Pegasus Leasing Ltd (Respondent) v Balescope Pty Ltd and Ors (Appellants) and Allegra Corporation Ltd (Defendant by Counterclaim) and Allegra Investments Ltd (Defendant by Counterclaim) and Maunthill Pty Ltd..

[1994] SASC 4763

COURT IN THE FULL COURT OF THE SUPREME COURT OF SOUTH AUSTRALIA BOLLEN(2), PRIOR(3) AND PERRY(1) JJ

CWDS
Practice and procedure - stay of proceedings - actions in two jurisdictions - Application for a stay of proceedings in South Australia pending resolution of Federal Court proceedings dealing with the same subject matter issued out of the ACT Registry of that Court - previous unsuccessful cross-vesting application to transfer the proceedings into the Federal Court - held that failure of the cross-vesting application should normally lead to a refusal of a stay application which, if successful, would have the same practical effect - observations as to the test to be applied where actions brought in two Australian jurisdictions and application brought to stay one of them on convenient forum grounds. Pegasus Leasing Ltd v Tieco International (Australia) Pty Ltd and Ors (unreported) Debelle J 14.7.93 Judgment No 4044; Australian Commercial Research and Development Ltd v ANZ McCaughan Merchant Bank Ltd (1989) 3 All ER 65; Voth v Manildra Flour Mills (1990) 171 CLR 538; Z.P. v P.S. (unreported) 29.6.94 FC94/029; Cope Allman (Australia) Ltd v Celermajer and Anor (1988) 11 FLR 488 and Maritime Insurance Co Ltd v Geelong Harbor Trust Commissioner (1908) 6 CLR 194, considered.

HRNG ADELAIDE, 3-4 August 1994 #DATE 20:9:1994 #ADD 13:3:1995

Counsel for appellants Balescope:         Mr N Strawbridge
   with him Ms R Batt

Solicitors for appellants Balescope:        Minter Ellison Baker
   O'Loughlin

Counsel for respondent Pegasus:             Mr P Mcnamara

Solicitors for respondent Pegasus:         Kelly and Co

Counsel for defendant by counterclaim
Allegra Corporation   Mr A Fairbank

Solicitors for defendant by counterclaim Allegra Corporation:   Phillips Fox as
   agents for Phillips
   Fox Canberra ACT

Counsel for defendant by counterclaim Allegra Investments   Mr A Fairbank

Solicitors for defendant by counterclaim Allegra Investments   Phillips Fox as
   agents for Phillips
   Fox Canberra ACT

Counsel for defendant by counterclaim Maunthill Pty Ltd:  Mr G Britton

Solicitors for defendant by counterclaim Maunthill Pty Ltd:  Phillips Fox as
   agents for Blake
   Dawson Waldron
   Canberra ACT

Counsel for defendant by counterclaim M G Sinclair:   Mr G Britton

Solicitors for defendant by counterclaim M G Sinclair:   Phillips Fox as
   agents for Blake
   Dawson Waldron
   Canberra ACT

ORDER
Appeal dismissed.

JUDGE1 PERRY J This is an appeal against the dismissal by a Master of an application by the appellants, who are the defendants in the action, to stay the proceedings. By order of the Honourable Justice Olsson made on 3 June 1994, the appeal was referred for hearing to the Full Court.

2. The reference of the appeal to the Full Court does not detract from the application of Rule 97.03(1) pursuant to which the appeal is by way of re-hearing, with the consequence, inter alia, that the well known principles as to the review of a discretion apply.

3. For the appeal to succeed it is necessary for the appellants to demonstrate that the Master's exercise of his discretion miscarried in some way, and that on a proper exercise of the discretion, the application should have been granted.

4. Although this appeal is brought within one action only, the application for a stay was made by the defendants in relation to four actions in the Court. Apart from this action, they were Actions 821 of 1992, 822 of 1992 and 1966 of 1992.

5. The respondent Pegasus Leasing Ltd ("Pegasus") is the plaintiff in those actions and in more than forty other actions commenced variously in the District Court and in this Court, in which they seek judgments for amounts said to be due to it by the members or former members of various thoroughbred bloodstock breeding partnerships. The District Court actions have since been transferred to this Court.

6. In the action in question in this appeal, the plaintiff sues for an amount said to be due on an agreement pursuant to which it alleges that certain of the defendants, trading as Capricorn Park No 2 Breeding Partnership, agreed to lease fourteen thoroughbred horses for a term of three years. The remaining defendants are sued as guarantors.

7. Initially the action was brought against 36 defendants. At the time the appeal was argued, the action had been compromised against most of the defendants. It is now proceeding against only eight of those originally sued, of whom three are natural persons and three are limited companies associated with those natural persons. Two of the natural persons live in Sydney and one of them in the ACT.

8. The defendants have joined certain other parties by counterclaim. Two of the defendants by counterclaim, Allegra Corporation Ltd and Allegra Investments Ltd, are New Zealand based companies. The only other defendants by counterclaim heard on the appeal were the fourth defendant by counterclaim, Mauntill Pty Ltd, a company registered in the ACT, and Michael George Sinclair, an accountant practising in the ACT.

9. None of the defendants by counterclaim to whom I have referred were served with the application for a stay, with the consequence that they were not given an opportunity to be heard on the hearing of it before the Master. However, they were represented on the hearing of the appeal before this Court.

10. The respondent instituted the present proceedings, and indeed, a number of other similar actions in this Court, on 1 April 1992.

11. On 15 May 1992, the defendants issued Federal Court proceedings out of the ACT Registry of that Court. Pegasus is the respondent to the Federal Court proceedings in which the applicants, who in the main are the defendants to the proceedings the subject of this appeal, seek various heads of relief, including a declaration that the agreement, including the guarantee the subject of the action in this Court, is void pursuant to s.87 of the Trade Practices Act 1974 (Cwth) or s.72 of the Fair Trading Act 1987 (NSW), damages pursuant to both of those Acts, relief as to breaches of the Companies (NSW) Code, a claim that the agreements and guarantees are "unjust" within the meaning of the Contracts Review Act (1980) (NSW), and a declaration that Pegasus is liable to pay "equitable compensation".

12. Substantially, that relief is now also sought by way of the amended defence and counterclaim filed in the present proceedings on 23 March 1994.

13. By application brought in this Court on 13 August 1992, the appellants sought in the alternative an order for stay of the proceedings in this Court pending final judgment in the Federal Court action, or an order that the proceedings in this Court be transferred to the Federal Court (Australian Capital Territory Registry) pursuant to s.5(1) of the Jurisdiction of Courts(Cross-Vesting) Act 1987 (the "Cross-Vesting Act").

14. Debelle J heard that application insofar as it sought a cross-vesting order, as to which he delivered reasons for judgment on 9 December 1993 (unreported, Judgment No S4325). He dismissed the cross-vesting application.

15. There could be no appeal from the decision of Debelle J, having regard to s.13(a) of the Cross-Vesting Act.

16. In the course of his reasons for decision Debelle J observed:
    "The actions in this Court and in the Federal Court are
    related. It is, therefore, necessary to consider whether it
    is more appropriate that these actions be heard in the
Federal Court. Although it is s.5(1)(b)(iii) which requires
    regard to be had to the interests of justice, I do not think
    that the interests of justice can fairly be excluded from
    the factors to which regard should be had when determining
    which is the more appropriate Court. The interests of
    justice is a phrase which should be read widely: Bourke v
State Bank of NSW (1988) 85 ALR 61, 75 and 78. In my view,
    what is significant is that the issues as between Pegasus
    and members of the syndicates and the guarantees are
    relatively straightforward and capable of prompt and ready
    prosecution. There is no plea that the defendants have
    rescinded or repudiated the loan agreements. The defendants
    will be able to set aside the agreements only if they are
    able to establish one or more of the statutory defences on
    which they rely. All that Pegasus has to do is to prove the
    loan agreements, which are in the main admitted, the amount
    owing, and the guarantees. In short, proof of the claim of
    Pegasus is capable of being relatively straightforward. The
    defences in each of the actions in the South Australian
    courts raise almost all of the issues which are raised as
    between Pegasus and the syndicate members in the Federal
    Court actions. The only issues not raised in the South
    Australian actions are the defences under the provisions of
    ss.169, 170 and 171 of the Companies (NSW) Code and under
    the Contracts Review Act, 1980(NSW), defences which can be
    readily included in the actions in this Court by amendment.
    Although the actions in South Australia can be prosecuted
    without any undue delay, the actions in the Federal Court
    might be delayed by issues arising as between the syndicate
    members and the other four sets of parties in the Federal
    Court actions. Those actions have already been delayed by
    the applications to strike out the statements of claim. The
    fact that Pegasus also applied to strike out the statement
    of claim is not, I think, relevant. Further, if the actions
    are transferred, Pegasus will no longer be dux litis which
    could render it more vulnerable to delays caused by
    applications by the other parties in the Federal Court
    actions. .... I do not think Pegasus should be liable to
    the possible delays in the Federal Court actions to which I
    have referred and be denied the opportunity promptly to
    prosecute its actions to judgment in this Court.

Further, Pegasus has properly commenced these actions in the
    court of the State in which it principally carries on
    business. The action is in respect of debts payable in
    South Australia. The cause of action arose in South
    Australia. Pegasus has regularly invoked the jurisdiction
    of the courts of this State and there is no challenge to
    their jurisdiction to be able to determine all issues as
    between the parties. I do not think that there is a risk of
    inconsistent findings if the actions in this State proceed
    as well as the Federal Court action. The greater likelihood
    is that the Federal Court will be concerned only with the
    issues as between members of the respective syndicates and
    the respondents other than Pegasus."

17. Debelle J did not go on to hear the application for a stay of proceedings. Instead, after his decision, that application was listed before the Master from whom the present appeal is brought.

18. In his reasons for decision, the Master accepted that the "tests" to be applied upon an application for a stay were different from those applicable to an application for a transfer under the cross-vesting legislation, and observed:
    "I must say that the onus on an applicant for a stay seems
    to me to be heavier than that involved in a cross-vesting
    application."

19. He saw support for that proposition in an earlier decision of Debelle J: Pegasus Leasing Ltd v Tieco International (Australia) Pty Ltd and Ors, unreported, 14 July 1993, Judgment No 4044.

20. The learned Master in the reasons for the decision now in question went on to observe:
    "I think Pegasus v Tieco and Ors is very much of assistance
    on this application as it has very many common features and
    his Honour's discussion of the stay application is apposite
    here. In the defendant's cross-vesting application his
    Honour found that the application was grounded on what was
    said to be a greater inconvenience and lesser cost of having
    the action heard in Victoria. In essence that is what the
    case at hand 'boils down to' though Canberra is the
    preferred venue. His Honour dealt with this factor (as he
    dealt with it likewise in this case on the cross-vesting
    application) pointing to the fact that in these days of
    quick and efficient transport and communication arguments of
    convenience have less force than hitherto. He mentions the
    proximity of Melbourne and Adelaide. I too mention the
    proximity of Canberra and Adelaide.

I would go into these matters in more detail but I see
    little to be gained in doing so. I follow Debelle J's
    approach to the question of a stay in Pegasus v Tieco
    (supra) and adopt the very same reasoning in this case. I
    particularly refer to all that he said from the bottom of
    page 12 to the end of that judgment where he specifically
    applies the 'tests' set out in Voth's case (supra).

Indeed if one ponders the 'tests' of Voth the finding I am
    about to make seems to me to be inescapable. Let me mention
    the last two of them which seem to me to 'sink the
    defendants' ship'.

The point is made:
    'The mere fact that the balance of convenience favours
    another jurisdiction or that some other jurisdiction would
    provide a more appropriate forum does not justify the
    dismissal of the action or the grant of a stay.'

In my view all that the defendants put is merely an argument
    as to balance of convenience or a more appropriate forum
    which does not justify a stay.

The further point:
    'The jurisdiction to grant a stay or dismiss the action is
    to be exercised with great care or extreme caution.'

I must say that only ordinary care and caution would justify
    a finding against the defendants' application in this case."

21. Part of the passage in Pegasus v Tieco referred to by the learned Master reads as follows:
    "In addition to supporting the defendant's application, the
    accountants applied for an order staying the hearing of this
    action. This application was not made pursuant to the
Cross-Vesting Act. Instead the accountants invoked the
    common law rules as to convenience of forum. In order to
    succeed the accountants were required to demonstrate that
    this court was clearly an inappropriate forum: Voth v
Manildra Flour Mills Pty Ltd (1990) 171 CLR 538. The
    accountants contend that the more appropriate forum was the
    Supreme Court of Victoria relying on the grounds advanced by
    the defendant. In determining the question whether this
    court was clearly an inappropriate forum regard must be had
    to the following factors:
    1. the fact that a plaintiff should be able to proceed in
    the forum in which he has regularly instituted the action.
    However, undue weight should not be placed on that factor;
    2. the inappropriateness or comparative inappropriateness of
    the suggested forum; and
    3. the extent to which the law of the forum is applicable in
    resolving the rights and liabilities of the parties. The
    substantive law of the forum is a very significant factor in
    the exercise of the court's discretion but the court should
    not focus upon that factor to the exclusion of all others:
    see Voth v Manildra Flour Mills Pty Ltd (at 564-566)."

22. In Voth v Manildra Flour Mills, two companies incorporated and resident in New South Wales sued Voth, an accountant resident in and a citizen of the United States of America practising in Missouri, in the Supreme Court of New South Wales for damages for professional negligence in the giving of advice relating to the plaintiffs' taxation affairs. The plaintiffs obtained leave to serve the statement of claim in Missouri. The defendant having filed a conditional appearance, sought to have the statement of claim, or the service of it, set aside, or alternatively, an order that the proceedings be stayed pending determination of the issues between the parties in an appropriate court in the United States.

23. At first instance, a Judge of the Supreme Court of New South Wales dismissed the application of the defendant. An appeal to the Court of Appeal of New South Wales was likewise dismissed. On further appeal to the High Court, the majority held that the action should be stayed on the ground that New South Wales was clearly an inappropriate forum in which to permit the action to proceed.

24. The question which arises is whether or not the "clearly inappropriate forum" test adopted by the High Court in Voth v Manildra Flour Mills Pty Ltd should govern the approach of the Court to the question of determining an application for a stay in circumstances such as those posed in this case. The question of principle here is whether proceedings in one or other of two courts in different States or a State court as opposed to the Federal Court sitting in another State, should be stayed to enable the litigation to proceed in what is said to be the more appropriate forum.

25. In my opinion, the decision in Voth v Manildra Flour Mills Pty Ltd is of application only to situations where the competing courts are a court within Australia and a court outside of Australia. Although the Court did not say so expressly, it does not seem to me that in that case the High Court was propounding principles of application to jurisdictional contests within Australia.

26. Support for the view that the case is limited to the situation where the issue is as to whether an Australian court is the most convenient forum as opposed to a foreign court is derived from dicta in a recent unreported decision of the High Court: Z.P. v P.S. (unreported) 29.6.94, FC94/029. In that case, Mason CJ, Toohey and McHugh JJ in their joint judgment said (6):
    "Prior to the decision of this Court in Voth v Manildra
Flour Mills Pty Ltd (1990) 171 CLR 538), the principles upon
    which the Family Court acted in determining whether it
    should allow a foreign forum rather than itself determine a
    question of custody seem to have accorded with the foregoing
    account of the law (see El Alami and El Alami (1988) FLC
91-930; Taylor and Taylor (1988) FLC 91-943). But, after
    the decision in Voth, the Family court adopted a different
    approach to submissions that a custody dispute should be
    determined in a foreign forum. In Voth, this Court decided
    that, when an issue arises as to whether a foreign forum
    rather than an Australian court is the forum most convenient
    to determine a dispute, the Australian court should hear the
    matter unless it is satisfied that it is a clearly
    inappropriate forum."

27. It follows that the learned Master erred in taking the view that Voth v Manildra Flour Mills Pty Ltd obliged him to apply the "clearly inappropriate forum" test in disposing of the stay application. But it seems to me that despite that, he reached the correct conclusion.

28. If the "clearly inappropriate forum" test is not applicable to applications to stay in situations such as that in question here, what test does apply?

29. In answering that question, Mr McNamara of counsel for Pegasus referred the Court to the decision of Gibbs J, as he then was, in Cope Allman (Australia) Ltd v Celermajer and Anor (1988) 11 FLR 488. That case concerned an application to stay proceedings instituted in the Supreme Court of the Australian Capital Territory on the basis that the more convenient forum was the Supreme Court of New South Wales. During the course of his judgment in that case, Gibbs J observed (492):
    "However, the question that I am bound to pose to myself is
    not simply, 'Which is the more convenient forum?' The
    principles to be applied in such a case as this were laid
    down by the High Court in Maritime Insurance Co Ltd v
Geelong Harbor Trust Commissioner (1908) 6 CLR 194."

30. He went on to conclude (494):
    "Before I may decline to exercise jurisdiction and deny to
    the plaintiff its prima facie right to proceed in this Court
    I must be satisfied that there would be something amounting
    to vexation, oppression or injustice to the defendants. I

    am not so satisfied."

31. That case was decided before the introduction throughout Australia of the uniform statutes conferring interlocking and reciprocal jurisdiction throughout the superior courts of the land, pursuant to which cross-vesting orders may, in appropriate cases, be made. As was observed by Debelle J in his decision on the cross-vesting application in this case:
    "Cross-vesting applications are determined having regard
    broadly to the interests of justice."

32. If the test before the introduction of the cross-vesting legislation was that the applicant for a stay needed to demonstrate "vexation, oppression or injustice", the test could hardly be less stringent now that the cross-vesting legislation is in force, at least in those cases where the stay is sought in order that proceedings may be pursued in another Australian jurisdiction. I would conclude that in such cases the test is as identified in the Geelong Harbour Trust case, as explained by Gibbs J in the passage I have just cited from Cope Allman, but that in considering an application for a stay, the Court should now have regard to the question whether the parties have, or should have had, recourse to the cross-vesting legislation.

33. The fact that an unsuccessful application has been made under the cross-vesting legislation must be a factor which should weigh heavily in the scales in considering whether or not an application to stay proceedings, designed to have the same practical effect as a successful cross-vesting order, should be allowed. An application for a stay should not be permitted as an indirect means of appealing against a refusal to make an order under the cross-vesting legislation. To do so would be to render nugatory the effect of s.13(a) of the Cross-Vesting Act which proscribes appeals.

34. In the present case, the arguments which did not meet with success on the application for an order under the cross-vesting legislation were in substance no different from the arguments which are now advanced in support of the application for a stay. Given the existence of the cross-vesting legislation, it would only be in a most unusual and extraordinary case in which an application for a stay could succeed in such circumstances.

35. There is no reason in this case to adopt a different approach in responding to the application for a stay than the approach adopted by Debelle J in dealing with the cross-vesting application. The reasons advanced by him in the context of that application to support his refusal of it, apply equally strongly to the application for a stay, with the added fact that such an application for a stay should not, for the reasons which I have given, be favourably entertained after refusal of a cross-vesting application.

36. A further matter, not adverted to in Debelle J's decision on the cross-vesting application, is that clause 22.1 of the lease the subject of these proceedings, reads:
    "This lease shall be governed by and construed in accordance
    with the laws of South Australia and the parties hereby
    submit to the non-exclusive jurisdiction of the Courts of
    that State."

37. The submission to the jurisdiction of the Courts of this State, albeit non-exclusive, is a factor to be taken into account against the grant of the stay sought by the defendants.

38. During the course of argument, the parties referred to the fact that it is likely that the appellants will be dux litis at the trial, having regard to the fact that proof of Pegasus' claim is more or less a formality and is unlikely to give rise to any serious issue. But the question of who might be dux litis at the trial is different from the question of who should be dux litis in the conduct of the litigation before trial. Here, no doubt, the defendants would be happy if the case never came to trial. It is Pegasus which is pursuing its claim for moneys due to it on the lease, and no doubt it has a much keener interest in bringing the matter to trial. It is inappropriate in those circumstances to accede to the making of an order which would displace Pegasus from that position and allow the defendants to be put in a position of conducting the litigation as plaintiffs or applicants in the Federal Court.

39. Before parting with the matter, I should deal with a separate argument put by counsel for such of the defendants by counterclaim as were heard on the appeal.

40. They argued that the plaintiff's application to stay the proceedings would operate also to stay the counterclaim as against them. But as they were happy for the counterclaim not to proceed, so the argument went, there was really no issue between them and the plaintiff as to that aspect of the matter. However, so it was put, having regard to the decision in Australian Commercial Research and Development Ltd v ANZ McCaughan Merchant Bank Ltd
(1989) 3 All ER 65, the appropriate order should be to dismiss the counterclaim, rather than to stay the proceedings, forcing the plaintiff to elect to proceed with its action against those defendants by counterclaim in the Federal Court proceedings.

41. That submission is misconceived. If the defendants vis-a-vis the plaintiff should not be granted a stay, the attitude of the defendants by counterclaim cannot affect the matter. Separately, of course, the defendants by counterclaim may argue that as between the defendants and them the proceedings should be stayed or dismissed so as to be determined elsewhere.

42. As to that, there is already a separate application due to be heard by a Master of the Court in which the defendants by counterclaim seek an order that the counterclaim be struck out. In my opinion, that application should be dealt with in the ordinary course. The outcome of that application cannot affect the ability of the plaintiff to proceed with its claim against the defendants in this Court.

43. The appeal should be dismissed.

JUDGE2 BOLLEN J I think that the appeal should be dismissed. I agree with the reasons of Perry J.

JUDGE3 PRIOR J I agree with the reasons published by Justice Perry. The appeal should be dismissed.