Royal Bank of Scotland Plc v Babcock & Brown DIF III Global Co-Investment Fund LP
[2017] VSCA 138
•15 June 2017
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2016 0158
| ROYAL BANK OF SCOTLAND PLC | First Applicant |
| RBS EQUITY CORPORATION | Second Applicant |
| v | |
| BABCOCK & BROWN DIF III GLOBAL CO-INVESTMENT FUND LP & ORS (According to the schedule annexed) | Respondents |
S APCI 2016 0159
| BABCOCK & BROWN INVESTMENT HOLDINGS PTY LTD | First Applicant |
| BABCOCK & BROWN INTERNATIONAL PTY LTD (ACN 108 617 483) | Second Applicant |
| BBLP LLC | Third Applicant |
| v | |
| BABCOCK & BROWN DIF III GLOBAL CO-INVESTMENT FUND LP & ORS (According to the schedule annexed) | Respondents |
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| JUDGES: | MAXWELL P, WHELAN and SANTAMARIA JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 6 April 2017 |
| DATE OF JUDGMENT: | 15 June 2017 |
| MEDIUM NEUTRAL CITATION: | [2017] VSCA 138 |
| JUDGMENT APPEALED FROM: | [2016] VSC 623 (Hargrave J) |
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PRACTICE AND PROCEDURE – Stay of proceedings – Exclusive jurisdiction clause – Where parties seek to enforce exclusive jurisdiction clause in agreement to which they are not party – Where party to agreement seeks to enforce exclusive jurisdiction clause even though not a party to the proceeding – Construction and interpretation of exclusive jurisdiction clause – Application of foreign law – No relevant error identified in judge’s exercise of discretion to refuse stay, House v The King (1926) 55 CLR 499 – Application for leave to appeal granted, appeal dismissed – Global Partners Fund Ltd v Babcock & Brown Ltd (in liq) & Ors (2010) 79 ACSR 383 considered.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicants in proceeding S APCI 2016 0158 | Mr M Borsky QC with Mr J McComish | Allens |
| For the Applicants in proceeding S APCI 2016 0159 | Mr P Brereton SC with Ms V Whittaker and Mr C Mitchell | Herbert Smith Freehills |
| For the Respondent Babcock & Brown DIF III Global Co-Investment Fund LP and the Respondent DIF III GP Limited in each proceeding | Mr C M Caleo QC with Mr C R Brown | Piper Alderman |
MAXWELL P:
I have had the advantage of reading in draft the reasons of Whelan JA. I would make the orders which his Honour proposes, for the reasons which he gives.
WHELAN JA:
These applications for leave to appeal concern stay applications brought on the basis of an exclusive New York jurisdiction clause in an agreement signed by the second plaintiff on behalf of the first plaintiff. Unusually, other than the plaintiffs, none of the parties to the relevant agreement are parties to the proceeding in this Court.
In 2007 the plaintiffs invested in a merger, which was in practical terms a takeover, of a USA corporation named Coinmach Service Corporation (‘Coinmach’). The investment was promoted by the Australian investment, financial advisory and funds management group, Babcock & Brown, which collapsed in 2009.[1] The claims made by the plaintiffs concern the involvement of the defendants in the decision making process which led to the plaintiffs making that investment. There are arrangements and agreements which regulated that decision making process. The exclusive jurisdiction clause is not part of those arrangements or agreements. The formal agreement of most significance in that context provides for the non-exclusive jurisdiction of the courts of Victoria.
[1]Voluntary administrators of the ultimate parent company in the group, Babcock & Brown Limited, were appointed on 13 March 2009 and the company was placed in liquidation on 24 August 2009.
There are also arrangements and agreements which governed the Coinmach takeover. The plaintiffs are not party to those arrangements and agreements. Some of those agreements, but not all, contain an exclusive New York jurisdiction clause.
The plaintiffs invested $US25,000,000 in the Coinmach takeover. The
commitment to make that investment was made by the plaintiffs signing a letter addressed to two Babcock & Brown group entities who were parties to the arrangements and agreements which governed the takeover. It is this letter which contains the exclusive New York jurisdiction clause relied upon in these applications.
Before turning to a consideration of the relevant agreement itself and the claims made in the proceeding, it is necessary to identify the principal parties and actors, to refer to the arrangements and agreements which governed the decision making process, and to also refer to the arrangements and agreements which regulated the takeover.
Principal parties and actors
In 2007 the Babcock & Brown group comprised over 3,000 companies in Australia and throughout the world. Its headquarters were in Sydney. The ultimate holding company of the group was Babcock & Brown Limited, an Australian company listed on the Australian Securities Exchange. As at 2007 the main operating company of the group was Babcock & Brown International Pty Ltd (‘BBIPL’), an Australian company which was a majority owned subsidiary of Babcock & Brown Limited.
BBIPL had three subsidiaries of particular relevance to this proceeding, two in Australia and one in the United States. Babcock & Brown Investment Holdings Pty Ltd (‘BBIH’) is an Australian company which was a wholly owned subsidiary of BBIPL. DIF Capital Partners Limited (‘DIF Capital’) is the other Australian company of particular relevance. It was (indirectly) also a wholly owned subsidiary of BBIPL. The US entity of particular relevance which was (indirectly) a wholly owned subsidiary of BBIPL was a company now incorporated in Delaware and named BBLP LLC, but which was, at the relevant time, a limited partnership registered in Delaware named Babcock & Brown LP (‘BBLP’).
In 2007 Babcock & Brown established an investment fund which was held by a limited partnership established in Delaware named Babcock & Brown DIF III Global Co-Investment Fund, LP. The ‘General Partner’ (a defined term in the relevant agreement of limited partnership) is and was at all relevant times DIF III GP Limited, a company incorporated under the laws of the Cayman Islands. These two entities, the limited partnership and the ‘General Partner’, are the plaintiffs in the proceeding. Unless for some reason a distinction needs to be made, I will refer to them together as ‘the DIF Fund’.
In 2007 the manager of the DIF Fund was DIF Capital.
The takeover of Coinmach was, in substance, a project undertaken by a consortium of three interest groups. They were: the Babcock & Brown group, the Royal Bank of Scotland Plc, and a group of senior executives of Coinmach. Funds drawn from different parts of the Babcock & Brown group, including the DIF Fund, and elsewhere were brought together in a Babcock & Brown established Delaware corporation named Babcock & Brown Spinco LLC (‘B&B Spinco’). Royal Bank of Scotland Plc, B&B Spinco, and other consortium participants brought their funds together in a US corporation named Spin Holdco Inc. The takeover itself was effected by a US subsidiary of Spin Holdco Inc named Spin Acquisition Co.
I pause at this point to relate the parties I have described to the proceeding.
The plaintiffs are the DIF Fund. The DIF Fund invested in the Coinmach takeover through B&B Spinco. B&B Spinco is not a party to the proceeding. It no longer exists. It has been deregistered.
BBIPL, BBLP, and DIF Capital are the first, second and third defendants. They are the DIF Fund’s manager, the manager’s parent company, and a subsidiary of the manager’s parent, BBLP, which was the parent of B&B Spinco.
The sixteenth and seventeenth defendants are The Royal Bank of Scotland Plc and RBS Equity Corporation. Where convenient, I will refer to them together as RBS.
The fourth to eighth defendants and the twenty-second defendant are all individuals who were involved in the decision making process whereby the DIF Fund invested in the Coinmach takeover.[2]
[2]The eighteenth defendant Bernice Talintyre was also an individual involved in the decision making process. The Court was informed on the hearing that a settlement has been reached with her as a consequence of which she will be removed as a defendant. The Court was also informed that contribution claims had been made against her which meant she would continue to be a party to the proceeding.
Spin Holdco Inc is the twenty-eighth defendant.
The agreements and arrangements regulating the decision making process
The DIF Fund was established pursuant to a Private Placement Memorandum in March 2007. The fund was established with the objective of raising $US 350,000,000 to invest in opportunities identified by the Babcock & Brown group. The Private Placement Memorandum set out an investment process involving an initial review by DIF Capital’s ‘Management Team’, a decision upon the management team’s recommendation by DIF Capital’s ‘Compliance Committee’, and a final approval from DIF Capital’s ‘Investment Committee’.
The specific role of the Compliance Committee was to protect investors from conflicts of interest. The members of the Compliance Committee are not defendants in the proceeding. The meeting at which the Coinmach transaction was dealt with by that committee was held in Australia.
The individuals who are the defendants, with the exception of the twenty-second defendant, Mr Umbrecht, were all members of either the ‘Management Team’ or the ‘Investment Committee’. The sixth defendant, Mr Nielsen, was a member of both the Management Team and the Investment Committee, as was the seventh defendant, Mr Nicholson. The other members of the Investment Committee who are defendants are the fifth defendant, Mr Green, the fourth defendant, Mr Topfer, and the eighth defendant, Mr Officer. All of these individuals were at the relevant time Australian residents.
The investors in the fund included Australian institutional investors.[3]
[3]The affidavit of Anthony John Duncan sworn 18 December 2015 and filed on behalf of the plaintiffs, set out in paragraph [24.2] a table of the equity investors drawn from the relevant books and records. The table reads as follows:
Investors
US$ drawdown
Ownership %
WA Local Government Super
24.5
30.4
Military Superannuation
16.0
19.8
Australian National University
12.0
14.9
Babcock & Brown
9.7
12.0
Master Superannuation
9.0
11.1
Quay Partners
4.7
5.8
Pinnacle Superannuation
3.0
3.7
Staff & Associates
1.8
2.2
Total
80.7
100%
Management agreements governing the relationship between the DIF Fund (the plaintiffs) and DIF Capital (the third defendant) were executed on 31 August 2007 and 6 September 2007. Under those agreements DIF Capital was appointed as the DIF Fund’s exclusive agent to invest and manage all of the assets of the fund and to provide administrative and company secretarial services. The agreements provided that they were to be governed by the laws in force in the State of Victoria, Australia and the parties submitted to the non-exclusive jurisdiction of the Victorian courts.
Arrangements and agreements governing the takeover
An agreement entitled ‘Agreement and Plan of Merger’ dated as of 14 June 2007 between Coinmach, Spin Holdco Inc and Spin Acquisition Co, set out the terms upon which what was described as a merger, at the conclusion of which Coinmach would become a wholly owned subsidiary of Spin Holdco Inc, would be undertaken (‘the Merger Agreement’).[4] The Merger Agreement contained a non-exclusive jurisdiction provision in favour of the courts of Delaware (clause 7.5).
[4]The agreements which constituted what were described as the ‘Coinmach Transaction documents’ were listed in paragraph 23 of the ‘Joint Agreed Summary for the Court of Appeal’ dated 21 February 2017 (the ‘Agreed Summary’). Prior to the hearing copies of the Merger Agreement were forwarded to the Court by the solicitors acting on behalf of RBS.
The consortium participants committed themselves to Spin Holdco Inc, and to each of their co-investors, by a series of interrelated letter agreements also dated 14 June 2007.[5] Each consortium participant signed a letter agreement addressed to Spin Holdco Inc and to each of the other participants. The participants’ identity and their respective contributions were set out in a schedule to each letter. The aggregate amount committed was $US312,300,000. Contributions relevant for present purposes were: $US92,000,000 by BBIH, $US70,000,000 by another Babcock & Brown entity named ‘Babcock & Brown Global Partners’, and $US136,000,000 by The Royal Bank of Scotland Plc. Under each of these letter agreements the signing party agreed to the exclusive jurisdiction of the courts of New York.
[5]BBIH signed a letter agreement dated 12 June 2007, but the evidence was that a further letter dated 14 June 2007 supplanted the earlier letter.
In addition to the Merger Agreement and the 14 June letter agreements, relevant parties executed a Consortium Agreement, a Stockholders Agreement, a Spinco Subscription Agreement, an RBS Equity Subscription Agreement, and a Syndication Agreement. The DIF Fund was not a party to any of these agreements. The Syndication Agreement and the Stockholders Agreement contained exclusive jurisdiction clauses in favour of New York. The Consortium Agreement, the Spinco Subscription Agreement, and the RBS Equity Subscription Agreement did not.[6]
[6]Agreed Summary (21 February 2017) [27].
The DIF Fund Letter Agreement
The DIF Fund committed itself to investment in the Coinmach transaction by a letter agreement dated 14 November 2007 (‘the DIF Fund letter agreement’). The Coinmach merger was completed on 20 November 2007.
The terms of the DIF Fund letter agreement appear to be an adaptation of the 14 June letter agreements which had been signed by the consortium participants in the Coinmach takeover. The terms are not identical, but they are very similar.
An important, and obvious, distinction between the DIF Fund letter agreement and the 14 June letter agreements signed by the consortium participants is that the DIF Fund letter agreement is addressed to B&B Spinco and to BBIH. The DIF Fund’s commitment is to one of the consortium participants (BBIH) and to the vehicle for Babcock & Brown group’s investment in the takeover (B&B Spinco). The DIF Fund did not commit itself to Spin Holdco Inc. The DIF Fund is one step removed from the consortium participants. The differences between the 14 June letter agreements and the DIF Fund letter agreement reflect the different ‘level’ of the transaction provided for by the DIF Fund letter agreement, but, like the letters dated 14 June 2007 signed by the consortium participants, the DIF Fund letter agreement contains an exclusive jurisdiction clause in favour of the courts of New York.
The content of the DIF Fund letter agreement, to which I have added paragraph numbers, is set out in full in Annexure A.
Nature of the claims made by the DIF Fund
The cornerstone of the claims made by the DIF Fund in this proceeding is an alleged arrangement which the Statement of Claim calls the ‘RBS Preference Agreement’.
In substance, it is alleged that after RBS had committed itself pursuant to the 14 June letter agreement which it signed and prior to completion of the Coinmach merger on 20 November 2007, RBS realised that the financial projections which had been made in relation to Coinmach were not achievable. It wished to extract itself from the transaction. It had intended to syndicate its equity investment and it anticipated that it would suffer losses in doing so.
The DIF Fund alleges that RBS negotiated the RBS Preference Agreement with BBIPL (the first defendant) and BBLP (the second defendant) through the agency of Mr Topfer (the fourth defendant), Mr Umbrecht (the twenty-second defendant) and Ms Talintyre (who was the eighteenth defendant). Under the RBS Preference Agreement BBIPL, BBLP, and the majority vendor Coinmach shareholder, agreed to indemnify RBS for losses it might suffer on the transaction up to $US35,000,000, and a sum of $US35,000,000 was agreed to be held in escrow to secure that indemnity. It is alleged that Mr Green (the fifth defendant), who was then the chief executive officer of the Babcock & Brown group and a member of the Investment Committee, was aware of this arrangement.
The DIF Fund alleges its investment turned out to be worthless.
The first claim made by the DIF Fund in the proceeding is against BBIPL (the first defendant), BBLP (the second defendant), Spin Holdco Inc (the twenty-eighth defendant), Mr Topfer (the fourth defendant), Mr Green (the fifth defendant) and Mr Umbrecht (the twenty-second defendant) for breaches of fiduciary duty for failing to disclose the RBS Preference Agreement.[7] Certain additional breaches of fiduciary duty are alleged against Mr Topfer and Mr Green specifically which are related to the same matter, and claims are made against BBIPL, BBLP and Mr Umbrecht for knowing assistance and knowing receipt in relation to the breaches alleged specifically against Mr Topfer and Mr Green.[8]
[7]A similar claim had been made against Ms Talintyre.
[8]Again, a similar claim had been made against Ms Talintyre.
The DIF Fund alleges that each of The Royal Bank of Scotland Plc (the sixteenth defendant) and RBS Equity Corporation (the seventeenth defendant) knew of the breaches of fiduciary duty alleged against the other defendants, assisted them in those breaches of duty, and accepted the benefit of the RBS Preference Agreement knowing of those breaches.
Claims are made for misleading and deceptive conduct under s 1041H of the Corporations Act 2001 and s 12DA of the Australian Securities and Investment Commission Act 2001 against those defendants who were members of the Investment Committee (the fourth to eighth defendants) and against DIF Capital (the third defendant) as manager of the DIF Fund. Separate additional claims for misleading and deceptive conduct are made against Mr Topfer and Mr Green and against BBIPL, BBLP, Spin Holdco Inc, Mr Topfer, Mr Green and Mr Umbrecht.[9]
[9]Previously that claim had also been made against Ms Talintyre.
Finally, a claim for breach of the management agreement is made against DIF Capital (the third defendant), and a claim for breach of a common law of duty of care is made against Mr Topfer (fourth defendant), Mr Green (fifth defendant), Mr Nicholson (seventh defendant), Mr Nielsen (sixth defendant) and Mr Officer (eighth defendant) for which it is alleged that DIF Capital (third defendant) is vicariously liable.
On the same day as this proceeding was issued in Victoria a proceeding making similar claims based upon the same allegations was issued by the DIF Fund in New York. That proceeding has not been served.
The applications to stay the proceeding
BBIPL (the first defendant), BBLP (the second defendant) and BBIH (which is not a defendant) applied under s 30 of the Supreme Court Act 1986 to have the proceeding, or alternatively the proceeding against BBIPL and BBLP, stayed. Hereafter I will refer to BBIPL and BBLP as the ‘B&B defendants’.
By a separate summons The Royal Bank of Scotland Plc and RBS Equity Corporation made a similar application. Hereafter I will refer to these parties as ‘the RBS defendants’.
Key provisions of the DIF Fund letter agreement
In each case the application for a stay was founded upon the following provision in the DIF Fund letter agreement, which is the paragraph I have numbered 12 in Annexure A.
12This Letter Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. Each of the parties hereto (a) consents to submit itself to the personal jurisdiction of the United States District Court for the Southern District of New York or any court of the State of New York located in such district in the event any dispute arises out of this Letter Agreement or any of the transactions contemplated by this Letter Agreement, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction or venue by motion or other request for leave from any such court and (c) agrees that it will not bring any action relating to this Letter Agreement or any of the transactions contemplated by this Letter Agreement in any court other than such courts sitting in the State of New York. THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THEM AGAINST THE OTHER IN ANY MATTERS ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT.
In resisting the application, the DIF Fund relied in particular upon the provisions of the DIF Fund letter agreement which I have numbered 7, 9 and 11. Those provisions read as follows:
7This Letter Agreement shall be binding on the undersigned solely to the benefit of each addressee and nothing set forth in this Letter Agreement shall be construed to confer upon or give to any person other than the addressees any benefits, rights or remedies under or by reason of, or any rights to enforce or cause such addressees to enforce, the Commitment or any provisions of this Letter Agreement.
9This Letter Agreement may only be enforced by BBPty or, at the direction of Babcock & Brown in its sole discretion, B&B Spinco; provided, however, that no party shall have any right to enforce this Letter Agreement unless and until it becomes effective in accordance with is terms. B&B Spinco shall not have any right to enforce this Letter Agreement unless directed to do so by Babcock & Brown in its sole discretion. None of the Parent, the Company or any other creditor of B&B Spinco (other than BBPty) shall have the right to enforce this Letter Agreement or to cause B&B Spinco to enforce this Letter Agreement.
11Nothing in this Letter Agreement, express or implied, is intended to or shall confer upon any person, other than B&B Spinco, acting at the direction of Babcock & Brown in its sole discretion, and BBPty, any right, benefit or remedy of any nature whatsoever under or by reason of this Letter Agreement.
It will be recalled that the addressees were B&B Spinco, which is no longer in existence, and BBIH, which is not a defendant, and which the agreement refers to as ‘BBPty’. The references to ‘Babcock & Brown’ were references to BBLP (the second defendant).[10]
[10]This was accepted as accurate by all parties before the judge below and before us.
The hearing below
On the hearing of the stay applications opinion evidence was called from two retired judges of the Court of Appeals for the State of New York, Judge Robert S Smith, whose evidence was relied upon by the applicants for a stay, and Judge Howard A Levine, whose evidence was relied upon by the DIF Fund in resisting a stay. Because the DIF Fund letter agreement is governed by New York law (under paragraph 12), the content of that law was a relevant issue of fact on the applications.
As well as hearing the two applications for a stay based upon the exclusive jurisdiction clause in paragraph 12, the judge below also dealt with an application by Ms Talintyre (then the eighteenth defendant) for a stay on the basis that Victoria was a clearly inappropriate forum.
The judge below dismissed all three applications for a stay.[11] The applications to this Court concern the two applications for a stay relying upon the exclusive jurisdiction provision in paragraph 12.
[11][2016] VSC 623 (‘Reasons’).
Reasons for judgment
The judge below set out the relevant factual circumstances, and described the claims made in the proceeding. He said that the principal issues which he had to determine were the following:
1 Is this proceeding within the scope of the exclusive jurisdiction clause?
2Can the B&B defendants and/or the RBS defendants enforce the exclusive jurisdiction clause, notwithstanding that they are not party to the Letter Agreement?
3Can BBIH enforce the exclusive jurisdiction clause, notwithstanding that it is not a party to the proceeding?
…
4 Should the proceeding be stayed on discretionary grounds?[12]
The judge recorded the fact that the parties had agreed that the first three issues had to be determined in accordance with the law of the State of New York. In relation to the residual discretion, the parties had agreed that the principles guiding the exercise of that discretion were governed by the laws of the State of Victoria.[13]
[12]Ibid [39].
[13]Ibid.
In relation to the issue of whether the proceeding was within the scope of the exclusive jurisdiction clause the judge below found in favour of the applicants for a stay. His conclusion was that all of the causes of action alleged by the plaintiffs, the DIF Fund, related to the Coinmach merger, which was clearly a transaction contemplated by the DIF Fund letter agreement.[14]
[14]Ibid [43].
In relation to the issue of whether the B&B defendants and the RBS defendants could enforce the exclusive jurisdiction clause, notwithstanding that none of them is a party to the DIF Fund letter agreement, the judge was required to reach findings on the applicable New York law.
The judge found that under New York law there were three circumstances where a person who is not a party to a contract containing an exclusive jurisdiction clause may enforce the clause. They are:
(1)where the non-party is a third party beneficiary of the agreement containing the clause (‘the third party beneficiary exception’);
(2)where the non-party and contractual parties are part of an integrated global transaction and some of the relevant agreements include the forum selection clause (‘the global transaction exception); and
(3)where the non-party is closely related to one of the parties (‘close relationship exception’).[15]
[15]Ibid [45].
The judge below recorded the fact that the two New York judges differed on the issue as to whether the three exceptions were subject to contractual language indicating a contrary intent. For reasons set out by the judge in some detail, he found that New York law provides that the three exceptions are subject to contractual language indicating a contrary intent.[16]
[16]Ibid [46]–[62].
The judge below then turned to the issue of whether the DIF Fund letter agreement did indicate a contrary intent.
The judge referred to the provision of the DIF Fund letter agreement which I have numbered 7 as the ‘first remedy clause’, the provision I have numbered 9 as the ‘second remedy clause’, and the provision I have numbered 11 as the ‘third remedy clause’. The judge below considered that the meaning of the three remedy clauses was clear. His conclusion was that the parties to the DIF Fund letter agreement intended and provided that non-parties could not in any circumstances enforce any of the provisions of that agreement, including the exclusive jurisdiction clause (paragraph 12).[17]
[17]Ibid [64]–[65].
The judge below addressed submissions made by the B&B defendants, BBIH, and the RBS defendants, which the judge characterised as submissions made in the face of the ‘clarity of language’ of the three remedy clauses (paragraphs 7, 9 and 11). They submitted that the sole intention of the three remedy clauses was to negative the third party beneficiary exception. They submitted that the global transaction exception (upon which all the applicants for a stay relied) and the close relationship exception (upon which the B&B defendants relied — BBIH not having to rely on any exception as it is a party to the agreement) were unaffected by the three remedy clauses. The B&B defendants and the RBS defendants sought to fortify this contention by submitting that the three remedy clauses could not be read literally because, if they were, it would mean that the DIF Fund itself could not enforce the provisions of the agreement.
The judge below rejected these submissions.
As to the submission made concerning the effect of a literal reading of the three remedy clauses, the judge below accepted the evidence of both Judge Levine and Judge Smith that the parties to the letter agreement must have intended that the DIF Fund could enforce its terms. The judge observed, however, that they had not given evidence of the ‘doctrinal basis’ under New York law for that conclusion. He said that, in any event, even if that contention were accepted, it would not justify any ‘further reading down’ of the plain words of the three remedy clauses.[18]
[18]Ibid [69].
In the context of the argument that the three remedy clauses only preclude the third party beneficiary exception, the B&B defendants and the RBS defendants sought to rely on what the judge below described as ‘extrinsic evidence’ by Judge Smith. The judge rejected the admissibility of that evidence.[19] In the application before us, Judge Smith’s extrinsic evidence was not sought to be relied upon.
[19]Ibid [70]–[81].
Judge Levine’s evidence had been that the question for the court to consider under New York law was whether the three remedy clauses ‘clearly and unambiguously preclude enforcement of the forum selection clause by non-parties’. The judge below accepted Judge Levine’s evidence on this issue.[20] He concluded that the three remedy clauses did clearly and unambiguously preclude enforcement. Accordingly, the judge held that neither the B&B defendants nor the RBS defendants could rely on the exclusive jurisdiction clause and that the stay applications advanced on their behalf should be dismissed.[21]
[20]Ibid [82].
[21]Ibid [82]–[84].
Thus far the judge had concluded that the DIF Fund’s claims were within the scope of the exclusive jurisdiction clause but that the B&B defendants and the RBS defendants could not enforce the exclusive jurisdiction clause because they were not parties to the DIF Fund letter agreement and the three remedy clauses clearly and unambiguously precluded enforcement by non-parties. The judge then turned to the third principal issue which he had said required his determination which was whether BBIH could enforce the exclusive jurisdiction clause notwithstanding that it is not a party to the proceeding.
The judge firstly observed that there is no precedent for a party to an agreement who was not a party to the proceeding obtaining a stay on the basis of an exclusive jurisdiction clause, in either New York or Australia.[22]
[22]Ibid [85].
In the absence of precedent, both Judge Smith and Judge Levine had given evidence about how they considered a New York court would approach the issue. This was a matter upon which they did not agree. The judge below found that each of them implicitly recognised that what was being sought, in essence, was specific performance and that in New York, as in Victoria, that relief is discretionary. The judge below observed that the two retired New York judges had not agreed as to how a New York court would go about exercising the discretion. The judge was not satisfied that the content of New York law had been sufficiently proven to enable him to apply it to BBIH’s stay application and he accordingly presumed that New York law was the same as the law of Victoria and determined to apply that law to the circumstances of the case.[23]
[23]Ibid [89].
Before the judge below BBIH particularly relied upon the decision of the New South Wales Court of Appeal in Global Partners Fund Ltd v Babcock & Brown Ltd (in liq) (‘Global Partners’)[24] and upon the decision of Allsop J in Incitec Ltd v Alkimos Shipping Corp (‘Incitec’).[25]
[24](2010) 79 ACSR 383.
[25](2004) 138 FCR 496.
The passages particularly relied upon from the decision of the New South Wales Court of Appeal in Global Partners were a passage where Spigelman CJ, with whom Giles and Tobias JJA agreed, had set out the general approach, and a passage where he had addressed specifically the purpose of exclusive jurisdiction clauses and why it was important that they should be enforced.
The passage setting out the general approach was the following:
In the case of an application for a stay based on an exclusive jurisdiction clause, the prima facie position is that a court will enforce the clause and grant the stay ...
The kinds of considerations which may lead to the prima facie position being overturned have been frequently expressed in forceful words of equivalent import such as:
‘A strong bias in favour’
‘Strong reasons’
‘Strong cause’
‘Substantial grounds’
‘Strong countervailing circumstances’[26]
[26]Global Partners (2010) 79 ACSR 383, 402–3 [88]–[89] (citations omitted).
The passage where the New South Wales Court of Appeal dealt specifically with the importance and significance of the purpose of exclusive jurisdiction clauses was the following:
A significant purpose of an exclusive jurisdiction clause is to ensure that all disputes are determined in a coherent manner by a single jurisdiction. There is a clear commercial interest in minimising the possibility of a dispute being determined by multiple tribunals, with the consequent prospect of divergent findings. Furthermore, the parties, in advance, have determined that a particular jurisdiction is acceptable to them, both in terms of the speed and efficacy of its civil dispute resolution procedures and for the competence and skill of its judges and lawyers. A party to such a clause should be held to its contractual obligations, whether enforced by another party on a contractual basis or by means of the exercise of a discretion conferred upon the Court.[27]
[27]Ibid 399 [67] (emphasis added by the judge below).
The passage from the judgment of Allsop J in Incitec which was particularly relied upon was the following:
To the extent that the operation of the exclusive jurisdiction clause causes financial or forensic inconvenience to the party which bound itself to the clause, that, of itself, is to be seen as only the direct consequence of the bargain entered and, generally, can be set to one side.[28]
[28](2004) 138 FCR 496, 506 [49] (emphasis added by the judge below).
In relation to the passage from the New South Wales Court of Appeal’s decision in Global Partners setting out the general approach, the judge below accepted that the applicable principles had been accurately summarised in that passage.[29]
[29]Reasons [94].
In relation to the passage from Global Partners relied upon concerning the purpose and significance of exclusive jurisdiction clauses the judge below quoted that passage and then said the following:
The references in the above quotation to:
(1)‘the parties, in advance, have determined’, is a reference to persons who are both parties to the relevant proceeding and to the contract containing the exclusive jurisdiction clause — in that case the partnership agreement; and
(2)enforcement ‘by another party’, is a reference to enforcement by one party to the proceeding, who is also a party to the contract containing the relevant exclusive jurisdiction clause, enforcing the clause for the benefit of other parties to the proceeding who were not also parties to the relevant contract.
As BBIH is not a party to this proceeding, these statements do not apply to its stay application. The discretionary aspects of BBIH’s application are considered below.
Spigelman CJ also considered that, in the circumstances of the case, the non-parties to the relevant partnership agreement referred to in (2) above were not ‘strangers’ to that contract;[30] as they had involvement in the affairs of the partnership constituted by the partnership agreement and were ‘indemnified persons’ under that agreement.[31] This reasoning is also distinguishable from the facts of this case, because the [DIF Fund letter agreement] expressly states that it does not confer any rights on any third parties.[32]
[30]Global Partners (2010) 79 ACSR 383, 400–1 [73]–[74].
[31]Ibid.
[32]Reasons [96]–[97].
In relation to the passage relied upon from Incitec, the judge below made the following observation:
In other words, the kinds of factors considered by courts when dealing with stay applications made on forum non conveniens grounds are not generally relevant where the stay application is based on an exclusive jurisdiction clause binding both a plaintiff and, at least, one or more defendants who is a party to ‘the bargain’.[33]
[33]Ibid [99] (emphasis added by the judge below).
The judge referred to instances in other decided cases where countervailing circumstances had been found to be ‘sufficiently strong’ to justify a refusal of a stay of proceedings brought in breach of an exclusive jurisdiction clause.[34]
[34]Ibid [100].
The judge said that he considered that in relation to BBIH’s application the ‘most relevant circumstances’ were the fact that BBIH was not a party to the proceeding and the fact that there was no evidence that it would be adversely affected by the proceeding continuing in Victoria.[35]
[35]Ibid [102].
The judge expanded upon those matters[36] and then contrasted that position with his conclusion that the plaintiffs, the DIF Fund, would suffer real prejudice if a stay were granted. He found that such prejudice amounted to ‘strong countervailing circumstances’ when compared to the absence of any prejudice to BBIH.[37]
[36]Ibid [103]–[105].
[37]Ibid [106].
The judge below said there were three aspects of this ‘real prejudice’. The first was that the proceeding substantially concerned the role of the manager, the third defendant, DIF Capital, and that the agreement governing the relationship between the DIF Fund and DIF Capital was governed by the law of Victoria. If the proceeding were to be heard in New York it would be necessary to prove the content of Victorian law which, the judge said, would be costly and time consuming.[38] The second aspect of the prejudice was the risk that the statutory misleading and deceptive conduct claims might not be available in New York.[39] The third aspect of the prejudice was said to be a ‘range of matters’ which indicate that Victoria is a convenient forum and which, the judge below said, would cause prejudice to the plaintiffs if forced to litigate in New York.[40] The range of matters were said to include eleven circumstances which essentially reflect the kind of factors relevant to applications founded on forum non conveniens. The judge had earlier observed that in the unusual circumstances of the BBIH application he saw no reason why in assessing whether there is real prejudice to the plaintiffs from a stay the court should ignore such factors.[41]
[38]Ibid [107].
[39]Ibid [108].
[40]Ibid [109].
[41]Ibid [105].
It should be observed at this stage that not all of the listed ‘range of matters’ were such as to cause ‘prejudice’ to the plaintiffs. Among the listed matters was the fact that neither the B&B defendants nor the RBS defendants had sought a stay on forum non conveniens grounds, and the fact that there were eight defendants who had not sought a stay on any grounds and who the judge accordingly inferred were content for the proceeding to continue in Victoria. Otherwise, the factors set out concerned the location of witnesses and so on. It was not suggested that there were factual errors in the matters listed.
For these reasons the judge exercised his discretion to refuse BBIH’s application for a stay.
Proposed grounds of appeal
The RBS defendants proposed grounds of appeal are:
1.The applicants were entitled to rely on the exclusive jurisdiction clause on its proper construction according to the law of New York.
2.The same construction should have been adopted according to the law of the forum.
The B&B defendants and BBIH’s proposed grounds of appeal are:
1.The trial judge erred by misidentifying and misapplying established principles of Australian law concerning the exercise of the discretion to stay a proceeding based on an exclusive jurisdiction clause, and in particular, the trial judge wrongly:
a.identified the principles as only applying on an application by a person who is both a party to the contract with the exclusive jurisdiction clause and a party to the proceedings;
b.assimilated the application to cases where a stay is sought on the principles of forum non conveniens; and
c. had regard to and weighed up discretionary considerations.
2.The trial judge erred in construing the [DIF Fund letter agreement], as a matter of (a) New York Law or (b) Victorian Law, as precluding enforcement of the provisions of the [DIF Fund letter agreement] by non-parties, and particularly BBIPL and BBLP.
Submissions of the RBS defendants and the B&B defendants
The RBS defendants submitted that the judge below had failed to apply the correct principles of construction and had misconstrued the DIF Fund letter agreement, and that this was so whether one applied New York law or Victorian law.
Under New York law the RBS defendants submitted that the judge ought to have asked whether the global transaction exception had been ‘clearly and unambiguously’ precluded by the three remedy clauses. In this respect RBS cited and relied upon the evidence of Judge Levine. Instead, it was submitted on behalf of RBS, the judge below had been led into error by, in effect, addressing the question of whether it was ‘possible’ for the global transaction exception to be excluded by a contractual provision.
The RBS defendants submitted that the judge below had misconstrued the exclusive jurisdiction clause and that the construction he had adopted, in effect, read into the exclusive jurisdiction clause (paragraph 12) a limitation that it applied only to proceedings brought against parties to the agreement. It was submitted that the judge had failed to adopt the only construction which was ‘harmonious’ with all of the provisions of the agreement, being a construction which read the three remedy clauses (paragraphs 7, 9 and 11) as preventing claims by putative third party beneficiaries seeking to compel or enforce the DIF Fund’s commitment to invest in the Coinmach takeover through B&B Spinco.
The RBS defendants submitted that the application of Australian law resulted in the same outcome on the issue of construction, and in that respect particular reliance was placed upon the decision of the New South Wales Court of Appeal in Global Partners. It was submitted that the judge below had entirely failed to consider or apply Global Partners on RBS’s application. It was accepted that he had purported to apply it on BBIH’s application but it was submitted that he had misinterpreted it and wrongly distinguished it in that context.
The RBS defendants accepted that even if the exclusive jurisdiction clause was construed so as to permit the RBS defendants to rely upon it, the court retained a residual discretion. It was submitted that this is not an unfettered discretion, and that the ‘prima facie position’ ought to be that the exclusive jurisdiction clause should be enforced. The New South Wales Court of Appeal judgment in Global Partners was also relied upon in this regard.
In oral submissions counsel for the RBS defendants addressed in detail the construction of the DIF Fund letter agreement. There were said to be four significant features of that agreement.
The first feature was that the agreement expressly incorporated the wider transaction, being the Merger Agreement and the related arrangements. In this respect particular reliance was placed upon paragraphs 1, 3 and 13.
The second feature was said to be the substantive obligations. It was said that these are provided for in paragraphs 2, 3, 4, 5, 6 and 10.
The third feature was the three remedy clauses in paragraphs 7, 9 and 11. In relation to paragraph 7 it was submitted that the reference in that paragraph to persons other than the addressees not being permitted to enforce ‘any provisions’ of the agreement should properly be interpreted as referring to the substantive obligations, as previously identified, and not to the exclusive jurisdiction clause in paragraph 12. It was submitted that any other construction leaves the wide terms of paragraph 12, in particular the reference to ‘any of the transactions contemplated’, without work to do. As to paragraph 9 particular reliance was placed on the last sentence which, it was submitted, precisely identifies the kinds of claims to which the three remedy clauses are in fact directed. They are directed at preventing a third party from seeking to enforce the substantive obligations. It was submitted that paragraph 11 needs to be read together with paragraph 10 and that it also is consistent with the construction contended for in relation to the three remedy clauses.
The fourth feature of the DIF Fund letter agreement was submitted to be the exclusive jurisdiction provision itself, paragraph 12. It was submitted that the construction adopted by the trial judge had in effect read into paragraph 12 a limitation confining its operation (unjustifiably) so as to preclude reliance on the paragraph by non-parties who were clearly otherwise within the ambit of its express provisions, adopting the broad and liberal interpretation of such clauses which Global Partners requires.
RBS submitted that the construction adopted by the judge below had defeated the purpose of exclusive jurisdiction provisions, which is to prevent the fragmentation of disputes.
Counsel for RBS accepted that the construction RBS contended for involved finding an implicit limitation in the three remedy clauses, but submitted that the alternative construction involved finding an implicit limitation in the exclusive jurisdiction clause.
The focus of the submissions of the RBS defendants was on what is described in New York law as the global transaction exception. The B&B defendants relied upon both the global transaction exception and the close relationship exception, but the arguments as to construction were essentially the same and counsel for the B&B defendants adopted the submissions which had been made on behalf of the RBS defendants.
Counsel for the B&B defendants emphasised that under New York law third parties could enforce a contract and that this is an important background circumstance to understanding the issue to which the three remedy clauses are directed. They also emphasised that the three remedy clauses could not be read literally because if they were the DIF Fund itself would have no right to enforce the agreement. They submitted that the construction contended for by the RBS defendants was the one which led to the most harmonious outcome, albeit with some complexity. They submitted that once it were accepted that the exclusive jurisdiction clause applied then it was inevitable, in this case, that the discretion be exercised in favour of a stay.
Submissions on behalf of BBIH
BBIH is a party to the DIF Fund letter agreement. It is not a party to the proceeding. BBIH submitted that the judge had placed far too much significance in the fact that BBIH is not a party to the proceeding. In substance, it was submitted that BBIH had made a contract with the DIF Fund under which the DIF Fund had agreed that it would not bring any action in connection with the Coinmach transaction anywhere other than in New York. The DIF Fund had instituted this proceeding in contravention of that agreement. BBIH was entitled to enforce it and the DIF Fund should be required to comply with the bargain it had made. BBIH’s parent (BBIPL) is a defendant and BBIH is fully entitled to insist that the DIF Fund comply with the agreement which it had made so as to further and protect the interests of its parent.
Counsel for BBIH placed reliance on the New South Wales Court of Appeal decision in Global Partners and on the decision of Allsop J in Incitec and submitted that the judge below had wrongly distinguished those decisions. They submitted that the judge had placed inappropriate reliance on matters said to constitute ‘prejudice’ to the DIF Fund when, as is made clear in Global Partners and in Incitec, the critical consideration is that the DIF Fund had already bargained away its right to rely on any such prejudice. It was submitted that the matters said to constitute prejudice did not in fact establish relevant prejudice in any event.
It was submitted on behalf of BBIH that the judge below had made a fundamental error by failing to place primary significance on the contractual obligation which the DIF Fund had undertaken and by placing inappropriate weight on the fact that BBIH was not a party to the proceeding and the fact that BBIH had not contended that it suffered prejudice of the kind that might be relevant in a forum non conveniens application. In the present context, it was submitted that the relevant prejudice was that BBIH was being deprived of what it had bargained for and what the DIF Fund had agreed to do.
Submissions on behalf of the DIF Fund
Counsel on behalf of the DIF Fund submitted, in substance, that the decision below should be upheld for the reasons which the judge had given. It was submitted on behalf of the DIF Fund that the application for leave to appeal concerned the exercise of a discretion on a matter of practice and procedure. It was submitted that there had been a failure to demonstrate the existence of an error of the House v The King[42] kind.
[42](1936) 55 CLR 499, 505.
Judgments at first instance and on appeal in Global Partners
Global Partners also concerned the Coinmach transaction, and claims by an investor against those who allegedly advised it to make the investment. Given that circumstance, and the reliance placed upon the New South Wales Court of Appeal decision in Global Partners before us, it is important to devote particular attention to both the judgment at first instance of Hammerschlag J[43] and the decision of the New South Wales Court of Appeal.
[43]Global Partners Fund Ltd v Babcock & Brown Ltd (in liq) (2010) 267 ALR 144 (‘First Instance Judgment’).
In May 2005 Babcock & Brown established a limited partnership in England named ‘Babcock & Brown Capital Partners’. The name was subsequently changed to ‘Babcock & Brown Global Partners’.[44] Babcock & Brown Global Partners was a consortium participant in the Coinmach takeover and a signatory to one of the 14 June letter agreements. It was one of the investors specified in Schedule A to those letter agreements, its contribution being $US70,000,000.
[44]Ibid 147 [13]–[15].
Funds for Babcock & Brown Global Partners had been raised pursuant to a private placement memorandum and, like the arrangements in relation to the DIF Fund, a system was set up for the review of investments in a staged process, involving some of the same executives involved in the relevant process for the DIF Fund, including in particular Mr Green and Mr Topfer.
After the collapse of the Babcock & Brown group, Babcock & Brown Global Partners changed its name to ‘Global Partners Fund LP’. The managing general partner was removed and a dispute began in relation to outstanding management fees and compensation for termination. The managing general partner which had been removed threatened proceedings in the United Kingdom. In response, the partnership alleged misconduct relying upon the same arrangement concerning RBS as is relied upon by the DIF Fund in this proceeding.
On 29 January 2010 Global Partners Fund Limited, the new managing general partner, instituted proceedings in New South Wales making claims similar to those made by the DIF Fund in this proceeding. Three days later three of the defendants in the New South Wales proceeding instituted proceedings in the High Court of Justice in England seeking recovery of management fees and compensation, which were allegedly due to the removed managing general partner, and seeking declarations that no duties had been breached.
A number of motions in relation to the New South Wales proceeding came before Hammerschlag J. One of the applications was for a stay of the proceeding on the basis that the limited partnership agreement between Global Partners Fund LP and the removed managing general partner, which was the fourth defendant in the New South Wales proceeding, contained an exclusive jurisdiction clause in favour of the courts in England. The exclusive jurisdiction clause was clause 18.11 of the limited partnership agreement. Clause 18.15 of the agreement provided that third parties acquired no rights under the Contracts (Rights of Third Parties) Act 1999 (UK).
As was the case here, before Hammerschlag J there was a dispute as to the scope of the exclusive jurisdiction clause and also a dispute as to whether non-parties to the limited partnership agreement could rely upon it in seeking a stay. The second, third and fourth defendants in the New South Wales proceeding sought to rely upon it, but only the fourth defendant (the removed managing general partner) was a party to the limited partnership agreement.
Hammerschlag J had ‘no difficulty’ in concluding that the New South Wales proceeding fell within the scope of the exclusive jurisdiction clause.[45]
[45]Ibid 168 [129].
As to parties, Hammerschlag J’s conclusion was as follows:
I prefer the second, third and fourth defendants’ construction of cl 18.11 as extending to disputes arising out of or in connection with the partnership agreement, the PPM or the acquisition of commitments between any party to the partnership agreement and a third party. The provision states that the Courts of England ‘are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with’. It does not say that the courts of England are to have exclusive jurisdiction to settle any disputes between them or between the parties. Whether a party would be entitled to a decree for specific performance of the provision where a party to the agreement (not it) and a third party was involved would depend on whether the court considered it had a legitimate interest in doing so, and upon all other considerations relevant to grant of discretionary relief.
But whether or not the provision is so construed there can be no doubt that these proceedings (with the fourth defendant as a party) have been commenced by the plaintiff in breach of cl 18.11. That breach is in no way assuaged by the fact that there are other defendants as well. The fourth defendant’s position does not involve an attempt to enforce any third party right and accordingly cl 18.15 does not intrude.[46]
[46]Ibid 169 [130]–[131].
Hammerschlag J had decided that the proceeding had to be stayed because the plaintiff did not have standing to bring the claims, but he concluded that if the plaintiff had established standing he would have ordered a permanent stay on the basis of the exclusive jurisdiction clause in favour of the courts of England.[47]
[47]Ibid 169 [134].
When the matter went on appeal to the New South Wales Court of Appeal, Spigelman CJ, after referring to Hammerschlag J’s finding that the plaintiff had had no proper basis for purporting to institute the proceeding, turned to Hammerschlag J’s treatment of the exclusive jurisdiction clause, concluding that the applications for a stay should be resolved on the basis of that clause without the necessity to consider the issue of whether the plaintiff had standing.
Spigelman CJ referred to the limited partnership agreement which contained the exclusive jurisdiction clause in favour of the courts of England as the ‘LPA’.
In relation to the issue of parties, Spigelman CJ referred to the fact that one of the defendants (BBMGP), who had applied for a stay, was a party to the LPA. He then referred to other defendants who were not parties to the LPA and went on:
However, they are members of the ‘Babcock & Brown Group’, as defined in the LPA and as referred to in the private placement memorandum. On the issues of construction that have arisen, it is pertinent to note the extent to which, in confirmation of a principal theme in the private placement memorandum, the LPA envisages that members of the BB Group other than BBMGP will be involved in making decisions with respect to the partnership’s investments.[48]
BBMGP was the removed managing general partner who was a party to the LPA and who was the fourth defendant.
[48]Global Partners (2010) 79 ACSR 383, 389 [28].
Spigelman CJ then set out a number of provisions of the LPA which provided for the involvement of an ‘Fund Investment Committee’ and an ‘Advisory Board’. He referred to the fact that a number of entities, including the defendants who were not parties to the LPA, were entitled to indemnity in certain circumstances under the provisions of the LPA. Spigelman CJ continued:
The scope of the exclusive jurisdiction cl 18.11 must be construed having regard to these provisions and to the scheme envisaged in the private placement memorandum to which cl 18.11 explicitly extends. Clause 18.11 falls to be construed against the background of other, interrelated contracts contemplated by the scheme.[49]
[49]Ibid 392 [33].
Spigelman CJ quoted Hammerschlag J’s statement of the legal principles applicable in a case where there is an exclusive jurisdiction clause, as follows:
Both in the United Kingdom and in this country, where parties to a contract have agreed by an exclusive foreign jurisdiction clause to submit to the exclusive jurisdiction of a foreign court, such a clause does not operate to exclude the forum court’s jurisdiction. However, the court will hold the parties to their bargain, and grant a stay of proceedings, unless the party seeking that the proceedings be heard can show that there are strong reasons against doing so. There is a strong bias in favour of granting a stay of proceedings in the event that there has been a submission to the exclusive jurisdiction of a foreign forum. In considering such an application the court should take into consideration all the circumstances of the particular case, but the application is not to be assimilated to cases where a stay is sought on the principle of forum non conveniens, nor is it a matter of mere convenience …[50]
He expressly adopted that statement of the principles.[51]
[50]First Instance Judgment (2010) 267 ALR 144, 166 [118].
[51]Global Partners (2010) 79 ACSR 383, 401 [82].
Spigelman CJ reached the same conclusion as Hammerschlag J as to what was described as the ‘subject matter scope’ of the exclusive jurisdiction clause. Spigelman CJ addressed the importance and the significance of the purpose of exclusive jurisdiction clauses quoting and adopting the passage I quoted earlier from Hammerschlag J, a passage also quoted and adopted by the judge below.[52]
[52]See above [64].
In relation to the question of ‘party scope’ Spigelman CJ said the following:
With respect to the proposition that cl 18.11 does not respond to claims made against non-parties to the agreement, there are judgments which have interpreted an exclusive jurisdiction clause to bind a party with respect to proceedings against a non-party. On the other hand, other exclusive jurisdiction clauses have been interpreted as applying only to proceedings between the parties.
Each contract must be interpreted in its context. Similar, even identical, words do not necessarily have the same meaning in different contexts.
In the present case, it hardly needs saying that BBL, BBI and BBUS do not have contractual rights with respect to the exclusive jurisdiction clause, because they are not parties to the LPA. BBMGP does have such rights which, in my opinion, it is entitled to assert both with respect to the claims against itself, and with respect to the closely related, indeed, relevantly identical, claims against BBL, BBI and BBUS. The focus of such an assertion is the fact that GPF, which is a party to the contract, has agreed to conduct litigation ‘arising out of or in connection with’ the LPA in England. However, BBL, BBI and BBUS are also entitled to approach the court, in their own right, to request that the court exercise its discretion to grant a stay. This is so because of their involvement in the affairs of the partnership, as envisaged by the LPA itself, and the rights conferred upon them as indemnified persons under the LPA.
GPF sought to categorise the first three respondents as ‘non parties’. However, there are non parties and non parties. These respondents are not strangers to the LPA.
I have set out … the provisions of the LPA that directly refer to the involvement of the members of the BB Group in the decision making processes of the partnership. These proceedings concern the internal decision making processes of the BB Group that determined how the funds of the partnership were to be invested, particularly the decision-making process that led to the Coinmach transaction being completed. The obligation imposed upon GPF by cl 18.11 should be interpreted to extend, at least, to the participants in the decision making processes envisaged by the LPA.
The proceedings in this court arise, and arise only, from the internal decision making processes for which the LPA provides, namely the making of investments. By reason of the structure of the BB Group, the functions of BBMGP, as the managing general partner under the LPA, were subject to the assistance and direction of other members of the group in the manner alleged in the commercial list statement. Indeed, that participation is the very foundation of the causes of action which GPF seeks to agitate in this court.
An important clue to resolving this issue is found in the indemnity provisions in the LPA … Each of the respondents is entitled to the benefit of those provisions. Dr A Bell SC, who appeared for BBI, BBUS and BBMGP, informed the court that his clients intended to rely on these provisions as a contractual defence to the applicant’s claims. GPF did not suggest that such issues do not legitimately arise.
Notwithstanding the fact that BBL, BBI and BBUS are not parties to the LPA, they cannot be categorised as members of an undifferentiated group of ‘non parties’. It may well be that cl 18.11 will not apply to other non parties. However, the respondents in the present case are in a quite distinct category.
In a context where the very contract confers rights on identified non parties, the choice of law and exclusive jurisdiction clauses should be construed as binding the parties with respect to proceedings in which such an indemnity may arise. Furthermore, the principles underlying the conclusion that such a clause should not be narrowly construed … apply, at least, to include claims against non parties who are so closely connected with the implementation of the contract as are BBL, BBI and BBUS.
In my opinion the GPF’s contention that, as a matter of construction, cl 18.11 does not apply to proceedings against BBL, BBI and BBUS should be rejected.[53]
[53]Global Partners (2010) 79 ACSR 383, 400–1 [71]–[80] (citations omitted).
Finally, Spigelman CJ recognised that the existence of an exclusive jurisdiction clause is not ‘determinative’ of the application for a stay.[54] He emphasised, however, that there are important policy considerations. Parties should be held to their contractual bargains. The resolution of disputes arising from contractual arrangements should occur in a coherent and consistent manner, as expeditiously and efficaciously as possible, with the fewest different jurisdictions involved.[55] Spigelman CJ referred to the authorities indicating that ‘strong reasons’ are required to supplant the prima facie position that a court will enforce an exclusive jurisdiction clause and grant a stay, and said the plaintiff had not identified strong reasons in the case before the court.[56]
[54]Ibid 402 [84].
[55]Ibid.
[56]Ibid 402-3 [85]–[90].
Spigelman CJ upheld the decision of Hammerschlag J.
Giles and Tobias JJA agreed with Spigelman CJ.
Issues on the applications for leave to appeal
The relevant issues in relation to the stay applications were clarified and confined in the course of submissions.
RBS and the B&B defendants, as non-parties to the DIF Fund letter agreement, claim to be entitled to rely on the exclusive New York jurisdiction clause in that agreement because of the existence of the global transaction exception and the close relationship exception under New York law. Under New York law, they are entitled to rely on these exceptions unless the agreement clearly and unambiguously precludes that reliance. RBS and the B&B defendants contend the judge did not apply that principle, and contend that, if the principle is applied, the conclusion ought to be that the two relevant exceptions have not been precluded clearly and unambiguously. Thus, the first matter to be determined is whether, on its proper construction, the DIF Fund letter agreement clearly and unambiguously precludes enforcement of the exclusive jurisdiction clause by non-parties in reliance on the global transaction exception and the close relationship exception. Amongst their submissions, RBS and the B&B defendants made submissions on these issues relying on Global Partners, notwithstanding that New York law applies on these issues.
In relation to BBIH’s application no issue as to enforcement by a non-party to the agreement arises. The issue in relation to that stay application is whether the discretion to stay the proceeding should be exercised in circumstances where BBIH is not a defendant and where no claim is presently made against it. Before the judge below no party was able to cite a precedent in Australia or in New York where such an issue had arisen and, given that the judge found that there had been a failure to prove the relevant New York law in relation to the exercise of that discretion, the law of Victoria applied.[57] The decision in Global Partners is of particular significance in that context.
Are the global transaction exception and the close relationship exception clearly and unambiguously precluded?
[57]Reasons [85], [89].
The exclusive jurisdiction clause (paragraph 12) is expressed in wide terms. It extends to cover ‘any dispute [which] arises out of … any of the transactions contemplated’ by the agreement, and the DIF Fund when it signed the letter agreed that it would not ‘bring any action relating to … any of the transactions contemplated … in any court other than … courts sitting in the State of New York’.
The subject matter of the claims made in this proceeding concern disputes arising out of the transactions contemplated by the letter agreement, and the action which the DIF Fund has brought relates to transactions contemplated by the letter agreement, as paragraph 1 of the letter agreement makes clear. As the judge below found, this proceeding falls within the ambit of the exclusive jurisdiction clause in paragraph 12.
The RBS defendants, the B&B defendants, the DIF Fund which is a signatory to the DIF Fund letter agreement, and B&B Spinco and BBIH who are parties to the DIF Fund letter agreement as addressees, are all part of a broader transaction concerning the Coinmach takeover. Some of the other agreements in relation to that broader transaction also include exclusive New York jurisdiction clauses. The RBS defendants and the B&B defendants group together the DIF Fund letter agreement and the 14 June letter agreements, but they are not truly part of the one group, as explained earlier. Apart from the 14 June letter agreements, there is no uniformity in the jurisdiction clauses across the relevant agreements. The Merger Agreement nominates Delaware. The management agreements nominate Victoria. The Syndication Agreement and the Stockholders Agreement contain exclusive jurisdiction clauses in favour of New York, but the Consortium Agreement, the Spinco Subscription Agreement and the RBS Equity Subscription Agreement do not.
The B&B defendants are ‘closely related’ to the addressees, BBIH and to B&B Spinco.
The basis upon which it is contended that the global transaction exception and the close relationship exception are clearly and unambiguously precluded is the three remedy clauses in paragraphs 7, 9 and 11.
Paragraph 7 provides that the letter agreement is binding on the DIF Fund ‘solely to the benefit of each addressee’. It provides that no other person is to have conferred upon it any ‘benefits, rights or remedies’ under the agreement, including any right to ‘cause’ an addressee to enforce the agreement.
In my opinion paragraph 7 clearly and unambiguously precludes any enforcement by a third party, either by acting in its own right or by ‘causing’ a party to seek to enforce the agreement for the non-party’s benefit. The terms of paragraph 7 are simply too clear to confine its operation to preclusion of what is referred to as the third party beneficiary exception. It is expressed more broadly than that. It applies to any enforcement by a non-party. Non-parties are not entitled to ‘benefit’ from the agreement either directly or indirectly through the agency of an addressee. Nor can its terms be limited or confined to what counsel for RBS characterised as the substantive obligations (paragraphs 2, 3, 4, 5, 6 and 10). There is nothing in the words used which suggest that any provision of the agreement, most pertinently paragraph 12, is excluded from paragraph 7’s operation.
Paragraph 9 is not as emphatic as paragraph 7. It does refer to the fact that the agreement may ‘only’ be enforced by the addressees. It incorporates into the agreement BBLP, the second defendant, in that BBLP (referred to in the letter as ‘Babcock & Brown’) must give B&B Spinco a direction before it can enforce the agreement. The final sentence is, no doubt, included so as to avoid any doubt in relation to particular non-parties who might seek to enforce the terms of the agreement, most obviously the commitment itself.
Paragraph 11 repeats an important component of paragraph 7 in providing that the agreement is not to confer upon ‘any person’, other than the addressees, any ‘benefit … of any nature whatsoever’.
The judge was correct in concluding that paragraphs 7, 9 and 11 do clearly and unambiguously preclude reliance upon the DIF Fund letter agreement by non-parties.
Two further arguments put in support of a contention that paragraphs 7, 9 and 11 should not be construed in this way need to be addressed. The first was that such a construction must inevitably lead to the implication of limiting words in paragraph 12. The second was that paragraphs 7, 9 and 11 cannot be read ‘literally’ because to do so would preclude the DIF Fund itself from enforcing the agreement.
I do not consider that my conclusion as to the clear meaning of paragraphs 7, 9 and 11 implicitly results in a situation where words must be ‘read in’ to paragraph 12. The broad and general words of paragraph 12 have to be read together with the specific provisions of paragraphs 7, 9 and 11. The DIF Fund agreed that it would not bring a proceeding of the kind which it has brought anywhere other than in New York, but it and the two addressees also agreed that no party other than the addressees themselves could enforce that obligation either directly, or indirectly by ‘causing’ one of the addressees to do it. I do not consider that this interpretation in effect reads words into paragraph 12 or that it is a construction so ‘unharmonious’ as to lead to the need to place an implicit limitation upon paragraphs 7, 9 and 11. Such an implicit limitation would be inconsistent with the express wording.
The argument that a ‘literal’ reading of paragraphs 7, 9 and 11 would preclude the DIF Fund from enforcing the letter agreement faces the initial obstacle that such evidence as there was of New York law did not support that contention. Further, it seems to me to be significant in this respect that the letter agreement is properly characterised as a ‘commitment’ by the DIF Fund to the addressees. Save for qualifications and limitations upon that commitment, there are no obligations by the addressees which the DIF Fund would seek to enforce. The acquisition of the equity in Coinmach does not occur pursuant to the letter agreement. In any event, as the judge below concluded, whatever the position might be in relation to enforcement by the DIF Fund that cannot alter the clear meaning of paragraphs 7, 9 and 11 in relation to non-parties.
In my opinion the judge was correct to refuse the application by the RBS defendants for a stay because the DIF Fund letter agreement clearly and unambiguously precludes reliance by the RBS defendants on paragraph 12.
Further, insofar as the B&B defendants sought a stay relying upon their own right to enforce paragraph 12, in my opinion the judge below was correct to refuse a stay on that basis on the ground that the DIF Fund letter agreement clearly and unambiguously precludes reliance by them on paragraph 12. The claim for a stay made by them in reliance upon BBIH’s capacity to enforce paragraph 12 is, of course, a separate matter, to which I will now turn.
BBIH’s application for a stay
BBIH is entitled to seek to enforce paragraph 12 of the DIF Fund letter agreement. The proceeding has been brought, as BBIH contends, in contravention of paragraph 12. Nevertheless, in my opinion the judge’s exercise of discretion to refuse to stay the proceeding on the application of BBIH has not been shown to have been the result of an error of the relevant kind. Before an appellate court will interfere with a discretion of this kind the applicant must show that the judge has acted upon a wrong principle; has taken into account irrelevant matters, mistaken the facts, or failed to take into account relevant matters; or that the decision is so unreasonable or unjust that error may be inferred.[58]
[58]House v The King (1936) 55 CLR 499, 505.
The relevant principles were set out by the New South Wales Court of Appeal in Global Partners, and in my view the judge below accepted that that was so. There was no failure on the part of the judge below to identify the applicable legal principles.
It is important to be mindful of the differences between the position here and the position which the court addressed in Global Partners. They are:
(1)The contracting party in Global Partners was a defendant to the proceeding.
(2)The non-parties in Global Partners were incorporated into the relevant contract in an extensive and significant way. There is no equivalent here to the provisions which Spigelman CJ found to be significant in Global Partners, particularly the indemnity provisions of the relevant agreement. The relevant agreement in Global Partners was the limited partnership agreement. The equivalent contracts here are the management agreements. The DIF Fund letter agreement incorporates BBPL into its terms in one respect, being the exercise of a discretion before B&B Spinco can enforce the agreement, but this comparatively insignificant feature of the agreement is in marked contrast to the provisions incorporating the non-parties into the limited partnership agreement in Global Partners, most obviously a contractual right to indemnity upon which they proposed to rely.
(3)The claims made in Global Partners and the claims made here are very similar. As Spigelman CJ explained, the claim in Global Partners, like the claim here, concerns the internal management decision making process whereby the two partnerships invested in the Coinmach takeover. The exclusive jurisdiction clause which was enforced in Global Partners was in the limited partnership agreement. The equivalent agreement here is not the DIF Fund letter agreement, it is the management agreements, which contain a non-exclusive jurisdiction clause in favour of the courts of Victoria. Spigelman CJ saw it as particularly significant that claims concerning the internal decision making process should be determined in accordance with the document which governed that process, and the outcome in Global Partners produced that result. The limited partnership agreement required that disputes be determined in England, and the granting of a stay in New South Wales brought that result about. By contrast, here, the management agreements do not require that disputes be determined in New York, they envisage that they be determined in Victoria. Whilst the stay was refused by the judge below in this case, the outcome produced reflects, in this respect, the outcome produced in Global Partners. Counsel for BBIH submitted that this consideration was a ‘distraction’ and that the significance of Global Partners is not the outcome but the principles. So much might be accepted. But the relevant issue is the exercise of a discretion. The factors which were seen as significant by Spigelman CJ were the extensive express incorporation of the non-parties into the limited partnership agreement and the fact that the nature of the dispute concerned internal decision making regulated by an agreement requiring disputes to be litigated in England. Here, the non-parties are not incorporated into the relevant agreement and the agreement which governs internal decision making envisages that disputes will be determined in Victoria.
(4)I have said that the absence of incorporation of the non-parties into the relevant agreement is a point of contrast between this case and Global Partners, but in fact one must go further. Here, the agreement containing the exclusive jurisdiction clause clearly and unambiguously precludes third party reliance upon it. There was a non-party exclusion provision in Global Partners (cl 18.15). Hammerschlag J referred to it. Spigelman CJ did not. On any view, the provisions of paragraphs 7, 9 and 11 are more extensive and more emphatic.
The judge below distinguished Global Partners on two bases. He gave a description of the parties in Global Partners and pointed to the fact that the position of the parties in Global Partners was not the same as the position before him. In Global Partners both the party to the relevant agreement and the non-parties were all defendants. That is not the position here. The judge was correct in articulating that difference. The judge below also distinguished Global Partners on the basis that Spigelman CJ had placed significance on the provisions of the limited partnership agreement which referred to and incorporated the non-parties into the arrangement. The judge was correct in that observation.
In my view, the judge, while distinguishing Global Partners, accepted the general principles which had been set out by Spigelman CJ and, in particular, the principle that where a dispute does fall within the ambit of an exclusive jurisdiction clause ‘strong reasons’ are required before a discretion will be exercised against the grant of a stay. The judge accepted that principle,[59] but he found that in this case strong reasons did exist.[60]
[59]Reasons [94].
[60]Ibid [100], [106].
Counsel for BBIH were correct when they submitted that it was most important that parties should be held to what they have agreed to, and that disputes should not be fragmented.
In relation to being held to what has been agreed, it is critical to clarify what it was that was agreed. The DIF Fund promised BBIH that it would bring disputes concerning the Coinmach takeover in the courts of New York. But the DIF Fund and BBIH also agreed that no-one other than BBIH (and B&B Spinco) could enforce that obligation or obtain any ‘benefit’ from it either in its own right or by ‘causing’ BBIH to act for it. This is a factor which qualifies the importance to be placed upon the consideration that the DIF Fund should be held to to what it agreed. While it is not a matter that was relied upon by the DIF Fund, it cannot be overlooked that BBIH is seeking to obtain a ‘benefit’ for the B&B defendants to which it had agreed that they were not entitled.
In relation to the fragmentation of disputes, this is not a matter where a series of interrelated agreements all provide for disputes to be determined in one jurisdiction. The risk of fragmentation is inherent in the various contracts which the parties have made. The various agreements (including those in Global Partners) include jurisdiction provisions which nominate New York, Delaware, England and Victoria.
The application by BBIH for a stay, for the ‘benefit’ of the B&B defendants, required the exercise of a discretion. When counsel for BBIH was asked to identify the errors of the relevant kind upon which BBIH relied he referred to the failure to give primary importance to the consideration that the DIF Fund should be held to its agreement, the taking into account of the absence of prejudice to BBIH if the
proceeding were to continue in Victoria, the taking into account of the fact that the proceeding substantially concerned the role of the manager and that the management agreements were governed by the law of Victoria and contained a non-exclusive jurisdiction clause in favour of Victoria, the taking into account of the risk that the plaintiffs’ statutory claims might not be available in New York, and the taking into account of the ‘range of matters’ which were of the kind that might have been relevant on a forum non conveniens application but not on an application of this kind.
The circumstances confronting the judge below were relevantly without precedent. The judge below recognised the importance of the contractual bargain, but he took the view that the fact that no claim is made against BBIH and that it is not a party to the proceeding meant that this case involved considerations different to those which might normally apply. In that context, it seems to me that the judge was entitled to take into account all of the matters which he did and I do not consider that any error of a House v The King kind has been demonstrated in his doing so. It is particularly significant in that respect that, in my view, the kinds of considerations which the judge below took into account were not inconsistent with the considerations which Spigelman CJ took into account in Global Partners, as I have already explained.
Conclusion
The proposed grounds of appeal raised by the applicants were arguable and leave to appeal should be granted. The appeals should be dismissed.
SANTAMARIA JA:
I have had the advantage of reading, in draft, the reasons of Whelan JA. For the reasons that he gives, I agree that leave to appeal should be granted and that the appeals should be dismissed.
ANNEXURE A
November 14, 2007
CONFIDENTIAL
TO: Babcock & Brown Spinco LLC (‘B&B Spinco’)
Babcock & Brown Investment Holdings Pty Ltd (‘BBPty’)
Purchase of Spin
Ladies and Gentlemen:
1.Reference is made to (1) the Agreement and Plan of Merger (the ‘Merger Agreement’), dated as June 14, 2007, among Coinmach Service Corp., a Delaware corporation (the ‘Company’), Spin Holdco Inc., a Delaware corporation (‘Parent’), and Spin Acquisition Co., a Delaware corporation and a wholly-owned subsidiary of Parent (‘Merger Sub’), pursuant to which Parent has agreed to acquire, on the terms and subject to the conditions set forth in the Merger Agreement, the Company pursuant to a merger of Merger Sub with and into the Company (such transaction, the ‘Acquisition’), and (2) the letter agreement (the ‘BBPty Commitment Letter’), dated June 14, 2007, among BBPty, Parent and the other investors listed on Schedule A thereto. Capitalized terms used herein without definition shall have the meanings given to them in the Merger Agreement.
2.The undersigned hereby commits to purchase, on the closing date of the Acquisition (the ‘Closing Date’), equity securities (the ‘Spinco Equity Securities’) of B&B Spinco, for an aggregate purchase price equal to the dollar amount set forth next to the undersigned’s name on Schedule A (the ‘Commitment’), solely for the purpose of funding and to the extent necessary to fund the Merger Consideration pursuant to and in accordance with the Merger Agreement, to pay related amounts required to be paid by Parent under the Merger Agreement and to reimburse certain costs and expenses of the purchasers of equity securities of Parent (‘Parent Equity Securities’). B&B Spinco agrees and acknowledges that the Spinco Equity Securities will [be] issued to the Investors set out in Schedule A proportionally to their respective Commitments.
3.The foregoing obligations of the undersigned to purchase Spinco Equity Securities are subject to the consummation of the Acquisition following the satisfaction or waiver of the conditions set forth in the Merger Agreement to Parent’s obligations to consummate the transactions contemplated thereby, the substantially contemporaneous funding of the Debt Financing and the simultaneous purchases (directly or indirectly) by other Investors (as defined in the BBPty Commitment Letter) of Parent Equity Securities. Funding of the Commitment will occur contemporaneously with the closing of the Acquisition and the issuance of the Parent Equity Securities, provided that the undersigned shall not, under any circumstances, be obligated to contribute to B&B Spinco more than such Commitment.
4.In the event Parent becomes obligated to make any payment to the Company pursuant to Section 6.5(e) of the Merger Agreement as a result of the undersigned’s failure to fund the Commitment, the undersigned hereby commits to contribute to B&B Spinco (or BBPty, at BBPty’s request) 100% of the amount of such payment.
5.The undersigned’s obligation to fund the Commitment shall terminate upon the earliest to occur of (a) the termination of the Merger Agreement, and (b) December 31, 2007.
6.The undersigned’s obligation to fund the Commitment may not be assigned, except as permitted in this paragraph. The undersigned may assign all or a portion of its obligations to fund the Commitment to affiliates or affiliated funds or to entities governed by an affiliate or an affiliated fund or to third parties, provided, however, that any such assignment shall not relieve the undersigned of its obligations under this Letter Agreement.
7.This Letter Agreement shall be binding on the undersigned solely to the benefit of each addressee and nothing set forth in this Letter Agreement shall be construed to confer upon or give to any person other than the addressees any benefits, rights or remedies under or by reason of, or any rights to enforce or cause such addressees to enforce, the Commitment or any provisions of this Letter Agreement.
8.Notwithstanding anything that may be expressed or implied in this Letter Agreement, the addressees by their acceptance of the benefits of this equity commitment, each covenant, agree and acknowledge that no person other than the undersigned shall have any obligation hereunder and that, notwithstanding that the undersigned may be a limited partnership (if applicable), no recourse hereunder or under any documents or instruments delivered in connection herewith shall be had against any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder, affiliate or assignee of the undersigned or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder, affiliate or assignee of any of the foregoing, whether by the enforcement of any assessment or by any legal or equitable proceeding, or by virtue of any statute, regulation or other applicable law, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder, affiliate or assignee of the undersigned or any former, current or future director, officer, employee, agent, general or limited partner, manager, member, stockholder, affiliate or assignee of any of the foregoing, as such, for any obligations of the undersigned under this Letter Agreement or any documents or instruments delivered in connection herewith or for any claim based on, in respect of, or by reason of such obligation or their creation.
9.This Letter Agreement may only be enforced by BBPty or, at the direction of Babcock & Brown in its sole discretion, B&B Spinco; provided, however, that no party shall have any right to enforce this Letter Agreement unless and until it becomes effective in accordance with its terms. B&B Spinco shall not have any right to enforce this Letter Agreement unless directed to do so by Babcock & Brown in its sole discretion. None of Parent, the Company or any other creditor of B&B Spinco (other than BBPty) shall have the right to enforce this Letter Agreement or to cause B&B Spinco to enforce this Letter Agreement.
10.The undersigned hereby represents and warrants with respect to itself, to B&B Spinco and BBPty that (a) such party has all corporate, limited partnership or limited liability company power, as applicable, and authority to execute, deliver and perform this Agreement; (b) the execution, delivery and performance of this Letter Agreement by the undersigned has been duly and validly authorized and approved by all necessary corporate, limited partnership or limited liability company action, as applicable, by such party; (c) this Letter Agreement has been duly and validly executed and delivered by such party and constitutes a valid and legally binding obligation of such party, (d) the execution, delivery and performance of this Letter Agreement by such party does not and will not conflict with, violate the terms of or result in the acceleration of any obligation under (i) any material contract, commitment or other material instrument to which such party is a party or is bound, or (ii) the constituent documents of such party, (e) the Commitment of such party is less than the maximum amount, if any, that such party is permitted to invest in any one portfolio investment pursuant to the terms of its constituent documents and (f) such party has available funds or uncalled capital commitments at least equal to the Commitment.
11.Nothing in this Letter Agreement, express or implied, is intended to or shall confer upon any person, other than B&B Spinco, acting at the direction of Babcock & Brown in its sole discretion, and BBPty, any right, benefit or remedy of any nature whatsoever under or by reason of this Letter Agreement.
12.This Letter Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York applicable to contracts executed in and to be performed in that State. Each of the parties hereto (a) consents to submit itself to the personal jurisdiction of the United States District Court for the Southern District of New York or any court of the State of New York located in such district in the event any dispute arises out of this Letter Agreement or any of the transactions contemplated by this Letter Agreement, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction or venue by motion or other request for leave from any such court and (c) agrees that it will not bring any action relating to this Letter Agreement or any of the transactions contemplated by this Letter Agreement in any court other than such courts sitting in the State of New York. THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THEM AGAINST THE OTHER IN ANY MATTERS ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT.
13.Except for the limited liability company agreement of B&B Spinco, a shareholders agreement to be separately entered into among the purchasers of Parent Equity Securities to define their rights as holders of such securities, the letter agreements with respect to the Commitments of the other Investors and the Side Letter between Babcock & Brown and the undersigned, this Letter Agreement constitutes the sole agreement, and supersedes all prior agreements, understandings and statements, written or oral, between the parties hereto or any of their respective affiliates and any other person with respect to the subject matter hereof. The terms of this Letter Agreement may not be modified or otherwise amended, or waived, except pursuant to a written agreement signed by the parties hereto. This Letter Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument.
SCHEDULE OF PARTIES
| S APCI 2016 0158 | |
| BETWEEN: | |
| ROYAL BANK OF SCOTLAND PLC | First Applicant |
| RBS EQUITY CORPORATION | Second Applicant |
| - and - | |
| BABCOCK & BROWN DIF III GLOBAL CO-INVESTMENT FUND LP | First Respondent |
| DIF III GP LIMITED | Second Respondent |
| BABCOCK & BROWN INTERNATIONAL PTY LIMITED (ACN 108 617 483) | Third Respondent |
| BABCOCK & BROWN LP | Fourth Respondent |
| DIF CAPITAL PARTNERS LIMITED (ACN 101 611 438) | Fifth Respondent |
| ROBERT NEIL TOPFER | Sixth Respondent |
| PHILLIP HARTLEY GREEN | Seventh Respondent |
| FERGUS JOHN NEILSON | Eighth Respondent |
| HARRY NICHOLSON | Ninth Respondent |
| ROBERT RUPERT OFFICER | Tenth Respondent |
| BERENICE TALINTYRE | Eleventh Respondent |
| RICHARD UMBRECHT | Twelfth Respondent |
| SPIN HOLDCO INC | Thirteenth Respondent |
| BABCOCK & BROWN INVESTMENT HOLDINGS PTY LTD | Fourteenth Respondent |
| S APCI 2016 0159 | |
| BETWEEN: | |
| BABCOCK & BROWN INVESTMENT HOLDINGS PTY LTD | First Applicant |
| BABCOCK & BROWN INTERNATIONAL PTY LTD (ACN 108 617 483) | Second Applicant |
| BBLP LLC | Third Applicant |
| - and - | |
| BABCOCK & BROWN DIF III GLOBAL CO-INVESTMENT FUND LP | First Respondent |
| DIF III GP LIMITED | Second Respondent |
| DIF CAPITAL PARTNERS LIMITED (ACN 101 611 438) | Third Respondent |
| ROBERT NEIL TOPFER | Fourth Respondent |
| PHILLIP HARTLEY GREEN | Fifth Respondent |
| FERGUS JOHN NEILSON | Sixth Respondent |
| HARRY NICHOLSON | Seventh Respondent |
| ROBERT RUPERT OFFICER | Eighth Respondent |
| RICHARD UMBRECHT | Ninth Respondent |
| SPIN HOLDCO INC | Tenth Respondent |
| THE ROYAL BANK OF SCOTLAND PLC | Eleventh Respondent |
| RBS EQUITY CORPORATION | Twelfth Respondent |
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