FEDERAL COURT OF AUSTRALIA

Tiger Yacht Management Ltd v Morris [2019] FCAFC 8

ORDERS

THE COURT ORDERS THAT:

1.    There be leave to appeal.

2.    The appeal be dismissed.

3.    The appellant do pay the first respondent's costs of the appeal to be assessed if not agreed.

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

REASONS FOR JUDGMENT

THE COURT:

1    Mr Jonathon Morris seeks to advance claims in this Court against McConaghy Australia Pty Ltd (MA), MC2 Composites Limited (MC2), Tiger Yacht Management Limited (Tiger) and Mr Mark Evans. Both MC2 and Tiger are incorporated in the Cayman Islands. MA is incorporated in Australia. Its sole shareholder is MC2. The shareholders in MC2 are Tiger as to 50% and Mr Morris and Mr Evans, each as to 25%. MA is one of a number of subsidiaries of MC2.

2    In 2014, Mr Morris and Mr Evans controlled a group of companies carrying on a boat building business known as McConaghy Boats. Mr Morris, Mr Evans, Tiger and MC2 entered into a shareholders agreement. The Recitals to the agreement stated that the parties had agreed to establish MC2 to invest in the 'McConaghy Group'. They stated that the parties wished to conduct the business as 'an equal partnership' between Mr Morris and Mr Evans on the one hand and Tiger on the other. They referred to an investment agreement between the parties. Finally, the recitals stated that the shareholders agreement was to record the agreement between the parties concerning 'the establishment, financing, operation and management of [MC2] and [the parties'] respective rights and obligations as shareholders'.

3    The shareholders agreement provided for the overall supervision and management of MC2 'and the Business' to be vested in the board of MC2 and 'for the day-to-day management and supervision of [MC2] and the Business' to be vested in Mr Morris and Mr Evans as 'joint Managing Directors' reporting to the board of MC2.

4    The Business was defined as 'the business of [MC2] (including any subsidiary of MC2) as described in Recital B'. Recital B was expressed in the following terms:

The Parties have agreed to expand and develop the business of designing and manufacturing marine and industrial products that incorporate composite technology whilst preserving the core business of boatbuilding.

5    It is common ground that Mr Morris lived in Australia and the Business had operations in Australia, China and Hong Kong. So, the agreed terms as between the shareholders of MC2, including Tiger, were that an existing business operating in Australia and other places was to be managed by two people one of whom was a resident of Australia. They were to report to the board of MC2. Although Mr Morris was to be a joint managing director of MC2, the shareholders agreement required that he (and Mr Evans) manage not only the affairs of MC2 but also the whole of the Business. The Business included activities of MA which had long been carried on in Australia. So, the shareholders agreement provided for a significant part of the commercial activities of MC2 to involve the management of a business in Australia through a managing director resident in Australia.

6    Broadly, there are two claims made by Mr Morris in this Court. First, a claim against MA and MC2 for unpaid remuneration as an employee. Second, a claim against the shareholders in MC2 requiring them to buy his shares in MC2 on the basis of the alleged terms of the shareholders agreement, alternatively an order to wind-up MC2. As between the parties to the proceedings, the extent to which the two claims are properly described as separate or distinct is contentious. However, for the purposes of description and analysis it remains helpful to identify those two aspects of the case that Mr Morris seeks to advance.

7    The case originated as an employment claim under the Fair Work Act 2009 (Cth) that was brought in the Federal Circuit Court. The claim was brought only against MA. It alleged that Mr Morris was employed by MA as its joint managing director. It claimed unpaid salary. In its points of defence MA alleged, amongst other things, that Mr Morris had acted as managing director of MC2, not MA.

8    The defence pleaded by MA led to the discontinuance of proceedings in the Federal Circuit Court and the commencement of proceedings in this Court. Tiger accepts that MA and MC2 are each proper parties to those proceedings. So, it raises no issue as to service out of the jurisdiction on MC2, even though it is a Cayman Islands company. However, it says that service out was justified by the employment claim only.

9    When proceedings were commenced in this Court, Mr Morris also claimed relief against Mr Evans and Tiger in their capacity as shareholders in MC2. The relief sought was an order for specific performance of the shareholders agreement requiring Mr Evans and Tiger to purchase the shares of Mr Morris in MC2 at fair value, alternatively an order under s 583(c)(ii) of the Corporations Act 2001 (Cth) that MC2 be wound up on the just and equitable ground. A concise statement was filed alleging that it was a term of the shareholders agreement implied in fact that an original party who wished to leave MC2 could sell their shares to the remaining shareholders at fair value, alternatively that on a proper construction of the shareholders agreement, upon an original party ceasing fulltime employment MC2 would nominate a buyer for their shares in MC2.

10    Significantly for present purposes, the concise statement also alleged conduct by which Mr Morris had been excluded from any involvement in the affairs of MC2. It also said that there had been a loss of trust and confidence between the members of MC2 such that the affairs of the company were deadlocked.

11    The concise statement described the relief sought as relating to three claims: the employment claim, the contract claim for shares and the Part 5.7 claim (advanced in the alternative to the contract claim). In support of the Part 5.7 claim it was alleged that MC2 is a Part 5.7 body within the meaning of s 9 of the Corporations Act because it is a foreign company carrying on business in Australia. By way of particulars as to that statement it was said:

MC2 carries on business in Australia through the business of McConaghy Australia, including the management, control and operation of McConaghy Australia's boat building business.

Orders concerning Tiger's participation in these proceedings

12    In this Court, after the proceedings were commenced, orders were made prohibiting Tiger from seeking anti-suit relief in the Cayman Islands. Those orders were served on Tiger. The matter came before the primary judge on a challenge to the Court's jurisdiction to grant the anti-anti-suit injunction. The primary judge described at [3] what occurred on that occasion concerning the appearance to be entered by Tiger:

I ordered Tiger to file and serve a notice of appearance …, but noted that its appearance was to contest jurisdiction to seek a stay on forum non conveniens grounds … and, if the Court found that it had jurisdiction over Tiger and did not order any stay, that appearance would have full effect as a notice of appearance for all purposes in accordance with the Rules.

13    The primary judge had ordered service out of the jurisdiction against Mr Evans and MC2 on the basis that the circumstances were closely analogous to the situation in Ho v Akai Pty Ltd (in liq) [2006] FCAFC 159; (2006) 247 FCR 205 at [62]-[66] 'where there was a prima facie case that the directors and officers of an Australian company regarded themselves as being bound to follow the instructions of a foreign holding company, this Court had jurisdiction to order service out on the foreign holding company and its chief executive officer on the basis that each was a shadow director': Morris v McConaghy Australia Pty Ltd [2017] FCA 1526 at [17].

14    Tiger's application challenging the jurisdiction was heard on a later date. In its written submissions on the appeal Tiger described the position that it had advanced before the primary judge in the following way. It said that it had maintained that the claims against shareholders were discrete and did not overlap the employment claim against MA and MC2. As to the shareholder claims, Tiger said that a prima facie case had not been demonstrated because the claim under the shareholders agreement was weak and the winding-up claim could not proceed because MC2 did not carry on business in Australia. On that basis it was said that the Court should refuse to allow service on Tiger on discretionary grounds or order a permanent stay because Australia was a clearly inappropriate forum.

15    Therefore, even though the issues concerning the service of the application on Tiger arose as a result of the challenge to the making of the anti-anti-suit injunction, the argument proceeded on the basis that Mr Morris had to demonstrate that it was appropriate for there to be leave to serve the application out of the jurisdiction.

16    Ultimately, orders were made by the primary judge granting leave to serve Tiger in the Cayman Islands. Further service was dispensed with (on the basis that Tiger plainly had notice of the proceedings and had entered an appearance on the basis described above). An order was made that the notice of appearance by Tiger be unconditional. It is those orders that are the subject of the present appeal.

Relevant requirements of the Rules

17    Rule 10.43(1) of the Federal Court Rules 2011 (Cth) (Rules) provides:

Service of an originating application on a person in a foreign country is effective for the purpose of a proceeding only if:

(a)    the Court has given leave under subrule (2) before the application is served; or

(b)    the Court confirms the service under subrule (6); or

(c)    the person served waives any objection to the service by filing a notice of address for service without also making an application under rule 13.01.

(Rule 13.01 provides, amongst other things, for applications to set aside service).

18    Rule 10.43(2) provides:

A party may apply to the Court for leave to serve an originating application on a person in a foreign country in accordance with a convention, the Hague Convention or the law of the foreign country.

19    Then, relevantly, r 10.43(4) provides:

For subrule (2), the party must satisfy the Court that:

(a)    the Court has jurisdiction in the proceeding; and

(b)    the proceeding is of a kind mentioned in rule 10.42;

(c)    the party has a prima facie case for all or any of the relief claimed in the proceeding.

20    Rule 10.42 provides that subject to r 10.43, an originating application may be served on a person in a foreign country if the proceeding 'consists of, or includes, any one or more of the kinds of proceeding' listed in the table within r 10.42.

21    Item 20 of the Table states: 'Proceeding properly brought against a person who is served, or is to be served, in Australia, if the person to be served has been properly joined as a party'.

22    Other items of possible relevance to the circumstances in the present case are item 2 (proceeding based on a breach of contract in Australia), item 8 (proceeding that affects the person to be served in relation to the person's membership of a corporation carrying on business in Australia), item 15 (proceeding seeking any relief or remedy under an Act), item 23 (proceeding seeking an injunction ordering a person to do, or to refrain from doing, anything in Australia) and item 24(a) (proceeding affecting the person to be served in relation to the person's membership of, or office in, a corporation incorporated, or carrying on business, in Australia).

23    The material facts required to determine whether a claim is of the requisite kind will be revealed by the statement of claim (or concise statement) or the affidavit as the case may be. However, in some cases, further evidence may be required: Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 at [52].

Reasoning of the primary judge

24    In determining that the application could be served on Tiger in the Cayman Islands, the primary judge dealt with the application as one advanced in reliance upon item 20 of r 10.42: at [9]. However, the decision dealt with an issue between the parties as to whether MC2 was carrying on business in Australia because that was relevant to whether the statutory winding-up jurisdiction applied to MC2.

25    The primary judge described the inclusion of the claims based upon the shareholders agreement, alternatively the claim to wind-up MC2, as a widening of the earlier dispute about payment to include the exclusion of Mr Morris from the management of MC2 and the dispute between the three shareholders: at [25].

26    His Honour found that the requirement for a prima facie case as to the relief sought had been met 'in respect of the employment claims': at [32]. As to the position of Tiger, his Honour then found at [33]:

Because Mr Morris has such a prima facie case for relief against both McConaghy Australia and MC2, Tiger focused its argument on what it contended was the discrete nature of Mr Morris' claims against it and Mr Evans. I reject that argument. I am satisfied that there are significant disputes between the shareholders of MC2 as to the operation and effect of the shareholders' agreement and the issue as to whether the substratum of that agreement or "equal partnership" to conduct the business of MC2, as stated in its recital C, has disappeared. Having regard to s 22 of the Federal Court of Australia Act 1976 (Cth) it is appropriate, in order to avoid a multiplicity of suits concerning those matters, that Tiger and Mr Evans be joined in the one proceeding.

27    The primary judge had found earlier (at [21]) that the claim by Mr Morris to relief on the basis that the relationship between the parties to the shareholders agreement had broken down had a solid arguable foundation and there is no challenge to that finding.

28    It can be seen that the approach adopted by the primary judge was to find that the shareholder dispute formed part of the overall dispute and that Tiger should be joined on the basis that it was a proper party to the overall dispute. On that approach, his Honour did not accept the claim that the shareholder claim was a discrete claim. As a result there was no need to consider the argument advanced for Tiger that the shareholder claim was not a proper foundation for its joinder in the proceedings as a foreign corporation.

29    There was no consideration given by the primary judge to whether there needed to be a separate and independent basis for service on Tiger rather than an exercise of the necessary party power under item 20.

30    His Honour made an express finding that the claim to wind-up MC2 was within the Court's jurisdiction: at [37]. That would only be the case if MC2, a foreign corporation, was a registrable body because it was carrying on business in Australia. However, later (at [45]), when dealing with whether Australia was a convenient forum his Honour found expressly that it was not necessary to resolve whether or not MC2 is carrying on business in Australia for the purposes of determining whether to allow the proceedings to go ahead against MC2.

31    However, there is no doubt that the issue whether MC2 was carrying on business in Australia was agitated in detail before the primary judge. Indeed, at [11] there is reference to 'a great deal of material' being filed on that issue for the purpose of proving or disproving that MC2 was a registrable body because it carries on business in Australia.

32    His Honour then dealt with residual discretion. He began by considering whether Australia was a 'clearly inappropriate forum': at [38]. After considering the circumstances, his Honour concluded that Australia was not a clearly inappropriate forum: at [53]. So, the discretion was exercised by reference to those considerations that were relevant to forming a view as to whether Australia was an appropriate forum. There was no separate consideration of the question whether service should be set aside on discretionary grounds. That was because the application proceeded in a rolled up manner. As Tiger was before the Court (and had been served with the anti-anti-suit injunction) the application proceeded as both an application for leave to serve out and an application to set aside the service that had occurred. Sensibly, the parties proceeded on the basis that the outcome would determine the issue of service.

33    However, as we will see, part of the complaint by Tiger is that the primary judge failed to consider matters that arise on a set aside application.

Subject matter of the appeal

34    As we have noted, Tiger seeks leave to appeal against the making of the orders granting leave to serve Tiger and making its appearance unconditional. Submissions were heard on both the leave application and the substantive grounds.

35    The appeal was brought on the basis that the primary judge had a residual discretion when deciding whether to permit Tiger to be served in the Cayman Islands. It was said that there had been an error in the exercise of that discretion (grounds 1 and 2). Tiger also claimed that in considering whether Australia would be a clearly inappropriate forum, the primary judge failed to consider two contentions that had been advanced by Tiger on that point (ground 3).

36    Mr Morris opposed both the grant of leave and the substantive grounds if leave was granted. He contended that it was sufficient if (a) the employment claim was within jurisdiction; (b) it was appropriate to bring the shareholder claim in the same proceedings; and (c) Tiger was a necessary and proper party to the shareholder claim. Further, by a notice of contention served, it was said that if it was necessary to demonstrate that there was a proper jurisdictional basis for the shareholder claim then it could be concluded on a prima facie basis that MC2 was carrying on business in Australia which provided that jurisdictional foundation.

37    In the course of argument an issue arose as to whether Tiger as appellant only advanced a claim that there had been a miscarriage in the exercise of the residual discretion or whether it also said that there was error because the primary judge did not find that Tiger was itself a party to a claim that was within jurisdiction. Leave was sought to include such a claim. The addition of the new ground of appeal was opposed. For Mr Morris it was submitted that Tiger had raised no such issue before the primary judge in circumstances where it was item 20 that was relied upon. In those circumstances, it was contended that Tiger had conceded the application of item 20 or acted in a way that was analogous to a submission to jurisdiction (reserving only its argument as to clearly inappropriate forum). It was also said that if the issue as to whether there was power under item 20 to grant leave to serve out of the jurisdiction had been raised by Tiger before the primary judge then Mr Morris could have sought to justify service out of the jurisdiction on the basis of other items in r 10.42, particularly items 2, 23 and 24(a), and Mr Morris would have advanced the additional detail as to his claim that is now to be found in his statement of claim. Therefore, so it was submitted, there would be prejudice if the issue was raised at this stage. Finally, it was said that if there was uncertainty as to whether any of those other items applied then there should be regard to the terms of the statement of claim that has since been filed in the proceeding and, if necessary, the matter should be remitted to the primary judge for further consideration.

Overview of determination of appeal

38    The question whether Tiger carried on business in Australia was squarely in issue before the primary judge. The primary judge was correct to approach the matter on the basis that Mr Morris had demonstrated a prima facie case that Tiger carried on business in Australia. In all the circumstances, the finding concerning carrying on business justified the grant of leave to serve Tiger in the Cayman Islands given the other matters that were not in issue before the primary judge or on appeal. As a result it was not necessary to consider whether there would have been power to order service on Tiger in the Cayman Islands solely on the basis that it was a proper party to proceedings in which MC2 had been served out of the jurisdiction under r 10.43.

39    Therefore, while leave to appeal ought to be granted, the appeal should be dismissed and we set out our reasons for that conclusion below.

The significance of the term 'proceeding' as used in r 10.43 and r 10.42

40    In considering the matters to be satisfied in relation to service out of the jurisdiction it is important to pay close attention to the language used in the Rules as presently expressed. Learning developed in connection with other rules cannot automatically be applied: Agar v Hyde at [39].

41    Rule 10.43(4) uses the term 'proceeding' when describing each of the three requirements that must be met in order for the discretion of the Court to grant leave to serve out of Australia to be enlivened. However, it is to be noted that the form of order to be sought is one which authorises service out of the jurisdiction of the 'application'. An application may take various forms depending on the nature of the proceeding. The application must state the relief sought: r 8.03. It must be accompanied by an affidavit or statement of claim: r 8.05. In either case, in order to comply with the requirements of the Rules, the document must state the material facts necessary to give fair notice of the case to be made at trial. Ultimately, the applicant will need to demonstrate a cause of action; but upon the commencement the application must identify the relief sought and the material facts.

42    Where leave is sought to serve an application out of the jurisdiction, the proceeding referred to in r 10.43 is the whole proceeding commenced by the application. The question whether the proceeding meets the three requirements specified in r 10.43(4) is to be evaluated by a consideration of the proceeding commenced by the application as a whole. Each of those three requirements is expressed in terms that makes clear whether it is a requirement that has to apply to the whole of the proceeding.

43    First, as to jurisdiction, there must be jurisdiction as to the whole of the proceeding. This will only be the case where a claim to each head of relief that is sought may be established by the material facts as alleged on the basis of a cause of action that is within the subject matter jurisdiction of the Court.

44    Second, as to r 10.42, the proceeding must 'consist of, or include' any one or more of the kinds of proceeding mentioned in the rule. It is not necessary for the whole proceeding to be brought within one of the items described in r 10.42. Nor is it necessary for each aspect of the proceeding to be brought within an item in r 10.42. It is enough if the proceeding includes a proceeding of the requisite kind. It is the use of the word 'includes' in r 10.42 that makes that clear. So, even though the term 'proceeding' is used in r 10.43(4) to describe the whole proceeding covered by the application, in r 10.42 it is used to refer to the whole or part of the proceeding. The result is that the whole proceeding will be of the kind mentioned in r 10.42 (for the purposes of r 10.43(4)(b)) if it 'consists of, or includes' one or more of the proceedings described in r 10.42.

45    Third, the requirement that there be a prima facie case demonstrated pertains to 'all or any' of the relief claimed in the proceeding. So, it is not necessary to demonstrate merit in all of the claims made in the proceeding. Under the former rule, where there was a requirement to demonstrate a prima facie case for the relief sought, the preponderance of authority supported the view that save for an extreme case it was not necessary to demonstrate a prima facie case for each cause of action said to support the relief: Cell Tech Communications Pty Ltd v Nokia Mobile Phones (UK) Ltd [1995] FCA 239; (1995) 58 FCR 365 at 373. In context, the requirement for a prima facie case for 'all or any' of the relief sought must mean merit in a claim of the requisite kind, namely a claim listed in r 10.42. Otherwise, the requirement that there be a claim of the kind listed in r 10.42 would be undermined.

46    It follows that on an application for leave to serve out of the jurisdiction it is not necessary to conclude that each of the three requirements are met as to discrete parts of the proceeding. There must be jurisdiction as to the whole. Otherwise, as to the items in r 10.42 and the relief claimed, it is sufficient if the proceeding to be commenced by the application includes a proceeding of the requisite kind and all or any of the relief in the proceeding of the requisite kind has merit. Further, the requirement to establish a prima facie case must be understood in the context in which it arises. Inferences may be drawn more readily than they may be at trial: Re Merpro Montassa Ltd v Conoco Specialty Products Inc [1991] FCA 72; (1991) 28 FCR 387 at 390. It involves a mini not a mega trial: WSGAL Pty Limited v Trade Practices Commission [1992] FCA 904; (1992) 39 FCR 472 at 476.

47    In this case, as noted above, Tiger claimed that the shareholder claim was discrete and an assessment as to whether leave should be granted should be made by reference to the shareholder claim, not the employment claim. Therefore, so it was submitted, the fact that MC2 was a proper party to the employment claim and it might be appropriate for the shareholder claim and the employment claim to be conducted in the same set of proceedings (where no issue of service out of the jurisdiction arose) was not sufficient to justify a grant of leave to serve Tiger out of the jurisdiction. Rather, so it was submitted, the discrete proceeding in respect of the shareholder claim must be separately considered when it came to the application for leave to serve Tiger in the Cayman Islands. In effect, it is that claim (or proceeding) which must meet the requirements of r 10.43.

48    Where there is a significant part of the whole proceeding that might be described as relatively discrete which part is not of the kind described in r 10.42 and the foreign party is only to be served for the purposes of that part of the proceeding then that matter may be relevant to the residual discretion or the question whether the Court is a clearly inappropriate forum. So, in Bray v F Hoffman-La Roche Ltd [2003] FCAFC 153; (2003) 130 FCR 317 reference was made to the possibility that leave might be granted to serve out of the jurisdiction on the condition that a particular claim not be included in the application: at [186] (Branson J). However, for reasons set out above, it is not a matter that would deprive the Court of power under r 10.43 to grant leave to serve out of the jurisdiction. The power that is conferred by r 10.43 does not relate to each discrete claim the subject of the application. It relates to the whole proceeding the subject of the application.

49    For the following reasons, the primary judge was correct in finding that there was a prima facie case that Tiger had been carrying on business in Australia. As a result, the requirements of r 10.43 had been satisfied because:

(1)    there was jurisdiction as to the whole of the proceedings, including the claim to wind-up Tiger;

(2)    the proceedings included a claim against Tiger of the kind mentioned in r 10.42, namely the statutory claim to wind-up MC2 which affected Tiger as a member of MC2;

(3)    there was a prima facie case in respect of the claim mentioned in r 10.42 (there being no claim advanced that there was no prima facie case in respect of the winding up claim based upon any point other than the issue of carrying on business in Australia); and

(4)    it was not necessary to establish separately that there was a prima facie case as to the claim based upon the breach of the alleged terms of the shareholders agreement.

Prima facie case that Tiger has been carrying on business in Australia

50    The expression 'carrying on business' may have different meanings in different contexts: Luckins v Highway Motel (Carnarvon) Pty Ltd [1975] HCA 50; (1975) 133 CLR 164 at 178 (Gibbs J). So, care must be taken to understand the context in which the requirement is being considered. However, when used to ensure a jurisdictional nexus as a matter of comity it will have a meaning informed by the requirement to ensure there is sufficient connection with the country asserting jurisdiction. It requires resort to the usual or ordinary meaning of the phrase and invites a factual inquiry. As the Court said in Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd [2018] FCAFC 6 at [99]:

Whether a company is carrying on business in Australia is a question of fact: Luckins (Receiver & Manager of Australian Trailways Pty Ltd) v Highway Motel (Carnarvon) Pty Ltd (1975) 133 CLR 164 at 186. While it is correct to say that a company may be found to carry on business in Australia even though it does not maintain an office in Australia or the bulk of its business is carried on outside Australia, it does not follow that such a company will be found to carry on business in Australia merely because it has engaged in a small number of isolated transactions. Each case will depend on its own facts.

51    The activities must form a commercial enterprise: Australian Competition and Consumer Commission v Valve Corp (No 3) [2016] FCA 196 at [197].

52    The words 'carrying on' imply the repetition of acts and activities which possess something of a permanent character: Hope v Bathurst City Council [1980] HCA 16; (1980) 144 CLR 1 at 8 (Mason J). Participation in a single transaction or a number of isolated transactions will not satisfy this aspect.

53    A company may be carrying on business in Australia even though it does not have an identifiable place of business within Australia: Bray v F Hoffmann-La Roche Ltd [2002] FCA 243; (2002) 118 FCR 1 at [63].

54    There are cases where a company has been found to be carrying on business in Australia because its subsidiaries are not carrying on business on their own account but rather are doing so as agent for their international parent. In such instances, the actions of the subsidiary as agent are the actions of the foreign parent in Australia.

55    Although there was some reference to those cases in the course of argument, the issue that arises in the present case is of a different character. Ultimately, Mr Morris did not claim that MA was the agent of MC2. Rather, in submissions for Mr Morris reliance was placed upon the terms of the shareholders agreement which placed the management of the subsidiaries in the hands of MC2. As noted at the outset of these reasons, under the terms of the shareholders agreement the managing directors of MC2 were required to manage the Business of all subsidiaries (including MA) and report to the board of MC2. There was evidence that it was undertaking the management of the activities of MA (its subsidiary) in Australia and was not merely supervising the management by local directors and employees in Australia. Rather, all management was to be centralised in MC2. MC2 was itself undertaking a continuous and repetitive commercial activity in Australia, namely the management supervision of the boat building business in Australia through Mr Morris who was resident in Australia. The evidence was as to what occurred at meetings of MC2 and in informal discussion following those meetings.

56    In addition to the terms of the shareholders agreement was the position maintained by MA and MC2 in answer to the employment claim by Mr Morris. They said that Mr Morris was not an employee of MA at all, but rather acted as managing director of MC2 when carrying out responsibilities in relation to the management of MA.

57    Against those matters, Tiger relied upon the following matters.

58    First, in evidence was a letter from JLA Asia Limited to the directors of MC2 concerning an engagement to provide a report setting out the fair market value of the group of companies that were owned or controlled by MC2 and the shareholdings in MC2 of each of Mr Morris and Mr Evans. It was countersigned by way of acceptance by Mr Hudson, a director of MC2, recorded as 'and for Mark Evans & Jonathon Morris' on 8 February 2017. The letter described MC2 as 'a non-operating holding company incorporated in the Cayman Islands'. It identified various shareholdings held by MC2 including 100% of the shares in MA. It referred to the 'Group's business' as including manufacturing facilities in Australia and China, a design and engineering office in New Zealand and sales arms in Hong Kong, Australia and New Zealand.

59    We note that the letter made no reference to the way the affairs of the group were operated and managed. The instructions included a review of the shareholders agreement. The letter was relied upon as an admission that MC2 is a non-operating company. We doubt that the letter could operate as an admission against Mr Morris. However, even assuming that it could, the description 'non-operating' is not inconsistent with a structure by which MC2 does not itself own or conduct any of the operations, but is responsible for, and is undertaking the management of, the operations of all subsidiaries.

60    Second, there was an email sent on 3 April 2014 by Mr Hudson to a number of persons including Mr Morris and Mr Evans. It described MC2 as a holding company with the following additional terminology: 'Non operating: acts only as an investor in subsidiary companies and does not contract with customers or suppliers'. MA was described as 'Manufactures in Australia and Sells'.

61    Again this terminology is dealing with activities of the various companies, not who is undertaking the day-to-day management of those activities.

62    Third, although there was general evidence from Mr Morris and Mr Hudson that MC2 exercised a degree of control over MA, it was said that the evidence was properly accepted by the primary judge as submissions and not evidence. Further, it was said to be deficient in failing to identify any concrete examples of acts done on a repetitive basis.

63    However, the affidavit of Mr Morris included the following specific examples of decisions made by MC2 that concerned the management of the affairs of MA:

(1)    a decision taken by the board of MC2 in August 2016 to consolidate all the cash flow of its subsidiaries into the bank account of MC2;

(2)    the retention by MC2 of funds said to be due to MA or another subsidiary McConaghy One Pty Ltd;

(3)    Mr Morris said that he was present at many meetings of MC2 either in person or by telephone. He said that at those meetings 'there was no discussion at any of those meetings whilst I was present either before, during or after the meetings as to the holding of a board of directors meeting of any of the subsidiaries including [MA] immediately after the meeting of the board of directors of MC2'. He said there were no such meetings; and

(4)    Mr Morris said that for many of the meetings of MC2 he and Mr Evans attended by telephone whilst they were both in Australia.

64    Agendas and minutes of meetings of MC2 were produced that provided support for the claims made by Mr Morris as to how the affairs of MA were managed.

65    Mr Hudson (who was a director and chairman of MC2 at the relevant time) also provided an affidavit as to what occurred. Amongst other things he deposed (at paras 5-7) as follows:

In this regard, during the Period, I do not recall there having been any reporting whatsoever to the board of directors of MC2 by any of the directors of any of MC2's subsidiaries, direct or indirect, as to the board of directors of any of those subsidiaries having met and having resolved to do anything.

During the Period, as I understood the operations of MC2 and its subsidiaries, the directors of the subsidiaries were bound to follow the instructions of the board of MC2.

At paragraph 68 and 87 of his affidavit, Flynn refers to meetings of the board of directors of the first respondent, McConaghy Australia taking place "immediately after the meeting of the board of MC2 Composites".

66    He also referred to informal discussions after the directors meeting concerning the affairs of the subsidiaries.

67    The evidence concerning the meetings was not generalised in any sense that could be properly critical of the evidence. It provided considerable support for the position that it was meetings of MC2 and not meetings of the directors of MA (or other subsidiaries) at which reports as to the operating affairs of MA were received and management decisions requiring board approval were taken.

68    There was a dispute as to this evidence. However, in the context of the application it was not necessary for the Court to form a final view on the issue whether MC2 was carrying on business in Australia. It was sufficient if the cause of action alleged was based on a claim that MC2 was carrying on business in Australia (which it was) and that there was a prima facie case to support that position (which there was).

69    Fourth, Mr Flynn (a director of Tiger) deposed to being the Tiger representative on the board of MA and a director of MC2. He gave evidence contradicting some of the evidence of Mr Morris and Mr Hudson about what occurred at meetings of MA and MC2. He emphasised that MC2 was a non-operating holding company acting only as an investor. He said that he had never seen nor heard in discussions among board members or staff that presented or represented any demonstration of roles and responsibilities that were different from those descriptions.

70    However, this evidence depends upon what is meant by the description 'non-operating holding company acting only as an investor'. It is not evidence that demonstrates a basis upon which the evidence of Mr Morris and Mr Hudson about how management actually occurred might be rejected. Mr Flynn also deposed that to his knowledge MC2 does not transact business, has never had an employee, has never owned or occupied premises or held a lease, has never issued an invoice and has never entered into a contract with a customer. However, none of these matters engage with the nature of the case advanced to support the claim that MC2 was carrying on business in Australia which depends upon an allegation (supported by evidence) that it was MC2 that managed the commercial activities of MA in Australia.

71    Fifth, it was said that MC2 had never been advised by Mr Hudson as the company's chairman and accountant to register as a foreign corporation. However, again the claim made does not depend upon whether MC2 was registered.

72    Sixth, it was said that MC2 had no earnings. However, it was common ground that MC2 held the shares in all the subsidiaries. It was entitled to the distribution of any profits and any return of capital from those subsidiaries. It has a commercial interest in the way they were managed. The subsidiaries themselves were undertaking commercial activities. It was those activities that, on the case advanced, were being managed by MC2.

73    Each case depends on its facts. In the particular circumstances of the present case the commercial interest of MC2 in the affairs of MA (and the other subsidiaries) was a basis upon which to conclude that there was a prima facie case that the management activities of MC2 did involve it in carrying on a business of managing the activities of its subsidiaries in order to derive profits through those companies. On the evidence advanced by Mr Morris, MC2 was not confined to holding its shareholding in the subsidiaries. It was the manager of the operating activities of the subsidiaries.

74    Seventh, it was said that MA was operated by its own officers. However, for reasons already given, there was a conflict of testimony as to whether the affairs of MA were under the management responsibility of MC2. Further, and of considerable importance, there was the position adopted by MA in the Federal Circuit Court proceedings, namely that Mr Morris was not an employee of MA.

75    Eighth, it was said that MA contracted and invoiced on its own behalf and the name of MC2 is not displayed at the premises of MA or on its stationary.

76    The above matters do not detract from the manner in which the claim is made that MC2 is carrying on a business in Australia. Therefore, for the purposes of service out of the jurisdiction, a prima facie case has been demonstrated that MC2 was carrying on business in Australia.

The merits of the shareholders claim made in the alternative

77    The primary judge found that it may be difficult for Mr Morris to succeed in his claim for relief by way of an order for specific performance of the shareholders agreement: at [37]. No real attempt was made on behalf of Mr Morris to demonstrate merit in that claim on the appeal (at least in the form that it was advanced before the primary judge). Rather, it was said that he had since amended his claim and the way it was now pleaded had demonstrable merit. For Tiger it was not suggested that it was a claim that was not within jurisdiction. The focus was upon the claim lacking merit. In circumstances where there was also demonstrated to be merit in the statutory winding up claim and that it was a claim to which r 10.42 applied, it was not necessary for Mr Morris to demonstrate a prima facie case on the separate claim under the shareholders agreement.

The nature of the residual discretion

78    Tiger claimed that the primary judge erred in the exercise of the residual discretion. In particular it was said that there was error by the primary judge at [39] in following the view of Beach J in Trina Solar (US) Inc v Jasmin Solar Pty Ltd [2017] FCAFC 6; (2017) 247 FCR 1 that there had to be a good, if not compelling, reason why leave should be refused if the three conditions in r 10.43(4) were satisfied. It was submitted that the correct approach was to view service out of the jurisdiction as an exceptional measure the exercise of which was to be tempered with caution.

79    In Trina Solar the existence of a residual discretion in the exercise of the power conferred by r 10.43 was confirmed. As to the nature of the residual discretion Beach J (Dowsett J agreeing) said at [117]-[118]:

Now the residual discretion to refuse leave is not at large in the sense that if the three necessary conditions for leave have been satisfied, there must be a good if not compelling reason why nevertheless leave should be refused in the face of such satisfaction.

If a stay of the proceeding would be granted or this was inevitable, then that could provide a compelling reason for the exercise of the residual discretion to refuse leave. Before his Honour, Trina US recognised as much. Trina US couched its submissions before his Honour in terms that "it would be futile to serve Trina US because the proceedings would subsequently be stayed by application of s 7(2)". But if all that could be established was that a stay might be granted or that it was reasonably arguable, but all of this below the threshold of inevitability or a strong case for a stay, then it may not be appropriate to exercise the residual discretion to refuse leave. Rather, the appropriate course may be to grant leave to serve out, and to then allow the respondent to apply for a stay of the proceeding under s 7(2) of the IA Act on proper material. It is inappropriate to be definitive on such questions given that a discretion is being exercised and each case will turn on its own circumstances. But the context of the application that his Honour was dealing with is not unimportant.

80    In effect, his Honour was observing that it was not appropriate to approach the residual discretion on the basis that a particular strength was required as to how compelling a countervailing reason had to be before it would cause the Court to decline to grant leave to serve out of the jurisdiction even though the three conditions in r 10.43 had been satisfied. Rather, all would depend upon the circumstances. Importantly, Beach J was also differentiating between an ex parte application for leave and any subsequent application by a respondent for a stay. This is evident from the next passage at [119] where his Honour refers to the fact that applications for leave to serve out are dealt with expeditiously and there is a need to avoid a mini trial at that point. It was in that context that his Honour then stated that: 'Unless a case for a stay is inevitable or strongly made out, alternatively expressed it is not reasonably arguable that no stay would be granted, the better course is to grant leave to serve out and to deal with the stay question at a later stage at the behest of the respondent'.

81    In the present case, the matter came before the primary judge at a time when an objection had been raised by a respondent who had already been served. The position arose because the anti-anti-suit injunction had been served on Tiger and it then appeared to oppose orders allowing service out of the jurisdiction. As a result, the application was considered at the later stage referred to by Beach J. His Honour did not deal directly with the test to be applied at that time. Implicit in the reasoning of his Honour is the view that the same approach of requiring a compelling reason why leave should not be granted is not the approach to be adopted if there is an application for a stay brought by the party served.

82    For Tiger it was submitted that the approach of Beach J was plainly wrong and was inconsistent with other authorities as to the approach to be adopted concerning the residual discretion. It was said that the grant of leave is an exceptional measure and the Court should be guided by such a perspective when exercising the residual discretion.

83    In Voth v Manildra Flour Mills Pty Ltd [1990] HCA 55; (1990) 171 CLR 538 at 564 (Mason, CJ, Deane, Dawson and Gaudron JJ) it was said that on an ex parte application for leave to serve out of the jurisdiction the court should not grant leave unless it was positively persuaded that it should do so and:

Plainly, it should not be so persuaded unless the plaintiff satisfies it that the case is of the relevant category and that the proceedings would not be subsequently stayed as an abuse of process on form non conveniens grounds or for some other reason. In such a case the onus should remain on the plaintiff on a subsequent application to set aside the service outside the jurisdiction. Otherwise, the ex parte order for service outside the jurisdiction, if onus of proof were to prove decisive, would confer an enduring advantage upon a plaintiff notwithstanding that the expanded evidence on a contested application to set aside service indicated that the applicant had not been entitled to that ex parte order.

84    The terms in which the requirement that the Court must be positively persuaded that there should be leave to serve both on an ex parte application for leave and on a set aside application is expressed do not suggest any requirement for circumspection on the basis that the jurisdiction is exceptional. However, at the outset of the reasons of the majority in Voth at 551, there was the following reference to the reasoning of Gleeson CJ in the Court of Appeal:

Gleeson C.J. also noted that there was a further dimension to the case arising out of the circumstance that it involved an exercise of the Supreme Court's "extended", "assumed" or "exorbitant" jurisdiction in that the respondents were given leave to serve the writ out of the jurisdiction. However, it did not become material for his Honour to explore this matter because the appellant did not contend before the Court of Appeal that there was any material difference between the test to be applied in considering his application for a stay of proceedings based upon considerations of forum non conveniens and that to be applied in considering his application directed at setting aside the grant of leave to serve out of the jurisdiction.

85    The way in which this summary is expressed indicates a view that such considerations may be relevant when considering whether to set aside a grant of leave to serve out of the jurisdiction. In the result, the Court found that as New South Wales was a clearly inappropriate forum no purpose would be served in considering whether service out of the jurisdiction should be set aside.

86    In Quinlan v Safe International Försäkrings AB [2005] FCA 1362, Nicholson J considered an application under the former rule concerning service out of the jurisdiction. At [27], his Honour observed that service out of the jurisdiction should be 'approached with circumspection' and that it was an 'exceptional measure', citing Kennedy J in ICI Australia Operations Pty Ltd v Kidde-Graviner Ltd [1999] WASCA 65 at [2]. Kennedy J cited New Zealand and English authority for that proposition, including Vitkovice Horni A Hutni Tezirstvo v Korner [1951] AC 869.

87    In the United Kingdom it has long been held that a party seeking to serve out must demonstrate a good arguable case as to the claim which is said to bring the case within the particular head of power relied upon by the party seeking leave. Despite changes to the applicable rules, this remains the position: Brownlie v Four Seasons Holdings Inc [2017] UKSC 80 and Aspen Underwriting Ltd v Credit Europe Bank NV [2018] EWCA Civ 2590 at [21]. So, the test in the United Kingdom requires more than a prima facie case to be demonstrated. The requirement is expressed as something more than a prima facie case and something less than a case satisfying a balance of probabilities test. Therefore, the foundation for the observations by Kennedy J depends upon rules expressed in different terms to those now stated in r 10.43 which, as to merits, expressly requires a prima facie case to be demonstrated for all or any of the relief claimed. It is unclear whether the statement about circumspection was intended to reflect the character of some form of residual discretion to be exercised.

88    It was submitted that the same principle as that stated by Nicholson J in Quinlan v Safe International Försäkrings AB had been expressed by McKerracher J in Freehills, in the matter of New Tel Limited (in liq) [2008] FCA 762 at [24] when his Honour observed that the exercise of the discretion to allow service out of the jurisdiction 'has always been tempered with caution' citing considerations listed by Megarry J in GAF Corporation v Amchem Products Inc [1975] 1 Lloyd's Rep 601 at 604-605. The decision of Megarry J has since been doubted to some degree: Conductive Inkjet Technology Ltd v Uni-Pixel Displays Inc [2013] EWHC 2968 (Ch) at [56]-[58]. As explained below, the need for caution remains by reason of comity, but such concerns are now to be seen as encapsulated in the principles of forum non conveniens.

89    Moreover, as to the English position, in Abela v Baadarani [2013] 4 All ER 119 at [53], Lord Sumption observed that the service of the court's process out of the jurisdiction had been described in the Court of Appeal as 'exorbitant'. As to that description, Lord Sumption (other members of the Court agreeing) said:

This characterisation of the jurisdiction to allow service out is traditional, and was originally based on the notion that the service of proceedings abroad was an assertion of sovereign power over the defendant and a corresponding interference with the sovereignty of the state in which process was served. This is no longer a realistic view of the situation. The adoption in English law of the doctrine of forum non conveniens and the accession by the United Kingdom to a number of conventions regulating the international jurisdiction of national courts, means that in the overwhelming majority of cases where service out is authorised there will have been either a contractual submission to the jurisdiction of the English court or else a substantial connection between the dispute and this country. Moreover, there is now a far greater measure of practical reciprocity than there once was. Litigation between residents of different states is a routine incident of modern commercial life. A jurisdiction similar to that exercised by the English court is now exercised by the courts of many other countries. The basic principles on which the jurisdiction is exercisable by the English courts are similar to those underlying a number of international jurisdictional conventions, notably the Brussels Convention … and the Lugano Convention…The characterisation of the service of process abroad as an assertion of sovereignty may have been superficially plausible under the old form of writ (We command you …). But it is, and probably always was, in reality no more than notice of the commencement of proceedings which was necessary to enable the defendant to decide whether and if so how to respond in his own interest. It should no longer be necessary to resort to the kind of muscular presumptions against service out which are implicit in adjectives like 'exorbitant'. The decision is generally a pragmatic one in the interests of the efficient conduct of litigation in an appropriate forum.

90    It is to be noted that there is a difference between the English and Australian law concerning forum non conveniens. The test in the United Kingdom focuses upon a consideration of the 'more appropriate forum': Spiliada Maritime Corporation v Cansulex Ltd [1986] 3 All ER 843. Whereas, Voth establishes the clearly inappropriate forum test as the test to be applied in Australia. It was submitted that the decision in Abela may be distinguished on that basis. However, the significance of Abela is that it marks a departure in England from any view that the jurisdiction to serve out of the jurisdiction is exorbitant and is to be exercised with circumspection. So, past English decisions which have rested upon that view must now be considered in that context.

91    In Voth it was also noted by the majority that the procedure whereby leave is required as a condition precedent to service outside of the jurisdiction is of diminishing importance because a requirement for leave is no longer uniformly required in Australia. The High Court in that case was concerned with the approach to be adopted when seeking leave, where required. Even so, the majority observed at 564 that both on an application for leave and an application to set aside on inappropriate forum grounds the principles to be applied as to forum were those stated by Deane J in Oceanic Sun Line Special Shipping Company Inc v Fay [1988] HCA 32; (1988) 165 CLR 197 at 247-248. Those principles were not expressed in terms that required circumspection of any kind. They were summarised by Deane J in the following way:

In the light of the foregoing and at the cost of some repetition, it is possible to identify in summary form what I see as the modern content of the traditional principles governing the power of a court in this country to order that proceedings which have been regularly instituted within jurisdiction should be dismissed or stayed on inappropriate forum grounds. That power is a discretionary one in the sense that its exercise involves a subjective balancing process in which the relevant factors will vary and in which both the question of the comparative weight to be given to particular factors in the circumstances of a particular case and the decision whether the power should be exercised are matters for individual judgment and, to a significant extent, matters of impression. The power should only be exercised in a clear case and the onus lies upon the defendant to satisfy the local court in which the particular proceedings have been instituted that it is so inappropriate a forum for their determination that their continuation would be oppressive and vexatious to him. Ordinarily, a defendant will be unable to discharge that onus unless he can identify some appropriate foreign tribunal to whose jurisdiction the defendant is amenable and which would entertain the particular proceedings at the suit of the plaintiff. Otherwise, that onus will ordinarily be discharged by a defendant who applies promptly for a stay or dismissal if he persuades the local court that, having regard to the circumstances of the particular case and the availability of the foreign tribunal, it is a clearly inappropriate forum for the determination of the dispute between the parties. The reason why that is so is that, once it is accepted that the adjectives "oppressive" and "vexatious" are not to be narrowly or rigidly construed and are to be applied in relation to the effect of the continuation of the proceedings rather than the conduct of the plaintiff in continuing them, the continuation of proceedings in a tribunal which is a clearly inappropriate forum would, in the absence of exceptional circumstances being established by the plaintiff (cf. Spiliada Maritime Corp. v. Cansulex Ltd. [1987] 1 AC 460, at p.478), be oppressive or vexatious to such a defendant if there is some available and appropriate tribunal in another country.

92    Further, in reaching that view, Deane J considered the role that the desire for judicial comity has played. It is comity that has been advanced as the reason for circumspection (or caution) in the exercise of the power to allow service out of the jurisdiction. His Honour found that arguments advanced by reference to comity did not justify a broader forum non conveniens discretion than that encapsulated by the clearly inappropriate forum test. The latter formulation was found to be consistent with the principle that access to the courts is a right, not a matter to be regulated by an ample discretion. This reasoning pathway is against some form of circumspection at least in considering whether Australia is an inappropriate forum.

93    When the plurality summarised the relevant principles in Henry v Henry [1996] HCA 51; (1996) 185 CLR 571 at 587 (Dawson, Gaudron, McHugh and Gummow JJ), there was no suggestion that circumspection was required to be applied. The approach required was summarised as follows:

In Voth, this Court adopted for Australia the test propounded by Deane J in Oceanic Sun, namely, that a stay should be granted if the local court is a clearly inappropriate forum, which will be the case if continuation of the proceedings in that court would be oppressive, in the sense of "seriously and unfairly burdensome, prejudicial or damaging", or, vexatious, in the sense of "productive of serious and unjustified trouble and harassment". It was also held in Voth that, in determining whether the local court is a clearly inappropriate forum, "the discussion by Lord Goff in Spiliada of relevant 'connecting factors' and 'a legitimate personal or juridical advantage' provides valuable assistance". In this last regard, Lord Goff of Chieveley expressed the view that legitimate personal or juridical advantage is a relevant but not decisive consideration, the fundamental question being "where the case may be tried 'suitably for the interests of all the parties and for the ends of justice'".

(citations omitted)

94    Then, in Agar v Hyde, Gaudron, McHugh, Gummow and Hayne JJ summarised the nature of the power to authorise service out of the jurisdiction under the heading 'Service out of the jurisdiction - an exorbitant jurisdiction?' as follows at [42]-[43]:

In Amin Rasheed Corpn v Kuwait Insurance, Lord Diplock said that jurisdiction exercised by an English court over a foreign corporation which has no place of business in England, as a result of granting leave under the relevant rule of court to serve out of the jurisdiction:

"is an exorbitant jurisdiction, ie, it is one which, under general English conflict rules, an English court would not recognise as possessed by any foreign court in the absence of some treaty providing for such recognition. Comity thus dictates that the judicial discretion to grant leave under this paragraph [of the rules] should be exercised with circumspection in cases where there exists an alternative forum, viz the courts of the foreign country where the proposed defendant does carry on business, and whose jurisdiction would be recognised under English conflict rules."

Considerations of comity, and consequent restraint, have informed many of the reported decisions about service out of the jurisdiction. It is, however, important to notice that rules of court, or local statutes, providing for service outside the jurisdiction are now commonplace - at least in jurisdictions whose legal systems have been formed or influenced by common law traditions. Further, as the Court of Appeal rightly noted in its reasons in these matters, contemporary developments in communications and transport make the degree of "inconvenience and annoyance", to which a foreign defendant would be put, if brought into the courts of this jurisdiction, "of a qualitatively different order to that which existed in 1885".

The considerations of comity and restraint, to which reference has so often been made in cases concerning service out of the jurisdiction, will often be of greatest relevance in considering questions of forum non conveniens. The starting point for the present inquiry, however, must be the terms of the Rules, not any general considerations of the kind just mentioned.

(citations omitted)

Otherwise, it is to be noted that Agar v Hyde concerned a rule expressed in very different terms to r 10.43.

95    Having regard to the above passage, two matters emerge. First, the significance of the description 'exorbitant jurisdiction' must be placed in a modern context. Second, considerations of comity and constraint have their greatest significance in evaluating the question of forum non conveniens. Given that those principles, as consistently expressed by the High Court, do not require separate regard to the exorbitant character of the jurisdiction, this must mean that the concerns behind such observations are incorporated in the principles to be applied when considering whether service should be set aside on such grounds (or not granted on a leave application because of the likelihood that service may be set aside on such grounds).

96    Indeed, it is difficult to see how, as a matter of coherent principle, there could be a proper consideration of the principles as to whether the Court was an inappropriate forum leading to a conclusion that there could be service out of the jurisdiction and then a further consideration by reference to a residual discretion that resulted in the opposite conclusion based upon circumspection informed by matters of comity or a view that the jurisdiction was exorbitant.

97    In Agar v Hyde, Gaudron, McHugh, Gummow and Hayne JJ went on to consider the differences between an application for leave and an application to set aside: at [53]-[55]. To some extent those observations reflect the terms of the rule there under consideration. However, the analysis lends support for the approach described by Beach J in Trina Solar. In particular, the view is expressed that if on a leave application the necessary conditions are satisfied then, in the absence of some countervailing consideration, leave to proceed should be given. It is when an application is brought to set aside that there is to be consideration whether the Court is an inappropriate forum and whether 'the claims have insufficient prospects of success to warrant putting an overseas defendant to the time, expense and trouble of defending the claims': Agar v Hyde at [55].

98    Tiger also relied upon statements by Wilcox J in BEST Australia Ltd v Aquagas Marketing Pty Ltd (1988) 83 ALR 217 at 222-223. However, that case too stated the test by reference to English authority as to the appropriate forum.

99    None of the above matters demonstrates error in the reasoning by Beach J in Trina Solar. On the contrary, the statement of principle in that case reflects the current state of the law which is to the effect that concerns about comity are now addressed principally in the law as to forum non conveniens. Further, generally they are matters to be addressed upon any application for a stay.

100    Drawing these matters together, the following points may be made concerning the residual discretion exercised by the primary judge in this case:

(1)    it is necessary to pay close attention to the terms of the Rules as to service out of the jurisdiction when considering the relevance of past decisions;

(2)    in this Court, leave is required by the Rules before there can be service of an application on a respondent out of Australia;

(3)    the requirement for leave does not invite a mini trial;

(4)    if the three conditions expressed in r 10.43 are met, then there remains a residual discretion;

(5)    the residual discretion may only be exercised for good reason;

(6)    if, at the time of considering whether to grant leave, a stay of the proceeding would be granted or this was seen to be inevitable, then that could provide a compelling reason for the exercise of the residual discretion to refuse leave;

(7)    to the extent that the making of orders to allow service out of the jurisdiction is seen to be exorbitant, and therefore a matter requiring circumspection or restraint or caution by reason of comity, provision is made as to those matters mainly by the principles concerning forum non conveniens;

(8)    save where it appears inevitable at the time that leave is sought that a stay would be granted on forum non conveniens grounds, the issue of the appropriate forum is a matter that should be left for any application by the respondent;

(9)    at both the leave stage and upon an application to set aside service (or for a stay) the onus is upon the party seeking leave to serve and have the matter proceed in the home jurisdiction; and

(10)    as the onus remains on the party seeking to have the matter proceed in the home jurisdiction when there is a set aside application, it is important to recognise that if a set aside application is brought then it is for the applicant to provide sufficient detail as to the nature of the claim to enable the Court to evaluate whether the home jurisdiction is an inappropriate forum. If there is a failure by the applicant to do so then service should be set aside. It is not for the respondent to place those facts before the Court. It may choose to put evidence on in support of the set aside application, but need not do so.

101    In deciding whether Australia is a clearly inappropriate forum, the Court has regard to the whole of the claim the subject of the application: McGregor v Potts [2005] NSWSC 1098; (2005) 68 NSWLR 109 at [51].

102    Further, 'a court is not an inappropriate forum merely because another is more appropriate': Regie National des Usines Renault SA v Zhang [2002] HCA 10; (2002) 210 CLR 491 at [24] (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ).

Ground 1: Alleged weak jurisdictional connection

103    For reasons we have given, the winding-up claim was not properly characterised as one where jurisdiction had not been demonstrated. The claim by Tiger that the primary judge should have found that there was a weak jurisdictional connection depended upon demonstrating that there was little or no merit in the claim that MC2 had been carrying on business in Australia. This was not the case. Even though it may be accepted that the shareholder claim as relied upon at the time of the application (which is the relevant time) was weak, that was not a significant matter bearing upon discretion.

104    Further, once it was accepted that there was a prima facie case that MC2 was carrying on business in Australia, it did not matter whether the employment claim should be seen as a discrete claim which provided insufficient foundation for the making of an order allowing service on Tiger.

Ground 2: Alleged error as to the character of the residual discretion

105    For reasons we have given, the primary judge was not in error in following the position articulated by Beach J in Trina Solar. The observation by Beach J to the effect that there had to be a good, if not compelling, reason why leave should be refused if the three conditions in r 10.43(4) were satisfied applied only to an application for leave. The primary judge was dealing, in effect, with a claim both for leave and an application to stay or set side in one hearing. Therefore, it was necessary for his Honour to focus upon the concerns encapsulated in the principles of forum non conveniens. It was those principles that ensured that issues of comity (and the need for appropriate caution) were addressed.

106    The primary judge dealt with the principles of forum non conveniens in some detail. In focusing upon the question whether Australia had been shown to be a clearly inappropriate forum, the primary judge was following the proper approach as explained by the High Court.

Ground 3: Alleged error as to forum non conveniens

107    Tiger claimed that the primary judge failed to consider two matters that it advanced as to why Australia was a clearly inappropriate forum.

108    First, it was said that the need to litigate the issue whether Tiger was carrying on business in Australia was an additional issue that would not have to be litigated if any claim as to the winding up of Tiger was progressed in another jurisdiction.

109    Second, it said that the primary judge failed to have regard to evidence to the effect that the corporate group owned by MC2 was overwhelmingly based abroad. In particular it was said that, on the evidence, of the 216 employees of the MC2 subsidiaries only 20 were employees in Australia.

110    As to the appropriate forum, the primary judge considered a number of matters about which there is no challenge: at [42]-[46]. First, the parties and their principals are scattered between Malaysia, Hong Kong and the Cayman Islands. Second, there is no natural forum for their dispute. Third, the dispute arose at a time when Mr Morris was predominantly in Australia. Fourth, the claim made was of a breakdown in a partnership or quasi-partnership relationship for the running of their commercial enterprise through MC2. Fifth, by instructing MA to put the identity of the employer of Mr Morris as managing director in issue, MC2 has made itself a necessary party to the proceedings. Sixth, there is no particular place at which many witnesses or potential witnesses may be located at any point in time.

111    To the above matters the evidence of the arrangements that were made for meetings may be added which involved attendees being in different places by telephone or meetings being held in places other than the Cayman Islands. Further, the activities of the subsidiaries were international in character with operations in Australia, Hong Kong, China and New Zealand. It may be expected that a business of that character may be involved in proceedings in courts in different jurisdictions in the event of a dispute. This is not a case where a party is being brought to a place where it has no commercial connection and the nature of its commercial activities do not involve no ongoing or continual participation in operations in Australia.

112    As to the issue of the place of business, the primary judge did consider that issue at [48] and found:

As Mr Morris argued, a deal of evidence may be necessary if the parties choose to litigate whether or not MC2 was carrying on business here [ie in Australia]. However, that may arise in any event because the issue of the relationship between MC2 and McConaghy Australia may be relevant in the determination of the position of Mr Morris occupied and which company owed him remuneration and in what capacity.

113    Aside from the costs associated with the issue of carrying on a business, it was not submitted for Tiger that there were particular aspects or consequences of having to proceed in Australia that would be oppressive to Tiger.

114    In the above circumstances, the primary judge did have regard to the international character of the Business. Even if particular consideration is given to where the employees of the subsidiaries are located, that is not a matter that would mean that Australia is an inappropriate forum.

115    Therefore, the appeal ground does not demonstrate error in the decision reached by the primary judge.

Notice of contention: MC2 carrying on a business in Australia

116    For reason we have given, we accept that aspect of the contention advanced by Mr Morris to the effect that on the evidence before the primary judge there was a prima facie case that MC2 was carrying on business in Australia by reason of its responsibility for managing the day-to-day operations of its subsidiaries.

Limits upon leave for service out based on item 20 of r 10.42

117    There is support for the proposition that where leave has been obtained to serve a party on the basis of one of the jurisdictional heads in r 10.42 then there cannot be joinder of another foreign party solely on the basis that the additional foreign party is a necessary party for the purposes of item 20 of r 10.42 to the claim against the other foreign party. In other words, a proper party joinder cannot be 'piggy backed' on a claim against a foreign respondent joined only a proper party to an action against a party who has been served out of the jurisdiction. Cases which may be advanced to support that position include: Darrell Lea Chocolate Shops Pty Ltd v Spanish-Polish Shipping Co Inc (The 'Katowice II') (1990) 25 NSWLR 568 at 574; BY Winddown, Inc v Vautin [2016] FCAFC 168; (2016) 249 FCR 262 at [39] and AK Investment CJSC v Krygyz Mobil Tel Ltd [2011] 4 All ER 1027.

118    Mr Morris sought to advance an argument that the scope of item 20 of r 10.42 is not limited to cases where the 'anchor party' (being the party to the initial action) is served in Australia. He submitted that so long as the party to be served could be seen in some general way as being a proper party to the 'proceedings as a whole', the item was enlivened. He further submitted that the current rule in r 10.42 item 20 of the Rules was in different terms to the cognate rules considered in cases such as AK Investment CJSC v Krygyz Mobil Tel Ltd or Costa Vraca Pty Ltd v Bell Regal Pty Ltd [2003] FCAFC 305 and those cases can be distinguished on that basis. Although the precise point need not be finally determined on this appeal, those submissions should not be accepted. Leaving aside the good sense in terms of international comity of a rule which prevents the extension of jurisdiction to persons who are only proper parties to actions commenced against other persons through the exorbitant jurisdiction, the words of item 20 clearly delineate its limits. It provides extended jurisdiction in cases to permit service on a person who is properly joined as a party in proceeding which have been 'properly brought against a person who is served, or is to be served, in Australia'. The terms of this item make it clear that the anchor party is one which is served in Australia and, therefore, is not a party who has been served by use of the extended jurisdiction. The suggestion that item 20 would extend jurisdiction to permit service out where the party to be served is only a proper party to an action against a party who has also been served outside Australia would render otiose the words of the item which are quoted above.

119    If Mr Morris' claim to join Tiger rested solely upon item 20 it is doubtful that his application could have succeeded because (a) it is difficult to see that Tiger could be regarded as a proper party to the employment claim; and (b) the presently pleaded claim with respect to the shareholders agreement appears to be without merit. At best, it might be a proper party to the oppression action in respect of which relief is sought in the nature of winding up on the just and equitable ground. However, that action has been brought against MC2 by use of the service out provisions and it is strongly arguable that item 20 would not apply for the purposes of serving Tiger.

120    However, for reasons we have given, there is a prima facie case that MC2 is carrying on business in Australia. Therefore, Tiger is properly joined in the proceedings on the basis of service out of the jurisdiction under at least item 15 (as there is a claim properly brought for the winding-up of MC2 on the basis that it is carrying on business in Australia). Further, based upon Tiger's position as a member of MC2 whose membership interest would be affected, there was a proper basis for granting leave to serve Tiger under item 24(a) of r 10.42. As a consequence, Tiger is properly joined as a party under item 24(a). So, the issue whether the approach of the primary judge of joining Tiger on the basis that it is a proper party to an overall dispute to which MC2 is a proper party as a foreign respondent need not be determined.

Argument advanced for Mr Morris by analogy to submission to jurisdiction

121    It was submitted for Mr Morris that Tiger could not claim on appeal that there was no jurisdiction under item 20 to join Tiger where MC2 had itself been joined on the basis of the power to serve out of the jurisdiction because it had not raised such a claim in express terms before the primary judge.

122    Authority to serve out of the jurisdiction could not be conferred by conduct that was insufficient to amount to a submission to jurisdiction or waiver. Tiger appeared before the Court on an application to challenge the jurisdiction to grant the anti-anti-suit injunction and serve the order on Tiger. There was no submission to jurisdiction by Tiger. There was no conduct that could be identified as a waiver of the right to object to jurisdiction. In those circumstances, the primary judge had to conclude that there was a proper basis to grant leave to serve Tiger in the Cayman Islands.

123    We do not accept the submission that there was some form of concession or submission to jurisdiction by Tiger by the manner in which it approached the hearing before the primary judge. The primary judge did not proceed on that basis. His Honour stated the question for determination on the application before him turned on whether 'this Court is not a clearly inappropriate forum and has jurisdiction to grant at least some of the relief sought': at [21]. Both jurisdiction and discretion were in issue.

124    It followed that Tiger was entitled to raise in the appeal the question whether the primary judge had power to grant leave to serve Tiger in the Cayman Islands even though the issue had not been raised in terms before the primary judge. Equally, once that issue was raised in the appeal it was open to Mr Morris to justify the decision of the primary judge by reference to other sources of power that were established on the evidence that was in issue before the primary judge or to seek to have the matter remitted if there was prejudice. However, on the evidence before the primary judge there was power to grant the orders made. Therefore, it is not necessary to consider whether the matter should be remitted.

125    Finally, we note that this is not a case where leave was obtained to serve out of the jurisdiction on the basis of a particular item in r 10.42 and then there was an attempt to justify the service out on different grounds when an application was brought to set aside the service out. In such a case, given the nature of the power, it may be that it cannot be subsequently justified on different grounds: ICI Australia Operations Pty Ltd v Kidde-Graviner Ltd at [11] citing Burt CJ in Koranna Nominees Pty Ltd v Roberts (Unreported, WASCA, Library No 4289, 15 October 1981). Rather, in effect as to Tiger, both the question of leave and matters that might be raised on a stay were dealt with at a single hearing because Tiger was already before the Court as a result of having been served with the anti-anti-suit injunction (as distinct from the application itself).

Leave to appeal, additional ground and conclusion

126    The appeal concerns an interlocutory decision. Leave is required. It is well established that an applicant for leave must demonstrate that the decision is attended by sufficient doubt and there would be substantial injustice if leave were refused supposing the decision to be wrong: Décor Corporation Pty Ltd v Dart Industries Inc [1991] FCA 655; (1991) 33 FCR 397.

127    Further, the appeal for which leave is sought concerns a matter of practice and procedure. In such cases if no questions of general principle are at stake, particular caution must be exercised when considering whether to grant leave: Hogan v Australian Crime Commission [2010] HCA 21; (2010) 240 CLR 651 at [34].

128    As formulated, the appeal concerned whether there had been the proper exercise of a residual discretion. The complaint focused upon whether the primary judge had considered the discrete nature of the claim sought to be advanced against Tiger. We are of the view that there was a point of principle involved in considering the extent to which a discrete aspect of an application to relief which may not, of itself, satisfy the requirements for leave might be a reason why leave should not be given to serve out of the jurisdiction. Further, if the decision of the primary judge had been overturned, Tiger would not have been required to participate in the proceedings in Australia. It claimed that those proceedings should have been confined to the employment dispute and should not have included the shareholders dispute. It claimed that most of the cost was associated with the shareholder claim, which was a separate dispute in respect of which there was no jurisdiction in this Court.

129    In the particular circumstances of this case, we are of the view that the case went beyond a challenge to an exercise of discretion as to a procedural matter. It raised a point of principle that would have sufficient consequences for Tiger, if the argument was successful, such that leave should be given.

130    Given our view that there was a prima facie case that MC2 was carrying on business in Australia, there is no need to consider the application to advance the further ground of appeal that arose in the course of oral argument. It was dependent upon Tiger demonstrating that its joinder was sought to be justified solely on the basis that it was a proper party to a claim against MC2 in circumstances where there was no separate basis upon which Tiger may be brought within one of the items in r 10.42. For reasons we have given, that is not the position.

131    For reasons we have given we find that the appeal should be dismissed. Costs should follow the event in an appeal of this nature.

Associate:

Dated:    5 February 2019

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