FEDERAL COURT OF AUSTRALIA

PCH Offshore Pty Ltd (ACN 086 216 444) v Dunn (No 2) [2010] FCA 897

THE COURT ORDERS THAT:

1.         Orders 1 and 2 of the orders made by the Court on 20 May 2009 and order 1 of the orders made by the Court on 30 July 2009, be set aside.

2.         Service of the application and statement of claim on the respondent pursuant to orders 1 and 2 of the orders made by the Court on 20 May 2009 further or alternatively order 1 of the orders made by the Court on 30 July 2009, be set aside.

3.         The applicant pay the respondent’s costs of the application, including reserved costs, to be taxed if not agreed.

4.         The taxing officer is to make a reasonable allowance for:

4.1       the engagement and services of both senior and junior counsel; and

4.2       the obtaining of transcript.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

1                          The applicant, PCH Offshore Pty Ltd (PCH), is a company which is incorporated in Australia.  At the material times, PCH carried on business supplying scaffolding and other industrial services in Azerbaijan and Kazakhstan through a branch operation.  The respondent, Mr Dunn, is a United Kingdom citizen who is not resident in Australia.  Mr Dunn was until the termination of his relationship with PCH, the manager of PCH’s branch operations in each of Azerbaijan and Kazakhstan.  He was also a director of PCH.

2                          On 1 May 2009, PCH commenced a proceeding in this Court seeking relief against Mr Dunn alleging that he had breached his statutory, contractual and fiduciary duties to PCH, and claiming compensation.  By orders made on 20 May 2009 and 30 July 2009, I ordered that the application and statement of claim in this proceeding be served on Mr Dunn out of the jurisdiction.  The orders were obtained ex parte on the basis of affidavit evidence from Mr Guy Robert Rackham sworn on 30 April 2009.  Mr Rackham is a director of PCH and is also Operations Director of Cape plc, which is the ultimate parent company of PCH.  Cape plc is a public company whose shares are listed on AIM, a market operated by the London Stock Exchange.  Mr Rackham is resident in the United Kingdom.

PCH’S CLAIM AGAINST MR DUNN

3                          In its statement of claim, PCH alleges that it entered into an employment agreement with Mr Dunn in February 1999 pursuant to which Mr Dunn agreed to act as the manager of PCH’s Azerbaijan branch office.  It is alleged that in April 2005, that agreement was varied and Mr Dunn also agreed to be responsible for the management of PCH’s Kazakhstan branch.  It is also alleged that pursuant to the laws of Azerbaijan and Kazakhstan, PCH provided Mr Dunn with powers of attorney which authorised him to carry out his duties in relation to the two branch offices.

4                          It is also alleged that in December 2007, after the takeover of PCH’s parent company by Cape plc, Mr Dunn resigned his employment as manager of the branch offices.  It is also alleged that Mr Dunn ceased to be a director of PCH on 26 November 2007, and that on 31 March 2008, Mr Dunn was removed as manager of the Azerbaijan branch office and the powers of attorney were revoked or expired on that date.

5                          It is alleged, however, that Mr Dunn continued to manage the branch offices from 11 December 2007 to June 2008 and was an officer of PCH from 11 December 2007 until June 2008.

6                          Further, PCH alleged that between January 2008 and June 2008, Mr Dunn withdrew USD1,452,243 from PCH’s Azerbaijan bank account in the form of cash cheques without proper cause and without PCH’s knowledge or consent.  In its particulars of this plea, made in para 16 of the statement of claim, PCH referred to 11 cheque requests to the Bank of Baku during the period 11 January 2008 to 3 June 2008.

7                          PCH also pleaded that from March 2007 to April 2008, Mr Dunn directed a number of debtors of PCH to stop making payments to PCH’s bank account and instead make payments to a local bank account that was not controlled by PCH.  It is contended that during that period, the debtors of PCH transferred USD1,334,369.35 into the bank account of a company not under the control of PCH.

8                          PCH also alleged that from December 2007, Mr Dunn withheld or failed to deliver up fixed assets of the PCH Azerbaijan office to the value of USD323,000 and 2,676 tonnes of scaffolding to the value of USD3.6 million (para 18 of the statement of claim).

9                          Further, PCH also contended that Mr Dunn authorised the transfer of USD432,000 from the PCH Kazakhstan Branch Office bank account to Mr Elnur Tagiyev, the finance officer of PCH at the Kazakhstan Branch Office without PCH’s knowledge or consent (para 19 of the statement of claim).

10                        PCH also alleged that Mr Dunn had failed to return PCH’s books and records including the accounting records, contractual documents and asset inventories.  In this regard, it was said that on 4 July 2008, Mr Dunn by his solicitors had returned eight items of PCH’s property but Mr Dunn has failed to return the remainder of PCH’s books and records (para 20 of the statement of claim).

11                        PCH claimed that by reason of the acts and omissions referred to above, Mr Dunn has breached one or more of his duties as an officer under ss 180, 181, 182 and 183 of the Corporations Act 2001 (Cth), the terms of his employment contract and/or his fiduciary duties.  It alleged that, consequent upon the alleged breaches of duty, PCH has suffered loss and damage.  PCH went on to claim damages for breach of the contract of employment, equitable compensation, alternatively an account of profit, a compensation order under s 1317H(1) and s 1317H(2) of the Corporations Act, and delivery up of all accounts, books and records of PCH in the possession, custody or control of Mr Dunn.

MR DUNN’S MOTION TO SET ASIDE THE ORDERS FOR SERVICE ON MR DUNN

12                        By a notice of motion dated 30 September 2009, Mr Dunn applied to set aside the orders for service of the application and the statement of claim on Mr Dunn out of the jurisdiction that I made on 20 May 2009 and 30 July 2009.

13                        In support of his application, Mr Dunn has relied upon a number of affidavits.  These were all affidavits which were not before the Court during the ex parte hearing.  However, it is to be observed that the affidavits relied upon by Mr Dunn, did not include an affidavit which he had sworn.  PCH has also relied upon further affidavit evidence which was not before the Court during the ex parte hearing.  Among the affidavit evidence upon which PCH relied, were two affidavits sworn by Mr Rackham on 30 April 2009 and 19 November 2009 respectively.  As mentioned, the April affidavit was before the Court on the ex parte hearing.

14                        On 18 June 2010, Mr Dunn applied to reopen his case to lead further evidence.  By consent orders made on 20 July 2010, the Court made orders giving Mr Dunn leave to reopen to adduce further evidence.  Mr Dunn, pursuant to that leave, read the affidavit of Mr Andre Bevz made on 28 June 2010.  In response, PCH relied upon the affidavit of Mr Rackham dated 5 August 2010.  The further evidence revealed that PCH had, on 4 September 2009, commenced a legal proceeding in Kazakhstan against Mr Elnur Tagiyev for the payment of the monies referred to in para 19 of the statement of claim in this proceeding; and that on 10 March 2010, PCH had joined Mr Dunn as a defendant to that proceeding.  PCH sought relief in that proceeding requiring Mr Dunn to produce the books and records of the Kazakhstan branch office and compensation in respect of withholding of scaffolding from PCH.  These claims reflected the claims made in para 18 and para 20 of the statement of claim in this proceeding.  The claims made in the Kazakhstan proceeding, were the subject of a judgment of the Aklau Court No 2 on 30 March 2010.  PCH accepted in its submission that there was an overlap between the claims made in paras 18, 19 and 20 of the statement of claim in this proceeding and the claims made against Mr Dunn in the Kazakhstan proceeding.  Accordingly, PCH said that it did not intend to pursue those claims in this proceeding, and sought the orders for service out of the jurisdiction of the application and the statement of claim be confirmed, save in respect of paras 18, 19 and 20 of the statement of claim.  The remainder of PCH’s claims in this proceeding comprise allegations of breach of duty by Mr Dunn in relation to his conduct in respect of the Azerbaijan branch office.

15                        Mr Dunn contended that the orders for service out of the jurisdiction should be set aside on two main grounds.  First, Mr Dunn said that there was a material non-disclosure by PCH during the ex parte hearing.  Secondly, Mr Dunn said that on a re-exercise of the discretion, the Court should decline to exercise its discretion in favour of service out of the jurisdiction.

16                        An important element of Mr Dunn’s contentions is founded on the fact that before commencing this proceeding, PCH had also brought proceedings against Mr Dunn in Azerbaijan.  It is necessary, therefore, to describe in outline the proceedings which PCH had undertaken against Mr Dunn in Azerbaijan.

THE PROCEEDINGS IN AZERBAIJAN

17                        PCH prosecuted a proceeding against Mr Dunn and others in the civil courts in Azerbaijan.  PCH also complained to the criminal prosecution authorities in Azerbaijan about Mr Dunn’s conduct.  I set out below a brief account of these matters.

18                        On 7 August 2008, PCH commenced a proceeding in the Baku Local Economic Court No 1 against PCH AZ LLC, Mr Dunn and Mr Eldar Siyavush Azakov, the former financial manager of the branch of PCH in Azerbaijan and the founder of the company, PCH AZ LLC.

19                        In a statement which set out PCH’s claim, PCH alleged, in summary, that following the termination of Mr Dunn’s employment, Mr Dunn had failed to co-operate with Mr Rackham, an officer of PCH, who had travelled to Azerbaijan to facilitate the transfer of the operations to Mr Dunn’s replacement branch manager, Mr Vugar Eyyubov, that Mr Dunn had excluded Mr Rackham from the premises which Mr Rackham believed were the premises from which PCH operated, and that he had refused to deliver the property and documents belonging to PCH.

20                        The statement alleged that Mr Dunn was obliged to assist in the carrying out of the inventory and the delivery and acceptance of the relevant assets and documents to the replacement employees.

21                        The statement went on to allege that pursuant to s 157 of the Civil Code of the Republic of Azerbaijan, an owner may demand its property from “illegal possession of the other person” and may claim from that person “the return or compensation of all proceeds which were generated or should have been generated by such person” whilst that person had possession of the property if that person was a “bad faith possessor”.

22                        The statement went on to state:

Moreover, pursuant to Section 49.3 of the Civil Code (CC) of the Republic of Azerbaijan, a person acting on behalf of a legal entity must act in good faith and reasonably for the benefit of the legal entity he or she represents.  Unless an agreement provides otherwise, upon demand of the founders (participants) of the legal entity, he must reimburse the damage caused to the legal entity.  At the same time, pursuant to Section 199 of the Labor Code (LC) of the Republic of Azerbaijan, an employee bears full liability if he or she willingly damages or destroys by illegal actions the employer’s property or other material values or otherwise willingly harms the employer.

In this connection, it should be noted that the Branch’s former head Craig Dunn and former financial manager Eldar Azakov, in breach of the CC and LC sections specified above, did not act in good faith for the benefit of the Company, damaged and/or destroyed the Company’s property and/or otherwise willingly harmed the Company by failing to deliver to Vugar Eyyubov, the new head of the Branch, the property and documents belonging to the Company (Branch), keeping actual possession of such property, and illegally using such property for their own benefit and, with high probability, for “PCH-AZ” LLC’s activities.

Specifically, Craig Dunn, Eldar Azakov and “PCH-AZ” LLC paralyzed the Branch’s business activity in the Republic of Azerbaijan by failing to deliver the Branch’s assets to Mr Vugar Eyyubov.  Thus, the new management of the Branch has no information about the Branch’s current state in the Republic of Azerbaijan, including a state of general business and relations with customers, financial turnover, number of employees and other issues which are significant for the Branch, due to the fact that the relevant property and documents of the Branch were not delivered and accepted.  Therefore, the new management of the Branch has not yet been able to properly build its business activity and, as a result, the Branch sustained financial damages.

23                        The statement also said that PCH AZ LLC entered, on its own behalf, into new agreements with the Azerbaijan branch’s former customers and started providing them with services formerly provided to them by the branch.  As a result, the branch lost its customers and was unable to realise the profit which it could otherwise realise.  The statement continued:

Having regard to the fact that the more precise evaluation of the damage caused to the Branch by Craig Dunn, Eldar Azakov and “PCH-AZ” LLC may become possible only as a result of the delivery and acceptance of the Branch’s assets and documents, the plaintiff intends, in accordance with Article 53 of the Civil Procedure Code, to exercise its right to change the basis or subject of the complaint and extend or reduce the scope of the complaint before the court passes a resolution.

24                        The relief claimed included a claim that Mr Dunn deliver up PCH’s property and documents, and that Mr Dunn and the other respondents compensate PCH.  The statement setting out the claim records that Mr Elnur Mammadov is a legal representative of PCH.

25                        By a letter dated 21 August 2008, PCH also made a complaint about the conduct of Mr Dunn and Mr Azakov to the Azerbaijan prosecution authority.  It alleged in that complaint that they had embezzled PCH’s property.

26                        In October 2008, the civil proceeding was, on Mr Dunn’s application, transferred to the Sabail District Court.

27                        On 8 November 2008, a letter was sent by Mr Bagirov, a police colonel-lieutenant in the Baku City Police Headquarters, to Mr Eyyubov of PCH stating that PCH’s complaint had no criminal conduct content and should be resolved in the relevant civil courts.  This decision was subsequently successfully challenged by PCH.

28                        On 25 November 2008, PCH’s claim was amended by PCH filing with the Sabail District Court a document, headed “addendum to the claim” which claimed compensation from Mr Dunn and Mr Azakov.  A translation of the amended claim was annexed to the affidavit of Mr Rackham dated 30 April 2009.

29                        The addendum alleges, inter alia, that Mr Dunn managed PCH’s branch office in Azerbaijan even after his removal from that position until June 2008, and withdrew large sums of money from PCH’s bank account with the Bank of Baku but did not pay these sums into the “company’s cash desk and used [the sums] for personal purposes abusing confidence”.  The sums of money referred to in the addendum are substantially the same sums of money identified in the particulars of para 16 of the statement of claim (see [6] above).

30                        PCH also alleged in the addendum that Mr Dunn did not deliver any of the fixed assets of PCH comprising USD7,278,119.06.  It is alleged that the assets “were plundered by the respondents who appropriated the rights to the assets”.

31                        The addendum then stated:

Section 49.3 of the Civil Code of the Republic of Azerbaijan provides that a person acting on behalf of a legal entity must act in good faith and reasonably for the benefit of the legal entity he or she represents.  Unless an agreement provides otherwise, upon demand of the founders (participants) of the legal entity, he must reimburse the damage caused to the legal entity.

32                        The addendum asked the court on the “basis of the above”, to “pass a resolution on withholding from respondents” the amount of 1,213,500 manats and USD7.3 million.

33                        On 12 December 2008, a statement made by Mr Eyyubov alleging that Mr Dunn had transferred monetary assets of PCH abusing the trust of the company management, was given to the head of the Directorate for Combating Organised Crime.

34                        On 29 December 2008, the Directorate for Combating Organised Crime, forwarded to the Sabail District Court documents which it had generated as part of its investigation of PCH’s criminal complaint against Mr Dunn.

35                        On 26 January 2009, however, PCH again amended its claim in the Sabail District Court, by filing a further “addendum”.  This “addendum” recited and expanded upon the allegations of unlawful use of monies and failure to deliver PCH’s assets made in the first addendum.  However, the second addendum withdrew PCH’s claim for compensation against Mr Dunn and the other respondents and confined the relief sought to the delivery of documents evidencing and reporting upon the making of the payments from PCH’s bank accounts and reporting upon the whereabouts of PCH’s property.  The addendum again cited, among other provisions, Art 49.3 of the Civil Code.

36                        PCH said in this addendum that the claims made in the initial claim and first addendum were of a “criminal nature” and an application had been made to the criminal prosecution authorities for investigation of the alleged criminal activities.

37                        On 26 January 2009, PCH also made an application to the Sabail District Court to transfer the documents referred to in [34] above, back to the local prosecutorial authority.  On 9 February 2009, that application was successful.

38                        PCH’s claim, as amended, was heard by the Sabail District Court.  In summary, the claim made by PCH which fell for decision by the Sabail District Court, sought documents relating to the following matters:

(a)        the expenditure of funds withdrawn by Mr Dunn from the PCH account on 2 April 2008, 14 April 2008, 16 May 2008, 19 May 2008, 3 June 2008, 11 January 2008, 17 January 2008, 13 March 2008, 22 February 2008 and 18 March 2008;

(b)       funds transferred from PCH’s account on 1 April 2008, 8 April 2008, 22 May 2008 and 3 June 2008;

(c)        the payment for eight vehicles said to have been sold by Mr Dunn to PFP AZ LLC at undervalue;

(d)       the whereabouts of a Kamaz vehicle, a Lexus vehicle and a number of hoisting trucks;

(e)        the whereabouts of office equipment and machinery relating to the business;

(f)        the place of storage or sale of scaffolding assets worth USD5,455,080.

39                        Judge Elnur Hasanov delivered judgment on PCH’s claim on 16 February 2009.

40                        As regards the withdrawal of the monies referred to in [38(b)] above, the Sabail District Court found that as the payment orders in question, disclosed the purpose for which the amounts were transferred from PCH’s Bank of Baku account and the legal entities to which the cash assets were transferred, there was no justification for an additional report from Mr Dunn.  As regards the scaffolding referred to in [38(f)] above, the Sabail District Court found that the customs documents showed that the scaffolding had been imported and then exported in connection with PCH’s activities.

41                        The Sabail District Court found that Mr Dunn should provide documentation regarding the sale of PCH’s vehicles to PFP AZ LLC referred to in [38(c)] above; and also in relation to the whereabouts of some of the vehicles referred to at [38(d)] above.

42                        As to the claim for documentation in respect of the payments referred to in [38(a)] above and the claim in respect of the moveable property referred to in [38(e)] above, the District Court found PCH had not shown that Mr Dunn was in possession of such documents.  In this regard, the court also referred to the fact that PCH had taken possession of a large number of documents from the basement of the building which housed the former offices of PCH.

43                        It is apparent from the decision of the Sabail District Court that Mr Dunn controlled a company, Caspian Blasting and Painting Services (CBPS), which he said had contracted with PCH on a joint venture basis and that PCH owed his company USD2,756,211.64.  It is apparent that that claim was part of this litigation.  It was referred to as a counterclaim by the judge.  This counterclaim was not dealt with.

44                        It is also evident from the judgment, that Mr Dunn also contended that he was not employed by PCH.  The court also found that there was no proof submitted by PCH that Mr Dunn was in employment relations with PCH.

45                        On 20 April 2009, PCH appealed against the decision of the Sabail District Court.

46                        On 29 May 2009, the Baku Appellate Court dismissed the appeal and upheld the decision of the Sabail District Court

47                        On 22 August 2009, PCH appealed to the Supreme Court of Azerbaijan from the decision of the Baku Appellate Court.

48                        On 3 September 2009, Senior Lieutenant Parviz Jafarov made an order dismissing the criminal complaint against Mr Dunn for “lack of evidences”.

49                        On 13 October 2009, the Supreme Court of Azerbaijan dismissed PCH’s appeal from the decision of the Baku Appellate Court.

NON-DISCLOSURE

50                        Mr Dunn submitted that the Court’s orders for service out of the jurisdiction should be set aside on the grounds that there had been material non-disclosure by PCH at the ex parte hearing.  Mr Dunn referred specifically to the evidence of Mr Rackham at para 57 and para 62 of his affidavit of 30 April 2009, which, as I have mentioned, was then before the Court.

51                        At para 57 of his affidavit, Mr Rackham deposed that the January 2009 addendum to PCH’s claim before the Sabail District Court was:

necessary as an application had been made to the Azerbaijan criminal prosecution authorities for investigation of and commencement of a criminal complaint against [Mr Dunn]…for embezzlement of [PCH’s] property by acting in collusion through their use of [PCH’s] company seal and other documents.

52                        Further, at para 58, Mr Rackham deposed that the Sabail District Court determined that it lacked jurisdiction to deal with PCH’s claim in relation to Mr Dunn’s employment and the counterclaim brought by CBPS.

53                        At para 62 of his affidavit, Mr Rackham said that he believed that the Azerbaijan court had held that it did not have jurisdiction to address whether Mr Dunn had breached his employment contract, his statutory duties or fiduciary duties owed to PCH.  Mr Rackham also deposed that he believed that the proceedings in Azerbaijan addressed the complaints of PCH regarding the delivery up of books and records of PCH and the sale of PCH’s vehicles at undervalue.  Mr Rackham also said he believed that the Azerbaijani court had declined to deal with:

(i)         the diversion of assets by [Mr Dunn] from [PCH] to entities not associated with [PCH];

(ii)        the misappropriation of the assets and scaffoldings of the Kazakhstan branch.

54                        Mr Dunn contended that Mr Rackham had created a misleading impression by deposing that it was necessary for PCH to make the January 2009 addendum because of the pending criminal investigations.  Further, it was said that Mr Rackham had given misleading evidence as to the effect of the judgment of the Sabail District Court.

55                        Mr Dunn also complained that Mr Rackham had failed to disclose documents, or alternatively, bring the Court’s attention to documents, which were relevant to the question of whether PCH had a prima facie case for the relief which it sought.  Mr Dunn referred specifically to a letter of 8 April 2008 from Mr Dunn to Mr Rackham which dealt with the question of the export of the scaffolding, entries in the PCH bank accounts which, said Senior counsel for Mr Dunn, cast light on the allegations of misappropriation of funds, and evidence referred to in the judgment of the Sabail District Court which related to the removal of documents from the basement of the PCH office building in Azerbaijan.

56                        In light of the decision to which I have come, it is not necessary to consider the first ground of Mr Dunn’s contentions.

WHETHER THE ORDERS FOR SERVICE OUT OF THE JURISDICTION SHOULD BE SET ASIDE

57                        In light of Mr Dunn’s application, it is incumbent upon the Court to reconsider PCH’s application for leave to serve the originating application and statement of claim on Mr Dunn out of the jurisdiction.  On the evidence, Mr Dunn is a British national from Scotland, who resides predominantly in Azerbaijan.

58                        In the case of Voth v Manildra Flour Mills Proprietary Limited (1990) 171 CLR 538 (Voth), Mason CJ, Deane, Dawson and Gaudron JJ observed (at 564) that where an application is brought to set aside orders granting leave to serve a proceeding outside the jurisdiction, the onus remained on the plaintiff to satisfy the court that the case is one which falls within the relevant category and “that the proceedings would not be subsequently stayed as an abuse of process on forum non conveniens grounds or for some other reason”.  The majority explained at 564 that:

Otherwise, the ex parte order for service outside the jurisdiction, if onus of proof were to prove decisive, would confer and 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.

THE EVIDENCE AS TO AZERBAIJANI LAW

59                        Each of the parties relied upon evidence as to Azerbaijani law.  Mr Dunn relied upon the evidence of Mr Anar Janmammadov and PCH relied on the evidence of Mr Elnur Mammadov.

60                        In his affidavit of 29 October 2009, Mr Janmammadov deposed that he was a lawyer employed by MGB Law Offices Limited, a Baku based law firm.  Mr Janmammadov answered two questions which were posed to him in a letter from Mr Dunn’s instructing solicitors, Tottle Partners.  First, he deposed that Azerbaijani law did not require a plaintiff to amend a civil claim by reason of it having made a complaint or an application, to any Azerbaijani criminal prosecution authority.  Secondly, Mr Janmammadov said that a party was at liberty under the Civil Procedure Code to change the subject or basis of its claim or to increase or decrease the claim before the court decides the case.  No permission or approval of the judge was required for this procedural action, said Mr Janmammadov.  These questions arose in the context of Mr Dunn’s contention that there had been non-disclosure of material facts by PCH in its ex parte application.

61                        In an affidavit made on 9 November 2009, Mr Janmammadov deposed that the courts of the Republic of Azerbaijan have jurisdiction over civil and economic disputes when one of the parties to a dispute is a foreigner, namely, a foreign legal person, in a number of circumstances.  These circumstances include the circumstance that the foreign legal person has a management body, representative or branch office in Azerbaijan, or where the dispute concerns compensation for damage to property, “the acts” on which the claim is based took place in Azerbaijan, or the claim arises from a contract that was or must be fully or partially performed in Azerbaijan.

62                        Mr Janmammadov went on to say that Art 6(c) of the Labor Code excluded the Labor Code from applying to certain individuals.  One such class of individuals was foreigners who signed an employment agreement with a legal entity in a foreign country but performed their duties in Azerbaijan.  However, said Mr Janmammadov, this did not mean that other parts of Azerbaijani law, including the Civil Code did not apply to those individuals.

63                        Mr Elnur Mammadov deposed in his affidavit of 18 November 2009, that he was a lawyer practising at the OMNI Law Firm in Baku.  He said that he had provided legal services to PCH and had represented PCH in the civil proceedings in Azerbaijan.

64                        Mr Mammadov agreed with the evidence of Mr Janmammadov in his 29 October affidavit that there is no provision in Azerbaijani law requiring a party to amend its claim when it lodges a complaint or an application to an Azerbaijani criminal prosecution authority.  However, he said that it was not unusual, and he understood that it was a matter of practice for Azerbaijani criminal prosecution authorities to defer commencing a criminal investigation against a party with respect to matters the subject of civil proceedings, and not to initiate a criminal investigation in respect of matters which are subject to pending civil proceedings.  Mr Mammadov also agreed with Mr Janmammadov that an amendment to a civil claim before an Azerbaijani court adopted a final judgment on the case, did not require a judge’s approval.

65                        Mr Mammadov also referred to Art 49.3 of the Civil Code of Azerbaijan.  Mr Mammadov set out an English translation of Art 49.3 of the Civil Code.  This article read as follows:

A person acting on behalf of a legal entity shall act in good faith and reasonably for the legal entity.  Such a person shall be obliged to compensate damages caused to the legal entity at the request of its shareholders (participants), unless otherwise provided for by the contract.

66                        I note in passing, that Mr Mammadov stated that this article was subsequently expanded by amendment and came into force on 24 June 2008.  It was this amended version of Art 49.3 which had been translated by Mr Emil Rahimov which was exhibited to his affidavit.  Mr Mammadov said that the amended version of Art 49.3 of the Civil Code did not have retrospective effect.

67                        Mr Mammadov also deposed that Art 53.3 of the Civil Code provided that representative and branch offices did not qualify as legal entities.  Mr Mammadov attached an English translation of Art 53.3 which read:

53.3      Representative and branch offices are not legal entities and carry out their activities on the basis of regulations approved by the legal entity.

68                        Mr Mammadov also deposed that the Sabail District Court decision of 16 February 2009, did not comment on the applicability of Art 49.3 of the Civil Code to Mr Dunn’s position with PCH.

69                        Mr Janmammadov then swore a responsive affidavit on 25 November 2009.  Mr Janmammadov said that he considered that Art 49.3 of the Civil Code applied to relations between managers of branch offices (such as Mr Dunn) of a foreign legal entity (such as PCH), notwithstanding that its representative or branch offices, did not, in themselves, comprise a legal entity.  Mr Mammadov relied upon the second sentence of Art 53.3 of the Civil Code which translated provides:

Managers of representative and branch offices are appointed by a legal entity and act pursuant to its power of attorney.

70                        Mr Janmammadov also disputed Mr Mammadov’s evidence as to the practice of Azerbaijani criminal prosecution authorities, referred to in [64] above.  He said that he did not know of the practice referred to by Mr Mammadov.

71                        Mr Mammadov then affirmed a further affidavit on 2 December 2009.  Mr Mammadov responded to Mr Janmammadov’s evidence referred to at [69] above, by saying that the application of civil laws “to a relationship of an employment nature” would contravene Art 2.3 of the Civil Code.  That article provided that civil laws may only apply to a legal relationship to the extent that it is not otherwise provided for by the specific legislation governing that relationship.

72                        Article 6 of the Labor Code, said Mr Mammadov, precluded the application of Azerbaijani labor laws to the relationship between a foreign national and a foreign legal entity.  Mr Mammadov then went on to say:

For this reason, I believe the relevant jurisdiction should be where the employment agreement was made and the labor laws of that jurisdiction will apply to that employment agreement.

73                        Mr Mammadov also said he agreed that Art 49.3 of the Civil Code sets out fiduciary duties of persons “acting on behalf of a legal entity”.  However, he said that the provisions of the Civil Code could not be applied to breaches of an employment contract, whether it is governed by Azerbaijani or foreign law.

74                        Because of the lateness of the filing of Mr Mammadov’s affidavit of 2 December 2009, I gave Mr Dunn leave to file a responsive affidavit.  Pursuant to leave given at the hearing, Mr Dunn filed a further affidavit from Mr Janmammadov sworn on 11 December 2009.  Mr Janmammadov disagreed with Mr Mammadov’s conclusion that “the relevant jurisdiction should be where the employment agreement was made”.  Mr Janmammadov said:

A distinction must be drawn between jurisdiction on one hand and the substantive law applying to a dispute on the other.

75                        He referred to his previous evidence on this issue.

76                        As to Mr Mammadov’s evidence that the Civil Code could not be applied to breaches of an employment contract, Mr Janmammadov said that Art 2.3 of the Civil Code provided that the Civil Code applied to a relationship of an employment character if the Labor Code did not specify a rule that regulates a particular relationship in a different manner to the rule prescribed in the Civil Code.

DOES THE CAUSE OF ACTION FALL WITHIN O 8 R 2 OF THE FEDERAL COURT RULES

77                        The first question is whether one of the causes of action pleaded by PCH in its statement of claim falls within the ambit of O 8 r 2 of the Federal Court Rules (the Rules).  Order 8 r 2 of the Rules describes the causes of action in respect of which proceedings brought in this Court may be served outside of Australia.  These causes of action are characterised by having some connection with Australia.  It is not necessary that all of the causes of action relied upon in a proceeding fall within the ambit of the causes of action described in O 8 r 2 of the Rules.  It is sufficient if one of the causes of action falls within the ambit of the rule.

78                        Item 12 of O 8 r 2 of the Rules, permits service of a proceeding out of the jurisdiction if the proceeding is “based on a breach of a provision of an Act (wherever occurring) seeking relief in relation to damage suffered wholly or partly in Australia”.

79                        Mr Dunn acknowledged that PCH had alleged a breach of an Act, namely, the Corporations Act, but contended that the damage alleged by PCH, was damage suffered in Azerbaijan and Kazakhstan, and was not suffered in Australia.  Accordingly, said Mr Dunn, PCH could not rely upon O 8 r 2 Item 12 of the Rules.

80                        In my view, in considering the application of Item 12 of O 8 r 2 of the Rules, a distinction must be drawn between the location of the acts or omissions comprising the injury and the question of damage.

81                        In the case of Heilbrunn v Lightwood PLC [2007] FCA 433 at [10], Allsop J (as his Honour then was) observed:

It is clear from a number of cases in New South Wales decided in the 1980s on a cognate rule that damage in the rule does not mean the injury which completed the tort, but rather it means the disadvantage or detriment suffered by the plaintiff as a result of the tortious act or omission of the defendant.  In this respect the word “damage” in this context has a wider meaning than injury.

82                        In that case, Allsop J held that albeit that a motor vehicle was damaged in the United Kingdom whilst being loaded into a container, the owner of the motor vehicle, who was resident in Australia, suffered damage in Australia by reason of the injury which occurred in the United Kingdom.

83                        In my view, these observations have application to the circumstances of this case.

84                        In this case, PCH is incorporated in Australia and carries on business through branches in Azerbaijan and Kazakhstan.  Albeit that the alleged “injury” may have occurred abroad, for example, through the misappropriation of items of scaffolding, because the scaffolding is owned by an Australian company, the assets of the Australian company will, to that extent, be diminished and the attendant detriment will have occurred in Australia.

WHETHER PCH HAS DEMONSTRATED THAT THERE IS A PRIMA FACIE CASE

85                        Order 8 r 3(2) of the Rules stipulates the matters of which a Court must be satisfied before giving leave to serve a proceeding on a person in a foreign country.  One of these matters is that the person seeking leave has a prima facie case for the relief claimed in the proceeding.

86                        PCH relied on the evidence of Mr Rackham in support of its prima facie case.  As mentioned, Mr Rackham swore two affidavits dated 30 April 2009 and 19 November 2009 respectively.  Mr Rackham’s affidavits exhibited copies of a large number of source documents and the results of investigations which Mr Rackham had required his staff to undertake in relation to the acts and omissions of Mr Dunn concerning the Azerbaijan and Kazakhstan branch offices.  PCH referred specifically to evidence in support of a prima facie case of the allegations pleaded at para 16 and para 18 of the statement of claim.

87                        Among the source documents exhibited to Mr Rackham’s affidavit were the copies of each of the payment orders signed by Mr Dunn and addressed to the Bank of Baku for the payments of cash which are referred to in para 16 of the statement of claim.  That paragraph alleges that during the period January 2008 to June 2008, Mr Dunn, without proper cause and without PCH’s consent, withdrew cash from the PCH bank account.

88                        Mr Dunn contended that the evidence of Mr Rackham could not establish a prima facie case, because there was no statement from Mr Rackham that the withdrawals were not made with the consent of PCH.

89                        In the case of Western Australia v Vetter Trittler Pty Ltd (in liq) (1991) 30 FCR 102 at 109-110 (Vetter Trittler), French J (as his Honour then was) observed that a prima facie case is made out if, on the material before the Court, inferences are open which if translated into findings of fact, would support the relief claimed.

90                        In my view, the evidence adduced by PCH satisfied that criterion referred to by French J in Vetter Trittler.  Although there is no direct statement in Mr Rackham’s evidence that PCH had not authorised the withdrawal of the cash from the PCH bank account, there was evidence before the Court that was capable of giving rise to that inference.  This included the fact that Mr Dunn forwarded a letter of resignation from his employment with PCH in November 2008, that he refused to cooperate with Mr Rackham in February 2009 when Mr Rackham went to Azerbaijan to organise the handover of responsibility to Mr Dunn’s replacement, that Mr Dunn was removed as branch manager of the Azerbaijan office in March 2009, and that a considerable number of the withdrawals, referred to in para 16 of the statement of claim, post-date one or more of these events.

91                        Mr Dunn also contended that in assessing whether PCH had demonstrated a prima facie case, it was necessary to take into account the seriousness of the allegations that were made against Mr Dunn in the statement of claim.  Mr Dunn further contended that in assessing whether there was a prima facie case for the purposes of the application of O 8 r 3(2) of the Rules, it was relevant to have regard to the fact that, at trial, the Briginshaw considerations would apply.

92                        In my view, it is not necessary when considering whether the standard of a prima facie case has been reached for the purposes of service out of the jurisdiction, to have regard to the fact that at the trial, the seriousness of the allegations may call for the application of the Briginshaw considerations.  Senior counsel for Mr Dunn was not able to refer me to any authorities which supported that contention.

93                        Further, it is to be borne in mind that at this stage of the proceeding a party making an allegation would not have had the benefit of discovery or other procedural aids which would facilitate the proof at trial of the allegations made.

ABUSE OF PROCESS

94                        The next issue was whether the Court should in the exercise of its discretion refuse to authorise the service out of the jurisdiction of the proceeding on the grounds of abuse of process by PCH.

95                        Mr Dunn contended that the findings in the Azerbaijani proceedings meant that the matters the subject of the proceeding in this Court, were res judicata or gave rise to issue estoppel.  In support of this contention, Mr Dunn contended that the Azerbaijani proceedings dealt with “precisely the same matters as are sought to be agitated in this Court”.

96                        Mr Dunn also contended that PCH was estopped from continuing its proceeding in this Court by reason of the principles in the case of Port of Melbourne Authority v Anshun Proprietary Limited (1981) 147 CLR 589 (Anshun).

97                        Mr Dunn contended that by reason of his appointment as an authorised representative of a branch office in Azerbaijan, Art 49.3 of the Civil Code imposed duties on Mr Dunn in respect to PCH which were similar in effect to the duties imposed upon him as an officer of PCH, and permitted compensation to be claimed in respect of a breach of the duties.

98                        Mr Dunn then contended that PCH had initially sought to invoke Art 49.3 of the Civil Code in support of a claim against Mr Dunn for compensation arising in respect of the same acts and omissions complained of in this proceeding.  However, said Mr Dunn, PCH had deliberately chosen not to pursue a claim for compensation against Mr Dunn in the Azerbaijan proceedings by amending its claim in January 2009, to withdraw the claim for compensation, thereby confining the claim to an account in respect of PCH’s property by way of the disclosure of documents.  This was a “classic” case of an Anshun estoppel, contended Mr Dunn.

99                        In the case of Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853 (Carl Zeiss), the House of Lords held that it was open to a party to stay a local proceeding on the grounds that a foreign proceeding gave rise to an estoppel which barred the local proceeding.

100                      The Court of Appeal in England in the case of Charm Maritime Inc v Kyriakou [1987] 1 Lloyd’s Rep 433 (Charm Maritime), confirmed that the principle in Carl Zeiss applied to an estoppel founded upon, what is referred to in Australia, as Anshun estoppel.  At 441, Slade LJ observed:

It is plain from the Carl Zeiss decision that a foreign judgment is capable of giving rise to a cause of action estoppel, and indeed Lord Reid ([1967] 1 AC at p 916B) and Lord Wilberforce (ibid at p 966E) referred to Henderson v Henderson itself as an example of this type of estoppel.

101                      At 450, Dillon LJ observed:

The Carl Zeiss case was a case of issue estoppel, which the present is not, but the reasoning must equally apply to a case of cause of action estoppel per rem judicatam.

102                      The Charm Maritime case involved a dispute as to the ownership of shares in a Greek company, which were held by Mr Kyriakou for the benefit of Mr Mathias pursuant to a declaration of trust.  Mr Mathias then entered into an agreement to sell the shares to the plaintiff, Charm Maritime Inc (Charm).  Greek law did not embody any law of trusts.  Charm commenced an action in rem against Mr Kyriakou in the Greek court for the transfer of the shares relying on Greek law.  Charm’s action was dismissed in the Greek court.  Sometime later, Charm commenced a proceeding in the English court against Mr Kyriakou claiming a declaration that Mr Kyriakou held the shares on trust and an order for the delivery of the shares.  Charm contended that the declaration of trust was governed by English law.  In the Greek court, Charm had not sought to contend that the declaration of trust in respect of the shares which were in dispute in that case, was subject to English law.  Instead, as mentioned, Charm had limited its claim to a proprietary claim to the shares based on Greek law.

103                      One of the contentions advanced by Mr Kyriakou in the English court, was that it was open to Charm to have advanced the case it now made in the English proceeding before the Greek court, and Charm was estopped from now seeking to do so in the English court.

104                      Mr Kyriakou applied to stay the proceeding in the English court on this basis.  Mr Kyriakou also contended that the Greek court and not the English court, was the appropriate forum for the hearing of the proceeding.

105                      Dillon LJ in Charm Maritime at 449, approved the following observations of Lord Wilberforce in Carl Zeiss at 969:

The textbooks are in agreement in stating that for a foreign judgment to be set up as a bar in this country it must be res judicata in the country in which it is given…generally, it would see unacceptable to give to a foreign judgment a more conclusive force in this country than it has where it was given.

106                      At 450, Dillon LJ observed:

If Carl Zeiss is to be applied to a case of this extended form of cause of action estoppel per rem judicatum as well as to an ordinary case of res judicata or issue estoppel – and at present I cannot see why it should not be – then the effect of the final decision on the merits in the first proceedings, as raising an estoppel to preclude the raising of the fresh issues or claims in the second proceedings, has also to be decided according to the law of the foreign jurisdiction if the first proceedings took place in a foreign jurisdiction.

107                      The question, therefore, was whether a Greek court would treat the first proceeding as giving rise to an estoppel in respect of the second proceeding.

108                      The parties in Charm Maritime led evidence as to whether a Greek court would preclude Charm from prosecuting the second proceeding on the grounds of estoppel.  However, there was a conflict in the evidence of foreign law which the Court of Appeal could not resolve.  The Court of Appeal was, therefore, not satisfied that the first proceeding would give rise to an estoppel in respect of the second proceeding in Greek law.  The Court of Appeal upheld the trial judge’s decision, therefore, not to stay the English proceeding on the grounds of abuse of process.

109                      However, the Court of Appeal went on to find that the question of whether Charm was estopped from prosecuting the second proceeding would be an issue in whichever forum the second proceeding was brought.  The Court of Appeal went on to find that the fact that the estoppel question was to be determined by whether a Greek court would treat the first proceeding as giving rise to an estoppel, was a strong factor in favour of the Greek court being the appropriate forum.

110                      In this case, the parties have not led evidence of Azerbaijani law on the question of whether PCH would be estopped from prosecuting the second proceeding by reason of the circumstances of the first proceeding.

111                      In my view, however, it would be inappropriate to determine this issue by applying the presumption that the foreign law would be the same as Australian law.  There are two reasons for this.  First, no argument was addressed to me on the question of whether it was appropriate to apply the presumption.  Secondly, in my view, the following observations of Lord Wilberforce in Carl Zeiss at 970, are apt in these circumstances:

Unfortunately there is no clear evidence whether the judgment of the Federal High Court is res judicata (in the sense I have mentioned) in Germany or not.  The respondents rely on the accepted presumption that the foreign law is the same as English law, but this presumption, never more than a fragile support, is less than ever reliable here when the question is what is the effect of a particular judgment which has no exact parallel in English law.

112                      There would be an element of unreality if I was to apply the presumption in the circumstances of this case.  This is particularly so where the translation of the judgments are not easy to understand, and the system of law is so different to that applied in Australia.  Accordingly, I do not accept that the orders should be set aside on the grounds that the continuation of the proceeding in this Court would be an abuse of process.

113                      However, like the Court of Appeal in Charm Maritime, it is my view, that the fact that the estoppel defence raises the question of whether under Azerbaijani law the proceeding in the Sabail District Court (and the subsequent appeals) would constitute an estoppel in respect of this proceeding, is an important element in considering whether Australia is a clearly inappropriate forum.

CLEARLY INAPPROPRIATE FORUM

114                      Mr Dunn also contended that the discretion to permit service out of the jurisdiction should not be exercised because Australia was a clearly inappropriate forum.

115                      Mr Dunn contended the connecting factors pointed overwhelmingly to the conclusion that Australia was a clearly inappropriate forum and that the continuance of this proceeding in Australia would be oppressive and vexatious in the Voth sense.  These factors included the fact that the proceeding relates entirely to conduct alleged to have occurred in Azerbaijan, that the majority of witnesses on both sides are resident in Azerbaijan and that Mr Dunn would not have the power to compel the attendance of the witnesses.  Further, the witnesses who Mr Dunn would seek to call, were Azeri speakers.  This would give rise to the need to use interpreters.  Similar issues would arise in relation to the translation of the documents, in what was likely to be a case in which documents would play a significant part in the trial.

116                      PCH accepted that this proceeding had close connections with Azerbaijan but said the fact that the relief claimed was available in Australia, but was not available in Azerbaijan, was a very significant factor in favour of demonstrating that Australia was not a clearly inappropriate forum.

117                      In the case of Regie Nationale des Usines Renault SA v Zhang (2002) 210 CLR 491 (Zhang), Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ at 503-504, at [25] said:

Thus, it is appropriate to note what was said by Dawson, Gaudron, McHugh and Gummow JJ in Henry v Henry.  Their Honours said:

…

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’ ”  (Footnotes omitted.)

118                      Further, in Voth at 566, the majority observed that:

…in deciding whether it has been established that the chosen forum is clearly inappropriate, the extent to which the law of the forum is applicable in resolving the rights and liabilities of the parties is a material consideration.

119                      The majority in Voth then went on to say at 566:

In this respect Gaudron J stated in Oceanic Sun, as a qualification to her endorsement of the view of Deane J, that the selected forum should not be seen as an inappropriate forum if it is fairly arguable that the substantive law of the forum is applicable in the determination of the rights and liabilities of the parties.  We agree with Gaudron J that the substantive law of the forum is a very significant factor in the exercise of the court’s discretion, but the court should not focus upon that factor to the exclusion of all others.  (Footnote omitted.)

120                      In the case of McGregor v Potts (2005) 68 NSWLR 109 (McGregor), Brereton J after having referred to observations made by the High Court in Voth (at 588), observed at 120‑121, at [47]-[48]:

This indicates that the fundamental issue is the degree of connection which the proceedings have with the local forum:  while a conclusion that they have a greater connection with a foreign forum will not justify a conclusion that their continuation in the local forum is vexatious or oppressive, one that they have so clearly a stronger connection with the foreign forum than the local court can be said to be “clearly inappropriate” will do so.

In some situations, the continuation of an action in a selected (local) forum, though not amounting to vexation or oppression or an abuse of process in the strict sense, will amount to an injustice to the defendant when the bringing of the action in some other available and competent forum would not occasion an injustice to the plaintiff (Voth (at 556)).  The local forum would be a “clearly inappropriate” one where “the subject matter of the action and the parties had little connection with that forum and the defendant may be put to great expense and inconvenience in contesting the action in that forum” (Voth (at 577)).  There is no hint in their Honours’ reasoning that, in addition, proof of actual vexation or oppression was required; in effect; continuation of proceedings is presumed to be vexatious or oppressive where the forum is shown to be “clearly inappropriate”.

121                      I will consider first the connecting factors to Australia and Azerbaijan; and then the legitimate personal or juridical advantage to PCH in proceeding in Australia.

Connecting factors

122                      The solicitors acting for each of the parties gave evidence as to some of the connecting factors to Australia and Azerbaijan.

123                      Ms Hill, the solicitor acting on behalf of PCH, said that she believed that PCH would call as witnesses at the trial, the current manager of PCH’s Azerbaijan branch office, who is located in Azerbaijan; Mr Rackham, who resides in the United Kingdom; and a number of officers who conducted the investigations referred to in the affidavits of Mr Rackham.  These officers are located in Perth, Azerbaijan and the United Kingdom.  The number of officers from whom evidence will be led was likely to be between five to seven persons.

124                      Ms Hill also deposed that she had caused inquiries to be made about the practical difficulties which might attend a hearing of the proceeding in Australia.  Ms Hill deposed that the inquiries showed that there were only two persons listed on the directory of the National Accreditation Authority for Translators and Interpreters (NAATI) in Australia as persons who could translate and interpret from Azerbaijani to English and English to Azerbaijani.  Neither of these persons is accredited by NAATI.  They are only recognised interpreters - a classification lower than accredited interpreters.  One of these interpreters has been engaged in this proceeding to provide translation services to one of the parties.

125                      Ms Hill also deposed that her law firm had offices located in a number of countries in the Middle East and that each of these offices had video and audio facilities that are “likely to fulfil the Court’s requirements in terms of equipment used to establish videolinks or other forms of telecommunication”.

126                      In addition, Ms Hill deposed that she had caused inquiries to be made as to the time differences between Western Australia and each of Saudi Arabia and the United Arab Emirates.  The inquiries revealed that Western Australia is five hours ahead of Saudi Arabia and four hours ahead of the United Arab Emirates.  Ms Hill’s research also revealed that there were daily flights between Baku and Dubai.

127                      Mr Panotidis, a solicitor acting for Mr Dunn, deposed that Mr Dunn anticipated that he would seek to call at least seven witnesses from Azerbaijan including Mr Azakov, employees, contractors and suppliers of PCH and representatives of the landlord of the former PCH office premises in Baku.  Mr Dunn said that a number of these witnesses did not speak English and that he did not have the ability to compel the attendance of any of these witnesses.  Mr Panotidis also deposed that he anticipated that there would be a need to call evidence on Azerbaijani law in relation to the personal responsibility of a foreign company’s local representative in Azerbaijan including the responsibility for the incurring of debts on the company’s behalf.

128                      Senior counsel for PCH criticised the evidence of Mr Panotidis saying that his evidence as to the witnesses to be called was at too great a level of generality.  Whilst it is true that there is some lack of specificity in the evidence, this is understandable at this early stage of the proceeding.  Further, it is clear that the only real issue in that regard is the precise number of witnesses that Mr Dunn would need to call.  There is no dispute as to the crucial fact that a number of persons resident in Azerbaijan would be witnesses at the trial, and a number of them would not be English speakers.  Further, each of the issues identified by Mr Panaotidis as being issues in respect of which evidence would be required, are issues raised in PCH’s statement of claim.  Accordingly, I accept the evidence of Mr Panotidis that Mr Dunn would expect to call in support of his defence, a substantial number of witnesses who would be Azeri speaking residents of Azerbaijan.

129                      In my view, for the following reasons, a consideration of the connecting factors, referred to below, points strongly to Australia as being a “clearly inappropriate forum” so that the objective effect of the continuation of the proceeding in Australia would be that it would be vexatious and oppressive in the Voth sense.

130                      First, all of the material events pleaded as giving rise to the breaches of duty relied upon by PCH, occurred in Azerbaijan.  The connection in this respect with Australia is that the damage will have been suffered in Australia by reason only of PCH being an Australian company operating through a branch office in Azerbaijan.  There is also, of course, the question of relief being available in Australia, which I will consider separately.

131                      Secondly, and related to the first factor, is the fact that most of the witnesses who would give evidence in the proceeding are resident in Azerbaijan and most are likely to be Azeri speakers.  This means that there would be a very considerable expense to be incurred by each of the parties in transporting the witnesses from Azerbaijan to Australia to give evidence in Australia.  In addition, there will be a need for there to be an interpreter to be used for the taking of the evidence of the Azeri speaking witnesses.  The evidence also shows that there are only two potential interpreters in Australia, and that they are not accredited by NAATI.  Further, I accept the submission of Mr Dunn that he would face very considerable obstacles in seeking to procure the attendance of any reluctant Azerbaijan witnesses, at a trial in Australia.

132                      Further, as is evident from the evidence which has been adduced in this application, many of the important documents in the proceeding, including the judgments in the case, are in the Azeri language, and it has been necessary for these documents to be translated into English.  Despite the best efforts of those who have translated the documents, many of the documents, particularly the legal documents, have not been easy to follow.  This position would be considerably exacerbated in a trial in Australia when there would be even more translated documents which would find their way in to the evidence.

133                      Ms Hill did not seek to identify the number of likely witnesses who are resident in Australia.  However the inference to be drawn from her evidence is that it is unlikely to exceed two or three persons.  The other likely witnesses, including Mr Rackham, and to some extent, Mr Dunn, are resident in the United Kingdom.

134                      In my view, the difficulties for the conduct of a trial in Australia attendant on the fact that the majority of the likely witnesses are Azerbaijan residents and Azeri speakers and that a substantial amount of the documentary evidence will need to be translated, would not arise if the proceeding was to be conducted in Azerbaijan.  By contrast, the need for translation and interpreters in Azerbaijan will be considerably less because of the relatively fewer English speaking witnesses, and English documents.  Of particular importance in this respect will be the fact that the judgments of the Azerbaijani courts will be able to be construed by Azerbaijani judges.

135                      The proposal put forward by PCH that the witnesses who were resident in Azerbaijan could travel to Saudi Arabia or the United Arab Emirates to give evidence by videolink does not, in my view, sufficiently meet the difficulties referred to above.  The proposal may have the effect of reducing the travel expenses of the Azerbaijan witnesses who would otherwise have to travel to Australia to give evidence.  However, it does not meet the difficulties associated with the use of interpreters and translated documents.  In fact, these difficulties could be exacerbated by witnesses giving evidence by videolink from these countries.  Nor does it meet Mr Dunn’s point relating to the difficulties of procuring the attendance of Azerbaijan witnesses at a trial or hearing outside of Azerbaijan.  In any event, the proposal still involves the parties incurring additional travel expenses in respect of Azerbaijan witnesses which would not need to be incurred if the proceeding was heard in Azerbaijan.

136                      There would, of course, be some travel expenses incurred by witnesses from Western Australia having to travel to Azerbaijan if the proceeding was to be conducted in Azerbaijan, but there are likely to be substantially fewer witnesses from Australia.  There will also be expenses incurred in having witnesses travel from the United Kingdom, but those expenses will be incurred whether the trial was to be held in Australia or in Azerbaijan.

137                      Thirdly, as mentioned, it is clear that Mr Dunn will raise the defence of estoppel arising from PCH’s amendment in January 2009 to exclude the claim for compensation from the claim PCH made before the Sabail District Court.  The question of whether under Azerbaijani law PCH would be estopped from bringing this second proceeding by reason of the manner in which it conducted the Azerbaijani proceeding, is a matter which would best be determined by the Azerbaijani courts.  This is a factor which, as the Court of Appeal observed in Charm Maritime, points in favour of the proceeding being conducted in the foreign forum.

138                      Fourthly, the statement of claim and the evidence disclose that there are issues in PCH’s claim which are likely to give rise to consideration of local practices.  The law and practice in Azerbaijan pertaining to persons acting as authorised representatives of foreign companies will be relevant to the resolution of the claims made by PCH.

139                      In the case of McGregor, the plaintiff, Ms McGregor, was a resident of the State of Victoria.  She was a veterinary surgeon.  Whilst Ms McGregor was resident in England and working there for a partnership of veterinary surgeons, she was kicked in the face by a horse and suffered serious injury.  Ms McGregor was treated at the Worcester Royal Infirmary which was operated by the second defendant, where she underwent surgery by the third defendant, Dr Hall.  She sued her employers on the basis that they operated an unsafe system of work and Dr Hall, the surgeon, on the basis that he was negligent in the manner in which he performed the operation.

140                      In considering the connecting factors, Brereton J in McGregor observed at 122, at [55] that:

At the heart of the case will be what are safe employment practices and appropriate professional standards in England.  The circumstance that professional standards of Missouri were “in play” was regarded as of significance in Voth (at 570).

141                      In my view, by analogy with the observations of Brereton J, the fact that the local practice referred to above, will be “in play” in this proceeding, is another circumstance that points to Azerbaijan as the appropriate forum.

142                      In my view, therefore, the connecting factors to which I have thus far referred, demonstrate that Australia is a clearly inappropriate forum and that the objective effect of the continuation of the proceeding would be vexatious and oppressive in the Voth sense.  It remains, however, to have regard to the major factor relied upon by PCH, namely, the juridical advantage to PCH of proceeding in this forum, and to weigh that factor with the factors considered up until now.

Juridical advantage of the Australian forum

143                      I now consider the question of the personal or juridical advantage to PCH in bringing this proceeding in Australia compared to Azerbaijan.

144                      In the case of Reinsurance Australia Corporation Ltd v HIH Casualty and General Insurance (in liq) (2003) 254 ALR 29 (Reinsurance), Jacobson J considered the “connecting factors” attaching to the local forum and to the United Kingdom, where proceedings relating to the same substratum of fact were pending.  Jacobson J observed that the case pleaded by the applicants in the Australian proceedings raised virtually all of the critical issues which arose in the UK proceedings.  After having considered a number of the connecting factors Jacobson J observed at 59, at [289]:

In summary, it seems to me that, but for the legitimate juridical advantage arising from the Trade Practices Act claim, the controversy considered as a whole would be vexatious or oppressive in the Voth sense, namely that the Australian proceedings would be productive of serious and unjustifiable trouble or seriously and unfairly burdensome; see CSR Limited at CLR 400-1; ALR 440.

145                      However, Jacobson J then went on to consider the juridical advantage afforded to the applicants in the Australian proceedings by reason of being able to rely upon the remedies available under the Trade Practices Act 1974 (Cth) in the Australian proceedings, but not in the United Kingdom proceedings.  One of the major advantages afforded by the Trade Practices Act in Australia was that the applicants could thereby overcome a vital exclusion clause which otherwise restricted the grounds upon which they could claim at common law.

146                      Jacobson J observed at 64, at [326]:

I accept the submission of counsel for the applicants that the present proceedings are in effect the converse of CSR Ltd.  The co-existence of local and foreign proceedings is not vexatious or oppressive where relief is available in one forum which is not available in the other; see CSR Ltd at CLR 395; ALR 435.

147                      The Court dismissed the respondents’ notices of motion seeking to set aside service of the originating process, or to stay the Australian proceedings.

148                      In the case of CSR Limited v Cigna Insurance Australia Limited (1977) 189 CLR 345, the High Court found that the New South Wales proceedings were oppressive and dismissed applications for anti-suit injunctions in respect of proceedings which had been brought in the United States of America in respect of the same controversy.  The High Court ordered that the New South Wales proceedings be stayed pending the outcome of the United States proceedings.

149                      In that case, the High Court had regard to the relief which was available in the United States proceedings.  It held that the United States proceedings were in quite a different position because they involved the further issue of whether Cigna Corporation was liable for a breach of the Sherman Act (US).  By reason of the fact that the Sherman Act claim could not be pursued in New South Wales, the court held that New South Wales was a clearly inappropriate forum for the litigation of the issues raised in the United States proceedings.  The High Court rejected the contention that too much attention should not be paid to the availability of treble damages under the Sherman Act because relief was available in Australia under the Trade Practices Act and by actions for economic torts.

150                      In the case of McGregor, Brereton J held that an examination of the “connecting factors” showed that England was the natural forum for the determination of the proceedings.  These factors included the fact that the incident took place in England, the only eyewitness was located in England, the fact that local standards would be relevant, the fact that expert witnesses were in England, the applicable law in determining these questions of liability would be the law of England, the fact that the insurance carried by the veterinarians in England only answered in circumstances where the litigation was conducted in the United Kingdom and the fact that there were potential difficulties in compelling the only eyewitness to give evidence in New South Wales.  Brereton J concluded at 126, at [73] that:

[T]he balance of these connecting factors “was such that, without more, New South Wales was a ‘clearly inappropriate forum’, so that it was to be inferred that it would be seriously and unfairly burdensome and prejudicial to require the defendants to litigate in New South Wales”.

151                      Brereton J then considered whether these considerations were outweighed by any legitimate personal juridical advantage which Ms McGregor may have had in New South Wales.  Ms McGregor contended that her claim in England would be barred by the Limitation Act (UK) and that she would require an extension of time to proceed with it.  In response to that submission, Brereton J observed at 127-128, at [79]:

As to this, even if no extension were available in England, it is doubtful that this would be decisive.  Although the unavailability of relief in another forum may often be a significant consideration, the circumstance that relief is not available in the clearly appropriate forum does not prevent the local Court from staying proceedings in the local forum.  As Callinan J said in BHP Billiton Ltd v Schultz (at 492 [258]):

…The party beginning proceedings will always be the party who selects the jurisdiction in which they are to be heard.  It is to beg the question to say that because a plaintiff has chosen his or her forum, a defendant cannot ask, or should suffer a disadvantage in asking that it be changed to a more appropriate one.  Furthermore, as I pointed out in Agar v Hyde ((2000) 201 CLR 552 at 601-602 [131]), one person’s legitimate advantage is another person’s disadvantage.  There should be no presumption in litigation in favour of any party.  Courts are required to do equal justice.  It is wrong to say that proceedings should be conducted in the, or indeed any Tribunal because a plaintiff, or for that matter a defendant, is likely to have a better chance of winning or more easily winning there.

152                      PCH contended that there was juridical advantage in bringing the proceeding in Australia because it could claim relief under the Corporations Act and the common law in respect of Mr Dunn’s alleged breach of duties as an officer of PCH.  Further, contended PCH, there was no similar relief available under Azerbaijani law, because Art 49.3 of the Civil Code did not apply to Mr Dunn in respect of his dealings as the authorised representative of PCH in Azerbaijan, and the Azerbaijani courts did not have jurisdiction to entertain its claim.

153                      First, it is necessary to determine whether PCH has demonstrated that Art 49.3 of the Civil Code would not apply to the relationship between Mr Dunn and PCH in his capacity as an authorised representative of PCH in Azerbaijan, and that the Azerbaijani courts did not have jurisdiction to entertain PCH’s claim for compensation.

154                      There is a conflict in the evidence between Mr Janmammadov and Mr Mammadov as to whether it would be open to an Azerbaijani court to award compensation to PCH in respect to the acts or omissions complained of in the statement of claim by reference to Art 49.3 of the Civil Code.

155                      PCH contended that Mr Dunn had in the Azerbaijani proceeding, denied that he was in an employment relationship with PCH; and that the Sabail District Court had found that it did not have jurisdiction to deal with the claim now sought to be made by PCH in this proceeding.  In my view, a close reading of the judgment of the Sabail District Court shows that it found no more than that PCH had not provided evidence of an employment contract between Mr Dunn and PCH.  It did not find that there was no jurisdiction to deal with a claim for compensation made by PCH in respect of breaches of the Civil Code.  In my view, the evidence of Mr Janmammadov, which I accept, shows that the Azerbaijani court would have jurisdiction to deal with PCH’s claim for compensation based on the acts and omissions of Mr Dunn pleaded in the statement of claim.

156                      Mr Janmammadov’s distinction between jurisdiction and substantive law is persuasive, whereas Mr Mammadov’s elision of the two concepts is not.  Further, the fact that PCH, advised by Mr Mammadov, invoked the jurisdiction of the Azerbaijani courts to bring a claim for compensation against Mr Dunn, provides support for Mr Janmammadov’s view.

157                      In my view, the evidence of Mr Janmammadov as to the application of Art 49.3 of the Civil Code is also to be preferred to that of Mr Mammadov.  This is because the evidence of Mr Mammadov that Art 49.3 has no application to the relationship between persons in the position of Mr Dunn and PCH respectively, is undermined by the manner in which his law firm conducted the proceeding on behalf of PCH in Azerbaijan.  The claim filed on behalf of PCH by Mr Mammadov’s law firm in Azerbaijan and the subsequent November 2008 addendum, relied specifically upon Art 49.3 as to the basis upon which to claim compensation against Mr Dunn in respect of alleged breaches of the duties imposed upon Mr Dunn under that Article.  Further, I do not read any of the judgments in the Azerbaijani courts as determining that Art 49.3 of the Civil Code would not have application to the relationship between PCH and Mr Dunn in his capacity as an authorised representative of PCH.

158                      Accordingly, I find that, on the evidence of foreign law, Art 49.3 of the Civil Code applies to the relationship between PCH and Mr Dunn in his capacity as an authorised representative of PCH in Azerbaijan, and that it would provide a basis upon which to claim compensation in respect of breaches of the duties imposed by Art 49.3 of the Civil Code.

159                      There was no evidence, that if applicable, Art 49.3 would not afford relief which was comparable to that available under Australian law.

160                      In my view, therefore, PCH has not demonstrated that there was such a significant juridical advantage arising from the continuation of the Australian proceeding, to outweigh the other connecting factors referred to above, which show that Australia is clearly an inappropriate forum.

161                      This case is distinguishable from Reinsurance because in that case, there were not the same difficulties arising from the need for interpreters and working from translated documents as there are in this case.  Further, in Reinsurance, there was a demonstrable juridical advantage in proceeding in Australia.  This case is also distinguishable from Charm Maritime, where a stay of the English proceedings was refused, because in that case the Greek court would have to have applied the English law of trusts, a concept not found in Greek law.  In this case, however, it was accepted by the parties that the Azerbaijani court would be applying its own law.

162                      In my view, for the reasons set out above, the continuation of this proceeding in Australia would be productive of serious and unjustified trouble, or unfairly burdensome and prejudicial to Mr Dunn.

163                      It follows that orders 1 and 2 of the orders that I made on 20 May 2009 and order 1 of the orders that I made on 30 July 2009 should be set aside.

OBJECTIONS TO EVIDENCE

164                      I deal first with the objections made by the applicant.

Affidavit of Anar Janmammadov made on 26 November 2009

Affidavit of Lee Simon Panotidis made on 29 October 2009

Affidavit of Wilfred Cuperus made on 29 October 2009

Affidavit of Stephen Penrose made on 4 December 2009

165                      I deal below with objections made by Mr Dunn to PCH’s evidence.

Affidavit of Guy Robert Rackham made on 30 April 2009

Affidavit of Guy Robert Rackham made on 19 November 2009

Affidavit of Elnur Mammadov made on 18 November 2009

Affidavit of Elnur Mammadov made on 2 December 2009

Associate:

Dated:         20 August 2010