Woodham v Medina Group Pty Ltd and Ors [2005] ACTSC 92

2. The substantive action was commenced by originating application filed on 12 July 2005. It seeks declarations that certain conduct amounts to misleading or deceptive conduct pursuant to the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1992 (the Fair Trading Act). It seeks an injunction against the third defendants restraining them from making any demand for payment of monies pursuant to certain agreements described as an "Escrow and Loan Agreement" and a mortgage.

3. The form of action commenced in this Court is an unusual one. It is apparent from affidavits filed in this application that a dispute has arisen in relation to a commercial transaction concerning the financing of a retirement home in New South Wales. A loan of some two million dollars was obtained and secured by a mortgage and an escrow and loan agreement.

4. It is common ground that on 9 June 2005 the lender communicated in writing with the first defendant, described in the escrow and loan agreement as the borrower, and the fifth defendant, described in the escrow and loan agreement and the mortgage as the mortgagor, asserting that the term of the loan had expired and that the principal sum and the lender's return were both due and payable.

5. The plaintiff asserts that this letter contains a misleading or deceptive statement, namely the assertion that there was a proper mortgage and loan agreement, and that payment is due.

6. The mortgage is a standard form of New South Wales mortgage over real property situated in New South Wales. Clause 18.5 provides that the mortgage is governed by the laws of New South Wales. The escrow and loan agreement asserts that all of the parties are situate in New South Wales. It provides that if any dispute arises under the agreement there should be mediation in accordance with the Mediation Rules of the Law Society of New South Wales (clause 13.3). It provides that the agreement shall be governed by and construed pursuant to the laws of New South Wales and that the parties submit to the jurisdiction of the Courts of New South Wales (clause 20).

7. One would assume that, if there was an issue as to whether monies were repayable pursuant to these agreements, being agreements governed by New South Wales law between parties in New South Wales and concerning a New South Wales mortgage over real property in New South Wales, that issue would be resolved by appropriate litigation in that State.

8. Instead, the plaintiff has commenced these proceedings in the Australian Capital Territory. The plaintiff in his affidavit has given a residential address in the Australian Capital Territory, but does not assert in his affidavit that he is a resident of this jurisdiction. He was notified that he would be required for cross-examination on this application, but his solicitors advised the applicants that he would not attend as he was in Port Macquarie in New South Wales on business. The plaintiff's counsel made the concession that the plaintiff maintains two residences, one in Canberra and one in Port Macquarie, and divides his time between the two.

9. The basis for the plaintiff's assertion of jurisdiction, other than residence, which may be problematic, is the assertion that the deceptive or misleading conduct occurred in the Australian Capital Territory. In his affidavit supporting the originating application he asserts that the letter of demand, which is said to contain the misleading and deceptive conduct, was sent by facsimile to a telephone number in the Australian Capital Territory. His assertion is based on information and belief only as it asserts that the plaintiff was told that it was sent to the telephone number of a director of the fourth defendant. It is this publication in the Australian Capital Territory which would be the basis for the claimed relief pursuant to the ACT Fair Trading Act.

10. In an affidavit in support of this application, Mr Ervits, a solicitor, states that the facsimile letter attached to the plaintiff's affidavit was faxed by him, not to any telephone number in the Australian Capital Territory, but rather to a facsimile number in Victoria, provided to him by the director of the fourth defendant. He attaches to his affidavit the covering letter showing this facsimile address.

11. Although an affidavit has been filed in reply by Mr Montagnino, solicitor for the plaintiff, it does not address this issue or contradict Mr Ervits. It seems to me that I thus have sworn evidence from Mr Ervits, who was available for cross-examination but was not cross-examined, that the letter was sent by the investor partners, being the interests represented by the present applicants, to the fourth defendant and the fifth defendant at an address nominated by the fourth defendant in Victoria. The plaintiff asserts on the basis of information said to be supplied to him that the facsimile was sent to a Canberra telephone number. The plaintiff was not available for cross-examination. His solicitor, who had access to Mr Ervits' affidavit and the documents attached to that affidavit, did not contradict Mr Ervits' claim that the letter was never sent to a Canberra telephone number by him.

12. It seems to me that this fundamentally undermines the jurisdictional connection with the Australian Capital Territory, as it is unlikely, on the evidence before me, that any breach of the ACT Fair Trading Act took place. That leaves an action asserting a breach of the Trade Practices Act, and an action that presumably could be amended to claim relief under another State's Fair Trading Act. The real issues seem to concern the commercial transaction between New South Wales entities and persons concerning a New South Wales mortgage over land situate in New South Wales, and a loan and escrow agreement which on its face is to be subject to a dispute resolution procedure in New South Wales, and is subject to the jurisdiction of New South Wales Courts.

13. Mr Ervits asserts, and I accept, that at the time of the agreement all the parties to it resided in or had their offices in New South Wales, and that the first, second and third defendants all either reside in or have their registered offices in New South Wales. The fourth and fifth defendants had registered offices in New South Wales until May 2005, but now show a Canberra address. It is apparent that there have been changes in the composition of these entities since the transaction was entered into. Mr Ervits asserts that "with the possible exception of the plaintiff, all of the people who may have to be called to give evidence in these proceedings live in the State of New South Wales".

14. Mr Montagnino asserts in his affidavit that the plaintiff will not require witnesses to give evidence in the claim, as the matter can proceed on affidavit and documentary evidence.

15. The Cross-vesting Act is part of a national scheme of legislation that permits State and Territory Courts to transfer proceedings to other courts. The legislation provides in s 5(2) that if a proceeding is pending in this Court, (the first court) and it appears to this Court that;

(ii) having regard to-

(A) whether, in the opinion of the first court, apart from this Act and a law of the Commonwealth or another State relating to cross-vesting of jurisdiction, the relevant proceeding or a substantial part of the relevant proceeding would have been incapable of being instituted in the first court and capable of being instituted in the Supreme Court of another State or Territory; and

(B) the extent to which, in the opinion of the first court, the matters for determination in the relevant proceeding are matters arising under or involving questions as to the application, interpretation or validity of a law of that other State or Territory and not within the jurisdiction of the first court apart from this Act and a law of the Commonwealth or another State relating to cross-vesting of jurisdiction; 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 of another State or Territory;

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

16. Mr Ashhurst, for the applicants, brought this application pursuant to the broad discretion under s 5(2)(iii).

17. The appropriate approach that a court should adopt to such an application has recently been clarified by the High Court in BHP Billiton Ltd v Schultz [2004] HCA 61, (2004) 211 ALR 523. I have had the advantage of considering a recent first instance decision of Hollingworth J in the Victorian Supreme Court (Hall v Australian Finance Direct Ltd [2005] VSC 306) which, with respect, seems to well summarise the course to be adopted.

18. Hollingworth J noted that the High Court has established that it is an error to approach a cross-vesting application on the basis of a traditional "forum non conveniens" basis, stating at [60]-[61]:

60. In the judgment of Gleeson CJ, McHugh and Heydon JJ in Schultz ("the joint judgment"), their Honours stated:

Rather, the court is required by statute to ensure that cases are heard in the forum dictated by the interests of justice ... If it appears to that court that it is in the interests of justice that the proceedings be determined by another designated court, then the first court shall transfer the proceedings to that other court. 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.

The "interests of justice" are not to be equated with the interests of one or other of the parties to the proceeding, although these may be relevant. According to the joint judgment:

... The interests of justice are not the same as the interests of one party, and there may be interests wider than those of either party to be considered. Even so, the interests of the respective parties, which might in some respects be common (as, for example cost and efficiency), and in other respects conflicting, will arise for consideration. The justice referred to in s 5 is not disembodied, or divorced from practical reality ...

On the other hand, there may be conflicting interests of a kind that justice would not attribute greater weight to one rather than the other. 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.

61. The decision to be made is not a discretionary one. Either the interests of justice demand that the proceeding be transferred or they do not.

19. It seems to me that in this case the interests of justice demand that the proceeding be transferred to the Supreme Court of New South Wales. The substantive application brought in this Court, although couched as an application for declarations and injunctive relief pursuant to the ACT Fair Trading Act, in reality concerns the legal effect of transactions entered into in New South Wales, by parties then based in New South Wales under instruments governed by New South Wales law, and with dispute resolution clauses directed to New South Wales mediation and New South Wales Courts. The land subject to the New South Wales mortgage is situate in New South Wales. Any injunctive relief would be directed to parties in New South Wales over land and instruments in New South Wales.

20. The apparent artificiality of conducting such a dispute based on an asserted misleading statement - that money is properly owed and due under a mortgage and loan agreement - is apparent, but it is compounded by the evidence before me that the letter of demand that is said to found the action was never sent to an ACT address. This would bring into real question whether there is any ACT law to be applied in this dispute at all.

21. The present applicants state, and I accept, that all their witnesses are in Sydney. The plaintiff says that no witnesses will need to be brought on his case. The plaintiff says that court costs are somewhat lower in the ACT. But this is not about a balance of convenience, as the High Court has established. In this case, the real dispute is about a substantial loan secured against real property in New South Wales. The interests of justice, in my view, require that the matter be transferred to the Supreme Court of New South Wales.

22. I order that the matter be cross-vested to the Supreme Court of New South Wales. The plaintiff/respondent should pay the defendant/applicants' costs of this application.

I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Connolly.