Babcock & Brown DIF III Global Co-Investment Fund, LP v Babcock & Brown International Pty Limited

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT

S CI 2013 05903

BABCOCK & BROWN DIF III GLOBAL CO-INVESTMENT FUND, LP	First Plaintiff
DIF III GP LIMITED	Second Plaintiff
v
BABCOCK & BROWN INTERNATIONAL PTY LIMITED (ACN 108 617 483) & ORS (According to the schedule annexed)	Defendants

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JUDGE:	HARGRAVE J
WHERE HELD:	Melbourne
DATE OF HEARING:	5, 6 April 2016
DATE OF JUDGMENT:	21 October 2016
CASE MAY BE CITED AS:	Babcock & Brown DIF III Global Co-Investment Fund, LP & Anor v Babcock & Brown International Pty Limited & Ors
MEDIUM NEUTRAL CITATION:	[2016] VSC 623

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PRACTICE AND PROCEDURE – Stay of proceedings – Exclusive jurisdiction clause – Where parties seek to enforce exclusive jurisdiction clause in agreement to which they are a non-signatory – Where signatory to agreement seeks to enforce exclusive jurisdiction clause even though not a party – Construction and interpretation of exclusive jurisdiction clause – No grant of stay – s 30 Supreme Court Act 1986 – Global Partners Fund Ltd v Babcock & Brown Ltd (in liq) & Ors [2010] NSWCA 196 distinguished – Incitec Ltd v Alkimos Shipping Corporation & Anor (2004) 138 FCR 496 considered – Application of foreign law – Content of foreign law not sufficiently proven – Victorian law applied – Neilson v Overseas Projects Corporation of Victoria Ltd & Anor (2005) 223 CLR 331 applied.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr P D Crutchfield QC with Mr C R Brown	Piper Alderman
For the First and Second Defendants and Babcock & Brown Investment Holdings Pty Ltd	Mr P Brereton SC with Ms V Whitaker	Herbert Smith Freehills
For the Sixteenth and Seventeenth Defendants	Mr M I Borsky	Allens
For the Eighteenth Defendant	Mr A T Broadfoot	Norton Gledhill

TABLE OF CONTENTS

The partnership’s investment.......................................................................................................... 2

The partnership’s claims.................................................................................................................. 7

The stay applications....................................................................................................................... 11

Is this proceeding within the scope of the exclusive jurisdiction clause?............................ 13

Summary of agreed and contested principles of New York law............................................ 15

A...... Agreed principles.............................................................................................................. 15
(I)....... General principles of construction...................................................................... 15
(II)...... Construction of forum selection clauses............................................................ 15
(III)..... Mandatory or permissive..................................................................................... 16
(V)...... Enforcement of forum selection clauses by non-parties.................................. 16

B...... Contested principles.......................................................................................................... 17

Applicable legal principles: evidence of foreign law............................................................... 18

Can the B&B defendants or the RBS defendants enforce the exclusive jurisdiction clause? 19

Can BBIH enforce the exclusive jurisdiction clause?............................................................... 29

Is this Court a clearly inappropriate forum?.............................................................................. 39

Conclusion and orders.................................................................................................................... 42

HIS HONOUR:

The first plaintiff is Babcock & Brown DIF III Global Co-Investment Fund, LP (‘the partnership’). The partnership is a Delaware (United States) limited partnership. The second plaintiff, DIF III GP Ltd is and was at all relevant times a Cayman Islands company and the ‘general partner’ of the plaintiff, and I will refer to it as ‘the General Partner’.

This proceeding concerns transactions arranged by the Babcock & Brown group of companies in 2007. A summary of the relevant corporate structure is annexed as Appendix A to these reasons. The holding company for the group is an Australian company, Babcock & Brown Ltd (‘Babcock & Brown’). Through its direct and indirect subsidiaries, Babcock & Brown arranged for the partnership to invest $US25 million in a merger transaction under which a number of investors contributed capital to an ‘acquisition holding company’ incorporated in the United States, Spin Holdco Inc, the twenty-eighth defendant, to enable it to fund another United States company, Spin Acquisition Co, and for that company to merge with another American company, Coinmach Service Corporation (the ‘Coinmach merger’). A diagram of the Coinmach merger is annexed as Appendix B to these reasons.

The partnership’s investment in Spin Holdco was made indirectly. On 15 November 2007, it paid the $US25 million to Babcock & Brown Spinco, LLC (‘B&B Spinco’), an American entity which was a wholly-owned subsidiary in the Babcock & Brown group. It has since been deregistered and is not a party to this proceeding. B&B Spinco then invested the $US25 million in Spin Holdco, Spin Holdco invested that money in Spin Acquisition Co, and Spin Acquisition Co merged with Coinmach. The result of the merger was that Spin Acquisition Co obtained 100 per cent ownership of Coinmach.

There were other investors in the Coinmach merger. Relevantly:

(1) other Babcock & Brown related entities, including an Australian subsidiary, Babcock & Brown Investment Holdings Pty Ltd (‘BBIH’), invested through B&B Spinco.[1] BBIH is not a party to this proceeding; and

(2) the Royal Bank of Scotland PLC (‘RBS’), invested $US136 million directly in Spin Holdco, through its wholly-owned subsidiary RBS Equity Corporation PLC (‘RBS Equity’).

[1]The total investments by Babcock & Brown related entities were $US176,300,000.

The partnership’s investment in the Coinmach merger was a financial disaster. On 13 November 2013, the plaintiffs commenced this proceeding against a range of defendants, seeking to recover damages of $US23,521,631 and other relief based on a variety of causes of action. On the same day, the partnership commenced a proceeding in the Supreme Court of the State of New York, raising substantially the same factual allegations made in this proceeding (‘the New York proceeding’). The plaintiffs have not served the summons in the New York proceeding on any of the defendants.

Some of the defendants have applied for a permanent stay of this proceeding on the basis of an exclusive jurisdiction clause in the ‘Letter Agreement’ described below, under which the partnership agreed to invest in the Coinmach merger. The clause specifies the Courts of New York as the agreed forum for disputes. Another defendant seeks a stay on the basis that this Court is a clearly inappropriate forum for the determination of this proceeding.

Before turning to the issues arising on the stay applications, it is first necessary to describe in more detail how the partnership came to invest in the Coinmach merger and to summarise the allegations in the proceeding.

The partnership’s investment

The partnership was established by the Babcock & Brown group as a vehicle for investment in transactions which it originated and promoted as part of its global investment and advisory business. The partnership agreement provided in effect that the whole of its management, operation and control was vested exclusively in the General Partner. By management agreements dated 31 August 2007 and 6 September 2007 (‘the management agreement’), the General Partner appointed DIF Capital Partners Limited, which is the third defendant in this proceeding (‘the Manager’) as its exclusive agent to invest and manage the partnership’s investment portfolio. Clause 21 of the management agreement provides that the management agreement:

is governed by the laws in force in the State of Victoria, Australia. The parties submit to the non-exclusive jurisdiction of Courts exercising jurisdiction there.

The management agreement contained further relevant terms, as follows:

(1) the Manager was required to invest and manage the partnership’s investment portfolio in accordance with the terms of the management agreement — clause 3.1(a);

(2) the Manager was required to ‘exercise all due diligence and vigilance in carrying out its functions, powers and duties under [the management agreement]’ — clause 3.1(g);

(3) the Manager was given the power to delegate its powers under the management agreement ‘to a committee of principals from the Manager’ called the ‘Investment Committee’, but any such delegation would not relieve the Manager of its duties owed to the partnership — clause 4.4;

(4) the Manager and its related bodies corporate, directors, officers, employees, shareholders and other agents (each of which is defined in the management agreement as an ‘Indemnified Party’) were released from any liability to the partnership for any loss arising out of or in connection with the performance of the management agreement ‘except to the extent that any such loss [is] primarily attributable to the gross negligence or wilful misconduct of such Indemnified Party’ — clause 5.1(a); and

(5) the Manager was required by clause 5.2 to:

provide reasonable assistance to the [partnership] (at the cost of the [partnership]) in any action of the [partnership] against an agent of the Manager arising out of, or in connection with any negligence, default, fraud or dishonesty of the agent. These obligations continue after the termination of this Agreement.

The Manager is an Australian company. It is the indirect wholly-owned subsidiary of another Australian company, Babcock & Brown International Pty Ltd (‘BBIPL’), which is the first defendant. BBIPL is also the indirect parent company of the second defendant, BBLP LLC (‘BBLP’). BBLP was formerly a United States limited partnership which owned all of the issued shares in B&B Spinco at relevant times.

The General Partner arranged for the establishment of the partnership by issuing a private placement memorandum to potential investors in March 2007. The memorandum proposed raising $US350 million of equity capital for the purpose of investing in a diversified portfolio of investment opportunities identified by the Babcock & Brown group, on the basis that Babcock & Brown entities would ‘co-invest’ in those opportunities. The memorandum described the investment process as involving the following steps:

(1) identification of investment opportunities by a ‘B&B Group project team’, which would give a summary of the opportunity to the Manager;

(2) if the Manager considered that the opportunity merited further review, it would appoint a management team to undertake a stringent ‘triple layer’ due diligence process;

(3) the Manager would work with Babcock & Brown group specialists to structure the proposed investment and would engage third party advisors;

(4) the Manager would prepare a transaction recommendation addressed to its compliance committee, which would have the right to veto any proposed transaction deemed to present an unresolved conflict of interest;

(5) if the compliance committee did not veto the proposed investment, the management team would prepare an investment recommendation addressed to the Manager’s Investment Committee; and

(6) any investment to be made by the partnership would require the unanimous approval of the Investment Committee.

The partnership did not raise all of the $350 million capital which the Manager was seeking. The partnership was closed to new investors on 30 May 2008.

In accordance with the private placement memorandum and the management agreement, the Manager put the following management structure in place:

(1) The Manager established a management team. The principals of the management team were all Australian residents at relevant times and included:

(a) the sixth defendant, Fergus Neilson, the CEO and an alternate director of the Manager, a director of the General Partner and a member of the Investment Committee at relevant times; and

(b) the seventh defendant, Harry Nicholson, the Manager’s Chief Investment Officer and also a member of the Investment Committee at relevant times.

(2) The private placement memorandum had described the role of the management team as undertaking:

All investment analysis and decision-making, including deal sourcing, structuring, investment and credit analysis, portfolio construction and management, as well as diversification and liquidity management.

(3) The Manager established a compliance committee for the purposes described above, which purposes were more specifically described in the private placement memorandum as including ‘reviewing and approving’ transaction costs payable to the Babcock & Brown group or third parties on the acquisition or disposition of an asset by the Manager.

(4) The Manager appointed an Investment Committee, as described above. As appears above, Messrs Neilson and Nicholson were members of the Investment Committee. The membership of the Investment Committee included other Australian residents:

(a) the fourth defendant, Robert Topfer, a director of the Manager, a director of relevant companies in the Babcock & Brown group, the Global Head of Corporate and Structured Finance for the Babcock & Brown group and a member of the ‘Coinmach Deal team’ referred to below which was responsible for originating and promoting the Coinmach merger;

(b) the fifth defendant, Phillip Green, a director of the Manager, the CEO of the Babcock & Brown group and the Chair of its Executive Committee; and

(c) the eighth defendant, Robert Officer, a director of the Manager.

The genesis of the investment was identification of the Coinmach merger as a desirable investment by BBIPL and BBLP through their ‘Coinmach Deal Team’. The operational head of the Coinmach Deal Team was the 18^th defendant, Berenice Talintyre, an Australian resident who was employed by BBIPL and BBLP in New York between 2006 and 2008. Ms Talintyre was also a director of Spin Holdco, which is the 28^th defendant.

Richard Umbrecht, the 22^nd defendant, was also a member of the Coinmach Deal Team and a director of Spin Holdco. Mr Umbrecht was a member of the executive committee of the Babcock & Brown group.

The partnership’s investment in the Coinmach merger was unanimously approved by the Investment Committee by the circulation of emails among Investment Committee members between 1 and 7 November 2007. As appears below, the partnership’s claims in the proceeding are all linked to that approval. The partnership’s allegations relate primarily to the failings of the Manager and its agents. In particular, the alleged dishonesty of two of the Manager’s directors who were members of the Investment Committee, Messrs Topfer and Green, is central to the allegations. The management agreement and the actions taken by the Manager and its agents are central to the issues to be resolved in the proceeding. It is to be expected that the Manager and other Indemnified Parties will rely upon clause 5.1 of the management agreement in their defences.

The partnership’s claims

The partnership’s allegations are summarised below.

Having identified the Coinmach merger as a desirable investment, the Coinmach Deal Team negotiated agreements between Coinmach, BBLP and/or BBIPL, and RBS. The first agreement was an ‘Equity Commitment Agreement’, under which it was agreed that B&B Spinco would invest $US176.3 million in Spin Holdco and RBS would invest $US136 million. The B&B Spinco equity commitment comprised a commitment by BBIH to invest $US92 million, with the balance to be invested by investors including investors in the partnership. BBIH’s commitment was to be reduced by the amount contributed by the partnership. RBS intended to contribute its equity commitment through RBS Equity and to then syndicate its investment after completion of the Coinmach merger.

Under the terms of the Equity Commitment Agreement, BBLP was to receive an origination fee of 1.5 per cent of the total transaction value on completion of the Coinmach merger (approximately $US21.6 million) and, following successful completion of the merger, BBLP was entitled to receive sizeable ongoing fees. On the other hand, if the Coinmach merger did not proceed for any reason, BBLP and/or BBIPL was bound to pay to Coinmach a cancellation fee of $US17 million.

The Equity Commitment Agreement was finalised on 14 June 2007. On the same day, RBS executed a letter agreement addressed to Spin Holdco under which, effective upon execution of a merger agreement by Spin Holdco and Coinmach, it committed to Spin Holdco and the other proposed investors that it would invest $US136 million. This commitment letter was signed on behalf of Spin Holdco by Ms Talintyre. It became binding and effective on the same day, when the Coinmach merger agreement was entered into by Spin Holdco, Spin Acquisition Co and Coinmach.[2]
[2]The RBS commitment letter is not pleaded by the partnership in its statement of claim, but a copy of the agreement was in evidence on the application and I include it for completeness, as the fact that RBS was bound to invest its agreed contribution from 14 June 2007 is critical to the partnership’s allegations.

The Coinmach merger agreement was modelled on the basis of a specified debt finance profile and a compound annual growth rate in revenue over the previous five years. Following the RBS equity commitment, further modelling in October 2007 forecast compound annual growth of Coinmach’s revenue for the five years following completion of the Coinmach merger.

On 9 August 2007, Coinmach publically released its report for the quarter ending 30 June 2007. The report disclosed that Coinmach’s revenue had decreased for that quarter as compared to the corresponding period ending 30 June 2006 and that, as a result, Coinmach had incurred a net trading loss of $US1.9 million for the June 2007 quarter. On 7 November 2007 Coinmach publicly released its results for the six months to 30 September 2007. These results also disclosed a decline in revenue over the equivalent trading period in the previous year. As a result of these quarterly reports from Coinmach, RBS and RBS Equity (the ‘RBS defendants’) concluded that Coinmach’s value had deteriorated below the purchase price. However, the RBS defendants were already bound to participate in the Coinmach merger transaction. As a result sometime prior to 14 November 2007:

(1) The RBS defendants offered to BBLP and/or BBIPL to pay the cancellation fee if the transaction were cancelled.

(2) BBLP and/or BBIPL rejected the offer and counteroffered that the RBS defendants pay both the cancellation fee and the success fee if the transaction were cancelled.

(3) The RBS defendants rejected that counteroffer.

(4) BBIPL and BBLP (the ‘B&B defendants’) and the RBS defendants then agreed that if the RBS defendants honoured their commitment to participate in the transaction:

(a) BBLP and/or BBIPL and the majority Coinmach shareholder (GTCR) would contribute approximately $US35m into escrow accounts; and

(b) in the event that the RBS defendants suffered loss in syndicating their 43% equity stake after completion of the Coinmach merger, they would be reimbursed up to the amount in the escrow accounts (the ‘RBS Preference Agreement’). This meant the RBS defendants could syndicate their Coinmach shares at a discount of up to 25.74% without making a loss. Syndication at that discount would likely deflate the value of any equity securities purchased by the partnership immediately on their acquisition.

On 14 November 2007, the partnership signed a ‘Letter Agreement’ under which it committed to invest $US25 million in the Coinmach merger. On the next day, 15 November 2007, the partnership paid the $US25 million to B&B Spinco in accordance with its obligation under the Letter Agreement. By the terms of the Letter Agreement, the partnership committed to invest $US25 million in B&B Spinco for the sole purpose of enabling Spin Holdco to fund Spin Acquisition Co’s acquisition of Coinmach under the Coinmach merger agreement. The Letter Agreement was signed on behalf of the partnership by the General Partner.

The RBS Preference Agreement, and the negotiations preceding it, were known to Messrs Topfer, Green and Umbrecht and to Ms Talintyre.

When the Letter Agreement was entered into, and when the partnership paid $US25m to B&B Spinco under the Letter Agreement, the RBS Preference Agreement was not known to the partnership, and was not known to any members of the Manager’s management team, the Manager’s Compliance Committee or the Manager’s Investment Committee except Messrs Topfer, Green and Umbrecht and Ms Talintyre. The partnership claims that had it known of the RBS Preference Agreement, it would not have invested in the Coinmach merger transaction.

The partnership now claims for breach of fiduciary duty, breach of statutory prohibitions on misleading and deceptive conduct, breach of contract, and negligence.

The partnership claims that the B&B defendants, Spin Holdco, Mr Topfer, Mr Green, Ms Talintyre and Mr Umbrecht were promoters of the Coinmach merger, as promoters owed the partnership fiduciary duties, and they breached those duties by not disclosing to the plaintiffs the circumstances of the RBS Preference Agreement prior to the partnership making the investment, by placing themselves in positions of conflict of interest, and by using their position for their own benefit or the benefit of others.

The partnership alleges that Mr Topfer also owed the partnership fiduciary duties because of his position as a director of the General Partner, a director of the Manager and a member of the Investment Committee. Mr Green also owed the partnership fiduciary duties because of his position as a director of the Manager and a member of the Investment Committee. The partnership alleges that Mr Topfer and Mr Green breached those additional fiduciary duties.

Against the B&B defendants, Ms Talintyre and Mr Umbrecht, the partnership makes claims for knowing assistance and knowing receipt in relation to Mr Topfer and Mr Green’s breaches of their additional fiduciary duties.

Against the RBS defendants, the partnership makes claims for knowing assistance and knowing receipt in relation to the promoters’ breaches of fiduciary duty, and Mr Topfer and Mr Green’s breaches of their additional fiduciary duties.

The partnership pleads statutory misleading and deceptive conduct causes of action under s 1041 of the Corporations Act 2001 and s 12DA of the Australian Securities and Investments Commission Act 2001; on the basis that the Investment Committee’s representation that the $US25m investment was commercially advisable and worthwhile, in circumstances where Mr Topfer and Mr Green knew of the RBS Preference Agreement, was misleading and deceptive or likely to mislead or deceive. That representation induced the partnership to make the investment.

Further, by not disclosing the RBS Preference Agreement to the Manager and the members of the Investment Committee who did not know of it, the promoters breached s 1041 of the Corporations Act 2001 and s 12DA of the Australian Securities and Investments Commission Act 2001. That non-disclosure induced the partnership to make the investment.

The partnership alleges that the members of the Investment Committee breached their common law duty to exercise reasonable care and skill in relation to the representation recommending the investment, and that the Manager is vicariously responsible for those breaches. The partnership also claims also that the Manager breached express and implied terms of the management agreement in various ways, including by failing to disclose the RBS Preference Agreement and by failing to realise independently (as the RBS defendants did) that Coinmach’s value had deteriorated below the purchase price.

The partnership pleads that but for the breaches of fiduciary duty, statutory misleading and deceptive conduct, negligence and breaches of contract, they would not have made the $US25m investment.

The stay applications

By summonses filed in the proceeding, each of the B&B defendants, the RBS defendants, BBIH and Ms Talintyre seek an order that the whole of this proceeding be permanently stayed, or alternatively that it be stayed against them.

The B&B and RBS defendants, and BBIH, rely on the exclusive jurisdiction clause contained in the ‘Letter Agreement’ dated 14 November 2007. The parties to the Letter Agreement agreed that it would be governed by, and construed and interpreted in accordance with, the laws of the State of New York; and agreed that they would not bring any action relating to the Letter Agreement, or any of the transactions contemplated by it, in any court other than courts sitting in the State of New York. None of the defendants is a party to the Letter Agreement.

If the other defendants (or BBIH) are not successful in their application that the whole proceeding be permanently stayed on the basis of the exclusive jurisdiction clause, Ms Talintyre relies upon discretionary considerations in support of her stay application. In summary, she contends that this proceeding should be stayed against her because this Court is a clearly inappropriate forum to determine the dispute. That application must be determined in accordance with the law of Victoria.

None of the other defendants has applied for a stay. In particular, the Manager has not applied.

The principal issues for determination are:

(1) Is this proceeding within the scope of the exclusive jurisdiction clause?

(2) Can the B&B defendants and/or the RBS defendants enforce the exclusive jurisdiction clause, notwithstanding that they are not party to the Letter Agreement?

(3) Can BBIH enforce the exclusive jurisdiction clause, notwithstanding that it is not a party to the proceeding?

The parties agree that these three issues must be determined in accordance with the law of the State of New York (‘New York law’).

(4) Should the proceeding be stayed on discretionary grounds? In this regard, the parties also agree that, if the Court determines that any of the B&B defendants, the RBS defendants, or BBIH has a contractual entitlement to enforce the exclusive jurisdiction clause, the Court nevertheless retains a residual discretion to refuse their stay application; and that the principles guiding the exercise of that discretion are governed by the laws of the State of Victoria. As stated above, Ms Talintyre’s stay application is also based on discretionary grounds, and is to be determined under Victorian law.

Is this proceeding within the scope of the exclusive jurisdiction clause?

The full text of the Letter Agreement is set out below. For present purposes, it is sufficient to record that the exclusive jurisdiction clause states that each of the parties to the Letter Agreement:

(c) agrees that it will not bring any action relating to this Letter Agreement or any of the transactions contemplated by this Letter Agreement in any court other than such courts sitting in the State of New York.[3]

[3]Emphasis added.

The parties agree that exclusive jurisdiction clauses, or ‘forum selection clauses’ as they are called under New York law, must be construed broadly so as to give effect to their purpose.

The expert evidence before the Court established that, under New York law, the phrase ‘relating to’ is construed broadly to include having a connection with the specified subject matter. Such an approach accords with Australian law, which also gives the words ‘relating to’ a broad interpretation unless contrary intent is expressed in the relevant contract or statute.[4]
[4]Office of the Premier v Herald & Weekly Times (2013) 38 VR 684, 702 [71] (Tate JA, Whelan JA and Kaye AJA agreeing), applying O’Grady v The Northern Queensland Co Ltd (1990) 169 CLR 356, 376 — ‘no more than a relationship, whether direct or indirect, between the two subject matters’ (McHugh J).

In my opinion, all of the causes of action alleged by the plaintiffs in the proceeding relate to the Coinmach merger, which is clearly a transaction contemplated by the Letter Agreement. The proceeding is about the circumstances in which the partnership invested in that transaction. All claims in the proceeding are therefore within the scope of the exclusive jurisdiction clause.

In determining whether the B&B defendants or the RBS defendants can enforce the exclusive jurisdiction clause in these circumstances, notwithstanding that none of them is a party to the Letter Agreement, it is necessary to consider the relevant content of New York law.

It is first necessary to note an aspect of New York law which has no direct counterpart in Australian law. Under New York law, there are three circumstances where a person who is not a party to a contract containing a mandatory forum selection clause may enforce the clause (the ‘three exceptions’):

(1) where the non-party is a third party beneficiary of the agreement containing the clause (‘third party beneficiary exception’);

(2) where the non-party and contractual parties are part of an integrated global transaction and some of the relevant agreements include the forum selection clause (‘global transaction exception’); and

(3) where the non-party is closely related to one of the parties (‘close relationship exception’).

These three exceptions to the privity of contract rule were agreed by the parties based on opinion evidence called from two retired judges of the Court of Appeals for the State of New York, Judge Robert S Smith for the B&B defendants, and Judge Howard A Levine for the plaintiffs. The parties disagree as to whether the three exceptions are subject to ‘contractual language indicating a contrary intent’. For the reasons given below, I accept that New York law provides that the three exceptions are subject to contractual language indicating a contrary intent. This is an important factual issue, because the plaintiffs rely on three clauses in the Letter Agreement which they contend demonstrate a clear contrary intent, with the effect that the B&B defendants and RBS defendants are unable to enforce the forum selection clause. The three clauses were often referred to in submissions and evidence as the ‘three remedy clauses’. I will adopt that terminology in these reasons, but note that the clauses are sometimes referred to in the evidence as simply ‘the three clauses’.

In order to determine these issues, it is necessary to set out a summary of the relevant legal principles under New York law, and to identify any differences between the parties and their expert witnesses as to the content of that law. The following summary of the relevant principles was prepared by the parties at the Court’s request, with only a few footnotes added by the Court in bold type to identify how the contested principles arise, by bolding the contested principles, and making some grammatical changes. One contested paragraph has been deleted, as it is unnecessary to resolve the contest.[5]
[5]Paragraph 10A.

Summary of agreed and contested principles of New York law
A Agreed principles
(I) General principles of construction

Language in a written agreement will be interpreted according to its ordinary meaning to a reasonable person in the parties’ position.[6]
[6]First Smith Report [13(1)] and [17]; Levine Report [42].

Contractual provisions will be interpreted in accordance with their purpose, as those purposes are evidenced in the writing.[7]
[7]First Smith Report [18]; Levine Report [66].

A contract should be read as a whole, and every part will be interpreted with reference to the whole; and if possible, it will be interpreted so as to give effect to its general purpose.[8]
[8]First Smith Report [18]; Levine Report [36] and [66].

Where the language in a written agreement is complete, clear and unambiguous, it is controlling, and will be applied without reference to any extrinsic evidence of the parties’ meaning.[9]
[9]First Smith Report [17]; Levine Report [31], [65], [66].

It is the role of the courts to enforce an agreement made by the parties not to add, excise or distort the meaning of the terms they chose to include thereby creating a new contract under the guise of construction.[10]

(II) Construction of forum selection clauses

[10]Judge Smith T112/L1-9; Levine Report [39] and [70].

Forum selection clauses are construed broadly under New York law.[11]
[11]First Smith Report [24]-[27]; Levine Report [67].

Forum selection clauses are construed in a way that gives effect to their purpose, as that purpose is evidenced in the writing.[12]

(III) Mandatory or permissive

[12]First Smith Report [13(2)]; Levine Report [66].

New York law distinguishes between mandatory and permissive forum selection clauses. The distinction depends upon whether the specified forum is the exclusive or sole forum in which the matter may be heard (a mandatory clause), or whether the clause confers jurisdiction on such a court without denying the plaintiff the right to sue elsewhere (a permissive clause).[13]

(V) Enforcement of forum selection clauses by non-parties

[13]First Smith Report [19]. Judge Levine was instructed to assume that the Jurisdiction Clause was mandatory.

There are three sets of circumstances under New York law where a non-signatory may, [absent contractual language indicating a contrary intent,][14] enforce a forum selection clause:
[14]The plaintiffs rely on the emphasised words. The defendants disagree that they form part of New York law.

(a) where the non-signatory is a third party beneficiary of the agreement;

(b) where the non-signatory and contractual parties are part of an integrated, global transaction with respect to which, some of the relevant agreements include the forum selection clause; and

(c) where the non-signatory is closely related to one of the signatories.[15]

[15]First Smith Report [32]; Smith Supplementary Report [25]; Levine Report [43] and [68].

In determining whether an entity is closely related for the purpose of enforcing a forum selection clause, the following matters will be relevant under New York law:

(a) the existence of a sufficiently close relationship between the non-party and the signatory;[16] and

(b) [reading the agreement as a whole,][17] whether the relationship is sufficiently close so that, under the circumstances, enforcement by the non-party of the forum selection clause was foreseeable by the party against whom the clause is sought to be enforced.[18]

[16]First Smith Report [37]; Levine Report [47], [48] and [55].

[17]The plaintiffs rely on the emphasised words. The defendants disagree that they form part of New York law.

[18]First Smith Report [32], [33] and [38]; Levine Report [44], [47], [48] and [55].

[Subject to the terms of the agreement as a whole, or series of agreements read together][19] where a series of agreements effectuate and form part of a transaction, New York law allows a person who is a party to one of the agreements to invoke a jurisdiction clause in favour of the courts of New York contained in another agreement in the series even though the person was not a party to that other agreement.[20] [Provided it is consistent with the purpose of the agreement or series of agreements, as that purpose is evidenced in the writing:[21]][22]
[19]The plaintiffs rely on the emphasised words. The defendants disagree that they form part of New York law.
[20]First Smith Report [33], Smith Supplementary Report [25]-[28]; Judge Levine T116/L20-31.
[21]Smith Supplementary Report [30], Levine Report [101] and [104].
[22]The plaintiffs rely on the emphasised words. The defendants disagree that they form part of New York law.

(a) the principle can be applied notwithstanding that the agreements in the series were not executed on the same date and notwithstanding that some of the agreements might not contain jurisdiction clauses;[23] and

(b) it has also been applied where some of the agreements comprising the global transaction have different forum selection clauses or none at all.[24]

B Contested principles

[23]First Smith Report [33] and [34], Judge Levine T117/L1-9 and Levine Report [47].

[24]Smith Supplementary Report [28]; Judge Levine T118/L28-31.

Judges Smith and Levine disagree on the following points:[25]
[25]T61-62. Six points were originally identified by Judges Smith and Levine, but only four remain in dispute. Point 5 (whether the New York Court of Appeals would in the future adopt the three Tate categories) is not relevant. Point 6 was subsumed by point 4.

(a) the purpose of the Jurisdiction Clause;[26]
[26]T63/L18-20.

(b) the application of the plain meaning rule to Clauses 1 through 3;[27]

(c) they agree that evidence of custom and usage constitutes extrinsic evidence, but disagree on whether the evidence of custom and usage advanced in the Smith Report could be relied on in this case;[28] and

(d) they agree that there is no precedent governing the enforcement of forum selection clauses by a party to the clause who is not a party to the relevant litigation, but disagree as to how a New York court would approach that issue in this case.[29]

[27]T70/L10 -31.

[28]T84/L16 to T85/L5.

[29]T88/L13 to 24.

Applicable legal principles: evidence of foreign law

The content of foreign law is an issue of fact. On the other hand, the application of foreign law to the circumstances of the case is an issue of law and is not generally a matter for expert evidence. If the foreign law involves a discretion, expert evidence may be adduced to establish how that discretion might be exercised by the foreign court and, more particularly, what factors are likely to be taken into account in the exercise of that discretion.[30]
[30]National Mutual Holdings Pty Ltd & Ors v The Sentry Corporation & Anor (1989) 22 FCR 209, 226; Neilson v Overseas Projects Corporation of Victoria Ltd & Anor (2005) 223 CLR 331, 371 [122]-[123] (Gummow and Hayne JJ); and R v Mokbel (Ruling No 4) [2006] VSC 137, [15]-[16], [30].

Judges Smith and Levine gave evidence of their opinion on the content of New York law. The application of New York law to the interpretation of the Letter Agreement fell to the Court.[31] I made this position clear when Judges Smith and Levine were giving evidence, and it was accepted by counsel.
[31]See United States Trust Co of New York & Ors v Australia and New Zealand Banking Group Ltd & Ors (1995) 37 NSWLR 131, 146-147 (Sheller JA, with whom Mahoney and Meagher JJA agreed); and Marshall v Fleming [2014] NSWCA 64, [20] (Bathurst CJ, Beazley P and Meagher JA).

If the relevant foreign law is not proved, the Court will assume that the foreign law is the same as Victorian law.[32]
[32]Neilson v Overseas Projects Corporation of Victoria Ltd & Anor (2005) 223 CLR 331, 343 [16] (Gleeson CJ), 353 [45] (McHugh J), 370 [116], 372 [125] (Gummow and Hayne JJ), 411 [249], 415 [261] (Callinan J), 416-7 [267] (Heydon J).

Can the B&B defendants or the RBS defendants enforce the exclusive jurisdiction clause?

I turn to consider the proper interpretation of the three remedy clauses under New York law. It is first necessary to set out the whole of the Letter Agreement and emphasise the three clauses relied upon by the plaintiffs.

November 14, 2007
CONFIDENTIAL
TO: Babcock & Brown Spinco LLC (‘B&B Spinco’)
Babcock & Brown Investment Holdings Pty Ltd (‘BBPty’)
Purchase of Spin

Ladies and Gentlemen:
Reference is made to (1) the Agreement and Plan of Merger (the ‘Merger Agreement’), dated as June 14, 2007, among Coinmach Service Corp., a Delaware corporation (the ‘Company’), Spin Holdco Inc., a Delaware corporation (‘Parent’), and Spin Acquisition Co., a Delaware corporation and a wholly-owned subsidiary of Parent (‘Merger Sub’), pursuant to which Parent has agreed to acquire, on the terms and subject to the conditions set forth in the Merger Agreement, the Company pursuant to a merger of Merger Sub with and into the Company (such transaction, the ‘Acquisition’), and (2) the letter agreement (the ‘BBPty Commitment Letter’), dated June 14, 2007, among BBPty, Parent and the other investors listed on Schedule A thereto. Capitalized terms used herein without definition shall have the meanings given to them in the Merger Agreement.
The undersigned hereby commits to purchase, on the closing date of the Acquisition (the ‘Closing Date’), equity securities (the ‘Spinco Equity Securities’) of B&B Spinco, for an aggregate purchase price equal to the dollar amount set forth next to the undersigned’s name on Schedule A (the ‘Commitment’), solely for the purpose of funding and to the extent necessary to fund the Merger Consideration pursuant to and in accordance with the Merger Agreement, to pay related amounts required to be paid by Parent under the Merger Agreement and to reimburse certain costs and expenses of the purchasers of equity securities of Parent (‘Parent Equity Securities’). B&B Spinco agrees and acknowledges that the Spinco Equity Securities will [be] issued to the Investors set out in Schedule A proportionally to their respective Commitments.
The foregoing obligations of the undersigned to purchase Spinco Equity Securities are subject to the consummation of the Acquisition following the satisfaction or waiver of the conditions set forth in the Merger Agreement to Parent’s obligations to consummate the transactions contemplated thereby, the substantially contemporaneous funding of the Debt Financing and the simultaneous purchases (directly or indirectly) by other Investors (as defined in the BBPty Commitment Letter) of Parent Equity Securities. Funding of the Commitment will occur contemporaneously with the closing of the Acquisition and the issuance of the Parent Equity Securities, provided that the undersigned shall not, under any circumstances, be obligated to contribute to B&B Spinco more than such Commitment.
In the event Parent becomes obligated to make any payment to the Company pursuant to Section 6.5(e) of the Merger Agreement as a result of the undersigned’s failure to fund the Commitment, the undersigned hereby commits to contribute to B&B Spinco (or BBPty, at BBPty’s request) 100% of the amount of such payment.
The undersigned’s obligation to fund the Commitment shall terminate upon the earliest to occur of (a) the termination of the Merger Agreement, and (b) December 31, 2007.
The undersigned’s obligation to fund the Commitment may not be assigned, except as permitted in this paragraph. The undersigned may assign all or a portion of its obligations to fund the Commitment to affiliates or affiliated funds or to entities governed by an affiliate or an affiliated fund or to third parties, provided, however,[33] that any such assignment shall not relieve the undersigned of its obligations under this Letter Agreement.
[First remedy clause]
This Letter Agreement shall be binding on the undersigned solely to the benefit of each addressee and nothing set forth in this Letter Agreement shall be construed to confer upon or give to any person other than the addressees any benefits, rights or remedies under or by reason of, or any rights to enforce or cause such addressees to enforce, the Commitment or any provisions of this Letter Agreement.[34]
Notwithstanding anything that may be expressed or implied in this Letter Agreement, the addressees by their acceptance of the benefits of this equity commitment, each covenant, agree and acknowledge that no person other than the undersigned shall have any obligation hereunder and that, notwithstanding that the undersigned may be a limited partnership (if applicable), no recourse hereunder or under any documents or instruments delivered in connection herewith shall be had against any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder, affiliate or assignee of the undersigned or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder, affiliate or assignee of any of the foregoing, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder, affiliate or assignee of the undersigned or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder, affiliate or assignee of any of the foregoing, as such, for any obligations of the undersigned under this Letter Agreement or any documents or instruments delivered in connection herewith or for any claim based on, in respect of, or by reason of such obligation or their creation.
[Second remedy clause]
This Letter Agreement may only be enforced by BBPty or, at the direction of Babcock & Brown in its sole discretion, B&B Spinco; provided, however, that no party shall have any right to enforce this Letter Agreement unless and until it becomes effective in accordance with its terms. B&B Spinco shall not have any right to enforce this Letter Agreement unless directed to do so by Babcock & Brown in its sole discretion. None of Parent, the Company or any other creditor of B&B Spinco (other than BBPty) shall have the right to enforce this Letter Agreement or to cause B&B Spinco to enforce this Letter Agreement.[35]
The undersigned hereby represents and warrants with respect to itself, to B&B Spinco and BBPty that (a) such party has all corporate, limited partnership or limited liability company power, as applicable, and authority to execute, deliver and perform this Agreement; (b) the execution, delivery and performance of this Letter Agreement by the undersigned has been duly and validly authorized and approved by all necessary corporate, limited partnership or limited liability company action, as applicable, by such party; (c) this Letter Agreement has been duly and validly executed and delivered by such party and constitutes a valid and legally binding obligation of such party, (d) the execution, delivery and performance of this Letter Agreement by such party does not and will not conflict with, violate the terms of or result in the acceleration of any obligation under (i) any material contract, commitment or other material instrument to which such party is a party or is bound, or (ii) the constituent documents of such party, (e) the Commitment of such party is less than the maximum amount, if any, that such party is permitted to invest in any one portfolio investment pursuant to the terms of its constituent documents and (f) such party has available funds or uncalled capital commitments at least equal to the Commitment.
[Third remedy clause]
Nothing in this Letter Agreement, express or implied, is intended to or shall confer upon any person, other than B&B Spinco, acting at the direction of Babcock & Brown in its sole discretion, and BBPty, any right, benefit or remedy of any nature whatsoever under or by reason of this Letter Agreement.[36]
[33]Original emphasis.
[34]Emphasis added.
[35]Emphasis added.
[36]Emphasis added.
[Forum selection clause]
This Letter Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. Each of the parties hereto (a) consents to submit itself to the personal jurisdiction of the United States District Court for the Southern District of New York or any court of the State of New York located in such district in the event any dispute arises out of this Letter Agreement or any of the transactions contemplated by this Letter Agreement, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction or venue by motion or other request for leave from any such court and (c) agrees that it will not bring any action relating to this Letter Agreement or any of the transactions contemplated by this Letter Agreement in any court other than such courts sitting in the State of New York.[37] THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THEM AGAINST THE OTHER IN ANY MATTERS ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT.
Except for the limited liability company agreement of B&B Spinco, a shareholders agreement to be separately entered into among the purchasers of Parent Equity Securities to define their rights as holders of such securities, the letter agreements with respect to the Commitments of the other Investors and the Side Letter between Babcock & Brown and the undersigned, this Letter Agreement constitutes the sole agreement, and supersedes all prior agreements, understandings and statements, written or oral, between the parties hereto or any of their respective affiliates and any other person with respect to the subject matter hereof. The terms of this Letter Agreement may not be modified or otherwise amended, or waived, except pursuant to a written agreement signed by the parties hereto. This Letter Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument.

[37]Emphasis added.

In summary, the clear meaning of the three remedy clauses is to the following effect:

(1) The first remedy clause provides that the Letter Agreement confers ‘benefits, rights or remedies’ on the addressees only (ie B&B Spinco and BBIH) and expressly states that other persons have no rights ‘to enforce … any provisions of this Letter Agreement’.[38] In other words, the first remedy clause contains an express intention of the parties that persons other than the addressees cannot enforce any provision of the Letter Agreement and, moreover, that the Letter Agreement should be construed so as not to confer any right on a non-party to the Agreement to cause a party to the Agreement to enforce any provision of it. This summary of the intent of the first remedy clause is required by the words: ‘nothing set forth in this Letter Agreement shall be construed to confer upon or give any person other than the addressees any benefits, rights or remedies …’.

(2) The second remedy clause expressly provides that only specified persons can enforce the provisions of the Letter Agreement. The second remedy clause specifies that it ‘may only be enforced by [BBIH] or, at the direction of ‘Babcock & Brown’[39] in its sole discretion, B&B Spinco’. In other words, the Letter Agreement expressly states that the only parties who can enforce its terms are the addressees, with the added limitation that B&B Spinco can only enforce it at the direction of BBLP. The express exclusion of the proposed merger parties (other than the addressees) should, in my opinion, be read as for the avoidance of doubt.

(3) The third remedy clause is consistent with the first two. It expressly states that the Letter Agreement is not ‘intended to or shall confer… any right, benefit or remedy of any nature whatsoever under or by reason of this Letter Agreement’[40] on any person other than the addressees.

[38]Emphasis added.

[39]The parties agreed that this was a reference to the second defendant, BBLP.

[40]Emphasis added.

When the three remedy clauses are read as a whole, and in the context of the Letter Agreement as a whole without recourse to any admissible extrinsic evidence, it is clear that the parties intended that non-parties could not in any circumstances enforce any of the provisions of the Letter Agreement. In particular, the first remedy clause expressly states that non-parties have no right to enforce ‘any provisions of this Letter Agreement’; the second remedy clause expressly states that the Letter Agreement ‘may only be enforced by’ the addressees; and the third remedy clause expressly states that the parties did not intend that any person other than the addressees would have ‘any right, benefit or remedy of any nature whatsoever under or by reason of this Letter Agreement’.

Faced with this clarity of language, the B&B and RBS defendants and BBIH contend that the sole intention of the three remedy clauses is to negative the first exception, namely, the third party beneficiary exception. On that basis, they contend that the second and third exceptions continue to apply under New York law, namely, the global transaction exception and the close relationship exception. The B&B defendants rely on the close relationship exception, given their position within the Babcock & Brown group as described above and set out in Appendix A to these reasons. The RBS defendants rely upon the global transaction exception, given their role in the Coinmach merger transaction as described above.

The contentions of the B&B and RBS defendants in this regard involve acceptance that the third party beneficiary exception may be negatived by contrary contractual intent. On the other hand, they contend that, as a general proposition, the three exceptions are not subject to contractual language indicating a contrary intent. That general contention is inconsistent with their own submission that the intention of the three remedy clauses is to negative the first exception only.[41]
[41]First Smith Report at [33]–[34].

The B&B and RBS defendants contend that the text of the Letter Agreement does not disclose an express intention to exclude the second and third exceptions. First, because applying the literal meaning would mean that the partnership, as a party to the Letter Agreement, could not enforce it as it is not one of the ‘addressees’. That literal meaning cannot have been intended because it would deprive the partnership of any right to enforce the Letter Agreement, and that is obviously an absurd result. It follows that the three remedy clauses must be ‘read down’ so as to enable the partnership to enforce the Letter Agreement. Once that position is acknowledged, ‘it is a very short step’ to read the three remedy clauses down to exclude only third party beneficiaries which might otherwise have an entitlement to enforce the Letter Agreement under the first exception. Such a result accords with the agreed principle that forum selection clauses are construed broadly under New York law, so as to give effect to their purpose ‘as evidenced in the writing’.[42]
[42]First Smith Report at [13](2), [18]; Levine Report at [66].

I do not accept these submissions. Although I accept that both Judge Levine and Judge Smith gave evidence that the parties to the Letter Agreement must have intended that the partnership could (as a party) enforce its terms, they gave no evidence of the doctrinal basis for that evidence under New York law. For example, they did not give evidence as to the content of New York law concerning rectification, contractual interpretation to supply obviously omitted words or an implied term to include the partnership (referred to in the Letter Agreement as ‘the undersigned’) as a person entitled to enforce the Letter Agreement. In any event, the writing on the face of the Letter Agreement does not justify any further reading down of the plain words of the three remedy clauses so as to confer a benefit on non-parties — especially the first and third.

Second, the B&B and RBS defendants seek to rely on extrinsic evidence of Judge Smith that:

(1) the three remedy clauses are in fact ‘typical “no third-party-beneficiary” clauses’.[43]

(2) it is ‘possible that a New York judge … would recognise from his or her experience that [the three remedy clauses] are typical “no-third-party-beneficiary” clauses, and would judicially notice that fact in considering the proper interpretation of the Letter Agreement’;[44] and

(3) in these circumstances, a reasonable person in the position of the parties would have understood the three remedy clauses as intended to negate the third party beneficiary exception only.[45]

[43]Smith Reply Report at [9](c), [26]–[31].

[44]Ibid [31].

[45]Ibid [35]–[36].

Judge Smith gave this extrinsic evidence based on his own ‘experience as a New York lawyer and judge’.[46]
[46]Ibid [27], referring to the First Smith Report.

For the following reasons, I do not accept that Judge Smith’s extrinsic evidence is admissible to displace the clear and unambiguous meaning of the three remedy clauses, as I have interpreted them above.

First, in his first report Judge Smith gave extrinsic evidence that language of the kind in the three remedy clauses was ‘commonly used to say, and it is commonly understood to mean, that there are no third-party beneficiaries to an agreement’.[47] It was implicit in this evidence that this was the sole purpose of such clauses. Judge Smith endeavoured to take this evidence out of the realm of the extrinsic, by citing a number of cases in support of it and, together with reference to general principles of contractual interpretation under New York law, impermissibly endeavoured to apply the law to the proper interpretation of the three remedy clauses, by concluding that, notwithstanding the three remedy clauses:

a New York court would consider in this case whether [the plaintiffs] are closely related parties entitled to enforce the forum selection clause, even if it found them to be third-party beneficiaries.[48]

[47]First Smith Report [34].

[48]Ibid [36].

Second, Judge Levine was highly critical of Judge Smith’s approach in this respect.[49] In Judge Levine’s opinion, the cases cited by Judge Smith for how clauses such as the three remedy clauses are ‘commonly used’ and ‘commonly understood’ go no further than representing:

instances where courts applied the clauses to exclude litigating parties claiming to be third-party beneficiaries. None of the cases cited presented an attempt by a non-signatory to claim rights by reason of a close relationship to a contracting party. As a result, the cited cases carry no precedential implications regarding whether such non-party exclusionary clauses may be construed to also restrict the enforcement rights of persons closely related to contract signatories.[50]

[49]Levine Report [72]–[81].

[50]Ibid [76].

On this basis, Judge Levine gave evidence that Judge Smith was not, in his First Report, ‘expressing a legal opinion … restricting the meaning of such clauses, but rather a factual opinion, apparently based on his own experience as a commercial litigator [and judge]’.[51] Accordingly, Judge Levine concluded that Judge Smith’s evidence did not constitute expert opinion evidence as to the content of New York law:

but rather opinions or assertions of fact concerning New York corporate drafting practices, apparently meant to assist the court in ascertaining the parties’ intent in inserting the [three remedy clauses] in the Letter Agreement. As such, the opinions of Judge Smith … would constitute extrinsic evidence offered to interpret the Letter Agreement. However, the use of such extrinsic evidence to construe contractual language that Judge Smith does not claim to be ambiguous would be barred under the well-established first principle of New York contract law [that a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms without reference to extrinsic evidence, and extrinsic evidence is not admissible to create an ambiguity in such an agreement].[52]

[51]Ibid (original emphasis).

[52]Ibid [78], referring to paragraphs [31]–[32] earlier in the Levine Report. I note that Judge Levine qualified this evidence by accepting that the New York courts will admit evidence of established trade usage. He gave the example of the Hatch case, which dealt with royalties in the mineral extraction industry.

Third, in his reply report, Judge Smith agreed with aspects of Judge Levine’s criticism of his evidence:

I agree with the generalisation, implicit in Judge Levine’s report, that evidence of the custom and usage of a particular trade or business is considered by New York courts to be ‘extrinsic’ evidence, and thus may not be considered in interpreting a written agreement unless the agreement is ambiguous. I believe, however, that Judge Levine overlooks certain limitations on the application of this principle, and thus overvalues its importance in this case.[53]

[53]Smith Reply Report [9](c).

Fourth, in his reply report, Judge Smith did not take issue with Judge Levine’s characterisation of the cases cited by Judge Smith to support his evidence that clauses such as the three remedy clauses are ‘commonly understood’ to be intended to negative the third party beneficiary exception, as giving no consideration to whether or not such clauses may also negative the close relationship or global transaction exceptions. I have read the cases cited by Judge Smith and I agree with Judge Levine’s characterisation of them.

Fifth, in his reply report, Judge Smith gave evidence that:

It has been held by courts applying New York law that, in determining whether an agreement is ambiguous, the relevant question is whether it would have appeared ambiguous to a person experienced in the particular trade, and evidence of trade custom may be admitted to answer that question … (“To find out [the parties’] intent from the language used the court … must be informed of the meaning of the language as generally understood in that business, in the light of the customs and practices of the business.”) … (… [T]he question of whether an ambiguity exists is assessed from the viewpoint of a “reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognisant of the customs, practices, usages and terminology as generally understood in the particular trade or business”) … Thus, the rule excluding such evidence may be to some extent illusory: New York courts will, in substance, consider evidence of custom and usage in order to decide whether they may consider it.[54]

[54]Ibid [29] (emphasis added) (citations omitted).

The examples of trade custom and usage given by Judge Smith in his reply report, concerning the lumber trade and the psychotherapy business or profession are, in my opinion, not to the point.[55] In this case, the particular business of the parties is the financing of large scale commercial transactions. The case does not concern the business or practice of lawyers and others who draft agreements. In my opinion, Judge Smith’s evidence was inadmissible extrinsic evidence on this ground alone.
[55]Ibid [30].

Sixth, although the three exceptions are stated separately in the leading New York authorities on their content, Freeford Ltd v Pendelton[56] and Tate & Lyle Ingredients Ams., Inc. v. Whitefox Techs. USA, Inc.,[57] all of the three exceptions are necessarily directed at the ability of third parties (ie non-parties to the relevant contract containing the forum selection clause) to enforce a forum selection clause. The difference between the third party beneficiary exception on the one hand, and the close relationship and global transaction exceptions on the other hand, is that the third party beneficiary exception applies only where the parties to the relevant contract intended one or more third parties to benefit from the forum selection clause, while the other two exceptions may apply in the absence of such intent. Thus, as Judge Smith gave evidence:

a non-party need not be a third-party beneficiary of an agreement to enforce a forum selection clause as a closely related party. There would have been no need for the Tate court to identify a third category, closely related parties, if no such party could enforce a forum selection clause without also being a member of the first category, third-party beneficiaries. The conclusion implicit in Tate is stated explicitly in another state appellate decision, Freeford … : “third-party beneficiary status is not required.” …[58]

[56]53 A.D.3d 32, 39 (1^st Dep’t 2008).

[57]98 A.D.3d 401, 401 (1^st Dep’t 2012).

[58]First Smith Report [36].

While Judge Smith’s analysis in this respect may be accepted, the fact remains that each of the close relationship and global transaction exceptions involve extending to third parties (ie non-parties to the contract) a right to enforce a forum selection clause. I see no reason in principle why such an exception should not be the subject of contrary contractual intent, as acknowledged by Judge Smith in respect of the third party beneficiary exception. This issue is not dealt with in Freeford or Tate, and no other New York authority on the issue was placed before this Court.

Seventh, Judge Levine agreed that the question for this Court to consider under New York law is whether the three remedy clauses clearly and unambiguously preclude enforcement of the forum selection clause by non-parties. Judge Smith did not comment on this aspect of Judge Levine’s evidence. I accept Judge Levine’s evidence.

Counsel for the plaintiffs sought to ask Judge Smith how a New York court would reconcile a broad construction of the forum selection clause with the fact that the Letter Agreement in its terms excludes parties other than the parties to it from having the benefit of the agreement or rights under the agreement. The question was not allowed, as the interpretation of the Letter Agreement based on the principles of New York law is a matter for this Court. What Judge Smith could have been, but was not, asked was whether, under New York law, each of the three exceptions in Tate and Freeford are subject to contrary contractual intent.

For the above reasons, neither the B&B defendants nor the RBS defendants can rely on the forum selection clause. Their stay applications must be dismissed.

Can BBIH enforce the exclusive jurisdiction clause?

In its capacity as a party to the Letter Agreement, BBIH makes its own application to stay the proceeding, notwithstanding that it is not a party to the proceeding. The parties and their respective expert witnesses agree that there is no precedent governing the enforcement of forum selection clauses in such circumstances, but disagree as to how a New York court would approach that issue in this case.

The evidence of Judge Smith and Judge Levine may be summarised as follows:

(1) Judge Smith gave evidence that a New York court would approach BBIH’s application as one of contractual interpretation. In his view, the relevant enquiry conducted by a New York court in such circumstances would focus on whether, reading the contract containing the forum selection clause as a whole and in light of its purpose as disclosed in the writing, the parties intended to give BBIH a right to enforce the clause. Judge Smith described this question as ‘in substance’ an application by BBIH for specific performance of the forum selection clause.

(2) Judge Levine gave evidence that a New York court would focus on the justiciability of the issue, that is, whether the non-party had suffered injury by reason of the breach of the forum selection clause. If the non-party had not suffered any injury, a New York court would not entertain the application.

Against the background of this broad summary of the rival positions adopted by Judge Smith and Judge Levine, they were each taken in oral evidence to the following sections of the United States Restatement (Second) of the Law of Contracts (‘Restatement’):

(1) Section 304, which states:

A promise in a contract creates a duty in the promisor to any intended beneficiary to perform the promise, and the intended beneficiary may enforce the duty.[59]
[59]Emphasis added.

This general statement appears to do no more than identify the third party beneficiary exception to the law of privity of contract in the United States.[60] This is a general exception, not one limited to forum selection clauses.
[60]Section 302 distinguishes a promisee from an ‘intended beneficiary’, who may enforce the relevant contractual promise; and states that an ‘incidental beneficiary’ of the promise may not enforce it.

(2) The commentary to section 305, which relevantly states:

a. … If the promisee has no economic interest in the performance, as in many cases involving gift promises, the ordinary remedy of damages for breach of contract is an inadequate remedy, since only nominal damages can be recovered. In such cases, specific performance is commonly appropriate. See [section] 307.[61]
[61]Emphasis added.

Judge Smith gave evidence that this proposition was consistent with his understanding of the law of New York. Judge Levine gave evidence that specific performance is a remedy which is available in New York, but the remedy is not available in every case where the breach does not give rise to economic loss to the party seeking to enforce the contract.

(3) Section 307 which states that:

Where specific performance is otherwise an appropriate remedy, either the promisee or the beneficiary may maintain a suit for specific enforcement …

and the commentary to that section, which states that:

b. Suit by promisee.[62] Even though a contract creates a duty to a beneficiary [ie a third party beneficiary], the promisee has a right to performance. See [section] 305. The promisee cannot recover damages suffered by the beneficiary, but the promisee is a proper party to sue for specific performance if that remedy is otherwise appropriate under the rules stated in [sections] 357–69.[63]

Judge Smith gave evidence that he had ‘no quarrel’ with these propositions and that New York courts would grant specific performance where damages are inadequate. Judge Levine considered these statements in the Restatement related to the third party beneficiary context, and that sections 357–69 would need to be considered to determine whether specific performance would otherwise be appropriate in the circumstances of the particular case.

[62]Emphasis in original.

[63]Emphasis added.

In oral examination of the two judges, considerable time was taken with questions concerning the availability of specific performance in a contract between A and B in which A promises to B that A will pay an amount to C. Where A breached such a contract, Judge Smith was of the opinion that B could seek specific performance under New York law. Judge Levine disagreed, and said that a New York court would not intervene because of the lack of any damage to B and thus lack of any justiciability. In my opinion, this example was irrelevant to the circumstances of this case. The example involves a contract where the essence of the bargain is for A to confer a benefit on C. That is not the purpose of the Letter Agreement. Its purpose is to facilitate an investment in the Coinmach merger, with the forum selection clause being merely incidental to the principal purpose. Moreover, the parties agree that the three remedy clauses are intended to exclude claims by any third party beneficiaries of the Letter Agreement.

Taking the evidence of the two judges on this issue as a whole, it is implicit that the remedy of specific performance under New York law is, as in Victoria, discretionary and depends upon a range of factors. The judges could not agree as to the principal focus of a New York court if faced with an application by a person in BBIH’s position. In other words, they could not agree as to how a New York court would go about exercising its discretion, or the principles to be applied. Those parts of the Restatement concerning whether specific performance was ‘otherwise appropriate’ (ie sections 357–69) were not placed in evidence and were not the subject of evidence from the two judges. Moreover, as discussed above, the sections of the Restatement which were put to the two judges assume a promise in the relevant contract to confer a benefit on a third party, which is not the case here. In all the circumstances, I am not satisfied that the content of New York law has been sufficiently proven to enable me to apply it to BBIH’s stay application. Accordingly, I presume that New York law is the same as the law of Victoria,[64] and apply that law to the circumstances of this case.
[64]Neilson v Overseas Projects Corporation of Victoria Ltd & Anor (2005) 223 CLR 331, 372 [125] (Gummow and Hayne JJ), 411 [249] (Callinan J), 416-7 [267] (Heydon J).

BBIH contends that, in determining its stay application, the Court should accept Judge Smith’s evidence set out above to the effect that:

(1) under New York law, the stay application would be considered as ‘in substance’ an application by BBIH for specific performance of the forum selection clause; and

(2) specific performance would be granted as a routine remedy in the circumstances, because BBIH has not suffered any compensable loss and thus damages are an inadequate remedy.

For the reasons given, I do not have sufficient evidence of the content of New York law to accept these aspects of Judge Smith’s evidence and will apply Victorian law.

Alternatively, the B&B defendants contend that the position would be no different under Victorian law. They submit that BBIH’s application should still be considered as, in substance, an application for specific performance of the forum selection clause and the stay should be granted on that basis as a routine remedy because otherwise the plaintiffs will have breached the forum selection clause without any penalty. Again, reliance was placed upon the fact that BBIH has not suffered any compensable loss and thus damages are an inadequate remedy for the plaintiffs’ breach.

I do not accept this alternative submission. In my opinion, it is unnecessary to characterise BBIH’s application by analysing whether it is ‘in substance’ an application for specific performance; or for a mandatory or prohibitive injunction. The Court is not considering a proceeding commenced by BBIH for any such relief, or for damages in the alternative. BBIH has made an application under s 30 of the Supreme Court Act 1986 for a stay. That section provides:

Nothing in this Act affects the power of the Court to stay a proceeding in the Court, either of its own motion or on the application of any person, whether or not a party.[65]

[65]Emphasis added.

Accordingly, BBIH has standing to apply for a stay, and the Court has a discretion to grant or refuse the application. The principles governing the exercise of that discretion where an exclusive jurisdiction clause operates were summarised by the New South Wales Court of Appeal in Global Partners Fund Ltd v Babcock & Brown Ltd (in liq) & Ors:

In the case of an application for a stay based on an exclusive jurisdiction clause, the prima facie position is that a court will enforce the clause and grant the stay …
The kinds of considerations which may lead to the prima facie position being overturned have been frequently expressed in forceful words of equivalent import such as:
‘A strong bias in favour’ …
‘Strong reasons’ …
‘Strong cause’ …
‘Substantial grounds’ ...
‘Strong countervailing circumstances’ …[66]

[66](2010) 79 ACSR 383, 402-3 [88]–[89] (Spielgman CJ, Giles and Tobias JJA agreeing) (citations omitted).

The Global Partners case involved a claim by another investor in the Coinmach transaction, who commenced a proceeding in Australia against BBIPL, BBLP and two others in breach of a foreign exclusive jurisdiction clause. At first instance, the Court made orders which had the effect of dismissing the proceeding as against all defendants, including BBIPL and BBLP, who were not parties to the relevant partnership agreement containing the exclusive jurisdiction clause.[67] This decision was upheld on appeal. Relevantly, the Court of Appeal said this:

A significant purpose of an exclusive jurisdiction clause is to ensure that all disputes are determined in a coherent manner by a single jurisdiction. There is a clear commercial interest in minimising the possibility of a dispute being determined by multiple tribunals, with the consequent prospect of divergent findings. Furthermore, the parties, in advance, have determined that a particular jurisdiction is acceptable to them, both in terms of the speed and efficacy of its civil dispute resolution procedures and for the competence and skill of its judges and lawyers. A party to such a clause should be held to its contractual obligations, whether enforced by another party on a contractual basis or by means of the exercise of a discretion conferred upon the Court.[68]

[67]Global Partners Fund Ltd v Babcock & Brown Limited (in liq) & Ors (2010) 267 ALR 144.

[68]Global Partners Fund Ltd v Babcock & Brown Ltd (in liq) & Ors (2010) 79 ACSR 383, 399 [67] (Spielgman CJ, Giles and Tobias JJA agreeing) (emphasis added).

The references in the above quotation to:

(1) ‘the parties, in advance, have determined’, is a reference to persons who are both parties to the relevant proceeding and to the contract containing the exclusive jurisdiction clause — in that case the partnership agreement; and

(2) enforcement ‘by another party’, is a reference to enforcement by one party to the proceeding, who is also a party to the contract containing the relevant exclusive jurisdiction clause, enforcing the clause for the benefit of other parties to the proceeding who were not also parties to the relevant contract.

As BBIH is not a party to this proceeding, these statements do not apply to its stay application. The discretionary aspects of BBIH’s application are considered below.

Spigelman CJ also considered that, in the circumstances of the case, the non-parties to the relevant partnership agreement referred to in (2) above were not ‘strangers’ to that contract;[69] as they had involvement in the affairs of the partnership constituted by the partnership agreement and were ‘indemnified persons’ under that agreement.[70] This reasoning is also distinguishable from the facts of this case, because the Letter Agreement expressly states that it does not confer any rights on any third parties.
[69]Ibid [73]–[74].
[70]Ibid.

In Incitec Ltd v Alkimos Shipping Corporation & Anor, Allsop J held that:

To the extent that the operation of the exclusive jurisdiction clause causes financial or forensic inconvenience to the party which bound itself to the clause, that, of itself, is to be seen as only the direct consequence of the bargain entered and, generally, can be set to one side.[71]

[71](2004) 138 FCR 496, 506 [49] (emphasis added).

In other words, the kinds of factors considered by courts when dealing with stay applications made on forum non conveniens grounds are not generally relevant where the stay application is based on an exclusive jurisdiction clause binding both a plaintiff and, at least, one or more defendants who is a party to ‘the bargain’.

There are a number of countervailing circumstances which have been considered sufficiently strong to justify refusal of a stay of proceedings brought in breach of an exclusive jurisdiction clause by a party to the relevant contract against another party to that contract. Examples include:

(1) where the foreign jurisdiction clause offends the public policy of the forum;[72]

[72]AkaiPty Limited v The People’s Insurance Company Limited (1996) 188 CLR 418, 445 (Toohey, Gaudron and Gummow JJ).

(2) where the relief sought or cause of action relied on by the plaintiff in the proceeding is not available in the selected forum;[73]
[73]Commonwealth Bank of Australia v White [1999] 2 VR 681, [89]-[91]; Faxtech Pty Ltd v ITL Optronics Ltd [2011] FCA 1320, [21]-[22].

(3) where the grant of a stay would increase the likelihood of parallel proceedings and potentially conflicting litigation;[74]

(4) where there has been an unforeseeable change in the procedure of the foreign courts, or where the general political situation of the foreign country has altered radically, since the plaintiff agreed to the foreign jurisdiction clause;[75] and

(5) where for political, racial, religious or other reasons, a plaintiff would be unlikely to get a fair trial in the foreign courts.[76]

[74]Incitec Ltd v Alkimos Shipping Corporation & Anor (2004) 138 FCR 496, 506-7 [45]–[47], 508 [62], 509 [66].

[75]Carvalho v Hull, Blyth (Angola) Ltd [1979] 1 WLR 1228.

[76]Ellinger v Guinness, Mahon & Co [1939] 4 All ER 16, 24.

As will be apparent, there are a range of circumstances which have been held to be sufficiently strong to justify refusing a stay. The corollary of this is that the categories of such circumstances are not closed. Each case must depend upon its own facts.

In this case, I consider the most relevant circumstances to be that: (1) BBIH is not a party to the proceeding; and (2) there is no evidence that it will be adversely affected by the proceeding continuing in Victoria. Indeed, there is no evidence that BBIH will be prejudiced in any way by the allegations in the proceeding, wherever those allegations progress and whatever the result in such a proceeding. BBIH has not been sued and, indeed, was on the same side of the failed Coinmach transaction as the plaintiffs, as it was also an investor who lost the overwhelming proportion of its investment. Its only connection with the B&B defendants is that it and those defendants are part of the insolvent B&B group of companies.

In my opinion, the circumstances of this case are very different from the cases which established the general principles to be applied where applications are made for a stay based on an exclusive jurisdiction clause. In those cases, the person seeking to enforce the exclusive jurisdiction clause by making a stay application was both a party to the contract containing the exclusive jurisdiction clause, or a third party beneficiary under that contract, and a defendant in the proceeding. Those circumstances do not exist in this case as: (1) BBIH is not a party to the proceeding; and (2) for the reasons given above, the Letter Agreement expressly excluded each of the three exceptions.

In cases such as the present, where there is no prejudice of any kind to BBIH if the proceeding continues in Victoria, a stay may be refused if it will cause real prejudice to the plaintiffs and the jurisdiction which is invoked is an appropriate forum. The existence of such real prejudice will ordinarily govern the exercise of the discretion to grant or withhold a stay in such circumstances, especially but not necessarily where there is also prejudice to the other parties to the proceeding. The position may be different if there was evidence that a non-party to the proceeding such as BBIH would itself suffer prejudice or loss as a result of the breach of the exclusive jurisdiction clause, which may need to be weighed in the balance of discretionary factors. That is not this case and it is unnecessary to explore that state of affairs further.

Moreover, in a case such as the present, which is different from those previously considered in the authorities, I see no reason why, in assessing whether there is real prejudice to the plaintiffs arising from a stay, the Court should ignore financial or forensic inconvenience to the plaintiffs or other forum non conveniens matters.

For the following reasons, I am of the opinion that the plaintiffs will suffer real prejudice if a stay of the proceeding is granted, and that such prejudice amounts to strong countervailing circumstances when compared to the absence of any prejudice to BBIH. Moreover, although not necessary for my decision, I infer there will likely be prejudice to other defendants in the proceeding if a stay were granted.

First, this proceeding substantially concerns the role of the Manager under the management agreement. That agreement is governed by the law of Victoria. Issues arising under or relating to the management agreement are at the heart of the case. If the proceeding is not statute barred in New York, the plaintiffs will need to engage expert witnesses to prove the content of Victorian law in New York if they are to prosecute their case under the management agreement. That will be a costly and time-consuming process.

Second, there is a risk that the plaintiffs’ statutory claims based on misleading and deceptive conduct may not be available to them in New York. These are important parts of the plaintiffs’ case, and the plaintiffs will be prejudiced if they cannot pursue them.

Third, there are a range of matters which indicate that Victoria is a convenient forum for the conduct of this proceeding, and which will cause prejudice to the plaintiffs if they are forced to litigate in New York, including:

(1) half of the investors in the partnership who suffered loss from the partnership’s investment in the Coinmach merger reside in Australia;

(2) significant elements of the partnership’s investment in the Coinmach merger transaction took place in Australia:

(a) the Manager’s representation that the investment was commercially advisable and worthwhile was made and received in Australia; and

(b) many of the relevant management and funding decisions in relation to the partnership’s participation in the Coinmach merger transaction were made by Australian representatives;

(3) several of the defendants were resident in Australia at the relevant times, including all the members of the Manager’s Investment Committee;

(4) many key witnesses are located in Australia;

(5) the majority of the defendants are Australian;

(6) most of the key documents are in Australia or able to be accessed here. For example, Michael Larkin, the CEO and a director of BBIPL, a director of BBIH, and a vice president of BBLP, is resident in Australia and has deposed that he has access to the books and records of BBIPL and BBLP, and has produced relevant documents as exhibits to his affidavits in the stay application;

(7) neither the B&B defendants nor the RBS defendants seek a stay on forum non conveniens grounds;

(9) there would likely be expensive and time-consuming interlocutory disputes in New York concerning limitation of actions issues. The parties agreed that the possibility of limitation issues was alive, and the B&B defendants informed the Court they would take those limitation points which may be open to them;

(10) the plaintiffs would likely need to fly witnesses to New York and pay for their accommodation, other expenses and loss of income if a trial were to proceed in New York; and

(11) putting aside the B&B defendants, the RBS defendants and Ms Talintyre (who contends that Victoria is a clearly inappropriate forum for resolving the case against her), there are eight other defendants (including the Manager) who have not sought a stay and, I infer, are content for this proceeding to continue in Victoria if it is to proceed at all. These defendants reside mostly in Australia or are companies registered in Australia — as is BBIH. Those Australian parties are likely to suffer similar prejudice to the plaintiffs in respect of these costs and convenience matters.

When these matters of real prejudice are compared to BBIH’s position, strong countervailing circumstances are shown for refusing a stay at its behest. Put simply, BBIH will be in exactly the same position it is in now if the stay is refused.

Is this Court a clearly inappropriate forum?

Ms Talintyre is currently a party to these proceedings, however, counsel for Ms Talintyre informed the Court that the plaintiffs and Ms Talintyre have settled their differences and agreed that the plaintiffs will withdraw their claims against her, neither party will seek costs, and a notice of discontinuance has been filed.

The RBS defendants claim contribution from Ms Talintyre under the Wrongs Act 1958, and for the purposes of that claim they served a notice of contribution on Ms Talintyre. Their contribution claim depends on Ms Talintyre being liable in respect of the same damage for which the RBS defendants are liable. As Ms Talintyre has ceased to be a party to the proceeding, the RBS defendants will need to amend their notice of contribution against her to comply with the rules concerning third party proceedings, by filing a statement of claim alleging she is liable for the same damage.

I will deal with Ms Talintyre’s application on the basis that the RBS defendants will maintain their contribution claim against her. I note that Ms Talintyre has foreshadowed that she may make a claim against BBIH, but it is difficult to see on what basis and no draft statement of claim was put before the Court.

Ms Talintyre submitted that this forum is clearly an inappropriate forum for the plaintiffs’ claims. The B&B and RBS defendants did not rely on forum non conveniens. The critical factor relied on in support of this argument was the inability to obtain evidence on subpoena. Ms Talintyre’s principal concern relates to obtaining documents. She contends that:

(1) it may be necessary for her to rely on documents located in the United States for the purposes of her defence to contribution or third party claims against her by the RBS defendants;

(2) she will have real difficulty in obtaining such documents if this proceeding continues; and

(3) she will have no (or less) difficulty in obtaining these documents if the plaintiffs’ claims are litigated in New York.

Rule 7.06 of the Supreme Court (General Civil Procedure) Rules 2015 provides that the Court may allow service outside of Australia of any summons, order or notice, such as a subpoena to produce documents. However, Ms Talintyre relies on authorities which establish that the established practice of this Court is not to allow parties to serve subpoenas overseas in the absence of exceptional circumstances.[77] She contends it is ‘hard to see that this would be a case of exceptional circumstances’, as it is a ‘fairly conventional commercial dispute’.
[77]Gao v Zhu [2002] VSC 64, [11]-[15]; ASIC v Flugge [2015] VSC 665, [16].

Further, it was submitted that Ms Talintyre cannot rely on r 41.01(1)(b) to obtain documents, because that rule is concerned with the taking of evidence of a person, not with the production of documents. Ms Talintyre relied on Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd[78] and Rawson Finances Pty Ltd v Commissioner of Taxation.[79]
[78](1987) 14 FCR 461.
[79][2016] FCAFC 95 (Robertson, Moshinsky and Bromwich JJ).

I accept that Ms Talintyre will have difficulty in obtaining US documents by compulsory process.

The particular documents Ms Talintyre said she will have difficulty in obtaining are Coinmach documents. Part of the plaintiffs’ claim relates to forecasts as to the future performance of the Coinmach business. The plaintiffs contend that there was no reasonable prospect of Coinmach meeting those forecasts and generating sufficient cash flow in the future to service its debt. For her defence Ms Talintyre contends she will need to look at the Coinmach business’ operational performance and history. The fact that the company collapsed soon after the Coinmach merger transaction does not necessarily mean the future cash flow forecasts were unreasonable.

It is for Ms Talintyre to satisfy this Court that Victoria is a clearly inappropriate forum for these proceedings.[80] The focus is on the inappropriateness of this forum, rather than on the appropriateness of any other forum.[81]
[80]Puttick v Tenon Ltd (2008) 238 CLR 265, 276-7 [27] (French CJ, Gummow, Hayne and Kiefel JJ).
[81]Ibid.

Ms Talintyre will not be one of the defendants pursued by the plaintiffs. If the plaintiffs had their way, she would cease to be a party to the proceedings. If Ms Talintyre remains a party, it will only be due to the RBS defendants seeking contribution from her. Ms Talintyre is not a principal defendant. Her role in these proceedings will be minor (if she has any role), and it will be brought about by some of the more significant defendants, who do not themselves rely on forum non conveniens.

The difficulty in obtaining documentary evidence in the US is a relevant factor to consider. However, another factor to consider is that similar difficulty may be encountered in New York proceedings when seeking to obtain Australian documents relevant to the proceedings.[82]
[82]See Mineral Commodities Ltd v Promet Engineers Africa (Pty) Ltd [2008] FCA 30, [24].

Taking Ms Talintyre’s case on forum non conveniens at its highest, meaning that I assume she will remain a party to the proceedings and there are documents which may be relevant to her defence in the US that she will not be able to obtain under compulsory court processes in Victoria, I am not satisfied that this Court is a clearly inappropriate forum for these proceedings. My reasons above, for deciding that there are strong countervailing circumstances justifying refusal of BBIH’s stay application, demonstrate that Victoria is an appropriate forum for determining the issues in this proceeding.

Ms Talintyre’s stay application will be dismissed.

Conclusion and orders

For the above reasons, I have concluded that the stay applications should be dismissed, in summary because:

(1) Each of the three exceptions to the privity rule under New York law was negatived by the three remedy clauses in the Letter Agreement. Accordingly, none of the B&B defendants nor the RBS defendants have standing to apply for a stay based on the forum selection clause or exclusive jurisdiction clause. As that is the only basis of their applications, they must be dismissed.

(2) There are strong countervailing circumstances to displace the prima facie position that a Court will grant a stay where there is a breach of an exclusive jurisdiction clause. BBIH’s stay application therefore fails.

(3) This Court is not a clearly inappropriate forum for the determination of the issues in this proceeding. Thus, Ms Talintyre’s stay application also fails.

I will hear the parties as to costs.

SCHEDULE OF PARTIES

S CI 2013 05903
BETWEEN:
BABCOCK & BROWN DIF III GLOBAL CO-INVESTMENT FUND, LP	First Plaintiff
DIF III GP LIMITED	Second Plaintiff
- and -
BABCOCK & BROWN INTERNATIONAL PTY LIMITED (ACN 108 617 483)	First Defendant
BBLP LLC	Second Defendant
DIF CAPITAL PARTNERS LIMITED (ACN 101 611 438)	Third Defendant
ROBERT NEIL TOPFER	Fourth Defendant
PHILLIP HARTLEY GREEN	Fifth Defendant
FERGUS JOHN NEILSON	Sixth Defendant
HARRY NICHOLSON	Seventh Defendant
ROBERT RUPERT OFFICER	Eighth Defendant
THE ROYAL BANK OF SCOTLAND PLC	Sixteenth Defendant
RBS EQUITY CORPORATION	Seventeenth Defendant
BERENICE TALINTYRE	Eighteenth Defendant
RICHARD UMBRECHT	Twenty-second Defendant
SPIN HOLDCO INC	Twenty-eighth Defendant

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Citations

Babcock & Brown Dif Iii Global Co-Investment Fund, LP v Babcock & Brown International Pty Limited [2016] VSC 623

Most Recent Citation

Babcock and Brown Dif Iii Global Co-Investment Fund, LP v The Royal Bank of Scotland Plc [2016] VSC 769

Cases Citing This Decision

6

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[2016] VSC 623

21 October 2016