Gresham Property Investments Limited v Global Consulting Services Pty Limited
[2016] NSWSC 415
•7 April 2016
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New South Wales |
Case Name: | Gresham Property Investments Limited v Global Consulting Services Pty Limited |
Medium Neutral Citation: | [2016] NSWSC 415 |
Hearing Date(s): | 07/04/2016 |
Date of Orders: | 7 April 2016 |
Decision Date: | 7 April 2016 |
Jurisdiction: | Equity - Commercial List |
Before: | McDougall J |
Decision: | Dismiss application to cross-vest proceedings to Supreme Court of Victoria. |
Catchwords: | PROCEDURE – application to cross-vest proceedings to Supreme Court of Victoria – whether it is in the interests of justice to cross-vest – where competing considerations are evenly balanced – no evidence to suggest that Supreme Court of Victoria is more appropriate or natural forum – application denied |
Legislation Cited: | Jurisdiction of Courts (Cross-vesting) Act 1987 |
Cases Cited: | Bankinvest AG v Seabrook (1988) 14 NSWLR 711 |
Category: | Procedural and other rulings |
Parties: | Gresham Property Investments Limited (Plaintiff) |
Representation: | Counsel: |
File Number(s): | 2016/37916 |
JUDGMENT (EX TEMPORE – REVISED 7 APRIL 2016)
HIS HONOUR: I am concerned today with an application brought by the first and second defendants to transfer these proceedings to the Supreme Court of Victoria pursuant to s 5(2)(b)(iii) of the Jurisdiction of Courts (Cross-vesting) Act1987. That application is supported by the third and fourth defendants but is opposed by the plaintiff.
The transactions giving rise to the plaintiff's claim are complex. However, in essence, the position may be sufficiently stated as follows.
The plaintiff and the first and second defendants were both secured creditors of other entities and held securities over, among other things, real estate owned by the third and fourth defendants. That real estate is located at Coburg in the State of Victoria. The third and fourth defendants are both under external administration. Receivers and managers were appointed to them. Those receivers and managers sold the real estate in question. After applying the proceeds of sale to costs, expenses and the like, and to discharge the debts of senior creditors, there is left approximately $3 million over which the plaintiff and the first and second defendants are fighting.
The net or balance of proceeds of sale are held by or on behalf of the receivers and managers of the third and fourth defendants. Those receivers and managers are located, and the funds are held, in Victoria.
So far as can be gleaned from the plaintiff's Commercial List Statement (and I do not mean to be pejorative in using the word "gleaned"), the real dispute is one between the plaintiff and the first and second defendants. The third and fourth defendants are necessary parties. It is obvious that they must be bound by whatever the final resolution of the disputes between the plaintiff and the first and second defendants may be. However, as it seems to me at present, the third and fourth defendants have no independent interest in the money in question, apart from securing payment of their proper fees and costs including in relation to these proceedings.
At present, as it seems to me, there is no reason for the third and fourth defendants to take any active part in the proceedings. No allegation is made that those defendants, or their receivers and managers, acted in any way improperly in relation to the sale of the properties in question or in relation to their distribution to date of the net proceeds of sale.
One of the things the plaintiff does say is that the third and fourth defendants or their receivers have allocated or may allocate the proceeds of sale in a way which is inappropriate as between the plaintiff and the first and second defendants. However, as I see it at present, that is an issue to be fought out between the plaintiff and the first and second defendants, and again one in which the third and fourth defendants have no real or practical interest.
In short, as the matter stands at present, I have some difficulty in seeing why the third and fourth defendants need do anything other than submit, save as to costs, to whatever order the Court may make as to the respective rights as between the plaintiff and the first and second defendants.
I have undertaken that excursus to show why, in my view, the real question on the cross-vesting application is one to be decided as between the plaintiff and the first and second defendants. I do accept of course that even if what I have said as to the position of the third and fourth defendants is correct, their interests cannot be disregarded. However, to the extent that they raise questions of the location of their legal advisers, and costs to be incurred if the proceedings are heard here rather than in the Supreme Court of Victoria, those considerations are likely to be, in a practical if not a conceptual sense, reasonably minimal in weight.
The power under s 5(2)(b)(iii) of the Cross-vesting Act (as I shall call it) is one to transfer the proceedings in this Court to (in this case) the Supreme Court of Victoria if, in the view of this Court, it is in the interests of justice that the proceedings be so transferred, so that they may be determined by the Supreme Court of Victoria.
The approach that the Court takes to such applications was described by Gleeson CJ, McHugh and Heydon JJ in BHP Billiton Limited v Schultz (2004) 221 CLR 400 at [18], [19]. Although their Honours dissented in the outcome of that appeal, their statement of the approach to be taken has never, so far as I am aware, been questioned. On the contrary, it is frequently cited, both in argument and by courts hearing applications under the Cross-vesting Act, as descriptive of the proper approach.
Their Honours referred at [18] to the identification of "connecting factors", including matters of convenience and expense, as bearing on the consideration of the "natural forum" for the hearing of the case. At [19], their Honours considered the way in which the Court should assess the balancing of the connecting factors, in cases where (as is usual) there are connecting factors that tend either way.
I set out those paragraphs of their Honours reasons and that will be done in the revised version of these reasons:
[18] There is nothing unusual, either in the state or the federal judicature, about actions between residents of different Australian law areas. Federal diversity jurisdiction is an obvious example. Actions in New South Wales courts are commonly brought by residents of other states, especially when the residence or principal place of business of the defendant is New South Wales. Reference is sometimes made to one forum or another being the “natural forum”. Such a description is usually based upon a consideration of “connecting factors”, described by Lord Goff in Spiliada as including matters of convenience and expense, such as availability of witnesses, the places where the parties respectively reside or carry on business, and the law governing the relevant transaction. Lord Templeman described such factors as “legion”, and said that it was difficult to find clear guidance as to how they are to be weighed in a particular case. Thus, New South Wales might well be the “natural forum” for an action for damages brought by a passenger in a motor vehicle against the driver if they were both residents of New South Wales, even though the injury resulted from a collision that occurred on the other side of the Queensland or Victorian border.
[19] In many cases, there will be such a preponderance of connecting factors with one forum that it can readily be identified as the most appropriate, or natural, forum. In other cases, there might be significant connecting factors with each of two different forums. Some of the factors might cancel each other out. If the action is between two individuals, and the plaintiff resides in one law area and the defendant in another, there may be no reason to treat the residence of either party as determinative, although, as already noted, it will ordinarily be the residence of the defendant that is important to establish jurisdiction. Weighing considerations of cost, expense, and convenience, even when they conflict, is a familiar aspect of the kind of case management involved in many cross-vesting applications.
Their Honours referred with approval to the decision of the Court of Appeal in this State in Bankinvest AG v Seabrook (1988) 14 NSWLR 711. In that case, Street CJ, although agreeing with Rogers AJA on the outcome of the application, gave brief separate reasons in which, among other things, he referred at 714 to the Cross-vesting Act as calling for a "nuts and bolts" management decision as to which court, in the interests of justice, is the more appropriate one to hear and determine the substantive dispute. The approach recommended by his Honour has often been followed in considering applications of this nature.
The plaintiff's legal advisers are located in Sydney. They have briefed senior counsel whose Chambers are in Sydney. The plaintiff itself has its principal place of business in Sydney. Its documents are located in Sydney. To the extent that it calls testimonial evidence, it says that the relevant witness will be a gentleman who is located in Sydney.
The first and second defendants have their principal place of business in Melbourne. Their solicitors are located in Melbourne. They have, at least for the purpose of advice on earlier occasions, briefed senior counsel whose practice is in Melbourne. To the extent that they may call witnesses, it is likely that those witnesses would come from Melbourne. Their documents are located in Melbourne.
The position of the third and fourth defendants is essentially the same as that of the first and second defendants, as I have briefly summarised it.
As I have said already, the funds are located in the State of Victoria and the real estate that was the source of those funds is located in that State.
The plaintiff's claim is based upon an "Intercreditor Deed" which, as restated and amended, appears to be dated 30 May 2014. Clause 19.9 of that deed, on which the defendants place reliance, provides that it is governed by the laws of “Victoria, Australia” (seemingly, both) and provides for an irrevocable and unconditional submission to the non exclusive jurisdiction of the courts of Victoria. That is a matter of significance because, as Mr Bulley of counsel (who appeared for the first and second defendants) submitted, it reflects a commercial choice made by the parties to the Intercreditor Deed as to the legal system by which their rights should be defined and evaluated.
However, Mr Bulley did not submit that there was any peculiar or unique feature of the law of Victoria that was relevant to the resolution of this dispute. He accepted, I think correctly, that the underlying principles as to priorities, contribution, subrogation, marshalling, or whatever they may be, are effectively common to the States and Territories of Australia. Mr Bulley was not so bold as to submit that this Court was incapable of dealing with disputes involving the consideration of those principles.
One of the matters that seems to me to be of practical significance is the fact that, in apparent reliance upon or obedience to UCPR r 44.5, the application for cross-vesting was made before the defendants filed their Commercial List Responses and any cross-claims. Rule 44.5 requires that a party who intends to seek the cross-vesting of any proceedings commenced in this Court should make its application "on or as soon as practicable after commencement of the proceedings". Read literally, that is a somewhat unfortunate provision. If it is obeyed literally, and the application is made as soon as the proceedings are commenced, it may be very difficult for the Court to make an informed judgment of the real issues that are likely to be agitated, and hence to make an assessment of competing considerations of expense, convenience and the like.
In this case, the only clue as to the issues is what comes from the plaintiff's Commercial List Statement. That Commercial List Statement really says no more than that the issues are as to priorities between the plaintiff on the one hand and the first and second defendants on the other.
The evidence for the first and second defendants on the application contemplated that they might call witnesses, even if there were no cross-claim. I have some difficulty in understanding that. Taking into account the way the plaintiff's Commercial List Statement is framed, it seems to me that the evidence will be substantially, if not entirely, documentary. The real question is as to the proper construction and operation of the relevant provisions of the Intercreditor Deed, in the events that have happened.
As matters stand at present, it does not seem to me that there is likely to be any dispute whatsoever as to the events that have happened. They are matters of objective history. Again, to the extent that they need to be proved, they are matters that are likely to be proved by documentary evidence.
The affidavit of the first and second defendants' solicitor postulated that there might be a cross-claim based on representations said to have been made before the Intercreditor Deed was executed and delivered, presumably said to be representations that in some way were misleading or deceptive and that in some way induced the first and second defendants into the Intercreditor Deed in the form (amended and restated) that it now bears. There is absolutely no indication given as to what those representations might have been; who might have made them; how or why they might have been misleading or deceptive; and how or why they might have had the relevant inducing effect on the minds of the first and second defendants.
Given that the Deed was made almost two years ago, and given that these proceedings have now been in force for more than two months, one might have expected that some degree of insight could have been given which would enable the Court to evaluate the strength, or force, of that suggestion. In the absence of any real indication of what that case might be, I am not persuaded that the suggestion in question is anything more than speculation.
The outcome, as it seems to me, is that leaving aside cl 19.9 of the Deed, the competing considerations tend are evenly balanced as between the active or substantive parties: that is to say, the plaintiff and the first and second defendants. If the proceedings are heard and determined in this Court, there will be inconvenience and expense occasioned to the first and second defendants. If they are heard and determined in the Supreme Court of Victoria, there will be inconvenience and expense occasioned to the plaintiff.
The extent of that inconvenience and expense, either way, is a matter of conjecture. It is common ground that the legal representatives are (at least) national law firms. Each has offices in this city and in the city of Melbourne. The Court cannot but know that lawyers from Melbourne travel all the time to this Court to conduct cases, and likewise that lawyers from Sydney travel all the time to Melbourne to conduct cases.
To the extent that the documents in question are electronic, they can be transmitted by the magic of the internet across state borders without any inconvenience or expense. To the extent that they are hard copy documents, that may not be so. But again, the Court cannot but be aware that, even in the case of hard copy documents, common practice is for them to be imaged, precisely so that they can be transferred electronically.
Because I cannot at present see any issue that is likely to require significant testimonial evidence, I do not this think that there is likely to be any additional factor of complication or inconvenience or expense arising from the location of potential witnesses. In saying that I discount, for the reasons given, the suggestion that there might be a cross-claim relying on misrepresentation. I should add that it was also suggested in the course of argument that there might be a need for valuation evidence. In circumstances where the plaintiff is not attacking the propriety of the exercises of the power of sale, that speculation seems to me to be entirely unconvincing.
So far, I have talked of the balancing exercise as between the active parties: the plaintiff and the first and second defendant. I have not overlooked (nor can I overlook) the position of the third and fourth defendants. However, for the reasons given earlier, I am by no means persuaded that such participation as they should properly take is likely to involve them in any real inconvenience or expense whatsoever if the proceedings are heard and determined in this Court. In short, it does not seem to me that a consideration of their position, viewed against the objective reality of the limited nature of their interest in the proceedings, adds one way or the other to the balance.
That really leaves no more than cl 19.9 of the Deed. Whilst I accept that the choice of the parties, embodied in a solemn contract made by deed, must always be given respect, it is nonetheless the fact that the very choice they made contemplated that the courts of jurisdictions other than the State of Victoria might hear and determine disputes arising out of, or governed by the operation of, the Deed. Thus, it does not seem to me that the non-exclusive submission to the jurisdiction of the courts of Victoria adds in any real way to the balancing exercise. And for the reasons I have given, the selection of the law of Victoria as the governing law does is not of any present significance.
When one summarises the matter bearing in mind the realities of the litigation as they can be perceived at present, there simply does not seem to me to be any such preponderance of connecting factors that it can be said that one forum rather than the other is the more appropriate or natural forum for the resolution of the dispute. Thus, weighing those factors, I am completely unpersuaded that the evidence justifies the conclusion that the State of Victoria is the more appropriate or natural forum for the resolution of the dispute.
That conclusion having been reached, there is no residual reason as I understand it to suggest that the interests of justice require that the proceedings should be transferred from this Court to the Supreme Court of Victoria. It follows that the first and second defendants' notice of motion filed on 25 February 2016 should be dismissed with costs and I so order.
Counsel addressed on costs
Mr Bulley of counsel says that there should be no present order for costs against his client. He referred to what he said was the command of UCPR r 44.5 that the matter be dealt with at this stage. I do not agree that that is the proper reading of r 44.5. It expressly contemplates that the application may be made "as soon as practicable after" the commencement of proceedings. In my view, those words suggest that where some delay is necessary to enable the issues to be entitled and defined (by quasi-pleadings or whatever other method may be required), then that is when the application should be brought.
More generally, in circumstances where the first and second defendants had sought costs in the event that their application succeeded, there seems to me to be a clear identification of the relevant "event" for the purposes of UCPR r 42.1, as the outcome of the notice of motion. Since that event was decided in favour of the plaintiff, I see no reason why the order that I indicated earlier should not be made.
I should perhaps have added to it that I would make no order as to the costs of the third and fourth defendants. I make that order also.
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