Synergy Audio Visual Pty Ltd v SoundVision Technologies LLC
[2020] VCC 1417
•10 September 2020
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
General List
Case No. CI-20-02244
| Synergy Audio Visual Pty Ltd | Plaintiff |
| v | |
| SoundVision Technologies LLC | Defendant |
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JUDGE: | His Honour Judge Woodward | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers | |
DATE OF RULING: | 10 September 2020 | |
CASE MAY BE CITED AS: | Synergy Audio Visual Pty Ltd v SoundVision Technologies LLC | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 1417 | |
REASONS FOR RULING
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Subject: PRACTICE AND PROCEDURE
Catchwords: Stay or dismissal of proceedings – inappropriate forum test for trial of proceeding – insufficient prospects of success – application of ‘connecting factors’ to be considered .
Legislation Cited: County Court Civil Procedure Rules 2018 (Vic) r7.02, 7.04; Competition and Consumer Act 2010 (Cth) Sch 2, s18.
Cases Cited:Madden International Ltd v Lew Footwear Holdings Pty Ltd [2015] VSCA 90; Yunghanns v Colquhoun-Denvers [2016] VSC 403; Voth v Manildra Flour Mills PtyLtd (1990) 171 CLR 538; RegieNationale des Usines Renault SA v Zhang (2002) CLR 491;; Republica Democratica de Timor Leste v Lighthouse Corp Ltd [2019] VSCA 290; Re Point of Pay Pty Ltd [2012] VSC 380; Bendigo and Adelaide Bank Ltd v Quine [2018] VSC 272; Agar v Hyde (2000) 201 CLR 552; Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A.M.J Meagher | K L Gates |
| For the Defendant | Mr C.T Moller | MST Lawyers |
HIS HONOUR:
Application, summary and outcome
1 The defendant (“SoundVision”) applies by summons dated 5 August 2020 for an order under r7.04 of the County Court Civil Procedure Rules 2018 (Vic) (“the Rules”) that the court stay, or alternatively dismiss, this proceeding. The proceeding was commenced by the plaintiff (“Synergy”) on 20 May 2020 and emailed to SoundVision’s lawyers in Utah, USA later that day. SoundVision filed its own proceedings against Synergy in Utah also on 20 May 2020, but because of the time difference of 16 hours at that time of year, the filing in Utah occurred at approximately 5.50am AEST on 21 May 2020. Thus, Synergy’s proceeding in this court was first in time.
2 SoundVision relies on the affidavits of Eli Milne, SoundVision’s Utah lawyer, and Ron Davies, its CEO, both dated 4 August 2020. SoundVision has filed and served written submissions of its counsel Mr Möller, dated 25 and 31 August 2020. Synergy relies on the affidavits of Jonathan Chan, its Melbourne lawyer, and its Managing Director, Philip Sawyer, both dated 17 August 2020. Synergy’s written submissions by its counsel Mr Meagher are dated 17 and 27 August 2020. The facts are not materially in dispute; nor are the applicable legal principles, except perhaps as to matters of emphasis.
3 For the reasons below, I am satisfied that this court is not an inappropriate forum for the trial of this proceeding within the meaning of r7.04(2)(b) of the Rules. Indeed, in my view, it is the appropriate forum (although it is not necessary for me to go that far). I am also satisfied that SoundVision has failed to establish for the purposes of r7.04(2)(c) of the Rules that Synergy’s claim as a whole has insufficient prospects of success to warrant putting SoundVision to the time, expense and trouble of defending Synergy’s claim. I will therefore order that SoundVision’s application be dismissed and that it pay Synergy’s costs of the application on the standard basis, in default of agreement.
Factual background
4 Synergy sells high end audio equipment and operates a wholesale distribution business, selling goods to retailers and resellers throughout Australia. It is based in Heidelberg, Melbourne. It sells from a physical store and through a website. SoundVision is a manufacturer of audio equipment, based in Utah, USA.
5 In May 2018, Synergy approached SoundVision about becoming SoundVision’s Australian distributor and sent SoundVision its standard distribution agreement. The parties negotiated the terms of the distribution agreement over the ensuing weeks and signed the agreement on 19 and 20 June 2018 (“agreement”). SoundVision signed in Utah on 19 June 2018 and then emailed the agreement to Synergy. Synergy signed in Melbourne on 20 June 2018 and then sent the signed agreement to SoundVision by email and by post.
6 The agreement relevantly provided as follows:
“Synergy’s Obligations to Supplier
”1.Distribution – Synergy shall exclusively distribute the Supplier’s products in Australia for a five year period commencing on July 1, 2018. This agreement shall continue for a subsequent five years, unless terminated by either party giving three (3) months written notice of [sic] the other party prior to the commencement of the subsequent term.
…
7.Targets – Synergy shall aim to achieve any sales targets agreed upon for each fiscal year. A minimum opening order of $60,000 USD will be submitted within two (2) weeks of the date of this agreement. Synergy’s orders over the initial term of the agreement and over each subsequent year, will equal a minimum projection of $150,000 USD. These yearly goals are an important part of this agreement and will be evaluated on a quarterly basis. If Synergy’s orders have not equalled or exceeded the minimum goals during each quarter, the supplier reserves the right to exercise other remedies within the Agreement.
…
Mutual Obligations
1.Termination – Notwithstanding any other remedy that may be available to either Synergy or Supplier under applicable laws of Utah with respect to such event, any of the following events with respect to either party shall permit the other party to immediately terminate the Agreement by written notice: any other material breach of the agreement, which is not cured within thirty (30) days after written notice from one party to the other, a substantial change of ownership, either party ceases to conduct its operations in the normal course of business.”
7 The parties conducted business pursuant to the agreement until around March 2020, when SoundVision notified the solicitor for Synergy that it intended to, or had already, appointed another distributer of its products in Australia. Mr Sawyer of Synergy deposes that between 10 and 26 March 2020, he and Mr Harrison, the vice president of SoundVision, communicated by email and phone regarding SoundVision’s proposed change to its distribution model. Synergy has since alleged that SoundVision’s conduct evinced an intention to no longer be bound by the agreement and thereby repudiated the agreement. Synergy accepted that repudiation by letter from its lawyers dated 27 March 2020, and claims damages against SoundVision for breach of the agreement. It also alleges that SoundVision engaged in misleading and deceptive conduct contrary tos18 of the Australian Consumer Law (Schedule 2, Competition and Consumer Act 2010 (Cth)) (“ACL”).
8 For its part, SoundVision claims Synergy’s opening order was only $33,000 USD and at no time did its orders total $150,000 USD per year as required under the agreement and thus “Synergy never fulfilled its obligations concerning the volume of product it was required to order from SoundVision”. SoundVision is yet to file a defence or any counterclaim in this proceeding.
Legal framework
9 The legal framework for the resolution of this application is r7.04 of the Rules, which provides as follows:
(1)On application by a person on whom an originating process has been served out of Australia, the Court may by order set aside the originating process or its service on the person or dismiss or stay the proceeding.
(2)Without limiting paragraph (1), the Court may make an order under this Rule if satisfied—
(a)that service out of Australia of the originating process is not authorised by these Rules; or
(b)that the Court is an inappropriate forum for the trial of the proceeding; or
(c)that the claim has insufficient prospects of success to warrant putting the person served out of Australia to the time, expense and trouble of defending the claim.”
10 Synergy also relies on the terms of r7.02 of the Rules, which is primarily concerned with providing for when proceedings commenced in Victoria can be served out of Australia, without first obtaining leave of the court. It relevantly states that:
“An originating process may be served out of Australia without leave in the following cases—
…
(b) when the claim is for the enforcement, rescission, dissolution, annulment, cancellation, rectification, interpretation or other treatment of, or for damages or other relief in respect of a breach of, a contract which—
(i) was made or entered into in Victoria; or
(ii)was made by or through an agent trading or residing within Victoria; or
(iii)was to be wholly or in part performed in Victoria; or
(iv)was by its terms or by implication to be governed by Victorian law or to be enforceable or cognizable in a Victorian court;
…
(c)when the claim is in respect of a breach in Victoria of any contract, wherever made, whether or not that breach was preceded or accompanied by a breach out of Victoria that rendered impossible the performance of that part of the contract that ought to have been performed in Victoria;
…
(j)when the claim arises under an Australian enactment and—
(i)any act or omission to which the claim relates was done or occurred in Victoria; or
(ii)loss or damage to which the claim relates was sustained in Victoria; or
(iii)the enactment applies expressly or by implication to an act or omission that was done or occurred outside Australia in the circumstances alleged; or
(iv)the enactment expressly or by implication confers jurisdiction on the Court over persons outside Australia (in which case any requirements of the enactment relating to service must be complied with);
…”
Principles to be applied
11 In his primary submissions, counsel for Synergy Mr Meagher submits that the applicable test pursuant to r7.04 was determined in Madden International Ltd v Lew Footwear Holdings Pty Ltd[1] (“Madden”), summarised by Dixon J in Yunghanns v Colquhoun-Denvers[2](“Yunghanns”). Mr Meagher then sets out an extract from the decision of the Court of Appeal in Madden before submitting that the defendant’s application “should properly be considered pursuant to r7.04 and the principles in Madden.”
[1] [2015] VSCA 90.
[2] [2016] VSC 403.
12 In his reply submissions, counsel for SoundVision Mr Möller argues that Synergy’s reliance on the principles in Madden is difficult to understand. He argues that Madden and Yunghanns:
“…concerned an application to set aside service out of Australia. The principles identified by the Court of Appeal concern the test for determining whether such a proceeding comes within Rule 7.01, which allows process to be served out of Australia without an order of the Court.
SoundVision does not apply to set aside Synergy’s writ. Nor does it contend that this proceeding does not come with [sic] Rule 7.01. Rather, it seeks that the proceeding be stayed or dismissed, on basis that Victoria is an “inconvenient forum”.
Synergy’s further submissions that “each of the orders sort [sic] by the defendant’s summons should be considered pursuant to [the Madden] test” …and the “proper approach the court should adopt is that set down in Madden”…should not be accepted either. If those submissions were correct, it would mean that every time service out satisfies Rule 7.01, the Court would not have the power to stay the proceeding – whether under Rule 7.04 (which, on Synergy’s argument, cannot operate when Rule 7.01 is satisfied) or the “clearly inappropriate forum” test set out in Voth v Manildra Flour Mills and subsequent cases. Further, the submissions fly in the face of almost every case to have considered the courts’ power to permanently stay or dismiss a proceeding on the grounds the forum is inappropriate, which have emphasised repeatedly the courts’ power to order stays or dismissals as part of their inherent or implied power to control their own processes.
13 I agree. In my view, Synergy’s focus on the principles in Madden (and related submissions) are a distraction. The principles to be applied in this case are those stated in the decision of the High Court in Voth v Manildra Flour Mills Pty Ltd (“Voth”)[3]. As Mr Möller submitted, there is relatively little Victorian authority on the test for what is an “inappropriate forum” under r7.04(2)(b). But in Regie Nationale des Usines Renault SA v Zhang,[4] the High Court, discussing the expression as then used in the rules of the Supreme Court, described the expression "inappropriate forum" as “less emphatic” than the expression “clearly inappropriate forum” adopted in Voth to determine whether an Australian court should decline to exercise its jurisdiction”.[5] However, the High Court held that the test was nevertheless the same:
“Because a court’s power to stay proceedings is an aspect of its inherent or implied power to prevent its own processes being used to bring about injustice, the same concepts and considerations necessarily inform the test of ‘inappropriate forum’…as inform the ‘clearly inappropriate forum’ test adopted in Voth. And because the ultimate consideration is the prevention of injustice, they inform it in the same way.
[3](1990) 171 CLR 538.
[4](2002) 210 CLR 491.
[5](2002) 210 CLR 491 at [24].
14 Turning to the decision in Voth itself, as Mr Möller notes, the Victorian Court of Appeal in Republica Democratica de Timor Leste v Lighthouse Corp Ltd[6] recently and conveniently summarised the relevant principles in Voth as follows (citations omitted):[7]
[6][2019] VSCA 290.
[7][2019] VSCA 290 at [40]-[44].
In Voth…,the High Court held that a defendant will ordinarily be entitled to a permanent stay of proceedings instituted against it and regularly served upon it within the jurisdiction, if the defendant persuades the local court that, having regard to the circumstances of the particular case, and the availability of an alternative foreign forum to whose jurisdiction the defendant is amenable, the local court is a ‘clearly inappropriate forum’ for determination of the dispute.
The principle is a manifestation of the broader power reposed in a superior court to stay proceedings if they are oppressive, vexatious or an abuse of process, or are productive of injustice in the particular case.
In many cases, the Court said, the application of the ‘clearly inappropriate’ test — which focuses on the inappropriateness of the local forum, rather than on the appropriateness of any other forum — is likely to yield the same result as an inquiry as to which of the two fora is the ‘more appropriate forum’. Further, the inquiry will inevitably involve an assessment of the relevant ‘connecting factors’, including the nature of the dispute and cause of action, the law to be applied, the location of the cause and the location of witnesses.
The fact that the law of the forum provides the governing law of the cause may be important, but is not necessarily determinative. So much follows from the choice of law rules which permit a local court to apply the law of a foreign jurisdiction. It may be that the existence of a much stronger connection with a foreign forum may justify a conclusion that the local court is clearly inappropriate notwithstanding that the law of the cause may not be the law of the foreign forum.
The onus remains on the party seeking the stay to establish that the chosen forum is clearly inappropriate. The test is a stringent one that requires the party seeking a stay to establish not only that the local forum is inappropriate, but that it is clearly so. This indicates that ‘something more than merely balancing relevant considerations is required’.”
15 A useful example of the factors a court may consider in applying the principles of Voth can be found in the decision of Robson J in Re Point of Pay Pty Ltd[8] (“Point of Pay”), which included the following:
[8][2012] VSC 380 [31].
· whether each country will recognise the other’s orders and decrees;
· which forum can provide more effectively for the complete resolution of the matters involved in the parties’ controversy;
· the order in which the proceedings were instituted, the stage which they have reached and the cost that the parties have incurred;
· the ability of the parties to participate in the respective proceedings on an equal footing;
· the true nature and full extent of the issues involved in the controversy between the parties;
· whether the local proceeding offers a juridical advantage over the proceedings in the other forum.
16 In relation to the application of r7.04(2)(c), and whether Synergy’s claim had insufficient prospects of success to justify requiring SoundVision to defend it, this was recently considered by Croft J in Bendigo and Adelaide Bank Ltd v Quine.[9] In applying the rule, his Honour adopted the approach of the majority of the High Court in Agar v Hyde;[10] namely, that the same test should be applied as would apply in a summary judgment application.
[9][2018] VSC 272.
[10](2000) 201 CLR 552 at 576 [60].
Submissions and analysis
17 In relation to the factors from Point of Pay listed above, Mr Möller submits (and I agree) that there are several factors where there is no material difference between these proceedings and the Utah proceedings. He submits that each country recognises the orders and decrees in the other, each party has connections with the forum in which it commenced proceedings and each party will participate in the proceedings on an equal footing.
18 On the issue of which proceeding was commenced first, Mr Möller accepts that this proceeding was commenced first, “but only by a few hours”. In my view, Mr Möller understates the significance of this factor. It is not decisive, of course, but it is relevant. And I am not persuaded that the relevance is materially diminished by the relatively short time between commencement in each jurisdiction.
19 Mr Möller next submits that there are two factors in the list above which weigh in favour of Victoria being a “clearly inappropriate forum”. First, the terms of the agreement and, second, an element of SoundVision’s claim in the Utah proceedings that is not available under Australian law.
20 Taking each of these in turn, Mr Möller argues that the “Mutual Obligations- Termination” provision set out above “contains an express reference to the ‘applicable laws of Utah’”. He accepts that the High Court in Voth confirmed that “the application of foreign law as the lex causae cannot make an Australian court a clearly inappropriate forum”, but submits it is a “centrally important factor” and a relevant consideration.
21 The difficulty with this submission is that the clause on which SoundVision relies to make this argument, bears little resemblance to the usual clause providing that the law of a particular country is the governing law of the contract. The opening words of the clause are (emphasis added): “Notwithstanding any other remedy that may be available to either Synergy or Supplier under applicable laws of Utah with respect to such event...” Thus, on its proper construction, it does no more than make clear that certain rules will govern termination despite other remedies that may be available under Utah law. On any view, this falls a long way short of providing that the agreement is governed by Utah law.
22 Accordingly, I agree with Synergy that it is far from clear that Utah law will be engaged on any of the issues that may arise for determination at trial. And if they do, there are clear procedures for enabling this court to decide those issues. Having said that, I accept that this factor does weigh in favour of a finding that Victoria is an inappropriate forum but, in my view, only very marginally.
23 Turning next to SoundVision’s second factor, it points to its claim in the Utah proceeding which pleads a breach of the implied covenant of good faith and fair dealing,[11] the equivalent of which is not recognised under Australian law.[12] Mr Möller submits that, given the unavailability of the claim under Australian law, this proceeding should be stayed or dismissed and the Utah proceeding allowed to progress. It is true that under Australian law it cannot be said unequivocally that commercial contracts are a class of contract that carry an implied term of good faith as a legal incident. However, as the decision of the Court of Appeal in Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL[13] demonstrates, it may be appropriate in a particular case to import such an obligation.[14] It will be a matter for trial as to whether this is such a case.
[11]Pursuant to the Utah Commercial Code §70A-1-203, which states ‘every contract or duty within this act imposes an obligation of good faith in its performance or enforcement.’
[12]Specialist Diagnostic Services Pty Ltd (formerly Symbion Pathology Pty Ltd) v Healthscope Ltd (2012) 41 VR 1 at [86]; Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228; see also Royal Botanic Gardens & Domain Trust v South Sydney City Council (2002) 240 CLR 45 at [88] (Kirby J).
[13][2005] VSCA 228.
[14][2005] VSCA 228, per Buchanan J at [25].
24 Further, as Mr Meagher for Synergy has submitted, an equivalent argument can be made regarding Synergy’s misleading and deceptive claim under the ACL, which is not available to the plaintiff under Utah law. On the other hand, SoundVision submits (in the context of its argument relying on r7.04(2)(c) of the Rules), that Synergy’s claim of misleading and deceptive conduct under s18 of the ACL, is unsustainable. There is some force in this submission, but SoundVision’s argument based on r7.04(2)(c) is limited to Synergy’s ACL claim – it does not appear to argue that its other claims would justify a finding that Victoria is an inappropriate forum under that rule.
25 In summary, Synergy has in its favour that this proceeding is first in time and that it is advancing claims in this proceeding under the ACL that are not available under Utah law. z Against it is the fact that the ACL claim is at least arguably unsustainable (as currently pleaded). For SoundVision:
· it is possible that Utah law may need to be considered in construing each party’s rights to termination under the agreement, but the extent of that consideration (if any) is highly uncertain; and
· it may have claims based on an implied covenant of good faith in Utah that are more well defined and certain than similar claims available in Australia, but the availability and relevance of those claims is again highly uncertain.
26 As for other factors, I am satisfied that these are essentially neutral. In particular, as Synergy has submitted, given the ongoing COVID-19 pandemic in both jurisdictions, it is likely that witnesses in both proceedings would be appearing remotely using Zoom or another similar electronic platform, in any event. The only additional hardship will be managing the time differences, but for this court’s part, I am confident that this can be ameliorated by taking evidence from witnesses overseas outside usual sitting hours, if required.
27 Weighing all these matters into the balance, in my judgment, this court is not an inappropriate forum for the trial of this proceeding within the meaning of r7.04(2)(b) of the Rules. Nor does the claim by Synergy as a whole have insufficient prospects of success to justify an order staying or dismissing the originating process under r7.04(2)(c).
28 Indeed, as I foreshadowed in my introductory remarks (and notwithstanding that a finding to this effect goes further than I need to), it seems to me that this court is an appropriate forum for the trial of the proceeding. My reason for this view has its foundation in the factor in the Point of Pay list above that was not touched upon directly in the parties’ submissions, namely, that “the true nature and full extent of the issues involved in the controversy between the parties” arise from acts and omissions that are alleged to have occurred in Victoria (or Australia), not Utah.
29 Putting to one side questions of construction of the agreement (which, as discussed above, slightly favour SoundVision), it seems to me that the issues in the proceeding will be largely factual and will essentially focus on alleged acts and omissions by both parties that will be said to have occurred in Australia. These are, from SoundVision’s perspective, the adequacy of Synergy’s performance of its alleged sales targets in Australia. And, from Synergy’s perspective, the circumstances of SoundVision’s appointment of another distributor in Australia, which Synergy alleges was a repudiation of the agreement. Thus, the defaults that both parties allege concern conduct wholly within Australia. To my mind, it follows that the “issues involved in the controversy between the parties” (to the extent they have a connection with any jurisdiction) are most closely connected to the jurisdiction of this court.
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Certificate
I certify that these 12 pages are a true copy of the judgment of His Honour Judge Woodward delivered on 10 September 2020
Dated: 10 September 2020
Claire Findlay
Associate to his Honour Judge Woodward
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