Compass Airlines Pty Ltd v Grey, C.B

[1992] FCA 499

4% ,S2

JUDGMENT No. ..... , ..... ,. --,...

IN THE FEDERAL COURT OF AUSTRALIA )	No. QG 3005 of 1992
QUEENSLAND DISTRICT REGISTRY	)
GENERAL DIVISION	)

IN THE MATTER OF COMPASS AIRLINES PTY. LIMITED

(IN PROVISIONAL LIQUIDATION) ACN 006 804 851

IN THE MATTER OF COMPASS HOLDINGS LIMITED

(IN PROVISIONAL LIQUIDATION) ACN 006 808 555

COMPASS AIRLINES PTY. LTD. (IN

PROVISIONAL LIQUIDATION)

First Applicant

COMPASS HOLDINGS LIMITED ( IN

PROVISIONAL LIQUIDATION)

Second Applicant

CHARLES BRYAN GREY

First Respondent

LEO JOHN CARDEN

Second Respondent

PHILLIP DAVID ARUNDELL WRIGHT

Third Respondent

RONALD ROYCE WALKER

Fourth Respondent

DAVID MARSHALL RICE

Fifth Respondent

IAN DAVID CLARE

Sixth Respondent

LEIGH ROBERT BROWN

Seventh Respondent

WHERE MADE:  Brisbane

WILLIAM ANDREW JEFFREY

Eighth Respondent

DAVID LINCOLN REYNOLDS

Ninth Respondent

MICHAEL JOHN GREY

Tenth Respondent

MINUTES OF ORDER

JUDGE W I N G ORDER:	Drummond J
DATE OF ORDER:	15 July, 1992

THE COURT DIRECTS THAT:

1. The proceeding be transferred to Sydney.

2.         The Queensland District Registrar transmit all documents in his charge relating to the proceeding to the New South Wales District Registrar.

m:  Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA )	No. QG 3005 of 1992
QUEENSLAND DISTRICT REGISTRY	1
GENERAL DIVISION	)

IN THE MATTER OF COMPASS AIRLINES PTY. LIMITED

(IN PROVISIONAL LIQUIDATION) ACN 006 804 851

IN THE MATTER OF COMPASS HOLDINGS LIMITED

(IN PROVISIONAL LIQUIDATION) ACN 006 808 555

COMPASS AIRLINES PTY. LTD. (IN

PROVISIONAL LIQUIDATION)

First Applicant

COMPASS HOLDINGS LIMITED (IN

PROVISIONAL LIQUIDATION)

Second Applicant

CHARLES BRYAN GREY

First Respondent

LEO JOHN CARDEN

Second Respondent

PHILLIP DAVID ARUNDELL WRIGHT

Third Respondent

RONALD ROYCE WALKER

Fourth Respondent

DAVID MARSHALL RICE

Fifth Respondent

IAN DAVID CLARE

Sixth Respondent

LEIGH ROBERT BROWN

Seventh Respondent

WILLIAM ANDREW JEFFREY

Eighth Respondent

DAVID LINCOLN REYNOLDS

Ninth Respondent

MICHAEL JOHN GREY

Tenth Respondent

m:	Drummond J
Date:	15 July, 1992

Place: Brisbane

REASONS FOR JUDGMENT

The applicants and the sixth and seventh respondents seek an order that these proceedings be transferred to Sydney.

The proceedings were commenced by application filed with a statement of claim on 19 March, 1992. At the initial directions hearing on 30 April, 1992, when it was mentioned that the sixth respondent had just filed an application for an order that the trial of these proceedings take place in Sydney, the applicants and one of the respondents indicated that they would oppose such a change while almost all of the other respondents said they would support it.

On 15 June, 1992, I had before me the sixth respondent's notice of motion and also motions by the applicants and the seventh respondent for orders that the proceedings be transferred to Sydney. The real issue is whether the proceedings should be transferred to Sydney now.

By 15 June, 1992 the position had changed from that which existed on 30 April in that all of the parties either	were then applicants for orders for the transfer of the
proceedings or supported such a transfer or did not oppose such a transfer.
The first and sixth respondents, who reside in Melbourne and Sydney respectively, and the ninth respondent, who resides in Brisbane, did not file any material and were content to rely on submissions from the bar table. The real applicant, the Australian Securities Commission, relied only on an opinion sworn to by one of its Regional Commissioners to the effect that, after having read the material filed on behalf of the second, third, fourth, fifth and seventh respondents, "the Commission considers that on the balance of convenience that the matter ought to be transferred to the New South Wales Registry". The Commission did not further explain why, after having commenced proceedings in Brisbane and having initially indicated opposition to a transfer to Sydney, it had changed its mind.
When I indicated on 15 June last that I was not prepared to transfer the proceedings on the material then before me, the Commission and various of the respondents sought an opportunity to put further material before me. The transfer application was brought back before me on 15 June,
1992 by the Commission, on very short notice to the other
parties who were not fully prepared then to argue in favour of the transfer and when some only of the parties had filed material.
I note the suggestion in the further material by Hemphill & Co., the Sydney solicitors for the first, eighth and tenth respondents, that the proceedings could be moved to Sydney even if I were to refuse to transfer them by the expedient of the Commission, with the support of the respondents, discontinuing and commencing afresh there. I doubt that such an exercise would necessarily be assured of
achieving that objective.
Notwithstanding that, I have considered the additional material that has now been filed and have decided to order that the proceedings be transferred.
The test to be applied in exercising the powers conferred by S. 48 of the Federal Court of Australia Act 1976 fCth1 and 0. 10 r. l(2) (f) of the Federal Court Rules is that stated in National Mutual Holdinas Ptv. Ltd. v The Sentrv
Cor~oratiorj (1988) 19 F.C.R. 155 at 162:

"The balance of convenience is important, but its weight must vary from case to case. Ultimately the test is: where can the case be conducted or continued most suitably bearing in mind the interests of all the parties, the ends of justice in the determination of the issues between them, and the most efficient administration of the Court."

I am satisfied that, for reasons which follow, if the matter proceeds in Brisbane, all of the respondents save	for the seventh and ninth respondents will each incur, and the
Commission as the real applicant may incur a substantial financial burden additional to that which will fall on each of those parties if the proceedings are transferred to Sydney now. I also think that while it is not possible at this early stage of the action to form any precise view on the matter, it is likely that a considerable number of expert and technical witnesses will be involved on behalf of the various parties both at the trial and, to some extent, in interlocutory activities such as inspection. Most of these witnesses are likely to come from Sydney and Melbourne, rather than Brisbane, so cost and logistical considerations with respect to this class of witness also indicates that the proceedings should be transferred now to Sydney.
The statement of claim filed on 19 March last shows that it is the Commission which brings the proceedings pursuant to S. 50 of the Australian Securities Commission Act 1989 (Cthl. Relief is sought against seven directors of the applicant companies (the first seven respondents) and three other respondents who were officers only, as distinct from directors, of those companies. It is alleged that each respondent breached various duties which they owed to the applicant companies, essentially by permitting the companies to continue to trade after they knew that the companies were insolvent; it is alleged that the companies were in this position from the date of commencement of the operation of Compass Airlines on 1 December, 1990 or, alternatively, on
each of a series of later dates through to 20 December, 1991,
when provisional liquidators were appointed. The damages sought to be recovered amount to many millions of dollars.
Although it is not yet possible at this early stage of the proceedings for anyone to estimate with any precision the likely length of the trial, it may very well run for a number of months. The issues, which are now identified in a much more detailed statement of claim filed following the
grant on 15 June, 1992 of general leave to the Commission to deliver an amended pleading, show that discovery of the Commission's documents will be an important and quite complicated exercise.
Eight of the ten respondents, namely, the first to sixth and the eighth and tenth respondents, will incur substantially more legal costs and (except for the eighth and tenth respondents) substantially more in the way of travelling expenses if this action proceeds through the interlocutory stages and to trial in Brisbane rather than in Sydney. The second to fifth respondents live in Canterbury (Vic), Armidale, (NSW), Kew (Vic) and Melbourne respectively. The first respondent resides in Melbourne, the sixth respondent in Sydney and the eighth and tenth respondents in Brisbane.
Each has retained Sydney solicitors and counsel in this matter. It was reasonable for them to do that: each has
dispute with Heath, concerning the scope of a liability policy also retained those same legal representatives to act in a
issued by Heath. Proceedings were commenced in respect of this dispute in the New South Wales Supreme Court shortly before the present proceedings were themselves commenced.
As to the Heath action, all of the respondents, other than the ninth respondent, are now parties in that action seeking declarations that they are entitled to an indemnity in respect of the claims made against them in these proceedings under a directors and officers liability insurance policy issued by Heath.
It appears from the letters from Heath's solicitors dated 12 June and 26 May, 1992 exhibited to the affidavits of
M r . Tapp and Mr. Werksman that there is likely to be a
considerable degree of overlap between the issues in the Heath action and those in the present proceeding so far as they relate to the knowledge of the respondents, who were directors of the first applicant of that applicant's financial position from time to time throughout 1991, although Rogers J has indicated that, following the close of pleadings in the Heath action, he may well be prepared to deal with a number of preliminary points which, if decided in favour of Heath, will terminate that action at an early date, but which, if determined otherwise, will leave those proceedings to go to trial.
will be a question whether those proceedings should be preliminary point but are to run their full course, then there If the Heath proceedings are not determined on the transferred to the Federal Court under S. 5(1) of the Jurisdiction of Courts (Cross-Vestina) Act (NSW) 1987, given this overlap. However, it was submitted that the respondents here would (understandably) want a decision in the Heath proceedings at the earliest possible time, given the costs they are facing in defending these present proceedings.
But none of this detracts from the proposition that it is reasonable for the various respondents who have done so to retain New South Wales legal representatives in these present proceedings, given that a considerable amount of work has been done by various of the respondents in the Heath action which will also need to be done in the course of preparing the respondents' cases in the present proceedings.
Agency costs will therefore increase substantially if this matter continues in Brisbane. In that event, the Sydney solicitors for eight of the respondents and, from time to time, their Sydney counsel and occasionally various experts, will still have to travel to Brisbane before the trial itself starts for such purposes as appearing at some interlocutory hearings and for inspection of the Commission's documents. Mr. Werksman estimates that his four clients would incur additional costs and expenses (including agency costs) totalling approximately $80,000.00 if the Commission proceedings remain in Brisbane and they retain their Sydney
representation.
It is likely to be even more costly for the respondents who have engaged Sydney representatives in the Heath proceedings and the present proceedings to now engage Brisbane legal representatives if the proceedings remain here: Brisbane lawyers would have to duplicate to a considerable extent work already done by the Sydney lawyers. Mr. Werksman says that the second to fifth respondents have to date incurred a total of about $160,000.00 in legal costs incurred in large part in respect of himself, other solicitors and retained counsel acquainting themselves with the facts and issues relevant to both the proceedings in this Court and the Heath proceedings.
The seventh respondent has engaged a Brisbane solicitor and a Sydney senior counsel in both the Heath proceedings and the present proceedings. I am not satisfied that this particular respondent will incur a greater costs burden if the matter proceeds in Brisbane rather than Sydney.
The sixth and seventh respondents are in private practice in Sydney as an accountant and a solicitor respectively. They will suffer the burden of additional disruption to their practices if the matter proceeds in Brisbane rather than Sydney. This will be a particular problem for the sixth respondent, who is a sole practitioner. He says that the disruption to his practice involved in long
three to six months, is such that "I would be seriously absences from Sydney, particularly if the hearing runs for concerned about my ability to conduct my practice at all and I
would be concerned as to whether I could successfully re- establish it after such a lengthy interruption. If the proceedings were conducted in Sydney, the disruption to my practice would be substantially reduced."
The eighth and tenth respondents, who both reside in Brisbane, have filed short affidavits stating that notwithstanding the additional costs to them they support the application for transfer.
The ninth respondent is the only person who would prefer the proceedings to remain in Brisbane, although he has "reluctantly" advised the Commission he would not oppose a transfer of the proceedings to Sydney. He is a Brisbane resident, a former employee of Compass and now an employee of the provisional liquidator; he has quite limited financial means. The costs burden that will fall on him if the proceedings are transferred to Sydney is exactly the same sort of burden as that which will fall on all the other respondents if the proceedings are kept in Brisbane.
The material filed after 15 June, 1992 by the Commission shows that, in response to foreshadowed applications for security for costs, it undertook to each
might obtain if the applicants are unsuccessful in the action. respondent to meet any order for costs that that respondent
The amount of the costs which the Commission would have to pay to the respondents if they are successful in the action will be substantially less if the proceedings are now transferred to Sydney than if they continue in Brisbane with the trial also being held here. The Commission's situation in this regard is also a consideration entitled to weight; since the Commission is a publicly funded body, it attracts I think a little more weight.
Although the Commission appeared on 30 April last by senior and junior counsel resident in Brisbane, the Commission has now briefed senior and junior counsel in Sydney. I do not give any weight to this unexplained fact that the Commission has now retained Sydney counsel and will, for this reason and whether or not the action succeeds, result in it having to meet costs in respect of its own counsel, if the matter were to stay in Brisbane, which costs would be additional to those it would have incurred if it had kept Brisbane counsel.
As to witnesses, it is I think clear enough that many significant witnesses will come from either Sydney or Melbourne, with few from Brisbane.
So far as the Commission's witnesses are concerned, it has retained one expert presently Brisbane-based "but who is expected to be residing interstate shortly". If further
experts are retained, as I think is likely, the Commission expects to engage persons located interstate or overseas.
There is no information as to where non-expert witnesses the Commission intends to call reside other than that the majority of former Compass employees, however many persons that may be, who are envisaged being called "would be likely to reside in Brisbane at the date of trial". It is also said that only
about 40% of all non-expert witnesses will be located in Brisbane.
The main merchant banking and legal advisers to the directors who were concerned in both the establishment of the airline and its continued operation have at all times been located in Sydney, while the accountancy advisers were the sixth respondent himself and the Melbourne office of Arthur Andersen. It is likely that a number of witnesses from these three organisations will be called by one or other of the parties. The seventh respondent says that, while it is not yet possible to identify just what witnesses will be called on his behalf, it will be necessary to call expezts in aviation, accountancy, taxation and marketing, which experts he anticipates are likely to be concentrated in Sydney and Melbourne.
I certify that this and the eleven
preceding pages is a true copy of the reasons for judgment herein of the Honourable Mr. Justice Drummond.
Associate :  $"-\fie
Date:  15 July, 1992