Martin Bruce Jones and Darren Gordon Weaver and Andrew John Saker as Receivers and Managers of Narrogin Beef Producers Pty Ltd (Receivers and Managers Appointed) v Narrogin Beef Producers Pty Ltd (Receivers And... - [2010] WASC 327

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: MARTIN BRUCE JONES AND DARREN GORDON WEAVER AND ANDREW JOHN SAKER AS RECEIVERS AND MANAGERS OF NARROGIN BEEF PRODUCERS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) -v- NARROGIN BEEF PRODUCERS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) [2010] WASC 327

CORAM: LE MIERE J

HEARD: 9 NOVEMBER 2010

DELIVERED : 10 NOVEMBER 2010

FILE NO/S: COR 174 of 2010

MATTER :The Receivers and Managers of Narrogin Beef Producers Pty Ltd (Receivers and Managers Appointed)

BETWEEN: MARTIN BRUCE JONES AND DARREN GORDON WEAVER AND ANDREW JOHN SAKER AS RECEIVERS AND MANAGERS OF NARROGIN BEEF PRODUCERS PTY LTD (RECEIVERS AND MANAGERS APPOINTED)
Plaintiffs
AND
NARROGIN BEEF PRODUCERS PTY LTD (RECEIVERS AND MANAGERS APPOINTED)
First Defendant
JANET HUFNAGEL THOMPSON
MATT WILLIS THOMPSON
Second Defendants

Catchwords:

Courts - Application to transfer Supreme Court proceedings to Federal Court - Cross-vesting legislation - Whether in the interests of justice - Turns on own facts

Legislation:

Jurisdiction of Courts (Cross-vesting) Act 1987 (WA), s 5

Result:

Application refused

Category: B

Representation:

Counsel:

Plaintiffs:     Dr J O'Donovan
First Defendant             :     Mr P King
Second Defendants       :     Mr P King

Solicitors:

Plaintiffs:     Lavan Legal
First Defendant             :     Murray Hutchings
Second Defendants       :     Murray Hutchings

Case(s) referred to in judgment(s):

BHP Billiton Ltd v Schultz [2004] HCA 61; (2004) 221 CLR 400

LE MIERE J:

Background

The first defendant, Narrogin Beef Producers Pty Ltd, owned and operated a feedlot at Narrogin. The second defendants, Mr and Mrs Thompson, are the sole directors and shareholders of the company. The company executed securities to secure advances from the National Australia Bank Ltd (NAB). The company defaulted and on 21 September 2010 NAB appointed the plaintiffs as receivers and managers of the mortgaged property.
Mr and Mrs Thompson dispute the validity of the appointment of the plaintiffs. In broad terms Mr and Mrs Thompson say that NAB did not have authority to appoint the plaintiffs as receivers and managers of the company because of a conflict of interest arising from work previously done by Ferrier Hodgson in relation to the company and its affairs. The plaintiffs are partners in the firm of Ferrier Hodgson. Mr and Mrs Thompson refused to give up possession to the plaintiffs of the land on which the company carried on the feedlot business.
On 14 October 2010 the plaintiffs commenced these proceedings against the defendants seeking an order under s 418A of the Corporations Act 2001 (Cth) (the Corporations Act) that their appointment as receivers and managers of the property of the company was valid. On the same day the plaintiffs and NAB commenced action CIV 2637 of 2010 against Mr and Mrs Thompson claiming delivery up of possession of the land at Narrogin by reason of the defendants' breach of the terms of a mortgage and deed of guarantee and indemnity.
On 20 October 2010 Mr and Mrs Thompson commenced proceedings in the New South Wales District Registry of the Federal Court against the Department of Environment and Conservation, State of Western Australia, Paul Byrnes, NAB, the plaintiffs and the company. In the Federal Court proceedings Mr and Mrs Thompson claim against the plaintiffs a declaration pursuant to s 418A of the Corporations Act that the appointment of the plaintiffs as receivers and managers of the company is void and of no effect and an order restraining the plaintiffs from entering into possession of the property of the company or otherwise trespassing on or in relation to the property rights of Mr and Mrs Thompson.

This application

On 1 November 2010 the defendants applied in these proceedings for orders that these proceedings and CIV 2637 of 2010 be transferred to the Federal Court pursuant to Jurisdiction of Courts (Cross‑vesting) Act 1987 (WA) (the Cross‑vesting Act). The plaintiffs oppose the transfer.

Legal principles

The defendants rely upon s 5(1) of the Cross‑vesting Act which relevantly provides:
(1)Where ‑
(a)a proceeding (in this subsection referred to as the relevant proceeding) is pending in the Supreme Court; and
(b)it appears to the Supreme Court that, having regard to ‑
…
(iii)the interests of justice,
it is more appropriate that the relevant proceeding be determined by the Federal Court …
the Supreme Court shall transfer the relevant proceeding to the Federal Court …
In BHP Billiton Ltd v Schultz [2004] HCA 61; (2004) 221 CLR 400, the High Court considered s 5(2)(b)(iii) of the Jurisdiction of Courts (Cross‑vesting) Act 1987 (NSW) which is in the same terms as the equivalent provision of the Cross‑vesting Act. The court held that the Supreme Court of New South Wales had made a material error in taking into account the plaintiff's choice of forum as a matter not to be likely overridden. Gummow J, with whom Hayne J agreed, said:
The phrase 'otherwise in the interests of justice' in sub‑para (iii) of section 5(2)(b) of the Cross‑Vesting Act requires the Supreme Court to determine a transfer application by identifying the more appropriate forum without any specific emphasis in favour of the choice of forum made by the plaintiff [77].
Kirby J said:
The 'interests of justice' necessarily include justice to all parties. It would be incompatible with our notions of justice to apply the NSW Cross‑vesting Act in a way that favoured the rights of one party to litigation over others, rewarding the parties selecting the initial venue with significant substantive (as distinct from purely procedural) advantages for doing so [169].

Defendants' contentions

The defendants base their application on two principal grounds. First, the defendants say that the defendants first served notice on the plaintiffs of their intention to bring Federal Court proceedings, amongst other things, to contest the appointment of the plaintiffs as receivers and managers and to bring a derivative action on behalf of the company under s 237 of the Corporations Act and instead of responding appropriately to that notice the plaintiffs 'forum jumped' by issuing these proceedings seeking a declaration pursuant to s 418A of the Corporations Act that they have been validly appointed as receivers and managers of the company. That is not a reason for transferring the proceedings to the Federal Court. In identifying the more appropriate forum the court must do so without any specific emphasis in favour of the choice of forum made by the plaintiffs. It follows that the court must identify the more appropriate forum without any specific emphasis in favour of the foreshadowed choice of forum by the defendants.
The second ground relied upon by the defendants is that if the present proceedings are transferred to the Federal Court then all of the matters in dispute between the parties will be resolved in the Federal Court whereas if the proceedings are not transferred then the question of the validity of the plaintiffs' appointment will be determined in this court and the other matters in dispute between the parties will be determined in the Federal Court. The defendants submitted that the issues that arise in determining the validity of the appointment of the plaintiffs overlap with the issues in the other matters in dispute in the Federal Court proceedings. That submission requires some attention to be given to the Federal Court proceedings.
In the Federal Court proceedings Mr and Mrs Thompson claim damages and compensation against the Western Australian Department of Environment and Conservation, the State of Western Australia, Mr Byrnes, who is an employee in the Department, and NAB for what might broadly be described as misleading conduct. They also seek an order under the Trade Practices Act 1974 (Cth) and Fair Trading Act 1987 (WA) for the restoration or recoupment of the property rights of the company and Mr and Mrs Thompson as a consequence of the conduct of the Department, the State, Mr Byrnes and NAB. Mr and Mrs Thompson seek various declarations or orders in relation to a works approval or licence issued in 2002 by the Department or the State with respect to the operation of the beef cattle feedlot business. They also seek a declaration that s 5 of the Environmental Protection Act 1986 (WA) is invalid as it is beyond the power of the Parliament of Western Australia. Mr and Mrs Thompson seek against the plaintiffs a declaration pursuant to s 418A of the Corporations Act that their appointment as receivers and managers of the company is void and of no effect and an order restraining them from entering into possession of the property of the company or otherwise trespassing on or in relation to the property rights of Mr and Mrs Thompson. Alternatively, Mr and Mrs Thompson seek an order restricting the appointment of the plaintiffs pursuant to s 420 of the Corporations Act and/or s 1323 so as to permit Mr and Mrs Thompson to bring the present proceedings for or on behalf of the company.
Mr and Mrs Thompson's application to the Federal Court is supported by an affidavit of Mrs Thompson sworn 19 October 2010. In that affidavit Mrs Thompson gives evidence concerning a licence granted by the Department or the State to the company to run beef cattle on its feedlot. Mrs Thompson complains of successive licence restrictions and in particular restrictions relating to the number of cattle that could be run on the feedlot. In her affidavit Mrs Thompson alleges that the actions of the Department and its officers, including Mr Byrnes, have been misleading, unnecessary and unconscionable. None of those matters concern anything done by the plaintiffs as receivers and managers or their appointment by NAB.
It is not clear from the Federal Court application to what extent the relief is sought by Mr and Mrs Thompson on their own behalf and to what extent they seek relief on behalf of the company but it seems they principally seek relief on behalf of the company. Insofar as they seek relief on behalf of the company they need leave under s 237 of the Corporations Act to bring proceedings on behalf of the company. The Federal Court application is indorsed with a claim for interlocutory relief which includes leave to proceed with the claims on behalf of the company pursuant to s 237 of the Corporations Act and/or s 1323.
The basis of the defendants' claim that the plaintiffs' appointment as receivers and managers is invalid is, as I have said, based on an alleged conflict of interest. In August 2009 NAB offered to provide further facilities to the company on condition that the company employed either Price Waterhouse Coopers or PPB to carry out certain investigations and report to the bank concerning matters relating to the company, its business and finances. Mr Thompson asked the bank if it would be possible to use Ferrier Hodgson instead of Price Waterhouse Coopers or PPB as Ferrier Hodgson was already familiar with their case. Mr Greg Daniel, of NAB, responded:
The bank's preference is that either Price Waterhouse Coopers or PPB be utilised on the basis that the bank employed Ferrier Hodgson to complete the business review and therefore there could be a conflict of interest.
There is no relevant or significant overlap of issues that arise in the application concerning the validity of the plaintiffs' appointment as receivers and managers and the issues that arise in the proceedings that Mr and Mrs Thompson will seek leave to bring against the Department, the State, and Mr Byrnes concerning or relating to the company's licence to operate the feedlot. Nor is it apparent what overlap there is between the issues concerning the validity of the plaintiffs' appointment as receivers and managers and any claim Mr and Mrs Thompson bring, or seek leave to bring on behalf of the company, against NAB for damages or other orders as result of misleading conduct.

Plaintiffs' contentions

The plaintiffs submit that this court is the appropriate forum for determining the validity of their appointment as receivers and managers because:
•Each of the parties, or in the case of the company its directors and shareholders, are located in Western Australia;
•Each of the persons who has been involved in the transactions which gave rise to the appointment of the plaintiffs as receivers and managers of the property of the company are located in Western Australia;
•All of the relevant transactions which gave rise to the appointment of the plaintiffs as receivers and managers of the company were performed and took place in Western Australia;
•The property of the company over which the plaintiffs were appointed and which forms the subject matter of the s 418A application is located in Western Australia;
•The real property to which the plaintiffs are appointed as receivers and managers (and the subject of the CIV 2637 of 2010 proceedings) is located in Western Australia;
•The only apparent connection to New South Wales is the location of the second defendant's solicitors and counsel in the Federal Court proceedings.
In response, the defendants accept that all of those points are correct but say that the Federal Court proceedings might be transferred to the Perth Registry and there would then be no inconvenience arising from the location of the parties and witnesses.
The plaintiffs submit that the s 418A application is urgent for the following reasons. The plaintiffs have approximately six weeks remaining in which to commence court proceedings in respect of the Minister for the Environment's decision in relation to the licence granted to the company under the Environmental Protection Act. Mr and Mrs Thompson have failed to provide the plaintiffs with any information in connection with the Minister's decision to allow them to properly consider whether any further proceedings are required and they may only do so once the s 418A application has been determined. The plaintiffs cannot make any informed decision on whether to commence proceedings until after that application has been determined. The company's business is feed lotting, whose season and high cash flow benefits runs from October to April of each year. As the season progresses with no resolution of the s 418A application the business will be detrimentally impacted by reason that the sale programme will be delayed, any purchaser will only likely see benefits in cash flow from operations in the 2011/2012 season and as a result, any purchaser's offer for the assets of the company will likely be lower. The plaintiffs, as receivers and managers, are presently exposed to liabilities that they cannot reasonably control but which, depending on the outcome of this application, they will ultimately be liable for.
I accept that the s 418A application is urgent for the reasons given by the plaintiffs. The plaintiffs say that the s 418A application is capable of determination immediately in this court or alternatively within a shorter timeframe than in the Federal Court proceedings. That is clearly so if the s 418A application was to be determined by the Federal Court together with the other matters raised in the Federal Court proceedings. When that was put to counsel for the defendants, counsel stated that the Federal Court might determine the application under s 418A of the Corporations Act prior to determining the other matters in issue in those proceedings.

Proceedings should not be transferred

The application under s 418A of the Corporations Act should be determined in Western Australia. That is conceded by the defendants. Indeed, the defendants say that all of the matters in issue in the Federal Court proceedings should be determined in Western Australia. The defendants say that the Federal Court may transfer further interlocutory proceedings and the trial of the matter from the New South Wales registry to the Perth registry. Nevertheless, the Federal Court proceedings have been commenced in the New South Wales registry. That is where the matter will proceed unless and until an order is made transferring the matter to the Perth registry. There has not yet been any directions hearing in the Federal Court. The first directions hearing will be on 12 November 2010 in Sydney. No application has yet been made to transfer the Federal Court proceedings to the Perth registry. If an application is made it is not known when it will be made or when it will be determined. It is more convenient that the s 418A application remain to be determined in this court.
The s 418A application has twice been called on for hearing or directions in this court. On the last occasion it was adjourned sine die because of the defendants' application to transfer the proceedings to the Federal Court. The plaintiffs say that they are ready to immediately proceed with the application. The court is able to hear the application within a short time. If the proceedings are transferred to the Federal Court that is likely to cause at least some delay. In the first place, the first directions hearing in the Federal Court has not yet taken place. Secondly, Mr and Mrs Thompson are to seek leave under s 237 of the Corporations Act to bring proceedings on behalf of the company. Thirdly, if the s 418A application is to be heard in the Federal Court at the same time as the other matters in issue in those proceedings then it will take substantially longer to resolve the s 418A application than if it was determined in this court. The defendants say that the s 418A application may be dealt with separately in the Federal Court. No such application has been made. There is no evidence that any of the parties have given any consideration to such a course of action before the hearing of the current application. To the contrary, the submissions of counsel for the defendants proceeded, at least initially, on the basis that all of the matters in the Federal Court proceedings should be dealt with together. If an application to hear the s 418A application separately from the other matters in issue in the Federal Court proceedings is made there will necessarily be some delay in determining how that is to be done and making directions in relation to that. It follows that whatever course the parties adopt in the Federal Court proceedings the s 418A application may be resolved more expeditiously in this court.
I conclude that it is in the interests of justice that the proceedings be determined in this court and not transferred to the Federal Court.

CIV 2637 of 2010

I have considerable misgivings whether an application to transfer CIV 2637 of 2010 to the Federal Court is properly before me. CIV 2637 of 2010 is a separate action commenced by writ of summons. The application for transfer has been made in the course of proceedings commenced under the Corporations Act. It is not clear to me that it is competent for the defendants in these proceedings to apply for CIV 2637 of 2010 to be transferred to the Federal Court. In any event, the second plaintiff in CIV 2637 of 2010, NAB, has not been served with the application and, so far as I know, has no notice of the application to transfer CIV 2637 of 2010 to the Federal Court. That is sufficient reason to refuse to transfer that action. Furthermore, the application to transfer CIV 2637 of 2010 to the Federal Court should be refused for similar reasons to those which apply to the application to transfer these proceedings. Transferring the action to the Federal Court would cause inconvenience and lead to a delay in the resolution of the proceedings.

Conclusion