Reality Cinema Pty Ltd v Canbet Limited No. Scciv-01-919
[2002] SASC 62
•27 February 2002
REALITY CINEMA PTY LTD v CANBET LIMITED
[2002] SASC 62
Civil
MULLIGHAN J The plaintiff brought this action against the defendant for breach of contract and repudiation of contract and claims a little less than $1m. It seeks summary judgment pursuant to r 25.01 of the Supreme Court Rules 1987.
The defendant opposes that application and has made an application that this action be transferred to the Supreme Court of New South Wales pursuant to s 5(2) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 and r 123 of the Supreme Court Rules.
The applications were heard together.
Background
The plaintiff is a corporation duly registered under the Corporations Law on 24th October 1995 and, at all material times, had its registered office at 12 Dequetteville Terrace, Kent Town in South Australia. Its business was carried on in association with businesses owned by two other companies, the registered offices of which are situated at North Adelaide in this State and Kent Town respectively. The companies owned licences to operate motion simulation theatres and leased premises suitable for such a business.
The defendant is a corporation duly registered under the Corporations Law on 22nd March 1991. It changed its name to its present name on 13th March 2000. It formerly carried on business in the entertainment industry, including video distribution and other general entertainment business and now holds itself out as carrying on business in internet gaming.
In 1998 the plaintiff owned leasehold premises in the Harbourside Shopping Centre at Darling Harbour in Sydney in New South Wales which included a fully equipped motion simulation movie theatre (“the Harbourside assets”). The theatre has computer controlled seats and is known as a “reality-type” theatre.
It is the plaintiff’s case that on 9th October 1998 the parties entered into a memorandum of understanding under which the defendant agreed, in principle, to purchase a number of assets for $7.1m, including the Harbourside assets for $1.5m, which latter mentioned sum was to be paid on, or before, 21st December 1998 to Westpac Banking Corporation (“Westpac”) to release a charge which AGC Limited, a wholly-owned subsidiary of Westpac, held against the Harbourside assets as security for a loan advanced to the plaintiff. A collateral security for the loan was given to Westpac by Marshall and Brougham Pty Ltd (“M & B”), a major shareholder in the plaintiff, in the form of a term deposit of $550,000 which was subsequently converted to a bank guarantee in that amount. The defendant entered into possession of the Harbourside assets on 1st October 1998 and remained in possession and operated the theatre until 30th June 2000.
There was a reconciliation of amounts due to, and payable by, each of the parties to the other upon settlement of the transaction but some payments due by the plaintiff pursuant to that reconciliation were not paid until M & B paid them subsequently. The defendant did not pay the $1.5m due to Westpac by the due date which was 21st December 1998.
The agreement incorporated in the memorandum of understanding was varied by a further agreement between the parties on 6th January 1999. The defendant agreed to pay $1.6m instead of $1.5m. It undertook to engage persons to secure the other securities for debt due to AGC and in the interim it paid the monthly payment due to AGC of $29,119.64. It agreed to issue 30m shares to the plaintiff and its associates on or shortly after 6th January 1999 as part payment for the purchase of the assets from the plaintiff.
The same monthly lease payments to AGC were paid by the defendant until 26th June 2000. The total amount of lease payments paid by the defendant is $804,938.02. The 30m shares were issued to the plaintiff and its associates. However, it is the plaintiff’s case that a substantial debt remained due to AGC which was $745,200.80, together with penalty interest, on that amount since that date. Also the balance of the purchase price of $49,861.18 had not been paid.
The plaintiff alleges that there were discussions between representatives of the parties and correspondence between them in order to reconcile the amount due upon the sale and purchase of the business and that it was agreed in about February 2000 that the defendant was to pay $106,206.00 upon that reconciliation. That amount has not been paid. By 3rd May 2000 that amount due had increased to $110,361.00. It is the plaintiff’s claim that the amounts due under the agreement are $745,200.80, $49,861.18, $110,361.00 and interest due and paid to AGC and further interest to be assessed. The plaintiff also claims damages, interest and costs.
The defendant objected to the claim for that part of the penalty interest which was paid by M & B on the grounds that it was not the loss of the plaintiff and, if it was due by the plaintiff to M & B, that allegation had not been pleaded. I did not rule on the objection and intimated that I would do so if necessary. If I was minded to order summary judgment in favour of the plaintiff, such a ruling would be required and it might be necessary to permit the plaintiff to amend the statement of claim. However, in view of the course I have decided upon, it is not necessary to resolve that matter.
The plaintiff’s case is that the parties entered into a legally binding contract which is evidenced by the memorandum of understanding and the terms of the contract are to be found in that memorandum. It was subsequently varied by the further agreement on 6th January 1999. The defendant did not perform the contract and is in breach.
Substantial affidavits were filed on behalf of both parties to which considerable documentation was exhibited. This evidentiary material is said to provide a clear factual basis for judgment for the plaintiff at this stage. Mr O’Sullivan, who appeared with Mr Latimer for the plaintiff, took me through the affidavits, including those filed on behalf of the respondent, and submitted that the plaintiff’s case is unanswerable in fact and law.
Mr Knoll, who appeared with Mr Cameron for the defendant, contested those submissions and contended that the facts revealed in the affidavits and documents do not establish that a concluded agreement had been reached between the parties and that the claim in law made by the plaintiff that there was a contract partly performed by the defendant was unsound.
The Law
The test to be applied upon an application for summary judgment is well settled, although at times differently expressed. In Jones v Stone [1894] AC 122 Lord Halsbury, in delivering judgment for the Privy Council upon consideration of a similar provision in the Rules of the Supreme Court of Western Australia, said at 123:
“The proceeding established by that order is a peculiar proceeding, intended only to apply to cases where there can be no reasonable doubt that a plaintiff is entitled to judgment, and where, therefore, it is inexpedient to allow a defendant to defend for mere purposes of delay.”
Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) & Ors (1964) 112 CLR 125, when considering whether an action should be summarily dismissed, accepted that the jurisdiction should be exercised sparingly and “is not to be used except in a clear case where the Court is satisfied that it has the requisite material and the necessary assistance from the parties to reach a definite and certain conclusion”: 129. He went on to say:
“It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of a cause of action - if that be the ground on which the court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; ‘so obviously untenable that it cannot possibly succeed’; ‘manifestly groundless’; ‘so manifestly faulty that it does not admit of argument’; ‘discloses a case which the Court is satisfied cannot succeed’; ‘under no possibility can there be a good cause of action’; ‘be manifest that to allow them’ (the pleadings) ‘to stand would involve useless expense’.
At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or ‘so manifest on the view of the pleadings, merely reading through them, that it is a case that does not admit of reasonable argument’; ‘so to speak apparent at a glance.”
In Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87, the High Court said at 99:
“The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried: see Clarke v Union Bank of Australia Ltd (1917) 23 CLR 5; Jones v Stone [1894] AC 122; Jacobs v Booth’s Distillery Co (1901) 85 LT 262. In our view, it is not possible to say without doubt, on the whole of the material, that there is no question to be tried ...........”
In Webster & Anor v Lampard (1993) 177 CLR 598, Mason CJ, Deane and Dawson JJ said at 602:
“The power to order summary judgment must be exercised with ‘exceptional caution (General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129) and ‘should never be exercised unless it is clear that there is no real question to be tried’ (Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99).”
Their Honours referred, with approval, to the following passage from the judgment of Dixon J in Dey v Victorian Railways Commissioners (1948-1949) 78 CLR 62 at 91:
“A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process.”
In Kadeh v Gill & Ors [2000] SASC 367 Doyle CJ said at para 27:
“In South Australia a defendant as well as a plaintiff can apply for summary judgment: see R 25.04 of the District Court Rules 1992 (SA). But whether the application for summary judgment is made by a plaintiff or by a defendant, the power to enter summary judgment “should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried”: Fancourt & Anor v Mercantile Credits Ltd (1983-1984) 154 CLR 87 at 99. Whether the questions to be decided are questions of law or questions of fact, the applicant must demonstrate that the “action should not be permitted to go to trial in the ordinary way because it was apparent that it must fail”: Webster & Anor v Lampard (1992-1993) 177 CLR 598 at 602 Mason CJ, Deane & Dawson JJ.
and at para 29:
“An application for a summary judgment invites the Court to do more than determine the adequacy of a Statement of Claim or Defence. It usually invites the Court to try and to determine facts by a summary process, usually by affidavit. If the proceedings are disposed of on affidavit, it deprives the relevant party of the usual right to a trial on oral evidence. Unless there are circumstances of urgency, the only basis for making an order can be that the case is, as a matter of law and as a matter of fact, bound to fail. There has to be some good reason to deal with a claim or defence in this summary fashion.”
A draft defence was prepared and exhibited to the affidavit of the defendant. In that draft and affidavit the bases of the defence of the defendant are set forth. They raise issues of fact and law. Defences which the defendant wishes to advance include that the parties did not enter into a contract for the sale and purchase of the business, that the defendant operated the business and entered into possession of the Harbourside assets not because it had acquired them but in anticipation of doing so.
The defendant alleges that the statement of claim is deficient and that further and better particulars of various allegations should be given. It is submitted that until those particulars are given, some aspects of the defence cannot be adequately articulated.
I heard extensive submissions on behalf of both parties concerning these matters and also as to the factual and legal basis of the plaintiff’s case. All of those submissions have been considered. Upon the application of the principles which have been discussed in the cases mentioned, the plaintiff is not entitled to summary judgment. It cannot be said that there is no question to be tried and that the defendant should be denied the opportunity to make a defence. In view of the conclusion I have reached, I do not think I should say anything about the merits or strengths of the respective cases of the parties. I do not think it is appropriate to discuss the respective contentions of the parties and express views about them as to do so could compromise the approach and decision of the trial judge. It is sufficient to say that I have understood the bases of the plaintiff’s case and the evidence advanced in support of it but there are disputes as to fact and the inferences which should be drawn from what appear to be undisputed facts. Until those disputes are resolved, the facts to which the law is to be applied cannot be known.
The application for summary judgment must fail.
Transfer of the proceedings
The defendant seeks the transfer of the action to the Supreme Court of New South Wales on the basis that it has a substantial and real connection with the State of New South Wales (“NSW”) that outweighs any connection with this State. The power to make such an order is to be found in s 5(2) of the Jurisdiction of Courts (Cross-Vesting) Act 1987. The relevant part of the section for present purposes is that it is in the interests of justice that the action be heard and determined in the Supreme Court of New South Wales. Section 5(2)(b)(ii)(C) provides:
“5(2) Where-
(a) a proceeding (in this subsection referred to as the ‘relevant proceeding’) is pending in the Supreme Court (in this subsection referred to as the ‘first court’); and
(b) (i) N/A
(b)(ii) it appears to the first court that having regard to-
(A) N/A
(B) N/A
(C) the interests of justice,
it is more appropriate that the relevant proceeding be determined by that other Supreme Court.”
The first court shall transfer the relevant proceedings to (that other)Supreme Court.
In Bourke & Ors v State Bank of New South Wales (1988) 85 ALR 61, Wilcox J made the following observation about “the interests of justice” in the legislation at 77:
“Finally, in connection with this sub-paragraph the court must consider ‘the interests of justice’. In my opinion this phrase ought to be read widely. Under that rubric, as it seems to me, the court is entitled to consider not only the ability of a particular court to deal with all aspects of a matter, and to make and to enforce all the orders to which a party may be entitled, but also adjectival matters such as the availability of particular evidence, the procedures to be adopted, the desirable venue for trial and the likely hearing date. It is not in ‘the interests of justice’ to adopt a course, in relation to those matters, which places unnecessary burdens and delays upon the parties to the litigation.”
I considered the matter in SAGASCO South East Inc & Ors v BHP Petroleum P/L [1998] SASC 6998 at para 14 and accepted that the matters to be considered include with which court the action has the most real and substantial connection which includes not only factors such as convenience and expense but also the law governing the relevant transaction and where the parties reside and carry on business.
The defendant contends that:
1The case relates to the sale and a lease of property in NSW which is governed by legislation in that State.
2It also relates to property, much of which is intangible and not yet identified, which is likely to be used and evidenced by use in NSW.
3The costs of the litigation under NSW property laws and practices will be less in that State.
4There are other proceedings in NSW which are likely to involve the same transactions and witnesses.
5The principal place of business of the plaintiff is in NSW.
6The evidence suggests that the alleged contract was prepared in NSW.
7The cost to the defendant is considerably less in having the same counsel deal with the common facts in the two sets of proceedings in one location.
8The substantial connections of the parties’ places of business, the assets which are likely to be the subject matter of the contract and the majority of the witnesses of relevance will be in NSW and the law of NSW is likely to apply. It is submitted that judicial expertise in NSW real property law and practice will be needed to resolve many of the issues at hand.
9While the courts of both States can take oral evidence from the witnesses and at similar efficiency and cost, there are real cost increments caused by transporting documents back and forth between the two sets of proceedings in different cities and there are incremental costs of running NSW conveyancing issues in a court that is not routinely familiar with them.
I add another matter. In response to a question from me, Mr Knoll asserted that he expected that if the action was transferred to the Supreme Court of NSW and was entered into the commercial list, it could be listed for trial in about 12 months and probably no later than two years. He made it plain that he could not give any assurance. Also, in that Court there is a procedure for the fast tracking of an action and it is possible that under that procedure there could be a trial before the expiration of twelve months. I expect that if the action is heard in this Court, in the ordinary course of events, it should come to trial within about 12 months unless there is an order for an urgent trial. I accept that there will not be a substantial additional delay if the action is transferred to the Supreme Court of NSW.
Before considering these matters and the submissions in opposition to the application, I mention the relevant principles to be applied.
I now turn to each of the matters raised by the respondent:
1, 2 & 3:I do not regard the first matter to be of particular importance. The primary issues are whether the parties entered into a contract and, if so, the terms and scope of that contract and whether the defendant is in breach. The law of NSW as to sale and leasing of real and personal property does not seem to me to be of much significance, but if it is, there is no reason to suppose that a judge of this Court could not understand and apply the relevant law of NSW. It is also submitted that it may be necessary to apply principles of equity applied by the Supreme Court of NSW. I can see no reason why a Judge of this Court could not apply appropriate principles of equity. The application of foreign law is familiar to courts in all jurisdictions.
I reject the contention that there will be additional costs in informing a Judge of this Court about these matters than if submissions were made to a Judge in the Supreme Court of NSW. Any difference in cost would depend upon the nature of the issue and the principles to be applied and no submission has been made which demonstrates that any such difference would exist, let alone be substantial.
4On 4th June 2001 the former Chief Executive Officer and Managing Director of the defendant, and companies associated with it, brought proceedings against the defendant and directors of the respondent in the Industrial Relations Commission of NSW following the termination of his employment with the defendant and seeks benefits in excess of $2m. I am informed that the proceedings are pending and will go to trial. It is submitted that there are issues common to this action and those proceedings and that justice requires that the two actions be tried in Sydney so as to avoid considerable expense to the defendant in having to maintain counsel and instructions in two States and to move documentary evidence from one State to another. The plaintiff is not in any way involved in those proceedings.
I do not regard the proceedings in the Industrial Relations Commission of NSW as a matter of significance. They are proceedings arising out of issues as to the internal management of the defendant. There may be common witnesses but it is unlikely that the plaintiff will call in the trial of this action any witnesses whom the defendant will call in the proceedings before the Industrial Relations Commission. Any documents or other materials which may be needed in both proceedings may be easily moved from one State to another.
If one party is to be inconvenienced, it does not necessarily have to be the plaintiff because of the proceedings in NSW.
5A search of records of the Australian Securities and Investments Commission as at 10th August 2001 relating to the plaintiff discloses that it is registered in this State but that its principal place of business is Shop 430 Harbourside Shopping Centre, Darling Harbour in NSW. As I understand the position, that entry is incorrect. The principal place of business of the plaintiff is in Adelaide, not in Sydney.
6Despite having heard considerable argument, it is not clear where the contract was entered into, if there is a contract, although it is suggested that the memorandum of understanding and the memorandum of modification may have been prepared in NSW.
7It is possible, if not likely, that the cost to the defendant will be less if the same counsel is retained in this action and in the proceedings before the Industrial Relations Commission but it is not possible to say to what extent or even that any present intention to use the same counsel will eventuate.
8It must be acknowledged that the subject matter of the alleged contract is a business which was conducted in Sydney. It is submitted, but it is by no means certain, that the majority of the witnesses to be called at the trial reside in, or near, Sydney. I expect that the parties will not know how many and the identity of the witnesses until the pleadings are closed and necessary pre-trial procedures, such as discovery and admissions of facts and documents, have been completed. It is likely that witnesses in both States will be called but it cannot be determined at this stage if there will be savings in costs if the action is tried in NSW. I regret that I do not follow the basis of the argument that judicial expertise in NSW property law and practice will be needed to resolve many issues. I understand the submission to be that the expertise of the judiciary in this Court will be inadequate. No satisfactory basis has been advanced for that submission and it is rejected. As I have said, the application of foreign law is not a novelty in this country.
9Upon the information placed before me, it is inevitable that documents will be transferred from one city to the other wherever the trial takes place. I am not persuaded that there will be substantial savings in costs of transferring documents, whether the trial is in Adelaide or Sydney. Documents have to be collated, copied and taken to Court. The additional cost of transferring them from one city to the other is unlikely to be substantial.
I have considered each of these matters separately as well as their cumulative effect. I do not think any sufficient reason has been advanced to transfer this action to the Supreme Court of NSW.
It is a matter of considerable importance that the plaintiff was entitled to bring the action in this Court which has jurisdiction to hear and determine the action. It has retained local counsel and solicitors. Unless there are no disputes of fact, which on present indications seems unlikely, witnesses living in, or near, Adelaide will have to be called. It is probable that the plaintiff will also have to call expert evidence, including perhaps a forensic accountant who is familiar with its financial structure and business activities and such a witness may reside in Adelaide.
Having considered the competing matters advanced respectively by the parties, I do not consider that it is in the interests of justice to transfer the action to the Supreme Court of NSW.
I dismiss both the application for summary judgment and the application to transfer the proceedings.
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