Pepetual Holdings Pty Ltd v Leviathan Pty Ltd

[1991] FCA 461

Re: PERPETUAL HOLDINGS PTY. LTD.; PERPETUAL INVESTMENTS PTY. LTD.; PERPETUAL
ESTATES PTY. LTD.; CYRIL JOHN AMER and SYLVIA LOO
And: LEVIATHAN PTY. LTD.; FRANCO TADDEO, GIANNA RINALDI, GEORGE BELPERIO,
VITTORIO BRUNO VENTURA, RAY D'ALESSANDRO and NEWMARK REAL ESTATE PTY. LTD.
No. S G57 of 1991
FED No. 461
Practice and Procedure
30 FCR 524

COURT

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIAN DISTRICT REGISTRY
GENERAL DIVISION
O'Loughlin J.(1)

CATCHWORDS

Practice and Procedure - Cross-Vesting - application to transfer Federal Court proceedings to Supreme Court of South Australia - separate proceedings involving many (but not all) litigants earlier instituted in Supreme Court - probability that an order would be made that the two sets of proceedings be heard together if both were under the control of one Court - willingness of this Court to consider the question of case management - order for transfer made.

Cross-Vesting - See above

HEARING

ADELAIDE

#DATE 8:8:1991

Counsel for the Applicants : Mr N. Morcombe

Solicitors for the Applicants : Cowell Clarke

Counsel for the 1st, 2nd, 3rd, 4th : Mr D. Bleby QC and Mr R. White
and 5th Respondents

Solicitors for the 1st, 2nd, 3rd, : Thomson Simmons and Co 4th and 5th Respondents

Counsel for the 6th and 7th : Mr P. Lawson
Respondents

Solicitors for the 6th and 7th : Lawson Downs
Respondents

ORDER

The within action be transferred from the Federal Court of Australia to the Supreme Court of South Australia.

The costs of these proceedings be reserved to the Supreme Court of South Australia.

Certified fit for counsel including senior counsel.

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

JUDGE1

These reasons for judgment are published as a consequence of orders made by the Court on 24 July 1991; one such order directed that these proceedings be transferred to the Supreme Court of South Australia pursuant to the provisions of sub-s.5(4) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) ("the Act")

1. Prior to April 1990, a group of people owned and operated a combined hotel and restaurant business in the city of Adelaide known as the "Green Dragon Hotel" and the "Settebello Restaurant". As a matter of convenience, those people will, in these reasons, be referred to as the "Leviathan group"; they include, either directly or indirectly, the first five named respondents. The last two respondents are the salesman and the business agent who were involved in the ultimate sale of that business. Within the same time frame, companies controlled by Mr Amer and Mrs Loo (two of the applicants in these proceedings) owned the freehold of another hotel, the "Old Mill", at Hahndorf, a small country town in the Adelaide hills. It will be sufficient to refer to Mr Amer, Mrs Loo and their companies, including those that are also applicants in these proceedings, as "the Amer group".

2. Commencing in late 1989, there were discussions between the two groups which led, in April 1990, to the Leviathan group purchasing the freehold premises of the "Old Mill" and the Amer group purchasing the lease and the business of the "Green Dragon" and the "Settebello Restaurant". The exact details of the two settlements have not, as yet, been investigated nor pleaded. However, for present purposes, it is sufficient to state that the two settlements were implemented contemporaneously.

3. Both purchasing groups became dissatisfied with their acquisitions. As a result, the Leviathan group instituted proceedings on 11 June 1991 in the Supreme Court of South Australia against the Amer group claiming, inter alia, damages for misrepresentation, negligence, breach of contractual undertakings and misleading or deceptive conduct. In their statement of claim, the Leviathan group have relied upon the Misrepresentation Act 1971 (S.A.) and the Fair Trading Act (1987) (S.A.) as well as on the provisions of the Trade Practices Act (1974) (Cth). However, it may be said of those proceedings that there was nothing about them that pointed to the need or the necessity of instituting them in the Supreme Court of South Australia or in this Court; either Court would have been an available and appropriate forum.

4. Subsequent to the service of the Supreme Court proceedings on the Amer group, the Amer group instituted proceedings in this Court on 12 July 1991 against the Leviathan group. They claimed that they were induced to purchase the business of the "Green Dragon Hotel" and the "Settebello Restaurant" as a result of misrepresentations; they sought declarations that the Leviathan group engaged in conduct that contravened the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (S.A.). In the Federal Court proceedings, the Amer group named Newmark Real Estate Pty. Ltd. and Mr D'Alessandro as additional respondents; they were both said to have engaged in conduct that breached the provisions of the Trade Practices Act as a consequence of them acting as agents for the Leviathan group in the sale of the hotel and restaurant business to the Amer group; neither of them is a party to the Supreme Court proceedings. In addition to the declaratory relief to which reference has been made, the Amer group also sought damages pursuant to the provisions of s.82 of the Trade Practices Act, damages for fraudulent misrepresentation, negligence and breach of contract and damages pursuant to the provisions of s.7 of the Misrepresentation Act 1971 (S.A.). It may also be said of these proceedings that there was nothing about them which pointed to the need or the necessity of instituting them in the Supreme Court of South Australia or in the Federal Court. As with the first-mentioned proceedings, both Courts were available and appropriate forums.

5. There was nothing about the facts of this case or the personalities who were involved that excited Federal interest: This case did not have an "Australia-wide nature", an expression used by Northrop J. in Mansell v Cumming (1989) 86 ALR 637 at p 643. Both businesses are situated in South Australia and all litigants are either South Australian residents or corporations that were incorporated in this State. There was no suggestion of interstate witnesses or interstate issues. It was only the invocation of s.52 of the Trade Practices Act that gave a Federal flavour to the matter.

6. The application that is the subject of these reasons was brought by way of notice of motion on behalf of the Leviathan group; they sought an order that the Federal Court proceedings be transferred from this Court to the Supreme Court of South Australia. The application was opposed by the Amer group; they pointed out - as was indeed the case - that, irrespective of the choice of Court, the proceedings that had been instituted by the Amer group had to be fresh originating proceedings - they could not have been by way of counter-claim because of the difference in the identities of the litigants. This meant, as I understood the argument, that the need for originating proceedings gave to the Amer group a free choice of forum. Furthermore, Mr Morcombe, counsel for the Amer group, argued that although there was a degree of relationship between the two sets of proceedings it was not of a sufficient degree to be significant. He conceded that there was a measure of common interest in the two causes of action up till the two settlements in April 1990 but that, thereafter, so he said, the two matters went their separate ways; thereafter, two separate and entirely independent bodies of evidence would be adduced. This led Mr Morcombe to the proposition that the two sets of proceedings could and should proceed independently of each other. Hence, so he concluded, there was no need and no justification to transfer these proceedings to the Supreme Court nor for his clients to consider an application to the Supreme Court for an order that the proceedings in the Supreme Court be transferred to this Court. When pressed, Mr Morcombe claimed that if the two sets of proceedings had been filed in the same Court (i.e. either the Federal Court or the Supreme Court) it would not have been appropriate for that Court to order that the two matters be heard together.

7. I am not at all attracted to this last argument. It is now well accepted that all Courts involve themselves in matters of case management; it is no longer left to the parties to determine when and if proceedings will be brought to trial and the manner in which proceedings will be prosecuted. These are matters in which all Courts continuously involve themselves. If both causes of action were in this Court, I am of the opinion that this Court would raise, of its own motion if necessary, the question whether they should be heard together. In the interests of saving court time, this Court would need to be convinced that there was no justification for hearing the two actions contemporaneously. It is true, as Mr Morcombe said, that there would be two bodies of evidence subsequent to April 1990; the Amer group would lead a body of evidence directed towards the activities of the "Green Dragon Hotel" and the "Settebello Restaurant" subsequent to April 1990 whilst the Leviathan group would lead a discrete body of evidence about the activities of the business of the "Old Mill" subsequent to that date. But that would not deter a Court from investigating whether conduct and conversations involving the principal participants in negotiations over a period of four or five months prior to the settlements would be the subject of substantially the same evidence in both pieces of litigation.

8. The management of the two sets of proceedings led me, at this stage at least, to the conclusion that there was a strong probability that the two matters might be heard together if they were in the same Court. The question then was to determine which was the appropriate Court and what powers were available to ensure that both sets of proceedings were in the same Court. As I have already said there was nothing peculiar about either proceeding which pointed to a preference of one Court over the other.

9. Whether this Court should or should not transfer proceedings to the Supreme Court is determined by a consideration of the provisions of sub-s.5(4) of the Act. That sub-section states that if it appears to the Federal Court that one of three matters exists then this Court "shall transfer the relevant proceedings to (the) Supreme Court". But as Wilcox J. pointed out in Bourke v State Bank of New South Wales (1988) 85 ALR 61 at pp 76-77, this Court can only make an order for transfer if it is satisfied that one of the criteria set out in the various sub-paragraphs of paragraph 5(4)(b) is present. In the absence of the criteria, the Court has no power to transfer; the Judge cannot form "an intuitive view" that it would be appropriate to transfer.

10. The first of the criteria appears in sub-para.5(4)(b)(i). It provides that if it appears to this Court that the proceedings in this Court arise out of or are related to other proceedings pending in the Supreme Court "and it is more appropriate" that the Federal Court proceedings be determined by the Supreme Court then the consequence is the transfer of the Federal Court proceedings. Mr Morcombe conceded that the Federal Court proceedings did have some relationship to the Supreme Court proceedings but, as he pointed out, it could not be said that it was "more appropriate" that the proceedings in this Court be determined by the Supreme Court; I accepted that argument.

11. The second test appears in sub-para. 5(4)(b)(ii). This provision requires this Court to make an assessment of the nature of the proceedings and the manner in which they might have been disposed of prior to the introduction of the cross-vesting legislation. It is necessary to investigate whether the matter is one that, but for the introduction of cross-vesting legislation, would have been incapable of being instituted in the Federal Court and is a matter "arising under or involving questions as to the application, interpretation or validity of a law of the State...". If those questions are answered affirmatively then, upon having regard to those matters and to "the interests of justice", this Court is required to transfer the proceedings to the Supreme Court if it concludes that it is more appropriate that the relevant proceedings be determined by the Supreme Court. Both counsel agreed that, despite the particular references to the Federal and the State Acts of Parliament, the substantive issues in both sets of proceedings could have been litigated in either the State Court or the Federal Court prior to the introduction of the cross-vesting legislation. This second test does not therefore assist in a resolution of the matter.

12. The final test calls for this Court to address "the interests of justice". If it appears to this Court that:-
    

"(iii) it is otherwise in the interests of

justice that the relevant proceeding

be determined by the Supreme Court

of a State or Territory;

the first court (i.e. the Federal Court) shall transfer the relevant proceeding to that Supreme Court."

Although each of the subjects separately encompassed by sub-paras (i), (ii) and (iii) of sub-s.5(4) of the Act are "true alternatives" (Mansell v Cumming (supra) at p 642), that does not mean that each is to be read in a vacuum. In this particular case, I was not satisfied that sub-para (i) applied because I was not satisfied that it would be "more appropriate" that the relevant proceedings be determined by the Supreme Court. However the first limb of sub-para (i) is directed to the nature of the Federal Court proceedings and to the question whether they have arisen out of, or are related to other proceedings that are pending in the Supreme Court. I concluded that there was the necessary relationship and that conclusion became a matter of importance - it was not to be ignored. It may not have been sufficient to invoke sub-para (i) but it remained a weighty matter that was to be brought to account when considering the application of sub-para (iii) and "the interests of justice". By virtue of the fact that sub-s.5(7) of the Act provides that an order of transfer may be made by the Court on its own motion, no question of onus arises in applications of this nature; hence it was not incumbent on the Leviathan group to satisfy the Court that the order of transfer should be made: Mansell v Cumming at p 644. It was my opinion that, in a case such as this, the responsibility of the Court was to have regard to all relevant material that was properly before it, irrespective of source, for the purpose of assessing what constitutes "the interest of justice". The principle of "case management" was, in my view, a matter of substantial importance.

1. Although I came to the conclusion that there was a strong probability that these two causes of action might be heard together, I did not have the power to implement any order to that effect whilst Leviathan's proceedings were in the Supreme Court and I had no jurisdiction to direct that the Supreme Court proceedings be transferred to this Court. I did however have the power to direct that the Federal Court proceedings be transferred to the Supreme Court. Such an order did not achieve my basic objective of properly considering whether the two cases should be heard together; that will be a matter for the Supreme Court to determine in due course of time. But, by making the order transferring these proceedings to the Supreme Court, I did at least, create the opportunity for the making of that order and thereby created an opportunity which otherwise did not exist.

2. It remains to mention Mr Morcombe's argument that I should not have been influenced by virtue of the fact that Leviathan commenced its proceedings prior to the Amer group commencing its proceedings nor should I have been influenced by the fact that the Amer group had not sought from the Supreme Court a cross-vesting order of the Supreme Court proceedings to this Court. Normally I would agree that each of those matters would be of little, if any, consequence. However they do assume a measure of importance in this case because there was an overriding need to ensure that every opportunity be explored for the purpose of determining whether both actions should be heard together; that could only be achieved if one Court had control of both matters.

3. In the circumstances as they transpired, the fact that the Leviathan group brought a cross-vesting application before this Court gave to this Court the opportunity of ensuring that only one Court will have jurisdiction over both matters; that this Court would have been prepared to be that ultimate Court is of no moment. Nor should it be a matter of concern that an application in the Supreme Court proceedings for a cross-vesting order to this Court might have led to the Supreme Court making an order for reasons similar to those that I have expressed. Hence the circumstances of this case militate against the Amer group in that they instituted their proceedings after the Leviathan group and they did not apply to the Supreme Court for a cross-vesting order. It is sufficient to say that the outcome of this application was determined by virtue of the fact that this application was made to this Court at a point of time when no similar application was before the Supreme Court.

4. Were it not for the existence of Supreme Court proceedings, these proceedings would not have been transferred; they contained allegations of misleading or deceptive conduct and, as a consequence, they clearly invoked the application of ss.52 and 87 (at least) of the Trade Practices Act. In concluding that an order of transfer was appropriate I allowed for the possibility that if the order of transfer was not made the Amer group (as defendants in the Supreme Court proceedings) might apply to that Court for a cross-vesting order; I also allowed for the possibility that the Supreme Court might make such an order. But I concluded that both matters had to be relegated to speculation. If the application was not made, or, having been made, was unsuccessful, a potentially unfortunate result of parallel proceedings in different courts would arise. In any event, it would have been wrong of me to assume how the Supreme Court might react to such an application if it was made. As Pincus J. said in Wan v McDonald (unreported: judgment delivered 19 February 1990)
   

"I cannot, as a matter of comity between the Courts, say

anything to the Supreme Court which might be interpreted as a suggestion of the way in which it should exercise its

jurisdiction, and I will not do that."

I respectfully endorse those remarks.

1. The views that I have expressed find support in the judgment of Spender J. in Teserioro v Matstar Pty Ltd (1990) 93 ALR 607. In that case, a vendor of land sued for specific performance in the Supreme Court of Queensland. A week later the purchaser instituted proceedings against the vendor and the vendor's agent in the Federal Court alleging misleading or deceptive conduct and claiming damages for breaches of s.52 and/or s.53A of the Trade Practices Act as well as common law relief. As his Honour pointed out there was a time when Trade Practice matters were exclusively within the jurisdiction of the Federal Court. But that has changed. Jurisdiction under Part V of the Trade Practices Act is no longer exclusive to the Federal Court: see, for example, s.86A of that Act. Furthermore there are the consequences of the cross-vesting legislation to consider. Spender J. came to the conclusion that:-
   

"... in the absence of special circumstances, the litigation should be pursued in the Court in which it was first

commenced." (p 608)

1. When, as is the case here, all else is equal, I agree with his Honour's conclusion. It was for these reasons that an order was made that the within action be transferred from the Federal Court of Australia to the Supreme Court of South Australia. At the request of the parties I reserved to the Supreme Court of South Australia the question of costs but I certified this matter as fit for counsel including senior counsel.