Wepar Nominees Pty Ltd v Schofield

Federal Court of Australia|2013-09-13|Before: Mr P, Besanko J

The second respondent's application dated 29 October 2012 be dismissed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION SAD 234 of 2012

JUDGE: BESANKO J DATE: 13 september 2013 PLACE: ADELAIDE

THE RELEVANT LEGAL PRINCIPLES 4 Section 48(1) of the Federal Court of Australia Act 1976 (Cth) and Rule 2.02 of the Rules are in the following terms: 48 Change of venue (1) The Court or a Judge may, at any stage of a proceeding in the Court, direct that the proceeding or a part of the proceeding be conducted or continued at a place specified in the order, subject to such conditions (if any) as the Court or Judge imposes. 2.02 Transfer of proceeding to another place A party may apply at the proper place for an order that the proceeding be transferred to another place. Note 1: Proper place is defined in the Dictionary. Note 2: See section 48 of the Act. 5 The term "proper place" is defined in the Rules as follows: (a) the place where the proceeding is started; or (b) if the proceeding is transferred to another place - the other place, from the date of transfer. 6 The seminal case in this area is National Mutual Holdings Pty Ltd and Others v The Sentry Corporation and Another (1988) 19 FCR 155 ("Sentry"). In that case, the respondent sought an order transferring the proceeding from the Victorian District Registry to the New South Wales District Registry. The respondent's application was refused by a single judge and the respondent sought leave to appeal from that decision. The Full Court granted leave to appeal and allowed the appeal. The Full Court held that the primary judge had erred in applying to the case a test which required the Court to refuse to transfer the proceeding unless the Court was satisfied that there was a manifest preponderance of convenience in support of the transfer. The Full Court said that that was not the correct test. 7 The Full Court said that the power in s 48(1) should be exercised flexibly having regard to the circumstances of the particular case. Unless an applicant's choice of place was capricious, the Court must be satisfied that there is sound reason to direct that the proceeding be continued or conducted elsewhere. The Court is entitled to ask itself why the place should be changed, although the Court emphasised that there is no onus of proof on the party seeking an order that the proceeding be conducted or continued elsewhere. The test to be applied is to ask where the case can be conducted or continued most suitably bearing in mind the interests of all the parties, the ends of justice in the determination of the issues between them and the most efficient administration of the Court. 8 In considering whether one venue or place is more appropriate than another, some of the relevant factors are the residence of the parties and of the witnesses, the expense to the parties, the place where the cause of action arose and the convenience of the Court. The balance of convenience will generally be a relevant consideration, but, as the Full Court said, "not necessarily determinative of each case" (at 162). 9 The Full Court referred to various rules in the Federal Court Rules 1979 (Cth): O 10, r 1(2)(f), O 1, r 4 and O 30, r 6. There is no suggestion that there is any difference in the test under the Federal Court Rules 2011 (Cth) Rule 2.02, Rule 5.04(3) item 34 and note 1 and Schedule 1. 10 In Cycles & Wheelman Pty Ltd and Others v Beltech Corporation Ltd (1988) 80 ALR 279 Gummow J, sitting as a judge of this Court, said, after referring to the fact that in the ordinary course interlocutory steps and a trial would take place in the then proper place (at 281): The question is whether there should be a departure from that ordinary course and, in that sense, it is for the applicant on the motion to satisfy the court that the proceedings should be transferred, with the attendant consequences of that transfer. It is not, in my view, simply a question of the court locating the balance of convenience, because the court must be satisfied by the applicant that there be a change in the status quo and in the identity of the "proper place" and that transfer be ordered. (Emphasis added.) 11 I have considered a number of other cases, including decisions of my own, but I do not think an analysis of single instance decisions is particularly helpful. Most cases turn on their own particular facts. However, there are two propositions which I think should be mentioned in the context of this case. First, it is important to remember the point made by French J sitting as a judge of this Court in Lamb v Hog's Breath Company Pty Ltd (No 1) [2007] FCA 49 that the question of the Registry from which the proceedings should be conducted does not raise matters of high principle. His Honour went on to say (at [7]): The proceedings were commenced in the Perth Registry of the Court. The respondents seek its transfer to the Brisbane Registry. The question of the Registry from which the proceedings should be conducted does not raise matters of high principle. It is essentially a matter of case management and proper recognition of the legitimate interests of each of the parties reflected, in part, in the balance of convenience as between them and, of course, the convenience of the Court and any economies and efficiencies that may attach to one choice or another. These matters used to be more critically dependent upon choice of Registry than they are today and some of the earlier cases about the discretion to transfer from one Registry to another may have to be read in that context, without affecting the underlying criteria that inform this discretion. 12 Secondly, the location of the parties' legal advisers is, generally speaking, accorded little weight. It is true that the situations which can arise are so varied that inflexible principles are to be avoided. Nevertheless, I agree with Mansfield J's observations in Baxendale's Vineyard Pty Ltd and Others v Geographical Indications Committee and Another (2007) 156 FCR 444 at 449 (at [29]): In my view, generally speaking, little weight should be given to the fact that counsel or the solicitors for a party are in a particular location. Principally, that is because the selection of counsel and solicitors is a matter for the parties. Their choice should not be of significance to the identification of the proper place of a matter. The Court is a national Court, with Registries in each State and Territory and can sit anywhere in Australia. However, to an extent, there is a tendency for parties to institute proceedings in a Registry of the Court convenient to counsel or the solicitors for the parties rather than in a Registry which has a real connection with the subject matter of the dispute, or indeed with the parties themselves or the witnesses. I do not think that the Registry where proceedings are instituted should be dictated by that consideration. Further, where that is the case, it may well be appropriate to transfer the proceeding to a proper place, having regard to the considerations discussed in Sentry 19 FCR 155 and other cases.

THE NATURE OF THE APPLICANTS' CASE 13 As I have said, the proceeding was commenced by the first and second applicants as a representative proceeding under Part IVA of the Federal Court of Australia Act 1976 (Cth) on its or his own behalf and on behalf of the other persons who: (1) acquired shares in White Sands Petroleum Limited ("White Sands") between 6 December 2005 and 21 September 2006; (2) suffered loss and damage because of the conduct pleaded in the Amended Statement of Claim ("Statement of Claim"); and (3) have entered into a Litigation Funding and Management Agreement with LCM Litigation Fund Pty Ltd. 14 The applicants allege that at the commencement of the proceeding, seven or more persons had claims against the respondents. 15 The applicants' allegations about the status and positions occupied by the respondents are largely admitted. The first respondent admits that he was the managing director of White Sands between 9 August 2004 and 2 July 2008. The second respondent admits that he was the chairman of White Sands and the chairman of the Board of Advice of ABN Amro Morgans Corporate Limited, which was the lead manager and underwriter of the prospectus referred to in the Statement of Claim. The third respondent admits that she was an employed partner of Nicol Robinson Halletts between 1 July 2005 and 30 June 2006 and an equity partner thereafter which firm were the lawyers to the offer of shares referred to below and to White Sands. She admits that she was a director of White Sands from 30 October 2005 until 21 September 2006. 16 The respondents admit that White Sands was a company incorporated under the Corporations Act 2001 (Cth) ("the Act") and that its shares were admitted to quotation on the Australian Securities Exchange Limited ("ASX") on or about 6 January 2006. 17 The applicants allege that at the time of the listing White Sands proposed to carry out a venture which involved the following activities: (1) the carrying on of the business of an oil and gas exploration and production company by owning and operating an EDM drill rig; (2) the undertaking of a drilling program which involved drilling 15 wells in 14 months; and (3) partially carrying the drilling costs to earn equity interests in the drilled tenements. 18 The applicants allege that White Sands offered to issue up to 40 million shares at an issue price of $0.20 ("Offer") pursuant to a prospectus dated 29 November 2005. They allege that the prospectus was fully underwritten by ABN Amro Morgans Corporate Limited and that the lawyers to the offer were Nicol Robinson Halletts. The applicants allege that the prospectus stated that it was issued with the consent and authority of the directors of White Sands including the respondents. 19 The applicants' case includes allegations that the prospectus contained representations which are described in the Statement of Claim as follows: (1) the Drill Rig Representations; (2) the Drilling Program Representations; and (3) the Cash Flow Representations. 20 It is not necessary for present purposes to set out the details of the representations. 21 The applicants allege that the shares of White Sands were placed in a trading halt by the ASX on 21 September 2006 and were suspended from official quotation from 25 September 2006. The applicants allege that on 20 December 2006 the directors of White Sands resolved that the company was insolvent, or likely to become insolvent, and administrators were appointed on that date. A deed of company arrangement within Part 5.3A of the Act was executed on 27 June 2007 and the deed contemplated a scheme whereby shares in White Sands were consolidated on a two for three basis from 73,772,500 shares to 49,181,667 shares and White Sands changing its name to Maverick Drilling International Limited ("Maverick"). The consolidation of shares became effective on 31 August 2007. 22 On 19 December 2007 there was a variation to the deed of company arrangement. The variation involved a recapitalisation scheme with three elements. I set out paragraphs 25.1, 25.2 and 25.3 in the Statement of Claim: 25.1 Existing shares in WSP (now called Maverick) being further consolidated on a one for three basis from 49,182,062 shares to 16,394,020 shares (Second Consolidation); 25.2 The capital of WSP (Maverick) being reduced by applying approximately $12,515,848 of WSP's (Maverick's) accumulated losses against the share capital which would be permanently lost; 25.3 Seeking to raise $3.2 million by offering: (a) 120,000,000 shares to Trident Capital Ltd, the proponent of the Recapitalisation Scheme, at an issue price of 0.5 cents per share; (b) 260,000,000 shares to the public at 1 cent per share; (c) 65,000,000 options to Trident Capital Ltd as its nominees for nil consideration with an exercise price of 1 cent each expiring on or before 31 December 2010. 23 The recapitalisation scheme was implemented. Paragraphs 26 to 29 inclusive of the Statement of Claim are in the following terms: 26. The Recapitalisation Scheme was approved on 9 May 2008 and a prospectus was issued to give effect to the Recapitalisation Scheme on 21 May 2008 (Recapitalisation Prospectus). 27. The capital structure of WSP (Maverick) following completion of the Recapitalisation Prospectus was as follows: Number of Shares % Number of existing Shares on issue 49,182,062 Number of Shares on issue following Second Consolidation 16,394,020 4.14% Shares issued to Trident Capital Ltd 120,000,000 30.27% Shares issued pursuant to Public Offer 260,000,000 65.59% Total 396,394,020 100% 28. WSP (Maverick) was readmitted to official quotation on the ASX on 7 July 2008 (Relisting). 29. Shares in WSP (Maverick) were not able to be traded on the ASX from the Trading Halt until 7 July 2008 at which time: 29.1 The shares issued before the Trading Halt had been reduced in number by the First Consolidation and the Second Consolidation; 29.2 The share capital had been set off against the accumulated losses of WSP (Maverick); and 29.3 The shares issued before the Trading Halt had then been diluted to such an extent by the Recapitalisation Scheme as to be worthless or retain only a nominal value. 24 In summary, the applicants allege: (1) that the Drill Rig Representations, the Drilling Program Representations and the Cashflow Representations in the prospectus were misleading or deceptive statements and, as a result, there were contraventions of s 728 of the Act. Furthermore, they were in breach of a fiduciary duty owed by the respondents to the first applicant and the group members; (2) that the prospectus did not contain the information it was required to contain by reason of s 710 of the Act; (3) that there was a failure to disclose matters at or about 6 January 2006 which constituted misleading or deceptive conduct or conduct likely to mislead or deceive contrary to s 1041H of the Act and s 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) ("ASIC Act"); (4) that there were announcements made to the ASX on 10 January 2006, 17 February 2006, 20 March 2006, 28 April 2006, 27 June 2006, 31 July 2006 and 14 August 2006 respectively at the direction of, or with the knowledge and authority of, each of the respondents or both, which were misleading and deceptive or likely to mislead and deceive in contravention of s 1041H of the Act and s 12DA(1) of the ASIC Act; (5) that there were representations by silence which were misleading and deceptive or likely to mislead or deceive in contravention of s 1041H of the Act and s 12DA(1) of the ASIC Act after 11 April 2006 and 11 May 2006 respectively. 25 The first applicant and those described in the Statement of Claim as the "IPO Group Members" claim that they purchased shares in White Sands pursuant to the Offer. The first applicant and the IPO Group Members would not have purchased the shares, but for the misleading or deceptive conduct, representations or material omissions. The first applicant alleges that it was reasonable for it and the IPO Group Members to retain their shares in White Sands until the trading halt (21 September 2006), that they could not then sell their shares until the relisting (7 July 2008) and that the value of the shares was destroyed by the failure of White Sands and the venture and by the effect of the recapitalisation scheme. 26 The second applicant and those described in the Statement of Claim as the "On Market Group Members" claim that their loss and damage flowed from the market contraventions or the continuing representation or the announcements. Again, it is alleged that at the time the shares were relisted the value of the shares was destroyed by the failure of White Sands and the venture and by the effect of the recapitalisation scheme. 27 The second respondent denies that the prospectus conveyed the Drilling Rig, the Drilling Program and the Cashflow Representations alleged by the applicants and, in any event, denies that they were misleading or deceptive statements. He pleads that insofar as the prospectus contained statements about future matters, there were reasonable grounds for making the statements and, in that context, he refers to a number of documents in what he calls the due diligence files. In relation to the representations he pleads that by operation of s 731(1) or s 733(1) of the Act or both, he has no liability under s 729 of the Act for any contravention of s 728 of the Act. Among other pleas, he denies that any of the announcements were misleading or deceptive. The second respondent denies that the first applicant or the IPO Group Members or the second applicant or the On Market Group Members suffered loss or damages. He alleges, in the alternative, contributory negligence on behalf of these groups and, in the further alternative, that he ought fairly be excused from liability. He raises delay and limitation period defences against the applicants and the groups they represent. Finally, he pleads proportionate liability claiming that the other respondents, White Sands and Mr Ronald Anderson, were concurrent wrongdoers. Mr Anderson is alleged to have been the company secretary of White Sands from 14 October 2005 to 1 April 2008.

Delay 28 As I have said, the second respondent issued this application on 29 October 2012. He did not press the hearing and determination of the application at that time. He accepted that the considerations relevant to the application were more accurately assessed after the proceeding had further progressed. I think the application was issued in a timely fashion and that there has been no delay which should weigh against the second respondent's application. At the same time, I am not required to ignore the fact that the proceeding has reached a relatively late stage in terms of the interlocutory steps before trial and that I have acquired a level of knowledge of the issues in the proceeding. The applicants have filed and served their witness statements. The respondents are required to file and serve their witness statements by 8 October 2013.

The Use of Video-link Facilities and the fact that Part of the Trial can be Conducted in a Different Place 29 In an application for transfer it is relevant to note that this Court can hear evidence by video-link and it can conduct part of a trial in one place and the other part in another place.

The Likely Duration of the Trial 30 It is difficult to be precise about the likely duration of the trial. An estimate of three weeks has been given. That estimate, or an estimate of four weeks if all issues are contested, is probably the best estimate that can be given at this stage.

The Location of the Parties 31 The first applicant is a small investment company owned by a Mr Brian Page and his wife. The company's registered office is in Mount Gambier in South Australia and Mr and Mrs Page live in Mount Gambier. Mr and Mrs Page have some health problems and when the trial begins Mr and Mrs Page plan to stay with family in Adelaide. Mr Page is 68 years old. 32 Mr Page read the prospectus and the ASX announcements in Mount Gambier and he instructed ABN Amro in Adelaide to purchase shares in White Sands. Mr Page states that because of his health, age and desire to be close to his family, he would consider standing down as lead applicant if the proceeding was transferred to Brisbane. 33 As I have said, the second applicant passed away recently and he is yet to be replaced. His personal circumstances are no longer relevant to the determination of the present application. 34 The first respondent lives in Coomera in Queensland and in his present employment he spends about half his time in Brisbane and half his time in Adelaide. The second respondent lives in Ascot in Queensland. The third respondent lives in Diddillibah which is about a 75 minute drive from Brisbane. She works three days a week in Brisbane and the balance of her time from the Sunshine Coast. The third respondent has school age children and her solicitor states that she would have extreme difficulty attending to her family and work responsibilities should a trial be held in Adelaide.

The Location of Witnesses and Potential Witnesses 35 The applicants have filed and served the evidence which they intend to rely on at the trial of this proceeding. The respondents are required to file and serve their evidence by 8 October 2013. The applicants have the right to file and serve evidence in reply. 36 The applicants' evidence and the location of their witnesses is as follows: (1) Mr Brian Page, who lives in Mount Gambier in the State of South Australia. (2) Mr Stephen Charles Fiske, a senior professional drilling consultant, who lives in Buckenderra in the State of New South Wales. (3) Mr Lawrence Arnold Fitzgerald, who owns a business called Westlands Engineering and Hydraulics. He states that he specialises in general repair in the agriculture industry and also the supply of parts and repairs for the oil and gas, railways and earthmoving industries operating in and around Roma in the State of Queensland. In his affidavit he gives an address in Roma. (4) Mr Ray Douglas Parker who is an oil rig survey and commissioning engineer. In his affidavit he gives an address in Bunbury, Western Australia. He states that he travels around the world, but is based in Western Australia. (5) Mr Paul Jorgensen who is a chartered accountant based in Adelaide. (6) Mr Philip Alexander Jay, an oil rig survey and commissioning engineer. In his affidavit, Mr Jay gives an address in Dulacca in Queensland. 37 The second respondent's solicitor, Mr Guy Humble of McCullough Robertson, provides an opinion as to the witnesses he expects the second respondent would wish to call and he identifies their location. For the Drill Rig Representations and more particularly the time spent on drill rig repairs and drill rig construction work, he estimates an unspecified number of witnesses including employees of particular firms all resident in Queensland, and for those representations in relation to failure to survey and fitness for purpose he estimates five witnesses of whom one is in Queensland and one in South Australia. For the Drilling Program Representations he estimates five witnesses, three of whom were in Queensland and none of whom are in South Australia. For the Cashflow Representations he estimates two witnesses, both of whom are in Queensland. For the Due Diligence process in relation to the prospectus, he estimates six witnesses all of whom are in Queensland, and for the Recapitalisation Scheme he estimates three witnesses who are in Queensland. In the result, he identifies only one witness in South Australia. It is not clear from the pleadings what the precise issues will be in relation to the Recapitalisation Scheme. 38 It seems clear that there are likely to be witnesses from places other than South Australia and Queensland. As far as those two places are concerned, I accept that there are likely to be appreciably more witnesses from Queensland than South Australia.

Relevant Law and the Place where the Cause of Action Arose 39 I did not understand it to be submitted that the law to be applied affects the proper place of the proceeding and the submissions on the place where the cause(s) of action arose were not detailed. On the face of it, as far as representations are concerned, the relevant cause of action arose where the relevant representations were read and relied on.

The Place where the Relevant Acts or Omissions Occurred 40 The second respondent made the point that most of the relevant events occurred in Brisbane. (1) White Sands was incorporated in Queensland on 9 August 2004. At the time of the relevant events, its registered office was in Brisbane. (2) The prospectus and ASX announcements were issued out of the registered office of White Sands in Brisbane. (3) Messrs Collins and Joiner were administrators of White Sands, and then deed administrators under the deed of company arrangement and under the varied deed of company arrangement. At all relevant times, they worked in practices in Queensland. (4) The underwriter and lead manager, investigating accountants and lawyers involved in the prospectus are in Queensland. (5) As at the date of the listing approximately 54% of the participants in the White Sands IPO resided in Queensland. Of the balance, there were a large number in New South Wales and South Australia. 41 The place where relevant events occurred is not of itself particularly significant. It gives weight to contentions about the location of likely witnesses, a matter which I have already addressed. Other than that, it does not take the resolution of the present application very far.

Location of Documents 42 Submissions were made about this matter, but in the end I did not think it was a particularly weighty matter.

conclusion 43 There is a good deal to be said for the second respondent's application. A large number of the likely witnesses reside in Queensland. On the other hand, the applicants' choice of venue was not capricious and there are connections between the proceeding and South Australia. I now have some familiarity with the matter and at present the proceeding, when ready, is likely to be listed for trial earlier in this Registry than in the Queensland District Registry. It is open to the parties to apply for some of the evidence to be taken by video-link from Queensland and even to ask for part of the trial to be conducted in Queensland. With some hesitation, I have concluded that this proceeding should not be transferred to the Queensland District Registry. 44 The second respondent's application will be dismissed. I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.

Federal Court Rules 1979(Cth)

Federal Court Rules 2011(Cth)rr 2.02, 5.04(3), Schedule

Corporations Act 2001(Cth)ss 710, 728, 729, 731, 733, 1041H

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