Meg Investments Pty Ltd v Rolton Limited NZBN 942 903 4464

SUPREME COURT OF SOUTH AUSTRALIA

(Civil: Application)
MEG INVESTMENTS PTY LTD & ORS v ROLTON LIMITED NZBN 942 903 4464 & ORS
[2022] SASC 38
Judgment of the Honourable President Livesey (ex tempore)
CORPORATIONS - SUPERVISION - COURTS - JURISDICTION UNDER CROSS-VESTING LEGISLATION AND TRANSFER OF PROCEEDINGS
COURTS AND JUDGES - COURTS - JURISDICTION AND POWERS - CONCURRENT JURISDICTION OF DIFFERENT COURTS - TRANSFER OF PROCEEDINGS UNDER CROSS-VESTING LEGISLATION - WHERE APPROPRIATE AND IN INTERESTS OF JUSTICE
By interlocutory application dated 29 October 2021, the first and second respondents sought an order for transfer of proceedings in this Court to the Federal Court of Australia (South Australia District Registry) pursuant to ss 5(1)(b)(i) and 5(1)(b)(iii) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) and r 113.1 of the Uniform Civil Rules SA (2020).
The first and second respondents contend these proceedings should be transferred to the Federal Court as the Supreme Court proceedings arise out of, or are otherwise related to, the Federal Court proceedings or, it is otherwise in the interests of justice that the Supreme Court proceedings be determined by the Federal Court.
The applicants oppose the application and contend that the Supreme Court and Federal Court proceedings concern different parties, different causes of action and different loss.
Held (per Livesey P) allowing the application:
1. Proceeding No 2051 of 2020 in the Supreme Court of South Australia be removed.
2.The proceeding so removed thereupon be transferred to the Federal Court of Australia (South Australia District Registry).

3. The applicants must pay the respondents’ costs on a standard basis, certified fit for counsel.
Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) s 5; Uniform Civil Rules 2020 (SA) r 113.1, referred to.
Alstom Power Ltd v Yokogawa Australia P/L & Ors (No 2) [2006] SASC 87; Anagnostis v Davies Brothers Ltd (1989) 99 FLR 196; BHP Billiton Ltd v Schultz (2004) 221 CLR 400; Chopsonion Pty Ltd (Controllers Appointed) v Watts Meat Machinery Pty Ltd [2021] FCA 491; Cini v Pets Paradise Franchising (SA) Pty Ltd (2008) 102 SASR 177; Harman v Home Department State Secretary [1983] 1 AC 280; Powell v Deputy International Ltd (2019) 343 FLR 309; Valceski v Valceski (2007) 210 FLR 387, considered.

MEG INVESTMENTS PTY LTD & ORS v ROLTON LIMITED
NZBN 942 903 4464 & ORS

[2022] SASC 38
Civil
LIVESEY P (ex tempore):
Introduction

By interlocutory application dated 29 October 2021, the first and second respondents (the Rolton parties) seek an order for the transfer of these proceedings to the Federal Court of Australia (South Australia District Registry).
In essence, the Rolton parties contend that these proceedings and the Federal Court proceedings are related. They contend that the underlying facts are similar, and the same evidence will be required in each proceeding. Accordingly, they maintain that it is in the interests of justice that, the plaintiffs having chosen to litigate the substance of the dispute in the Federal Court, both sets of proceedings should be determined in that Court.
For the applicants (the Lenders), it is said that the Supreme Court and Federal Court proceedings concern different parties, different causes of action and different loss. They contend that there is no reason for this matter to be transferred to the Federal Court because there is no reason for this matter to be heard together with the Federal Court proceedings.
Previously, the applicants said that they did not oppose transfer. Indeed, in the course of addressing interlocutory applications for security for costs and for transfer to the New South Wales District Registry, Besanko J noted that this was the attitude of the applicants before him.[1]
[1] Chopsonion Pty Ltd (Controllers Appointed) v Watts Meat Machinery Pty Ltd [2021] FCA 491, [97].
For the reasons that follow, an order for transfer should be made.
The Federal Court proceedings
On 3 August 2020, Action SAD109/2020 was commenced in the Federal Court of Australia out of the South Australia District Registry (the Federal Court proceedings) by Chopsonion Pty Ltd (Controllers Appointed) (Chopsonion).[2] The controllers of Chopsonion are MEG Investments Pty Ltd, Red Dog No. 1 Pty Ltd, Richard Willson, Leigh Willson, RJC Willson Nominees Pty Ltd and

John Charlton Rowley.[3] These are the applicants and Lenders in the Supreme Court proceedings. By his affidavit sworn on 7 March 2022, Mr Rowley acknowledged that the applicants in the Supreme Court proceedings have brought proceedings in the name of Chopsonion in the Federal Court.
[2] The applicant’s Statement of Claim is dated 31 July 2020 but was filed on 3 August 2020.
[3] The applicant alleges that the Lenders were appointed controllers of the applicant on 20 October 2016 pursuant to a General Security Agreement, whereby the applicant granted a security interest in favour of the lenders (PPSR Registration No 202004270044803). The records of the Australian Securities and Investments Commission suggest that only Mr Richard Willson was appointed the Controller of the applicant on 20 October 2016, although the record says that he was appointed “jointly”. None of the other lenders are named, see Chopsonion Pty Ltd (Controllers Appointed) v Watts Meat Machinery Pty Ltd [2021] FCA 491, [5] (Besanko J).
The applicants in the Federal Court proceedings and the applicants in the Supreme Court proceedings are represented by the same firm, Charlton Rowley. The respondents in both proceedings are represented by the same firm, Morgan English.
In the Federal Court proceedings, the Statement of Claim alleges that the applicants in the Supreme Court proceedings were lenders of finance. It is alleged that Private Funds Management Pty Ltd (PFM) as agent facilitated lending.[4] Chopsonion was looking to purchase abattoir equipment in New Zealand and it required finance. The abattoir equipment had been acquired by Watts Meat Machinery Pty Ltd for $528,000. An invoice for a higher amount was provided to PFM to facilitate Chopsonion obtaining finance. The Lenders made an advance to Chopsonion for the purchase of the abattoir equipment.
[4] Federal Court Statement of Claim dated 3 August 2020, [1.3] and [3].
It is alleged that Watts Meat Machinery Pty Ltd and its director, Mr Keith Watts, engaged in misleading or deceptive conduct and fraud.[5] It is also alleged that there were breaches of fiduciary and directors’ duties involving the overstatement of the purchase price of the abattoir equipment.
[5] Federal Court Statement of Claim dated 3 August 2020, [12], [13.7], [15] and [21].
It is pleaded that, in consequence, Chopsonion procured the loan and suffered loss and damage. The items of loss which are claimed include:[6]
1.$1.175 million for the loan principal;
2.$254,000 in legal fees;
3.$110,000 in storage fees; and
4.$167,000 in receiver’s costs.
[6] Federal Court Statement of Claim dated 3 August 2020, [16].
The Supreme Court proceedings
The Supreme Court proceedings were commenced on 3 August 2020 by a Statement of Claim which names the six Lenders as applicants. The Rolton parties are the respondents.
It is alleged that the Lenders appointed Private Funds Management Pty Ltd to facilitate lending with the assistance of its director, Ms Annette How. It is alleged that Chopsonion was looking to purchase abattoir equipment located in New Zealand and that it required finance.
The Rolton parties were commissioned by Chopsonion to value the abattoir equipment that had been purchased by Watts Meat Machinery Pty Ltd. They valued it at between $1.1 and $1.3 million, as set out in a written valuation dated 26 November 2014.[7] This valuation was to be provided to the Lenders for the purposes of assessing whether to provide finance.[8] It is alleged that the Lenders advanced loan monies to Chopsonion for the purchase of the abattoir equipment.[9]
[7] Amended Statement of Claim dated 16 July 2021, [3].
[8] Amended Statement of Claim dated 16 July 2021, [5].
[9] Amended Statement of Claim dated 16 July 2021, [6]-[7].
The applicants allege that the valuation was false or misleading or involved a negligent misrepresentation and that the Lenders advanced an amount to Chopsonion which exceeded the true value of the abattoir equipment. In consequence, it is alleged that the Lenders sustained loss and damage. The losses are alleged to include the following items:[10]
1.$1.175 million for the loan principal;
2.$254,000 in legal fees;
3.$110,000 in storage fees; and
4.$167,000 in receiver’s costs.
[10] Amended Statement of Claim dated 16 July 2021, [8C].
A comparison of the proceedings
As may be obvious, the applicants, the causes of action and the respondents in the Supreme Court and Federal Court proceedings are not the same.
The Federal Court proceedings were commenced in the name of the purchaser and they target the vendor and its director over what is claimed to be a misleading and false invoice. The Supreme Court proceedings were commenced in the name of the Lenders and they target the valuer and its director who provided what is claimed to be a negligent valuation which was relied on by the Lenders.
Nonetheless, the Lenders are the applicants in the Supreme Court proceedings, and they are the controllers of the applicant Chopsonion in the Federal Court proceedings. The applicants are represented by the same solicitors. Both proceedings raise as an issue the advance by the Lenders of a loan to Chopsonion following negotiations by Ms How of Private Funds Management Pty Ltd to facilitate the acquisition of abattoir equipment in New Zealand.
In both sets of proceedings, the true value of the abattoir equipment will be relevant. To a significant extent, the same items of loss and damage are alleged to have been sustained by the applicants in each proceeding, though the claims are not entirely the same.
The Federal Court proceedings have been on foot for some time and, following an application for security for costs and for transfer to the New South Wales District Registry, Besanko J ordered that security in the amount of $125,000 be provided for the costs of the respondents in those proceedings, and that the transfer application be dismissed.[11] After orders were made on 12 May 2021, those proceedings were stayed until 25 August 2021 when security was provided.
[11] See Chopsonion Pty Ltd (Controllers Appointed) v Watts Meat Machinery Pty Ltd [2021] FCA 491, [104], [106] (Besanko J).
In the latter part of 2021, there was correspondence concerning a request for further particulars of the Statement of Claim in the Federal Court proceedings.
Soon after the Supreme Court proceedings were commenced, the Rolton parties sought consent to transfer those proceedings to the Federal Court. By letter dated 16 October 2020, Charlton Rowley indicated that the applicants would consent to transfer to the Federal Court. Indeed, on 26 October 2020, the applicants indicated that they would apply to have the Supreme Court proceedings transferred to the Federal Court. As mentioned, in his reasons on the security for costs and transfer applications Besanko J recorded that the applicants in the Federal Court proceedings then consented to the transfer of the Supreme Court proceedings to the Federal Court.
On 16 July 2021, the applicants amended their Statement of Claim to join Mulga Corporation Pty Ltd (Mulga) to the Supreme Court proceedings as the third respondent.[12] That entity was already a respondent to the Federal Court proceedings. I am informed that Mulga has sought security for costs in the Federal Court proceedings but that, to date, it has not been provided.
[12] Mulga Corporation Pty Ltd ACN 144 810 435 ATF The Mulherin Family Trust.
At the hearing before me on 25 February 2022, counsel for Mulga said that it did not wish to be heard on the application for transfer and it was excused from attendance. Mulga neither consents to nor opposes an order for transfer.
Cross-Vesting
The application for transfer is made pursuant to the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) (the Cross-Vesting Act) and r 113.1 of the Uniform Civil Rules 2020 (SA).
The Rolton parties contend:
1.The Supreme Court proceeding arise out of, or are otherwise related to, the Federal Court proceedings and that it is “more appropriate” that the Supreme Court proceedings be determined by the Federal Court, s 5(1)(a) and (b)(i) of the Cross-Vesting Act; or
2.It is “otherwise” in the interests of justice that the Supreme Court proceedings be determined by the Federal Court of Australia, s 5(1)(a) and (b)(iii) of the Cross-Vesting Act.[13]
[13] BHP Billiton Ltd v Schultz (2004) 221 CLR 400, [59] (Gummow J).
As is now well-recognised, it is not necessary to demonstrate that the Supreme Court is a “clearly inappropriate” forum; it is “both necessary and sufficient that, in the interests of justice, the [Federal Court] is more appropriate”.[14] In determining what is in the interests of justice, whilst I am not constrained by the interests of any one party, the interests of the parties are relevant. Nonetheless, there may be interests “wider than those of either party to be considered”.[15] In Cini v Pets Paradise Franchising (SA) Pty Ltd, Bleby J adopted the observations of Brereton J in Valceski v Valceski as follows:[16]
In identifying the “more appropriate forum”, relevant considerations include the cost and efficiency of the proceedings in the respective jurisdictions, and the “connecting factors” described by Lord Goff in Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460 at 478 – including matters of convenience and expense such as availability of witnesses, the places where the parties respectively reside or carry on business, and the law governing the relevant transaction [BHP v Schultz, 422 [18]].
(footnote omitted)
[14] BHP Billiton Ltd v Schultz (2004) 221 CLR 400, [14] (Gleeson CJ, McHugh and Heydon JJ).
[15] BHP Billiton Ltd v Schultz (2004) 221 CLR 400, [15]-[16] (Gleeson CJ, McHugh and Heydon JJ).
[16] Cini v Pets Paradise Franchising (SA) Pty Ltd (2008) 102 SASR 177, [13] (Bleby J) citing Valceski v Valceski (2007) 210 FLR 387, [69]. See also Powell v Deputy International Ltd (2019) 343 FLR 309, [91]-[95] (Parker J).
I accept that the two limbs relied upon by the Rolton parties are true alternatives and, should either be satisfied, this Court must transfer the proceedings to the Federal Court.[17]
[17] Powell v Deputy International Ltd (2019) 343 FLR 309, [72]-[78] (Parker J).
Determination of the application
When this matter came on for argument on 21 March 2022, the applicant in the Federal Court proceedings had just issued an application for summary judgment. Argument proceeded before me but both parties accepted that this Court could not rule on this application until the fate of the summary judgment application was known.
On 13 April 2022, O’Sullivan J dismissed the application for summary judgment. This afternoon, Mr Thomas submitted that I should defer the resolution of this application until after O’Sullivan J hears a case management conference. It was submitted that this will demonstrate that the Federal Court proceedings are further advanced and that this tells against transfer. As will be seen, though this is a relevant factor, I do not regard it as being of much moment in this case.
In my opinion, the Supreme Court proceedings are related to the Federal Court proceedings given the commonality of the applicants’ interests, that both are concerned with the same underlying loan transaction and abattoir equipment, and the alleged loss and damage are, in significant respects, the same. In fact, there was really no dispute about whether the proceedings were relevantly related.
It will likely be more efficient and convenient to litigate these actions together in the same forum. That will, in addition, likely entail less overall expense given the commonality of evidence and witnesses. Whilst I accept that not all parties are the same and that the causes of action are different and, necessarily, there may be different or additional evidence and witnesses in each proceeding, the degree of commonality outweighs the differences. I anticipate that both sets of proceedings can, with respect, be appropriately and effectively managed by a Judge of the Federal Court.
If an order for transfer is not made, there is some risk of inconsistent findings, at least in relation to the loan transaction, the true value of the abattoir equipment and the common elements of loss and damage in each action. In my view, the requirements of s 5(1)(b)(i) of the Cross-Vesting Act are satisfied. It is more appropriate that the Supreme Court proceedings be determined in the Federal Court.
It is, accordingly, not necessary to consider whether it is otherwise in the interests of justice that the Supreme Court proceedings be determined by the Federal Court within s 5(1)(b)(iii) of the Cross-Vesting Act. Had it been necessary to do so, my view is that this limb is also satisfied. There is no material difference between the “more appropriate” limb and the “otherwise in the interests of justice” limb.[18]
[18] BHP Billiton Ltd v Schultz (2004) 221 CLR 400, [14] (Gleeson CJ, McHugh and Heydon JJ): which is “the more appropriate forum, upon a fair balancing of all the factors defining the relevant ‘interests of justice’”; see also [77] (Gummow J) and [161]-[165] (Kirby J).
In forming my views about whether the Supreme Court proceedings should be transferred, I did not overlook, and I took into account, that the applicants were at one time of the view that an order for transfer should be made. Whilst their change in opinion has been explained, that does not detract from the evident convenience of litigating these matters in the same Court. I also took into account the necessity for a release of Harman undertakings in each set of proceedings,[19] so that documents discovered and produced in one can be discovered and produced in the other.
[19] Harman v Home Department State Secretary [1983] 1 AC 280.
Finally, whilst the “stage” reached in each proceeding is relevant,[20] I did not regard any difference as being of much moment in this case. Though it may be accepted that the Federal Court proceeding is further advanced, it is not ready for trial and in both proceedings the parties are locked in interlocutory contests on various issues.
[20] Anagnostis v Davies Brothers Ltd (1989) 99 FLR 196.
Conclusion
There will be an order transferring these proceedings to the Federal Court of Australia (South Australia District Registry).
The successful respondents seek indemnity costs payable forthwith.[21] The respondents raised a number of matters, but I am not satisfied that there was conduct of a kind that warrants an order that costs be paid on an indemnity basis. Whilst I am satisfied that this application raises a discrete issue and that the respondents will have to wait before resolving costs, these proceedings are related and costs in both proceedings should be resolved at the same time.
[21] Alstom Power Ltd v Yokogawa Australia P/L & Ors (No 2) [2006] SASC 87, [8] (Debelle J).
The applicants must pay the respondents’ costs on a standard basis, certified fit for counsel.

[2022] SASC 38

14 April 2022