Robert Charles Morgan and Dianne Jane Morgan v Geoffrey M Henderson (Defendant L), William Ernest Balcam (Defendant 2), Garrick Lewis Gray (Defendant 3), Michael F Winter (Defendant 4), Amadio Pty Ltd (Defendant..

[1993] SASC 4311

COURT IN THE SUPREME COURT OF SOUTH AUSTRALIA NYLAND J

CWDS
Practice - cross vesting - Application to transfer proceedings to Victorian Registry of Federal Court - South Australian proceedings part of larger issue involved in Federal Court proceedings - Valuation evidence relevant to both actions - Building situated in Victoria - Risk of different results if valuation undertaken in separate proceedings - Observations as to the manner in which such applications should be approached - Application granted.
Jurisdiction of Courts (Cross Vesting) Act ss 5(1)a, 5(1)(b)(i), 5(1)(b)(iii), and 5(2). Pegasus Leasing v Tieco International (Aust) Pty Ltd and Ors unreported judgment delivered 14 July 1993 and Bankinvest AG v Seabrook and Ors (1988) l4 NSWLR 711, applied.

HRNG ADELAIDE, 19 November 1993 #DATE 3:12:1993
Counsel for plaintiffs:             Mr J Mansfield QC
Solicitors for plaintiffs:         David Johnson
Counsel for defendants 1-2, 6-12:    Mr Sallis
Solicitors for defendants 1-2, 6-12: Andersons Barker Gosling
Counsel for defendants 3-4:         Mr Whitington
Solicitors for defendants 3-4:     Piper Alderman
Counsel for defendant 5:             Mr Sulan QC
Solicitors for defendant 5:         Thompsons

ORDER
Application granted.

JUDGE1 NYLAND J The defendants have applied pursuant to s.5(2) of the Jurisdictionof Courts (Cross-vesting) Act, 1987 ("the Cross-Vesting Act") to transfer this action to the Victorian Registry of the Federal Court. The subject action was initiated by the plaintiffs against the twelve defendants by summons issued out of this court on Friday the 25th of June 1993. On Monday the 28th of June 1993 in Action No. VG 260 of 1993 ("Federal Court proceedings") proceedings were issued out of the Victorian Registry of the Federal Court by thirty-nine applicants, not including the plaintiffs herein, against fourteen respondents. On 7/9/93 leave was granted to the applicants in the Federal Court proceedings to join six further respondents and to file and serve an amended application and an amended statement of claim. All the defendants in the subject proceedings are respondents in the Federal Court proceedings. 2. It is alleged in the Federal Court proceedings (inter alia) that Amadio, the fifth defendant in these proceedings, was the registered proprietor of a property situated at 258 Queensberry Street Carlton in the State of Victoria, otherwise known as the "Coles-Myer building" and that in or prior to June 1990 Amadio entered into an agreement, arrangement or understanding with Gray, the third defendant, and Winter, the fourth defendant, to find and/or procure a buyer for the property. It is alleged that Gray, Winter and Amadio designed a scheme whereby a partnership would be formed to purchase the property for $14,835,000. The partnership was to consist of up to twenty partners. A one-twentieth share in the partnership could be acquired for the sum of $40,500. Amadio loaned the partnership the purchase price secured on the property for three years at fourteen per cent by first mortgage. The property was to be purchased by the proposed partnership subject to an existing fifteen year lease to Coles-Myer Ltd. 3. It is further alleged that in conjunction with Bird Cameron Accountants, Huntley McArdle and Glass Pty Ltd Accountants and others, Gray and Winter brought the scheme to the attention of clients of Bird Cameron and Huntley McArdle and represented that the scheme was an opportunity to acquire a good capital gain with limited risks. The applicants allege that they were induced to invest in the scheme on the basis of false representations made in trade or commerce in breach of ss.51A and 52 of the Trade Practices Act 1974 (Commonwealth) and ss.10 and 11 of the Fair Trading Act (Victoria and South Australia). It is also alleged that the scheme was promoted in contravention of ss.170 and 171 of the Companies (Victoria) Code and the Companies (South Australia) Code and that the obligations entered into by the various applicants as a result thereof were illegal and unenforceable. The applicants further allege misrepresentation, breach of duty and care and breach of retainer by Amadio, Graham Winter, Bird Cameron, Huntley McArdle and the other solicitors involved in the scheme. The applicants allege they have suffered loss and damage and seek declarations, damages and interest. 4. In the subject proceedings the plaintiffs allege that in the second half of June 1990 Henderson, the first defendant, and by him Bird Cameron (SA) approached them and advised them that they should invest in the partnership which was to acquire the Coles-Myer building on the basis that it was a sound financial investment. They allege that on or about 26/6/90 they attended at the offices of Bird Cameron in Millicent and there met with Henderson and Gray, the third defendant, a solicitor of the firm of Gray and Winters, solicitors of Melbourne, to discuss the proposal that their company Glincraft should invest in the partnership. They allege that during that meeting they instructed Henderson and Gray that the investment was to be made by Glincraft Pty Ltd and that they were not to assume any personal liability whatsoever for any debts or liabilities incurred by Glincraft in respect of the investment. 5. They allege that during that meeting, at the request of Henderson and Gray they signed a document which was a Power of Attorney granted by Glincraft to Balcam, the second defendant, in these proceedings. They say that in July 1990, acting upon Henderson's advice and at his request, they executed further documents which he placed before them. They say that they did not read nor understand the legal effect of same, but subsequently discovered that the documents consisted of powers of attorney on their behalf in favour of Balcam as well as power of attorney in favour of Glincraft. It is alleged that in about May 1993 they discovered that Balcam had purported to execute on behalf of each of them and exercise the powers given to him by the individual powers of attorney a document being a guarantee in favour of Amadio whereby with the several other persons named therein they jointly and severally guaranteed to Amadio the payment of each and all sums of money interest and damages described in the schedule annexed thereto. 6. The plaintiffs in the subject proceedings are claiming (inter alia) damages pursuant to the Fair Trading Act 1987, damages for breach of contract and negligent advice and a declaration that the guarantee is void and unenforceable. There is no application in the current proceedings to set aside the underlying transaction, i.e. the scheme which is the subject of the Full Court proceedings, but all the defendants argue that nevertheless the plaintiffs will, in due course, be joined in the Federal Court proceedings. Although there is no direct allegation in the current proceedings against Amadio, Mr Sulan QC who appeared as counsel for Amadio, said that as Amadio, the vendor and financier of the property, had not been repaid its loan it intended to join all the guarantors of the borrowers in the Federal Court proceedings. The plaintiffs will inevitably therefore become parties to those proceedings. Mr Sulan submitted that Amadio was a Victorian company and it should not be required to bear the costs and inconvenience of having to defend proceedings in South Australia as well as Victoria. He pointed out that the action against it in the current proceedings depended upon the plaintiffs succeeding in the claim under s.52 of the Trade Practices Act (Commonwealth) and that the main witnesses for the defendant resided either in Millicent or in Victoria. He also submitted that each action sought damages which would necessarily involve a valuation of the Coles-Myer building and that it would be inappropriate for such a valuation to be undertaken in two separate proceedings with the risk of different results. 7. Mr Whitington who appeared for Gray and Winter, the third and fourth defendants, also argued that the issue of valuation was implicit in both sets of proceedings and that it would be an absurdity for it to be canvassed more than once. He further argued that the present claim against Gray was tenuous (and, as the pleadings stand, I agree) and it would cause Gray considerable hardship and expense therefore to be involved in defending two sets of proceedings. 8. He further submitted that the application against the defendants in the current proceedings and the respondents in the Federal Court proceedings were all manifestations of an investment scheme, which was essentially Victorian and that the defendants Gray, Winter and Balcam were all Victorian residents whilst Amadio's principal place of business was in Victoria. Mr Sallis appeared for Henderson, the first defendant, Balcam, the second defendant, and the sixth to twelfth defendants inclusive. He similarly argued that there were common parties in both actions, that the plaintiffs would be joined as cross-respondent in the Federal Court proceedings, that both the actions arose from the same scheme, that the witnesses and evidence to be called in relation to both actions would be common and in particular that a valuation would be required in each case. 9. The plaintiffs however resisted the application for cross-vesting. Mr Mansfield QC who appeared for the plaintiffs described the possibility of Amadio joining the plaintiffs in the Federal Court proceedings as a non-significant factor that might or might not happen. He submitted that, in any event, that matter was irrelevant to the consideration of whether the current proceedings ought to remain in this court or whether they should be referred to the Federal Court to be heard with the plethora of other issues to be canvassed in those proceedings. He argued that the Federal Court action had different issues with different applicants. He said that the Federal Court proceedings were directed at challenging the entry into this transaction by the principals whereas the plaintiffs' action was directed to challenging the circumstances in which they came to give a power of attorney to Balcam which enabled the personal guarantees to be given. 10. He said that the plaintiffs' claim as formulated relied on three significant meetings which were referred to in the Statement of Claim, namely, the meeting in June 1990 in which Henderson of Bird Cameron-South Australia vicariously gave the plaintiffs advice about the potential investment, the meeting on 26/6/90 when the plaintiffs attended at the offices of Bird Cameron in Millicent and met with Henderson and Gray, and the meeting in July 1990 when Henderson is alleged to have advised the plaintiffs to execute the power of attorney to Balcam which led to the personal guarantees which are the subject of the relief. He argued therefore that the fundamental nature of the action consisted of allegations with respect to three meetings in Millicent, two of which were between South Australian residents and a South Australian adviser whilst the third involved the same parties but with the addition of Gray of Victoria. He argued that as such these were discrete proceedings, that there was no overlap of issues and the only common witnesses were likely to be the plaintiffs Henderson, Gray and possibly Balcam and it was inappropriate therefore that the plaintiffs should become embroiled in a much larger set of proceedings with different allegations, different parties and different transactions. 11. Mr Mansfield QC conceded that there was a possibility that the valuation of the Coles-Myer property would become relevant in these proceedings but submitted if that should occur it would be open to this Court to make a declaration as to the entitlement to damages and defer the full resolution of quantum to await the outcome of the Federal Court proceedings if they were still current. 12. The present application is brought pursuant to s.5(1)(a) and 5(b)(i) and (iii) of the Cross-Vesting Act which provides:
    "5. (1) Where -
    (a) a proceeding (in this subsection referred to as the
'relevant proceeding') is pending in the Supreme Court;
    and
    (b)
    (i) it appears to the Supreme Court that the relevant
    proceeding arises out of, or is related to, another
    proceeding pending in the Federal Court or the Family Court
    and it is more appropriate that the relevant proceeding be
    determined by the Federal Court or the Family Court;
    (ii) ...
    (iii) it appears to the Supreme Court that it is otherwise in
    the interests of justice that the relevant proceeding be
    determined by the Federal Court ... the Supreme Court shall
    transfer the relevant proceeding to the Federal Court..." 13. In Pegasus Leasing v Tieco International (Aust) Pty Ltd and Others (Unreported Judgment delivered on 14 July 1993) Debelle J referred to the factors relevant to cross-vesting applications and pointed out that the over-riding consideration was the interest of justice, he said at p.8:
    "Factors relevant to that decision are the place where the
    parties reside or carry on business, the places where witnesses
    reside or carry on business, the place where other evidence is
    located, the desirability of avoiding unnecessary costs and the
    law governing the questions which fall for determination in the
    action. But the question whether one court is more appropriate
    than another does not depend merely on questions of comparative
    suitability and convenience. Regard must also be had to the
    interests of justice. Although the expression 'the interests of
justice' does not appear in s.5(2)(b)(i), it would be curious, at
    the very least, if it were not a relevant factor. To conclude
    otherwise would be to conclude that the interests of justice are
    relevant in the case of the paragraphs (ii) and (iii) of
    s.5(1)(2)(b) but not in the case of paragraph (i). The
    proposition has only to be stated to be rejected.
    The phrase 'the interests of justice' should be read widely.
    I respectfully adopt the observations of Wilcox J in Bourke v
State Bank of NSW (1988) 85 ALR 61 at 77 and 78:
    '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 take this to be a charter for the court to take the course
    which appears to it to be more just, interpreting that word
    widely. However, for an applicant's choice of forum to be
    overridden, there must be some objective factor which makes it
    possible to say that the interests of justice will be better
    served by transfer than by non-transfer. Where, as here, it is
    impossible to identify any such factor, the sub-paragraph has no
application.'" 14. In reaching a decision I proceed on the basis that the defendants do not have an onus to establish on the balance of probabilities that the matter ought to be cross-vested but rather the decision to cross-vest is, in essence, a balancing act. In Bankinvest AG v Seabrook and Others (1988) 14 NSWLR at 711 Street CJ said at p.714:
    "Viewed from this standpoint it can be seen to be highly
    desirable that the judicial administration of the day to day
    working of the cross-vesting scheme is not encumbered by an
    encrustation of judge-made pronouncements of principles to be
    applied when considering making a transfer order. It 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. Consideration of textured principle and deep learning -
    in particular principles of international law such as forum non
    conveniens -have no place in a cross-vesting adjudication. There
    is, in substance, no principle to be enunciated other than the
    necessity of applying the specific considerations stated in the
    cross-vesting legislation, primary amongst which is the pursuit
    of the interests of justice. Internal administrative decisions
    within a court as to where particular proceedings should best go
    forward in the interests of justice are in many ways akin to the
    making or refusing of transfer orders under the cross-vesting
    legislation. The two provisions I have mentioned, namely the
    power of a court to make a transfer order on its own motion and
    the denial of any appeal from an order in relation to a transfer,
    are clear pointers towards this view." 15. In that case Rogers AJA said at p.721:
    "In the result, it is apparent that the Queensland
    proceedings tender issues which are all comprehended within the
    present proceedings. The New South Wales action enlarges the
    ambit of the issues and, of course, includes parties who are not
    involved in the Queensland proceedings.
    Nonetheless, it is clear beyond argument that if both the New
    South Wales and the Queensland proceedings were to proceed, there
    would be two courts in Australia required to make a determination
    of many of the same issues." 16. In my view, those comments are pertinent to the present proceedings. Whilst in one sense the current proceedings could be described as a discrete action they are nevertheless part of the larger issue which is involved in the Federal Court proceedings. It would appear to be inevitable that the plaintiffs will be joined in the Federal Court proceedings. The plaintiffs and those of the defendants who are South Australian reside in Millicent which is mid-way between Adelaide and Melbourne. The valuation evidence would appear to be relevant to both actions and, as the Coles-Myer building is in Victoria, the expert valuers are most likely to be Victorian. 17. The major litigation is in the Federal Court. I consider that in the interests of justice the various factual legal issues in dispute between all the parties should be determined in one court only. It would be clearly undesirable for two courts in Australia to make a determination of the same or similar issues. I consider that the interests of justice would be best served by the matters in dispute being litigated in the Federal Court proceedings. I therefore order that this action be transferred to the Victorian Registry of the Federal Court.