FEDERAL COURT OF AUSTRALIA

PRACTICE AND PROCEDURE - application to transfer proceeding - effect of choice of jurisdiction clause requiring parties to litigate claims “relating to” or “arising under” a purchase in South Australia - whether action to set aside guarantee is a claim “relating to” that guarantee

WORDS AND PHRASES - meaning of “relating to” and “arising under” considered

Federal Court of Australia Act 1976) (Cth) s 48

Federal Court Rules O 10 r 1(2)(f), O 36 r 6

Austrian Lloyd Steamship Co v Gresham Life Assurance Society Ltd [1903] 1 KB 249 referred to

Compagnie des Messageries Maritimes v Wilson (1954) 94 CLR 577 referred to

Evans Marshall & Co Ltd v Bertola SA [1973] 1 WLR 349 referred to

Exford Pines Pty Ltd v Vlado's Pty Ltd [1992] 2 VR 441 distinguished

Government of Gibraltar v Kenney [1956] 2 QB 410 referred to

Heyman v Darwins Ltd [1942] AC 356 referred to

Huddart Parker v The Ship “Mill Hill” (1950) 81 CLR 502 discussed

Oceanic Sun Line Special Shipping Co Inc v Faye (1988) 165 CLR 197 discussed

Kirchner & Co v Gruban [1909] Ch 413 referred to

Law v Garrett (1878) 8 ChD 26 referred to

Logan v Bank of Scotland (No. 2) [1906] 1 KB 141 referred to

Mackender v Feldia AG [1967] 2 QB 590 referred to

National Mutual Holdings v The Sentry Corporation (1988) 19 FCR 155 discussed

Racecourse Betting Control Board v Secretary for Air (1944) Ch 114 applied

The Cap Blanco [1913] P 130 referred to

The Eleftheria [1970] P 94 referred to

The Fehmarn [1957] 1 WLR 815 and on appeal [1958]1 WLR 159 considered

kc park safe (sa) pty ltd, benjamin kamer

and david richard pelman lester v

adelaide terrace investments pty ltd

VG 144 of 1998

FINKELSTEIN J

15 MAY 1998

MELBOURNE

THE COURT ORDERS THAT:

1.         The proceeding be transferred to the South Australia Registry of the Federal Court.

2.         The costs of the motion be costs in the cause.

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

REASONS FOR JUDGMENT

HIS HONOUR: The respondent applies for an order that this proceeding, which has been commenced in the Victoria District Registry of the Court, be transferred to the South Australia District Registry.  The power of the court to make such an order is to be found in s 48 Federal Court of Australia Act 1976 (Cth) which provides:

“The Court or a judge may, at any stage of the proceeding in the Court, direct that the proceeding or part of the proceeding be conducted or continued at a place specified in the order, subject to such conditions (if any) as the Court or Judge imposes.”

See also O 10 r 1(2)(f) of the Federal Court Rules, pursuant to which the Court may direct that a proceeding be transferred from one registry to another, and O 36 r 6, where the Court is given power to direct at what particular place the trial of a proceeding is to take place.

The proceeding is concerned with a lease of the Cosmopolitan carpark which is located at 128 Hindley Street, Adelaide.  The first applicant, a Victorian company, was granted the lease by the respondent, a company incorporated in New South Wales.  Contemporaneously with the grant of the lease, the second applicant and the third applicant, each a director of the first applicant, executed a deed pursuant to which they jointly guaranteed the observance and performance of the terms and conditions to be observed and performed by the first applicant under the lease.  In the proceeding the applicants seek orders that the lease and the guarantee be set aside.  They also seek other relief, including damages. 

The allegations that are made to found the relief that is claimed fall into two categories.  First it is said that in order to induce the first applicant to take the lease, and the second and third applicants to give the guarantee, certain false representations were made concerning the revenue to be derived from the carpark and concerning the ability to reduce the costs of operating the carpark.  The representations are set out in the statement of claim.  It is said that those representations were written, oral and to be implied.  To the extent that the representations are said to be in writing the particulars that are provided describe the documents where it is said the representations are to be found.  To the extent that the representations are said to have been made orally, the allegation is that they were made by Mr John Barrett, a manager of the respondent, in conversations with Mr R Turner and Mr R Belteky who were representing the applicants in the negotiations for the lease and the guarantee.  The representations are also said to arise by way of implication as a result of certain conduct of Mr Barrett.  It is not necessary to describe that conduct.

The second basis upon which the claim is put is that before the lease was taken and the guarantee given the respondent was planning to construct a building on a property that is adjacent to the carpark site which, when constructed, would have the effect of obstructing the visual attractiveness of the access to the carpark and therefore the respondent was under a duty to disclose that plan to the applicants.  In the particulars it is alleged that the applicants were aware that the respondent was proposing to develop the adjoining land and that they were shown plans of the proposed development.  The complaint is that those plans were changed in a way that would affect the visual attractiveness of the access to the carpark and the respondent did not advise the applicants of the change. 

The alleged facts are said to give rise to claims under s 52(1) of the Trade Practices Act 1974 (Cth) for misleading and deceptive conduct and claims for the common law tort of negligence. 

The matters upon which the respondent relies to obtain an order that the proceeding be transferred to the South Australian Registry of the Court may conveniently be summarised as follows:

1.         In the guarantee there is a choice of law and a choice of jurisdiction clause.        That clause reads:

          “This deed shall be governed and construed in all respects in accordance with the law of the state of South Australia and the Commonwealth of Australia, and the parties hereby submit to the jurisdiction of the courts of South Australia and the Commonwealth of Australia in respect of all matters arising hereunder, or relating hereto PROVIDED HOWEVER that any proceedings issued in the courts of the Commonwealth of Australia shall be issued in the Adelaide registry of any such court.”

2.         The respondent has commenced a number of actions against the applicants in the District Court of South Australia for money due under the lease and the guarantee.  In one action it has recovered a judgment against the applicants and, consequent upon the failure of the applicants to satisfy that judgment, a bankruptcy notice has been served on each of the second and third applicants.  The applicants have applied to set aside the judgment entered against them, and the second and third applicants have applied to set aside the bankruptcy notices.  I note that this last mentioned application has been made out of the Victoria District Registry of the Court.

3.         The carpark and the adjoining land are in South Australia and it is likely that at the trial the Court would wish to inspect those properties, especially having regard to the allegation that the proposed development of the adjoining land will visually impair the attractiveness of the access to the carpark.

4.         A number of witnesses, who reside in South Australia, will be required to give evidence. 

5.         There is a possibility that the Court will be required to consider aspects of law that are peculiar to South Australia in relation to the proposed development of the adjoining land, such as local laws relating to planning and the building proposal. 

6.         It will be part of the respondent's case that the applicants did not rely on any representation made by the respondent for the reason that the first applicant is an experienced carpark operator and thus it will be necessary to investigate all of the first applicant's carparking operations in South Australia and presumably lead evidence about those activities most likely from witnesses who reside in South Australia.

The applicants oppose the application.  Their grounds of opposition may be shortly stated.  

1.         The applicants chose to commence the proceeding here and the Court should not deprive them of that choice. 

2.         On its proper construction the choice of jurisdiction clause has no application to a claim which is concerned with the validity of the guarantee.  It is said that the clause only applies to a claim made under the guarantee, that is a claim which seeks to enforce one or other of the terms or provisions of the guarantee.  In any case the lease does not contain a choice of jurisdiction clause. 

3.         It will not be necessary for the trial judge to visit the carpark to understand the nature of the complaints that are made. 

4.         Most of the witnesses that the applicants will call, including the second and third applicants themselves, reside in Melbourne or frequently attend Melbourne. 

5.         The solicitors for the applicants are in Melbourne. 

6.         The application to set aside the Bankruptcy Notices will be heard in Melbourne. 

7.         The applicants will be prejudiced and inconvenienced by being required to make discovery in South Australia.  The inconvenience is said to arise by the need to send a voluminous quantity of documents to South Australia and the prejudice is said to arise by reason of the potential that some of those documents might be lost. 

There were one or two other matters that were relied upon by the parties but I do not regard them as of sufficient importance or relevance to set them out. 

The discretion that is conferred on the Court to transfer a proceeding from one registry to another is in unfettered terms.  As the Full Court said in National Mutual Holdings v The Sentry Corporation (1988) 19 FCR 155 that discretion should be exercised flexibly, having regard to the circumstances of the particular case.  The Full Court said (at 162) that the proper test to apply is this:

“where can the case be conducted or continued most suitably bearing in mind the interests of all the parties, the ends of justice in the determination of the issues between them, and the most efficient administration of the Court.  It cannot and should not, in our opinion, be defined more closely or precisely.”

While it is of course true that when dealing with a power such as is here under consideration it is not appropriate to circumscribe the exercise of that power by particular rules or practices, it seems to me that certain matters should not be ignored if the discretion is to be properly exercised.  For example, if the balance of convenience clearly favours the making of an order then, in the absence of some strong countervailing circumstance, it would be expected that an order will be made.  In referring to the balance of convenience I include matters such as the convenience of the parties and of the parties' witnesses.  I also include the additional costs that a party would incur in having a proceeding heard and determined in one place rather than another.  It would also be necessary to have regard to whether an applicant had commenced an action out of a particular registry in the knowledge or with the intention that it would cause great inconvenience to the respondent.  Here also, in the absence of some good reason to the contrary, an order would ordinarily be made.

In this case the matter that is of real importance so far as I am concerned is the choice of jurisdiction clause.  By that clause the parties to the guarantee, that is the second and third applicants and the respondent, agreed that "all matters arising" under the guarantee and all matters "relating" to the guarantee, if they are to be litigated in a federal court, must be litigated in a proceeding issued out of the Adelaide Registry of that court.  In my view when parties have reached an agreement that a particular court or a court that sits at a particular place is to have exclusive jurisdiction to resolve their disputes, that agreement should be given effect unless there is some good reason why the parties should not be kept to their bargain.

Choice of jurisdiction clauses have a long history.  Initially these clauses were treated as a submission to arbitration and were binding on the parties accordingly: see for example Law v Garrett (1878) 8 ChD 26, where the parties to an arbitration agreement had agreed to refer all disputes arising under that agreement to the St Petersburg Commercial Court; see also Austrian Lloyd Steamship Co v Gresham Life Assurance Society Ltd [1903] 1 KB 249 where a life policy issued by an English underwriter provided for all disputes arising under the contract of insurance be submitted to the jurisdiction of the courts of Budapest having jurisdiction in such matters;   see also Logan v Bank of Scotland (No. 2) [1906] 1 KB 141, Kirchner & Co v Gruban [1909] Ch 413, and The Cap Blanco [1913] P 130. 

The principle upon which these decisions were based, namely that an agreement to have a dispute determined by a particular tribunal, usually a foreign tribunal, was a submission to arbitration, was considered in Racecourse Betting Control Board v Secretary for Air [1944] Ch 114.  In the course of his judgment in that case, Mackinnon LJ said that a choice of jurisdiction clause does not constitute a submission to arbitration.  His Lordship said that an action brought in contravention of such a clause should be stayed “under a wider general principle, namely that the court makes people abide by their contracts, and therefore will restrain a plaintiff from bringing an action which he is doing in breach of his agreement with the defendant, that any dispute between them shall be otherwise determined”: Racecourse Betting Control Board at 126. 

Later cases in England have accepted that a court will enforce a choice of jurisdiction clause not on the basis that it is a submission to arbitration but on the basis of the wider principle stated by Mackinnon LJ in Racecourse Betting Control Board.  I will not mention all of the cases but will confine myself to a citation of a few of them;  they include The Fehmarn [1957] 1 WLR 815, and on appeal [1958]1 WLR 159; Mackender v Feldia AG [1967] 2 QB 590; The Eleftheria [1970] P 94; and Evans Marshall & Co Ltd v Bertola SA [1973] 1 WLR 349.  One point that has emerged from these cases is that a choice of jurisdiction clause will not be treated as absolutely binding but is a matter to which a court will pay great regard and will usually give it effect: see e.g. The Fehmarn supra at 161-162 per Denning LJ. 

Courts in Australia have also considered what effect is to be given to a choice of jurisdiction clause.  In Huddart Parker v The Ship “Mill Hill” (1950) 81 CLR 502, Dixon J (at 508) followed what he regarded as the settled position in England, namely that such a clause constitutes a submission to arbitration.  But it is clear that his Honour was doubtful that this was the correct view:  see also Compagnie des Messageries Maritimes v Wilson (1954) 94 CLR 577.  In Oceanic Sun Line Special Shipping Co Inc v Faye (1988) 165 CLR 197 Brennan J was content to follow Huddart Parker: see 165 CLR at 224.  However, Gaudron J appeared to take the wider view of the effect of a choice of jurisdiction clause: see 165 CLR at 259 and the cases cited by her Honour. 

It does not appear that the manner in which a choice of jurisdiction clause should be given effect has been authoritatively resolved in this country.  For my own part I see nothing in the decisions of the High Court to which I have referred that prevents me from acting upon the wider principle stated by Mackinnon LJ in Racecourse Betting Control Board, namely that a court can and should require parties to abide by their choice of a forum unless there is some good reason why that should not be done.

The applicants, or more correctly the second and third applicants, seek to avoid the choice of jurisdiction clause by contending that the clause has no application to a cause of action that seeks to avoid, that is have set aside, the guarantee.  The argument is that the clause has no operation because the second and third applicants do not bring a claim that arises under the guarantee. 

Reliance was placed on Exford Pines Pty Ltd v Vlado's Pty Ltd [1992] 2 VR 441 a decision of the Supreme Court of Victoria where Tadgell J was required to consider the meaning of the expression "arising under", in s 21(1) of the Retail Tenancies Act 1986 (Vic) which subsection provides that subject to certain exceptions "any dispute between a landlord and a tenant arising under a retail premises lease ... must be referred to arbitration in accordance with this part".  Tadgell J held that a dispute between a landlord and a tenant did not "arise under" a lease unless that dispute was concerned with the rights and obligations which are created by the lease.  His Honour held that the expression "arising under" could have no application to some indeterminate class of dispute which, in a loose sense, was connected with the lease but did not depend on it for its resolution. 

The language of the clause presently under consideration is quite different to the language of the statute that Tadgell J was required to construe.  The disputes that the parties have agreed should be litigated in South Australia are disputes in respect of all matters both "arising" under the guarantee and "relating" to the guarantee.  As Tadgell J pointed out in Exford Pines (at 452) expressions such as "a dispute arising in connection with" or, "in relation to" or, "arising out of" a contract are regarded as very much wider than a dispute arising "under" a contract:  see e.g. Heyman v Darwins Ltd [1942] AC 356 at 383, 389 and 394, and Government of Gibraltar v Kenney [1956] 2 QB 410 at 421.

In my view a dispute concerning whether there were misrepresentations or non‑disclosure that led to the making of the guarantee, if not a dispute arising under the guarantee, is a dispute relating to the guarantee.  Thus, so far as the second and third applicants are concerned, it is a dispute that should have been the subject of a proceeding issued out of the South Australian Registry of the Court.  But as the applicants point out, the first applicant is not bound by any agreement to commence a proceeding in South Australia.  Prima facie, it was free to issue this proceeding out of any registry of the Court subject of course to the Court's power to transfer the proceeding to some other registry.  It is clear enough that it was sensible, if not necessary, for the second and third applicants to bring their claim to avoid the guarantee in the same proceeding in which the first applicant brings its claim to avoid the lease.  Does that mean that the second and third applicants have found a way to avoid their promise?  I think not.  I have already pointed out that the lease and guarantee were executed at the same time.  I have no doubt that when it executed the lease, the first applicant was aware that disputes between the second and third applicants and the respondent concerning the guarantee were to be litigated in South Australia.  I have mentioned that the second applicant and third applicant are directors of the first applicant.  It would come as no surprise to the first applicant that any litigation concerning the guarantee would almost certainly require some consideration of the lease including the rights of the parties under the lease; after all the guarantee was a guarantee of the obligations of the first applicant under the lease.  Thus it would have been in the contemplation of the first applicant that it might be required to become a party to litigation concerning the guarantee in proceedings before a court sitting in South Australia.

Further if I was to require the second and third applicants to honour their promise the first applicant, whose fate on this application should in my view follow that of the other applicants, would not suffer any significant prejudice.  I accept that it is likely that all of the applicants will incur additional expense by being required to litigate their claims in South Australia.  The second and third applicants have no real cause for complaint that they might be required to incur that additional expense because that is the result of the bargain that they struck with the respondent.  I accept that the position of the first applicant is different but the additional cost to it is not sufficient to dissuade me from making an order to transfer the proceeding.  In the result an order for the transfer of a proceeding will be made.

It has not been necessary for me to deal with the other grounds put forward by the respondent to support its application.  However, I would not wish to leave this case without indicating that but for the existence of the choice of jurisdiction clause it is unlikely that I would have made the orders that are sought.

Associate:

Dated:              1 June 1998