FEDERAL COURT OF AUSTRALIA

The Smart Company Pty Ltd v Clipsal Integrated Systems Pty Ltd

[2006] FCA 428

PRACTICE AND PROCEDURE - application to transfer proceeding from Western Australia District Registry to South Australia District Registry - natural locus of proceeding in South Australia - claim relates to certain business activities by respondents in South Australia - preparation of matter for trial not at an advanced stage - persons resident in South Australia are the instructors of both applicant and respondent - applicant's law firm changed from one based solely in Western Australia to one with a national presence - new docket judge required - location of assets and liabilities of directions in South Australia in respect of security for costs.

BHP Billiton Ltd v Schultz (2004) 211 ALR 523 referred to

BWK Elders (Australia) Pty Ltd v Westgate Wool Company Pty Ltd (No 6) [2002] FCA 807 referred to

Moltoni Corporation Pty Ltd v Adelaide Brighton Cement Ltd [2004] FCA 482 referred to

National Mutual Holdings Pty Ltd v The Sentry Corporation (1988) 19 FCR 155 referred to

Shin Chin Distributors Pte Ltd v Parmalat Australia Ltd  [2003] FCA 1629 referred to

Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538 referred to

THE SMART COMPANY PTY LTD v CLIPSAL AUSTRALIA PTY LTD, CLIPSAL INTEGRATED SYSTEMS PTY LTD and CLIPSAL TECHNOLOGIES AUSTRALIA PTY LTD

WAD 132 of 2004

LEE J

29 MARCH 2006

PERTH

THE COURT ORDERS THAT:

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

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

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

REASONS FOR JUDGMENT

1                     By a motion filed on 17 February 2006 the respondent seeks an order pursuant to Order 10 rule 1(2)(f) of the Federal Court Rules (“the Rules”) that this proceeding be transferred to the South Australia District Registry of the Court.

2                     The proceeding was commenced in the Western Australia District Registry by an application and statement of claim filed by the applicant on 18 June 2004.

3                     It may be accepted that in usual circumstances such a belated application for transfer of a proceeding would be unlikely to succeed.  In this case, however, events that have occurred justify consideration of the motion. (See: Shin Chin Distributors Pte Ltd v Parmalat Australia Ltd [2003] FCA 1629). 

4                     After filing the statement of claim the applicant was granted leave on four occasions to amend the pleading.  The most recently amended statement of claim was filed on 20 May 2005.  An amended defence and cross-claim by the respondents was filed on 23 January 2006. 

5                     It can be seen that since the commencement of the proceeding the time elapsed has been spent on the pleadings, in particular the statement of claim, and preparation of the matter for trial has not reached an advanced stage.

6                     The dispute between the parties arose out of a commercial relationship established by contractual documents executed by the applicant and the first respondent in May 1995 (“the Collaboration Agreement”) and September 1996 (“the Heads of Agreement”).

7                     At that time the applicant carried on business in Western Australia.  It had been incorporated in Western Australia in 1993.  In its business the applicant developed an electronic control system for installation in residential premises, manufactured and sold under the brand name “Jeeves”.  At its place of business in South Australia the first respondent manufactured and marketed under the name “C-Bus” a computerised electrical wiring system for installation in buildings. 

8                     The object of the agreements between the applicant and the first respondent was to integrate the “know-how” of the respective systems and to undertake the further development thereof.

9                     The thrust of the applicant’s statement of claim is that at the time the commercial relationship between the applicant and first and second respondents broke down in about September 2002 the first respondent had breached the foregoing contracts and the first and second respondents had appropriated to their own purposes intellectual property of the applicant.  The applicant seeks declarations of ownership in that property; declarations of the existence of constructive trusts; recovery of damages or an account of profits; and injunctions. 

10                  In September 2001 administrators were appointed to manage the affairs of the applicant.  In May 2002 the applicant entered a Deed of Company Arrangement pursuant to which an entity registered in South Australia purchased the whole of the shareholding in the applicant.  The current registered office of the applicant is in South Australia.  The applicant informed the Court that it is not now engaged in trade and, presumably, has not carried on business in Western Australia or South Australia since about 2002.  The controllers of the applicant who provide instructions to the applicant’s solicitors reside in South Australia.  The firm of solicitors instructed by the applicant carries on business in Western Australia under the name Gadens Lawyers.  More will need to be said about that later in the reasons. 

11                  Each of the respondents is a company incorporated in South Australia.  The current registered office for each respondent is the registered office of the parent company, an international conglomerate, in New South Wales.  At all material times the first and second respondents have had their principal place of business in South Australia.  The registered place of business of the third respondent is its registered office but the Court was informed that the third respondent is not engaged in trade and is the holding company of the first and second respondents.  The solicitors instructed by the respondents is a firm that practises in South Australia.  The persons delegated to provide instructions to the solicitors are the General Manager and the Managing Director of the first respondent and they reside in South Australia. 

12                  At the time the applicant commenced the proceeding in this registry it instructed a firm of local solicitors, Solomon Brothers to act.  On 14 January 2005 the applicant entered into a “funding agreement” with a litigation funder, IMF (Australia) Limited (“IMF”) to meet the costs of the litigation.  In response to an application for security for costs by the respondents, IMF provided a guarantee and indemnity to the respondents in respect of any costs the applicant may be liable to pay to the respondents incurred in the period between 14 January 2005 and the date of termination of the “funding agreement”. 

13                  On 14 February 2006 IMF gave notice to the respondents that the “funding agreement” would be terminated by IMF on 21 February 2006.  On 14 February 2006 Solomon Brothers “terminated its retainer from the applicant”.  On 27 February 2006 the applicant’s present solicitors gave notice that they had been instructed to act for the applicant. 

14                  The termination of the “funding agreement” caused the respondents to revive its motion for an order that the applicant provide security for the respondents’ costs in the litigation.  To this point it has not been contested that the applicant has insufficient funds to pay such costs if ordered to do so.  The response of the applicant to that motion has been to offer personal guarantees and indemnities from directors of the applicant.  The applicant and its directors have not offered to pay a sum into Court or to obtain a bank-secured facility in respect of that liability, nor have the directors offered a charge over any assets they may own or control.  If the security offered by the applicant is accepted by the respondents, or is considered sufficient by the Court, it would follow that regular assessment of the current net worth of the directors would be required if the respondents were to be able to ascertain whether the security provided was sufficient as the litigation progressed and costs were incurred.  These events, if they were to occur, would have particular connection with South Australia in that the assets and liabilities of the directors are within that State. 

15                  In addition to the foregoing another recent event in the matter is my pending retirement as docket judge.  The matter must now be assigned to a new judge. 

16                  In their respective submissions both parties place some emphasis on the domicile of prospective witnesses likely to be called at trial.  That, of course, is of some relevance in an application for transfer but it is unlikely to carry great weight when a determination is made as to which is the appropriate registry of the Court to have control of the management of preparation of the matter for trial, particularly if the matter is not advanced and interlocutory applications and mediation proceedings are yet to be considered. (See: Moltoni Corporation Pty Ltd v Adelaide Brighton Cement Ltd [2004] FCA 482).  

17                  In an application for transfer of a proceeding to another registry the principal consideration for the Court is what will best serve the interests of justice and fairness to the parties and meet the public interest in the efficient and timeous despatch of litigation. (See: National Mutual Holdings Pty Ltd v The Sentry Corporation (1988) 19 FCR 155).  The application is not resolved by reference to the rules of common law that govern whether a chosen forum is the appropriate forum.  This is a national court exercising a single jurisdiction and an application to transfer a proceeding to another registry is an internal matter for the Court for which provision has been made in the Rules.  The considerations that are relevant to determining whether such an order should be made are not confined by the Rules and obviously they are broader in scope than those to be applied to decide a “forum non conveniens” application concerning competing jurisdictions. (See: Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538).

18                  It is not in issue that there is a connection with Western Australia in this proceeding.  However, the fact that an applicant has selected a registry in which to commence the proceeding that is not wholly inappropriate will not give rise to any presumption against transfer of the proceeding. (cf: BHP Billiton Ltd v Schultz (2004) 211 ALR 523 per Gleeson CJ, McHugh, Heydon JJ at [25], Gummow J at [72], Kirby J at [167]). 

19                  Counsel for the applicant conceded, properly, that the case really relates to the manufacture of products in South Australia and that if the question of where the proceeding should be commenced had been decided by weighing all issues, the balance would have fallen in favour of conducting the proceeding in South Australia.  However, counsel submitted, transactions of wider geographic import arose out of the events in South Australia and, therefore, this registry was as well placed as any to deal with the litigation.

20                  The applicant also contended that a provision in the Heads of Agreement added weight to that submission.  In the Heads of Agreement it was provided that in the event of a dispute between the parties under that agreement “the law governing these Heads of Agreement shall be the law of the State of Western Australia and the parties submit to the exclusive jurisdiction of the Courts of that state”.  The Collaboration Agreement on the other hand provided that that agreement was to “be interpreted in accordance with the law of South Australia”. 

21                  Obviously the applicant did not consider the foregoing clause in the Heads of Agreement to restrict the applicant when it commenced the proceeding against the respondents in this registry, recognising, quite properly, that the statement of claim involved federal jurisdiction and identified a matter appropriate for resolution in this Court.  Given that the agreements provided that the proper law to be applied was the law of Western Australia on the one hand and the law of South Australia on the other, they add little to the determination of what registry of the Court is the proper place for the conduct of the proceeding.  To the extent that one agreement indicated a preference by the parties to have a dispute arising thereunder litigated in courts of the State of Western Australia it was a preference confined to that agreement and, in the absence of supporting considerations, would be of limited relevance in determining the proper place for conduct of litigation of a matter that attracted the federal jurisdiction of this Court. 

22                  For the following reasons I consider that an order should be made that the proceeding be transferred to the South Australia Registry of the Court.

23                  First the natural locus of the proceeding is South Australia.  Wherever the causes of action pleaded may be said to have arisen, at its heart the case concerns acts carried out by the first and second respondents in the course of the conduct of their businesses in South Australia. 

24                  Second, whilst the proceeding has been commenced and managed in this registry for a period of almost two years a confluence of recent events has provided reason for the proceeding to be transferred from this registry.  The relevant circumstances in that regard are as follows.  The proceeding has made little progress in preparation for trial and important matters in that regard remain to be attended to, including discovery of documents and any interlocutory proceedings that may arise therefrom.  Oversight of those issues is better carried out in South Australia given that instructions on both sides are provided by persons resident in South Australia, whether or not relevant documents may be distributed between the two States. 

25                  Furthermore, the applicant has recently changed its solicitors and is no longer represented by a small firm that carries on practise only in this State.  The applicant has now instructed a firm which holds itself out as having a national presence.  In affidavits filed in opposition to the respondents’ application it was deposed on behalf of the applicant that “Gadens” represents “a joint venture of independent firms carrying on business under the same name, ‘Gadens’”.  Whatever that may mean it may be concluded that any disadvantage that may have been inflicted upon the applicant if an order had been made for the proceeding to be transferred whilst it continued to be represented by Solomon Brothers is no longer a relevant consideration. (See: BWK Elders (Australia) Pty Ltd v Westgate Wool Company Pty Ltd (No 6) [2002] FCA 807).  Circumstances have forced the applicant to change its solicitors and it may be assumed that being able to instruct solicitors who carry on business under the name Gadens in South Australia will be as convenient for the applicant as instructing practitioners who carry on business under that name in Western Australia given that the instructions are to be provided by persons resident in South Australia.

26                  In addition to the foregoing another important change in circumstances is the need for another docket judge to be assigned the matter and to take over management of the proceeding.  Obviously that may as easily be a judge in the South Australia District Registry of the Court as a judge in this registry.

27                  Another recent event in the matter is the resurrection of the respondents’ motion for the provision of security for costs by the applicant.  As alluded to earlier in these reasons, on the current material provided the applicant offers personal guarantees and indemnities from the directors of the applicant by way of security.  The worth of these offers depends upon the net worth of the property of the directors situated in South Australia.  If further security is provided by the applicant in that form there will be a continuing prospect that interlocutory proceedings may occur related to the sufficiency of the security.  The appropriate place for consideration of that issue would be in the South Australia District Registry of the Court. 

28                  In answer to the foregoing considerations the applicant raised a new issue, namely, the possibility that the applicant may commence proceedings in the Supreme Court of Western Australia against the first and second respondents in respect of a Deed of Settlement made between the applicant and the first and second respondents as persons who were defendants to an action in the Supreme Court commenced against them by the Administrators of the applicant.  In an affidavit filed by the applicant it was stated that the applicant has sought legal advice from Gadens in that regard.  The applicant appears to be seeking advice on whether it may contend that the first and second respondents made misrepresentations which induced the applicant to enter into the Deed of Settlement and whether it may obtain orders for relief against them. 

29                  Two comments may be made about that submission by the applicant.  First the issue has not progressed beyond the point of speculation and second, if such a proceeding were to be commenced it would appear to be a matter with insufficient connection with this proceeding to make it likely that an order would be made for the transfer of this proceeding to the Supreme Court of Western Australia, or that the Supreme Court would be likely to order that the proceeding in that Court be transferred to this Court.

30                  Having regard to all relevant circumstances and the submissions of the parties I am satisfied that an order should be made that the proceeding now be transferred to the South Australia District Registry and will so order.

Associate:

Dated:                 April 2006