Mosslake Drilling Services P/L (ACN 009 440 779) v Baker Hughes Australia P/L (ACN 004 752 050)

[1993] FCA 182

Re: MOSSLAKE DRILLING SERVICES PTY LTD
And: BAKER HUGHES AUSTRALIA PTY LTD
No. WAG216 of 1992
FED No. 182
Number of pages - 12
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
French J(1)

CATCHWORDS

Practice and Procedure - venue - proceedings commenced in Perth Registry - similar in substance to counterclaim in Queensland District Court - security for costs order in Queensland District Court - counterclaim discontinued in that forum - public interest considerations - waste of judicial resources - forum shopping not to be rewarded - transfer ordered - security for costs order made in same terms as that applied by Queensland District Court.

Trade Practices Act 1974 s.52

District Courts Act 196701982 (Qld) s.86

Bomanite Pty Ltd v. Slatex Corporation Australia Pty Ltd (1991) 104 ALR 165

Ketteman v. Hansel Properties Ltd (1987) 1 AC 189

HEARING

PERTH, 31 March 1993

#DATE 2:4:1993

Counsel for the Applicant : Mr J. Picton-Warlow

Solicitors for the applicant : Picton-Warlow and Co.

Counsel for the Respondent : Mr A. Stavrianou

Solicitors for the Respondent: Bennett Carroll Gibbons

ORDER

The Court orders that:

1. The proceedings be conducted henceforth at the Brisbane Registry of the Court.

2. The applicant do on or before 2 May 1993 provide security for the respondent's costs of the application in the amount of $50,000 by way of a bank guarantee in a form approved by the Queensland District Registrar or otherwise in a form agreed between the parties.

3. There be liberty to apply on the amount and form of the security.

4. The application be stayed as and from 3 May 1993 in the event that the security required is not provided.

5. The applicant pay the respondent's costs of the motion.

Note: Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

FRENCH J By an application filed on 23 December 1992, Mosslake Drilling Services Pty Ltd ("Mosslake") claims damages and repayment of moneys had and received against Baker Hughes Australia Pty Ltd ("Baker Hughes"). Baker Hughes moves for the stay or dismissal of the action or its transfer to the Brisbane Registry of this Court. An order for security for costs is also sought.

1. The application arises out of a contract entered into in October 1990 under which, it is said, Baker Hughes was to design, fabricate, supply and test a roller cutter head assembly and associated equipment. The purpose for which the cutter head was required was the drilling of a ventilation shaft in a rock formation situated at Gordonstone in the State of Queensland. The drilling was to be carried out under a contract between Mosslake and Costain Australia Pty Ltd. Mosslake alleges, inter alia, that certain pre-contractual representations on the part of Baker Hughes were misleading or deceptive in contravention of s.52 of the Trade Practices Act. It also contends that the representations were negligent and that in breach of various express and/or implied warranties the cutter head actually produced was not fit for the purpose for which it was required, was not capable of achieving a warranted penetration rate and was not of merchantable quality. Damages claimed are said to be in excess of $1.3 million.

2. This is not the first time that this claim has been ventilated in a court of law. It is that fact which leads to the present motion. On 11 July 1991, Baker Hughes instituted proceedings in the District Court at Brisbane against Mosslake and Mitchell Drilling. Its claim was for $152,305.72 being a sum it alleged was due to it for the design, fabrication and supply of the cutter to Mitchell Drilling or alternatively to Mosslake. Mosslake entered an appearance, defence and counterclaim in those proceedings on 27 August 1991. On 21 November 1991, it filed an amended defence and cross-claim. It is common ground that the counterclaim raised substantially the same issues as those raised in the proceedings filed in this Court. A reply and defence to the counterclaim were filed on 7 February 1992 along with a request for further and better particulars which was answered on 2 March 1992. Baker Hughes delivered interrogatories for the examination of Mosslake on 1 April 1992 and these were answered on 28 April 1992. Further interlocutory steps taken in those proceedings included the filing of affidavits of discovery and further amended pleadings.

3. On 28 October 1992, Baker Hughes made an application in the District Court at Brisbane for an order that Mosslake give security for costs in respect of the counterclaim. On that day, his Honour Judge Forno ordered that within twenty one days Mosslake give security in respect of the counterclaim to the extent of $50,000. On 26 November 1992 Mosslake, having lodged no security, discontinued its counterclaim in the Brisbane District Court and sent notice of the discontinuance to the solicitors for Baker Hughes. Baker Hughes' action against Mitchell Drilling had been discontinued on 2 October 1991 after settlement of the dispute between those parties.

4. In an affidavit filed in opposition to Baker Hughes' motion, Kenneth Macleay, a director of Mosslake, said that the order of Judge Forno was "clearly incorrect". He went on to say that Mosslake had had to decide whether to appeal the order and as a result "remain in a court which showed such an incorrect approach and which has a limit on its jurisdiction to claims under $200,000". As to the latter point, it is to be noted that s.86 of the District Courts Act 1967-1982 (Qld) provides that where a counterclaim is brought in the District Court which involves matters beyond its jurisdiction, any party to the action may, within fourteen days, apply to the Supreme Court for an order that the whole proceedings or the counterclaim be transferred to the Supreme Court. In the event that no such application is made within the time limited, s.86(4) provides that "the District Court shall have jurisdiction to hear and determine the proceedings, notwithstanding any enactment to the contrary". No application had been made by any party under s.86. It does not appear to be in dispute that the District Court had jurisdiction to entertain the counterclaim.

5. Notwithstanding this, Mr Macleay went on to say that the applicant had been intending to make application to transfer the matter into the Federal Court in any event "as the Applicant's claim is a dispute between residents of different states and elements of its claim relate to the provisions of the Trade Practices Act 1974. In these circumstances the proper court for the matter is the Federal Court". Mr Macleay went on to assert that in a claim for $1,326,595.02 it seemed to Mosslake that it had every right to prefer to have access to a court of superior jurisdiction. He referred to a waiting period of 12 to 15 months from readiness for trial to hearing in the District Court in Brisbane. The company, he said, had suffered considerable economic hardship caused by the losses arising from Baker Hughes' failure to properly carry out its contract and was anxious to have the matter heard as quickly as possible. Mosslake, he said, had the following witnesses in Western Australia, they being:
   

1. Mr Andrew Lord - The engineer in immediate charge of the project for the head contractor, Costain Australia Ltd.

2. Macleay himself.

3. Mr Peter Fischer, another director of Mosslake.

4. Mr Phillip McMillan, the secretary of Mosslake and its financial consultant.

5. Mr Ivan Carstensen, an independent contractor who worked for Mosslake on the ventilation shaft.

6. Dr. Harry Edgar, a computer image technologist from Curtin University and Image Technology Pty Ltd.

7. A further three drillers who "may well be needed" to give evidence.

8. Three expert witnesses from independent companies based in Perth.

The nature of the evidence to be given by these persons was not elaborated.

1. In support of the motion, Anthony Rosenthal, the solicitor with carriage of the proceedings for Baker Hughes, said on affidavit that he is hopeful that the Brisbane District Court proceedings can be entered on the callover list within the next couple of months. He estimated that evidence at the trial would take 6 or 7 days to hear. Baker Hughes is registered in New South Wales and those of its representatives who would be giving evidence at the trial live and work in Brisbane. A design expert is to be flown from the United States. Rosenthal said Baker Hughes is likely also to call evidence from representatives of Mitchell Drilling Contractors which has its registered office in Brisbane. Costain Australia Ltd, which was the head contractor, administered the contract from its Brisbane office. The ventilation shaft which was drilled using the equipment in question is at Gordonstone some 350 kilometres west of Rockhampton.

2. Ross Jackaman, the District Manager, Australia/Far East Region of Baker Hughes Mining Tools, also gave affidavit evidence about the negotiations leading to the contract to design and supply the cutter. He dealt with Mr Fischer of Mosslake. He and Sonia Calvert, two of the likely witnesses in the proceedings, work from the Brisbane office of Baker Hughes. He believed that the head and cutter involved were located at Emerald near Gordonstone. In reply to that affidavit, Macleay said that the head and cutters were in storage in Perth. He denied that the location of the ventilation shaft would be of any consequence in the litigation.

3. Mosslake's conduct in relation to the proceedings in the District Court in Brisbane has not been convincingly explained by the evidence called on its behalf. If the expressed concerns about the state of the list and the limits of that court's jurisdiction were genuine, one would expect to have seen the counterclaim proceedings instituted in the Federal or Supreme Courts in Queensland and appropriate orders sought in relation to the transfer or disposition of the principal proceedings in the District Court. The reasons given for not appealing the decision of Judge Forno also ring hollow. If Mosslake's intention had always been to have its counterclaim dealt with in the Federal or Supreme Courts, then its approach to the District Court proceedings was inexplicable. It involved a waste of time and money and inconvenience to Baker Hughes which is unlikely to be compensated for on a party and party costs order. The approach to the question of forum in respect of the counterclaim in the District Court was at best leisurely and neglectful. At worst, it was a tactic calculated to delay and impede the process of the claim against it.

4. I repeat here what I said as a member of the Full Court in Bomanite Pty Ltd v. Slatex Corporation Australia Pty Ltd (1991) 104 ALR 165 at 177:
   

"Non-compensable inconvenience and stress on individuals are significant elements of modern litigation. Costs recoverable even on an indemnity basis will not compensate for time lost and duplication incurred where litigation is delayed or corrective orders necessary. The public interest also has become an increasingly significant element in the application of judicial resources. Inefficiencies in their use arising from lost and wasted time can never be compensated by costs."

As Lord Griffiths said in Ketteman v. Hansel Properties Ltd [1987] AC 189 at 220, account must now be taken of the pressure on the courts caused by the great increase in litigation and the consequent necessity that, in the interests of the whole community, legal business should be conducted efficiently. His Lordship observed:

"We can no longer afford to show the same indulgence towards the negligent conduct of litigation as was perhaps possible in a more leisured age."

And although his Lordship's remarks were in the context of an amendment to pleadings at the close of trial, they have a wider application. - see also Bomanite v. Slatex (supra) at 173 per Gummow J.

1. Mosslake has taken an approach to the use of judicial resources that is cavalier and is not to be rewarded with any forensic advantage. If it had a complaint about Judge Forno's order the appropriate step was to appeal it. If it had a concern about the jurisdiction of the District Court then it should either have brought the counterclaim proceedings in the Federal or Supreme Court or moved to transfer the whole of the District Court proceedings to the Supreme Court. Having said all that, I do not consider there is anything to be gained by staying or dismissing the proceedings in this Court. I am satisfied however, that the most appropriate venue is the Brisbane Registry of the Court. There are solicitors on both sides of the case there who are familiar with the matter. There the judges controlling the progress of the case will be in the best position to consider how to deal with it in light of the pending District Court proceedings. Given Mosslake's initial choice of jurisdiction it cannot be thought oppressively inconvenient. The question of trial venue can be left open. In that regard it is to be noted that this Court has the power to hear a case in more than one centre if economy and efficiency so dictate.

2. On the question of security for costs, I have read the affidavit filed by Anthony Rosenthal in the District Court in support of the application before Judge Forno. That evidence included the 1991 Annual Return of Mosslake filed at the offices of the Australian Securities Commission and indicated current assets of $271,714 and current liabilities of $272,792. An exchange of correspondence between the parties in relation to the question of securities was exhibited to an affidavit of Mr Rosenthal in the District Court. In that correspondence the solicitors for Mosslake asserted that their client's operating losses for the year ended 30 June 1991 were entirely attributable to Baker Hughes' conduct as particularised in their counterclaim. Since that time it was said Mosslake had continued to trade successfully and had recently completed two contracts for CRA Exploration Ltd at Granite Flats and Bald Hills in Victoria with gross proceeds to that time being $119,821 and $111,961 respectively. A contract for coring and bulk sampling for CRA Ltd at Margaret River commencing on 26 March 1993 was projected to yield a gross income of $120,000. No further information was proffered about Mosslake's financial position in that letter. A further inquiry to Messrs. Flower and Hart evidently subsequently acting for Mosslake Drilling elicited a response on 29 September 1992 that Mosslake was not prepared to provide any further financial records to the solicitors for Baker Hughes. In a further affidavit filed in opposition to the motion presently before the Court, Mr Macleay referred to Judge Forno's finding that Mosslake was of very limited means except prospectively. That statement, according to Mr Macleay, was made when the only evidence of the financial affairs of Mosslake was an affidavit from himself which showed that the company had unencumbered assets in the form of drilling equipment valued at over $500,000. That valuation, he said, was very conservative and in fact the equipment is valued by their insurance company at $1 million. He exhibited to his affidavit filed in these proceedings a copy of the relevant insurance invoice. This indicates that the insured is Mosslake Pty Ltd. The applicant in these proceedings is Mosslake Drilling Services Pty Ltd. Whatever criticism may be made of his Honour Judge Forno's order and the reasons for making them, it seems to me that in the circumstances the same order should be made in this case. There was a basis for his Honour's finding that Mosslake was of limited means and for the exercise of his discretion that has not been dispelled by the evidence put before me. In the circumstances, Mosslake should not be advantaged in relation to the provision of security for costs by the way in which it has conducted itself in relation to the District Court proceedings. I propose therefore to make an order in similar terms to those of Judge Forno with liberty to apply to vary the order if Mosslake can, on proper evidence, satisfy the Court in Brisbane that it is appropriate to do so. The proceedings will be transferred to the Brisbane Registry of the Court.