PaperlinX Australia Pty Ltd v Canty
[2011] VSC 127
•5 APRIL 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. S CI 2010 5049
| PAPERLINX AUSTRALIA PTY LIMITED (ACN 007 228 113) | Plaintiff |
| v | |
| PAUL BRIAN CANTY AND OTHERS | Defendants |
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JUDGE: | HABERSBERGER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 15 MARCH 2011 | |
DATE OF JUDGMENT: | 5 APRIL 2011 | |
CASE MAY BE CITED AS: | PAPERLINX AUSTRALIA PTY LTD v CANTY | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 127 | |
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Practice and Procedure – Jurisdiction of Courts (Cross-vesting) Act 1987, s.5(2)(b)(iii) – Interests of justice – Factors to be considered on transfer application – Governing law and exclusive jurisdiction provision – Connections with competing jurisdictions – Cost and inconvenience – Transfer of proceeding.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J.L. Evans | Middletons |
| For the Defendants | Mr E. Patakas (Solicitor) | Evangelos Patakas & Associates |
HIS HONOUR:
Introduction
This is an application by the defendants by summons filed on 19 October 2010 for an order that the proceeding 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. The defendants relied on two affidavits of Paul Brian Canty sworn on 16 December 2010 and 10 March 2011 respectively in support of their application. Mr Canty was the first defendant, the husband of the second defendant, Denise Irene Canty, and a director of the fourth and fifth defendants. Mrs Canty was a director of the third defendant. The plaintiff, PaperlinX Australia Pty Ltd (“PaperlinX”) opposed the application. It relied on the affidavit of its Legal Counsel, Celia Gerreyn, sworn on 2 February 2011.
The Proceeding
In its statement of claim indorsed on the writ issued on 15 September 2010, PaperlinX pleaded that in and throughout 2008 and 2009 it entered into a number of agreements with The Quality Group Australia Pty Ltd (“Quality Group”) for the sale and delivery of paper to Quality Group’s warehouse. PaperlinX claimed that invoices totalling $1,084,350.92 for the supply of paper to Quality Group remain unpaid. Quality Group went into liquidation on 15 June 2010.
PaperlinX also pleaded that in or around December 2008, following Quality Group’s failure to pay amounts owing to it, it entered into an agreement with Quality Group which incorporated terms relating to the future conduct of the business between the two companies, including a payment plan (“the further agreement”). The further agreement was said to be partly oral and partly in writing. To the extent that the further agreement was oral it was said to be constituted by discussions between Mr Canty, the sole director of Quality Group, and employees of PaperlinX including Paul Amery, Darren Allard and Wayne Stanistreet.
PaperlinX pleaded that there were terms of the further agreement that Quality Group would pay interest to it on the amount overdue and outstanding at the end of each month and that where there were amounts owing to it by Quality Group, PaperlinX was entitled to withhold delivery of the goods and charge Quality Group for the costs associated with the storage of the goods prior to the delivery of the goods to Quality Group. PaperlinX claimed that invoices totalling $40,507.78 for interest and $91,106.62 for storage costs remained unpaid.
Thus, it was alleged that Quality Group was indebted to PaperlinX in the sum of $1,215,965.32.
PaperlinX then pleaded that on 16 July 2008 it entered into a Deed of Guarantee with Quality Group and the five defendants, Mr Canty, Mrs Canty, Quality Logistics Australia Pty Ltd, Quality Publications Australia Pty Ltd, and Quality Images (Australia) Pty Ltd, whereby each of the defendants guaranteed the obligations of Quality Group in relation to any agreements Quality Group entered into with PaperlinX.
Finally, PaperlinX pleaded that despite demand none of the defendants had paid to it the amounts owing by Quality Group and that, accordingly, each of the defendants was indebted to it in the sum of $1,215,965.32.
By a summons filed on 10 March 2011, PaperlinX sought to strike out a number of paragraphs of the defendants’ defence dated 16 December 2010. This defence had been served but not filed. Shortly prior to the hearing, the defendants filed and served a substitute defence. Mr Evans of counsel, who appeared for PaperlinX, submitted that this defence did not cure the problem with the original defence, which was that the defendants as guarantors were seeking to rely in part upon an alleged cross-claim by Quality Group for damages in reduction of, or as a defence to, their liability under the Deed of Guarantee, contrary to the principle referred to in the decision of the Full Court in Indrisie v General Credits Ltd.[1] Mr Patakas, the solicitor appearing for the defendants, really had no answer to the proposition that the defendant guarantors could not raise any such cross-claim as an equitable set-off against PaperlinX’s claim. This was an important point because it impacted on considerations such as the witnesses likely to be called by both sides at the trial.
[1][1985] VR 251 (Young CJ, Crockett and Nicholson JJ). See also Cellulose Products Pty Ltd v Trude (1970) 92 WN (NSW) 561 and Covino v Bandag Manufacturing Pty Ltd [1983] 1 NSWLR 237.
Although Mr Evans also pointed out that the proper procedures had not been followed with respect to either the initial defence[2] or the substitute defence,[3] he was content for the cross-vesting application to proceed on the basis of the substitute defence, minus the defences pleaded contrary to the principle in Indrisie This meant that it was necessary to consider the other defences raised by the defendants.
[2]See Supreme Court (General Civil Procedure) Rules 2005, r.14.10.
[3]See Civil Procedure Act 2010, ss.41 and 42.
First, the defendants pleaded that PaperlinX and Quality Group entered into an agreement for the supply of paper in about October 2007 (“the 2007 Head Paper Supply Agreement”) and several similar subsequent individual agreements. The 2007 Head Paper Supply Agreement was said to be oral, contained in conversations between Mr Canty and Mr Allard at the factory premises of Quality Group in Rhodes, a suburb of Sydney. The defendants denied that Quality Group was indebted to PaperlinX in the claimed sum of $1,084,350.92 because they did not admit the delivery of all of the paper referred to in PaperlinX’s invoices; denied that Quality Group had failed to pay the sum due by the due date; and alleged that, in breach of the 2007 Head Paper Supply Agreement and the subsequent individual agreements, PaperlinX had wrongly charged Quality Group the additional charge of $40 per ton of paper for the delivery by self-loading trucks when the paper was delivered to premises which had loading dock facilities and had on occasions charged Quality Group a price in excess of the agreed price of US$930 per ton and had calculated the price in Australian currency using the incorrect exchange rate. The defendants also denied the making of the further agreement and any liability on the part of Quality Group to pay the claimed interest and storage charges.
Secondly, Mr Canty and the three corporate guarantors, whilst admitting that they signed the Deed of Guarantee, pleaded that it was part of a broader credit agreement constituted by oral conversations between Mr Canty and Mr Allard by telephone and at meetings at Quality Group’s factory premises in Rhodes, which PaperlinX had breached. They further alleged that the Deed of Guarantee was unjust within the meaning of the Contracts Review Act 1980 (NSW) and should not be enforced. They also denied service of any demands and disputed the alleged indebtedness of Quality Group.
Mrs Canty did not admit the Deed of Guarantee. She pleaded that if she was bound by the Deed of Guarantee, which she denied, then executing it was extremely improvident because she did not receive any material benefit and she was therefore a volunteer and the purported guarantee was unlimited. Mrs Canty further pleaded that when she executed the Deed of Guarantee she did not understand the nature or effect of the document or that signing it was improvident because she was not aware of the financial situation of Quality Group or of the business relationship between PaperlinX and Quality Group. Mrs Canty also pleaded that she was not able to properly understand the nature or effect of the Deed of Guarantee or that executing it was improvident because she had little or no business experience or acumen and she relied entirely on her husband for advice in all financial and legal matters and acted at his direction. Mrs Canty finally pleaded that PaperlinX knew or ought to have known that she would repose trust and confidence in her husband in matters of business and that he might not fully and accurately advise and explain the meaning or effect of the document, or the fact that signing it was improvident and that it did not take steps to fully and accurately explain the transaction to her or to find out whether an independent person had done so. Therefore, she pleaded that, in the circumstances, it was unconscionable for PaperlinX to rely upon the Deed of Guarantee.
It can be seen, therefore, that the critical evidentiary issues are likely to be the making of the various agreements between PaperlinX and Quality Group, the terms of those agreements, the extent of the indebtedness of Quality Group to PaperlinX, and the circumstances surrounding the execution of the Deed of Guarantee.
The Test for Cross-vesting
Section 5(2)(b)(iii) of the Jurisdiction of Courts (Cross-vesting) Act 1987 provides:
Where … it is otherwise in the interests of justice that the relevant proceeding be determined by the Supreme Court of another State or of a Territory - the first court shall transfer the relevant proceeding to that other Supreme Court.
In Bankinvest AG v Seabrook,[4] Street CJ said that determination of a cross-vesting application:
calls for what I might describe as a “nuts and bolts” management decision as to which court, in the pursuit of the interests of justice, is the more appropriate to hear and determine the substantive dispute.
[4](1988) 14 NSWLR 711, 714.
The High Court in BHP Billiton Ltd v Schultz[5] made it clear that in deciding which court is the more appropriate, the plaintiff’s choice of the forum is not a relevant factor to be taken into account. For example, Gleeson CJ, McHugh and Heydon JJ said:
In the context of the Cross-vesting Act, one is not concerned with the problem of a court, with a prima facie duty to exercise a jurisdiction that has been regularly invoked, asking whether it is justified in refusing to perform that duty. Rather, the court is required by statute to ensure that cases are heard in the forum dictated by the interests of justice. An application for transfer under s.5 of the Cross-vesting Act is brought upon the hypothesis that the jurisdiction of the court to which the application is made has been regularly invoked. If it appears to that court that it is in the interests of justice that the proceedings be determined by another designated court, then the first court 'shall transfer' the proceedings to that other court. There is a statutory requirement to exercise the power of transfer whenever it appears that it is in the interests of justice that it should be exercised. It is not necessary that it should appear that the first court is a 'clearly inappropriate' forum. It is both necessary and sufficient that, in the interests of justice, the second court is more appropriate.[6]
[5](2004) 221 CLR 400.
[6](2004) 221 CLR 400, [14].
In Ross Mollison Group Pty Ltd v The Really Useful Company (Australia) Pty Ltd[7] Warren J, as her Honour then was, said that:
The courts have held that the “more appropriate forum” is the forum with the “most real and substantial connection” with the subject matter of the proceeding … Relevant factors to be taken into account in determining the more appropriate forum have included three factors. Firstly, the governing law of any agreement in dispute. Secondly, the connection between the alleged conduct and the jurisdiction. Thirdly, the cost and inconvenience for the parties as to the forum selected …
[Citations omitted]
[7][2000] VSC 256, [12].
Consideration of the Issues
Counsel for PaperlinX submitted that the first of the factors mentioned by Warren J favoured the retention of the proceeding in Victoria. He referred to the fact that clause 22 of what was said to be PaperlinX’s standard terms and conditions, which allegedly applied to each of the relevant supply agreements, provided that the transactions were governed by “the law of Victoria and Australia” and that “the parties submit themselves to the exclusive jurisdiction of the courts of any State or Territory within Australia as may be selected by the Seller in its sole discretion for proceedings in respect of any matter arising hereunder”. More relevantly, counsel also referred to clause 1.12 of the Deed of Guarantee which provided that:
In all respects, this Deed shall be governed by and construed according to the laws of the State or Territory that The Suppliers may in their sole discretion determine. Failing such determination, in all respects, this Deed shall be governed by and construed according to the laws in force in New South Wales and the parties hereby submit to the exclusive jurisdiction of the Courts of that State.
By a facsimile dated 3 November 2010, the solicitors for PaperlinX wrote to Mr Patakas’ firm confirming that the commencement of this proceeding in this Court constituted a determination by PaperlinX under clause 1.12 of the Deed of Guarantee that it was to be governed by and construed according to the laws of the State of Victoria, and under clause 22 of the standard terms and conditions that “the relevant jurisdiction for proceedings in respect of any matter arising under the [supply] agreements is Victoria and the Courts of that State”. The facsimile also purported, “for the avoidance of doubt”, to give “further notice” of such determinations by PaperlinX.
Mr Patakas submitted that PaperlinX, by its predecessor, had previously determined that the dispute was to be governed by the laws of New South Wales and that the courts of that State would have jurisdiction over the dispute. This submission was based on the following events. In April 2009, PaperlinX apparently assigned to another company, Paper Australia Pty Ltd (“Paper Australia”), its rights and entitlements against the principal debtor, Quality Group, and the guarantors. In May 2009, Paper Australia issued statutory demands against Quality Group and the third, fourth and fifth defendants, nominating the address of a firm of solicitors in Bankstown, New South Wales as the place to serve any originating process to set aside such demands. In June 2009, each of Quality Group and the third, fourth and fifth defendants issued originating proceedings in the Supreme Court of New South Wales to set aside the statutory demands and served the same at the place nominated by Paper Australia, namely in Bankstown, New South Wales. On 3 August 2009, Paper Australia filed a Notice of Appearance in these proceedings and consented to orders setting aside the statutory demands. In February 2010, Paper Australia assigned back to PaperlinX its rights and entitlements against Quality Group and the guarantors.
I am not persuaded that the issuing of statutory demands against Quality Group and the corporate guarantors specifying an address for service in New South Wales constituted a determination by Paper Australia, as the then assignee of PaperlinX, under clause 1.12 of the Deed of Guarantee. The statutory demands were properly served at the registered offices of those companies in New South Wales[8] and in compliance with the requirements of the form prescribed by the Corporations Regulations 2001 they specified as the address for service of any application and affidavit the address of Paper Australia’s solicitors in the State in which the demands were served.[9] In my opinion, these actions did not constitute a determination by Paper Australia, as the then assignee of PaperlinX, that the dispute was to be governed by the laws of New South Wales or that the courts of that State would have jurisdiction over the dispute. Although applications were made to the Supreme Court of New South Wales, that was done by Quality Group and the corporate guarantors, not Paper Australia.
[8]Corporations Act 2001, s.109X(1)(a).
[9]Form 509H. See Dominion Capital Pty Ltd v Pico Holdings Inc (2001) 4 VR 195.
Mr Evans submitted that clause 1.12 of the Deed of Guarantee should be construed as having the same effect as clause 22 of the standard terms and conditions and that PaperlinX had therefore selected Victoria as the exclusive jurisdiction for the proceeding for the purposes of the underlying agreement and the Deed of Guarantee. He further submitted that the existence of a clause under which the parties had submitted to the exclusive jurisdiction of Victorian courts was a particularly significant factor.
There are a number of points to make about this submission. First, in my opinion, the exclusive jurisdiction part of clause 22 of the standard terms and conditions is not relevant to the issue I have to decide because it relates to proceedings between PaperlinX and Quality Group, who were “the parties” to the supply agreements. Whilst it is a necessary part of PaperlinX’s claim against the guarantors to prove the amount of Quality Group’s indebtedness to PaperlinX, and that claim will be determined according to Victorian law, any argument about the exclusive jurisdiction for that claim must be based on the terms of the Deed of Guarantee.
Secondly, in the events that have occurred, clause 1.12 does not, in my opinion, contain any submission by the parties to the exclusive jurisdiction of Victorian courts. As stated above, either by commencing this proceeding or by its solicitors’ letter, PaperlinX has determined that the Deed of Guarantee was to be governed by and construed according to Victorian law. However, such a determination does not extend to any submission to exclusive jurisdiction. Under the wording of clause 1.12 that only occurs if PaperlinX does not make a determination and New South Wales then becomes the exclusive jurisdiction by default.
Thirdly, even if there has been a submission to the exclusive jurisdiction of Victorian courts by the parties to the Deed of Guarantee, the authorities relied on by counsel for PaperlinX in support of his submission that this is a particularly significant factor are distinguishable, in my opinion. Mr Evans relied on the following passage from the judgment of Whelan J in Slater & Gordon Pty Ltd v Porteous:[10]
Whilst exclusive jurisdiction clauses such as the clause in the January 2005 deed do not have the effect that they have in the “forum non conveniens” context, they remain a relevant factor and may be the critical factor in a particular case. Such a clause may indicate that the parties turned their minds to the question of where litigation should occur and agreed upon a single exclusive venue. This factor may be particularly compelling where it can be said that the parties must have been conscious at the time of the agreement of the existence of connecting factors between potential disputes and a State other than the exclusively designated State, and must have been conscious of the existence of potential inconvenience for one of the parties in litigating in the exclusively designated State.
[10][2005] VSC 398, [26]. See also World Firefighters Games Brisbane, 2002 v World Firefighters Games Western Australia Inc (2001) 161 FLR 355, [26], [33], [60] and [74].
Counsel also referred to the decision of Palmer J in Asciano Services Pty Ltd v Australian Rail Track Corp Ltd[11] where his Honour said that:
… regardless of whether a proper law and jurisdiction clause confers exclusive jurisdiction, it carries great weight in determining the appropriate forum in a cross vesting application because it records a term of the bargain between the parties that litigation arising from their agreement will be resolved in accordance with the substantive law of a specified forum and by the courts of that forum: see, for example, per Howie J in Patrick Badges Pty Limited v Commonwealth[2002] NSWSC 221, at [23]. Particularly persuasive is the weight of such a clause in a contract between commercial parties well able to protect their respective interests.
[11][2008] NSWSC 652, [18].
It should be noted, however, that in each of the above cases there was a term of the contract specifying the governing law and the jurisdiction to be that of a particular State, Victoria in the first case and South Australia in the second. By way of contrast, clause 1.12 did not contain any agreement by the parties upon an “exclusively designated State”. Instead, it left the determination of the governing law solely to the discretion of PaperlinX. Thus, it is arguable, in my opinion, that the exclusive jurisdiction submission allegedly contained within clause 1.12 of the Deed of Guarantee does not have the same significance as a clause where, as in the cases referred to, the parties have specifically chosen a particular jurisdiction.
Nevertheless, PaperlinX has validly determined that the Deed of Guarantee is to be governed by and construed according to the laws of the State of Victoria. Whilst not a very powerful factor, in my opinion, it is one that favours the retention of the proceeding in Victoria.
The second factor mentioned by Warren J was “the connection between the alleged conduct and the jurisdiction”. Quality Group’s registered office was in New South Wales and it carried on its business in that State. Each of the guarantors either lives in or has its registered office in New South Wales. On the other hand, PaperlinX’s registered office and principal place of business was in Victoria. Ms Gerreyn stated that PaperlinX leased premises in Chullora, a suburb of Sydney, which was staffed by Mr Allard whose role as regional manager was to market and sell PaperlinX products in New South Wales and Queensland. She deposed that he called on customers in those States, developing relationships with them and investigating any complaints. However, Ms Gerreyn said that according to Mr Simon Cameron, a former employee of PaperlinX, Mr Allard did not process orders from customers as they were sent to PaperlinX’s centralised customer service operation in Melbourne. There was some dispute about this last point because Mr Canty maintained that many of Quality Group’s orders were given or sent to Mr Allard as he attended Quality Group’s factory and office premises “almost every week”. It appears clear, however, that whether or not Mr Allard received the orders they ended up being dealt with by PaperlinX’s staff in Melbourne and that PaperlinX’s invoices came from Victoria and that payment was to be made there. All of the paper purchased by Quality Group from PaperlinX was delivered to its premises in New South Wales. According to Mr Canty the 2007 Head Paper Supply Agreement, which the defendants pleaded, was made with Mr Allard at Quality Group’s premises in Sydney and the Deed of Guarantee was negotiated and signed by the guarantors in New South Wales. Presumably, however, the offer was accepted by PaperlinX when the Deed was signed by Mr Amery in Victoria.
Taking all of the above into account, I am of the opinion that there is more of a connection between the subject matter of the proceeding and New South Wales than there is with Victoria, and that this factor therefore favours transferring the proceeding to New South Wales.
The third factor mentioned by Warren J was “the cost and inconvenience for the parties as to the forum selected”. In her affidavit Ms Gerreyn said that the management and supervision of the proceeding on behalf of PaperlinX would be conducted by employees in Victoria. All of the relevant books and records of PaperlinX were located in Victoria. PaperlinX had already engaged Victorian solicitors and counsel who were familiar with the matter. It was therefore submitted that unnecessary cost would be incurred if it had to send them interstate for directions hearings and the trial, alternatively unnecessary cost would be incurred if New South Wales solicitors and counsel took over the conduct of the matter. On the other hand, Mr Canty said in his first affidavit that Mr Patakas’ firm had acted for Quality Group since its incorporation in 2004 and it was therefore familiar with Quality Group’s affairs, and in particular with this dispute from acting in the proceeding concerning the statutory demands. The documents and records of Quality Group were now held by the liquidators of that company in Sydney. Thus, it was submitted that leaving the proceeding to be heard in Victoria would involve the guarantors being forced to incur the extra expense of having their solicitor, and possibly counsel, travel to another State to represent the defendants in the interlocutory hearings and the trial, alternatively of incurring the cost of instructing local agents to represent the defendants. It seems to me that these considerations pretty much cancel each other out. I note, however, that the cost of instructing new solicitors did not stop PaperlinX from changing from one national firm of solicitors to another shortly after this proceeding was issued.
As far as the potential witnesses are concerned, it seemed to me that both sides exaggerated the likely number of witnesses. Although one cannot be certain, I consider that much of the plaintiff’s case will be based on documents which should either be admitted or easily proved and that it may therefore only call the three witnesses identified in the statement of claim as participating in relevant conversations with Mr Canty. They were Messrs Amery, Allard and Stanistreet. Mr Cameron might also be a witness. Three of these four gentlemen reside in Victoria and only one of the four, Mr Stanistreet remains employed by PaperlinX. Significantly, however, Mr Allard is resident in New South Wales.
Apart from Mr and Mrs Canty, it would appear that the defendants would probably call Quality Group’s purchasing officer, David Pragasam, and possibly its financial controller, Sunil Amaratunga. All four are resident in New South Wales. I do not accept Mr Evans’ submission that for this purpose there is any difference between Mr and Mrs Canty as parties and the other witnesses.
In my opinion, there is a fine balance as to which side will suffer more cost and inconvenience. What counts most in favour of transferring the proceeding to New South Wales, in my opinion, is that those I consider to be the three principal witnesses, Mr Allard and Mr and Mrs Canty, are all resident in New South Wales. As such, they are likely to spend more time giving their evidence, whereas the remaining witnesses on both sides are likely to be short and could well give their evidence by video link. Even if I am wrong to include Mr and Mrs Canty in this balancing exercise, the conclusion does not alter because the plaintiff’s witness, Mr Allard, lives in New South Wales, as do all of the defendants’ potential witnesses.
Conclusion
I have therefore concluded that the jurisdiction with the “most real and substantial connection” with the subject matter of the proceeding is that of New South Wales. Accordingly, I will order that this proceeding be transferred to the Supreme Court of New South Wales.
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