In the Matter of the Jurisdiction of Courts (Cross-vesting) Act 1987 Kevin John Munro v Excel Finance Corporation Ltd (Receiver and Manager Appointed) No. 4161 Judgment No. SCGRG 93/1461 Number of Pages 4 Practice

[1993] SASC 4161

COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA OLSSON J

CWDS
Practice - Cross-vesting - action commenced in District Court claiming moneys owed under loan agreement - agreement entered into by parties as part of a wider transaction - proceedings in Queensland Supreme Court 'related to' District Court action - same legal issues and factual circumstances involved - claim in Queensland the major litigation - consideration of relevant factors - application granted.
Jurisdiction of Courts (Cross-Vesting) Acts 5(2). Pegasus Leasing Ltd v Tieco International (Australia) Pty Ltd and Ors (Debelle J, 14 July 1993, unreported); Skaventsos and Anor v Tirimon and Anor (1991) 162 LSJS 53; Skaventsos and Anor v Tirimon and Anor (No 2) (Mullighan J, 16 July 1993, unreported) and Mattock v Mattock and Anor (1989) FLC 92-038, considered.

HRNG ADELAIDE, 1 September 1993 #DATE 9:9:1993
Counsel for appellant:     Mr S Apps
Solicitors for appellant:    Playfords
Counsel for respondent:     Mr G Coppola
Solicitors for respondent: Kelly and Co

ORDER
Orders in terms of both paragraphs 1 and 2 of the summons

JUDGE1 OLSSON J In these proceedings the present applicant ("Munro") seeks orders against Excel Finance Corporation Ltd (Receiver and Manager Appointed) ("Excel") for a transfer of Action No 897 of 1992 in the District Court ("the subject action") to this court and that, upon such transfer, it be cross-vested to the Supreme Court of Queensland. 2. The subject action was initiated by Excel, as plaintiff, against Munro, as defendant, by summons issued on 7 April 1992. By that summons Excel claimed payment of a sum of $40,000 plus interest, averred to be payable to it pursuant to the provisions of a loan agreement dated 27 June 1990 entered into between the parties ("the loan agreement"). Munro duly appeared to the summons and, on 9 June 1992, filed a defence to it. In that defence he raised a number of issues, one of which was that he was entitled to avoid the loan agreement because it was part and parcel of a wider transaction or scheme whereby a "prescribed interest" within the meaning (inter alia) of the Companies (South Australia) Code ("the Code") had been issued to and acquired by him in contravention of the Code. It was pleaded that Excel was a promoter of the scheme whereby Munro acquired the prescribed interest. 3. It is common ground that the loan agreement was entered into between the parties to facilitate the entry of Munro into a wider transaction which related to the formation which became known as the "Chelandry Bloodstock Partnership Limited" ("Chelandry"), the proposed undertaking of which was to invest in the acquisition and breeding of high quality racehorses. 4. There were said to be certain taxation benefits which could be attracted by the venture. 5. I apprehend that there will be a factual dispute between the parties as to the extent to which, if at all, it can properly be said that Excel was a "promoter" or associated with any "promoter" of Chelandry, in relation to which various parties, including Munro, were solicited to take up fractional interests or shares. The total capital of Chelandry was, it is said, in excess of $2 million. 6. It is not disputed that the consummation of the Chelandry venture involved Munro in executing three separate documents, namely:-
     (1) The relevant Chelandry partnership deed.
     (2) A lease agreement, pursuant to the terms of which Excel
    was to acquire horses for the use of Chelandry and then lease
    them to Chelandry.
     (3) The loan agreement, pursuant to which $40,000 was advanced
    to Munro to enable him to take up his share in Chelandry. It is
    asserted by Munro that this loan resulted by a specific offer of
    finance made to him by Excel as "an integral part" of the
    overall scheme into which he entered. The subject action was,
    in accordance with the usual procedures of the District Court,
    duly listed for trial commencing on 20 July 1993. However, it
    was not reached on that day because of a shortage of judges
    available to hear it. In the normal course it would again come
    up for trial within the next few months. 7. It should be mentioned that, despite the conduct of the usual conciliation and pre trial conferences in the subject action months prior to the trial date, it was not until the day prior to that date that a belated application was made to a District Court Judge to transfer the subject action to this court, as a prelude to an application to cross-vest it to Queensland. 8. The present application was filed in this Court on 10 August 1993. 9. Against that background it is necessary to focus attention upon certain litigation which has also been initiated in Queensland. 10. On 11 July 1991, Jancolt Pty Ltd ("Jancolt") (which was also a party to the Chelandry partnership agreement) issued a writ in the Supreme Court of Queensland against Excel. In it Jancolt sought declarations that:- (1) Chelandry was a limited partnership, registered as such in accordance with the Mercantile Acts, 1867-1869 (Qld); and (2) The special partners in it are not responsible for any debt of the partnership except to the extent of their contribution of the common stock of specific sums of money, as capital of such partnership. In those proceedings Excel filed a counterclaim against all partners in Chelandry, including Munro, in the sum of $1,822,146.56 for unpaid rentals and interest, asserted to be payable under the lease agreement earlier referred to. 11. I digress at this stage to mention that Excel had earlier instituted proceedings in this court against the partners, but elected to discontinue them in favour of promoting the counterclaim in the Queensland action. 12. In his defence to the counterclaim Munro specifically pleaded that:-
     (a) the respective interests of the partners in Chelandry were
    "prescribed interests" within the meaning of the uniform
    Companies Code;
     (b) the acquisition by him of his interest involved an issue
    or offer to the public of such an interest for subscription or
    purchase or an invitation to the public to subscribe for or
    purchase such an interest within the meaning of section 169 of
    the Code;
     (c) at the relevant time Excel had not obtained an approval to
    the deed, as required by section 165 of the Code;
     (d) the execution by Munro of the lease agreement and the
    relevant partnership deeds were integral to the overall scheme
    of entry into the partnership;
     (e) by virtue of non compliance with the statute (inter alia)
    the lease agreement was invalid and unenforceable. It is not
    entirely clear as to what stage the action before the Supreme
    Court of Queensland has progressed. However, it is said that it
    could be at least two years or more before it is likely to come
    to trial. 13. On the present application Munro contends that it is inappropriate that the subject action proceed to trial before the District Court, both because it involves issues arising under the precursor of the Corporations Law which, in conformity with present practices, ought to be dealt with in this court and also because it ought to be cross vested to the Supreme Court of Queensland - so that the common issue arising as to the applicability of the uniform Code to the overall transactions in question can be determined by the one trial judge. 14. It must be said that the present application is belated indeed, despite the explanations proferred by counsel for Munro. That factor, coupled with the important consideration that the subject action initially quite properly and regularly invoked the jurisdiction of the District Court (as to which the decision of Debelle J in Pegasus Leasing Ltd v Tieco International (Australia) Pty Ltd and Ors (Debelle J, 14 July 1993, unreported) is pertinent) would normally constitute powerful reasons to decline the application for cross vesting, particularly as it is obvious that any cross vesting must have the practical effect of infusing a considerable delay factor in bringing this matter to trial. 15. However, as against those considerations, it must, in my view, be accepted that, in the sense in which that expression is employed in section 5(2) of the Jurisdiction of Courts (Cross-Vesting) Act 1987, the subject action "is related to" the action now pending in Queensland. The meaning of that expression was discussed by me in Skaventzos and Anor v Tirimon and Anor
(1991) 162 LSJS 53 and by Mullighan J in Skaventzos and Anor v Tirimon and Anor (No 2) (Mullighan J, 16 July 1993, unreported). 16. In a very direct sense each action is ancillary or complementary to the other. The relevant litigation involves both parties in each instance and the resolution of each action necessarily involves an identical core legal issue. There is a very real danger that, if the two actions are heard by different judges, there might be divergent conclusions reached as to fact and law in relation to the same factual circumstances. This could give rise to most undesirable, inconsistent end results in a manner which would act to the detriment of the parties and tend to bring the administration of the law into disrepute. Such circumstances provide a compelling basis for a cross-vesting, such as that which occurred in Mattock v Mattock and Anor (1989) FLC 92-038. 17. There can be no doubt that the major litigation is that which is in train in Queensland; and that the probable balance of convenience, in terms of witness attendance lies in attendance, in Brisbane. Moreover, there is a serious danger that, if the subject action is first heard and determined in Adelaide it will have the undesirable effect of a relatively small tail wagging a comparatively large dog. The monetary issue here involved is modest by way of contrast with the much more substantial issues in the other proceedings. 18. That being so I am constrained to make orders in terms of both paragraphs 1 and 2 of the summons in this matter. 19. As to the question of costs the merits all lie in the one direction. The belated application has embarrassed Excel and denied it an early trial. Further, I do not doubt that substantial costs have been thrown away in relation to the getting up of the Excel case in Adelaide. There will be an order that Munro pay to Excel, in any event, the costs of and incidental to the present application and which may have been thrown away in getting up the case in Adelaide, to be taxed. I grant a certificate for counsel in relation to the application.