Ausfert Pty Ltd v Superfert Dongbu Pty Ltd
[2014] SASC 157
•24 October 2014
SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
AUSFERT PTY LTD & ANOR v SUPERFERT DONGBU PTY LTD & ANOR
[2014] SASC 157
Reasons for Decision of The Honourable Justice Parker
24 October 2014
PROCEDURE - COURTS AND JUDGES GENERALLY - COURTS - CONCURRENT JURISDICTION OF DIFFERENT COURTS - TRANSFER OF PROCEEDINGS UNDER CROSS-VESTING LEGISLATION - WHERE APPROPRIATE AND IN INTERESTS OF JUSTICE - GENERALLY
Application by second defendant for transfer of proceedings under s 5(2)(b)(iii) of the Jurisdiction of Courts (Cross-vesting) Act 1987 to the Supreme Court of Western Australia.
Held (Parker J):
Application granted. It is in the interests of justice that the proceedings be determined in the Supreme Court of Western Australia.
Jurisdiction of Courts (Cross-vesting) Act 1987 s 5(2)(b)(iii), referred to.
BHP Billiton Ltd v Schultz (2012) 221 CLR 400; Cini v Pets Paradise Franchising (SA) Pty Ltd [2008] SASC 287; Australian Rail Track Corp Ltd v Mineral Commodoties Ltd [2006] SASC 27, considered.
WORDS AND PHRASES CONSIDERED/DEFINED
"interests of justice"
AUSFERT PTY LTD & ANOR v SUPERFERT DONGBU PTY LTD & ANOR
[2014] SASC 157
PARKER J: These are the reasons for the orders made on 17 October 2014 that, on the application of the second defendant, the proceedings be transferred to the Supreme Court of Western Australia under s 5(2)(b)(iii) of the Jurisdiction of Courts (Cross-vesting) Act 1987.
Before that order was made the second defendant gave an undertaking that until such time as the application of the first and second plaintiffs for an interlocutory injunction could be heard and determined by the Supreme Court of Western Australia it would not take any step to enforce a specified debt or securities.
Background
Each of the parties is involved in the business of manufacturing and supplying fertiliser products. In essence, the proceedings arise out of a joint venture relating to the fertiliser industry.
The first plaintiff, Ausfert Pty Ltd (Ausfert), and the second defendant Dongbu Farm Hannong Pty Ltd (Dongbu Australia), each own 50% of the first defendant, Superfert Dongbu Pty Ltd (SFDB). The second defendant, Dongbu Farm Hannong Co Ltd (Dongbu Korea), is based in the Republic of Korea and is the parent company of Dongbu Australia.
SFDB was incorporated on 30 August 2011 in furtherance of a joint venture agreement made and entered between Jacob Hendrik Beyers, Dongbu Australia, Ausfert, Valefox Pty Ltd and Superfert Pty Ltd. Dongbu Australia and Ausfert each owns 50% of the issued capital of SFDB.
In the negotiation of the joint venture Dongbu Korea acted on behalf of Dongbu Australia.
Jacob Beyers is the sole director of the second plaintiff, Valefox. The latter company owns 51% of the issued capital of Ausfert and is also the sole shareholder in Superfert.
Before SFDB was formed, Superfert conducted a fertiliser business in Australia and regularly purchased fertiliser products from Dongbu Korea. Superfert has since changed its name to Interpact Pty Ltd. Following the incorporation of SFDB, that company effectively took over the business of Superfert (now Interpact) and continues to conduct the business.
The joint venture agreement provided for Ausfert and Dongbu Australia to each nominate two directors to the board of SFDB. Jacob Beyers and his son, Leroux Beyers, were directors of SFDB from the date of its incorporation. Jacob Beyers resigned on 4 July 2014. His son remains a director.
While Dongbu Australia has nominated various directors, the affidavit sworn by Jacob Beyers and filed in these proceedings states that the directors relevant to this matter are Mr Jin Ho Park and Mr Kwang Chul Kim.
For many ventures Valefox has owned land at Kwinana in Western Australia. The joint venture agreement, and also a property joint venture agreement annexed to the joint venture agreement, provided that Valefox would transfer a 50% interest in the Kwinana property to Dongbu Australia on the basis that the business of the joint venture company, SFDB, would be conducted at the Kwinana property under a registered lease. That 50% interest in the land has been transferred to Dongbu Australia.
On 1 September 2011 Valefox and Dongbu Australia (as guarantors) and Dongbu Korea (as financier) executed a deed of guarantee and indemnity. Under that arrangement the guarantors agreed to guarantee all money owing, whether presently or in the future, by SFDB “under or in relation to sales contracts from time to time entered into between [Dongbu Korea] as seller and [SFDB] as buyer for the sale of the supply of fertiliser products”. Contemporaneously with the execution of the guarantee, Valefox and Dongbu Australia granted Dongbu Korea a mortgage over the Kwinana property.
The mortgage is security for all monies payable by Valefox and Dongbu Australia (as guarantors) to Dongbu Korea arising under or in relation to the sales contracts referred to in paragraph 13 above.
Jacob Beyers has deposed that he believes that certain large scale purchases of fertiliser by SFDB from third party suppliers (ie not Dongbu Korea) referred to in an affidavit sworn by his son, Leroux Beyers, have been structured in such a way so as to “attempt to capture under the terms of the guarantee what are in truth not sale and purchase agreements but rather financing agreements”.
Jacob Beyers has further deposed that at no time did Valefox agree to the characterisation by SFDB and Dongbu Korea of the impugned transactions as sale and purchase agreements so as to bring them under the guarantee when that was not, in his view, their true character.
Jacob Beyers has asserted that the only involvement of Dongbu Korea in the relevant transactions was the provision of letters of credit to facilitate payment by SFDB for the fertiliser shipments. Nevertheless, Dongbu Korea issued documents described as “sales contract” for each shipment.
The affidavit sworn by Leroux Beyers has annexed to it certain documents relating to the transactions referred to by his father, Jacob Beyers. It is not necessary for me to refer to the contents of those documents.
Jacob Beyers has also deposed that SFDB, at the request of Dongbu Korea forwarded the relevant third party sales contracts and trade invoices to Dongbu Korea in order to open a line of credit and allow Dongbu Korea to pay the freight arising from the third party shipments. Mr Beyers has gone on to state that he believes that invoices were subsequently issued by the third party sellers to Dongbu Korea, being the party with whom the line of credit had been opened.
According to the affidavit of Jacob Beyers the amount outstanding under the relevant Dongbu Korea sales contracts exceeds $AUD 26 Million. A further sum of $USD 1.6 Million is said to be payable by way of interest on previous shipments. Jacob Beyers has also stated that these are the only sums presently owed to Dongbu Korea by SFDB.
Jacob Beyers has stated that a deed of acknowledgement of debt dated 29 January 2014 was prepared between Dongbu Korea as the lender and SFDB as the borrower. Leroux Beyers has deposed to the circumstances surrounding the execution of that deed.
Leroux Beyers has stated that on or about 24 January 2014 he was requested (apparently by the solicitors acting for Dongbu Korea) to execute the deed in his capacity as a director of SFDB. He consulted his father about the matter. His father advised him that the deed should not be signed and, if that was required, SFDB should be liquidated immediately. Nevertheless, because SFDB needed funding for the purpose of importing fertiliser for its business and as Dongbu Korea refused to provide funding without the deed being signed, he and Mr Park executed the deed on 29 January 2014.
Leroux Beyers has further deposed that the execution of the deed was not authorised by the board of SFDB and nor was the deed consented to by Ausfert, a 50% shareholder of SFDB. He also has stated that he signed the deed without the knowledge or authority of his father and had told Mr Park before the deed was executed that his father had not agreed.
Leroux Beyers has also stated that SFDB has not made all of the payments to Dongbu Korea required under the deed.
Following email correspondence, on 3 October 2014 in his capacity as director and chief executive of SFDB Leroux Beyers received a notice of default from Dongbu Korea. On 6 October 2014 he received a notice of demand under the deed from Dongbu Korea. The amounts claimed by Dongbu Korea from SFDB (and from Valefox as guarantor) are those referred to in paragraph 20 above.
Jacob Beyers has stated that the enforcement of rights by Dongbu Korea against SFDB by way of the appointment of a receiver or administrator will cause SFDB, and thereby Ausfert as a 50% shareholder, irreparable damage. Thus, on his instructions on 2 October 2014 an Adelaide solicitor acting for the first and second plaintiffs sought an undertaking from Dongbu Korea through its Perth solicitors, Minter Ellison, that it would not appoint a receiver or administrator or otherwise enforce the charge purportedly created under the deed. On the same day Dongbu Korea refused to give any such undertakings and reserved all of its rights.
Jacob Beyers has stated that he is concerned that Dongbu Korea considers that the monies owed by SFDB fall within the definition of “guaranteed monies” under the guarantee and that it may take steps to enforce and realise the security interest held by Dongbu Korea as mortgagee of the Kwinana land. He asserts that the sums claimed by Dongbu Korea from SFDB are not subject to the guarantee and are not secured by the mortgage over the Kwinana land.
Dongbu Korea did not respond to a request made on the instructions of Jacob Beyers that no steps would be taken to enforce the security without at least two days notice.
Jacob Beyers has also deposed that SFDB has not paid rent to Valefox under the lease of the Kwinana land that was due on 1 October 2014.
Consideration
The affidavits sworn by Jacob Beyers and Leroux Beyers were filed in support of the application by the first and second plaintiffs for an interim or interlocutory injunction filed to restrain the defendants from enforcing the security over the Kwinana land.
The second defendant, Dongbu Korea, filed an interlocutory application dated 16 October 2014 seeking that the proceeding be transferred to the Supreme Court of Western Australia under s 5(2)(b)(iii) of the Jurisdiction of Courts (Cross-vesting) Act 1987. Mr Park has sworn an affidavit in support of that application.
The matter came before me on 17 October 2014. The second defendant gave an undertaking until such time as the application of the first and second plaintiffs for an interlocutory injunction could be heard and determined by the Supreme Court of Western Australia it would not take any step to enforce the debt or securities in furtherance of the notice of demand referred to in the affidavit of Leroux Beyers. The Court ordered that the proceeding be transferred to the Supreme Court of Western Australia and the costs of the proceedings in this court be reserved to that court for determination.
That undertaking removed the need for the Court to determine the application for an interlocutory injunction. The parties’ submissions therefore focussed on the cross-vesting application.
Counsel for the second defendant summarised the relief sought by the plaintiffs as being:
a.A declaration that the relevant clause of the deed was void;
b.A declaration that the assets and undertakings of SFDB were not subject to any charge in favour of Dongbu Australia;
c.Removal of a registered security interest from the PPS register;
d.A declaration that the notice of demand issued by Dongbu Australia to SFDB and Valefox was invalid in certain respects;
e.A declaration that Valefox had no liability to Dongbu Korea in respect of the guarantee and indemnity given by it and Dongbu Australia;
f.Alternatively, the liability of Valefox under the guarantee should be limited;
g.The guarantee should be discharged;
h.Dongbu Korea should release the mortgage from the Kwinana land and have it removed from the Western Australian certificate of title; and
i.An order for payment of rent in respect of the Kwinana land.
It is clear that this Court does have jurisdiction under the Cross-vesting Act to determine the application for an interlocutory injunction and to determine the dispute between the parties. It has not been contended otherwise. The parties also accept that this Court must transfer the matter to the Supreme Court of Western Australia under 5(2)(b)(iii) of the Cross-vesting Act if it considers it to be in the interest of justice to do so.
The plaintiffs contend that it would be contrary to the interests of justice to transfer the proceedings to Western Australia if the Supreme Court of that State would be unable to hear the claim for final relief for some time. Their solicitor expressed confidence that this Court could accommodate an early trial. However, after consulting with the Chief Justice, I informed counsel that it would not be possible to list the matter for trial before January 2015. The plaintiffs then indicated that they were content with that.
The plaintiffs also submitted that while the head office of SFDB was in Western Australia, the company conducted its business throughout Australia, including South Australia. SFDB was not expected to take an active role in the proceedings as the dispute was primarily between the plaintiffs and Dongbu Korea. SFDB is not represented and it has taken no active part in the proceedings. Ausfert would oppose any resolution that SFDB instruct Minter Ellison (ie the solicitors for Dongbu Korea).
Dongbu Korea is domiciled in Korea. The plaintiffs suggested that the fact that Dongbu Korea had chosen to engage a Western Australian firm of solicitors carried no greater weight than the choice of the plaintiffs to engage a South Australian firm. In that context the plaintiffs noted that Minter Ellison had an office in South Australia.
The plaintiffs also submitted that while Dongbu Korea may wish to lead evidence from witnesses resident in Western Australia, those persons and the nature of the evidence they may provide had not yet been identified. The plaintiffs’ case was documentary and merely required interpretation of the documents with little scope for oral evidence.
The final point made on behalf of the plaintiffs was that they are entitled to choose where they commence proceedings. That the second defendant may find it inconvenient to prosecute its case in South Australia was not a basis for a cross-vesting transfer.
Apart from the fact that the plaintiffs have chosen to engage South Australian based solicitors, no other connection with South Australia was suggested. While I was informed from the bar table that SFDB does operate a fertiliser depot in South Australia it was not suggested that this was in any way relevant to the decision to commence the proceedings in this State.
The leading authority relating to the interests of justice question is the decision of the High Court in BHP Billiton Ltd v Schultz[1]. Those principles were conveniently summarised by Bleby J in Cini v Pets Paradise Franchising (SA) Pty Ltd[2] as follows:
a.It is not relevant to ask whether the court is justified in refusing to transfer a matter. The court must ensure that the case is heard in the forum dictated by the interests of justice;
b.The question is not whether the court is an inappropriate forum. It is both necessary and sufficient that, in the interests of justice, the other court is more appropriate;
c.The court is required to ensure that cases are heard in the forum dictated by the interests of justice. It is not a question of the exercise of a discretion;
d.The interests of justice are not necessarily the same as the interests of any one party;
e.Because it is necessary to identify the more appropriate forum, no specific emphasis can be given in favour of the choice of forum made by the plaintiff; and
f.It is not apt to speak of the applicant for an order for transfer as bearing a burden of persuasion analogous to an onus of proof.
[1] [2004] HCA 61; (2012) 221 CLR 400.
[2] [2008] SASC 287 at [8].
Counsel for the second defendant also referred to the judgment of Debelle J in Australian Rail Track Corp Ltd v Mineral Commodities Ltd[3]. Debelle J compiled a list of considerations relevant to the interests of justice question, ie
a.Application of substantive law;
b.Forensic advantage or detriment conferred by procedural law;
c.The choice made by a plaintiff as to forum and the reasons for that choice;
d.Substantive connections with the forum;
e.The balance of convenience to the parties and witnesses; and
f.Convenience to the court system.
[3] [2006] SASC 27 at [21].
Counsel for the second defendant relied upon the affidavit of Mr Park in opposing the cross vesting transfer. Mr Park stated in his affidavit that the registered office and principal place of business of Ausfert, Valefox and SFDB is in Western Australia. That is also the case with Dongbu Australia. Both Jacob Beyers and Leroux Beyers also reside in Western Australia as does Mr Park. Kwang Chul Kim is a director of SFDB and of Dongbu Australia. He resides in the Republic of Korea. Cameron James Moyle, a director of Dongbu Australia, also resides in Western Australia.
Mr Park referred to the fact that the joint venture agreement was formed in Western Australia and is expressed to be governed by and construed in accordance with the laws of that State. The mortgage over the Kwinana land is also registered under Western Australian law. That land is the principal place of business and the registered office of SFDB (and of Valefox).
Mr Park also noted that the accountant engaged by SFDB was located in Western Australia and the business records of SFDB were also mostly held in Western Australia. He expressed concern at the additional cost occasioned by the need for witnesses to travel from Western Australia to South Australia to attend any hearing and the difficulties that SFDB and its solicitors would experience due to the need to work across three different time zones (ie WA, SA and Korea) should the matter remain in this Court.
I do not consider that the second defendant can rely upon inconvenience to the plaintiffs’ witnesses in support of its application for transfer. On the other hand, no specific emphasis can be given in favour of the choice of forum made by the plaintiff.
The fact that the relevant contractual arrangements are expressed to have been made under the law of Western Australia, while relevant, does not carry great weight. The primary issues to be decided would appear to involve matters of contract law and the operation of Commonwealth legislation, eg the Corporations Act 2001 and the Personal Property Securities Act 2009. It has not been suggested that the registration of the mortgage under the Transfer of Land Act 1893 (WA) will be a significant issue.
Subject to the observations made in the preceding two paragraphs, I consider that the matters identified by Mr Park are relevant and significant considerations in determining the interests of justice in accordance with the legal principles referred to above.
In light of the complete lack of any connection with South Australia, other than the plaintiffs’ choice of solicitor, combined with the fact that all relevant Australian connections are with Western Australia and the matters of practical convenience referred to by Mr Park, the Court determined that the interests of justice require a transfer under the Cross-Vesting Act to the Supreme Court of Western Australia and made the following orders:
Upon the undertaking of the Second Defendant (whether by itself, its agents or employees), until such time as the Application of the First and Second Plaintiffs for interlocutory injunctive relief dated 10 October 2014 can be heard and determined by the Supreme Court of Western Australia, not to take any step to enforce the debt or securities in furtherance of the Notice of Demand under Deed of Acknowledgement of Debt comprising exhibit “LJ6” to the affidavit of Leroux Beyers sworn 9 October 2014
The Court orders that:
1The notice requirement in rule 131(2) of the Supreme Court Civil Rules 2006, insofar as that rule applies to the Second Defendant’s Interlocutory Application dated 16 Ocotber 2014, be dispensed with.
2Pursuant to section 5(2)(b)(iii) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 this proceeding be transferred to the Supreme Court of Western Australia.
3Costs of the proceedings in this Court be reserved to the Supreme Court of Western Australia
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