Taurus Funds Management Pty Ltd v Aurox Resources Ltd

JURISDICTION : Equity Division Commercial List

Fair Trading Act 1987 (NSW) LEGISLATION CITED : Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW) Trade Practices Act 1974 (Cth)

AMCI (IO) Pty Ltd v Aquila Steel Pty Ltd [2009] QSC 66 Asciano Services Pty Ltd v Australian Rail Track Corp Ltd [2008] NSWSC 652 Bankinvest AG v Seabrook & Ors (1988) 90 ALR 407; (1988) 14 NSWLR 711 BHP Billiton Limited v Schultz (2004) 221 CLR 400 Bioag Pty Ltd v Hickey [2007] NSWSC 296 CASES CITED : Dawson v Baker (1994) 120 ACTR 11 Iasbet Ltd v Worldgroup Consulting Pty Ltd [2002] VSC 587 James Hardie & Coy Pty Limited v Barry (2000) 50 NSWLR 357 Kodak (Australasia) v AWA Davis [2006] VSC 111 Patrick Badges Pty Ltd v Commonwealth of Australia [2002] NSWSC 221 Twentieth Super Pace Nominees Pty Ltd v Australian Rail Track Corp Ltd [2003] VSC 112 Valceski v Valceski (2007) 70 NSWLR 36

PARTIES : Taurus Funds Management Pty Ltd (Plaintiff) Aurox Resources Ltd (Defendant)

COUNSEL : Mr SM Nixon (Plaintiff) Mr SA Goodman (Defendant)

SOLICITORS : Mallisons Stephen Jaques (Plaintiff) Blake Dawson (Defendant)

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

2010/00237928 Taurus Funds Management Pty Ltd v Aurox Resources Ltd JUDGMENT The application before the Court 1 There is before the Court a notice of motion pursued by the defendant seeking an order that these proceedings be transferred to the Supreme Court of Western Australia pursuant to s 5 (2) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (NSW) 2 Both parties have sought to mobilise a number of authorities seeking to further their clients interests in relation to the contest of application The principles 3 Section 5(2)(b)(iii) relevantly provides that if it appears to the Supreme Court of New South Wales that 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, then the Supreme Court of New South Wales shall transfer the relevant proceeding to that other Supreme Court. 4 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 & Ors (1988) 90 ALR 407 at 409, James Hardie & Coy Pty Limited v Barry (2000) 50 NSWLR 357 at [87] per Mason P, BHP Billiton Limited v Schultz (2004) 221 CLR 400 at 421 [14], 434 [63]. 5 An applicant for a transfer bears no burden of persuasion or onus of proof: BHP v Schultz (supra) at 437 [71]; and no particular significance attends the plaintiff's original choice of forum: see BHP v Schultz (supra) at 425 [26]-[27], 439 [77]. 6 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. 7 In James Hardie & Coy Pty Limited v Barry (2000) 50 NSWLR 357, Mason P at [95] endorsed the following useful checklist of factors, namely:-

ii. forensic advantage or detriment conferred by procedural law;

iii. the choice made by a plaintiff or a forum and the reasons for that choice;

v. balance of convenience to parties and witnesses; and

vi. convenience to the Court system. 8 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. 9 In Bankinvest AG v Seabrook (1988) 14 NSWLR 711 at 714, Street CJ said the following of the section:

It calls for what I might describe as a "nuts and bolts" 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. 10 In BHP Billiton Ltd v Schultz, Gleeson CJ, McHugh and Heydon JJ quoted from Street CJ's judgment in Bankinvest and stated [Although Gleeson CJ, McHugh and Heydon JJ dissented in the application of the principles, their enunciation of the principles was not disputed by other members of the Court, and has been frequently cited (see, for example, Valceski v Valceski (2007) 70 NSWLR 36 at [69]-[70] per Brereton J)]:

There is a statutory requirement to exercise the power of transfer whenever it appears that it is in the interests of justice that it should be exercised. It is not necessary that it should appear that the first court is a "clearly inappropriate" forum. It is both necessary and sufficient that, in the interests of justice, the second court is more appropriate. (emphasis added). 11 It follows that if, upon weighing the different factors, the Supreme Court of Western Australia and this Court are both equally appropriate as a forum for determination of the proceeding, the precondition for exercise of the power of transfer under s 5(2)(b)(iii) will not be made out and no order should be made [Valceski v Valceski (2007) 70 NSWLR 36 at 60 [70] per Brereton J]. 12 Similarly, where a hearing before the Supreme Court of Western Australia affords an advantage to the defendant that a hearing before this Court affords to the plaintiff these factors may effectively cancel each other out as it is not possible to say that one court is more appropriate than the other. This was recognised by Gleeson CJ, McHugh and Heydon JJ in BHP Billiton Ltd v Schultz, where their Honours stated:

The advantage which a plaintiff might obtain from proceeding in one court might be matched by a corresponding and commensurate disadvantage to a defendant. The reason why a plaintiff commenced proceedings in one court might be the same as the reason why the defendant seeks to have them transferred to another court. In such a case, justice may not dictate a preference for the interests of either party….

If, in a particular respect, the first respondent's assumed advantage and the appellant's assumed disadvantage are commensurate, the one simply being the converse of the other, then that does not advance the matter. 13 A number of the factors fall into this category and are not capable of demonstrating one court is more appropriate than the other. For example:

i. the fact that Aurox's records and offices are located in Subiaco in Western Australia is matched by the commensurate fact that the records and offices of each of Taurus and New Holland are located in Sydney; and

ii. the fact Mallesons Stephen Jaques has offices in Perth and is able to continue acting for Taurus if the proceeding is transferred to Western Australia is matched by the commensurate fact that Blake Dawson has offices in Sydney and is able to continue acting if the proceeding remains in this Court. 14 It is however fair to say that the balance of convenience is very close in relation to the respective contentions The background The issues arising for determination in the preceding 15 Taurus and Aurox entered two contracts in 2007 and 2008 respectively, and this proceeding primarily concerns the interpretation and application of those contracts. 16 The first contract was entered between Taurus and Aurox on 23 July 2007 (the Engagement), which superceded an earlier agreement entered into on 26 March 2006. Pursuant to the Engagement, Aurox appointed Taurus's authorised representative (New Holland) as its "Financial Bank Debt Advisor". This role encompassed the proposed scope of work at Appendix 1 to the Engagement. In return, Aurox undertook to pay certain fees to Taurus, set out in clause 3 of the Engagement. The Engagement was expressed to be governed by the laws of Western Australia, but did not contain any choice of jurisdiction clause. 17 The second contract was entered between Taurus and Aurox on 24 September 2008 (the Equity Mandate). Pursuant to the Equity Mandate, Aurox appointed Taurus's authorised representative, New Holland, as its financial advisor to assist Aurox to negotiate a proposed sale of an equity interest in an iron ore project (the Project) to one or more strategic investors. Aurox agreed to pay fees for New Holland's services in accordance with clause 3 of the Equity Mandate, with such fees to be invoiced directly by Taurus. The Equity Mandate was expressed to be governed by the laws of New South Wales (clause 13(e)), and further provided that Aurox irrevocably submitted to the non-exclusive jurisdiction of the Supreme Court of New South Wales in respect of any proceeding relating to the Equity Mandate (clause 13(f)). 18 The evidence filed on the motion discloses that the services performed by New Holland for Aurox as financial adviser were primarily performed in New South Wales, with payment to be made by Aurox to Taurus in New South Wales pursuant to clause 3 of the Engagement. In particular, the modelling and analysis set out in the scope of work at Appendix 1 to the Engagement was undertaken in New South Wales by staff based in New South Wales; the majority of discussions which New Holland had with potential third party financiers took place in New South Wales; and Mr Charles Schaus of Aurox attended numerous meetings at New Holland's offices in Sydney. 19 Although New Holland had two employees based in Perth, who provided assistance on the Engagement from time to time, they took their instructions from the executive directors in Sydney. Further, the evidence filed by Aurox acknowledges that New Holland did not open its Perth office until late 2008, more than a year after entry into the Engagement. In addition, Aurox's evidence is to the effect that there was only one occasion in September 2008 when representatives of New Holland visited the site of the Project in the Pilbara region of Western Australia; and otherwise the executive directors of New Holland only tended to come to Perth once every couple of months, and such trips were for the purpose of visiting various clients in addition to Aurox. 20 In its Commercial List Statement, Taurus pleads that:

i. it is entitled to be paid "equity fees" by Aurox pursuant to clause 3.1 of the Engagement, by reason of New Holland having introduced Atlas Iron Ltd ("Atlas") to Aurox as an equity partner, and Atlas having subsequently contributed both debt and equity capital to Aurox (paragraphs 4-27); and

ii. Aurox wrongfully repudiated the Engagement, causing Taurus to suffer loss and damage (paragraphs 28-34). 21 That is, the only breaches of contract in respect of which Taurus sues Aurox are its breach in failing to pay fees that were due to be paid to Taurus in New South Wales; and its repudiation of the Engagement by letter sent to Taurus in New South Wales. 22 In its Commercial List Response, Aurox defends Taurus's claims for breach of contract by pleading, inter alia, that:

i. the effect of the Equity Mandate was to terminate any entitlement of Taurus to fees under the Engagement, as and from the date of the Equity Mandate (pleaded in paragraph 4 (particulars (III)), 7(b), 17(b), 24(c), 27(c) and 33(c));

ii. neither Taurus nor New Holland introduced Atlas to Aurox (paragraphs 11, 13); and

iii. Aurox lawfully terminated the Engagement on 31 January 2010 by letter sent to Taurus on that date, pursuant to an implied term, and any entitlement to a fee under that retainer did not survive such termination (paragraphs 17(b), 24(c), 27(c), 28-32). 23 In its Reply, Taurus:

i. denies that the Equity Mandate had the effect contended for by Aurox, relying on the meaning and operation of a number of clauses in the Equity Mandate (paragraphs 5(a)-(i), 11); and

ii. pleads that Aurox is estopped from denying Taurus's entitlement to fees under the Engagement by reason, inter alia, of express representations made to Taurus in New South Wales, or alternatively engaged in misleading or deceptive conduct in contravention of the Fair Trading Act 1987 (NSW) (FTA NSW) and the Trade Practices Act 1974 (Cth) (TPA) by reason of those representations (paragraphs 7-8). 24 It follows that the main areas of dispute in this proceeding are:

i. the meaning and effect of the Engagement, which was expressed to be governed by the laws of Western Australia (without any choice of jurisdiction clause);

ii. the meaning and effect of the Equity Mandate, which was expressed to be governed by the laws of New South Wales, and which provided that Aurox irrevocably submitted to the non-exclusive jurisdiction of the Supreme Court of New South Wales in respect of any dispute relating to that contract;

iii. whether Aurox breached the engagement by failing to pay fees to Taurus in New South Wales, including the factual issue whether New Holland introduced Atlas to Aurox within the meaning of clause 3.1 of the Engagement, and whether Aurox validly terminated (or repudiated) the Engagement by letter sent to Taurus; and

iv. whether Aurox engaged in certain conduct, including express representations to Taurus in New South Wales, which gives rise either to an estoppel or to a contravention of the FTA NSW or the TPA. Specific factors to be considered 25 There is no exhaustive list of the factors to which regard may or ought be had in determining which is the more appropriate Supreme Court for the proceedings [In Bankinvest at 714, Street CJ warned against the cross-vesting scheme becoming "encumbered by an encrustation of judge-made pronouncements of principles."]. However, there are particular factors to which courts have often had regard and which arise on the evidence adduced in respect of the present application, including:

ii. any submission to the jurisdiction of a specified court;

The relevance of each of these factors to the present case is considered below. Applicable substantive law 26 In supporting its argument for transfer, Aurox has relied in correspondence upon the choice of law clause in the Engagement. Clause 11.6 provides:

This Engagement… shall be governed by and constructed [sic] in accordance with the laws of Western Australia. 27 Two things should be noted about clause 11.6. First, it is a choice of law clause and not a choice of forum or submission to jurisdiction clause. Secondly, "there is a common law of Australia rather than of each Australian jurisdiction". The common law governing the construction and repudiation of contracts will determine the contractual claim. The Supreme Court of Western Australia is in no better position to apply the law prescribed by clause 11.6 than the Supreme Court of New South Wales. 28 The above two points have been made in several analogous cases, in which judges considering transfer applications under the cross-vesting scheme have declined to attach significance to a choice of law clause [In addition to Kodak (Australasia) v AWA Davis, see Iasbet Ltd v Worldgroup Consulting Pty Ltd [2002] VSC 587 at [16] and [18] per Habsberger J; Valceski v Valceski (2007) 70 NSWLR 36 at 60 [72] per Brereton J; and AMCI (IO) Pty Ltd v Aquila Steel Pty Ltd [2009] QSC 66 at [30]-[32] per A Lyons J.]. For example, in Kodak (Australasia) Pty Ltd v AWA Davis Pty Ltd [2006] VSC 111, the Court was faced, as in the case of the Engagement here, with a choice of law provision in a contract, nominating the laws of Victoria, but without any accompanying choice of jurisdiction clause. In considering the significance of this factor on a transfer application, Hollingworth J held as follows:

[16] Here the cause of action is one based on simple breach of contract, involving common law principles governing contract formation, breach, repudiation and remedies. Kodak does not rely on any statutory provision and there is no basis for believing that the agreement is likely to be governed by a law that is unique or peculiar to Victoria. [17] In the circumstances, the choice of law clause is a neutral factor or, at best for Kodak, a weak factor in favour of the retention of this matter by this court. 29 In the present proceedings, Aurox has not led any evidence to demonstrate that the determination of the contractual claim will involve the application of any law (whether statute or otherwise) that is unique or peculiar to Western Australia. 30 Even if the choice of law clause in the Engagement is a relevant factor (which, for the reasons outlined above, it is not), it must be balanced against the fact that the Equity Mandate provides in clause 13(e) that:

This letter agreement will be governed by, and construed and interpreted in accordance with, the laws of New South Wales. 31 As noted above, the meaning and effect of the Equity Mandate is a matter of dispute between the parties (see Commercial List Response, [7(b)], [17(b)], [24(c)], [27(c)] and [33(c)]; and Reply, [5(a)]-[5(i)], [11(a)]). 32 The position therefore is that the interpretation and application of two contracts are at issue, one governed by the law of New South Wales, and the other by the law of Western Australia - but in each case the relevant law determining the meaning and effect of the contract will be the common law of Australia. Therefore, the choice of law clauses do not advance the matter. 33 The only legislation raised on the pleadings and required to be considered in these proceedings is the FTA NSW and the TPA. Insofar as the applicable substantive law favours one forum over the other, it suggests (if anything) that this Court is the more appropriate court in which to determine the proceedings, but this should fairly be regarded as a neutral factor. Submission to jurisdiction clause 34 The Equity Mandate goes further than simply specifying the law of New South Wales as its governing law and contains a clause by which the parties submit to the non-exclusive jurisdiction of the Supreme Court of New South Wales. 35 Clause 13(f) of the Equity Mandate provides that:

All actions and proceedings arising out of or relating to this letter agreement may be heard and determined in the Supreme Court of New South Wales or any Australian court of federal jurisdiction to whose non-exclusive jurisdiction [Aurox] irrevocably submits . (emphasis added) 36 In determining applications to transfer proceedings under the cross-vesting scheme, courts have given weight both to exclusive and non-exclusive jurisdiction clauses. For example, in Patrick Badges Pty Ltd v Commonwealth of Australia [2002] NSWSC 221, Howie J stated:

I doubt that it is necessary under the cross-vesting legislation to determine whether such a clause is an exclusive jurisdiction clause or not. Provided that the clause can be construed as being a substantive term of the agreement between the parties as to the likely jurisdiction for the determination of disputes under the agreement, it should be given weight in the determination of where the "interests of justice" lie. It would be a factor, possibly of significance when consideration is given to the weight to be accorded to the inconvenience of a particular party, that the party entered into an agreement under which dispute resolution would, prima facie at least, take place in a particular and possibly inconvenient jurisdiction. (emphasis added) 37 Justice Howie's views on this issue have been subsequently followed in a number of cases dealing with transfer applications under the cross-vesting legislation. In the most recent of these decisions, Asciano Services Pty Ltd v Australian Rail Track Corp Ltd [2008] NSWSC 652, Palmer J considered the significance of a choice of law clause coupled with a choice of forum clause (which was not expressed to be exclusive):

[18] However, regardless of whether a proper law and jurisdiction clause confers exclusive jurisdiction, it carries great weight in determining the appropriate forum in a cross vesting application because it records a term of the bargain between the parties that litigation arising from their agreement will be resolved in accordance with the substantive law of a specified forum and by the courts of that forum: see, for example, per Howie J in Patrick Badges Pty Ltd v Commonwealth [2002] NSWSC 221, at [23]. Particularly persuasive is the weight of such a clause in a contract between commercial parties well able to protect their respective interests. [19] In my opinion, the provisions of cl 21 in the present case as to the governing law of the Track Access Agreement and as to the courts in which disputes shall be determined are dispositive of the application. Whether or not cl 21.2 confers exclusive jurisdiction on the South Australian courts, the parties themselves have given a strong indication in that clause of where and under what law their disputes should be tried, regardless of the inconveniences which may be occasioned to either or both of them. 38 The fact that parties have expressly consented to the non-exclusive jurisdiction of the Supreme Court of New South Wales in respect to disputes arising out of the Equity Mandate should be regarded as a critical and decisive factor in determining that the Supreme Court of New South Wales is a more appropriate forum than the Supreme Court of Western Australia. When considering any inconvenience to Aurox by reason of the proceeding having been commenced in this Court, it is important to recognise that Aurox expressly agreed to proceedings being brought in this Court, and irrevocably submitted to its jurisdiction. Moreover, that choice of forum clause appears in the contract which, on Aurox's pleading, governs the rights and obligations of the parties at the relevant time in relation to the introduction of any equity partner. 39 In his Honour Justice Palmer's words, such a clause carries particularly persuasive weight when it appears in a contract between commercial parties well able to protect their respective interests: by clause 13(f) of the Equity Mandate, the parties "themselves have given a strong indication … of where and under what law their disputes should be tried, regardless of the inconveniences which may be occasioned to either or both of them." Location of witnesses 40 Leaving aside the issues regarding the interpretation and application of the Engagement and the Equity Mandate, there are two main areas of factual dispute on the pleadings:

i. whether New Holland "introduced" Atlas to Aurox as a potential equity partner (such introduction initially occurring at a meeting in Western Australia); and

ii. whether Aurox made certain representations to Taurus regarding payment for New Holland's work in relation to Atlas (with the express representations pleaded as having been made to Taurus in Sydney). 41 In relation to the disputed issue of the introduction of Atlas, nine persons have been identified in the evidence filed on this motion as persons who may be able to give relevant evidence. Four of these persons are either resident in NSW or persons whose costs of giving evidence will be met by New Holland (Mr Eastwood, Mr McGown, Mr Davies and Mr Menon). Of the other five persons located in Western Australia who have been identified by Aurox, it is not currently clear who may be required to attend for cross-examination should they give evidence. 42 In relation to the disputed issue of the representations made to Taurus by Aurox, two of the witnesses reside in New South Wales and one in Western Australia. 43 Given that the location of potential witnesses is split, it is not possible to say that the Supreme Court of Western Australia is more appropriate than this Court to determine the proceedings. This is particularly so where such witnesses can provide evidence on affidavit from their respective locations, and will only need to be present at any hearing if the issues of fact are contested and cross-examination is required. Prior to statements being exchanged, and discovery being completed, it is not possible to determine how many persons will be required for cross-examination, or whether the anticipated length of any such cross-examination would be such that it could conveniently be conducted by video link (see UCPR r31.3). 44 In this regard, it is particularly significant that paragraph 63 of the Practice Note for the Commercial List states that:

The use is encouraged, where appropriate, of technology permitting the taking of evidence in, or other conduct of, proceedings by video link or conference telephone… Practitioners should propose the use of such technology when appropriate, and the Court may give directions involving its use: … 45 Moreover, even if it is considered necessary at any final hearing that one or more witnesses who are resident in Perth should attend for the purpose of giving evidence in Sydney, given the relative ease of interstate travel and electronic communication, an application for transfer ought not to be decided by a superficial tallying of where potential respective witnesses reside. This point was made by Brereton J in Bioag Pty Ltd v Hickey [2007] NSWSC 296 at [14]:

I think the natural forum for proceedings, particularly in this day and age of electronic communication and interstate travel, usually falls to be determined by more principled issues than where the preponderance of the witnesses reside and I do not consider that there is any significant preponderance of convenience such as to resolve the question of more appropriate forum on the facts in this particular case. 46 Even if transferring these proceedings to Western Australia did lead to reduced travel costs (which, for the reasons outlined above, must be doubted), such a saving would be of very minor significance in relation to the size of the claim and the total costs of the proceedings. Cost and delay caused by a transfer itself 47 In weighing all of the factors referred to above, the Court must also have regard to the cost and delay which will necessarily attend any order for transfer. 48 This point was made by Higgins J (with whom Gallop J agreed) in Dawson v Baker (1994) 120 ACTR 11 at 18:

In all cases, the extra expense and delay which will follow the making of a transfer order will be a relevant consideration against transfer. 49 In the present case, over three months have passed since the proceedings were commenced in this Court. In that time, Aurox has filed a Commercial List Response and Taurus has filed a Reply, an Amended Summons and an Amended Commercial List Statement. All these documents adhere to the particular form of pleading prescribed for the Commercial List of this Court. Additionally, both Taurus and Aurox have retained counsel in Sydney, who have appeared on the matter. 50 As the pleadings have closed, the proceeding could now be the subject of timetabling orders for discovery and then evidence, with a hearing probably in the first half of next year. (In this regard, the proceeding has been listed on 22 October 2010 for both the hearing of the motion and for directions, and so, if the Court determines the motion on that day, it could immediately make further orders to take the matter forward). 51 As a result, significant costs may be wasted, and there may be unnecessary delay in the resolution of the proceeding, if the proceeding were now to be transferred to the Supreme Court of Western Australia. Certainly, it is unlikely that the step of transferring the proceeding would lead to the issues in the proceeding being resolved more quickly, or at less expense, than if the proceeding remains in this Court. Defendant's submissions 52 I have taken the defendant submissions into account. Centrally those submissions included the following propositions:

i. The presence of a clause as to jurisdiction is a relevant, but by no means conclusive, factor: Twentieth Super Pace Nominees Pty Ltd v Australian Rail Track Corp Ltd [2003] VSC 112 at [8].

ii. Greater weight is to be given to such a clause where it deals with an exclusive jurisdiction than with a non-exclusive jurisdiction: Patrick Badges Pty Ltd v Commonwealth [2002] NSWSC 221 at [14].

iv. In the present case, the clause relied upon by the plaintiff is non-exclusive.

v. The presence of that clause is a matter that falls to be considered together with other relevant factors, in particular the balance of convenience for parties and witnesses.

vi. Where there is an imbalance of such convenience, the Court often places more importance upon this imbalance than upon the existence of a non-exclusive jurisdiction clause. 53 Notwithstanding those submissions I have come to the clear conclusion that it is not in the interests of justice for the proceedings to be transferred to the Supreme Court of Western Australia. Conclusion 54 It is not in the interests of justice for the proceeding to be transferred to the Supreme Court of Western Australia. The evidence on the motion fails to establish that the Supreme Court of Western Australia is more appropriate than this Court to determine these proceedings. 55 Aurox's motion is dismissed, with costs. ************

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