Cold Rock Management Pty Ltd v Bailey
[2012] VCC 37
•16 February 2012
| IN THE COUNTY COURT OF VICTORIA | Revised (Not) Restricted |
AT MELBOURNE
COMMERCIAL LIST
GENERAL DIVISION
Case No. CI-11-04601
| COLD ROCK MANAGEMENT PTY LTD | Plaintiff |
| v | |
| PAUL LACHLAN BAILEY & ORS | Defendants |
---
JUDGE: | HIS HONOUR JUDGE ANDERSON | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 19 January 2012 | |
DATE OF JUDGMENT: | 16 February 2012 | |
CASE MAY BE CITED AS: | Cold Rock Management Pty Ltd v Bailey & Ors | |
MEDIUM NEUTRAL CITATION: | [2012] VCC 37 | |
REASONS FOR JUDGMENT
---
Catchwords: Practice and procedure – Summary Judgment Application by defendants –Plaintiff’s costs of Federal Court litigation relating to franchise agreements – Claimed against defendants as guarantors of franchisee’s obligations – Appropriate forum for dispute to be litigated – Section 20 Service and Execution of Process Act 1992 (Cth).
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr I. Upjohn | Comlaw |
| For the Defendants | Mr B. McCullagh | Connolly Suthers |
HIS HONOUR:
1 The defendants by Summons filed 30 November 2011 seek summary judgment against the plaintiff or alternatively an order staying the proceeding pursuant to s.20 of the Service and Execution of Process Act 1992 (Cth). The proceeding was commenced by Writ filed 27 September 2011. The plaintiff, as franchisor, two companies, as franchisees, and the defendants, as guarantors, were parties to three franchise agreements entered into on 28 April 2006.
2 The franchisees were given the right to operate three Cold Rock Ice Creamery franchises in around Townsville Queensland. The two companies, Maerceci Pty Ltd (the franchisee under the first two agreements) and Aurumine Pty Ltd (the franchisee under the third agreement) are now subject to external administration.
3 On 25 May 2011, the plaintiff commenced proceedings against Maerceci Pty Ltd and Aurumine Pty Ltd in the Federal Court of Australia. The companies filed cross-claims. Although the proceedings were issued in the Melbourne Registry of the Federal Court, the proceeding was transferred to the Queensland District on 11 August 2011. At trial, Logan J dismissed the cross-claim essentially because by that stage administrators had been appointed to each company and, as Logan J stated, “The cross-claim is not one which the respondent companies which to prosecute”.
4 As a consequence of the plaintiff’s involvement in the Federal Court litigation, it incurred legal costs and associated disbursements and expenses totalling $120,536.07. On 23 September 2011, the plaintiff demanded the defendants pay that sum pursuant to their obligations under the franchise agreement.
5 By clause 25.2 of each franchise agreement, the defendants as guarantors agreed “to indemnify the franchisor [the plaintiff] and its authorised representatives against all claims, loss, damage, costs, liability or expense sustained or incurred by the franchisor as a direct or indirect consequence of any failure on the part of the franchisee to partially discharge or perform any obligation under this agreement”.
6 By clause 25.5, “The guarantors jointly and each of them individually undertake to pay to the franchisor on demand all monies due and payable under the terms of this agreement in the event that the franchisee fails to punctually discharge or perform its obligations under the terms of this agreement”.
7 The defendants have filed a defence in the present proceeding dated 22 December 2011. The pleading contains the notation, “Service is made under protest and without prejudice to the right of the defendants to maintain their objections to jurisdiction and cause of action”.
8 The defendants allege that the plaintiff’s claim is essentially for the recovery of its solicitor’s legal costs. By clause 30 of the franchise agreements, the parties agreed that the agreements would be governed by and construed in accordance with the laws of Queensland. Accordingly, the Legal Profession Act 2007 (Qld) is said to regulate any claim made in respect of those legal costs.
9 The defendants make the following submissions:
a.Each of the defendants is a ‘non-associated third party payer” as defined by s.301 of the Act and were thereby entitled to certain rights in relation to any claim for legal costs which they were “under legal obligation to pay”.
b.The proceeding had been commenced without service of a ‘bill” on the defendants.
c.The defendants were entitled to, and did later, request an itemised bill in respect of the legal costs and disbursements claimed.
10 In my view, there is no basis for asserting that the plaintiff’s claim has “no real prospect of success”. The claim is made by the plaintiff and is not brought in the name of its solicitors. The claim is based upon the franchise agreements and the defendants’ obligation to indemnify the plaintiff in respect of costs and expenses it has incurred as a consequence of breaches of obligation by the franchisees.
11 Thomas v Balanced Securities Ltd [2011] QCA 258, a decision of the Court of Appeal of the Supreme Court of Queensland, supports the plaintiff’s contention that, “It is not apt to describe these proceedings under a contract of guarantee as proceedings to enforce a legal liability to pay costs”. (Para. 61 per White J A).
12 In relation to the issue of the appropriate forum for the dispute to be litigated, there appears to be no issue that the County Court has jurisdiction to entertain the plaintiff’s claims. The defendants entered a conditional appearance on 18 November 2011. The appearance has become unconditional although, as I have earlier noted, in the defence dated 22 December 2011, the defendants sought to maintain “their objections to jurisdiction”.
13 There appears little doubt that the franchise agreements were partly performed in Victoria, and arguably the alleged obligation of the guarantors to indemnify the plaintiff in respect of legal costs would have involved the payment of monies in Victoria, it being the place of residence of the plaintiff.
14 The defendants submit that the Court should stay the proceeding in exercise of the power contained in s.20 (3) of the Service and Execution of Process Act 1992 which provides that, “The Court may order that the proceeding be stayed if it is satisfied that a Court of another State, that has jurisdiction to determine all the matters in issue between the parties, is the appropriate Court to determine those matters”.
15 In St George Bank Ltd v McTaggart [2003] QCA 59, a decision of the Court of Appeal of the Supreme Court of Queensland, the Court considered the appropriate principles to be applied under the Act. McPherson J A, in delivering the judgment of the Court stated that, “What must be demonstrated before a stay can be ordered under s.20 (3) is that another State Court with jurisdiction to determine all the matters in issue is ‘the appropriate Court to determine those matters’” (para. 9).
16 McPherson J A agreed with an earlier judicial pronouncement that “The expression ‘appropriate Court’ in s.20 of the Act [was] the one with which the action has the most real and substantial connection, and which can therefore be regarded as the natural forum” (para. 10).
17 McPherson J A noted that s.20(4) listed “a series of factors to be taken into account, which are not expressed to be exhaustive but to ‘include’ what follows in paras. (a)-(f) of s.20(4), but specifically is not to include ‘the fact that the proceeding was commenced in the place of issue’. In view of the presence of the word ‘include’, I do not consider it would be correct to regard the provisions of s.20(4) as a complete code of the factors to be considered in deciding an application under s.20(3) to stay proceedings” (para. 11).
18 In the case before the Court of Appeal, McPherson J A noted that, “As regards para. (e) of s.20(4) there is no discernible difference between the law of Queensland and that of Western Australia that is applicable to the matters in issue between the parties” (para. 13). He also approached the issue on the basis that, “In s.20(4)(b) the expression subject matter of the proceeding refers to the cause of action” (para. 16).
19 McPherson J A noted that “In Rick Cobby Pty Ltd v Podesta Transport Pty Ltd (1997) 139 FLR 54 at 58, Olsson J said that the applicant for a stay must demonstrate a ‘clear and compelling basis for the relief sought’”. Mc Pherson J A considered however, that in the case before the Court of Appeal, the applicants for a stay of proceedings “were bound to discharge the onus of satisfying a Court on the balance of probabilities that the proceedings ought to be stayed, leaving it to the District Court of Western Australia as the appropriate Court to determine all the matters in issue between them and the plaintiff” (para. 17).
20 McPherson J A said that in the case before the Court of Appeal, “The question is whether the District Court of Queensland or of Western Australia is the one which the action has the most real and substantial connection, and which can therefore be regarded as the natural forum” (para. 20).
21 In the present case, Clause 30 of each of the franchise agreements, under the heading “Proper law, jurisdiction” provided as follows:
“30.1 Choice of law. This agreement is governed by and construed in accordance with the laws of Queensland.
30.2Jurisdiction. Actions, suits or proceedings relating in any way to this agreement or documents or dealings contemplated by it, may be instituted, heard and determined in a Court of competent jurisdiction in Queensland.
30.3Submission to jurisdiction. Each party irrevocably submits to the non-exclusive jurisdiction of such Court for the purpose of any such action, suit or proceeding”.
22 It is appropriate to deal with each of the matters specifically set out in sub-para.(4) of s.20 of the Service and Execution of Process Act:
a.The places of residence of the parties and of the witnesses likely to be called in the proceeding: The plaintiff is a corporation registered in Melbourne and the company does not have interstate offices. It’s solicitors are located in Melbourne. It is likely therefore that all evidence relating to the subject matter of the claim will be given by witnesses who ordinarily reside in Melbourne.
Each of the defendants lives in Townsville. It may be necessary for them to give evidence to establish that they are persons under a legal obligation to pay the legal costs sought to be recovered by the plaintiff, apart from this issue there may be a requirement for expert evidence from a costs consultant relating to the reasonableness of the costs and disbursements claimed, making up the solicitors’ accounts.
b.The place where the subject matter of the proceeding is situated: The plaintiff’s cause of action is based upon the defendants’ obligations as guarantors. It appears that the franchise agreements were made in Melbourne and the obligation to make payments pursuant to the guarantee would appear to involve the making of those payments at the place of residence of the plaintiff in Victoria. The plaintiff’s costs relate to accounts from its solicitors incurred in Victoria and probably requiring payment in Victoria.
The Federal Court proceeding was determined in Queensland, although it was commenced in Victoria. I was informed from the Bar table that the reason for the transfer related to the likely time at which the action could be fixed for trial rather than issues relating to the subject matter of that proceeding. In the absence of any specific evidence on this issue, I cannot make a finding either way.
c.The financial circumstances of the parties, so far as the Court is aware of them: The plaintiff is a corporation apparently involved in the franchising of businesses, from its offices in Melbourne, including businesses in Northern Queensland. The defendants are individuals who were directors of the two companies which apparently between 2006 and at least 2010, conducted three businesses in the Townsville area. The two companies are now externally administered, which is an indication that ultimately the businesses were probably unsuccessful.
The defendants own real property with little equity. The third defendant is an aged pensioner although he receives rental income from real property. The first defendant is in full time employment although it is not clear whether this is on his own account or as an employee. The second defendant, a secondary school teacher, apparently works only during school terms.
In an affidavit filed in the application, the first defendant said that, “The defendants are having considerable difficulty in funding the defence of these proceedings and those difficulties are exacerbated by the fact that the proceeding is conducted not in Queensland but in Victoria”. The defendants were represented by counsel upon their application before me. Whilst it is likely that the costs of litigation will be a considerable burden upon them, as unfortunately they are with most individual litigants except those with substantial means, nevertheless it is difficult to conclude more from the general statement made on behalf of the defendants.
d.Any agreement between the parties about the Court or place in which the proceeding should be instituted: The parties specifically agreed by clause 30 of the franchise agreements that the courts of Queensland would have jurisdiction to hear the parties’ disputes, although that was not to be an exclusive jurisdiction.
e.The law that would be most appropriate to apply in the proceeding: The parties’ agreement was to be “governed by and construed in accordance with the laws of Queensland”. The determination of the dispute is likely to involve interpretation of the Legal Profession Act 2007 (Qld). It was not suggested that the Queensland legislation was significantly different than the Victorian provisions.
f.Whether a related or similar proceeding has been commenced against the person served or another person: This matter is not relevant to the present proceeding.
23 The legislation requires me to exclude from my consideration “the fact that the proceeding was commenced in the place of issue”. The Federal Court proceeding which gave rise to the incurring of costs by the plaintiff, and therefore the alleged obligation on the part of the defendants, was finally determined in Queensland. The subject matter of that litigation was the three businesses conducted by the two companies in Townsville. The defendants all live in Townsville and do not have substantial means.
24 Nevertheless, the claim arises pursuant to the franchise agreements which the parties entered into in Victoria. The obligation allegedly breached, the non-payment of monies, occurred in Victoria as the place of residence of the plaintiff and therefore the place where any payment was due. The plaintiff’s legal costs of the Federal Court proceedings were incurred in respect of work done by Victorian solicitors and, presumably, pursuant to an agreement reached in Victoria where payments were required to be made in Victoria.
25 Evidence would likely be given on behalf of the plaintiff by Victorian witnesses and the evidence from the defendants would likely be fairly limited apart from the possibility of expert evidence which might be just as appropriately called from a cost consultant practising in Victoria as in Queensland.
26 The application of Queensland law can be carried out by any court, in this case because of the similar legislation without any additional time or expense. The agreement did not provide that the Queensland courts were to have exclusive jurisdiction but that, if proceedings were brought by a party in those courts, the other party could not object on the grounds of inconvenience or lack of jurisdiction.
27 In the present case there is little basis for determining that the present forum is not “appropriate” or that any other court, and particularly the District Court of Queensland, should be regarded as “the natural forum”. I consider on balance, that the matters in issue between the parties do not have a “real and substantial connection” with Queensland or that the District Court of Queensland should be regarded as the “natural forum” for the dispute.
28 The critical issues in dispute relate to the performance of the defendants’ obligations under the franchise agreements, the agreement by the plaintiff with its solicitors in relation to the Federal Court proceeding and any obligation the defendants may have to pay those legal costs giving rise to processes which they would be entitled to have followed in relation to the claim in the present proceeding. The connection with the present jurisdiction in this regard would seem as least as strong, if not stronger, than the District Court of Queensland which the defendants suggested as the “appropriate” court or “natural forum”.
29 The defendants have not made out the basis for a stay of the proceeding and, accordingly, the defendants’ summons filed 29 November 2011, will be dismissed.
- - -
Certificate
I certify that these 7 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 16 February 2012.
Dated: 16 February 2012
Caroline Dawes
Associate to His Honour Judge Anderson
0
3
0