FEDERAL COURT OF AUSTRALIA

Morris v McConaghy Australia Pty Ltd (No 3) [2018] FCA 606

ORDERS

UPON THE APPLICANT, BY HIS COUNSEL, GIVING THE USUAL UNDERTAKING AS TO DAMAGES, THE COURT ORDERS THAT:

1.    Until further order of the Court the Second Respondent be restrained from prosecuting or continuing with the proceedings in Action No 712 of 2018 in the High Court of the Hong Kong Special Administrative Region.

2.    A copy of this be served on the Second Respondent in accordance with the methods set out in order 3 of the orders made on 6 April 2018.

3.    Costs of the Applicant’s interlocutory application dated 5 April 2018 are reserved.

4.    Liberty to apply.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

PERRAM J:

1    On 9 April 2018 I granted the Applicant, Mr Morris, an ex parte anti-suit injunction restraining the Second Respondent, MC2 Composites Ltd (‘MC2’) a company incorporated in the Cayman Islands, from prosecuting or continuing with a proceeding pending in the High Court of the Hong Kong Special Administrative Region entitled MC2 Composites Limited v Morris being Action No 712 of 2018 in that Court. These are my reasons for making that ex parte order.

2    The litigation in this Court concerns a boat-building business. Until February 2014, the business was conducted by a group of companies known as the McConaghy Group. It included a business based in Australia and included a number of Australian and overseas companies. The owners of the group were Mr Morris and a Mr Evans. In boat-building circles, the McConaghy Group is well-known and has been responsible for some famous yachts including, so I was told from the bar table, Wild Oats XI.

3    In February 2014, Mr Morris and Mr Evans agreed to bring in an equal equity partner. This partner was to be Mr Graham Porter who would participate via his Cayman Islands company Tiger Yacht Management Ltd (‘Tiger’). In broad outline the transaction would be:

    Mr Morris and Mr Evans would bring shares and business assets to the table with a value of US$4 million;

    Tiger would provide US$4 million in cash;

    MC2 would carry on the new business through its subsidiaries;

    Mr Morris, Mr Evans and Tiger would be the shareholders in MC2 with Tiger owning 50% of the shares, Mr Morris owning 25% and Mr Evans owning 25%;

    Mr Morris and Mr Evans would be MC2's joint managing directors but they would report to a board of six members, three of whom were appointed by Tiger, and the other three by Mr Morris and Mr Evans jointly;

    There was a provision in a Shareholders Agreement, cl 11, which had the effect, so it was said, that if a shareholder other than a party to the Shareholders Agreement ceased to be a full-time employee in MC2 then that shareholder had to offer their shares for sale under certain pre-emptive rights arrangements and the shares would be sold at fair value.

4    Following the settlement of this transaction, Mr Morris and Mr Evans became joint managing directors. There is a debate as to whether they were also employees. In any event, Mr Morris had initially been paid US$20,000 per month but this seems to have been reduced to US$10,000 per month within a reasonably short time.

5    In or around 2017, Mr Morris fell out with Mr Porter and Mr Evans in an environment of increasing disharmony. A significant irritant appears to have been the failure, as Mr Morris saw it, of the Australian subsidiary company of MC2, McConaghy Australia Pty Ltd (‘McConaghy Australia’), to pay him the US$20,000 per month he believed himself due. On 12 April 2017, he commenced proceedings against McConaghy Australia for underpaid wages in the Federal Circuit Court of Australia. Subsequently, on 23 May 2017 he purported to resign as an employee. I say ‘purported’ because, as I have said, his status as an employee is disputed. Following some procedural complexities that proceeding was discontinued by Mr Morris and this proceeding commenced in its stead. The employment allegations live on in this proceeding but there is now also a claim for the winding up of MC2 in Australia on the just and equitable ground.

6    The proceeding in this Court was commenced on 18 July 2017. The respondents to it are:

(i)    McConaghy Australia, the Australian subsidiary of MC2 alleged by Mr Morris to have been his employer;

(ii)    MC2, which Mr Morris seeks to have wound up; and

(iii)    Mr Evans and Tiger, the other parties to the Shareholders Agreement relating to MC2.

7    Mr Evans resides in Hong Kong and each of MC2 and Tiger are situated in the Cayman Islands. Consequently, Mr Morris needed to obtain leave to serve each of them out of the jurisdiction. He filed an application seeking that leave on 7 September 2017. Service was sought in each case under the Hague Convention.

8    Before that application was heard by Rares J on 13 October 2017, Tiger commenced a proceeding in the Financial Services Division of the Grand Court of the Cayman Islands entitled Tiger Yacht Management Ltd v Morris & Ors being Cause No. FSD 185 of 2017. In that proceeding, Tiger sought an anti-suit injunction against Mr Morris to restrain him from continuing to prosecute the proceeding he had commenced in this Court. On 29 September 2017 Jagot J of this Court granted Mr Morris an ex parte interlocutory anti-anti-suit injunction to restrain Tiger from proceeding with its injunction application in the Grand Court.

9    Mr Morris’s anti-anti-suit injunction was returnable before Rares J on 13 October 2017 as was his application to serve Mr Evans, MC2 and Tiger out of the jurisdiction under the Hague Convention.

10    On the return of the injunction, Rares J made procedural orders for the readying for hearing of an application by Tiger to discharge the anti-anti-suit injunction. Further, on 19 October 2017 his Honour made orders granting Mr Morris leave to serve Mr Evans and MC2 out of the jurisdiction under the provisions of the Hague Convention: Morris v McConaghy Australia Pty Ltd [2017] FCA 1526. He did not determine, at that time, whether the proceeding could be served on Tiger in the Cayman Islands.

11    On 15 February 2018 his Honour heard argument on whether the Federal Court lacked jurisdiction or, if it had jurisdiction, whether the proceeding should nevertheless be stayed on forum non conveniens grounds. His Honour ordered that Tiger should be served under the Hague Convention. His Honour rejected the forum non conveniens argument on the basis that Australia was not a clearly inappropriate forum for the dispute. This also led his Honour to reject Tiger’s application to discharge the anti-anti-suit injunction. Finally, his Honour directed that Tiger’s notice of appearance be unconditional it having unsuccessfully appeared to contest jurisdiction: Morris v McConaghy Australia Pty Ltd [2018] FCA 435.

12    On 28 March 2018 MC2 commenced the proceeding against Mr Morris in the High Court of Hong Kong referred to above. The claim does not contain any detail. Paragraphs 6 and 7 of the indorsement on the writ of summons allege only this:

‘6.    The Defendant has acted in breach of the contractual obligations/undertakings under the Investment Agreement and Shareholders Agreement on divers occasions which has caused continuous harm and damage, among others, to the goodwill and reputation of the plaintiff.

7.    The Defendant has also acted in breach of his fiduciary duties and other duties as a managing director of the Plaintiff and has caused harm and damage to the Plaintiff.

…’

13    The following claim for relief is the made in the writ:

‘(i)    Damages;

(ii)    Injunctive and/or other equitable relief as the Court deems fit;

(iii)    Declaration in terms of paragraph 8 herein [that the Shareholders Agreement has been terminated];

(iv)     Interest pursuant to Section 48 of the High Court Ordinance;

(v)    Further or other relief;

(iv)    Costs.’

14    This writ came to Mr Morris’s attention sometime after 28 March 2018 and he informed his solicitors of it on 4 April 2018. Mr Morris had not yet been served with the proceeding when the present application was heard. On 5 April 2018, Mr Morris applied to Rares J for an ex parte anti-suit injunction to restrain the continuation of the Hong Kong proceeding. On 6 April 2018, his Honour made orders for the service of that application, including on MC2, and stood it over to Monday 9 April 2018 before me.

15    On the return of the application before me there was no appearance by MC2 although both McConaghy Australia and Tiger did appear. These two parties, however, did not wish to be heard on the application. Having heard argument, I made the orders sought.

16    I would not ordinarily give reasons for the grant of such orders since the matter would usually be fully argued at a later date. In this case, however, I think it is likely, or at least possible, that MC2 will not appear. It may be useful, in that circumstance, for the reasons of this Court to be known.

17    In relation to Mr Morris’s proceeding this Court has already held, over the objection of Tiger, that Australia is not a clearly inappropriate forum. I accept for the sake of argument that Hong Kong is not a clearly inappropriate forum either. One has, therefore, the situation that there are two courts with unobjectionable jurisdiction to entertain this case. That assumes, I should say, in MC2’’s favour that Mr Morris’s claims under the Fair Work Act 2009 (Cth) do not complicate the picture.

18    Of such a situation, the High Court observed in CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 at 372:

‘Although a domestic court may hold that it is not a clearly inappropriate forum to determine a controversy between parties, it does not follow that it should exercise a jurisdiction to enjoin a party from commencing or prosecuting proceedings in a foreign court which has jurisdiction to determine the same controversy. There must be an equity which entitles one party as against the other to an injunction to restrain the other from proceeding in the foreign court. It is not possible to define in advance the circumstances that give rise to such an equity, except to say that it arises when it would be unconscionable for the party enjoined to proceed in the foreign tribunal. The jurisdiction to issue an anti-suit injunction is not directed against the foreign court but against the party who would invoke that Court’s jurisdiction.’

19    In this case, there is prima facie evidence that the Hong Kong proceeding has been commenced to harass Mr Morris and to put him to the expense of litigating in multiple courts rather than as a result of any genuine interest on MC2’s part in utilising the processes of the High Court of Hong Kong. The following matters are relevant:

    an email from Mr Porter to Mr Evans dated 3 September 2016 in which Mr Porter was discussing their dispute with Mr Morris and part of which reads ‘I suggest we keep pushing him to have to spend funds’. Although this remark was made prior to the commencement of litigation by Mr Morris, I do accept that it is some evidence that Mr Porter, at least, regards exhausting Mr Morris financially as a legitimate commercial tactic;

    Tiger’s 50% holding in MC2 and the latter’s non-appearance in this Court when Tiger has appeared;

    the application by Tiger for an anti-suit injunction in the Grand Court of the Cayman Islands;

    the fact that Tiger and MC2 have commenced proceedings against Mr Morris in different foreign jurisdictions despite Tiger’s 50% holding in MC2;

    the extremely brief nature of the indorsement of the Hong Kong High Court’s writ which suggests that little effort went into it;

    the fact that MC2 is not domiciled in Hong Kong; and

    the fact that Tiger has appealed the judgment of Rares J on the issue of jurisdiction when that appeal, on its face, seems insubstantial and unlikely to succeed.

20    None of these might be determinative on their own. They do together provide, however, an arguable circumstantial case that Mr Porter and Mr Evans are trying to use foreign proceedings to harass Mr Morris.

21    It was for those reasons that I made the following ex parte orders on 9 April 2018:

‘UPON THE APPLICANT, BY HIS COUNSEL, GIVING THE USUAL UNDERTAKING AS TO DAMAGES THE COURT ORDERS THAT:

1.    Until further order of the Court the Second Respondent be restrained from prosecuting or continuing with the proceedings in Action No 712 of 2018 in the High Court of the Hong Kong Special Administrative Region.

2.    That a copy of this be served on the Second Respondent in accordance with the methods set out in order 3 of the orders made on 6 April 2018.

3.    Costs of the Applicant’s interlocutory application dated 5 April 2018 be reserved.

4.    Liberty to apply.’

Associate:

Dated:    2 May 2018