Toll (FHL) Limited v Finemore [2001] VSC 467

Supreme Court of Victoria|2001-12-04|Before: Warren J

JURISDICTION OF COURTS (CROSS-VESTING ACT 1987 (VIC), s.5(2) - governing law of contracts - connection with Victoria - costs and convenience - original choice of forum - interests of justice - proceeding in Commercial List.

Sub-section (2) of s.5 of the Cross-Vesting Act provides:

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

(b) it appears to the first court that -

(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;

(ii) having regard to -

(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;

(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-paragraph (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 jurisdictions; and

(C) the interests of justice -

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 another State or of a Territory -

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

The Plaintiffs' Claim

The plaintiffs are Toll (FHL) Ltd ("FHL") and two of its wholly owned subsidiaries FPL P/L and Resarta P/L. The defendants are Ronald Stanley Finemore and Riverina Bandag P/L and Michelin Australia P/L. Mr Finemore is a director of all the plaintiff companies and a director of the second defendant, Riverina Bandag P/L.

In essence, the plaintiffs claim that a number of contracts were entered into by them with the defendants that were detrimental to their interests and improperly beneficial to Mr Finemore and his interests. The plaintiffs allege that by virtue of his directorships of the plaintiff companies Mr Finemore is in breach of directors' duties owed to the plaintiffs including duties under the Corporations Law (now the Corporations Act).

The plaintiffs claim other breaches of the Corporations Law by the defendants including breach of the requirement to engage the expert advice reasonable in the circumstances (s.243K Corporations Law); failure to obtain shareholder approval in cases of termination payments (ss.237, 200B and 200C Corporations Law; failure to obtain shareholder approval for related party transactions in breach of the related party provisions; s.234H, and 208 Corporations Law); and failure to comply with Listing Rule 10.19 of the rules of the Australian Stock Exchange.

The plaintiffs' claim against Riverina Bandag P/L and Michelin Australia P/L relates to an alleged agreement to supply tyres to FHL. The plaintiffs claim misleading and deceptive conduct in breach of the Trade Practices Act 1974 and the Fair Trading Act 1987. The plaintiffs also allege negligence against the defendants.

The plaintiffs allege four agreements that provide the foundation of their various claims:-

(1) A service agreement ("the Service Agreement") between Resarta P/L and FHL ("the Resarta agreement") under which Resarta supplied FHL with the services of Mr Finemore to act as FHL's Chairman of the Board. Resarta were to receive $46,224,12.00 a month and Mr Finemore was eligible for a termination bonus of $1,307,342.00. The plaintiffs allege that both FHL and Mr Finemore received legal advice that this transaction was not in the interests of FHL and contrary to the provisions of the then Corporations Law.

(2) A call option deed over shares between FHL and Finemore under which in consideration of $1.00 Mr Finemore was granted an option to purchase for $1,307,342.40 one ordinary share in Resarta, to be transfered to FHL upon the exercise of the option and all of FHL's right, title and interest in an existent loan of $1,307,342.40 from FHL to Resarta.

(3) An employment agreement between Mr Finemore and Resarta under which Mr Finemore received a salary of $464,914.22 per annum and a Termination Bonus Package of $1,307, 342.46.

(4) An agreement ("the alleged agreement") between Mr Finemore and FHL. The plaintiffs allege Mr Finemore agreed not to exercise his right to terminate under the Sevice Agreement and FHL agreed, first on behalf of Resarta in effect to preserve its assets, and secondly on its on part to indemnify Mr Finemore for any loss he may suffer (e.g. any tax loss was what was primarily contemplated) arising out of any of the above agreements.

The Plaintiffs claim against all defendants declaratory relief, equitable compensation and damages including damages under ss.82 and 87 of the Trade Practices Act, s.159 of the Fair Trading Act 1999 (Vic) and ss.68 and 72 of the Fair Trading Act 1987 (NSW). The plaintiffs claim against Mr Finemore an order for compensation pursuant to s 1317H, alternatively, s.1317HD (1) of the Corporations Act.

In determining whether to order a transfer under s.5(2) of the Cross-Vesting Act the Court must be satisfied as to which is the "more appropriate forum" for the hearing and determination of the dispute: Bankinvest AG v Seabrook (1988) 14 NSWLR 711, 714, 730; Schmidt v Won (1988) 3 VR 435, 450. In Ross Mollison Group Pty Ltd & Anor v The Really Useful Company (Aust) Pty Ltd & Anor (2000) VSC 256 I observed that the courts have held that the "more appropriate forum" is usually the forum with the "most real and substantial connection" with the particular subject matter of the relevant proceeding: Bankinvest, supra, 728; Spiliada Maritime Corporation v Cansulex Ltd (1987) AC 460, 478. It seems that there are three primary factors to be taken into account. First of all, the governing law of any agreement in dispute. Secondly, the nexus or connection between the conduct that is alleged and the jurisdiction. Thirdly, the cost and inconvenience to the parties as to the forum selected by the plaintiff: Bankinvest, supra, 729.

An issue arose in the course of argument as to the appropriate test to be applied by this Court. On the basis of the binding view expressed by the Victoria Court of Appeal in Schmidt v Won, the fundamental test is the determination of which forum will give rise to meeting the interests of justice. However, the plaintiffs submitted that the threshold was at a higher level in that the Finemore parties carried the burden of proving that it was appropriate for the transfer of the proceedings.

Mr C. Caleo, who appeared for the plaintiffs, drew attention to the views expressed by Rodgers AJA in Bankinvest AG:

"it is inapt to speak in terms of onus. Bearing in mind that the Court may make an order of its own motion the language of onus being discharged is inapplicable".

The statement has subsequently been disapproved by the Court of Appeal of the New South Wales Supreme Court in James Hardie and Coy Pty Ltd v Barry and Anor [2000] NSWCA 353; (2000) 50 NSWLR 357 and by Gillard J of this Court in Realistech Consulting Pty Ltd v Westpac Banking Corporation Ltd & Ors unreported, 30 September 1998; also in Global Technology Australasia v Bank of Queensland Ltd [2001] VSC 230 and McKee v Van Haften [2001] VSC 251.

In James Hardie, Mason P stated the following (at p.380):

"One aspect of Bankinvest which has puzzled later courts is the statement by Rogers AJA (with which Street CJ definitely agreed and Kirby P probably agreed) that it is inapt to speak of any onus resting upon the applicant for transfer: see at 726-727. Such a sentiment may be understandable where transfer is ordered on the court's own motion. However, like others I find it elusive in the context of a contested proceeding inter partes. If one views the exercise of judicial discretion according to proper principle, then it is natural to regard the applicant for particular relief as carrying at least the persuasive onus."

In the present circumstances I do not consider it is necessary to determine whether or not there is a burden upon an applicant such as the Finemore parties in an application under s.5(2) of the Cross-Vesting Act. In my view the position is clearly known arising from the views expressed by the Court of Appeal in Schmidt v Won. It is a matter of which forum will give rise to best meeting the interests of justice.

The Factual Grounds Relied Upon by the Applicant

The Finemore parties relied upon a list of factual matters to support the application for transfer to New South Wales. They were the following, in summary form:

(1) The majority of the defendants reside, are incorporated or conduct their principal business in New South Wales.

(2) The majority of the subject agreements were negotiated and executed in New South Wales.

(3) The majority of the subject agreements provide that the particular contract is to be governed by the laws of New South Wales and that the parties submit to the non-exclusive jurisdiction of the courts of New South Wales.

(4) The primary property the subject of the dispute comprises property located in New South Wales.

(5) Investigations and preparation of evidence will necessitate interviewing a large number of individuals most of whom reside in New South Wales.

(6) The present proceeding was issued in Victoria at a time when proceedings had been foreshadowed in New South Wales; indeed the Finemore parties suggested that the plaintiffs' decision to issue in Victoria was purely tactical.

(7) Related proceedings have been commenced in the Industrial Relations Commission of New South Wales and those proceedings were foreshadowed in May 2001.

(8) The statement of claim alleges serious allegations of dishonesty and breach of directors' duties against the Finemore parties. Consequently, the allegations might lead to the joinder of third parties, a counterclaim, non party discovery and production of documents by subpoena, each step affecting parties in New South Wales.

(9 The misleading conduct allegations involve the application and interpretation of New South Wales State laws, namely, the Fair Trading Act 1987 (NSW).

The Facts Relied Upon by the Plaintiffs Against Transfer

There were four primary grounds relied upon by the plaintiffs to preserve the proceedings in Victoria. First, it was asserted that important witnesses relating to the Resarta agreement are based in Victoria. Further, it was asserted that all witnesses relating to the alleged agreement are based in Victoria. Hence, it was said that there were significant numbers of witnesses based in Victoria. Against this it was submitted by Mr J. Middleton QC who appeared with Mr M Connock on behalf of the Finemore parties that the claim made by the plaintiffs involved allegations against all directors of the company. As a consequence, it was submitted, all directors would be involved in the proceeding and such directors were universally based in New South Wales. Ultimately, I conclude that the location of witnesses is finely balanced. The evidence relied upon by both parties does not demonstrate an overwhelming list of witnesses in one State as against the other. I cannot be satisfied, therefore, that New South Wales is the more convenient forum for the purposes of the proceeding on the basis of witnesses to be called.

The second matter relied upon by the plaintiffs against transfer was the fact that the registered office of each of the corporate plaintiffs and, also, the third defendant was Victoria. Likewise, it was said that the principal place of business and primary location of management decision-making was in Victoria. It followed, it was argued, that Victoria was a predominantly more convenient forum. However, Mr Middleton submitted for the Finemore parties that the plaintiff parties had transferred to Victoria in March 2001 and all the allegations relied upon in the statement of claim occurred before that date. I must approach the circumstances of the parties as they stand at this point in time and as may be expected to prevail at the time of trial. I am satisfied that the fact that the registered office and principal place of business of each of the plaintiffs is Victoria, together with the third defendant, is a factor that weighs in favour of the plaintiffs being allowed to continue the proceeding in Victoria.

Thirdly, it was asserted on behalf of the plaintiffs that all negotiations in relation to the alleged agreement occurred in Victoria. Ultimately, the location of the negotiations will be a matter of fact to be determined at trial as may be relevant. For present purposes I accept, prima facie, that negotiations occurred in Victoria with respect to the alleged agreement and that of itself provides further basis for determining that Victoria is the more convenient forum.

The fourth matter relied upon by the plaintiffs was the location of documents with respect to each of the Resarta agreement and the alleged agreement. It was submitted that the documents are presently in Victoria or are in the process of being transferred to Victoria. It was not apparent as to the inconvenience that would be caused to the parties either way if the documents were to remain in Victoria or be returned to New South Wales as the case may be. In this day and age I do not consider that the transfer of documents is such an overwhelmingly burdensome task that it provides a foundation for determining that the interests of justice support one forum over another. It follows that I do not consider that this is a ground that supports the proceeding being determined in Victoria or New South Wales. It is a neutral matter. In that sense, there is no basis to support or warrant transfer at this stage of the proceeding.

The fifth matter relied upon by the plaintiffs was that the parties have retained solicitors in Victoria. Mr Middleton emphasised that the solicitors presently on the record for the Finemore parties are based in New South Wales. On the other hand, it was said that the solicitors acting for the plaintiffs and the third defendant are large national firms that would be able to facilitate transfer to New South Wales without any particular difficulty. Ultimately, I conclude that this is not an especially significant aspect of the application. However, in so far as solicitors have been retained already in Victoria then, inevitably, preparation has occurred and counsel has been briefed. On balance it seems to me there is no compelling reason why it would be more convenient, indeed in the interests of justice, to transfer the proceedings to New South Wales where other solicitors could manage the matter.

As for the third defendant, essentially its attitude was one that it consented to the transfer of the proceeding but did not take a strong view one way or the other. The Court was informed that Brendon Gibbons, a former employee of the third defendant, and who would be a witness in all likelihood, lives in Wagga Wagga, New South Wales. On the other hand, there were other employees of the third defendant likely to be called as witnesses who resided in Victoria.

On closer analysis of the matters relied upon by the Finemore parties on the one hand with respect to location of witnesses and the plaintiffs on the other hand likewise with respect to location of witnesses, documents and solicitors, these matters essentially come down to a question of cost and convenience. For the purposes of the application I accept that the plaintiffs and defendants genuinely believe they will need to call the witnesses adverted to. However, as observed by Beach J in Contract Media Sales (Aust) Pty Ltd v Roads & Traffic Authority of New South Wales (1999) VSC 391, unreported 15 October 1999, it is no longer an onerous task for witnesses to travel from Sydney to Melbourne. In addition, the present proceeding is one being conducted in the Commercial List of this Court and it necessarily follows that there are appropriate technological aids to facilitate the giving of evidence from interstate. Furthermore, it can be readily assumed in this century that solicitors engaged in commercial litigation whether they be based in Sydney or Melbourne or whether they have branch offices in the respective States would have available to them the types of facilities such that there is minimal inconvenience to the defendants if the trial proceeds in Melbourne (See also Ross Mollison Group Pty Ltd & Anor v The Really Useful Company (Aust) Pty Ltd & Anor, supra.

So far as the Finemore parties complained that the commencement of the present proceeding in Victoria constituted a tactical manoeuvre by the plaintiffs, I consider there is no evidence to support such an assertion. The plaintiffs are presently based in Victoria and it was open to them to commence the proceeding in this jurisdiction if so minded. The fact that there are proceedings on foot in the New South Wales Industrial Relations Commission does not, in my view, bear on the matter. The industrial jurisdiction could not be expected in any event to deal with the matters that the Finemore parties seek to have transferred to the Supreme Court of New South Wales. It has been observed on occasion that the choice of forum by a plaintiff is a factor to be taken into account: see Triumph International and Anor v ACP Publishing Pty Ltd (1997) 37 IPR 661, 665; Bourke v State Bank of New South Wales (1988) 22 FCR 378, 395-396. However, a contrary view has also been taken: see Overall v Permanent Trustee Co Limited (1999) FCA 1385, unreported judgment of Ryan J of the Federal Court dated 29 September 1999. I consider that the original choice of forum is a relevant factor to be taken into account but of itself is not a determinative factor. Rather, it is another factor that should be considered in the context of determining whether it is in the interests of justice that the proceeding be allowed to remain in the jurisdiction of first choice of the plaintiff. Here I accept the plaintiffs' reasons for choosing this jurisdiction as being its place of incorporation and business, the location of many of its witnesses and the general convenience and cost saving for the proceeding to continue in this jurisdiction.

There is a further factor to be taken into account. The plaintiffs have issued in the Commercial List presumably with an expectation of expedition. I am not informed as to whether the Supreme Court of New South Wales would be able to accommodate the parties by providing a speedier trial date than would be available in the Commercial List. As matters stand, subject to estimates of duration and the development of the defendants' cases the parties can readily anticipate a trial date in the first half of the coming year. In assessing the interests of justice this is a factor that can reasonably be taken into account. Indeed, it is to be observed that an expeditious timetable has been imposed on the parties already with a view to the matter progressing towards an early trial date.

There remains the question that the subject contracts were negotiated and executed in New South Wales. This fact of itself is not sufficient to command the transfer of the proceeding to New South Wales. Rather, it is a factor to be weighed up in determining whether it is in the interests of justice for the proceeding to be transferred to New South Wales. As already considered, many witnesses are located in Victoria. The fact of negotiation and execution in the circumstances of this matter, particularly as pleaded in the statement of claim, do not give rise to an imperative for transfer. Rather, it is the location of witnesses and the prevailing cost and convenience of the location of the trial. For the reasons already canvassed, I am not satisfied that it is in the interests of justice that the proceeding be transferred from Victoria to New South Wales.

The remaining matter is the fact relied upon by the Finemore parties that the majority of subject agreements provide that the relevant law is the law of New South Wales. Again, this will be a factor to be weighed into the overall equation of determining where the interests of justice lie as to the forum for trial. In any event, at least one of the agreements does not appear to fall into this category. A further factor to be considered is the nature of the allegations made by the plaintiffs against the defendants. Those allegations include breach of directors' duties. These types of allegations give rise to issues under the Corporations Act. Of course, such legislation is uniform. In so far as any discrete law of New South Wales was to be applied, I have not been informed of any matter that would indicate a judge of this Court would be incapable of applying such law. For example, part of the plaintiffs' claim seeks relief under the provisions of the Fair Trading Act 1987 (New South Wales). Such legislation, as with the Corporations Act, is uniform or largely uniform being based principally upon the Trade Practices Act 1974 of itself federal legislation. Again I am of the view that there is no imperative for transfer such as to accede to the application by the Finemore parties.

Fair Trading Act 1999(Vic)

Courts (Cross-Vesting) Act 1987

At a glance

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Judgment (34 paragraphs)

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Legislation Cited (3)

Cases Cited (5)