L R Warburton Pty Ltd v Primary Securities Ltd
[2023] WASC 439
•16 NOVEMBER 2023
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: L R WARBURTON PTY LTD -v- PRIMARY SECURITIES LTD [2023] WASC 439
CORAM: HOWARD J
HEARD: 14 NOVEMBER 2023
DELIVERED : 14 NOVEMBER 2023
PUBLISHED : 16 NOVEMBER 2023
FILE NO/S: CIV 2355 of 2022
BETWEEN: L R WARBURTON PTY LTD
Plaintiff
AND
PRIMARY SECURITIES LTD
Defendant
Catchwords:
Cross-vesting Application - Transfer sought of proceedings from Supreme Court to Federal Court (Western Australia) - Whether related proceedings - Overlap in facts in both proceedings - Interests of justice to transfer
Legislation:
Anti-Money Laundering and Counter-Terrorism Financing Act 2006
Judiciary Act 1903 (Cth)
Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth)
Jurisdiction of Courts (Cross-vesting) Act 1987 (WA)
Result:
Supreme Court proceedings transferred to Federal Court of Australia
Category: B
Representation:
Counsel:
| Plaintiff | : | Mr J C Yeldon |
| Defendant | : | Mr A P Young KC & Mr P H Murray |
Solicitors:
| Plaintiff | : | Huggins Legal |
| Defendant | : | K & L Gates |
Case(s) referred to in decision(s):
BHP Billiton v Schultz (2004) 221 CLR 400
Citta Hobart Pty Ltd v Cawthorn [2022] HCA 16; (2022) 96 ALJR 476
Rizeq v The State of Western Australia [2015] WASCA 81
Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538
HOWARD J:
(This judgment was delivered extemporaneously on 14 November 2023 and has been lightly edited for clarity from the transcript.)
On 29 August 2023, the defendant (Primary Securities) applied to transfer these proceedings to the Western Australian Registry of the Federal Court of Australia.
The application is brought (I infer) pursuant to s 5(1)(b)(i) or (iii) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth).
Primary Securities also placed reliance on s 5(1)(b)(iii) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (WA) (I infer) but I have not needed to consider the State provisions separately.
These proceedings were commenced by an endorsed writ dated 21 September 2022. By the endorsement the plaintiff (LRW) pleaded effectively:
1.Primary Securities is the trustee of the Baker Partners Master Fund (Fund)[1] established under a trust deed;
2.it (LRW) held 150,000 units in the Fund;
3.it (LRW) had requested a Redemption Notice for those units from Primary Securities; and
4.a dispute had arisen as to LRW's right to redeem its units and be paid the Redemption Price by Primary Securities as calculated by the trust deed.
[1] This trust defined as the Fund in these proceedings is referred to by the defined term of 'Master Fund' in the Federal Court proceedings which are WAD 31 of 2022.
Primary Securities filed a conditional appearance on 3 January 2023, which appears to have become unconditional.
In this Court, interlocutory steps have been taken by the parties, including discovery and a mediation on 25 July 2023.
At the time of Primary Securities' application for transfer (on 29 August 2023) the current pleadings are:
1.further amended statement of claim dated 4 August 2023 (statement of claim);
2.amended defence dated 29 March 2023 (defence); and
3.reply dated 6 June 2023 (reply).
In support of the transfer application Primary Securities relies on an affidavit of Robert Garton Smith made 29 August 2023 - Mr Garton Smith is a director of Primary Securities.
In outline, Mr Garton Smith deposes to Primary Securities:
1.being the trustee of the Fund (as alleged by LRW);
2.being the trustee of a trust known as the Baker Partners Founders Fund (Cayman Fund); and
3.having brought a claim on 11 January 2021 in the Federal Court which is WAD 31 of 2022.
Approach to this application
The principles to be applied are well established and are not seriously in dispute between the parties.
There is a different test to be applied on a transfer application under a Cross-vesting Act than at general law on an application for a stay on forum non‑conveniens grounds.[2] However, in my view, the observations and approach of Mason CJ, Deane, Dawson and Gaudron JJ in Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538, 565 as to the practical judgment which a court is called on to make in a forum non‑conveniens application is equally applicable as an approach to a transfer application under a Cross-vesting Act.
[2] BHP Billiton v Schultz (2004) 221 CLR 400 [8], [14] (Gleeson CJ, McHugh & Heydon JJ).
Correspondingly, Gleeson CJ, McHugh and Heydon JJ said that a transfer decision under the cross‑vesting legislation is a 'nuts and bolts' management decision.[3] Recourse to other cases is rarely of much assistance in the determination of such a transfer application.
[3] BHP Billiton v Schultz [14].
The basis of the application
Primary Securities submits there is a significant overlap in the underlying facts in the proceedings in this Court and those in the Federal Court proceedings in WAD 31 of 2022.
Primary Securities further submits that similar witnesses are likely to be called in both proceedings and there is a risk of inconsistent findings. It is also said that case management principles favour the transfer and for these proceedings to be determined with WAD 31 of 2022.
Accordingly, there needs to be an assessment of the two relevant proceedings.
Issues in these proceedings
In these proceedings, it is the units in the Fund and provisions of the trust deed of the Fund of 24 September 2019 which are in issue.
In the defence [12(c)], the principal point of difference or departure from LRW's case is that Primary Securities says that it suspended redemption from the Fund on valid bases: including to comply with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (Money Laundering Act) in accordance with cl 11.15(e) of the trust deed.
Clause 11.15(e) of the trust deed for the Fund is at page 455 of the affidavit of Mr Garton Smith (RGS-20). It provides, relevantly:
The Trustee may suspend Redemptions:
…
(e)in any particular case to comply with Anti-Money Laundering and Counter-Terrorism Financing Act 2006 or any other legal or administrative requirements.
The Cayman Fund, which appears to be one of the central 'entities' in WAD 31 of 2022, is mentioned (in passing only) in the defence at [7(a)].
In its submissions, Primary Securities says that it suspended redemptions from the Fund, including because it is said that the $150,000 was misappropriated from the 'Cayman Fund': it refers to Mr Garton Smith's affidavit at [35]. With respect, that is not what Mr Garton Smith's affidavit says in terms.
The Federal Court proceedings
It appears from an amended concise statement dated 10 March 2023 filed in WAD 31 of 2022 that Primary Securities sues (as trustee of the Cayman Fund) the following respondents:
1.Munich Re Syndicate Singapore Private Ltd;
2.Justin Neil Warburton;
3.Michlange Pty Ltd;
4.Natalie Grace Andre;
5.Paradise Bay International Pty Ltd;
6.Kerry Jay Warburton; and
7.Hatini Goncalves.
Each of the second to seventh respondents is said to have some relationship with Mr Warburton.
It appears that by Orders made by Feutrill J on 10 March 2023:
1.the second to seventh respondents were joined to the proceedings;
2.Munich Re Syndicate Singapore Private Ltd was renamed as the first respondent; and
3.by consent, the claim against the first respondent was dismissed.
The amended concise statement pleads that:
1.Leon Rodney Warburton (Mr Warburton) controls all of the capital in, and is the sole director of, Warburton Investment Management Pty Ltd (WIM);
2.WIM and Mr Warburton owed fiduciary duties to Primary Securities in respect of the Cayman Fund; and
4.Mr Warburton and WIM had, in breach of contract and their fiduciary duties, wrongfully and dishonestly transferred funds to Mr Warburton and the second to seventh respondents respectively.
As I noted the Fund (which appears to be central to these proceedings) is not pleaded in the amended concise statement in WAD 31 of 2022.
The common underlying facts between the proceedings
Primary Securities says it paid more than $8.4 million into the Cayman Fund by way of subscribing for shares in that fund.
Mr Garton Smith's affidavit [28] alleges that $3,500,000 was transferred from the Cayman Fund to WIM (Subscription Proceeds).
Primary Securities alleges that:
1.the $150,000 which LRW used to subscribe for its units in the Fund came from the Cayman Fund paying (that $3.5 million) moneys to WIM; and
2.WIM paid $150,000 to LRW, which LRW then used to acquire units in the Fund.
It is said in the affidavit then that Primary Securities has a claim against WIM and LRW in relation to the $150,000.
However, where Mr Garton Smith's affidavit deposes to $150,000 of the $3,500,000 of the Subscription Proceeds being paid to LRW, that is not presently alleged in the amended concise statement (or the defence in these proceedings).
The source of the $150,000 used by WIM (on the assertion of Primary Securities) is not put expressly in issue in the proceedings in this Court.
The above may be accepted for the purposes of argument. However, what is not at all clear on the pleadings at the present time is how that underlying factual background relates to the determination of the proceedings in this Court. It certainly is not part of the defence.
LRW's position on the transfer application
The primary basis on which LRW opposes the transfer of the application is that the Federal Court, it is said, does not have:
… original jurisdiction to hear the plaintiff's claim made in these proceedings. This is because the plaintiff's claim does not arise out of a law made by the Commonwealth Parliament.
So much may be accepted, but the submission of LRW does not take into account the defence raised by Primary Securities as identified above.
The plea by Primary Securities of cl 11.15(e) of the trust deed as entitling it to suspend Redemptions to comply with the Money Laundering Act would appear to bring the matter within federal jurisdiction.
In LRW's reply [1(c)(i)], it says that Primary Securities has failed to commence proceedings against LRW since 10 January 2020 to establish any breach by the plaintiff of the Money Laundering Act. LRW says, effectively, that any determination based, in part, on a breach of the Money Laundering Act was not honestly made by Primary Securities.
As the plurality in the High Court put it in Citta Hobart Pty Ltd v Cawthorn [2022] HCA 16; (2022) 96 ALJR 476 [35]:
… for a claim or defence in reliance on a Commonwealth law or in reliance on the Constitution to give rise to a matter of a description in s 76(i) or s 76(ii) of the Constitution, it is enough that the claim or defence be genuinely in controversy and that it give rise to an issue capable of judicial determination. That is to say, it is enough that the claim or defence be genuinely raised and not incapable on its face of legal argument.
Hence, it appears that a Commonwealth law is relied on by Primary Securities by way of defence to the claim brought in these proceedings. That would bring it within s 76(ii) of the Constitution in respect of which this Court has jurisdiction under s 39(2) of the Judiciary Act 1903 (Cth).
If I am correct as to the effect of the reliance by Primary Securities on the Commonwealth Act, then the Federal Court would have jurisdiction over this matter pursuant to s 39B(1A)(c) of the Judiciary Act.
In any event, the source of the $150,000 is said to be the subject, in part, of the factual dispute being agitated in the Federal Court: being alleged to be part of the Subscription Proceeds. In those circumstances it would appear to be within that Court's accrued jurisdiction as it was formerly referred to.[4]
[4] Rizeq v The State of Western Australia (2017) 262 CLR 1 [26] in fn 44 (Kiefel CJ); [55] (Bell, Gageler, Keane, Nettle & Gordon JJ)..
Further, LRW submits that:
1.there has been significant delay in making the application to transfer; and
2.these proceedings are at an advanced stage and could be shortly entered for trial, whereas the claim in the Federal Court remains at a very early stage.
It may be accepted that a transfer application should be brought as early as possible and that is a factor which weighs against the transfer when one has regard to the interests of justice. Transfer applications should not be deployed late in the piece strategically.
Consideration and Disposition
Overall, my assessment is that it is in the interests of justice to transfer these proceedings to the Federal Court because:
1.although not plain on the pleadings in this Court, it appears the subject matter of these proceedings are part of a much larger dispute being heard in the Federal Court;
2.it would be open to Primary Securities to bring into these proceedings at least some of its allegations which are being litigated in the Federal Court;
3.the parties in the two courts are related, or at least appear to be so; and
4.there are no advantages to the two matters being determined separately.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
JC
Associate to the Honourable Justice Howard
16 NOVEMBER 2023
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