Garra Water Investments Pty Ltd (in Liquidation) v Ourback Yard Nursery Pty Ltd & Garra
[2010] SASC 326
•26 November 2010
SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
GARRA WATER INVESTMENTS PTY LTD (IN LIQUIDATION) v OURBACK YARD NURSERY PTY LTD & GARRA
[2010] SASC 326
Judgment of The Honourable Justice White
26 November 2010
PROCEDURE - COURTS AND JUDGES GENERALLY - COURTS - CONCURRENT JURISDICTION OF DIFFERENT COURTS - TRANSFER OF PROCEEDINGS UNDER CROSS-VESTING LEGISLATION
The liquidator of the plaintiff company brought an action to enforce an indemnity from a trust controlled by the defendants - the defendants, both located in Victoria, sought an order transferring the proceedings to the Supreme Court of Victoria.
Whether it is in the interests of justice for the proceedings to be transferred under s 5(2) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (SA).
Held: application dismissed - insufficient material provided to indicate that it would be in the interests of justice for the matter to be heard in Victoria as opposed to South Australia - applicants failed to meet evidential burden.
Jurisdiction of Courts (Cross-vesting) Act 1987 (SA) s 5(2); Supreme Court Civil Rules 2006 (SA) r 92(2), referred to.
BHP Billiton Limited v Schultz (2004) 221 CLR 400; Cini & Ors v Pets Paradise Franchising (SA) Pty Ltd & Ors (2008) 102 SASR 177, applied.
Australian Rail Track Corporation v Mineral Commodities Ltd [2006] SASC 27; Bankinvest Letters A-G v Seabrook & Ors (1988) 14 NSWLR 711; James Hardie & Co Pty Ltd v Barry (2000) 50 NSWLR 357; Hackett v Hackett [2010] SASC 32; Pegasus Leasing v Tieco (1993) 61 SASR 195, considered.
GARRA WATER INVESTMENTS PTY LTD (IN LIQUIDATION) v OURBACK YARD NURSERY PTY LTD & GARRA
[2010] SASC 326
Civil
WHITE J. The defendants seek an order under the Jurisdiction of Courts (Cross-Vesting) Act 1987 (SA) transferring these proceedings to the Supreme Court of Victoria.
This Court made an order for the winding up of the plaintiff Garra Water Investments Pty Ltd on 14 October 2008 and Mr Lanthois, an Adelaide based chartered accountant, was appointed as its liquidator. This order had the effect (by virtue of the terms of a deed of trust) of terminating the plaintiff’s trusteeship of the Garra Family Trust. In that capacity, the plaintiff had carried on a garden supply business and incurred liabilities, including the liability which led to a notice of winding up being served on it by a South Australian creditor.
On 22 October 2008, the second defendant (Mr Garra) appointed the first defendant (Ourback Yard Nursery Pty Ltd) as the trustee of the Garra Family Trust. I was informed from the bar table that since that date, or shortly afterwards, Ourback Yard has carried on the garden supply business previously conducted by the plaintiff and has used the trust assets for that purpose.
The plaintiff commenced the present proceedings on 2 July 2010. It seeks a declaration that it is entitled to be indemnified to the extent of its indebtedness from the assets of the trust; a declaration that it has an equitable charge or lien over the assets of the trust in existence at the date of the liquidation; a declaration that it is entitled to trace assets or the proceeds from the sale, transfer or assignment of the assets which are subject to the indemnity and lien; a declaration that by virtue of Ourback Yard having conducted the garden supply business using the assets of the trust, the trust is entitled to the income it has produced; an award of equitable compensation or damages; and consequential orders.
As against Mr Garra, the plaintiff seeks compensation or damages in respect of the breaches of fiduciary duty alleged to have been committed by him in relation to the use and disposition of trust assets.
On the application for transfer, the defendants relied only upon s 5(2)(b)(iii) of the Jurisdiction of Courts (Cross-Vesting) Act. They contended that it is in the interests of justice that these proceedings should be determined in the Supreme Court of Victoria.
In support of that submission the defendants referred to five matters:
1.the trust deed of the Garra Family Trust is governed by the laws of Victoria (cl 1.2(h));
2.the assets which are the subject of the plaintiff’s claim are in Victoria;
3.Mr and Mrs Garra reside in Melbourne, and will incur additional expense if the proceedings remain in this Court;
4.the prospects of settlement of the proceedings are greater if they are transferred to the Supreme Court of Victoria; and
5.the action will be conducted more cheaply if the proceedings are transferred.
The submissions on these matters were put at a level of considerable generality and abstraction. Counsel was at some disadvantage as, despite the proceedings having been served upon Mr Garra on 21 July 2010 and both defendants having filed a notice of address for service on 30 July 2010, the defendants have still not filed a defence to the plaintiff’s statement of claim.[1] This meant that the issues have not yet been defined between the parties; the basis for the defendants’ defence, if any, to the plaintiff’s claims is yet to be articulated; and the evidence which may be necessary for the determination of the issues has not been identified. This is unfortunate and makes the determination of the interests of justice for the purposes of s 5(2)(b)(iii) quite difficult. Debelle J referred to this issue in Australian Rail Track Corp v Mineral Commodities Ltd:[2]
[28]It is undesirable for applications to transfer an action to another court to be made prematurely before the issues and all of the parties have been identified. One consequence is that it will not necessarily be clear whether one court is a more appropriate forum than another. As a general rule, the elucidation of the issues and the identification of the parties, especially the latter, will often have a critical bearing upon the outcome of the application. In some proceedings it will, therefore, be preferable for an application to transfer the proceedings to be brought after the issues have been identified and the parties ascertained. As a general rule, it is not an unduly onerous burden for pleadings and other pre‑trial issues to be conducted in a court other than the court in which a party resides or carries on business. The real burden occurs immediately before to prepare for the trial or during the trial when parties and witnesses might be required to travel interstate.
These observations may be made with even greater force in the circumstances of the present application.
[1] Rule 92(2) of the Supreme Court Civil Rules 2006 requires a defence to be filed within 28 days after service of the plaintiff’s statement of claim.
[2] [2006] SASC 27.
The problems created by the lack of identification of the issues, and of the evidence which will be necessary for a resolution of those issues, were exacerbated by the limited evidence which each party chose to put before the Court in relation to the present application.
The principles governing applications of the present kind are now well established. A number of the principles were discussed by the High Court in BHP Billiton Limited v Schultz.[3] I gratefully adopt the summary of those principles by Bleby J in Cini v Pets Paradise Franchising (SA) Pty Ltd & Ors:[4]
·It is not relevant to ask whether this Court is justified in refusing to exercise the jurisdiction conferred on it. Rather, it must ensure that the case is heard in the forum dictated by the interests of justice.
·The question is not whether this Court is an inappropriate forum. It is both necessary and sufficient that, in the interests of justice, the other Court is more appropriate.
·The Court is required to ensure that cases are heard in the forum dictated by the interests of justice. It is not a question of the exercise of a discretion.
·The interests of justice are not necessarily the same as the interests of any one party.
·Because it is necessary to identify the more appropriate forum, no specific emphasis can be given in favour of the choice of forum made by the plaintiff.
·It is inapt to speak of the applicant for an order for transfer as bearing a burden of persuasion analogous to an onus of proof.[5]
(Citations omitted)
[3] [2004] HCA 61; (2004) 221 CLR 400.
[4] [2008] SASC 287; (2008) 102 SASR 177.
[5] Ibid at [8].
Contrary to the submissions of the plaintiff, the principles applied on applications of forum non‑conveniens are not to be applied without qualification on applications under s 5 of Jurisdiction of Courts (Cross-Vesting) Act. Gleeson CJ, McHugh and Heydon JJ made this clear in BHP Billiton v Schultz, saying:
[A]lthough an application for transfer under s 5 will often involve evidence and debate about matters of the same kind as arise when a court is asked to grant a stay of proceedings on the ground of forum non conveniens, there are differences between the two kinds of application … The national scheme of legislation, of which the Cross-Vesting Act is a part, was intended to operate, and to be applied in a different juridicial context … [O]ne is not concerned with the problem of a court, with a prima facie duty to exercise a jurisdiction that has been regularly invoked, asking whether it is justified in refusing to perform that duty. Rather the court is required by statute to ensure that cases are heard in the forum dictated by the interests of justice.[6]
[6] [2004] HCA 61 at [8]-[14]; (2004) 221 CLR 400 at 419-421.
The sixth principle summarised by Bleby J in Cini v Pets Paradise Franchising (SA) Pty Ltd is that it is inappropriate to speak of an applicant for an order for transfer having a burden of persuasion analogous to onus of proof. Different views on this topic have been expressed in the Supreme Court of New South Wales: compare Bankinvest Letters A-G v Seabrook & Others[7] and James Hardie & Co Pty Ltd v Barry.[8]However, in BHP Billiton v Schultz[9] Gummow J, with whom Hayne J agreed, considered that:
Section 5(7) indicates that it is inapt to speak of the applicant for an order for transfer as bearing a burden of persuasion analogous to an onus of proof. However, it would be inaccurate to describe the decision upon a transfer application as administrative, by some analogy to the orders made with no lis inter partes in the administration of assets or of trust by courts of equity.[10]
(Citations omitted)
The approach outlined by Gummow J has been adopted in this Court by Bleby J, as noted above, and subsequently by Gray J.[11] I consider it appropriate to take the same view. However, I do not understand this to mean that an applicant for an order does not carry an evidential onus and, in particular, to establish the basis upon which a court may make an assessment of where the interests of justice lie. That is a matter of some significance on the present application bearing in mind both its timing and the limited evidence adduced by the defendants to support it.
[7] (1988) 14 NSWLR 711 at 721.
[8] (2000) 50 NSWLR 357 at 380.
[9] [2004] HCA 61; (2004) 221 CLR 400.
[10] Ibid at [71].
[11] Hackett v Hackett [2010] SASC 32 at [5].
Against that background, I address the particular features relied upon by the defendants as indicating that the interests of justice required a transfer of the proceedings to the Supreme Court of Victoria.
The first matter relied upon by the defendants is that the trust deed establishing the Garra Family Trust is governed by the law of Victoria. I accept that the trust deed contains a clause to that effect and that this is a material consideration on applications of the present kind.[12] However, counsel was unable to point to any issue concerning the construction or application of the trust deed to which some distinctive Victorian law would be pertinent. Nor could counsel point to any applicable statute or rule which would require consideration by the Court, or identify any concept or principle which would necessitate recourse to Victorian law.
[12] Cini v Pets Paradise Franchising (SA) Pty [2008] SASC 287 at [15]; (2008) 102 SASR 177 at 185.
At least on its face, cl 14 of the trust deed which provides for the trustee’s entitlement to indemnity out of the trust assets for the time being in respect of liabilities incurred by the trustee in good faith, seems straightforward. It is not apparent on its face that any particular question of construction will arise. Further, the proposition that a trustee’s right of indemnity against the assets of a trust gives it a first charge or a lien on those assets is well established.[13] The equitable interest of the trustee in trust assets, to the extent of the trustees’ right of indemnity against the trust assets, is not lost by a change of trustee or by the trustee giving up possession of the trust’s assets previously held by it. In Rothmore Farms Pty Ltd v Belgravia Pty Ltd, Mansfield J reviewed many of the authorities on these topics.[14] It is not necessary for present purposes to repeat that review.
[13] Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367.
[14] [1999] FCA 745 at [33]-[42].
Further, by an email of 10 November 2008, the defendants’ solicitors referred the liquidator to cl 14 of the trust Deed and said:
We are instructed that the indemnity is accepted.
To date, there has been no indication that the defendants, or either of them intend resiling from that position.
Although I accept, at a general level, that the fact that parties to a contract have agreed that their contract should be governed by the law of a particular State is a relevant factor on applications of the present kind it is not, for the reasons given above, a very material consideration on the present application. Bleby J reached a similar conclusion in analogous circumstances in Cini v Pets Paradise Franchising (SA) Pty Ltd [15]
[15] [2008] SASC 287 at [15]; (2008) 102 SASR 177 at 185.
Next, counsel referred to the fact that the assets of the first defendant which are the subject of the plaintiff’s claim are located in Victoria. Although the evidence about the assets was somewhat scant and generalised, I am prepared to act on the basis that that is so. I also accept that the location of the assets in dispute does give the present proceedings a real connection with the State of Victoria.
However, counsel was unable to indicate how the location of the assets bore on the interests of justice to be considered on this application. In large part this was because of the paucity of evidence put before the Court about those assets. There was no identification of the assets or their number, let alone a description of their general kind.
Counsel did not suggest that any tracing order which the plaintiff may obtain may be able to be enforced more expeditiously because of Victorian substantive or procedural law. Nor did the defendants indicate how any dispute about the identification or tracing of assets which may be subject to the trustees’ lien would be facilitated by taking place in closer proximity to the place in which the assets are located.
Next, counsel referred to the fact that both Mr and Mrs Garra reside at Keilor East in Victoria. Mr Garra was previously a director of the plaintiff. Mrs Garra is the sole director and shareholder of Ourback Yard. It seems that both Mr and Mrs Garra manage the business conducted by Ourback Yard.
Although there was no direct evidence about this, I am prepared to proceed on the assumption, in favour of the defendants, that it may be necessary for both Mr and Mrs Garra to attend for at least part of the trial. If the trial takes places in this Court, that means that each will incur the expense of travelling to Adelaide and the inconvenience of being away from their own residence and the business of Ourback Yard. Counsel suggested that they would also suffer the additional inconvenience of having to instruct South Australian solicitors. I am not prepared to attach much significance to this last factor: the defendants have, since late 2008, retained both Victorian and South Australian solicitors in relation to the liquidation and these proceedings. It was not suggested that doing so has caused any particular inconvenience or significant additional expense. Further, given the relative ease of interstate communication, it is not clear that the defendants will not be able to obtain appropriate representation economically.[16]
[16] See in this regard the comments of Debelle J in Pegasus Leasing v Tieco (1993) 61 SASR 195 at 199.
I agree that the inconvenience to the defendants in having to litigate away from their home state is a relevant consideration. However, as has been pointed out on previous applications of the present kind, one litigant’s advantage is another litigant’s disadvantage. If the proceedings were transferred, it is the liquidator and those of his staff who have been involved for some two years in the winding up and investigations of the defendants’ conduct who will have to travel to Melbourne. They will then incur additional expense and the corresponding inconvenience.
It is difficult for the Court to assess the respective disadvantage that each party will suffer in this respect. Counsel for the defendants acknowledged that the defendants have not yet identified the evidence which will be necessary at the trial (let alone put evidence before this Court on the present application on that topic). This makes it very difficult to compare the inconvenience which the defendants may suffer if the proceedings remain in this Court with that which the plaintiff may suffer if the proceedings are transferred to the Supreme Court of Victoria.
Next, counsel submitted that the prospects of settlement of the litigation would be greater if the matter was transferred to the Supreme Court of Victoria. Counsel was unable to articulate this consideration with any specificity. I surmise that it may reflect strategic considerations: the disadvantages which the liquidator is likely to incur if the proceedings are transferred to Victoria may be reflected in the plaintiff’s attitude to settlement. I do not regard this as a particularly persuasive consideration.
Finally, the defendants submitted that the proceedings could be run more cheaply in Victoria than in this State. This seemed to be an a self-centred submission as it referred only to the costs likely to be incurred by the defendants. Of course, if the proceedings are conducted in Victoria, the defendants will be spared the expense of coming to Adelaide and there may be some saving of the expense in the retaining of solicitors. However, the Court is required to look at the matter as a whole. The savings to the defendants will be achieved at the expense of the plaintiff. It will be the liquidator, and not the defendants, who incur the additional expense if the proceedings are transferred.
The defendants did not point to any other feature concerning the conduct of litigation in the Supreme Court of Victoria which may indicate that the proceedings could be conducted more cheaply in that Court. Accordingly, I regard this as a neutral factor.
I accept that there are other factors suggesting a real and substantial connection between the defendants and Victoria. Ourback Yard was incorporated in Victoria; it has its registered office in Victoria; and it conducts its business in Melbourne. However, for the reasons already stated, the defendants did not indicate how, in relation to the conduct of the proceedings, these matters suggest that the interests of justice require their transfer to Melbourne.
There are other considerations. The liquidation of the plaintiff has been conducted in this State by an Adelaide based liquidator for some two years. There has been no suggestion that the conduct of the liquidation in this State rather than Victoria has been inappropriate. The evidence as to the action taken in the conduct of the liquidation is scant, but the liquidator has obtained at least some of the assets or funds of the plaintiff. The communications between the parties have been through Adelaide based solicitors. It is probable that the liquidator would have to instruct Melbourne solicitors if the proceedings are transferred, thereby incurring additional expenses in the liquidation. I was informed, from the bar table, that the liquidator does intend to call a number of South Australian based witnesses at the trial.
The Court is being asked to determine the present application on incomplete evidence. Each party could have put much more specific evidence before the Court. On the basis of the limited material upon which the Court is being asked to determine the application, I cannot say that the interests of justice indicate that these proceedings should be determined in the Supreme Court of Victoria.
Accordingly, I refuse the defendants’ application.
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