Royal Bank of Scotland PLC v GBS Gold International Inc

[2009] FCA 1596

FEDERAL COURT OF AUSTRALIA

Royal Bank of Scotland PLC v GBS Gold International Inc [2009] FCA 1596

ROYAL BANK OF SCOTLAND PLC v GBS GOLD INTERNATIONAL INC, TERRITORY GOLDFIELDS PTY LIMITED (ADMINISTRATORS APPOINTED), PETER WALKER KERR, GILBERT E PLAYFORD and ANTHONY JAMES SIMPSON

WAD 167 of 2009

GILMOUR J
21 DECEMBER 2009
PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION	WAD 167 of 2009

BETWEEN: ROYAL BANK OF SCOTLAND PLC
Applicant

AND:

GBS GOLD INTERNATIONAL INC
First Respondent

TERRITORY GOLDFIELDS PTY LIMITED (ADMINISTRATORS APPOINTED)
Second Respondent

PETER WALKER KERR
Third Respondent

GILBERT E PLAYFORD
Fourth Respondent

ANTHONY JAMES SIMPSON
Fifth Respondent

JUDGE:	GILMOUR J
DATE OF ORDER:	21 DECEMBER 2009
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1.Leave be granted to allow the applicant to serve the amended application and statement of claim, filed in the Court on 15 October 2009, on the first respondent at 10th Floor, 595 Howe St, Vancouver, British Columbia V6C 275, Canada by a private agent.

2. An affidavit sworn or affirmed by the private agent, who effected service, be accepted as proof of service of the application and statement of claim, filed in the Court on 22 September 2009, on the first respondent.

3. The applicant's solicitors be authorised to alter the date for hearing in the service copy of the application to 9 February 2010 at 9.30 am.

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

The text of entered orders can be located using eSearch on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION	WAD 167 of 2009

BETWEEN: ROYAL BANK OF SCOTLAND PLC
Applicant

AND:

GBS GOLD INTERNATIONAL INC
First Respondent

TERRITORY GOLDFIELDS PTY LIMITED (ADMINISTRATORS APPOINTED)
Second Respondent

PETER WALKER KERR
Third Respondent

GILBERT E PLAYFORD
Fourth Respondent

ANTHONY JAMES SIMPSON
Fifth Respondent

JUDGE:	GILMOUR J
DATE:	21 DECEMBER 2009
PLACE:	PERTH

REASONS FOR JUDGMENT

1. The applicant, the Royal Bank of Scotland PLC, brings a notice of motion under order 8, rule 3 of the Federal Court Rules for leave to serve the first respondent, GBS Gold International Inc (GBS) outside Australia.  The motion is supported by the affidavits of Fiona Majella McNulty, sworn 12 October 2009 and Eric Thomas Allison, sworn 25 November 2009.  The applicant is incorporated under the laws of Scotland.  GBS is incorporated under the laws of British Columbia in Canada.  GBS, it is alleged, carries on business in Australia through “the Australia subsidiaries”, which is an expression defined in the statement of claim and does so by exploring for and mining gold at various mine sites in the Northern Territory of Australia.  These include mines known as Brocks Creek, which is an underground mine, Tom’s Gully, another underground mine, Fountainhead, which is an open pit mine, the so-called Chinese Big Pit, another open pit mine, and Cosmo Deeps, an underground mine.  It also produces gold at the Union Reefs Gold Processing Plant in the Northern Territory.

2. The quite detailed statement of claim and the supporting affidavit of Mr Allison disclose the claim by the applicant as against GBS for damages under s 1041I of the Corporations Act 2001 (Cth) alternatively, damages under s 12GF of the Australian Securities and Investment Commission Act 2001 Cth (the ASIC Act) alternatively, damages for alleged breaches of duty. These claims concern the applicant’s allegations that it was misled by GBS and other respondents, as a result of which the applicant entered into a subscription and option agreement on 5 August 2008, under which it subscribed for GBS shares and GBS warrants, on 7 August 2008, and on that date paid the purchase price of a little over $8 million Canadian. The alleged misleading conduct arises in the following statutory context as pleaded at paras [71]-[75 ] of the statement of claim.

   71.The GBS Shares are a "financial product" as defined in section 763A(1) of the Corporations Act 2001 (Cth) (Corporations Act) and section 12BAA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).

   72.The GBS Warrants are a "financial product" as defined in section 763A(1) of the Corporations Act and section 12BAA(1) of the ASIC Act.

   73.The issuing of the GBS Shares and the GBS Warrants by GBS involved GBS "dealing in a financial product" as defined in section 12BAB(7) of the ASIC Act and therefore "providing a financial service" as defined in section 12BAB(1) of the ASIC Act.

   74. The Negotiations and the making of arrangements to issue the GBS Shares and the GBS Warrants were all conduct in Australia in relation to a financial product by GBS within the meaning of section 1041 H(1) of the Corporations Act.

   75.The Negotiations and the making of arrangements to issue the GBS Shares and the GBS Warrants were all conduct in trade and commerce in Australia in relation to financial services by GBS within the meaning of section 12DA(1) of the ASIC Act.

3. Prior to the applicant entering into this agreement, then subscribing and paying for the shares and warrants, a number of critical matters are alleged to have occurred.  They are described in the statement of claim as:

   (1)      The Brocks Creek stope failure –

   (2)      the Brocks Creek stope failure consequences;

   (3)      the Chinese Big Pit Reduction;

   (4)      the Union Reefs cost increases;

   (5)      the Tom’s Gully cost increases and grade reduction.

4. None of these matters, it is alleged, was disclosed to the applicant by GBS, relevantly, whether during negotiations towards the execution and later performance of the agreement, or in announcements made by GBS to the Toronto Stock Exchange where its shares were then listed, or otherwise.  GBS is alleged to have known of all of these matters at the relevant times.

5. The applicant pleads and Mr Allison deposes, that it would not have agreed to pay the purchase price for the GBS shares and warrants, under the terms of the agreement, if it had known of any one or more of these matters.  The applicant relied on what it had been told during negotiations by GBS.  These matters which underpin the claims for damages for misleading and deceptive conduct form a common matrix of facts which underpin the allegations in the alternative claims of negligence which the applicant makes against GBS in the statement of claim.

6. The applicant alleges that, as a result of its reliance on these matters, entering into the agreement, subscribing for the shares and warrants and paying the purchase price, it has suffered damage, in that its shares were worth, it alleges, far less than it agreed to pay for them at the time and since then have become valueless.  The reason for that, it is alleged, and Mr Allison deposes to this, is that in September 2008, GBS appointed administrators to the company.  In October 2008, its shares were delisted from the Toronto Stock Exchange.  In November 2008, they were listed on the NEX of the TSX Ventures Exchange, but delisted from that exchange in March this year.  On 14 August 2009, the Alberta Securities Commission ordered that trading cease in respect of GSB Securities until its further order. 

7. I will now turn to the criteria that require to be satisfied under Order 8, rule 3 of the Federal Court Rules. 

   Order 8 rule 3(2)A – Jurisdiction of the court:

8. By its application and statement of claim, the applicant claims relief against GBS, including for damages under s 1041I of the Corporations Act and s 12GF of the ASIC Act. This court has jurisdiction under each of these Acts.

   Order 8 Rule 3(2)(b) – Proceeding is a kind referred to in Order 8 Rule 2 FCR. 

9. The applicant’s claims are of a kind referred to in order 8 rule 3(2)(b), these being:

   (a)The proceedings based on a cause of action arising in Australia (Item 1). This is supported by the matters pleaded in paragraphs 22, 24, 31, 44, 45 and 46 of the statement of claim.

   (b)A proceeding in relation to a contract governed by Western Australia law in which the applicant seeks an order rescinding or annulling the contract.  This is the subject of what is alleged in paragraph 47(d) of the statement of claim, together with paragraph 2(a) of the application.

   (c)A proceeding in relation to a tort (negligence) committed in Australia (Item 4).  In this regard I have in mind what is set out under paragraphs 96 to 100 as well as paragraphs 22, 24, 31, 44, 45 and 46 of the statement of claim.

   (d)A proceeding in relation to a breach of a provision of an act that is committed in Australia (Item 11).  This is supported by the matters pleaded in paragraphs 22, 24, 31, 44, 45 and 46 of the statement of claim.

   (e)A proceeding in relation to a corporation that carries on business in Australia (or did so at the material times).  This is supported by paragraph 2(d) of the statement of claim.

   (f)A proceeding affecting GBS in relation to its conduct as a member of corporations carrying on business in Australia.  This is supported by paragraphs 2(c) and 2(d) of the statement of claim.

   Order 8 Rule 3(2)(c) – prima facie case

10. I am satisfied that a prima facie case has been established for a number of reasons.  First, there is the certificate pursuant to order 11 rule 1B of the Federal Court Rules annexed to the statement of claim filed on 22 September 2009 and signed by the solicitor for the applicant, Jason Alexander Willi Munstermann.  Ms McNulty supports this in her affidavit to the end that she says that the factual and legal material available to the applicant’s solicitors at present provides a proper basis for each allegation in the statement of claim.  Then there is the affidavit which is in considerable detail going to the matters pleaded in the statement of claim to by Mr Allison.

    Order 8 Rule 3(3)(a) – Where GBS is to be served

11. GBS is a company with its registered office at 10 Floor, 595 Howe Street, Vancouver, British Columbia V6C2T5 Canada.  This is evident from a copy of the company search dated 28 September 2009 of GBS.

    Order 8 Rule 3(3)(b) – Proposed method of service

12. The proposed method of service of the application and statement of claim is by private agent, being a lawyer entitled to practice in Canada.  Then set out in full what is contained in paras 3 and 4 of the affidavit of Ms McNulty. 

    Order 8 Rule 3(c) – Legality of proposed method of service

13. Annexed to Ms McNulty’s affidavit and marked D “is a copy of court service documents abroad – Canada” which was printed on 6 October 2009 from the Attorney General’s Department website under “private international law and service of documents abroad”.  Based on this document, she deposes to her belief that the proposed method of service is permitted by the law of Canada.  I note that the Attorney General’s Department advises that:

    A private agent should be used to serve Australia court processes in Canada serviced through an agent (generally a lawyer) does not reach Canadian law and is not considered by Canada to be a breach of its sovereignty.

    Orders

14. For all these reasons there will be orders that:

    1.Leave be granted to allow the applicant to serve the amended application and statement of claim, filed in the Court on 15 October 2009, on the first respondent at 10th Floor, 595 Howe St, Vancouver, British Columbia V6C 275, Canada by a private agent.

    2. An affidavit sworn or affirmed by the private agent, who effected service, be accepted as proof of service of the application and statement of claim, filed in the Court on 22 September 2009, on the first respondent.

    3. The applicant's solicitors be authorised to alter the date for hearing in the service copy of the application to 9 February 2010 at 9.30 am.

I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour.

Associate:

Dated:       24 December 2009

Counsel for the Applicant:	Mr D J Pratt
Solicitor for the Applicant:	Henry Davis York
Date of Hearing:	21 December 2009
Date of Judgment:	21 December 2009