Jonathon B. Wills Pty Ltd v Work Options Pty Ltd
[2010] VCC 612
•16 June 2010
| IN THE COUNTY COURT OF VICTORIA | Revised |
(Not) Restricted
AT MELBOURNE
COMMERCIAL LIST
GENERAL DIVISION
Case No. CI-10-00769
| JONATHON B. WILLS PTY LTD | Plaintiff |
| v | |
| WORK OPTIONS PTY LTD | Defendant |
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| JUDGE: | HIS HONOUR JUDGE ANDERSON |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 10 June 2010 |
| DATE OF JUDGMENT: | 16 June 2010 |
| CASE MAY BE CITED AS: | Jonathon B. Wills Pty Ltd v Work Options Pty Ltd |
| MEDIUM NEUTRAL CITATION: | [2010] VCC 0612 |
REASONS FOR JUDGMENT
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Catchwords: Practice and procedure – Appropriate forum for dispute to be litigated – Written agreement provided for parties to submit “to the jurisdiction of the courts of [New South Wales]” – Whether proceeding should be stayed – Section 20 Service and Execution of Process Act 1992 (Commonwealth).
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P. Little | Bennett’s Lawyers |
| For the Defendant | Mr J. Sleight | Neville & Hourn |
| HIS HONOUR: |
1 The defendant seeks an order that the proceeding commenced in this Court by writ on 25 February 2010 be set aside or alternatively stayed. The determination of this issue depends upon a consideration of the “appropriate court” to decide the matters in issue between the parties. The relevant factors are the operation of a “jurisdiction”
clause in the commercial agreement sued upon by the plaintiff and other matters
including those specified in s.20(4) of the Service and Execution of Process Act
1992.2 The plaintiff sues upon a Sale of Business Agreement entered into on about 12 July 2007. The agreement is a substantial document and includes a number of annexures. The plaintiff claims that it is owed money by the defendant as a result of the defendant’s failure to pay sums due pursuant to certain clauses of the agreement which the plaintiff says entitle it to “at least $225,000”.
3 profits of the business” for periods following the purchase by the defendant.
The sums claimed by the plaintiff are to be calculated by reference to the “operating fees less professional costs for each applicable period”. The terms professional fees and professional costs are also defined in the agreement.
4 Professional fees “means all professional fees (as recorded in the vendor’s financial accounts provided to the purchaser and used by the vendor’s accountant for tax reporting purposes but excluding GST) validly and accurately invoiced in connection with the services performed by the business and paid for by:
a. clients on the client list; or b. suppliers on the supplier list; c. or any other person or entity acting on behalf of clients; d.
new business specifically introduced by the vendor’s principal during the bonus payment periods referred to in Special Condition 41;
but excluding:
i. new clients and suppliers introduced by the purchaser;
ii. clients and suppliers providing revenue in geographic regions outside those serviced by the vendor at settlement, (the service geography as defined in Annexure J) unless they arise by virtue of some direct nexus with the vendor’s business prior to settlement;
iii. revenue generated, irrespective of its geographic location, primarily as a result of the purchaser’s relationship with clients and suppliers;
iv. new services introduced by the purchaser”.
5 Professional costs are defined as meaning “all costs incurred in delivering professional fees. The agreed budget for professional costs is appended as Attachment E to this agreement”.
6 No defence has presently been filed by the defendant. During the course of the hearing, defendant’s counsel, Mr Sleight, by agreement with plaintiff’s counsel, informed me that: “The defendant will raise as an issue between the parties the calculation of professional fees and professional costs due under the agreement including, but not limited to, the treatment of GST”. Mr Sleight also referred to the defendant having a possible setoff based upon representations made by or on behalf of the plaintiff prior to the parties entering into the agreement. There is no reference to such matters in the material before me and in the absence of such material I will not take any account of that matter.
7 In support of the application, Mr Sleight relied principally upon Clause 32.4 of the agreement which provided that: “This agreement is governed by the laws of New South Wales and the parties submit to the jurisdiction of the courts of that State”. Mr Sleight submitted that this was an “exclusive jurisdiction clause” and, as a
consequence, the defendant should prima facie be entitled to a stay of proceedings
in order to enforce the parties’ agreement. He submitted that this principle would
operate quite separately from any argument that the New South Wales courts were
more “appropriate”.8 Alternatively, it was submitted that the parties’ agreement on the jurisdiction to which their dispute should be litigated was the most significant matter under s.20(4) of the Service and Execution of Process Act which should determine the appropriate court to determine the proceeding.
9 Mr Little, who appeared for the plaintiff, submitted on the other hand that the provision was a “non-exclusive jurisdiction” clause. Brereton J in ACE Insurance Ltd v Moose Enterprise Pty Ltd [2009] NSWSC 724 said at paragraph 15: “Whether a jurisdiction clause is an exclusive jurisdiction clause is a question of construction of the particular contract, and the absence of the word ‘exclusive’ is not determinative”.
10 In Equus Financial Services Limited v Lah [BC9405876], a decision of the Full Court of the Supreme Court of Victoria on 8 September 1994 in Action No. 9621 of 1993, the court had to consider a jurisdiction clause which read as follows: “This agreement shall be governed by and construed in accordance with the laws of the Australian Capital Territory, and the parties submit to the jurisdiction of the courts for that territory”. The Court ultimately upheld the decision of the County Court staying the proceeding pursuant to s.20 of the Act.
11 the agreement may be assumed in favour of the appellant to be a ‘non-exclusive’
jurisdiction clause. Its terms are, nevertheless, a relevant and important
consideration as regards the discretionary determination what court is the appropriate
court to determine the matters in issue … I am prepared to assume, again expressingBrooking J, delivering the principal judgment of the Court, stated: “C[lause] 125 of place to which the proceeding ‘should’ be instituted. It is nevertheless, as Mr Vassie concedes, a relevant consideration, and in my view it is an important one”.
12 It is clear from the judgment that Brooking J was not seeking to authoritatively determine the categorisation of the jurisdiction clause before the court. Accordingly, the case is of no relevant assistance in interpreting the clause in the present case. Ultimately, the resolution of this issue depends upon a determination of the parties’ intention having regard to the words used in the clause and their position in the contract and the nature of the transaction between the parties.
15 would be superfluous. He pointed to the fact that the reference to jurisdiction
followed the statement that the agreement was governed by the laws of New South
Wales which should reinforce the fact that the parties intended the courts of that13 the word “exclusive” or “non-exclusive”. In Slater & Gordon Pty Ltd v Porteous [2005]
VSC 398, Whelan J had to consider an agreement between parties which provided
that, “This deed will be governed by and construed in accordance with the laws in
force in the State of Victoria and each party submits to the exclusive jurisdiction ofIn other decisions, the courts have had to construe clauses which expressly include determinative, such usage is generally regarded as indicative of the parties’ intention. As Whelan J stated in paragraph 39, “My conclusion is that the parties’ agreement is, as counsel for Slater & Gordon submitted, the overwhelming factor. Mrs Porteous … should not be permitted to go back on that agreement in the circumstances existing here”.
14 Mr Little submitted that in the present case the purpose of including the jurisdiction clause in the agreement was to permit the defendant to bring an action in New South Wales in circumstances where there was little connection with that State and where a court would otherwise regard Victoria as a more appropriate forum for the determination of the dispute. Mr Little referred to a number of matters indicating a connection with Victoria rather than New South Wales including the following:
a. the contract was entered into in Victoria, b. the plaintiff was a Victorian company, the “vendor’s principal” as referred primarily in northern Victoria with its principal offices being in Wangaratta and Shepparton, although there was a third office in Albury.
Mr Sleight submitted that if Clause 32.4 were not an exclusive jurisdiction clause it noted that the present contract is a substantial document specifically prepared for this particular transaction. An email between solicitors during the course of negotiations referred to discussion about “which State’s form the contract is in”.
16 an exclusive jurisdiction clause. Apart from the words themselves, there is nothing
from the context of the agreement or the transaction evidenced by the agreement
which would lead to that conclusion. I accept Mr Little’s submission that there were
many features of the transaction between the parties which connected the
transaction with Victoria, particularly from the plaintiff’s point of view, and which might
if the defendant needed to enforce the agreement, make it difficult to do so in the
courts of the defendant’s own State, New South Wales, unless there were an expressI am, however, unpersuaded that in the present case Clause 32.4 was intended to be South Wales. I consider therefore that the jurisdiction clause should be regarded as a “non-exclusive” jurisdiction clause although an important matter to consider in determining the “appropriate court” for the proceeding pursuant to s.20 of the Act.
17 The defendant’s summons was filed on 23 April 2010. The affidavit in support of the summons was sworn by the defendant’s solicitor and indicated that the application was based on Clause 32.4 being an exclusive jurisdiction clause. An affidavit in opposition was sworn by a director of the plaintiff on 7 June 2010. It is a more substantial affidavit which specifically addresses the matters referred to in s.20(4) of the Act. In response, the defendant’s solicitor swore a further affidavit on 9 June 2010 referring to factual matters upon which he said he was “instructed”. In only one instance did he indicate that the instructions came from “my client” although the specific source of the instructions was not given.
18 There are disputed issues of fact raised on the affidavit material. They are matters which cannot be fully resolved on an interlocutory application. It is clearly unsatisfactory, however, that full weight should be given to the matters raised by the defendant in circumstances where it initiated the application and, in an affidavit served one day before the hearing, raised disputed matters of fact without any proper indication of the source of the information about those matters.
19 In the final analysis, however, I am satisfied that even taking a view of the disputed matters of fact, most favourable to the defendant, that it is more appropriate for the proceeding be heard in the County Court at Wangaratta rather than the proceeding being stayed and the plaintiff being required to issue proceedings in the courts of
New South Wales.
20 The contract dated 12 July 2007 involved the sale of a business providing employment seeking services. The consideration for the sale of the business was to be calculated by reference to the profitability of the business in the years following the purchase. The sums to be paid were to be calculated by reference to the operating profit as defined in the contract. The calculation of operating profit would require a consideration of how income was generated after the sale.
21 The determination of this matter involves a consideration of the nature of the business both before and after the sale and, particularly, reference to issues including the client list and supplier list prior to sale and new business introduced by
Mr Jonathon Wills, the director of the plaintiff vendor. Factors to be excluded from consideration would include professional fees attributable to the efforts of the defendant purchaser, and particularly revenue derived outside the geographic regions serviced by the plaintiff at the time of the sale.
22 At the time of the sale the plaintiff had offices in Wangaratta, Shepparton and Albury. The geographical regions serviced by the plaintiff vendor were shown on a map as including all of the populated areas in the northern half of Victoria. Pursuant to the contract, the defendant took over rental properties in Wangaratta and Shepparton. The annual rental of the Wangaratta property was $31,077.48 ($2,589.79 per month inclusive of GST) and of the Shepparton property $28,000 per annum plus GST.
23 The contract also included the sale of assets. In respect of the Shepparton office there was a motor vehicle, five computers, a quantity of furniture and other equipment. At the Wangaratta office, there were three motor vehicles, seven computers and other furniture and equipment. At what was described at the Albury/St Arnaud office, there was one motor vehicle, three computers, limited furniture and some equipment.
24 There is a dispute on the evidence as to the extent to which the business was connected with Victoria:
a. The plaintiff said that “approximately 95 per cent of the work performed by the plaintiff prior to the sale of its business to the defendant occurred in Victoria”. After the purchase, the defendant’s revenue increased and offices were established in Melbourne, Shepparton and Bendigo and a number of key contracts were entered into all of which were signed in Victoria. Before the sale, the plaintiff said that, of the 14 employees, 12 were based in Victoria.
b. The defendant in the answering affidavit by the solicitor did not deny that the figure of 95 per cent was correct or that the business was “predominantly around the Wangaratta/Shepparton regions”. The defendant said that the plaintiff had only employed “11.2 equivalent fulltime employees, two of which were in New South Wales”. The defendant said that, since the contract, 16 per cent of the revenue was derived from “business undertaken at the Albury site”. 25 It is appropriate to consider specifically the matters listed in s.20(4) of the Act. The plaintiff anticipates calling eight to 11 witnesses including Mr Wills who lives near Wangaratta, the plaintiff’s accountant and the plaintiff’s bookkeeper both of whom also live near Wangaratta and approximately five to seven members of the plaintiff’s staff who worked in the businesses after the sale and live “in or around the Wangaratta or Bendigo regions”.
26 The defendant says that the defendant is a company based in Sydney and it is anticipated that the defendant would call at least seven witnesses including “the director of the defendant, the defendant’s broker, the defendant’s accountant and those engaged to undertake due diligence on the plaintiff all of which are located in New South Wales”. The defendant states that “a number of staff resided in New South Wales”.
27 There was a dispute as to where documents relevant to the businesses are presently located. The plaintiff said that “all the documents relevant to business in the Sale of Business Agreement are based in Wangaratta”. The documents were described as including “accounting records, invoices, personnel records, taxation information, all relevant contracts with the respective agencies including WorkSafe and TAC, letters spreadsheets, notes, memoranda, reports and emails”. The plaintiff anticipated that an accounting expert would need to be engaged to examine the relevant documentation.
28 Mr Wills estimated that “over 98 per cent of the documentation relevant to this dispute is based in, created or relevant to Victoria”. Mr Wills stated in his affidavit that he had continued to work in the businesses sold for 19 months following the sale of the business. It is likely therefore that he would have knowledge of how the business operated including how the business records were kept. The answering affidavit from the defendant’s solicitor stated: “I am instructed by my client that all such finance files are retained in Sydney not Victoria as such. Over 98 per cent of the documentation is held in Sydney”.
29 The determination of the proceeding will essentially depend upon an analysis of the business before and after the sale. It operated primarily in Victoria and has continued to do so. It appears, however, that the defendant does centralise the storage of its financial information at its head office in Sydney although it is likely that most of that documentation was generated in Victoria where the business is primarily conducted.
30 The issues in dispute are likely to necessitate careful analysis of the financial records of the business both before and after the sale so that professional fees and professional costs can be accurately calculated enabling a determination of the operating profit of the business and therefore any entitlement of the plaintiff. If the majority of these records are stored in Sydney, there may be some convenience if the litigation were conducted in that location. On the other hand, Mr Sleight relied upon the fact that the District Court of New South Wales holds sittings in Albury, which was one of the places of business of the defendant as was Wangaratta, out of which Registry the present proceeding was issued.
31 I am inclined to the view that the present location of the financial records is not of much significance as it is likely that, in the discovery process, the relevant records will be copied and analysed by the parties and their experts wherever these experts
are located. If there were a need to independently verify particular records it is likely that this would be done by reference to witnesses or documents obtained from third parties who would predominantly be located in Victoria in the Wangaratta/Shepparton
34 that the proceeding was instituted here as that is a matter of which I must take no
account. I consider however that the matters in issue between the parties primarily
arose in Victoria and will be determined by witnesses who will give evidence of those
matters. The witnesses who give evidence of background facts and information,
even though some of their evidence may deal with matters recorded in documents,
are likely to predominantly come from Victoria. Those who give evidence as a result
of consideration of documents recording transactions may come from other locations.region.
32 There is no evidence before the court as to the financial circumstances of the parties and there are no related or similar proceedings. The court determining this dispute would need to apply the law of New South Wales. No submission was made to me indicating that there is any difference between New South Wales or Victorian law which would be relevant to this dispute. It is clear, however, that if the proceeding had been commenced by the defendant in New South Wales, it would have been difficult for the plaintiff to assert that the courts of New South Wales were not the appropriate forum in the light of the specific agreement reached by the parties. However, as I have formed the view that Clause 32.4 is not an exclusive jurisdiction clause, the parties’ reference to the New South Wales courts, although an important matter to be taken into account, is not decisive.
33 In the determination of this matter questions of onus of proof have little part to play as is to be heard. In St George Bank Limited v McTaggart [2003] QCA 59, the Queensland Court of Appeal referred with approval to the test of what is the appropriate court as being, “the one with which the action has the most real and substantial connection and which can therefore be regarded as the natural forum”.
In my judgment, the appropriate court is the present court, although not on the basis from New South Wales. On balance, however, I consider that the appropriate court is the present court.
35 The defendant’s application will be dismissed.
Certificate
I certify that these 10 pages are a true copy of the reasons for decision of His Honour Judge
Anderson delivered on 16 June 2010.
Dated: 16 June 2010.
……….……………………………………..
Caroline Dawes
Associate to His Honour Judge Anderson
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