Jamieson v Madden

[2003] NSWSC 639

CITATION:	Jamieson & Ors v Madden & Ors [2003] NSWSC 639
HEARING DATE(S):	7 July 2003
JUDGMENT DATE:	18 July 2003
JURISDICTION:	Equity Division
JUDGMENT OF:	Windeyer J at 1
DECISION:	Leave to proceed granted.
CATCHWORDS:	PRACTICE AND PROCEDURE - inconvenient forum - A in Canada transferred money to B a partner in Canadian law firm, B transferred money to London bank of London office of Sydney law firm C, of which D then London partner but now resident in New South Wales - A alleges moneys misappropriated - sues B in Canada and partners of C in New South Wales - partners of C bring action in New South Wales against E, a partner of B - claiming that if they liable to A then B bound to indemnify them or contribute to any judgment in favour of A and that E as partner of B vicariously liable for his conduct - Motion for leave to proceed - counter motion to dismiss New South Wales proceedings on ground inconvenient forum - leave granted
LEGISLATION CITED:	Supreme Court Rules Pt10 r1A
CASES CITED:	Henry v Henry (1996) 185 CLR 571 Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197 Regie National des Usines Renault SA v Zhang (2002) 76 ALJR 551 Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460 Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 513
PARTIES :	Hugh Hunter Jamieson and 63 others (Plaintiffs) Patrick Madden (First Defendant) Stanley Schumacher, Harry Gough and Ron Pedersen (Second Defendants) William Lukan and Gordon Dwayne Taylor (Third defendants)
FILE NUMBER(S):	SC 1264 of 2001
COUNSEL:	Mr R Weber SC with him Dr A S Bell (Plaintiffs) Mr N Nutley SC with him Mr J Clarke (Second Defendants)
SOLICITORS:	Minter Ellison (Plaintiffs) Clayton Utz (Second Defendants)

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WINDEYER J

FRIDAY 18 JULY 2003

1264/01 HUGH HUNTER JAMIESON & ORS V PATRICK MADDEN & ORS

JUDGMENT

1 This judgment deals with two notices of motion under which the question is whether leave should be given to proceed against foreign defendants.

Facts as pleaded in the amended statement of claim

2 The plaintiffs are the persons who were at the relevant dates partners in the firm of Messrs Allen Allen & Hemsley (Allens).

3 Mr Adrian Powles was a partner and in charge of the London office. Mr Patrick Madden (Madden) was a Canadian lawyer and a partner in the Alberta law firm of Messrs Schumacher, Madden & Gough.

4 A Canadian company, Lutaen Resources Limited (Lutaen) the directors of which were or included William Lukan (Lukan) and Gordan Dwayne Taylor (Taylor), in 1990 paid the sum of US$1 million to Madden for investment. This sum was sent by direction of Mr Madden from a bank account in Canada to an account of Allens with Westpac Banking Corporation in London and retained in United States dollars. Between 20 December 1990 and 16 July 1991 all those funds with the exception of US$27,604 were paid out of the Westpac account on authority of Powles at the direction of Madden, but the payments were not made for intended investments but for the benefit of Madden or his associates.

5 Lutaen and Lukan have commenced proceedings No 4505 of 1996 in the Equity Division of this Court against Allens claiming damages or equitable compensation for the loss of the moneys plus interest alleging breach of contract, breach of fiduciary duty and breach of trust.

6 Allens in this action by amended statement of claim claim against Madden, Gough, Lukan and Taylor under various heads indemnity against, or for contribution to any liability that Allens are found to have had to Lutaen or Lukan in the Lukan proceedings. By agreement between the parties the solicitors for Allens have notified the court that if leave is given to continue the proceedings then the claims against Madden and Taylor will be discontinued. Neither of these men has been served.

Procedural matters

7 Messrs Gough and Lukan both reside outside Australia. Although there is some doubt about the method of service on Gough, no point is taken on that. He is clearly aware of the action and the claim against him. As service was effected outside Australia Allens seek leave to proceed pursuant to Pt10 r2 against Gough and Lukan, and that the proceedings be heard with the Lukan proceedings, the evidence in one being evidence in the other. The notice of motion filed on 11 September 2002 seeks leave to proceed against Gough, Peterson and Lukan. By the amended statement of claim Peterson is removed as a defendant as is Schumacher. Notice has been given that if leave to proceed is granted the claims against Madden and Taylor will be discontinued. As I have said they have not been served.

8 By notice of motion dated 17 October 2002 the second defendants – which will now be Mr Gough only – seek an order pursuant to Pt 10 r6A or Pt 11 r8 that the court decline to exercise jurisdiction.

Further facts

9 The claim against Gough is that he was a partner of Madden in a firm of solicitors and that Madden in giving instructions for the payments out of the Westpac account did so representing to Powles that he had such authority to authorise the payments when he did not have authority, and that these representations were false or negligent and that Allens have suffered or will suffer loss if liable to Lutaen or Lukan in those proceedings. In addition it is claimed that Madden owed to Lutaen and Lukan as lawyer, agent, trustee and director a duty of care and fiduciary duty and as a director of Lutaen a duty of care and fiduciary duty to that company and that acting without authority and in breach of duty caused the loss of funds to Lutaen so that if Allens are liable to Lutaen and Lukan in tort Madden is a joint tortfeasor liable to contribution, and if Allens are liable in equity then Allens are in those circumstances entitled to contribution from Madden.

10 It is claimed that any liability of Madden arose out of his conduct as a lawyer, in partnership with Gough, in the ordinary or apparent course of partnership business so that Gough is vicariously liable for the conduct of Madden in breach of his duties.

11 The claim against Lukan is that, in breach of his duty to Lutaen namely a common law duty to act with reasonable care skill and diligence, and his fiduciary and other equitable duties to that company, he was in breach of those duties in failing to put in place a system of safeguards to ensure that Madden dealt with the funds of Lutaen for the benefit of Lutaen and that therefore if Allens are liable to Lutaen in tort then Lukan is also liable and Allens are entitled to contribution and if Allens have a liability in equity then Lukan has a coordinate liability so that Allens are entitled to contribution from him.

12 The whereabouts of Madden is unknown but it seems that he is not in Australia. Mr Gough is a resident of Canada. Mr Lukan is also a Canadian resident but he will have to be in Sydney for the Lukan proceedings.

13 There are proceedings in Canada in the Court of Queens Bench of the Province of Ontario between Lukan and Mr and Mrs Madden. Gough was but is not now a party to those proceedings. The proceedings are a claim against Madden to recover some but not all of the moneys deposited into the Westpac account, it being made clear that further claims in respect of other moneys withdrawn from that account may be made. A claim is made in the nature of a tracing claim against Mrs Madden in that it is alleged that US$240,000 of the sum was withdrawn to pay for a residence, the title to which is now in her name.

14 There is some suggestion that the Canadian action was settled, but this is not clearly established and it is obviously proceeding at the present time on the basis that there was no settlement.

15 The pleaded claim against Madden in the Canadian proceedings is that when the $1 million was advanced Madden was acting in his capacity as a lawyer retained by the plaintiff, Lukan. That may or may not have been for the purpose of bringing in his partners. Whether that is so or not the fact is that the Canadian proceedings have been discontinued against the partners. The defence of Madden on this aspect is that he was not acting in respect of the US$1 million as a barrister or solicitor for Lukan but as a business partner; that the funds were dispersed with consent; that a joint venture existed between Lutaen and Lislux Nominees Limited to form Lyn-Par Limited; that Madden’s personal corporate vehicle was engaged to provide legal services to that company for an agreed fee of $12,000 per month plus some additional entitlements including a loan of $500,000 to assist in the purchase of a residence and that the expenditure of the funds was legitimate. There is hearsay evidence admitted on the motions before me that the question of whether or not Madden was acting as solicitor for Lukan and Lutaen is still a live issue in the Canadian proceedings. It is not altogether clear why that would be so but on this application I must accept that to be the position. It is said that the Alberta action is ready for hearing and that the hearing is likely to take place in 2004.

Jurisdiction

16 It was not argued by counsel for Gough that service of the originating process was not authorised pursuant to Pt10 r1A of the Court Rules. It seems to me that Lukan has submitted to the jurisdiction of the court by bringing his own action in the Lukan proceedings. There is no real reason why the present proceedings could not have been brought as a cross claim in those proceedings, a cross claim being an originating process for the purpose of Pt10 r1A of the Rules. It would be technical in the extreme to say that more by way of submission was required to allow this action to be brought against Gough, Lukan having submitted by way of his earlier claim. That would bring the claim within sub-rule (c)(i). In addition Lukan has accepted that leave to proceed can be granted provided the notice of motion by Mr Gough fails, which brings him clearly within sub-rule (c)(h). Finally the proceedings are for contribution or indemnity in respect of a liability enforceable by proceedings in this Court which brings the proceedings within sub-rule (f). None of this was seriously contested. Counsel for Allens also said that the proceedings fell within sub-rule (e). I have doubts about that but in the circumstances there is no need to discuss it any further.

Discretion and the question of inappropriate forum

17 The court will not grant leave to proceed if the forum is inappropriate and in the opposite sense may make an order setting aside the service if the court is an inappropriate forum for the trial of the proceedings.

18 On an ex parte application for leave to proceed in the absence of appearance in this action I think it clear that the court would not have refused leave. This suggests that the substantive application that is made by Gough to set aside or stay the originating process pursuant to Pt 10 r6A on the ground:

10.6A(2)(b): that this Court is an inappropriate forum for the trial of the proceedings.

That being so the onus must be on the defendant but it does not seem to me that onus will be a deciding factor. Either this Court is an inappropriate forum or it is not.

19 The wording of Pt20 r6A(2) was considered by the High Court in Regie National des Usines Renault SA v Zhang (2002) 76 ALJR 551. The following passage appears in the majority judgment at p556:

22. The Rules relate to a judicial discretion to decline to exercise jurisdiction. Such a discretion is to be exercised in accordance with principle. The principles to be applied are encompassed within the doctrine developed by judicial decision. They are not extraneous to it.

23. The apparent objective of the inclusion in the Rules of provisions specifically authorising orders declining the exercise of jurisdiction on the ground that the Supreme Court is an inappropriate forum was to give explicit recognition to the judge-made doctrine in the procedures established by the Rules. It is by reference to authoritative Australian decisions from time to time expounding that doctrine that there is to be found the meaning of the expression in par (b) of Pt 10, r 6A(2):

"that this Court is an inappropriate forum for the trial of the proceedings."


"Inappropriate forum"?

24. The expression "inappropriate forum" in par (b) of Pt 10, r 6A(2) is less emphatic than the expression "clearly inappropriate forum", the latter being the term adopted in Voth to determine whether an Australian court should decline to exercise its jurisdiction. The formulation in Voth , as Spigelman CJ pointed out in James Hardie Industries Pty Ltd v Grigor , was adopted in preference to the "clearly more appropriate forum" test favoured in the United Kingdom. Thus, it should at once be noted that a court is not an inappropriate forum merely because another is more appropriate.

25. Because a court's power to stay proceedings is an aspect of its inherent or implied power to prevent its own processes being used to bring about injustice, the same concepts and considerations necessarily inform the test of "inappropriate forum" in par (b) of Pt 10, r 6A(2) as inform the "clearly inappropriate forum" test adopted in Voth . And because the ultimate consideration is the prevention of injustice, they inform it in the same way. Thus, it is appropriate to note what was said by Dawson, Gaudron, McHugh and Gummow JJ in Henry v Henry . Their Honours said:

"In [ Voth ], this Court confirmed its rejection, in [ Oceanic Sun ], of the forum non conveniens principle as stated by the House of Lords in Spiliada Maritime Corporation v Cansulex Ltd . The Spiliada principle allows that a court may stay proceedings which are pending before it if that court is not the natural forum and there is another available forum which is clearly or distinctly more appropriate. The result is that, in the United Kingdom, a stay will be granted in favour of a clearly more appropriate forum or, which is much the same thing in practice, the natural forum that being the forum 'with which the action [has] the most real and substantial connection'. ...

In Voth , this Court adopted for Australia the test propounded by Deane J in Oceanic Sun , namely, that a stay should be granted if the local court is a clearly inappropriate forum, which will be the case if continuation of the proceedings in that court would be oppressive, in the sense of 'seriously and unfairly burdensome, prejudicial or damaging', or, vexatious, in the sense of 'productive of serious and unjustified trouble and harassment'. It was also held in Voth that, in determining whether the local court is a clearly inappropriate forum, 'the discussion by Lord Goff in Spiliada of relevant "connecting factors" and "a legitimate personal or juridical advantage" provides valuable assistance. In this last regard, Lord Goff of Chieveley expressed the view that legitimate personal or juridical advantage is a relevant but not decisive consideration, the fundamental question being 'where the case may be tried "suitably for the interests of all the parties and for the ends of justice".

20 Insofar as a reading of these passages might require the words “inappropriate forum” to be read as meaning “clearly inappropriate forum” there is strong criticism and dissent from that view by Kirby J commencing at para 135 on page 557. I am of course bound by the majority decision though I would have thought the reasoning of Kirby J persuasive. But having said that I do not think this matter is determined by whether or not the word “clearly” is placed before “inappropriate”.

21 In Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 513; Henry v Henry (1996) 185 CLR 571 and Zhang the judgment of Deane J in Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197 at 247 has been accepted as setting out the correct principles on which the court should determine these matters. I will not set out that well known passage partly because it is well known and partly because I subscribe to the view of Lord Templeton in these matters: see Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460 at 464.

22 Counsel for Gough put forward a number of matters and facts in support of the order for stay or dismissal. These include: (a) that the disputed transactions took place in London and that Powles was resident in London at the time and Madden in Alberta (or perhaps in London); (b) that the claim for contribution might depend upon the law of England or of Alberta; (c) that witnesses would be required to come to Sydney from Canada: these potential witnesses were named as Lukan, Gough, Schumacher, Peterson and Madden; (d) that Powles is the only connecting factor with this State.

23 I deal with these matters first. None, nor more than one, would I consider make it inappropriate to try this action in this State. The place of the transactions is not important, the bank documents would be as readily obtained for a trial in Sydney as for a trial in Canada. No one is suggesting a trial in England. The foreign contribution legislation, if applicable, is not complicated and not unlike New South Wales legislation, the United Kingdom legislation having wider reach. Powles is resident in New South Wales. Of the Canadian witnesses Lukan and any necessary Lutaen witnesses will need to come to Sydney for the Lukan proceedings; it is accepted that Schumacher and Peterson were not partners of Madden at the relevant times and as they are no longer sued as defendants it seems unlikely that they would be called. Mr Madden may be a witness for Gough and if so then he and Gough would probably be required to come to Sydney for the hearing, as it is possible that video evidence would not be satisfactory. Thus it seems that if proceedings were commenced in Alberta Powles would be required to go to Alberta and if these proceedings continue here then Gough and perhaps Madden will be required to come to Sydney. However, these matters cannot be determined by counting up witnesses although the count must be taken into consideration: See Voth and Spiliada. In this case it would not justify a stay.

24 The strongest ground put forward for a stay is that it would be vexatious and oppressive to proceed to a hearing in New South Wales because the Alberta action of Lukan against Madden deals with one of the issues which will need to be decided in the local proceedings, namely whether or not Madden in receiving the money from Lukan was acting as a solicitor and member of the firm of which Gough was a partner or whether he received the moneys in some other capacity as he seems to claim by his defence in the Alberta action. In considering this matter it is necessary to remember: (a) Gough is not a party to the Alberta proceedings and will not be bound by any decision in those proceedings; (b) the Allens partners are not party to those proceedings and in the same way will not be bound by any judgment in those proceedings; (c) no leave is sought to proceed against Madden. He has not been served. The court is proceeding on the basis of a letter which it was agreed could be forwarded to my associate under which advice was given that the proceedings here will not be pursued against Madden and Taylor - in other words it is proposed to discontinue against those persons neither of whom have been served; (d) the Alberta proceedings will not necessarily be decided by the determination of whether Madden received the moneys in the course of his legal practice. If he received the moneys not as a lawyer but as an agent and dealt with the moneys contrary to the terms of the agency he would be liable in any event; (e) if the Lukan proceedings fail then this action must fail in which event Gough will be entitled to his costs; (f) there is some suggestion that the Alberta proceedings have been settled by agreement in which case the only action which would remain would be the action for breach of the settlement agreement. That however is a matter which is at least doubtful as the settlement may never have come into effect and I proceed on the basis that is the position as the evidence is conflicting on this question.

25 There are two ways of looking at the arguments on inconsistent judgments. From the point of view of Gough there is the possibility that in the Canadian proceedings it might be found that Madden did not receive the funds in his capacity as a lawyer while in this action it might be held that the did, making the claim against Gough for vicarious liability sustainable. But from the other perception, if the proceedings do not continue here then if Madden is found, in the Alberta proceedings, to have received the funds as a lawyer, Gough will not be bound by that and if Allens succeed in the Lukan proceedings then, if this claim is not allowed to proceed in this State against Gough, he would not be bound by any finding here. When looked at from this angle I do not think it could be said that New South Wales was not an appropriate forum or that it was vexatious or oppressive as explained in Oceanic Sun Line Special Shipping Company to allow the proceedings to be brought here.

26 The proceedings sought to be stayed or dismissed are not parallel proceedings between the same parties in different countries as was the case in Henry v Henry. That is a matter to be taken into account but when Allens are already parties to the Lukan proceedings here, whereas neither Allens nor Gough are parties to the Alberta proceedings, this weighs against a stay.

27 There was a final argument going to expense and inconvenience which was not made out sufficiently to influence the result. It was accepted that Gough was covered by professional indemnity insurance. It is by no means certain Madden will give evidence if this action continues in this State. Powles is no longer a solicitor so that the disruption to his life caused by giving evidence in Alberta is likely to be less than the disruption to the professional life of Gough as a party to a New South Wales action. But in the event I conclude that giving due weight to all these considerations it has not been shown that New South Wales is an inappropriate forum for the hearing of this action.

28 An order was sought by Allens that this action, if it proceeded, be heard at the same time as the Lukan proceedings, the evidence in one being evidence in the other. This order was not contested by the plaintiffs in the Lukan proceedings, which have been on foot for a long time. Whether or not the matters can proceed on the present date fixed for hearing cannot be determined as this stage. Whether or not it is necessary to have an order consolidating the actions other than the order sought that they proceed at the same time, the evidence in one being evidence in the other, is something for Allens and their representatives to consider. It will also be necessary to give consideration to the question of costs. While Gough should pay the costs of his notice of motion, he having failed, there were some additional costs incurred in respect of the Allens notice of motion which are not necessarily referable to Gough. Subject to the question of costs the orders which I propose to make are as follows:

Proposed orders

29 On notice of motion of plaintiffs filed 11 September 2002, orders as sought in paragraphs 1, 2 and 3 of the notice of motion.

30 On the notice of the second-named second defendant filed 17 October 2002 order the notice of motion be dismissed.

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Last Modified: 07/31/2003