Burdekin Pacific Ltd v Neil Gordon Wiles

[2003] NSWSC 1122

CITATION:	Burdekin Pacific Ltd & Anor v. Neil Gordon Wiles & Anor [2003] NSWSC 1122
HEARING DATE(S):	13 November, 2003
JUDGMENT DATE:	13 November 2003
JURISDICTION:	Equity Division
JUDGMENT OF:	Palmer J
DECISION:	Proceedings in Industrial Relations Commission transferred to New South Wales Supreme Court to await cross-vesting of Federal Court proceedings to this Court.
CATCHWORDS:	PRACTICE AND PROCEDURE - CROSS-VESTING - Proceedings under Trade Practices Act commenced by Plaintiffs in Federal Court in Western Australia - Defendants commence proceedings in New South Wales Industrial Relations Commission for relief under s.106 Industrial Relations Act - common substratum of fact - both proceedings arise out of one dispute - dispute more commercial than industrial - Plaintiffs seek cross-vesting of Industrial Relations Commission proceedings to Federal Court in Western Australia - Defendants seek cross-vesting of both proceedings to be heard by New South Wales Supreme Court.
LEGISLATION CITED:	Fair Trading Act 1987 (NSW) Federal Court of Australia Act 1976 (Cth) - s.48 Industrial Relations Act 1996 (NSW) - s.106 Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW) - s.8 Trade Practices Act 1974 (Cth) - s.52, s.80, s.82, s.87
CASES CITED:	- Dawson v Baker (1994) 120 ACTR 11 - James Hardie & Co Pty Ltd v Barry (2000) 50 NSWLR 357 - Premier Sports Australia Pty Ltd v Dodds [2001] NSW 707 - Rosenboom v Qantas Airways [2002] NSWSC 792 - Tryam Pty Ltd v Grainco Australia Ltd [2003] NSWSC 812
PARTIES :	Burdekin Pacific Limited - First Plaintiff Jerome Gino Vitale - Second Plaintiff Neil Gordon Wiles - First Defendant Communitee Pty Limited - Second Defendant
FILE NUMBER(S):	SC 5282/03
COUNSEL:	A.R. Moses, A. Metcalfe - Plaintiffs P.M. Kite SC - Defendants
SOLICITORS:	Corrs Chambers Westgarth - Plaintiffs Browne & Co - Defendants

Ex tempore

Introduction

1    By Summons filed on 15 October 2003, the Plaintiffs (“Burdekin” and “Mr Vitale”) seek an order under s.(8)(1) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW) removing into this Court proceedings commenced against them in the Industrial Relations Commission of New South Wales by the Defendants (“Mr Wiles” and “Communitee”), whereby Mr Wiles and Communitee seek relief under s.106 of the Industrial Relations Act 1996 (NSW). Burdekin and Mr Vitale seek removal of the Industrial Relations Commission proceedings (the “IRC Proceedings”) into this Court in order that they may in turn be transferred to the Supreme Court of Western Australia pursuant to s.5(2) of the Cross-vesting Act . 2    The application is made in the circumstance that Burdekin has commenced proceedings in the Federal Court of Australia, Western Australia District Registry, against Mr Wiles and Communitee and if this application to transfer the IRC Proceedings ultimately to the Western Australian Supreme Court is successful, it is proposed that the Federal Court proceedings also be transferred to the Western Australian Supreme Court so that that Court may hear both proceedings together. 3    Mr Wiles and Communitee oppose the application to remove the IRC Proceedings to any other court. Mr P.M. Kite SC, who appears for Mr Wiles and Communitee, says that the Industrial Relations Commission is the only appropriate tribunal to hear the IRC proceedings. As a secondary submission, Mr Kite says that if the IRC Proceedings are to be removed to any court to be heard concurrently with the Federal Court proceedings, that Court should be the Supreme Court of New South Wales.


The facts

4 The circumstances in which the two sets of proceedings arise are as follows. Mr Wiles was the co-founder of a business providing web development and on-line management services within the information technology industry. That business was conducted by a company called Xstream Pty Ltd of which Mr Wiles eventually became sole beneficial shareholder and managing director. 5 In October 1999, the whole of the shareholding of Xstream was transferred to a company called eMax Pty Ltd (“eMax”) and Mr Wiles became managing director of that company. A number of other persons and entities became shareholders of eMax at that time, one of which was Mr Wiles' company, Communitee. 6 On or about 21 December 2001, Mr Wiles, Communitee and the other shareholders of eMax entered into a deed with Burdekin whereby Burdekin acquired all of the issued shares of eMax and the business of that company for a consideration of $1.2 million to be satisfied partly in cash and partly by the issue of shares and options to subscribe for shares in Burdekin. Thereafter Burdekin assumed control of eMax and its business. 7 The deed was conditional upon Burdekin entering into a contract of employment with Mr Wiles whereby he would continue as managing director of eMax. Negotiations for this contract occurred in October 2001 and a contract is said to have been concluded by an exchange of e-mails on 25 October 2001 which set out the agreed terms. Completion of the deed took place on or about 9 January 2002 and the issued shares in eMax were transferred to Burdekin. On 8 February 2002, Mr Wiles became a director of Burdekin. 8 It was not long before the parties fell into dispute. Mr Wiles claimed that Burdekin was not providing sufficient working capital to eMax as Mr Vitale had represented it would do. eMax experienced increasing financial difficulties which prompted Mr Wiles to resign as a director of eMax on 7 June 2002 and of Burdekin on 3 July 2002. 9 On 10 September 2002 administrators were appointed to eMax. On 29 October 2002 eMax entered into a deed of company arrangement with its creditors. Its business was closed down and its staff was dismissed. 10 On 31 March 2003 Burdekin commenced proceedings against Communitee and Mr Wiles in the Federal Court Western Australia Registry. Burdekin sought relief under s.52, s.80, s.82 and s.87 of the Trade Practices Act 1974 (Cth) or, alternatively, under the corresponding sections of the Fair Trading Act 1987 (NSW). The relief claimed was the avoidance of the deed dated 21 December 2001 or, alternatively, damages on the ground of alleged misleading or deceptive conduct in the form of representations as to the financial affairs of the eMax business made by Mr Wiles and Communitee during negotiations leading to the purchase of eMax. 11 On 23 April 2003, Communitee and Mr Wiles filed in the Federal Court an application pursuant to s.48 of the Federal Court of Australia Act 1976 (Cth) seeking the transfer of the proceedings from the Western Australia District Registry of the Federal Court to the New South Wales District Registry. Pending determination of that application, a Defence and Cross Claim were filed by Mr Wiles and Communitee on 13 May 2003. 12 On 20 June 2003 Mr Wiles and Communitee commenced the IRC proceedings against Burdekin and Mr Vitale. The Summons claimed relief under s.106 of the Industrial Relations Act in respect of the contract of employment entered into between Mr Wiles and Burdekin and the deed of 21 December 2001 whereby Burdekin had acquired the shares in eMax. Both contracts were said to be unfair, harsh and unconscionable thereby entitling the Industrial Relations Commission to grant relief under s.106. 13 On 3 July 2003, R.D. Nicholson J heard and determined the application of Communitee and Mr Wiles to transfer the Federal Court proceedings to the New South Wales Registry. His Honour was of the view that as matters stood at that stage no sufficient ground had been demonstrated for disturbing Perth as the venue for the conduct of the proceedings. I will return in more detail to his Honour's reasons shortly.


The issues on the pleadings

14 On 3 September 2003, Mr Wiles and Communitee filed an Amended Summons in the IRC proceedings. I now turn to the matters therein alleged. After recitation of the facts and circumstances leading to the contract of employment between Burdekin and Mr Wiles and the deed of 21 December 2001, the Amended Summons alleges that subsequent to completion of the deed, Burdekin failed to provide the necessary level of working capital to eMax in accordance with representations which had been made to that effect by Mr Vitale in the course of negotiations. It is alleged that eMax was thereby unable to meet its projected income and suffered significant restraints on the level of its commercial activities. It is further alleged that Burdekin did not pay eMax' debts on completion of the deed, as it is said Burdekin was obliged to do. 15 Paragraph 19 of the Amended Summons alleges that in breach of the terms of Mr Wiles' contract of employment with Burdekin, Burdekin has failed to pay, or failed to provide, certain benefits amongst which are said to be outstanding salary, superannuation contributions and the provision of three million options to subscribe for fully paid ordinary shares in the capital of Burdekin. It will be seen that this alleged wrongdoing is pleaded purely and simply as a breach of contract. 16 The relief claimed by Mr Wiles in the Amended Summons includes payment of outstanding salary and superannuation contributions and compensation for the value of three million options in Burdekin, all of these claims being, as I have noted, for enforcement of what are alleged to be his contractual entitlements. It is not said, of course, that the employment contract is harsh, unconscionable or unfair for the purpose of s.106 of the Industrial Relations Act in so far as it provides the benefits which Mr Wiles now claims. It is clear that this claim is purely for performance of a contract according to its terms or for damages for breach of its terms. In accordance with what I have observed in Premier Sports Australia Pty Ltd v Dodds [2001] NSW 707, paragraph 19, it does not seem to me that those claims by Mr Wiles are within the jurisdiction of the Commission under s.106. They are claims simply for the enforcement of a contract, rather than claims for the variation, alteration or avoidance of a contract found to be unfair, harsh or unconscionable. 17 Paragraph 22 of the Amended Summons alleges that Burdekin has failed to pay Communitee any payments due to be made on 31 March 2003 under the deed of 21 December 2001. Communitee claims in respect of that alleged breach of contract payments totalling $594,000 being, in effect, damages for failure to pay cash and to transfer shares in Burdekin to Communitee. Again, this is a simple claim for damages for breach of contract and, for the reasons which I have given, one not within the jurisdiction of the Commission within s.106 of the Industrial Relations Act. 18 Nevertheless, there are other claims made in the Amended Summons which prima facie would fall within the jurisdiction of the Commission under s.106. There is a claim to the effect that Mr Wiles' employment contract ought to have contained certain terms as to the period of notice necessary prior to his dismissal and there are other terms which, it is said, the contract should have contained, leading to the assertion that by reason of their omission, the contract is harsh, unconscionable, unfair and therefore subject to variation by the Commission under s.106. It seems to me, therefore, that there is sufficient substance demonstrated in the Amended Summons for relief under s.106 to warrant it proceeding to trial. 19 It is conceded by Mr Kite that the issues falling for determination under the Amended Summons for relief in the IRC Proceedings considerably overlap with, and are affected by, the issues which arise in the Federal Court proceedings. My impression of the whole of the dispute, gleaned from the causes of action pleaded in the Federal Court proceedings, as well as from the issues arising in the IRC Proceedings, is that this dispute really has far more of a commercial character than an industrial flavour. It is clear that the dispute arises from the acquisition of a business by Burdekin and that the essence of the dispute is whether or not representations were made by Mr Wiles prior to the deed of 21 December 2001 which amount to misleading and deceptive conduct, and whether or not representations were made by Mr Vitale to Mr Wiles at that time as to the way in which Burdekin would support the eMax business which also amount to misleading and deceptive conduct. The dispute as to the terms of Mr Wiles' employment contract seem very much subsidiary to the major commercial issues which I have outlined.


Cross-vesting to this Court

20 The Industrial Relations Commission, of course, does not have jurisdiction to grant all the relief which is sought in the Federal Court proceedings, but a Supreme Court which is cross-vested with the jurisdiction of the Commission and of the Federal Court in the Federal Court proceedings will have jurisdiction to determine all issues in dispute between the parties and to grant all appropriate relief. 21 It seems to me that it is overwhelmingly in the interests of justice that all matters in dispute between the parties arising out of the common substratum of facts and circumstances which have brought about that dispute be determined at the one time in the one set of proceedings and in the one court. The appropriate course in the interests of justice, therefore, is that one court should determine both the IRC Proceedings and the Federal Court proceedings concurrently, the evidence in one being evidence in the other. 22 Applying the essential criterion to be considered in any cross-vesting application of this character, it seems to me to be unquestionably in the interests of justice that the IRC proceedings be cross-vested into this Court to enable a determination then to be made as to whether or not it is appropriate to transfer the proceedings from this Court to the West Australian Supreme Court. This is the issue which, I think, has principally occupied the parties in debate before me this morning. 23 As I have indicated, I am of the view that Burdekin has demonstrated to the Court's satisfaction for the purpose of s.8(1)(b)(i) of the Cross-vesting Act that the IRC Proceedings are related to a proceedings pending in the Federal Court, and that if the IRC Proceedings are cross-vested to this Court, there are grounds upon which the Federal Court proceedings could be transferred to this Court, as Mr Wiles and Communitee submit. 24 I am also satisfied for the purpose of s.8(1)(b)(ii) that an order should be made under s.8(1) cross-vesting the IRC Proceedings to this Court so that consideration can be given to whether they should be transferred to the West Australian Supreme Court as Burdekin submits. I therefore order that the IRC Proceedings be removed into the Supreme Court of New South Wales pursuant to s.8(1) of the Cross-vesting Act .


Whether to transfer to Western Australia Supreme Court

25    By virtue of the order which I have just made, the IRC Proceedings are now proceedings pending in this Court within the meaning of s.5(2)(a) of the Cross-vesting Act . The question now arises: should the IRC Proceedings remain in the New South Wales Supreme Court, leaving Mr Wiles and Communitee to apply to the Federal Court for removal of the Federal Court proceedings to this Court, or should they be transferred to the West Australian Supreme Court under s.5(2) of the Cross-vesting Act so that Burdekin can apply to transfer the Federal Court proceedings to that Court? That question must depend on the Court's assessment of whether it is in the interests of justice that both proceedings be determined in the Supreme Court of Western Australia or in the Supreme Court of New South Wales. 26    While a consideration of the interests of justice will always involve the determination of which forum is more appropriate (see for example per Spigelman CJ in James Hardie & Co Pty Ltd v Barry (2000) 50 NSWLR 357, at 361) the interests of justice are not determined by reference to that question alone: see Rosenboom v Qantas Airways [2002] NSWSC 792 at paragraph 25ff. However, in many cross-vesting applications, of which this is one, the factors to be considered will be confined to the useful checklist given by Higgins J in Dawson v Baker (1994) 120 ACTR 11, at 22; cited with approval by Mason P in James Hardie at 379. 27 I have reached the conclusion that the more appropriate forum for the determination of the IRC Proceedings is the Supreme Court of New South Wales and that it is in the interests of justice that those proceedings remain as proceedings pending in this Court until the fate of an application to transfer the Federal Court proceedings to this Court is known. My reasons have regard to the checklist referred to by Higgins J in Dawson and are as follows. 28    First, as I have already said, it is clearly in the interests of justice that the two proceedings be heard together by one court as the issues in both substantially overlap. Both sides to this dispute concede as much. 29    Second, I take into account that by clause 16.1(a) of the deed of 21 December 2001, Burdekin has agreed that the deed is to be governed by the law of New South Wales and by clause 16.1(b), it submits to the non-exclusive jurisdiction of the Courts of this State in respect of proceedings in connection with the deed. Further, by clause 16.1(b) it:
“… waives any right it might have to claim that (the Courts of New South Wales) are an inconvenient forum.”
30    I repeat what I said in Tryam Pty Ltd v Grainco Australia Ltd ([2003] NSWSC 812) at paragraph 159 in relation to a similar contractual provision:
“While such an agreement as to jurisdiction is not a decisive factor, it nevertheless carries weight. … When Tryam agreed to litigate these contracts in Queensland it was implicitly agreeing to the proposition that the more appropriate forum for such litigation was Queensland rather than New South Wales. In those circumstances, it seems to me that Tryam must show clearly that circumstances have arisen which now make the New South Wales courts the more appropriate forum so that there are good reasons in the interests of justice for allowing Tryam to depart from its agreement.”
31 Third, Burdekin has not identified any advantage conferred upon it by procedural law in Western Australia which it would lose if the IRC Proceedings and the Federal Court proceedings were heard together in the Supreme Court of New South Wales. 32 Fourth, there is a substantive connection between both sets of proceedings and New South Wales. eMax was incorporated in this State. Its business was conducted here. Its staff were located here. The negotiations which led to the deed of 21 December 2001 were conducted here, at least in part. Further, the parties themselves have acknowledged the substantial connection between the Courts of New South Wales and disputes arising under the deed by expressly making the law of New South Wales the governing law of the deed and by endeavouring to foreclose any argument that the Courts of this State are not a convenient forum. 33 Fifth, on the evidence now adduced, the balance of convenience in terms of witnesses is heavily in favour of both proceedings being heard in this State. Burdekin says that it is likely that seven or more witnesses will be called by it to give evidence about the facts and issues in dispute in the IRC Proceedings and in the Federal Court proceedings and that those witnesses reside in Perth. Its expert witness is in Perth, as are the financial records of eMax. On the other hand, Mr Wiles says, and his evidence is not challenged, that he anticipates that in addition to himself, nine witnesses will be called by him or required for cross-examination in relation to the IRC proceedings, all of whom are resident in Sydney, and in relation to the Federal Court proceedings, up to 28 witnesses will be called by him in addition to an expert. It seems that most, if not all of these witnesses are resident in Sydney. 34 Burdekin places emphasis on the judgment of Nicholson J in the application which was made by Mr Wiles to transfer the Federal Court proceedings from the West Australia Registry to the New South Wales Registry. However, I think that Mr Kite is correct in saying that his Honour did not have before him all of the facts and circumstances which are before me, nor was he considering the same question. What his Honour had before him was an application to transfer only the Federal Court proceedings from one Federal Court Registry to another. What I have before me is an application which involves two sets of proceedings, the Federal Court proceedings as well as the IRC Proceedings. 35 Further, it seems that on the evidence now available, and which was not available to his Honour in considering the application under s.48 of the Federal Court Act , there will be a significant preponderance of witnesses resident in Sydney who may be called to give evidence. 36    I take into account the fact that the records of the eMax business are located in Perth but the transport of records from one state to another will cause far less inconvenience than the transport of a large number of witnesses from one state to another. While I take into account that is it is possible to give evidence by video link, that is not, in my view, the most desirable course where complicated issues of fact and, possibly, issues of credit are involved. 37    It seems to me therefore that the balance of convenience is now demonstrated to be heavily in favour of both proceedings being conducted in New South Wales. 38    I take into account that Nicholson J did not foreclose any further agitation of the question of balance of convenience. His Honour was careful to point out that his decision was founded on the state of affairs as it was presented to him at that time. As I have said, the situation which now confronts me is significantly different from that which confronted his Honour. 39    Sixth, I take into account that convenience to the Court system and expedition in having both sets of proceedings finally determined is neutral as between the two Courts. There is no evidence to suggest that the proceedings, if conducted in the West Australian Supreme Court, could be brought to trial any more quickly than in the New South Wales Supreme Court. 40    In conclusion, in my view, no circumstance has been shown which makes the West Australian Supreme Court the more appropriate forum for trial of both sets of proceedings than this Court. Accordingly, I consider it to be in the interests of justice not to deprive Mr Wiles and Communitee of the benefit of Burdekin's agreement to submit disputes arising under the deed of 21 December to the jurisdiction of this Court. As I have said, although the submission to jurisdiction relates only to disputes arising under the deed of 21 December 2001, the totality of the dispute contains far more of substance arising in connection with that deed than it does in connection with the dispute properly arising in the IRC Proceedings. 41    For those reasons I conclude that it is in the interests of justice that the IRC Proceedings remain as proceedings pending in this Court pending determination of any application which may be brought by Mr Wiles and Communitee to transfer the Federal Court proceedings into this Court.

Orders

42    The parties have now agreed that the form of Short Minutes of Order proposed by Mr Moses, Counsel for the Plaintiffs, is appropriate and that the costs order he there proposes is also appropriate. Accordingly, I now make orders in accordance with Short Minutes of Order dated today, initialled by me and placed with the papers. I have amended in paragraph 2 “Western Australia” to “New South Wales”. A copy of the Short Minutes as amended will be provided to the parties.
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Last Modified: 12/01/2003