Manjimup Wine Enterprises v The Independent Liquor Group Distribution CoOperative Ltd
[2015] WASC 202
•8 JUNE 2015
MANJIMUP WINE ENTERPRISES -v- THE INDEPENDENT LIQUOR GROUP DISTRIBUTION COOPERATIVE LTD [2015] WASC 202
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASC 202 | |
| Case No: | CIV:2272/2014 | 25 FEBRUARY 2015 | |
| Coram: | MITCHELL J | 8/06/15 | |
| 11 | Judgment Part: | 1 of 1 | |
| Result: | Application to transfer proceedings to New South Wales refused Application for security for costs granted | ||
| B | |||
| PDF Version |
| Parties: | MANJIMUP WINE ENTERPRISES THE INDEPENDENT LIQUOR GROUP DISTRIBUTION COOPERATIVE LTD |
Catchwords: | Procedure Transfer of proceedings Security for costs Turns on own facts |
Legislation: | Jurisdiction of Courts (Cross-vesting) Act 1987 (WA), s 5 Corporations Act 2001 (Cth), s 1335 |
Case References: | Australian Zircon NL v Austpac Resources NL [2010] WASC 166 BHP Billiton Ltd v Schultz [2004] HCA 61; (2004) 221 CLR 400 Equinox Engineering and Installation Pty Ltd v Puffin Installation Services Pte Ltd [2008] WASC 183 Plantagenet Wines Pty Ltd v Lion Nathan Wine Group Australia Ltd [2006] FCA 247; (2006) 229 ALR 327 Sugarloaf Hill Nominees Pty Ltd v Rewards Projects Ltd [2011] WASC 19 Tirops Safety Technology Pty Ltd v Lazer Safe Pty Ltd [2005] WASC 164 Unified Pty Ltd v The Cancer Council Western Australia Inc [No 3] [2011] WASC 161 Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2013] WASC 57 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
THE INDEPENDENT LIQUOR GROUP DISTRIBUTION COOPERATIVE LTD
Defendant
Catchwords:
Procedure - Transfer of proceedings - Security for costs - Turns on own facts
Legislation:
Jurisdiction of Courts (Cross-vesting) Act 1987 (WA), s 5
Corporations Act 2001 (Cth), s 1335
Result:
Application to transfer proceedings to New South Wales refused
Application for security for costs granted
Category: B
Representation:
Counsel:
Plaintiff : Mr S G Leslie
Defendant : Mr P Mendelow
Solicitors:
Plaintiff : Wilson & Atkinson
Defendant : Gilchrist Connell
Case(s) referred to in judgment(s):
Australian Zircon NL v Austpac Resources NL [2010] WASC 166
BHP Billiton Ltd v Schultz [2004] HCA 61; (2004) 221 CLR 400
Equinox Engineering and Installation Pty Ltd v Puffin Installation Services Pte Ltd [2008] WASC 183
Plantagenet Wines Pty Ltd v Lion Nathan Wine Group Australia Ltd [2006] FCA 247; (2006) 229 ALR 327
Sugarloaf Hill Nominees Pty Ltd v Rewards Projects Ltd [2011] WASC 19
Tirops Safety Technology Pty Ltd v Lazer Safe Pty Ltd [2005] WASC 164
Unified Pty Ltd v The Cancer Council Western Australia Inc [No 3] [2011] WASC 161
Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2013] WASC 57
- MITCHELL J:
Factual and procedural background
1 On 10 September 2014, the plaintiff commenced an action in this court seeking damages for breach of an alleged contract and specific performance of the contract. Counsel for the plaintiff has indicated that the claim for specific performance will not be pursued.
2 The plaintiff claims that it entered into the contract with the defendant, which was a trading cooperative registered under the Co-operatives Act 1992 (NSW), on 23 February 2011. The contract is alleged to be partly written and partly oral. The contract is alleged to provide for the plaintiff to supply the defendant with 20,000 cases of Semillon Sauvignon Blanc Margaret River wine over a 12 month period from the wine being finished in approximately April or May 2011. It is alleged that the contract required the plaintiff to deliver, at its cost, shipments of wine in loads of 1,280 cases upon the request of the defendant. It is alleged that the defendant agreed to pay $30.00 plus GST for each case within 120 days from the end of the month in which the wine to be delivered arrived in the defendant's Sydney warehouse.
3 The plaintiff claims that there was a delay in the acceptance of the delivery of the first shipment of 1,280 cases of wine, and that the defendant has repudiated the contract by refusing to accept delivery of any further shipments under the contract. The plaintiff claims damages, being loss of profits on the sale of the wine, extra delivery costs on the first shipment and storage costs.
4 The defendant denies that there was any completed contract for the sale of wine, and says that 1,280 bottles of wine were accepted on consignment. The defendant admits that it has denied being bound by the alleged contract and has refused to accept delivery of any further wine.
5 On 26 November 2014, the defendant applied by chamber summons for the proceedings to be transferred to the Supreme Court of New South Wales pursuant to s 5(2)(b)(iii) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (WA) (Cross-vesting Act). The defendant also seeks security for costs of the proceedings in the amount of $96,000 and that the proceedings be stayed until security is given, pursuant to s 1335 of the Corporations Act 2001 (Cth).
6 The defendant's application was heard by Master Sanderson in Chambers on 25 February 2015. At the conclusion of that hearing the master reserved his decision.
7 After the decision was reserved, the master became concerned that he may lack jurisdiction to deal with the application for transfer under the Cross-Vesting Act.1 On 11 May 2015, the master made orders that I decide the application and that the parties have an opportunity to forward further submissions to my associate by 20 May 2015. I understand that the parties are content for me to deal with the matter on the papers, and neither party has filed any further submissions in relation to the matter.
Transfer application
8 The principles governing the exercise of the power conferred by s 5(2)(b)(iii) of the Cross-vesting Act are well established. Under that section, I am required to transfer these proceedings to the Supreme Court of New South Wales if it appears to me that it is in the interests of justice that these proceedings be determined by that court. The general principles are set out in the decision of the High Court in BHP Billiton Ltd v Schultz.2
9 No discretion is conferred on the court and, where it appears to the court that it is in the interests of justice to transfer the proceedings, that power must be exercised.3
10 The defendant does not bear a burden of persuasion analogous to an onus of proof. The court must determine which is the more appropriate forum, and in determining this no specific weight is to be given to the plaintiff's choice of forum.4
Defendant's contentions
11 The defendant relies on three factors which it contends make the Supreme Court of New South Wales the more appropriate forum for resolving the dispute between the plaintiff and defendant.
12 First, the defendant relies on the convenience and expense of the proceedings in relation to the parties' place of business. While this may be a relevant factor, in this case the competing considerations largely cancel each other out.5 The defendant is based in New South Wales, as is a related corporation which may need to be a substitute defendant. Neither corporation has any substantial presence in Western Australia. It is more convenient and less costly for the defendant, or the substitute body, to litigate in New South Wales. Conversely, the plaintiff is based in Western Australia, has no substantial presence in New South Wales, and would find it more convenient and less costly to litigate in this State.
13 Given the provisions of the Service and Execution of Process Act 1992 (Cth), this court has jurisdiction over the matter whether the defendant is located in Western Australia or New South Wales. Therefore the location of the defendant is not important for the establishment of the jurisdiction of the court which will try the case.6
14 Second, the defendant relies on the convenience and expense of the proceedings so far as it relates to witnesses. Again, this factor seems to me to be neutral when the position of both parties is taken into account. The plaintiff proposes to call a number of witnesses resident in Western Australia, whose evidence principally goes to liability. The defendant proposes to call a number of witnesses whose usual residence is in New South Wales and Queensland, many of whose evidence principally goes to the assessment of damages. In my view there is no obvious advantage, from the witnesses' perspective, to holding a hearing in Perth or Sydney. Video links will be available for witnesses who can most conveniently appear in this court from another State. I assume that the same opportunity would be available if the matter were tried in the Supreme Court of New South Wales. It may also be that certain matters can be agreed in a way that avoids the need for some witnesses to appear and give oral testimony. At this stage of the proceedings, I do not feel able to make any reliable assessment of the extent to which those matters may be agreed in the future. From the perspective of costs and convenience in relation to witnesses, there does not seem to be any significant advantage at this stage to trying the case either in New South Wales or Western Australia.
15 Third, the defendant says that the court dealing with the matter will be required to apply the substantive law of New South Wales, being the provisions of the (now repealed) Co-operatives Act dealing with the legal capacity and powers of a co-operative. Ordinarily, there will be an advantage to the trial court applying the law of the forum.7 However, in the present case it seems to me that the law which will be applied to resolve the dispute will be the common law of Australia. It is not obvious to me how contested issues of construction of the provisions of the Co-operatives Act will be critical to determining the outcome of the plaintiff's and defendant's cases as they are currently pleaded. The same may be said of the provisions of sale of goods legislation which were referred to in the course of submissions without any particularity.
16 Therefore, none of the matters principally relied on by the defendant support the conclusion that it in the interests of justice that this case be tried in New South Wales.
Plaintiff's contentions
17 The plaintiff contends that the contract was formed in Western Australia because the last act necessary to create a binding obligation between the parties, namely the receipt of the acceptance, occurred in this State. The alleged acceptance was sent by email from New South Wales to Western Australia, and the place of receipt of this email was in Western Australia. In this regard the plaintiff may be technically correct, but I do not regard the place where the law recognises the contract to have been formed to be of significant assistance in determining the justice of the case. The practical reality is that the alleged contract was formed by communications by telephone and email between Western Australia and New South Wales. The conduct which is alleged to create contractual relations was alleged to have occurred both in New South Wales and Western Australia. I see no practical benefit derived from having the case tried in the place where the contract was concluded.
18 The plaintiff says that the first breach of contract (the refusal to accept delivery of the first shipment) occurred in New South Wales. The plaintiff contends that the failure to make payment for the wine occurred in Western Australia where the plaintiff is located. The plaintiff contends that the repudiatory breach of contract occurred in Western Australia, because that is where it received the defendant's advice that it would accept no further deliveries. Again, the plaintiff may be right in these submissions as to location, but the practical impact of these matters on where the trial is most appropriately conducted is limited.
19 It is clear that the plaintiff's alleged loss occurred in Western Australia, and that is a factor which favours retaining the case in this jurisdiction to some extent.
20 The plaintiff also refers to the disparity between the parties' financial resources. It notes that the defendant is a cooperative with over 1,200 shareholder members, servicing over 1,500 outlets and reporting an annual turnover of $200 million. It is submitted that the defendant could absorb the cost and inconvenience of proceedings being held in Western Australia more easily than the plaintiff, with much more limited financial resources, could bear the cost and inconvenience of the proceedings being held in New South Wales.
21 Mark Kordic, a director of the plaintiff, gave evidence that the plaintiff had negotiated a fee arrangement 'which involves deferred payment of legal costs on a partial contingent basis'. He expressed the belief that the plaintiff would not be able to negotiate such an arrangement with lawyers in Sydney. The defendant objects to the admissibility of this paragraph of Mr Kordic's affidavit on the ground that the fee agreement referred to is not disclosed and there are no facts deposed to support the belief referred to. I uphold that objection so far as it relates to Mr Kordic's belief that a similar arrangement could not be negotiated with lawyers in Sydney. Otherwise, I accord little weight to this part of Mr Kordic's affidavit in determining the most appropriate forum for this action. There is, in my view, no reason why the plaintiff's existing solicitors could not continue to act if the matter were transferred to New South Wales, no doubt appointing an agent in Sydney for service purposes.
22 However, in my view the defendant is in a better position than the plaintiff to bear the practical costs and burdens of litigating in another State. The financial resources of the defendant are greater than those of the plaintiff. The defendant's solicitors have offices both in Sydney and Perth. That is a factor which can inform the transfer decision.8
23 This is not a case where there is such a preponderance of connecting factors that either New South Wales or Western Australia can readily be identified as the most appropriate, or natural, forum. There are factors pointing to both New South Wales and Western Australia as appropriate locations for the trial of the action. The factors counting against either State tend to relate to the costs and convenience of the parties litigating in their home State, and those factors tend largely to counter-balance each other.
24 The present case is finely balanced. By a very small margin, I consider that Western Australia is the more appropriate forum in which to conduct the litigation. It does appear to me that the subject matter of the litigation has a closer connection with Western Australia. Most significantly, the loss which the plaintiff claims occurred in Western Australia. The only significant event which occurred exclusively in New South Wales was the delay in the defendant accepting delivery of the first shipment of wine. It is also relevant that the defendant is in a better position to absorb the cost of litigating in Perth than the plaintiff is to absorb the cost of litigating in Sydney.
25 I recognise that the advantages of trying this case in this court rather than the Supreme Court of New South Wales are marginal. If neither court were a more appropriate forum than the other, then the condition for the exercise of my power to transfer proceedings - that it appears to me that it is in the interests of justice that the proceedings be transferred - would not be met.9 Even if I were incorrect in marginally preferring this court as a forum, transfer would not be appropriate unless it appears that the Supreme Court of New South Wales were a more appropriate forum (even if only slightly so). It does not appear to me that the Supreme Court of New South Wales is a more appropriate forum than this court in the present circumstances.
26 Having regard to all of the above matters, it does not appear to me that it is in the interests of justice that these proceedings be determined by the Supreme Court of New South Wales. I therefore dismiss the defendant's application to transfer these proceedings to that court.
Security for costs
27 The defendant also applies for security for costs, and a stay of proceedings until security is given, under s 1335 of the Corporations Act. That section empowers me to make such an order if it appears by credible testimony that there is reason to believe that the plaintiff corporation will be unable to pay the defendant's costs if it is successful in its defence.
28 In the present case it is common ground that the plaintiff, which has been in administration and subject to a deed of company arrangement, currently lacks any capacity to pay the defendant's costs of the action. The recent financial history of the plaintiff, which discloses that it was unable to pay its debts as they fell due during administration, and the limited dividend which the creditors received under the deed of company arrangement, is described in the affidavit of Allen De Costa sworn 29 October 2014. In my view that is credible testimony that there is reason to believe that the plaintiff will be unable to pay the defendant's costs if it is successful in its defence. The discretion conferred by s 1335 of the Corporations Act is clearly enlivened in this case.
29 It is well established that when the threshold requirement is established, s 1335 confers discretion to order security for costs or to decline to do so. That discretion is to be exercised judicially, and previous cases have identified a number of non-exclusive factors which may inform the exercise of that discretion.10 Ultimately, an important concern is to strike a balance between the interests of the plaintiff corporation in conducting litigation to protect or enforce its rights and the interests of a defendant in being able to recover costs if it is successful.11
30 In the present case the plaintiff has presented a reasonably strong bona fide claim, supported by a statement of claim verified by affidavit and an email exchange on 23 February 2011 which, prima facie, supports the proposition that there was a concluded agreement between the parties as to the supply of wine. The email sent by Mark Kordic for the plaintiff on 23 February 2011 arguably identifies the essential terms of a contract for the sale of wine. The response to that email, while informal, was such as to indicate agreement to those terms. There is no evidence to show that the claim is without merit or that the plaintiff is not acting in good faith in making and prosecuting the claim. On its face, the plaintiff's claim has substance, and I would be reluctant to shut the plaintiff out of litigation by making an order for security for costs which the plaintiff could not satisfy.
31 On the other hand, the defendant has promptly made the application for security for costs, which I do not regard as oppressive, and it seems clear that the plaintiff currently lacks the capacity to meet any costs award made to the defendant.
32 The plaintiff sought to argue that its present impecuniosity was caused by the defendant's failure to perform the alleged contract. While this may be a ground for refusing to order security, it is ordinarily necessary for the plaintiff to establish a real causal connection between the misconduct by the defendant and its impecuniosity which, in the exercise of the Court's discretion, would make it unjust to require security.12
33 In the present case I am not satisfied that the plaintiff has established a causal connection between its current impecuniosity and the defendant's alleged breach of contract. As the defendant notes in its submissions, the administrators' report indicates that the plaintiff has not recorded a profit since it commenced trading in 2009. In 2010, the year before the alleged contract was entered into, the evidence is that the plaintiff's then current liabilities were $630,348.28, total non-current liabilities were $1,472,062.18 and net assets were negative $599,842.70.13 The plaintiff has not adduced evidence of its 2011 financial records, or produced those records to the defendant despite request. While the alleged breach of contract reduced the revenue which would otherwise have flowed to the plaintiff, given the state of the evidence as to the financial position of the plaintiff I am unable to conclude that the alleged breach caused the plaintiff's current impecuniosity or the past appointment of administrators and receivers.
34 In my view it is significant that the current directors of the plaintiff, Mark Kordic and Paul Kordic, stand to benefit from these proceedings. Evidence referred to by the defendant indicates that Paul Kordic is a creditor of the plaintiff and Mark Kordic holds all the shares in a company which holds 50% of the plaintiff's shares. There is no evidence that those standing behind the plaintiff lack the financial capacity to provide the security which is sought. There is evidence that the directors have previously made significant financial contributions to the plaintiff.14 No personal undertaking in respect of the defendant's costs is offered by the directors or persons standing behind the plaintiff.
35 In my view it is reasonable to require those who will benefit from litigation pursued by the impecunious plaintiff to also accept the risk of an adverse costs order in favour of the defendant if the plaintiff's claim ultimately fails. There is no evidence that those persons lack the financial capacity to do so. The court is not justified in declining to order security on the ground that it will frustrate the litigation unless the plaintiff establishes that those who stand behind it, and who will benefit from the litigation if it is successful, are also without means.15 In those circumstances it does seem to me to be unfair to require the defendant to face all of the risk of the litigation without any recourse to the plaintiff for costs, even if the defendant has capacity to absorb the costs of the litigation.
36 The plaintiff did not submit that the amount of security sought by the defendant was unreasonable. In the present circumstances it appears to me to be just that an order for security be made in terms sought by the defendant.
Orders
37 For the above reasons, I will order that:
1. The defendant's application to transfer the proceedings to the Supreme Court of New South Wales is dismissed.
2. The plaintiff give security for costs of these proceedings in the amount of $96,000, and the proceedings be stayed until that security is given.
38 I will hear from the parties as to the costs of the application.
1 See O 81E r 8 of the Rules of the Supreme Court 1971 (WA).
2BHP Billiton Ltd v Schultz [2004] HCA 61; (2004) 221 CLR 400.
3Schultz [14], [63]; Australian Zircon NL v Austpac Resources NL [2010] WASC 166 [31]; Equinox Engineering and Installation Pty Ltd v Puffin Installation Services Pte Ltd [2008] WASC 183 [5].
4Schultz [25], [72], [168].
5Schultz [16], [19].
6Schultz [19].
7Schultz [99], [100].
8 See Plantagenet Wines Pty Ltd v Lion Nathan Wine Group Australia Ltd [2006] FCA 247; (2006) 229 ALR 327 [74] - [80].
9 See Australian Zircon [77] - [79].
10 See Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2013] WASC 57 [5] - [6] and cases there cited.
11See alsoSugarloaf Hill Nominees Pty Ltd v Rewards Projects Ltd [2011] WASC 19 [31]; Unified Pty Ltd v The Cancer Council Western Australia Inc [No 3] [2011] WASC 161 [10]; Tirops Safety Technology Pty Ltd v Lazer Safe Pty Ltd [2005] WASC 164 [43].
12Westonia [45]; Tirops [48].
13 Affidavit of De Costa sworn 29 October 2014, 41 (balance sheet as at 30 June 2010).
14 The evidence is identified in the Schedule of the Plaintiffs' Directors' Financial Assistance to the Plaintiff dated 25 February 2015.
15Tirops [46] - [47] and authorities there cited.
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