Connect and Communicate Pty Ltd v Russell
[2021] VCC 1079
•26 August 2021
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-21-01161
| CONNECT & COMMUNICATE PTY LTD (ACN 130 885 504) | Plaintiff |
| V | |
| ROLAND JAMES RUSSELL | Defendant |
---
JUDGE: | HER HONOUR JUDGE A RYAN | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9 July 2021 | |
DATE OF RULING: | 26 August 2021 | |
CASE MAY BE CITED AS: | Connect & Communicate Pty Ltd v Russell | |
MEDIUM NEUTRAL CITATION: | [2021] VCC 1079 | |
RULING
---
Subject:PRACTICE AND PROCEDURE
Catchwords: Stay – whether the Supreme Court of Queensland, alternatively, the District Court of Queensland is the “appropriate court” to determine the proceeding – principles applicable – ability of witnesses to give evidence by video link – effect of COVID-19 pandemic restrictions
Legislation Cited: Service and Execution of Process Act 1992 (Cth); Corporations Act 2001 (Cth)
Cases Cited:St George Bank Ltd v McTaggart [2003] QCA 584; Flooring Xtra Stores Pty Ltd & Anor v Guymer [2020] VCC 704; Smith v JZ Lee Interiors Pty Ltd [2015] VSCA 203; Irrigear Stores Ltd v Watertek Pty Ltd Pty Ltd [2015] VCC 1114; Toyota Material Handling Australia Pty Ltd v Cardboard Collection Source Pty Ltd [2020] NSWDC 667
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Heath QC with Mr B Petrie | Duxton Hill |
| For the Defendant | Mr A Galbraith | MJT Law |
HER HONOUR:
1By summons dated 25 May 2021, the defendant seeks a stay of this proceeding pursuant to s20 of the Service and Execution of Process Act 1992 (Cth) (“SEPA”). The defendant contends either the Supreme Court of Queensland or the District Court of Queensland is the appropriate court to determine this dispute.
2The defendant relies upon an affidavit sworn by his solicitor, Christopher Anthony De Santana, dated 12 May 2021. The plaintiff opposes the application and relies upon the affidavit of its solicitor, Rebecca Anne Elphinstone, sworn 7 July 2021.
3The plaintiff trades under the name Hearing Loop Australia. It is in the business of providing sound and hearing devices and solutions. The defendant was employed by the plaintiff between October 2018 and 5 March 2021. On 29 November 2018, the defendant registered the business name, Hear Room. This business also provides sound and hearing devices and solutions. The plaintiff summarily terminated the defendant’s employment on 5 March 2021 due to alleged serious misconduct.
4The plaintiff commenced this proceeding on 24 March 2021. By its amended statement of claim dated 4 June 2021, the plaintiff alleges the defendant has engaged in competitive conduct and misused its confidential information in breach of both contractual terms and fiduciary and statutory duties owed to the plaintiff. By his defence, the defendant denies the allegations made against him, including that he engaged in serious misconduct justifying summary termination.
Legal principles
5Section 20(3) of SEPA provides that a court may order a 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.
6Section 20(4) sets out various matters which the court may consider in determining whether the court of another State is the appropriate forum. These factors are as follows:
“(a)the places of residence of the parties and of the witnesses likely to be called in the proceeding; and
(b)the place where the subject matter of the proceeding is situated; and
(c)the financial circumstances of the parties, so far as the court is aware of them; and
(d)any agreement between the parties about the court or place in which the proceeding should be instituted; and
(e)the law that would be most appropriate to apply in the proceeding; and
(f)whether a related or similar proceeding has been commenced against the person served or another person;”
7Excluded from consideration is the fact that the proceeding was commenced in the place of issue: s20(4).
8The principles relating to applications under s20 are not in dispute and can be summarised as follows:
(a) an applicant for a stay bears the onus of satisfying the court on the balance of probabilities that the proceeding should be stayed;
(b) the applicant must show that another State court is the “appropriate court” to determine all matters in issue;
(c) the factors in s20(4) of SEPA do not constitute a code and are not exhaustive of the factors which may properly be taken into account in exercising the court’s discretion;
(d) the court must decide which court is the one where the action has the most real and substantial connection and therefore can be regarded as the natural forum;
(e) the applicant for a stay must demonstrate a clear and compelling basis for the relief sought.[1]
[1]St George Bank Ltd v McTaggart [2003] QCA 584 at [9]-[11], [17]; Irrigear Stores Ltd v Watertek Pty Ltd Pty Ltd [2015] VCC 1114; Flooring Xtra Stores Pty Ltd & Anor v Guymer [2020] VCC 704; Toyota Material Handling Australia Pty Ltd v Cardboard Collection Source Pty Ltd [2020] NSWDC 667 at [16].
9The focus of the debate related to the first three categories set out in s20(4) of SEPA. The factor in ss(d) did not apply because the agreement between the parties is silent as to forum. The common law in this jurisdiction and Queensland is the same with the result that ss(e) is not engaged. Subsection(f) has no application because there is no other related or similar proceeding that has been commenced against the defendant or another person.
(a) place of residence of the parties and witnesses
10The defendant resides in Cornubia in the State of Queensland. He is the holder of the business name Hear Room, which has its registered address in Queensland.
11The plaintiff operates with its staff across Australia. The plaintiff’s registered business is in Victoria and the director of Hearing Loop Australia, Mr Riddle, is also resident in Victoria.
12The defendant contends that the likely witnesses are exclusively or almost exclusively located outside Victoria and are in Queensland having regard to the pleadings.[2] The witnesses likely to be called will be the defendant and clients and customers of Hear Room who are in Queensland. In addition, Ms Donna Hounslow-Carracciolo is a potential witness and an employee of the Queensland Department of Education in the position of advisory visiting teacher. She lives and works in Brisbane. Other Queensland witnesses include employees at Brisbane Girls Grammar School in or about November 2020, and Ms Patricia Taylor, an employee of the Queensland Department of Education who is located in Brisbane. Another potential witness is Ms Donna Gravagna, an employee of Cairns Catholic Education. She is located in Cairns. Other likely witnesses are attendees at a meeting held in Cairns in March 2020, including members of the Hearing Loss Network.
[2]Paragraph 23 of the De Santana affidavit.
13The plaintiff acknowledges it carries the burden of proving the allegations to obtain the relief it seeks. It will be responsible for calling or subpoenaing witnesses identified in the amended statement of claim. This is said to be contrasted with the way the defendant has put his case which, to a large extent, is in the nature of bare denials to the allegations made against him with some minor exceptions.
14The plaintiff submits that the Court will need to hear evidence both from the director of the plaintiff, Mr Ian Riddle, and the defendant. The place of residence of the parties is relevant. Where one party resides in one State and another in a different State, consideration of the residence of the parties is therefore equivocal. The residence of one side in Victoria can be regarded as being offset by the other in another State.[3]
[3]Flooring Xtra Stores Pty Ltd & Anor v Guymer [2020] VCC 704 at [35] (Judge Macnamara).
15The plaintiff accepts that the place of residence of the likely witnesses is also relevant. Mr De Santana has not explained why the persons he has identified at paragraph 23 of his affidavit would be called by his client to give evidence. The plaintiff says the clients and customers of Hear Room generally are not required to give evidence. It is said that there would be no basis for the defendant to call Ms Hounslow-Carracciolo. It can readily be inferred that the defendant would not wish to call customers of Hear Room, as they would not assist his case.
16The plaintiff says it will rely on documentary evidence to establish its case, including various emails and business records of the defendant. It will not call persons from the schools mentioned or those who attended the conference in Cairns.
17Further, given the position with the current COVID-19 pandemic restrictions, this renders nugatory any significance which might otherwise have been placed on the places of residence of the parties and the witnesses. The plaintiff argues the Court can proceed on the basis that the places of residence of the parties and witnesses are at best equivocal for the purposes of s20(4)(a) of SEPA.
18The residence of the parties being in different States is a neutral factor. The plaintiff says the only witnesses will be Mr Riddle and the defendant. The defendant proceeded on the assumption that the persons named in the particulars in paragraph 11 of the amended statement of claim will be called. The defendant does not state that he intends to call those witnesses. The plaintiff says it does not need to do so to prove its claim. This assertion was challenged by counsel for the defendant. Be that as it may, the defendant has not identified the witnesses he would seek to call and for whom he would have to bear the cost of travel and accommodation in Melbourne. As matters currently stand, this Court would permit any Queensland witnesses to give evidence remotely, in which case those costs would be avoided.
The significance of online hearings in the post-COVID-19 environment
19The plaintiff submits that the considerations in s20(4) of SEPA should be weighed in the context of the current environment concerning COVID-19 and online hearings. Regarding the pattern of lockdowns that have occurred, there will be a risk that any witness would be prevented from travelling interstate. The only rational option would be to have the matter set down for an online hearing. Even if the case was heard in Queensland, it would be necessary to set the matter down for an online hearing in any event. Accordingly, there is little to be achieved by staying the present proceeding given the matter will proceed in substantially the same manner whether heard in Victoria or Queensland. An online hearing would thereby diminish any disadvantage the defendant contends he would otherwise incur because of the matter being conducted from Victoria. His lawyers would be able to appear remotely, and he would be able to give his evidence in the same format.
20On balance, I consider this factor to be neutral. The parties each reside in different States, so that does not sway the balance in either direction. The defendant has not identified the witnesses he wishes to call but makes assumptions about witnesses who will be called by the plaintiff. The plaintiff claims it will call few witnesses and will rely primarily on documentary evidence to establish its case. The reality is that in the current COVID-19 pandemic, regardless of where the hearing was held, the parties and witnesses would most likely be giving evidence by video link. The ability of persons to travel interstate is likely to remain uncertain for the foreseeable future. The courts have continued to function throughout the pandemic by way of remote hearings. If the hearing were held in Melbourne, the defendant and any of his witnesses would be permitted to give evidence remotely. The same would also apply to the plaintiff if it wished to call interstate witnesses. The reality is that Mr Riddle would give evidence by video link as well, given the current inability of witnesses in commercial causes to attend in person at the court building. I assume the courts in Queensland would give Victorian witnesses permission to appear remotely in the absence of an ability to appear in person due to border restrictions. Consequently, I regard this factor as being evenly balanced such that it cannot be said it favours one party more than another.
(b) The place where the subject matter of the proceeding is situated
21The defendant contends his employment with the plaintiff and his position was based in Queensland. The plaintiff did not require the defendant to manage accounts in the plaintiff’s business in any other region other than Queensland. Throughout the defendant’s employment he visited several clients of the plaintiff in Queensland. When the defendant was not required to visit a client, he worked from his home located at Cornubia which is in Queensland. He was only required to travel to Melbourne to attend limited internal meetings which did not involve clients.
22The alleged unlawful conduct of the defendant is claimed to have occurred in Queensland, where the defendant has remained and operated since his employment was terminated. It is said the subject matter of the proceeding has no apparent connection to the State of Victoria. Finally, it is said that the relevant letter of offer which is said to comprise the contract of employment insofar as it was in writing was signed and accepted by the defendant in Queensland. The defendant maintains that the Queensland Supreme Court or the Queensland District Court is the most natural forum. The claim concerns work done in Queensland as well as the conduct of another business in that State. There is no practical connection to Victoria.
23By contrast, the plaintiff says the case may be characterised as an identification of commercially sensitive and confidential information, whether Russell used that information in breach of his contract of employment and his fiduciary and statutory duties. It is said these are issues of an intangible nature and do not concern bricks and mortar. Whilst the relevant breaches may have occurred in Queensland, the loss incurred by Hearing Loss Australia was necessarily sustained in Victoria where its registered office is located. This consideration is equivocal in the plaintiff’s submission.
24In Flooring Xtra,[4] which concerned a debt claim, Judge Macnamara observed at [35] the significance of the intangible nature of the relevant subject matter:
“Precisely what might be regarded as ‘the subject matter of the proceeding’ is open to question or debate. There is no particular piece of immovable property identified. … This is not a situation where, for instance, there is a dispute as to the quality of building work which could be conveniently viewed in one State, being located there, and not being conveniently viewed by a court sitting in another State. No clear indication one way or another emerges from a consideration of the subject matter of the proceeding.”
[4] Flooring Xtra Stores Pty Ltd & Anor v Guymer [2020] VCC 704.
25Accordingly, the plaintiff argues this Court would not be at any disadvantage in determining the claim compared with a court in Queensland. It is said the defendant has not pointed to any evidence which would place this Court at a disadvantage. The plaintiff argues the consideration in s20(4)(b) of SEPA weighs against the stay application.
26The defendant maintains the County Court does not have jurisdiction to determine all the matters in dispute between the parties. The defendant claims that the Queensland Supreme Court is the appropriate forum for the dispute given the allegations relating to statutory duties under ss182 and 183 of the Corporations Act 2001 (Cth) and the decision of Smith v JZ Lee Interiors Pty Ltd.[5] The defendant is correct that this Court cannot entertain such claims under the Corporations Act, whereas it can be accepted that the Supreme Court of Queensland could do so being a superior Court.
[5] [2015] VSCA 203.
27The statement of claim filed on 24 March 2021 did seek compensation by way of relief under s1317H of the Corporations Act, as a result of contraventions of ss182 and 183 of that Act. The registry notified the plaintiff on 12 May 2021 that the County Court does not have jurisdiction to hear such claims as it is not a capital “C” court within the meaning of the Corporations Act.[6] The plaintiff then amended its statement of claim, as it could do once without seeking leave, and deleted the claim for relief under s1317H.
[6] Exhibit “CD-11” to the De Santana affidavit.
28There was some force in the defendant’s submission on this point. Had the claim been in its original form, then this Court would not have been able to hear all the issues in dispute. But as the plaintiff no longer seeks any relief in the amended statement of claim under the Corporations Act, such as damages or declaratory relief, then this issue is removed from determination. The references in the body of the pleading to statutory duties go nowhere in the absence of relief being claimed. The plaintiff says this is a pleading point which can be remedied. The result is that this Court can hear all the issues dealt with in the amended statement of claim which involve the application of common law.
29The factor relating to subject matter is finely balanced. On the one hand, the defendant’s contract was formed in Queensland and that is where he predominantly conducted his employment. His supposedly rival business is being conducted in that State. On the other hand, the plaintiff says the subject matter is intangible such that a breach of confidential information has no particular attachment to either jurisdiction. The plaintiff says its losses, being the damages claimed because of the misuse of its confidential information, were suffered in Victoria where the plaintiff is located. The claim for statutory relief is no longer pressed so that does not impact on this Court’s jurisdiction to hear the claim. I consider this factor does not favour one of the parties more than the other. That being so, I am not satisfied the defendant had discharged the onus placed upon him to justify the grant of a stay.
(c) The financial circumstances of the parties
30The defendant’s case is that he has placed evidence before the Court setting out the financial difficulties that he will have in defending the case in Victoria. He is the sole income earner for his family. His income is solely derived from his work as a sole trader operating Hear Room. As at 14 April 2021, Hear Room had recorded a loss of $31,633. The profit and loss statement for Hear Room from 1 January 2020 to 18 June 2021 only shows a gross profit of $4,059 and a net loss of $34,888. The defendant deposes that he does not have any significant assets. The defendant has limited available funds in his bank accounts including Hear Room.
31The balance in the Hear Room account as at 19 June 2021 was only plus $172.19. The balance of the defendant’s joint account with his wife only has a balance of $1,158.02 as at 12 June 2021 and their credit account shows a balance of minus $4,948.68 as at 18 June 2021.
32Mr De Santana deposes that the defendant is receiving financial support from third parties, including having to borrow money from his wife’s parents to pay for everyday expenses. These borrowings include the “Karen Trace legal fees transfer credit” noted by the plaintiff. Karen Trace is the defendant’s mother-in-law and has been lending the defendant moneys to fund the proceeding to date. The defendant is not able to borrow any more moneys from his mother-in-law to pay for legal fees moving forward or to fund the future conduct of the proceeding beyond the hearing of the determination of this application. At the hearing, counsel for the defendant said his instructions were that moneys advanced by Ms Trace were required to be repaid, although the plaintiff noted in reply this was not the subject of evidence.
33The defendant’s position is that he does not have money to pay for himself or for any witnesses to travel to or stay in Melbourne to participate in the proceeding in the County Court. This includes the money for costs of flights, taxi fares or accommodation expenses. He currently receives a salary of $1,500 per week from Hear Room, which is substantially less than he earned when employed with the plaintiff. This is not a salary which permits an inference or provides a reasonable basis to suggest he has means to fund the litigation in Victoria.
34By contrast, the defendant notes it appears the plaintiff has financial resources necessary to litigate in Queensland given it achieved budget and the defendant was paid bonuses during his employment in Queensland. There is no evidence filed by the plaintiff which would dispute this. There is nothing to indicate that the plaintiff is other than a solvent operating company. The plaintiff has not put any evidence before the Court to suggest that it would be unable to fund the proceeding in Queensland and therefore the implication must be that it has the means to do so.
35The plaintiff argues the evidence provided by the defendant does not show that the defendant is in dire financial circumstances as asserted. The plaintiff notes the defendant failed to produce relevant information which was sought pursuant to a notice to produce. The failure to provide this supports an inference that such information would not have assisted him.
36Also of significance is the defendant’s refusal to produce documents which would clearly be relevant to making a proper assessment of his financial circumstances. By letter sent to his solicitors on 2 July 2021, the defendant has failed or refused to produce information regarding his equity in a property, details of other bank accounts in which the defendant has an interest, or his customer profile with the National Australia Bank which would identify accounts in his name. The plaintiff says that the Court can infer from the refusal to give such information that documents of this nature do in fact exist. The defendant refused to produce various documents concerning three unknown bank accounts and circumstances regarding various loan repayments referred to in the joint account. It is said there is no evidence to support the defendant’s assertion that he does not have finances to litigate this matter in Victoria. The Court should also infer that the evidence the defendant has refused to produce would have been unfavourable to him.
37It is said that the reference in paragraph 24(h) of the De Santana affidavit that the defendant would not have money to pay for witnesses to travel to Victoria is misguided. For the reasons already explained, the defendant would not be required to call any witnesses other than himself. Any financial burden for other witnesses which have so far been identified will be the burden of the plaintiff alone. Accordingly, it is said by the plaintiff that s20(4)(c) of SEPA does not favour a stay of the proceeding.
38Even assuming the defendant is in dire financial circumstances, which is contested by the plaintiff, I am not persuaded his position will necessarily be worsened if the case remains in Victoria. The defendant’s financial position is raised as a factor as to why he could not bear the cost of a trial in Melbourne. This assumes travel and accommodation expenses for himself and potential witnesses.[7] But the reality in the COVID-19 pandemic is that witnesses can give evidence remotely, which avoids the need to travel. Consequently, the defendant will not have to bear these additional travel and accommodation expenses if the proceeding remains here. Self-evidently, the defendant will incur legal costs if he continues to defend the proceeding, but those costs will be incurred in any event regardless of where the proceeding is heard. It is not suggested he would, for example, have to engage new solicitors in Melbourne to act for him. I am not persuaded that the defendant’s apparent straitened financial circumstances, as compared with the uncontested solvency of the plaintiff, provides a clear and compelling reason why a stay should be granted.
[7] Paragraph 24(h) De Santana affidavit.
Conclusion
39The contentions raised by the parties were finely balanced. The COVID-19 pandemic has affected the way that trials are now held, with the result that the residence of parties and witnesses in assessing these applications is of less significance than previously when trials were routinely held in person. In exercising my discretion, I also considered the fact that evidence will most likely be given by video link wherever the hearing is conducted. That being so, no obvious prejudice arises to either party such that one forum can said to be preferable to the other. But having considered the factors under s20(4) and the parties’ detailed submissions, I was not ultimately persuaded the defendant had discharged the onus placed upon him to show that a court of another State was the “appropriate court”.
40The application for a stay is dismissed. Subject to hearing from the parties, there would appear to be no reason why costs should not follow the event.
- - -
Certificate
I certify that these 13 pages are a true copy of the Reasons for Ruling of Her Honour Judge A Ryan delivered on 26 August 2021.
Dated: 26 August 2021
Associate to Her Honour Judge A Ryan
0
4
0