IN THE FEDERAL COURT OF AUSTRALIA AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY GENERAL DIVISION BETWEEN: PRINCIPAL REGISTAY No. eee CADOROLL PTY LIMITED CADOSHARE PTY LIMITED JAMES DOUGLAS BLAKE HAMERLEEN PTY LIMITED ALFRED NATHAN LESTER LESTER FIRTH ASSOCIATES PTY LIMITED JOHN WILLIAM FIRTH WALTRAME PTY LIMITED ZANDRA_ JOY BLAKE Applicants ALLEGRA CORPORATION LIMITED First Respondent ALLEGRA INVESTMENTS LIMITED Second Respondent MAUNTILL PTY LIMITED Third Respondent PEGASUS LEASING LIMITED Fourth Respondent MICHAEL GEORGE SINCLAIR, MARUTA PEARSON and MICHAEL MARKO ZIVKOVIC trading as FARNHAM SINCLAIR & ASSOCIATES Fifth Respondents MINUTE OF ORDER JUDGE MAKING ORDER DATE OF ORDER WHERE_MADE Neaves J. 23 December 1994 Canberra ACT G 18 of 1992 THE COURT ORDERS THAT: 1. The motion by the first and second respondents and the motion by the third and fourth respondents and the first named of the fifth respondents, notice of which was given on 28 November 1994, in so far as they seek orders dismissing or striking out the substantive application herein, be dismissed. 2. The said motions, in so far as they seek orders as to the sufficiency or appropriateness of the second further amended statement of claim, be adjourned until 17 February 1995. 3. The parties to the substantive application herein be restrained until the hearing and determination of that application or until further order from taking any further step in the proceedings pending in the Supreme Court of South Australia numbered 818 of 1992, 2221 of 1992, 2228 of 1992 and 2230 of 1992. 4. The costs of and incidental to the proceedings in this Court on 2 and 8 December 1994 and this day be costs in the cause. 5. Any party have liberty to apply on 7 days' notice. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. * IN THE FEDERAL COURT OF AUSTRALIA AUSTRALIAN CAPITAL TERRITORY ) ) No. ACT G 18 of 1992 DISTRICT REGISTRY ) ) ) GENERAL DIVISION BETWEEN: CADOROLL PTY LIMITED CADOSHARE PTY LIMITED JAMES DOUGLAS BLAKE HAMERLEEN PTY LIMITED ALFRED NATHAN LESTER LESTER FIRTH ASSOCIATES PTY LIMITED JOHN WILLIAM FIRTH WALTRAME PTY LIMITED ZANDRA_ JOY BLAKE Applicants AND: ALLEGRA CORPORATION LIMITED First Respondent ALLEGRA INVESTMENTS LIMITED Second Respondent MAUNTILL PTY LIMITED Third Respondent PEGASUS LEASING LIMITED Fourth Respondent MICHAEL GEORGE SINCLAIR, MARUTA_ PEARSON and MICHAEL MARKO ZIVKOVIC trading as FARNHAM SINCLAIR & ASSOCIATES Fifth Respondents CORAM: Neaves J. DATE: 23 December 1994 REASONS FOR JUDGMENT Before the Court are three motions. There is a motion, notice of which was given on 28 November 1994, by the first and second respondents, Allegra Corporation Limited and 2. Allegra Investments Limited. There is also a motion, notice of which was given on the same date, by the third respondent, Mauntill Pty Limited, the fourth respondent, Pegasus Leasing Limited ("Pegasus") and the first named of the fifth respondents, Michael George Sinclair who, with Maruta Pearson and Michael Marko Zivkovic traded as Farnham Sinclair & Associates ("Farnham Sinclair"). Those motions seek orders that the substantive proceeding brought by the applicants be struck out or dismissed as an abuse of process or, alternatively, that the second further amended statement of claim of the applicants be struck out as not disclosing a cause of action or as having a tendency to cause embarrassment and to delay the trial of the action. The third motion is a motion by the applicants, notice of which was given on 2 December 1994, seeking an order that, pending final determination of the substantive proceeding in this Court, Pegasus be restrained from taking any steps in certain proceedings in the Supreme Court of South Australia. The motions are made in a proceeding, numbered ACT G 18 of 1992, pending in this Court. That proceeding was commenced by application filed on 15 May 1992. It named 29 applicants, being 15 corporations and 14 individuals. Notices of discontinuance have since been filed by various of the applicants. In the result, there are now 9 applicants, being 5 corporations and 4 individuals. The remaining applicants 3. are Cadoroll Pty Limited, Cadoshare Pty Limited, James Douglas Blake, Hamerleen Pty Limited, Alfred Nathan Lester, Lester Firth Associates Pty Limited, John William Firth, Waltrame Pty Limited and Zandra Joy Blake. The applicants in the substantive proceeding appear to fall into two groups. One group comprises Cadoroll Pty Limited, Cadoshare Pty Limited, Hamerleen Pty Limited, Alfred Nathan Lester, Lester_Firth Associates Pty Limited and John- William Firth. The other comprises James Douglas Blake, Waltrame Pty Limited and Zandra Joy Blake. In that proceeding, Cadoroll Pty Limited, Cadoshare Pty Limited and James Douglas Blake are described as "Partners". The other applicants are described as "Guarantors". The applicants seek declarations that, pursuant to s.87 of the Trade Practices Act 1974 (Cth) or s.72 of the Fair Trading Act 1987 (NSW), certain agreements and guarantees into which they entered in reliance upon the respondents' misleading or deceptive conduct are void. Those agreements and guarantees are said to relate to a thoroughbred bloodstock breeding partnership known as_ the "Capricorn Park No.2 Breeding Partnership". The applicants also allege breaches of fiduciary obligations owed to them by the respondents, that the agreements and guarantees are illegal and unenforceable as being in breach of ss 169, 170 and 171 of the Companies (New South Wales) Code, the Companies Act 1981 (Cth) or the Companies (South Australia) Code, breaches of contract on the 4. part of Farnham Sinclair, unconscionable conduct on the part of the respondents within the meaning of s.52A of the Trade Practices Act 1974 (Cth) or s.43 of the Fair Trading Act 1987 (NSW) and that the agreements and guarantees are unjust within the meaning of subs.7(1) of the Contracts Review Act 1980 (NSW). In the substantive proceeding, the applicants filed and served a statement of claim and, subsequently, an amended statement of claim pursuant to Order 13, rule 3(1) of the Federal Court Rules. The amended statement of claim was struck out by order of the Court, those who were then applicants being granted liberty to file and serve a further amended statement of claim. The further amended statement of claim filed pursuant to the liberty so granted was the subject of further motions to have it, or certain parts of it, struck out. Those motions were partially successful and, in the result, those who were then applicants were granted liberty to file and serve a second further amended statement of claim. The motions then before the Court were adjourned pending the filing of the further amended document. The respondents seek orders striking out the document filed and served pursuant to the liberty so granted or certain parts of it. Argument on the respondents' motions in so far as they seek those orders has been deferred. Other proceedings, numbered respectively ACT G 27 of 1992 and ACT G 29 of 1992, are pending in this Court in which 5. similar relief to that sought in this proceeding is sought against the respondents arising out of agreements and guarantees relating to thoroughbred bloodstock breeding partnerships known as the "Capricorn Park No.3 Breeding Partnership" and the "Capricorn Park No.4 Breeding Partnership" respectively. Those remaining as applicants in proceeding numbered ACT G 27 of 1992 are identical with the applicants remaining in this proceeding. The applicants remaining in proceeding numbered ACT G 29 of 1992 are Cadoroll Pty Limited, Caldpost Pty Limited, Hamerleen Pty Limited, Alfred Nathan Lester, Lester Firth Associates Pty Limited and Madeline Marie Lester. There is yet a further proceeding pending in this Court against the respondents, that proceeding being numbered ACT G 45 of 1992, the relevant agreements and guarantees the subject of that proceeding relating to the thoroughbred bloodstock breeding partnership known as the "Capricorn Park No.1 Breeding Partnership". Although some of the applicants in the present proceeding are also applicants in that proceeding, the Court has been informed that it is unlikely that that proceeding will continue. Proceedings arising out of the "Capricorn Park No.2 Breeding Partnership" are pending in the Supreme Court of South Australia at the suit of Pegasus. The proceedings in that Court are numbered respectively 818 of 1992, 2221 of 1992, 2228 of 1992 and 2230 of 1992. The proceeding numbered 818 of 1992 was commenced by Pegasus on 1 April 1992. It 6. named 36 defendants being all those who were originally named as applicants in the proceeding in this Court numbered ACT G18 of 1992, together with Mauntill Pty Limited (the third respondent in the proceeding in this Court), Maruta Pearson, Michael George Sinclair and Michael Marko Zivkovic (the fifth respondents in that proceeding), Copake Holdings Pty Limited, Ray Nicholas Andracchio and Barbara Ann Andracchio. The evidence before the Court is that Pegasus has discontinued that proceeding against all those named as defendants other than the applicants who remain in the proceeding in this Court numbered ACT G 18 of 1992. It also appears that the only remaining defendant parties to the proceedings in the Supreme Court of South Australia numbered 2221 of 1992, 2228 of 1992 and 2230 of 1992 are companies which, or individuals who, are applicants in the proceeding in this Court numbered ACT G 18 of 1992. Proceedings at the suit of Pegasus are also pending in the Supreme Court of South Australia against those remaining as applicants in the proceedings in this Court numbered ACT G 27 of 1992, ACT G 29 of 1992 and ACT G 45 of 1992. The evidence before the Court establishes that the applicants that are corporations are incorporated in and carry on business in either New South Wales or the Australian Capital Territory, that the applicants who are individuals are residents of that State or that Territory and that the 7. representations relied upon are alleged to have been made in that State or that Territory. Of the respondents, Pegasus is the only respondent that carries on business in South Australia, Mauntill is incorporated in the Australian Capital Territory, Allegra Corporation Limited and Allegra Investments Limited are incorporated in New Zealand, Michael George Sinclair is a resident of the Australian Capital Territory and Farnham Sinclair carries on business in New South Wales and the Australian Capital Territory. On 9 December 1993, the Supreme Court of South Australia (Debelle J.) dismissed applications under subs.5(1) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (S.A.) by, inter alios, the defendants in proceeding numbered 818 of 1992 who were applicants in the proceeding in this Court numbered ACT G18 of 1992 to transfer to this Court the proceedings then pending in that Court. Similar applications in the proceedings in the Supreme Court of South Australia relating to "the Capricorn Park No.3 Breeding Partnership" and the "Capricorn Park No.4 Breeding Partnership" were also dismissed. It appears from his Honour's reasons for judgment that a very significant factor influencing his decision was that, on the pleadings as they then stood, "the issues as between Pegasus and members of the syndicates and the guarantees [sic] are relatively straightforward and capable of prompt and ready prosecution". His Honour also considered that there was a likelihood that this Court would "be concerned only with the issues as between the members of the 8. respective syndicates and the respondents other than Pegasus". In the light of subsequent events, neither proposition can now be confidently asserted. On 17 January 1994, this Court dismissed a motion by those who were then named as applicants in the proceeding numbered ACT G 18 of 1992 for an order restraining Pegasus from taking any steps, including the entry of default judgment, in the proceedings pending against them in South Australia. In dismissing the motion, I said: "In my opinion, the applicants have failed to establish a sufficient basis for the grant of the injunctive relief sought in the motion presently before the Court. The applicants have not filed a defence to the proceedings pending in the Supreme Court of South Australia and identified in the Schedule to the notice of motion filed on their behalf in this Court so that it is not possible, at this stage, to identify the issues that may arise in those proceedings. No evidence has been placed before this Court to show that the applicants have an arguable case against Pegasus which may be raised by way of defence or cross claim in the South Australian proceedings. The mere assertion in the amended statement of claim filed in this Court - and it is no more than an assertion - that the agreements upon which Pegasus relies in the South Australian proceedings should be declared void on the basis that those agreements were entered into as a result of false or misleading representations made by Pegasus or are otherwise void or unenforceable does not, of itself, provide a sufficient basis upon which an injunction should go. It may be added, that the amended statement of claim filed in this Court is itself deficient in that it asserts no primary facts which, if established, would support the proposition that Pegasus made the representations on which the applicants rely or is otherwise liable in respect of allegedly false or misleading representations made by others. I am unable to conclude that the existence of the South Australian proceedings in which, as I have said, no defence has been filed, involves, at this stage at least, any interference with this Court's process or its right to control the proceeding pending before it." 9. Similar motions in the proceedings numbered ACT G 27 of 1992 and ACT G 29 of 1992 were also dismissed. On 23 March 1994, those defendants in the Supreme Court proceedings numbered 818 of 1992 who were applicants in the proceedings in this Court numbered ACT G 18 of 1992 filed a defence in that proceeding in the Supreme Court of South Australia raising issues as against Pegasus identical with those pleaded in this Court and filed a counterclaim against Allegra Corporation Limited, Allegra Investments Limited, Mauntill Pty Limited, Pegasus and Farnham Sinclair claiming identical relief to that claimed in the proceeding in this Court and on identical grounds. Defences and counterclaims raising similar issues were also filed in the proceedings pending in the Supreme Court of South Australia in relation to the "Capricorn Park No.3 Breeding Partnership" and the "Capricorn Park No.4 Breeding Partnership. On 7 April 1994, a Master of the Supreme Court of South Australia dismissed an application by those defendants in the proceeding in that Court numbered 818 of 1992 who were applicants in the proceeding in this Court No. ACT G 18 of 1992 for a stay of the proceedings in that Court pending judgment in the proceeding in this Court. A Full Court of the Supreme Court of South Australia dismissed an appeal from that dismissal on 20 September 1994. Similar orders were made by the Master and by the Full Court in the proceedings pending in the South Australian Supreme Court in relation to the 10. "Capricorn Park No.3 Breeding Partnership" and the "Capricorn Park No.4 Breeding Partnership". In my opinion, no basis has been shown for the making of an order dismissing the proceeding in this Court numbered ACT G 18 of 1992 as being an abuse of the process of the Court. It is a sufficient, though not necessarily the only, reason for declining to make such an order that there is a real possibility that, in the related proceedings in the Supreme Court of South Australia, there may be no determination on the merits of the issues that arise in the proceeding before this Court. This stems from the circumstance that the respondents to the proceeding in this Court have foreshadowed a defence to the counterclaim against them in the Supreme Court based on the effluxion of time between the date on which the cause of action is said to have arisen and the date upon which the counterclaim was filed. On the material at present before the Court - and although I should not be taken as expressing a final view on the question - a defence based on effluxion of time will not be available to the respondents in the proceeding in this Court. It was urged upon me by counsel for Mauntill Pty Limited and Michael George Sinclair that the applicants in the proceeding in this Court numbered ACT G 18 of 1992 should be required to elect whether to proceed in this Court or in the Supreme Court of South Australia. That approach, however, is unrealistic as the applicants in this Court are defendants in 11. the proceedings in the Supreme Court of South Australia and they could not be expected to elect not to proceed with their defence and counterclaim in that Court unless Pegasus was prepared to undertake not to proceed further against them in that Court pending the hearing and determination of the proceeding pending in this Court. Pegasus clearly will give no such undertaking. To refuse the application to strike out the proceeding in this Court, however, is not the end of the matter. It cannot be doubted - and I do not understand any of the parties to contend to the contrary ~- that it is not in the interests of the parties, in point of either convenience or expense, or, indeed, in the public interest to allow proceedings in which the same issues are raised and the same relief claimed to proceed simultaneously in the federal and State systems of justice. The question remains, however, how is the desirable objective of having the issues determined in one court to be realised. There appear to be two courses of action available. One, that urged by the applicants in the proceeding in this Court numbered ACT G 18 of 1992, is to allow the matter to proceed in this Court and to restrain the respondents, in particular Pegasus, from taking any further steps in the related proceedings in the Supreme Court of South Australia. The other course, although not the subject of any application to the Court, is to transfer the proceeding in this Court to the Supreme Court of South Australia pursuant to 12. subs.5(4) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) ("the Cross-vesting Act"). In determining what course should be followed a variety of factors must be taken into account, including the question of expense and the convenience of the respective parties and their prospective witnesses, the interlocutory steps which have been taken in each jurisdiction and the public interest, one element of which concerns comity between federal and State courts of co-ordinate jurisdiction. The applicants in the proceeding in this Court strongly urge that the matter proceed in this Court. Mauntill Pty Limited and Michael George Sinclair have expressed a preference for the matter to proceed in this Court. Allegra Corporation Limited and Allegra Investments Limited are indifferent whether the Matter proceeds in this Court or the Supreme Court of South Australia. Only Pegasus urges that the matter proceed in the Supreme Court of South Australia. Taking into account the various considerations put to me on behalf of the respective parties, I am of opinion, on balance, that the matter should continue in this Court. To transfer the proceeding in this Court to the Supreme Court of South Australia pursuant to subs.5(4) of the Cross-vesting Act would require a positive finding that it is more appropriate, or that it is otherwise in the interests of justice, that the issues be determined by that Court. I am not satisfied that such a finding should, in all the circumstances, be made. It 13. follows, in my opinion, that all parties should be restrained, until the hearing and determination of the proceeding pendang in this Court or until further order, from taking any further step in the related proceedings pending in the Supreme Court of South Australia, being the proceedings in that Court numbered 818 of 1992, 2221 of 1992, 2228 of 1992 and 2230 of 1992, and I so order. Liberty is reserved to any party to apply on 7 days' notice. The motion by the first and second respondents and the motion by the third and fourth respondents and the first named of the fifth respondents, notice of which was given on 28 November 1994, in so far as they seek orders dismissing or striking out the proceeding in this Court, are dismissed and, in so far as they seek orders as to the sufficiency or appropriateness of the second further amended statement of claim, are adjourned until 17 February 1995. In all the circumstances, I think it appropriate to order that the costs of and incidental to the proceedings in this Court on 2 and 8 December 1994 and this day be costs in the cause. I certify that this and the preceding 12 pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Neaves, Dated: Counsel for the applicants Solicitors for the applicants Counsel for the first and second respondents Solicitors for the first and second respondents Counsel for the third 14. respondent and the first named: of the fifth respondents Solicitors for the third respondent and the first named of the fifth respondents Counsel for the fourth respondent Solicitors for the fourth respondent Dates of hearing Date of judgment Mr G.J. Richardson SC and Mr B.B. McClintock Minter Ellison Morris Fletcher Mr R.J. Arthur Phillips Fox Mr K.J. Crispin QC and Mr I.J. Nicol Blake Dawson Waldron Mr R.C. Refshauge Macphillamy Cummins & Gibson 2, 8 December 1994 23 December 1994