Vero Insurance Limited v Williams and Anor

CATCHWORDS : APPEAL - leave to appeal and appeal orders made from s 20 of the Service and Execution of Process Act 1992 (Cth) staying proceedings in Local Court - Guarantee and Indemnity - whether Supreme Court of Queensland appropriate Court to determine matters raised in Local Court proceedings - whether Queensland proceedings and Local Court proceedings separate or distinct - whether there was an error in exercising the discretion - whether there was failure to take into account or giving sufficient weight to relevant matters - whether there were material errors of fact - whether irrelevant matters were taken into account - no errors shown - leave to appeal refused - costs

Local Courts Act 2007 LEGISLATION CITED : Service and Execution of Process Act 1992 (Cth) Trade Practices Act 1974 (Cth)

House v King [1936] HCA 40; (1936) 55 CLR 499 Julia Farr Services Inc v Hayes [2003] NSWCA 37; (2003) 25 NSWCCR 138 CASES CITED : Meriton Apartments Pty Ltd v GNC Assets Pty Ltd (2003)1 DCLR (NSW) 207 Queensland Rail v Irving & Others (2004) 1 DDCR 578 Reliance Developments (NSW) Pty Limited v Lumley General Insurance Limited [2008] NSWCA 172 Wood Hall Ltd v Pipeline Authority [1979] HCA 21; (1979) 141 CLR 443

Vero Insurance Limited - Plaintiff PARTIES : Kevan Charles Williams - First Defendant Marlene Rae Williams - Second Defendant

COUNSEL : Mr RA Parsons, counsel Mr AC Casselden, counsel

SOLICITORS : Gadens Lawyers - Plaintiff Slater & Gordon Lawyers - Defendants

• 13 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION SCHMIDT J

2010/129990 VERO INSURANCE LIMITED v KEVAN CHARLES WILLIAMS & ANOR

JUDGMENT 1 HER HONOUR: By summons filed in May 2010 pursuant to s 40 of the Local Courts Act 2007, the plaintiff sought leave to appeal and appeals from a decision given by Magistrate O'Shane in April 2010. Her Honour made orders under s 20 of the Service and Execution of Process Act 1992 (Cth) staying the proceedings, having come to the view that the Supreme Court of Queensland was the appropriate court to determine the matters in issue between the parties. 2 The proceedings had been commenced in the Local Court in 2009 by a statement of claim. They concerned an indemnity given by the defendants in relation to a 'Deposit Power Guarantee' issued by the plaintiff in October 2006. Thereby, it was claimed, the first and second defendants irrevocably indemnified the plaintiff for monies payable by the plaintiff under the guarantee in respect of the payment of a deposit of some $36,000 payable by the defendants under a contract for the purchase of property located in Cairns. The defendants purported to terminate the purchase contract, on the basis that they had been misled into entering the contract by representations made by the vendor's agent. They advised the plaintiff of the termination by letter of 17 April 2009. 3 On 20 April, the plaintiff advised the defendants that if the vendor provided it with the original guarantee and copies of a notice of termination of the contract served on the defendants, under the guarantee it would be obliged to pay the deposit to the vendor. The plaintiff advised that the defendants should either obtain the original guarantee from the vendors, or take steps to protect their position, such as applying to a court for relief against the vendor, or an injunction preventing it from making payments under the guarantee, failing which it might be obliged to make payments under the guarantee, if its terms were met. The defendants did not take such steps. 4 The vendor disputed the defendants' right to terminate the contract and regarded the purported termination to amount to a repudiation, which it did not accept. It required the defendants to perform the contract. The vendor then itself terminated the contract. 5 On 14 May, the vendor sought payment of the deposit from the plaintiff, providing it with the original guarantee and a copy of a letter of 8 May sent to the defendants' solicitors, terminating the contract. On 22 May, the plaintiff paid the deposit to the stakeholder and sought repayment of the deposit from the defendants, pursuant to the guarantee, in accordance with the indemnity. 6 When payment was refused, the plaintiff commenced the Local Court proceedings, seeking to recover the deposit from the defendants under the indemnity. The claim is defended on the basis that the defendants had validly terminated the contract before the vendors sought payment of the deposit under the guarantee, thereby also bringing the guarantee to an end. The guarantee provided that it had a term which expired on the earliest of a number of specified events, including:

"3. The Contract of Sale is terminated or rescinded, and, in either case, the Purchaser is entitled to a refund of the deposit ... " 7 The defendants and some 34 other purchasers commenced the Queensland proceedings in June 2009, seeking orders against the vendor under the Trade Practices Act 1974 (Cth), that the contract had been validly terminated, amongst other things. Against the plaintiff, a declaration that it is not entitled to seek the repayment of the deposit under the indemnity on which it relies in the Local Court proceedings, was sought. 8 By motion filed in October 2009 the defendants sought orders staying the proceedings in the Local Court and transferring them to the Supreme Court of Queensland, to be joined with the proceedings there on foot. Her Honour made orders staying the proceedings, for reasons given on 27 April 2010. The Local Court had no jurisdiction to order a transfer of the proceedings and that order was not pressed at the hearing. The record of the proceedings shows that this was not appreciated by her Honour, who initially ordered the transfer. When the error was drawn to her attention immediately on her decision being given orally, the order was withdrawn and orders staying the Local Court proceedings until the Queensland Supreme Court proceedings are determined were made.

The parties' cases 9 The appeal was pressed on the basis of demonstrated error. The plaintiff argued that her Honour failed to take into account or give sufficient weight to relevant matters; made material errors of fact; and took irrelevant matters into account. The subject matter of the Local Court proceedings were submitted to be separate and distinct from the subject matter of the Queensland proceedings. The Local Court matter was straightforward and capable of being determined in less than a day, while the Queensland proceedings were a complex representative action, involving multiple defendants, which might take up to 3 years to be determined. 10 The defendants are one of 35 plaintiffs who commenced the Queensland proceedings in June 2009, against the vendors of the property. In the Queensland proceedings, the defendants seek a declaration that they validly terminated the contract for sale of the property; orders that either the vendor return the deposit, or that they be compensated by payment of an amount equal to the deposit paid to the vendor, which they may be liable to indemnify the plaintiff; and against the plaintiff, a declaration that:

"1. A declaration that the Fourth Defendant is not entitled to seek indemnity from the Plaintiffs in respect of payments made to the First Defendant under the deposit guarantee where such payments were made subsequent to notice being given to the Fourth Defendant that the contracts of sale between each of the Plaintiffs and the First Defendant had been validly terminated."

11 The plaintiff complains that her Honour erred in concluding that the Supreme Court of Queensland was the appropriate court to determine the issues between the parties, by placing excessive reliance on one relevant factor, namely the existence of the Queensland proceedings. Her Honour failed to give adequate weight to other factors requiring consideration under s 20(4) of the Act. 12 They included that the plaintiff's witnesses reside in New South Wales; the defendants reside in Western Australia; the plaintiff and defendants' solicitors reside in New South Wales; the subject matter of the proceedings is situated in New South Wales; the indemnity was formed in this State; and the most appropriate law to apply in the proceedings is that of New South Wales. Her Honour also erred in taking into account the defendants' desire to have the proceedings consolidated with those in Queensland. 13 It was also agreed that her Honour did not adequately consider that if the defendants are ordered to pay the plaintiff the guaranteed amount under the indemnity, they are still entitled to seek to recover the deposit from the vendor in the Queensland proceedings. They would then be no worse off than if they had paid a cash deposit to the vendor, instead of obtaining a deposit guarantee from the plaintiff. The Queensland proceedings only concern whether the vendor was entitled to terminate the contract and retain the deposit. 14 It was also argued that her Honour failed to have regard to the nature and character of the plaintiff's deposit guarantee. If a valid demand was made under the guarantee, there was no requirement for the plaintiff to enquire into the underlying relationship between the vendor and purchaser (see Reliance Developments (NSW) Pty Limited v Lumley General Insurance Limited [2008] NSWSC 172 at [20] and [40] - [41]). The vendor was not obliged to prove that its rescission or termination of the contract was lawful, before requiring payment of the deposit (see Meriton Apartments Pty Ltd v GNC Assets Pty Ltd (2003)1 DCLR (NSW) 207 and Wood Hall Ltd v Pipeline Authority [1979] HCA 21; (1979) 141 CLR 443). 15 The material factual error relied on was the finding that the subject matter of the primary dispute was in Queensland and that the proceedings were inseperable from the proceedings in the Queensland Supreme Court. The plaintiff also relied on her Honour's mistaken understanding that the defendants were seeking to consolidate and transfer the Local Court proceedings to the Queensland Supreme Court. It was also complained that her Honour took no account of the delay which would result from the order made. The Local Court proceedings have not be transferred to the Queensland Supreme Court and have merely been stayed, pending the determination of those proceedings. 16 The simple matter in issue between the parties, separate from that being litigated in the Queensland Supreme Court, ought not to have led to the stay ordered. The issue is the defendants in the Local Court was only concerned with the defendants' failure to pay the plaintiff the sum of $36,800 under the indemnity agreement. 17 It was common ground that in order for the appeal to succeed, error must be shown (see House v King [1936] HCA 40; (1936) 55 CLR 499). 18 The defendants' case was that there was no error. Her Honour had considered and weighed relevant matters and had not given excessive weight to any one factor. The plaintiff conducted its business in respect of property located in Queensland. It could hardly complain that it is required to litigate disputes which arose in relation to such transactions in Queensland. 19 The case between the plaintiff and the defendants was primarily a documents case. The whereabouts of witnesses was largely irrelevant. While the defendants reside in Western Australia and the plaintiff in New South Wales, they are all already involved in the Queensland proceedings, where they already have Queensland legal representatives for the purposes of the proceedings. The guarantee here in issue supported and depended upon a transaction in relation to land situated in Queensland, to which Queensland law applied. The fact that the guarantee was formalised in Sydney was a minor consideration in this case. While it was likely that NSW law applied to the guarantee, the identity of the applicable law was but of little moment within the Commonwealth of Australia. 20 The defendants were seeking relief against the plaintiffs in the Queensland proceedings in relation to the subject matter of the Local Court proceedings. Whether the vendor had the right to terminate the contract for sale and retain the Queensland deposit was a question to be determined in the Queensland proceedings and also relevant to the Local Court proceedings. It was not correct that the claims and issues in the two proceedings were separate and distinct. If the defendants succeeded in the Queensland proceedings, the plaintiff would lose the right to press the claim brought in the Local Court. The vice in not staying the Local Court proceedings was that a risk arose as to conflicting findings of fact by the two Courts in relation to the same issues. 21 That the defendants might have a remedy against the vendors in the Queensland proceedings, if they failed to defend the Local Court proceedings, was not a sufficient reason for upholding this appeal. 22 Furthermore, no questions of the merits of the parties' cases arose for consideration before the Local Court or this Court on this appeal. Nor did the judgment in Reliance Developments undermine the defendants' case. The terms the guarantee here in question expired on the happening of certain events, including the termination of the contract of sale. If it had terminated before the vendor's claim for payment, then there was no requirement to pay the deposit, when the vendor made its claim on the plaintiff. Neither the plaintiff nor the defendants were liable under the guarantee if it had expired before a claim was made. 23 While sought in the motion, it was accepted that the Local Court had no jurisdiction to transfer the proceedings to Queensland, as a matter of discretion and that order was not pressed at the hearing. Her Honour's reference to transfer was thus but a slip. Her reasons made clear that she was dealing with a stay application, even though, in error, the Notice of Motion sought orders for transfer and consolidation of the proceedings. Immediately upon the error being raised, when the decision was given, the error was corrected, the order made was a stay. The question of the fate of the plaintiff's claim was then discussed, with that being left by her Honour on the basis of it being a matter for the parties to take the necessary steps to bring the plaintiff's claim before the Queensland Supreme Court. 24 For the defendants' part, such steps were thought to be by the plaintiff bringing a cross claim in the Queensland proceedings, rather than any application being made under cross vesting legislation, which would be unnecessarily time consuming and expensive. The defendants would consent to such an application.

Was error shown? 25 Section 20 of the Service and Execution of Process Act provides: " 20 Stay of proceedings (1) This section does not apply in relation to a proceeding in which the Supreme Court of a State is the court of issue. (2) The person served may apply to the court of issue for an order staying the proceeding. (3) The court may order that the proceeding be stayed if it is satisfied that a court of another State that has jurisdiction to determine all the matters in issue between the parties is the appropriate court to determine those matters. (4) The matters that the court is to take into account in determining whether that court of another State is the appropriate court for the proceeding include: (a) the places of residence of the parties and of the witnesses likely to be called in the proceeding; and (b) the place where the subject matter of the proceeding is situated; and (c) the financial circumstances of the parties, so far as the court is aware of them; and (d) any agreement between the parties about the court or place in which the proceeding should be instituted; and (e) the law that would be most appropriate to apply in the proceeding; and (f) whether a related or similar proceeding has been commenced against the person served or another person; but do not include the fact that the proceeding was commenced in the place of issue. (5) The court's order may be made subject to such conditions as the court considers just and appropriate in order to facilitate determination of the matter in issue without delay or undue expense. (6) The court may determine the application for an order without a hearing unless the applicant or a party objects. (7) For the purposes of determining the application, the court may hold a hearing by audio link or audiovisual link. (8) A person who is entitled to practise as a barrister, solicitor or both before a court in: (a) the place of issue; or (b) another State in which a person is participating in the hearing by audio link or audiovisual link; has a right of audience before the court at the hearing. (9) This section does not affect the court's power to stay a proceeding on a ground other than the ground mentioned in subsection (3). (10) This section does not affect the operation of: (a) the Jurisdiction of Courts (Cross-vesting) Act 1987; or (b) a corresponding law of a State." 26 In Queensland Rail v Irving & Others (2004) 1 DDCR 578, following its earlier decision in Julia Farr Services Inc v Hayes [2003] NSWCA 37; (2003) 25 NSWCCR 138, the Court of Appeal held:

"4 We consider that there is a general discretion under s 20(3) of the Service and Execution of Process Act. The factors enumerated in s 20(4) first have to be taken into account when deciding whether a Court of another State is the appropriate Court for the proceedings. Once that decision has been made, the discretion under s 20(3) is activated and all relevant matters can then be considered in the balancing exercise. The primary judge undertook such an exercise." 27 In this case there was no issue between the parties that the Supreme Court of Queensland had jurisdiction to determine all of the matters in issue between the parties. Whether it was the appropriate court to determine the matters pursued in the Local Court proceedings, was disputed by the plaintiff. The defendants' case is that the Supreme Court of Queensland is the appropriate Court to determine these matters, given their relationship to the issues lying between the parties, in the Queensland proceeding. 28 On her Honour's reasons, it is apparent that in rejecting the plaintiff's case that its claim ought to be permitted to proceed in the Local Court, her Honour had regard to the matters dealt with in s 20(4). The plaintiff's complaint was that in coming to the conclusion that the discretion provided by s 20(3) should be exercised, her Honour did not sufficiently appreciate the nature of its case, or the authorities relied on. Certainly her Honour made no reference to them. 29 Her Honour took the view that the defendants' case, that the plaintiff was not obliged to make the payment demanded by the vendor under the guarantee, because it was no longer in effect, was arguable, albeit observing that it was not the Local Court's function to enquire into the legal ramifications of the defendants' conduct in terminating the contract. Her Honour noted that there was a clear intention by the defendants to repudiate, given the terms of the letter directed to the vendor. Her Honour also observed that while she did not have to decide the matter, it was in her view arguable that the guarantee expired on 17 April 2009 and that the purchasers then became entitled to a refund of the deposit. In her view, these were matters which could be ventilated in the Queensland proceedings. 30 Her Honour also noted the steps which the vendors took to act on the guarantee; the payment made thereupon by the plaintiff; the recovery sought from the defendants in the Local Court and the stay of these proceedings which the defendants thereupon sought under s 20, given what was pursued in the Queensland proceedings. Her Honour referred to the various factors dealt with in s 20(4) and the cases which the parties had each advanced. She noted that the Queensland proceedings had not yet had a hearing date allocated and that there were various contentions as to when that might occur. She noted that the issue of prejudice was not the subject of submission by either party, but did not take the view that significant prejudice would be occasioned to the plaintiff from the time at which the Queensland matter might be heard. 31 Her Honour took the view, she said somewhat perplexingly, that the proceedings were both 'separable and inseparable from the Queensland proceedings'. She concluded, however, that the Supreme Court of Queensland was the appropriate court to determine all of the matters in issue between the parties. In doing so, her Honour referred further to the fact that the subject matter of the primary dispute was in Queensland and that the parties were resident in various locations throughout the country. 32 Despite the difficulties with her Honour's explanation of the conclusion which she reached, it is difficult to see that any relevant error infected her Honour's decision. In an appeal such as this it is not a question of whether this Court would have come to a different view, as a matter of discretion, on the matters over which the parties joined issue, but rather whether relevant error has been established. 33 The parties are all parties to the Queensland proceedings and those brought in the Local Court. That the plaintiff commenced the proceedings it pursues in New South Wales is not a matter which may be given any weight (s 20(4)). It must be accepted, given the terms of the indemnity on which the plaintiff relies, that the argument which the defendants wish to advance in relation to the guarantee, is not one which can readily be seen as providing a basis for the defendants resisting the plaintiff's claim. The defendants' argument is that the vendor was not entitled to make a call under the guarantee, because the contract for sale had been earlier terminated. Thereby, the vendor had no rights under the guarantee, it too having expired, with the result that it had no obligation to pay the deposit and no occasion to call upon the defendants under the indemnity. 34 It does seem to me that the authorities on which the plaintiff relied supported the case which it wishes to advance, given the terms of the indemnity, although it should be observed that in the High Court's judgment in Wood Hall Ltd, the possibility of relief in circumstances of the kind which have here arisen, was referred to at [14], although in that case it was a question found unnecessary to consider. The question of the merits of the respective claims which the parties wish to advance in the proceedings, is not a matter referred to in s 20(4) as a matter to be considered in determining which Court is the appropriate court for the proceedings. Such considerations, in my view, cannot be determinative of the exercise of the discretion granted by s 20(3), either before the Local Court, or by this Court on appeal. 35 The practical situation of course is that the plaintiff has paid out on the guarantee and seeks to recover that sum from the defendants under the indemnity. The defendants for their part resist making such a payment, claiming that the plaintiff was not obliged to make any payment under the guarantee and accepting that it cannot call on the indemnity, because the guarantee was not longer in effect. This is what the defendants seek to litigate against both the vendor and the plaintiff in the Queensland proceedings. They are therefore resisting the repayment of the deposit to the plaintiff, before the Queensland proceedings are determined. 36 It follows that if this appeal does not succeed, the plaintiff will need to take steps to recover the deposit, either from the defendants or perhaps the vendor or stakeholder in the Queensland proceedings. For their part, the defendants will consent to the plaintiff bringing a cross claim in those proceedings. 37 If the appeal is upheld, and the plaintiff does not succeed in the Local Court proceedings, it will have to take other steps to recover the deposit from the vendor. In either case, the risk for both the defendants and the plaintiff is that the vendor, which is not a party to the Local Court proceedings, will not be bound by conclusions reached in the Local Court. It follows, as the defendants argued, that there must be a risk that different conclusions might be reached by two courts in relation to the same factual questions, which may have an impact on the issues requiring resolution in the two proceedings. 38 But for the complication that in the Queensland proceedings, the defendants are but one of 34 plaintiffs, the more efficient course would be to have the Queensland Court deal with all issues. There are clearly common factual issues alive in both proceedings. Neither party suggested that her Honour's observation that neither party had raised prejudice in their submissions was wrong, albeit, as her Honour observed they had each led evidence about the question of delay. 39 In all of the circumstances, on balance, I have not been convinced that necessary error has been shown. It seems to me that the conclusion which her Honour reached was available, in the circumstances, as a proper exercise of the discretion. It follows that leave to appeal may not be granted. 40 The defendants sought an order for costs, if this conclusion were reached. The plaintiff advanced no argument to the contrary, accordingly it is appropriate that the order sought be made.

Orders 41 For these reasons, I order that: 1 Leave to appeal be refused. 2 The plaintiff bear the defendants' costs, as agreed or assessed. **********

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