Atomos Limited v McGechie
[2023] VSC 754
•15 December 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S ECI 2022 03658
| Atomos Limited (ACN 139 730 500) | Plaintiff |
| v | |
| Estelle McGechie | Defendant |
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JUDGE: | Croft J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 29 November 2023 |
DATE OF JUDGMENT: | 15 December 2023 |
CASE MAY BE CITED AS: | Atomos Limited v McGechie |
MEDIUM NEUTRAL CITATION: | [2023] VSC 754 |
JUDGMENT APPEALED FROM: | Orders of Efthim AsJ dated 22 March 2023 |
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PRACTICE AND PROCEDURE — Application pursuant to r 23.01 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) to stay proceeding pending proceeding in overseas court — Whether proceedings in two courts constitutes an abuse of process — Inherent jurisdiction of the Court — Business Service Brokers Pty Ltd v Optus Mobile Pty Ltd [2021] VSC 310, considered.
PRACTICE AND PROCEDURE — Appeal from an Associate Justice — Whether primary judge misapprehend or failed to consider the totality of the evidence available — Whether primary judge considered irrelevant matters — House v The King (1936) 55 CLR 499 — Oswal v Carson [2013] VSC 355, applied.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr B Gibson and Mr J Lipinski | Mills Oakley Lawyers |
| For the Defendant | Mr A C Blair | Burn City Legal |
HIS HONOUR:
Background
The matter before me is an appeal from a decision of an Associate Judge pursuant to r 77.06 of the Supreme Court (General Civil Procedure) Rules2015 (Vic) (Rules). Before turning to the appeal, it is helpful to briefly summarise the relevant facts and procedural history of this matter.
The dispute before this Court may be characterised as a simple debt claim,[1] though it should be noted that defendant seeks a set‑off alleging, among other things, breach of contract.[2]
[1]Statement of Claim dated 15 September 2022 (AB296–300).
[2]Defence dated 7 July 2023, [15]–[16].
The plaintiff, Atomos Limited (ACN 139 730 500) (Atomos), is global technology company. It is involved in the design and manufacture of video recording products and software. Atomos is listed on the Australian Stock Exchange. At all relevant times, including for the purpose of determining the appeal before me, Atomos’ registered office and company address is located in Victoria.
The defendant, Ms Estelle McGechie, has held relatively senior positions in a number of large global technology companies. In June 2021, Ms McGechie commenced working as the Chief Product Officer for Atomos and was based in California.[3]
[3]Affidavit of Christopher John Tait made on 9 March 2023, [8] (AB322).
A few months into her employment, Atomos decided to promote Ms McGechie to the position of Chief Executive Officer (CEO). On or around 20 September 2021, Atomos sent Ms McGechie a letter (Letter of Offer) offering her the CEO role, subject to terms and conditions both in the Letter of Offer and an Executive Service Agreement (ESA) attached to that letter (collectively, Employment Agreement).[4] Shortly thereafter, the parties executed the ESA and Ms McGechie commenced in the CEO role.
[4]Affidavit of Estelle McGechie dated 9 April 2023, [4] (AB226).
It will be recalled that the period during which Ms McGechie worked for Atomos in both the Chief Product Officer and CEO roles was during the covid‑19 pandemic.
As the CEO role at Atomos was based at Atomos’ Melbourne headquarters, the Employment Agreement required that Ms McGechie relocate from her residence in California.[5] The Letter of Offer noted that it was currently planned for Ms McGechie to be in Australia on a permanent basis on or around 1 January 2022.[6]
[5]Executive Service Agreement, cl 2.4.1 (AB61); Letter of Offer (AB86–87).
[6]Letter of Offer (AB86–87).
On 8 March 2022, being some months after entering into the Employment Agreement, Ms McGechie (who was still residing in California) emailed representatives from Atomos, including its Chairman, Mr Christopher Tait, seeking a bridging loan to enable her to purchase a property in Elwood, Victoria (Loan Request).[7] The Loan Request relevantly provided:
…
Thank you for your patience with my relocation, it is quite a complex issue managing the move and you have been supportive of our process. While there are many complexities such as immigration for Adam and our dog, one of the massive stumbling blocks is moving our finances. Adam is unable to even open a bank account, our US assets cannot be used as collateral, our mortgage was structured to be fixed at a low rate without drawdown, and our investments will incur capital gains if we withdraw money today.
My request is for a six‑month maximum relocation bridging loan of $365K, transferred directly for the sale deposit today to… [a specified] account.
…
[7]Loan request (AB267).
Later that day, Ms McGechie and Mr Tait had a telephone conversation where, at the very least, the Loan Request was discussed (Telephone Conversation).[8]
[8]Affidavit of Estelle McGechie dated 9 April 2023, [7] (AB227); Affidavit of Christopher John Tait made on 9 March 2023, [13] (AB323).
The following day, Mr Tait emailed Ms McGechie accepting her request for a bridging loan (Acceptance Email). The email relevantly stated:[9]
…
Further to our conversation yesterday I can confirm that Atomos Ltd will loan you $365k for up to 6 months. This will be documented in a simple loan agreement that Marcia (our Atomos counsel) can draft. Interest may be payable (depending on tax etc‑James to investigate) but will only be at 1.75% per annum (if payable) and will be paid at the end of the loan period.
Marcia, James and Stephen will review the document. This can be put in place subsequently, so I can confirm that payment of the $365k can be made immediately as per instructions below.
…
[9]Acceptance Email dated 9 March 2022 (AB268).
No such simple loan agreement (or other written loan agreement) was ever provided to Ms McGechie.
The parties do not dispute that there was an agreement for a bridging loan (Loan Agreement). Atomos pleads that the Loan Agreement and its terms are constituted by the Loan Request together with the Acceptance Email.[10] Ms McGechie pleads that the Loan Agreement is constituted by the Loan Request along with the telephone conversation on 8 March 2022 and the Acceptance Email.[11]
[10]Statement of Claim dated 15 September 2022, [8] (AB298).
[11]Defence dated 7 July 2023, [8].
On 14 April 2022, Atomos published an announcement on the ASX noting that:[12]
…
Estelle McGechie’s appointment as CEO of Atomos has concluded, primarily because she has not yet relocated to Australia. The Company has always indicated that it requires the CEO to be based in its Melbourne headquarters.
…
[12]Atomos’ASX announcement dated 14 April 2023 (AB291).
Between the time of the Loan Agreement and the ASX announcement, Ms McGechie did not relocate from California to Atomos’ headquarters in Melbourne.
It does not presently fall for me to determine what exactly happened in relation to Ms McGechie ceasing to be employed in the CEO role, save to say that the parties appear to have different accounts.
On 15 August 2022, Ms McGechie filed a document described as a ‘Complaint’ against Atomos (Complaint) in the Superior Court of California, County of Nevada (California Court Proceeding).[13] As would be expected of a proceeding in California, the Complaint is framed in terms of the laws applicable in that jurisdiction.
[13]‘Complaint’ filed on 15 August 2022 in the Superior Court of California, County of Nevada, case number CU0000253 (AB12–38).
Caution is to be had when having regard to material from overseas jurisdictions. In doing so, Courts are best informed through considering expert evidence. I do not propose to set out every aspect the Complaint, save for present purposes where it is convenient to note the following below.
The Complaint seeks a jury trial,[14] and has twenty defendants.[15]
[14]‘Complaint’ filed on 15 August 2022 in the Superior Court of California, County of Nevada, case number CU0000253 (AB14, 38).
[15]‘Complaint’ filed on 15 August 2022 in the Superior Court of California, County of Nevada, case number CU0000253 (AB12, 16).
Four distinct causes of action are clearly labelled as follows:
(a) ‘Gender Discrimination: Violation of Government Code § 12940(a)’;[16]
[16]‘Complaint’ filed on 15 August 2022 in the Superior Court of California, County of Nevada, case number CU0000253 (AB33).
(b) ‘Retaliation: Violation of Government Code § 12940(h)’;[17]
(c) ‘Retaliation: Violation of Labour Code § 1102.5’;[18] and
(d) ‘Wrongful Termination in Violation of Public Policy’.[19]
[17]‘Complaint’ filed on 15 August 2022 in the Superior Court of California, County of Nevada, case number CU0000253 (AB34).
[18]‘Complaint’ filed on 15 August 2022 in the Superior Court of California, County of Nevada, case number CU0000253 (AB35).
[19]‘Complaint’ filed on 15 August 2022 in the Superior Court of California, County of Nevada, case number CU0000253 (AB35).
The gist of the Complaint is so described:
…
NATURE OF THE CASE
…
Ms. McGechie brings this lawsuit to address Atomos’ unlawful retaliation and toxic culture of gender bias and to hold the company accountable for discrimination, retaliation, and wrongful termination in violation of California’s Fair Employment and Housing Act and the California Labor Code.
…
There is a section contending that the County of Nevada, California is the proper jurisdiction for the determination of the dispute.[20] It is not necessary to set out the entirety of this section, but it is convenient to note that it essentially alleges the following matters in support:
[20]‘Complaint’ filed on 15 August 2022 in the Superior Court of California, County of Nevada, case number CU0000253, [10]–[21] (AB17–18).
(a) Atomos entered into an employment contract with Ms McGechie to perform work for it in the County of Nevada (reference in this part is also made to provisions of presumably applicable codes in California, being ‘California Code of Civil Procedure § 395(a) and California Government Code § 12965’);
(b) the employment of Ms McGechie, including all significant events giving rise to the alleged liability and harm suffered by her, occurred in the County of Nevada;
(c) Ms McGechie was recruited by Atomos through meetings conducted in California;
(d) Atomos has a significant presence in the United States through its business operations, retaining United States employees, and marketing and promotional activities;
(e) Atomos maintains offices and facilities in the United States;
(f) majority of Atomos’ sales are in the United States, with the company selling its products in over 30 reseller locations in California;
(g) Atomos executives regularly travel to California for business purposes;
(h) Atomos received a loan from the United States government via the ‘Paycheck Protection Program’ during the covid‑19 pandemic, with the loan application reporting that ‘Atomos, Inc. is a corporation located in the U.S. and that the loan was used for payroll expenses’;
(i) Atomos directs the majority of its promotional activities to the United States, where it participates in tradeshows and employs United States based consultants and tradespeople to create and distribute marketing and promotional materials; and
(j) Ms McGechie was ‘onboarded’ to her role at Atomos by its General Manger in the United States.
The prayer for relief reads as follows:
1.For compensatory damages, including but not limited to, lost equity, lost back earnings and fringe benefits (including, but not limited to, salary and bonus wages and equity), future lost earnings and fringe benefits, emotional distress damages, and out‑of‑pocket loss, according to proof as allowed by law;
2.For injunctive relief to prevent future violations of Government Code § 12940;
3.For punitive damages as allowed by law;
4.For prejudgment interest and post‑judgment interest as allowed by law;
5.For an award to Plaintiff of costs of suit incurred herein and reasonable attorney’s fees; and
6.For an award of such other and further relief as the Court deems just and proper.
On its face, the Complaint does not appear to refer to the Loan Agreement, or the substance of that agreement.
A month after Ms McGechie commenced the California Court Proceeding, Atomos commenced proceedings by writ against Ms McGechie in this Court. As I have stated earlier, Atomos’ action, in its present form, is a rather unremarkable claim for debt which also seeks interest and costs.
At some point, although on the material before me it is not exactly clear when, Atomos filed a motion in the California Court Proceeding to dismiss for that proceeding to be dismissed on the basis of forum non‑conveniens. In that regard, Ms McGechie filed a motion in the California Court Proceeding in opposition to Atomos’ motion in that proceeding. In support of her motion, Ms McGechie made a ‘Declaration’ on 8 December 2022 (Declaration).[21] The Declaration is signed and stated as made ‘under penalty of perjury under the laws of the State of California’.[22]
[21]Declaration of Estelle McGechie in support of plaintiff’s opposition to defendant Atomos Limited’s motion to dismiss for forum non conveniens, dated 8 December 2022 (AB148–158).
[22]Declaration of Estelle McGechie in support of plaintiff’s opposition to defendant Atomos Limited’s motion to dismiss for forum non conveniens, dated 8 December 2022 (AB157).
It is worth noting here that aside from the Complaint and the two abovementioned motions, there is very little evidence before me about the status of the California Court Proceeding. Further, even if a trial of the matter could be conducted in that proceeding, there is no evidence before me indicating with any certainty when this might occur (and even still, when judgment (or jury verdict as the case may be) could be expected).
By way of summons dated 20 January 2023, defendant made an application seeking to have this proceeding to be stayed, pursuant to r 23.01(1) of the Rules, in light of the California Court Proceeding.
The defendant’s application was heard by Efthim AsJ on 10 March 2023. His Honour made orders on 22 March 2023 dismissing the application, setting out his reasons as follows:[23]
[23]Orders of Efthim AsJ dated 22 March 2023, Other Matters (emphasis in bold added) (AB222–223).
A.The defendant applies to have this proceeding dismissed or stayed pending the outcome of a proceeding between the parties, which is presently on foot in the Supreme Court of the State of California (‘US Proceeding’).
B.To be successful, the defendant must establish on the evidence that this Court is clearly an inappropriate forum for the determination of the plaintiff’s debt claim (see Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538, 544).
C.The defendant has failed to establish this requirement because:
(i)there is no evidence to demonstrate that the superior court in the State of California has the jurisdiction to hear and determine the claim before this Court. The defendant’s solicitor has sworn that she is not aware of an impediment to the matters in issue in the proceeding being determined by the superior court in California. That is not sufficient to satisfy this Court that the superior court in California will be able or willing to hear and determine the plaintiff’s cause of action in debt against the defendant;
(ii)the loan agreement is made between the plaintiff and an Australian company, with its registered office in Victoria. The loan was made in Australian dollars and for the purpose of the purchase of a property in Victoria, and was used for that purpose. The loan is governed by the law of Australia. Whilst not determinative, the proper law of the contract of the loan is a jurisdiction of the lender (here, an Australian company) (see Tomanovic Multiown Pty Limited v Interlux Projects Pty Limited [2021] NSWSC 190, [66].
D.The plaintiff asserts that but for the existence of the employment contract between the plaintiff and defendant, the loan agreement alleged by the plaintiff would never have been agreed. It says the loan is either:
(i)collateral to the employment contract, in circumstances where the loan agreement is an agreement supported by a separate consideration and stands alone, but itself is contingent upon or related to the employment contract, is not inconsistent with the employment agreement terms, and part of its consideration is the due performance of the employment contract by the defendant; or
(ii)a variation of the employment contract whereby in addition to the other benefits the defendant would enjoy pursuant to the employment contract, the plaintiff would advance the principal sum loaned.
E.There is no collateral contract here. The loan contract was made some months after the employment agreement. A collateral contract may be either antecedent or contemporaneous to the main contract (see Hoyts Pty Ltd v Spencer (1919) 27 CLR 133, 137).
F.There is no evidence in this proceeding upon which the defendant can allege that the loan agreement is a variation to the employment agreement. To the contrary, the plaintiff has produced evidence from a witness who deposes that there were no discussions regarding a variation of the service agreement. The loan agreement appears to be a stand‑alone agreement.
G.The defendant submits that it is open to the defendant to plead a defence of set‑off, together with a counterclaim against the plaintiff in respect of those matters presently agitated within the US proceeding. That issue does not outweigh the other matters raised in support of the proceeding continuing before this Court.
Some time after the delivery of his Honour’s reasons, the defendant filed its defence in this proceeding.[24] The defence relevantly alleges that ‘the Plaintiff’s wrongful termination of the Employment caused loss and damage to the Defendant’[25] and seeks a set‑off of the alleged loss and damage against any liability owed to Atomos.[26] It is worth noting that at present, there is no counterclaim.
[24]Defence dated 7 July 2023.
[25]Defence dated 7 July 2023, [16(k)].
[26]Defence dated 7 July 2023, [16(k)(1)].
Appeal
The defendant’s Notice of Appeal originally contained six grounds. At the hearing before, me counsel for the defendant gradually disclaimed reliance on four grounds of appeal. The remaining appeal grounds to be determined by me are:
1The Court erred by misapprehending and failing to consider the totality of the evidence available.
…
3The Court erred by taking into consideration irrelevant matters.
…
Applicable law and principles: r 77.06
As McDonald J said in Pentridge Village Pty Ltd (in liq) & Ors v Construction, Forestry, Maritime, Mining & Energy Union & Ors: [27]
The appeal is in the nature of a rehearing and requires the party seeking to appeal to establish error on the part of the Associate Judge before the appellate power may be exercised. Once error is established in relation to the determination of the subject of the appeal, the Judge hearing the appeal has all the powers of the Court constituted by the Associate Judge, including to give any judgment and make any order which ought to have been given or made and to make any further or other order as the case may require.
[27][2022] VSC 303, [45]; and see r 77.06.9(2)(b) and r 77.06.9(2)(d).
Further, as stated by Ferguson J in Oswal v Carson (citations omitted):[28]
Such appeals … are rehearings which, in the absence of further evidence or a change in the law, ordinarily require the appellant to show error on the part of the Associate Judge before appellate power may be exercised. In addition, if the orders from which an appeal is brought relate to a matter of practice and procedure … an appellate court will exercise particular caution in reviewing the decision.
[28][2013] VSC 355, [11]. This principle has been applied with approval many times: see eg, Timbercorp Finance (In Liq) v Lefam Holdings [2023] VSC 623, [39] (Stynes J).
In respect of discretionary decisions made by a primary judge, the applicable principles were discussed by Elliott J in Re IPO Wealth Holdings No 2 Pty Ltd (in liq); Mawhinney v Giasoumi.[29] In IPO Wealth, his Honour stated:[30]
[29][2022] VSC 199 (IPO Wealth).
[30]IPO Wealth, [54]–[59] (citations omitted, excepting House v the King).
54.However, before a discretionary decision of a court may be overturned, the appellant must show an error of the kind identified in House v The King.[31] In that case, it was stated:[32]
[31](1936) 55 CLR 499 (Starke, Dixon, Evatt and McTiernan JJ).
[32]Ibid, 504.9–505.4 (Dixon, Evatt and McTiernan JJ).
It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if [she or] he allows extraneous or irrelevant matters to guide or affect [her or] him, if [she or] he mistakes the facts, if [she or] he does not take into account some material consideration, then [her or] his determination should be reviewed and the appellate court may exercise its own discretion in substitution for [her or] his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in [her or] his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance.
55.In some instances, it may not be possible to identify with sufficient certainty the exact class of error made by the trial judge. Nevertheless, where the decision is so unreasonable or plainly unjust, the appellate court may infer that an error of the kind described in House v The King has occurred and that the decision should be overturned.
56.However, there is a strong presumption in favour of the correctness of a discretionary decision and the authorities make clear that the judgment the subject of rehearing should be overturned only if it is “clearly” or “plainly” wrong. In other words, an appellate court must be persuaded that the order stands outside the limits of “sound discretionary judgment” before it intervenes.
57.Indeed, insofar as the 4 classes of error identified in House v The King are concerned:
(1)Acting upon a wrong principle will only invalidate a decision where the principle is a “binding rule rather than a guideline”. A failure to apply a guideline will not, of itself, amount to error. This is because there may be instances where it is inappropriate to follow a guideline or, regardless of the failure to apply it, the overall decision is still the product of a sound discretionary judgment.
(2) A mistake of fact must be “clearly wrong”.
(3)Considering an irrelevant factor or failing to consider a relevant factor will only warrant setting aside a discretionary decision if it “really amounts to a failure to exercise the discretion actually entrusted to the court”.
58.Further, the court will be slow to overturn a discretionary decision on the grounds that the primary judge failed to give appropriate weight to various factors. The “constant emphasis” of the authorities is that an appellate court should not overturn a decision merely because it would have accorded the factors different weight. This is especially so where the assessment of weight is likely to have been affected by seeing and hearing the parties at first instance, which only the primary judge has had the opportunity to witness. Although there has been no trial in this proceeding, this principle remains relevant to the extent that her Honour observed and then took into account Mawhinney’s conduct during the previous examination hearings in arriving at the conclusions that she did on this particular issue.
59.In short, the onus borne by an appellant seeking to disturb a discretionary decision is heavy.
Misapprehending and failing to consider the totality of the evidence available
The first ground of appeal before me essentially relates to alleged matters which the Associate Judge failed to taken into account.[33] It is directed toward the findings at paragraph F of his Honour’s reasons.
[33]I note that this is a separate matter whether there was error in finding that there was positive evidence about there being ‘no discussions regarding a variation’ of the Employment Agreement.
Counsel for the defendant submitted:[34]
what I strove to demonstrate before His Honour was that the Californian court was seized of the terms and conditions of the employment contract. There was evidence to suggest that [the loan agreement] was a variation to that agreement. Just what the extent and effect of that was is not something that His Honour needed to consider. And in the Californian court being first in time, this proceeding should have been stayed at least until - well, the forum non conveniens application in the US is heard and determined.
…
And so, that's why I say, Your Honour, that forming a final conclusion as to the law of the contract was metaphorically speaking, a bridge too far for the purpose of the application at first instance.
[34]Transcript 29.11.23, T16.5–23 (emphasis in bold added).
Counsel for the defendant contended that the following paragraph of Ms McGechie’s Declaration constitutes evidence pointing toward the Loan Agreement being a variation to the Employment Agreement: [35]
In order to relocate myself and my family from California to Australia, I began to search online for a home to purchase in Melbourne and a suitable school for my child while Melbourne remained in COVID lockdowns. I kept Atomos apprised of my progress on the move. On March 8, 2022, I signed a contract to purchase a house in Melbourne. I was required to provide a down payment to the seller. On March 9, 2022, Atomos provided a bridging loan for a down payment as part of my relocation package. Atomos wired the loan directly into the Melbourne home seller’s account. As a result of the termination of my employment, I was forced to exit the home purchase contract, which resulted in the loss of the majority of the loan deposit— in addition to the loss of significant relocation costs I had already incurred.
[35]Declaration of Estelle McGechie in support of plaintiff’s opposition to defendant Atomos Limited’s motion to dismiss for forum non conveniens, dated 8 December 2022 (AB152) (emphasis in bold added).
Properly viewed, the bolded part of above statement is nothing more than subjective evidence as to Ms McGechie’s state of mind at the time of making the Declaration.
Additionally, counsel for the defendant seeks to rely on the Telephone Conversation between Ms McGechie and Mr Tait where, at least, the Loan Request was discussed. In support of this submission, counsel for the defendant also points the Acceptance Email wherein Mr Tait comments that the correspondence is ‘[f]urther to [the] correspondence yesterday’.[36]
[36]Acceptance Email dated 9 March 2022 (AB268).
However, I note that the Acceptance Email does not directly refer to the Employment Agreement nor does it refer to matters which necessarily refer to the Employment Agreement.
Reliance was also placed on paragraph 13 of the affidavit of Mr Tait.[37] In this paragraph, Mr Tait deposes about the Telephone Conversation between the parties ‘to discuss the loan request’.[38] As with what I have said above about the content of the Acceptance Email, Mr Tait’s affidavit neither deposes about the Employment Agreement nor any matters which necessarily refer to the Employment Agreement.
[37]Defendant’s submissions dated 19 July 2023, [28] (AB360).
[38]Affidavit of Christopher John Tait made on 9 March 2023, [13] (AB323).
Accordingly, neither the Acceptance Email nor the affidavit of Mr Tait can be relied upon as evidence pointing toward the fact that during the telephone conversation the parties discussed that the Loan Agreement would vary the Employment Agreement (or that the substance of the discussions necessarily had that effect). In the present context, evidence of a discussion, without more, should not be used as evidence pointing to the substance of what was said during that discussion.
In light of the above, the Associate Judge’s finding that there was ‘no evidence… upon which the defendant can allege that the loan agreement is a variation to the employment agreement’, ought fairly be seen as saying nothing more than that he had not seen any admissible and/or probative evidence for the purpose of demonstrating that the Loan Agreement varied the Employment Contract.
In light of the above, I reject the submission that the Associate Judge erred by misapprehending and failing to consider the totality of the evidence available.
Consideration of irrelevant matters
The other ground of appeal before me relates to matters which the defendant alleges the Associate Judge should not have taken into account in coming to a particular finding (or at least, that inappropriate weight was attributed to those matters). This ground is directed toward the findings at paragraph C(ii) and paragraph F of the Associate Judge’s reasons. The defendant’s written submissions relevantly provided:[39]
[39]Defendant’s written submissions dated 19 July 2023, [30], [41], [43].
Irrelevant considerations
39.The Court at first instance afforded considerable weight to the identity of the Plaintiff, being an Australian company with a registered office in Victoria, and that the money advanced on behalf of the Defendant was in Australian dollars for the purpose of a purchase of a property in Victoria.[40] In doing so, the Court at first instance construed the loan agreement and concluded that it was a ‘stand‑alone agreement’.[41]
…
41.Notwithstanding that the Court at first instance was not required to finally determine, and should not have sought to finally determine, whether the agreement to loan money to or on behalf of the Defendant was a variation to the Employment Contract, in so doing, it fell into error by taking into consideration irrelevant matters.
…
43.The Court’s apparently final conclusion of a matter properly the subject of triable evidence, such as the proper construction of the loan agreement and whether it was a variation to the Employment Contract was not relevant to the determination of the questions before it.
[40]AB222 and AB223 at recital C(ii).
[41]AB223 at recital F.
On the one hand, paragraph C(ii) of the Associate Judge’s reasons plainly relate to degree of connection between the Loan Agreement and the jurisdiction of Victoria.
On the other, paragraph F of the reasons clearly go to the question of whether there was evidence pointing toward the Loan Agreement being a variation to the Employment Agreement. This matter has been discussed in relation to the other ground of appeal before me.
In no way can the matters considered in determining the degree of connection between the Loan Agreement and the jurisdiction of Victoria be seen as supporting or in regard to the Associate Judge’s separate finding at paragraph F about whether there was a variation to the Employment Agreement.
It is also worth noting that the matters considered in both paragraph C(ii) and paragraph F were clearly relevant to the dispute before the Associate Judge. In fact, it was the defendant who raised and pressed the issue of whether the Loan Agreement was either ‘collateral’ to or a ‘variation’ of the Loan Agreement.[42]
[42]Defendant’s written submissions dated 9 March 2023, [10]–[16] (AB160–161).
In those circumstances, it was plainly appropriate for the Associate Judge to note that he had not seen any evidence upon which the defendant can allege variation. In this way, there is some force in the plaintiff’s submission that his Honour:[43]
was simply dealing as he was required to with a submission that had been made based on the evidence that was before him. And whether the onus lies with the appellant, his conclusion was he wasn't satisfied on the evidence that that was so. He would have been in error, respectfully, if that had been raised and he had failed to consider it. So, it's a bit perverse - I don’t mean that disrespectfully – [for the defendant] to raise [the issue of whether there was a variation] and then complain that it's irrelevant when His Honour considers it.
[43]Transcript 29.11.23, T70 (emphasis added).
In any event, the Associate Judge merely stated that, on the evidence available, the loan agreement ‘appears to be a stand‑alone agreement’.[44] This can hardly be taken as purporting to finally determine the matter in absence of a trial. As is essentially submitted by counsel for the defendant, the question of whether or not there is evidence supporting the alleged variation is a relevant question to consider. After considering the issue, his Honour correctly noted his view.
[44]Orders of Efthim AsJ dated 22 March 2023, Other Matters (emphasis in italics added) (AB222–223).
Accordingly, I reject counsel for the defendant’s contention that the Associate Judge considered irrelevant matters in finding that there appears to be a stand‑alone agreement.
No rehearing necessary
As the defendant failed to demonstrate an appealable error, the appellate power under r 77.06 of the Rules has not been enlivened. In any event, had I been required to exercise my appellate power, I would have nonetheless dismissed the defendant’s substantive application for a stay of this proceeding along the lines described below.
The substantive application at first instance was much broader than that which ultimately falls for me to decide. Counsel for the defendant considerably narrowed the ambit of the of his case as follows:[45]
… the highest that I can put my client's case is in those circumstances, there appears at least prima facie to be two courts construing the same agreement. And the consequence of that is it is open to the court to find that there is a multiplicity of proceeding in respect of matters that are substantially in dispute in this court.
Which then leads to an entitlement - the court can order under rule 23.01 to stay the proceeding generally or on a temporary basis to allow the other proceeding to progress to either its conclusion or alternatively, the end of its own forums non conveniens application. And Your Honour, I think that’s about as high as I can put my client's case…
[45]Transcript 29.11.23, T44.22–45.7.
Applicable law and principles: r 23.01(b)
In essence, the defendant contends that the purported multiplicity of proceedings constitutes an ‘abuse of the process of the Court’ for the purpose of r 23.01(b) of the Rules. [46]
[46]Transcript 29.11.23, T.21.13–20; see also Transcript 29.11.23, T15.31–16.3.
It is convenient to briefly note the principles relevant to stay applications on the grounds of abuse of process.
Rule 23.01 does no more than gives effect to the inherent jurisdiction of the Court.[47]
[47]See Brimson v Rocla Pipes Ltd [1982] 2 NSWLR 937, 944 (Cross J); see also Batistatos v Roads and Traffic Authority of New South Wales [2006] HCA 27, [19]–[26] (Gleeson CJ, Gummow, Hayne and Crennan JJ).
In Business Service Brokers Pty Ltd v Optus Mobile Pty Ltd,[48] Connock J said:[49]
It has been said, in relation to a predecessor of r 23.01(1), that any distinction between whether a proceeding or claim is ‘scandalous, frivolous or vexatious’ or ‘an abuse of process of the Court’ is now ‘largely irrelevant’…
[48][2021] VSC 310 (Business Service Brokers).
[49]Business Service Brokers, [24], [27]–[28] (citations omitted).
His Honour in Business Service Brokers also referred to Kermani v Westpac Banking Corporation (among other cases)[50] in concisely summarising the some of the applicable principles:[51]
[50]Kermani v Westpac Banking Corporation (2012) 36 VR 130.
[51]Business Service Brokers Pty Ltd v Optus Mobile Pty Ltd [2021] VSC 310 [27]–[28] (Connock J) (citations omitted).
27In Kermani v Westpac Banking Corporation, [the Court] outlined the principles relating to stay applications on the grounds of abuse of process. Those principles relevantly included the following:
(1)The court possesses an inherent jurisdiction to stay its proceedings as an abuse of process if the proceedings are unjustifiably oppressive and vexatious or manifestly unfair or otherwise bring the administration of justice into disrepute among right‑thinking people …
(2)The jurisdiction should only be exercised in exceptional cases or sparingly with the utmost caution …
(3)The jurisdiction to stay for abuse of process is not limited to cases where the proceedings have been brought for an improper purpose or where there is no possibility of the court affording the affected party a fair hearing …
(4)The circumstances in which abuse of process may arise are extremely varied and the courts have refrained from limiting the circumstances to fixed categories …
(5)In considering whether to grant a stay as an abuse of process, the court should undertake a weighing process involving a subjective balancing of a variety factors and considerations …
…
28The factors and considerations to be weighed and balanced include the requirements of fairness to the parties, the public interest and the need to maintain public confidence in the administration of justice.
Consideration (as if an appealable error had been shown)
Proper law of the Loan Agreement (assuming no variation to the Employment Agreement)
The Loan Agreement does not have an express statement about the ‘governing law’ or any dispute resolution procedure.
For the following reasons, I consider there to be, at least, a strong prima facie case that the Loan Agreement is governed by the laws of Victoria:
(a) Atomos, as the lender, is an Australian company, with its registered office in Victoria;[52]
(b) as requested by Ms McGechie, the loan was made in Australian dollars for the purchase of a property in Elwood, Victoria;[53] and
(c) while not determinative, as a general rule, the proper law of a loan contract is that of the jurisdiction of the lender.[54]
[52]Affidavit of Christopher John Tait made on 9 March 2023, [6] (AB322).
[53]Affidavit of Christopher John Tait made on 9 March 2023, exhibited transaction record (AB p.352).
[54]Tomanovic Multiown Pty Limited v Interlux Projects Pty Limited [2021] NSWSC 190 at [66] (Emmett AJA).
I note also that in circumstances where the above factors point to the jurisdiction of the laws of the state of Victoria, the fact that that Ms McGechie was working in California as the CEO of Atomos at the time of entering into the Loan Agreement is not a weighty factor pointing toward the proper lawing being California.
In the context of there being a strong prima facie case that the proper law of the Employment Agreement is the law of Victoria, it should be observed that the defendant has also failed to provide any evidence that the Superior Court of California, County of Nevada has jurisdiction to entertain the debt claim arising from the Loan Agreement. The affidavit of Ms Badvi, being the Australian solicitor for the defendant, deposing that she was ‘not aware of any reason why Atomos is unable to advance its allegations in [their Statement of Claim] within the ambit of the [California Court Proceeding]’ can hardly be taken as positive evidence for that purpose.[55]
Positive evidence of variation of the Employment Agreement
[55]I note that counsel for the defendant no longer sought to rely on the affidavit of Michelle Lee dated 7 April 2023 (AB224–225) and the affidavit of Estelle McGechie dated 9 April 2023 (AB226–293); Transcript 29.11.23, T73.26–31.
Having considered the evidence before me at the rehearing, I do not consider the defendant to have shown any positive evidence pointing toward there having been a variation to the Employment Agreement. It is not necessary to set out the reasons again here, but my view of whether there is positive evidence pointing toward a variation, largely replicates the findings paragraph F of the Associate Judge’s reasons (as discussed above at paragraphs 34 - 42 of these reasons).
Proper law of the Employment Agreement (assuming variation by the Loan Agreement)
In the event that I am wrong and there were found to be positive evidence pointing toward a variation of the Employment Agreement, I should say something about what I consider to be the likely proper law of the Employment Agreement (including as said to be varied).
As I have discussed above, assuming that the Loan Agreement was, in fact, a stand‑alone agreement, there is a strong prima facie case that its proper law would be the law of Victoria.
The crux of the defendant’s case is that there is a ‘multiplicity’ of proceedings between this Court and the Californian court that is allegedly ‘already seized’ of construing the Employment Contract, on the basis that:
(a) the proper law of the Employment Agreement is the law of California;
(b) the Loan Agreement varied the Employment Agreement; and
(c) if the above two propositions are correct (or at least, are fairly arguable), it stands to reason that it is fairly arguable that the proper law of the Loan Agreement is the law of California.
Counsel for the defendant appeared to concede that the appeal would likely fail in the event that the law of the Employment Agreement is the law of Victoria:[56]
[His Honour:] I mean, if it's clear to the Australian courts that this is the jurisdiction, well you know, why would a court stay the matter to see whether a Californian court wants to asserts jurisdiction in a circumstance which would not be accepted by the Australian courts?
[Mr Blair:] I see Your Honour’s point. Respectfully, I'd agree with Your Honour's point. I understand it.
[56]Transcript 29.11.23, T22.9–15; see also Transcript 29.11.23, T27.1–30.
For completeness, I note that counsel for the plaintiff rightly directed significant attention the issue about the proper law of the Employment Agreement in circumstances where the defendant alleges that it was varied by the Loan Agreement. Relevantly, the plaintiff’s Notice of Contention provided:[57]
If (which is denied) the Court erred in finding that the Loan Agreement was a stand‑alone agreement and not a variation of the Executive Services Agreement (ESA), then it is at least “fairly arguable” that the ESA (properly construed) is governed by the law applying in the State of Victoria and, by operation of cl. 24 of the ESA, the parties submitted to the exclusive jurisdiction of the courts of Victoria.
[57]Notice of Contention emailed to chambers on 28 November 2023 (leave granted to rely on the notice: Transcript 29.11.23, T22.16–24).
The ESA provides:
…
2.4 Location and travel
2.4.1The Executive role is based in Melbourne, Victoria. The Executive may be required to travel within or outside Australia.
2.4.2The Employer acknowledges that the nature of the Executive’s role allows for flexible working arrangements and, subject to Board approval, the Executive will be permitted to work remotely
…
24 Governing law
This Agreement is governed by the law applying in the state or territory where the Executive is based and the parties submit to the exclusive jurisdiction of the courts of that state or territory.
Additionally, the Letter of Offer which enclosed the ESA states:
…
Specific to this role and discussions:
·The position is based in Melbourne, Australia.
…
·It is currently planned that you will be in Australia on a permanent basis on or around January 1, 2022.
…
In light of the above provisions of the ESA and statements contained in the Letter of Offer, counsel for the defendant submitted the proper law of the Employment Agreement is the physical location where Ms McGechie was located at the time of executing the ESA. That physical location was the State of California. Accordingly, it was submitted that:[58]
It's the jurisdiction of the location where the executive is based, the executive being my client. And she was based at the time of the agreement in the state of California.
[58]Transcript 29.11.23, T2.24–27; see also Transcript 29.11.23, T25.
I have also had regard to the fact that the ESA is replete with references to Australian legislation such as the Copyright Act 1968 (Cth),[59] Corporations Act 2001 (Cth),[60] Fair Work Act 2009 (Cth),[61] Privacy Act 1988 (Cth),[62] and the Superannuation Guarantee Charge Act 1992 (Cth).[63] There does not appear to be any reference to the laws of any other jurisdiction.
[59]Executive Service Agreement (AB59).
[60]Executive Service Agreement (AB59).
[61]Executive Service Agreement (AB60).
[62]Executive Service Agreement (AB60).
[63]Executive Service Agreement (AB61).
Upon the evidence before me, and noting that it is not for me to finally determine the matter in absence of a trial, even in the event that the Loan Agreement varied the Employment Agreement, it is highly doubtful that the proper law of the Employment Agreement as varied is the law of California (and not the law of Victoria).
As stated above, had I been required to decide on the matter, I would decline to stay this proceeding.
Conclusion and orders
For the preceding reasons the appeal is dismissed.
The parties are to bring in orders to give effect to these reasons. I reserve the question of costs and will hear the parties on this issue if necessary.
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