FEDERAL COURT OF AUSTRALIA

Faxtech Pty Ltd v ITL Optronics Ltd [2011] FCA 1320

THE COURT ORDERS THAT:

1.    The First and Second Respondents’ interlocutory application dated 20 October 2011 is dismissed.

2.    Upon:

(a)    the First Respondent undertaking to the Court to refrain, until the determination of this proceeding or a further order, from taking any further step directly or indirectly in Claim Number 2011 Folio 1124 in the Commercial Court of the High Court of Justice in England against the Applicant, save for discontinuing those proceedings or seeking a stay thereof; and

(b)    the Applicant undertaking to the Court:

(i)    to submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person, whether or not a party, adversely affected by the operation of the interlocutory undertaking referred to in Order 2(a) above or any continuation (with or without variation) thereof; and

(ii)    to pay compensation referred to in (i) to the person there referred to;

the Applicant's interlocutory application dated 31 October 2011 is dismissed.

3.    The proceeding is adjourned to a directions hearing on Friday 18 November 2011 at 9.30am.

4.    The costs of the interlocutory applications dated 20 and 31 October 2011 are reserved to be determined at the directions hearing on 18 November 2011.

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

REASONS FOR JUDGMENT

1    In this application, the first respondent, ITL Optronics Ltd, and the second respondent, Elbit Systems Ltd, have applied for an order to stay this proceeding until the determination of an English proceeding. The applicant’s proceeding in this Court is for relief on the basis that the respondents have engaged in misleading or deceptive conduct, contravening s 18 of the Australian Consumer Law (Sch 2 to the Competition and Consumer Act 2010 (Cth)). Alternative relief was sought by the respondents in this application, but the stay of proceeding application will effectively resolve the matter of alternative relief. Some discussion took place as to whether or not the stay of proceeding was to be permanent or temporary. In the end, the matter proceeded on the basis that the appropriate application was one for a temporary stay.

2    The respondents contended that the proceeding in this Court ought to be stayed pending the resolution of the English proceeding for a number of reasons. However, there were essentially three issues for determination, as identified by the respondents. The first issue related to a 2010 agreement between the applicant and the first respondent (‘2010 agreement’) and whether or not its jurisdiction clause, cl 10, is an “exclusive jurisdiction” clause. If the answer was yes, the second issue was whether the issues raised in the English proceeding were covered by the jurisdiction clause. If the answer was again yes, then, the third issue was whether there were any compelling reasons to not grant a stay of proceeding whilst the English proceeding was resolved. This third issue is to be considered bearing in mind that there is a strong bias in favour of granting a stay of proceeding where parties have indicated their choice of forum is elsewhere.

3    The applicant, Faxtech Pty Ltd, submitted that, even if the Court concluded that the answer to the first issue was “yes”, the Court should consider whether or not a stay of proceeding would be appropriate in the circumstances. I will deal with this submission in due course.

4    Clause 10 of the 2010 agreement provides that:

the agreement shall be interpreted, construed and enforced in accordance with the laws of England, and the parties submit to the jurisdiction of the competent courts of England (London).

5    Whether this jurisdiction clause is “exclusive” needs to be determined according to the proper law of the contract. In this case, there is no doubt the proper law of the contract is English law.

6    To inform the Court as to English law, the respondents tendered into evidence an opinion of Professor Adrian Briggs, Professor of Private and International Law at the University of Oxford. No dispute has been raised as to his experience, qualifications or expertise to provide advice as to the English law relevant and applicable to this proceeding. Certain objections were taken to parts of Professor Briggs’ opinion, which were rightly objectionable. As such, they have either not been read into evidence, or I have ruled them to be inadmissible. However, Professor Briggs’ opinion has been relied upon as part of the respondents’ submissions, which the rules of Court permit, and which I have permitted in this case.

7    Professor Briggs’ opinion details the English law and how it applies to cl 10 of the 2010 agreement. Professor Briggs’ conclusion, which is now part of the submissions made by Counsel for the respondents, was that, under English law, the clause provided for the exclusive jurisdiction of the English courts.

8    The construction of cl 10 is not without its difficulties. Nevertheless, I have come to the view that it is not an exclusive jurisdiction clause. I have come to this view, despite the considerations raised by Professor Briggs’ opinion, for the following reasons.

9    The parties to the 2010 agreement were also parties to an earlier 2005 agreement (‘2005 agreement’). In the 2005 agreement, the word “exclusive” was expressly used in the jurisdiction clause. This word is not in cl 10 of the 2010 agreement. It may well be that in drafting the 2010 agreement, those responsible were aware of the law referred to by Professor Briggs. That is, that one does not have to use the word “exclusive” to effectively have an exclusive jurisdiction clause. Therefore, its express inclusion may have been viewed unnecessary.

10    By contrast, the omission of the word “exclusive” in the 2010 agreement may be viewed as a deliberate omission when it had been used in the 2005 agreement.

11    Using the cases and principles referred to by Professor Briggs, I have brought my own legal reasoning to interpret the 2010 agreement, taking into account the change from the 2005 agreement. It seems that the omission of the word “exclusive” was deliberate, so as not to render cl 10 of the 2010 agreement an exclusive jurisdiction clause.

12    The other reason I have reached this conclusion is the reasoning referred to by Professor Briggs in paragraph 30 of his opinion in reliance on the decision of Waller J in British Aerospace Plc v Dee Howard Corp [1993] 1 Lloyd’s Rep 368. Professor Briggs states:

According to Waller J, the transitive/intransitive distinction comes from the unreported judgment of Hobhouse J in Cannon Screen Entertainment Ltd v Handmade Films Distributors Ltd (July 13, 1989): the judgment is not easily available (and I have not been able to locate or read a full copy) but is sufficiently quoted in British Aerospace at page 374.

13    Professor Briggs then goes on to state:

As clause 10 of the 2010 agreement is on the intransitive side of the line, Screen Entertainment would, as I understand it, make the clause a non-exclusive one.

14    Having read the reasoning of Hobhouse J in Cannon Screen Entertainment as cited in British Aerospace, the comments made by the his Honour are applicable to this case. Those comments were made in respect of a clause of similar wording to cl 10 and arose in a similar context.

15    I need not analyse this in any greater detail, as I can dispose of this matter even working from the assumption that cl 10 is an exclusive jurisdiction clause. This is for the following reasons.

16    The proceeding before this Court does not just involve the matters in the English proceeding. It also involves a cause of action for misleading or deceptive conduct that is not within, and cannot be within, the English proceedings.

17    Many substantive issues and matters for factual determination may well be covered in both proceedings. To a large, though not complete, extent, the determinations made in the English proceeding will be relevant to assist in the determination of the proceeding before this Court. However, by looking at paragraph 23 of the amended statement of claim in this proceeding, it is apparent that the plea as to misleading or deceptive conduct covers matters wider than the English proceeding.

18    It was suggested by Counsel for the respondents that the English proceeding could be amended to cover those particular factual matters raised in this proceeding, that is, the substratum of fact to be determined relevant to misleading or deceptive conduct. However, I do not think that I should proceed from that basis in determining this matter. In any event, whatever is the substratum of fact that may be determined in English proceeding, and whether it is the same as the substratum of fact that is going to be dealt with in this proceeding, there is no doubt that the claim for misleading or deceptive conduct can only be dealt with in this Court, and not by an English court. The relief sought under the Australian Consumer Law can only be obtained in this Court.

19    Even if there was an exclusive jurisdiction clause, I would be of the view that this application for a stay of proceeding should not succeed. I have been referred to the authority of Jacobson J in Hume Computers Pty Ltd v Exact International BV [2006] FCA 1440. In that case, there was an exclusive jurisdiction clause. At [6], his Honour observed “An exclusive jurisdiction clause does not deprive an Australian court of its jurisdiction to try the proceedings”.

20    I accept that where one has an exclusive jurisdiction clause, there have to be strong reasons showing why the matter should not be heard in the forum chosen by the parties. There have to be strong reasons why the matter should not be heard in an English court and should proceed in this Court.

21    However, as Jacobson J in Hume Computers stated at [25]-[26] (citing authority), the court leans against “the multiplicity of proceedings in different jurisdictions”. The only forum able to deal with all the causes of action is this Court. This seems to me to be an overwhelmingly powerful reason for not allowing the stay. Again, this is so even if cl 10 is an exclusive jurisdiction clause.

22    I make some observations in relation to some of the submissions put forward by the respondents. Reference was made to Recyclers of Australia Pty Ltd v Hettinga Equipment Inc (2000) 100 FCR 420 and Francis Travel Marketing Pty Ltd v Virgin Atlantic Airways Ltd (1996) 39 NSWLR 160. In my view, those cases are distinguishable, because they do not raise the very point that I have just been discussing, namely, where there is only one forum able to hear all the disputes, being this Court. A further point of distinction is that this matter does not concern arbitration and the statutory requirements involved when the parties to an agreement have included an arbitration clause.

23    The next observation, which, if I have not made clear already, is that assuming cl 10 is an exclusive jurisdiction clause, the principles relating to the “balance of convenience” are not directly applicable. As I have said, there have to be strong reasons for not holding the parties to their bargain. I refer to the principles recently pronounced by the New South Wales Court of Appeal in Global Fund Partners Ltd v Babcock and Brown Ltd (2010) 79 ASCR 383; [2010] NSWCA 196, particularly the comments of Spigelman CJ at [40], citing the primary judge in that proceeding, Hammerschlag J.

There is a strong bias in favour of granting a stay of proceedings in the event that there has been a submission to the exclusive jurisdiction of a foreign forum. In considering such an application the court should take into consideration all the circumstances of the particular case, but the application is not be assimilated to cases where a stay is sought on the principle of forum non conveniens, nor is it a matter of mere convenience...

24    In the written submissions of both the respondents and the applicant, various matters were raised as to the appropriateness of Australia as a forum for the resolution of the contractual issues.

25    I do not think that any one particular factor, if one goes into the realm of looking at particular factors, is decisive. If I were to undertake a balancing exercise between those particular factors, as set out in the written submissions of the parties, I would lean in favour of the matter staying in this Court. The applicant has properly commenced the proceeding in this Court. There is no suggestion that the proceeding has been brought other than in good faith, or that the matters are not properly pleaded for determination. As far as the witnesses and the determination of English law are concerned, they can all be accommodated expeditiously in Australia.

26    The next matter I observe is that there was some mention of what occurred in a proceeding in Israel. In my view, that has no relevance to my determination. To the extent that anything was opined or relied upon in relation to cl 10 in the Israeli proceeding, it is not a matter relevant to my determination of the construction of cl 10. I see no need to rehearse the factual matters raised in relation to the Israeli proceeding or the rulings in that proceeding.

27    It is apparent that my main consideration in refusing to grant the stay of proceeding has been that which was referred to by Jacobson J in Hume Computers, applied on the basis of my knowledge of the issues in the English proceeding and those which can be dealt with by this Court.

28    The simple fact is that the English proceeding does not encompass all the matters with which this Court in this proceeding can deal. As matters currently stand, even if the first respondent succeeds in the English proceeding, that would not resolve the proceeding in this Court. One way or the other, the matter would need to be determined in this Court based upon the relief sought under the Australian Consumer Law.

29    For these reasons, the application for a stay of proceeding will be refused.

Associate:

Dated:    17 November 2011