLawRp 11; (1921) 29 C.L.R. 115 at pp. 121, 122, Leary v. Commissioner of Taxation [1980] FCA 112; (1980) 11 A.T.R. 145 and Rofe v. Commissioner of Stamp Duties (N.S.W.) (1988) 88 A.T.C. 4, 865; "consideration" can have a wider meaning to conveyancers than in the law of contract.

[ ]35 The order for costs which Thomas J. made against Rothwells was not expressly set aside by the Court of Appeal. Even if it was set aside by implication, there was no other order made in substitution for it.

[ ]37 See generally Murphy v. FAI General Insurance Co Ltd (1993) 7 ANZ Insurance Cas. 61-188.