FEDERAL COURT OF AUSTRALIA Activate No 1 Pty Ltd v Equuscorp Pty Ltd [1999] FCA 619 PRACTICE and PROCEDURE – Application under cross-vesting legislation to transfer proceeding to Supreme Court of Victoria – Criteria for transfer set out in legislation – Related proceedings in State court – Consideration of more appropriate forum and the interests of justice – Purpose of legislation in avoiding fragmentation of litigation. WORDS and PHRASES: "related to", "more appropriate", "interests of justice" Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth), s 5(4) Trade Practices Act 1974 (Cth) ss 51A, 52, 82 and 86 Real Property Act 1901 (NSW), s 42 Conveyancing Act 1919 (NSW) s 115A(2)(c) Evidence Act 1995 (Cth) Equuscorp Litigation [1999] VSC 21, followed Buckley v Gibbett (1996) 69 FCR 554, cited Linter (in Liq) v Price Waterhouse (1992) 9 ACSR 346, cited Bankinvest AG v Seabrook (1988) 14 NSWLR 711, followed Spilada Maritime Corporation v Consulex Ltd [1987] 1 AC 460, cited Voth v Manildra Flour Mills Ltd (1990) 171 CLR 538, distinguished Schmidt v Won [1998] 3 VR 435, cited PIHA vVidex Tubemakers [1999] FCA 132, followed Bahr v Nicolay (1988)164 CLR 604, cited Cascade Group Ltd v Carlton and United Breweries Ltd (1992) ATPR 41-172, cited T O'Connor & Sons v Clough [1996] FCA 263, cited Teserioro v Matstar Pty Ltd (1990) 93 ALR 607, cited ACTIVATE NO 1 PTY LIMITED and the persons whose names are set out in Schedule A-C annexed to the Application v EQUUSCORP PTY LTD, PHILIP ARTHUR HENNESSY, ALEXANDER ROBERT MacKAY MacINTOSH AND MICHAEL JOSEPH DWYER NG 1062 OF 1998 TAMBERLIN J SYDNEY 11 MAY 1999 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG1062 OF 1998 BETWEEN: ACTIVATE NO 1 PTY LIMITED (ACN 001 071 950) and the persons whose names are set out in Schedules A-C annexed to the Application Applicants AND: EQUUSCORP PTY LTD (ACN 006 012 334) First Respondent PHILIP ARTHUR HENNESSY Second Respondent ALEXANDER ROBERT MacKAY MacINTOSH Third Respondent MICHAEL JOSEPH DWYER Fourth Respondent JUDGE: TAMBERLIN J DATE OF ORDER: 11 MAY 1999 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The proceedings shall be transferred to the Supreme Court of Victoria. 2. The respondents on the Motion pay the costs of the applicants on the application. 3. Liberty to apply is reserved on 24 hours notice in relation to any matters which may arise in relation to giving effect to Order 1. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG1062 OF 1998 BETWEEN: ACTIVATE NO 1 PTY LIMITED (ACN 001 071 950) And the persons whose names are set out in Schedules A-C annexed to the Application Applicants AND: EQUUSCORP PTY LTD (ACN 006 012 334) First Respondent PHILIP ARTHUR HENNESSY Second Respondent ALEXANDER ROBERT MacKAY MacINTOSH Third Respondent MICHAEL JOSEPH DWYER Fourth Respondent JUDGE: TAMBERLIN J DATE: 11 MAY 1999 PLACE: SYDNEY REASONS FOR JUDGMENT 1 This is a Motion by the respondents under s 5 of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) ("the Act") to transfer Federal Court proceeding NG 1062 of 1998 to the Supreme Court of Victoria. The principal proceedings in this Court were filed on 9 October 1998. There have been several short directions hearings with a view to hearing the cross-vesting application which was filed on 16 November 1998. 2 Section 5(4) of the Act provides as follows: "s 5(4) Where: (a) a proceeding (in this subsection referred to as the "relevant proceedings") is pending in the Federal Court or the Family Court (in this subsection referred to as the "first court"); and (b) it appears to the first court that: (i) the relevant proceeding arises out of, or is related to, another proceeding pending in the Supreme Court of a State or Territory and it is more appropriate that the relevant proceeding be determined by that Supreme Court; (ii) having regard to: (A) whether, in the opinion of the first court, apart from this Act and any law of a State relating to cross-vesting of jurisdiction, the relevant proceeding or a substantial part of the relevant proceeding would have been incapable of being instituted in the first court and capable of being instituted in the Supreme Court of a State or Territory. (B) the extent to which, in the opinion of the first court, the matters for determination in the relevant proceeding are matters arising under or involving questions as to the application, interpretation or validity of a law of the State or territory referred to in sub-sub-paragraph (A) and not within the jurisdiction of the first court apart from this Act and any law of a State relating to cross-vesting of jurisdiction; and (C) the interests of justice; it is more appropriate that the relevant proceeding be determined by that Supreme Court; or (iii) it is otherwise in the interests of justice that the relevant proceeding be determined by the Supreme Court of a State or Territory; the first court shall transfer the relevant proceeding to that Supreme Court." 3 The preamble to the Act makes it clear that the purpose of the Act is to establish a system of cross-vesting of jurisdiction between federal and State courts, and between the Courts of different States. The Act aims to avoid the inconvenience and expense inherent in duplication of court proceedings which would otherwise inhibit the administration of justice in a federal system. This is to be achieved by ensuring that there is a determination by one court of both the federal and State matters and by ensuring that the court selected is an appropriate court to hear the whole of the dispute. 4 There are presently pending in the Supreme Court of Victoria in the order of 530 proceedings in relation to which Equuscorp Pty Ltd ("Equuscorp") is a party. Some of these actions were commenced in the Victorian County Court but were transferred to the Supreme Court. The history of the Victorian proceedings is set out in the reasons for judgment of Beach J, of the Victorian Supreme Court, where his Honour refused an application by the present applicants to transfer the Victorian proceedings to the Federal Court: Equuscorp Litigation [1999] VSC 21. His Honour's judgment was delivered in relation to summonses filed in seven particular proceedings which were selected by his Honour as appropriate for consideration on the question of cross-vesting. His judgment was delivered on 10 November 1998. The seven proceedings were considered to raise those significant and relevant matters which required consideration on the cross-vesting application. 5 The issues raised in the Victorian and federal proceedings arise out of a tax driven investment scheme based on a blueberry farming venture, carried out on land in New South Wales, which proved to be unsuccessful. 6 Filings of actions in the Victorian proceedings commenced in November 1997. Because of the large number of investor plaintiffs in Victoria there was a suggestion that there might be issued a single mega-writ but this was not implemented as the parties were unable to agree. In December 1997, Beach J, who was in control of the listing, became concerned at the problems inherent in the case management of such a large volume of matters. The individual matters had been filed in consequence of the failure of the parties to agree on a single proceeding or group of proceedings. His Honour considered that the sheer volume of the litigation required careful hands-on case management. Accordingly, his Honour instructed the Prothonotary to establish in Victoria a specific list called the Equus List in order that the progress of the cases to hearing could be managed with consistency, efficiency and expedition. Since delivery of his Honour's cross-vesting judgment, after hearing extensive submissions, his Honour held an extensive directions hearing and made orders fixing a timetable for filing of documents. I understand that these orders have now been complied with and the matters are next set down for further directions before his Honour on 12 May 1999. 7 In his reasons for judgment, Beach J notes that the Federal Court proceeding involves some hundreds of investors as applicants, with Equuscorp and the nominated receivers and managers as respondents. His Honour itemises the classes of claims in the federal proceeding and notes the submissions of Counsel in respect to them. In particular he refers to the fact that 58% of the defendants in the Victorian proceedings are resident in Sydney and country areas of New South Wales with the remaining 42% spread throughout other States and Territories. A consideration of the names and addresses of the investors in New South Wales indicates that a large number of them are not from Sydney but are from country areas. His Honour also noted that the blueberry projects were conducted in New South Wales, and that some issues which fall to be determined in the matter are governed by the law of New South Wales. Further, his Honour noted that it may be cheaper to have inspection of documents in Sydney rather than in Victoria. Since his Honour's judgment there has been substantial inspection of loan documents in Victoria. The basic documents are located in Queensland and there would need to be some movement of those documents in any event. Taking these matters into consideration, inconvenience in relation to discovery is not, in my view, a major factor in this case. 8 In his concluding observations his Honour said at p 17 that: "Having considered all relevant factors in this matter, including the slightly different factual situations in the seven cases presently before me, I am firmly of the opinion that the interests of justice do not require that the seven cases be cross-vested from this Court to the Federal Court. This Court has now set up an Equus List and that list will be subject to the hands-on control of the Court with a view to ensuring that the Equus litigation be finalised as speedily and economically as possible." Principles governing transfer 9 The controlling considerations are set out in the language of the Act. Section 5(4) requires this Court to form a conclusion whether the proceeding before it relates to the pending Supreme Court proceedings, and if so whether it is more appropriate that the federal proceeding be transferred to the Supreme Court of Victoria. 10 Among the numerous allegations at issue in the Federal Court proceeding, the only federal element arises in relation to allegations of misleading and deceptive conduct, which requires a consideration of ss 51A, 52 and 82 of the Trade Practices Act 1974 (Cth) ("the TPA"). Under s 86 of the TPA, jurisdiction in relation to these matters is conferred on both federal and State courts. Thus there is no problem from a jurisdictional viewpoint in a State court considering the provisions of the TPA. The important considerations are those set out in s 5(4) of the Act and one of those is the interests of justice. 11 There is no presumption that simply because proceedings have been instituted in a particular court, such as the Supreme Court of Victoria, such court must exercise that jurisdiction. Nor is there any onus on a party to persuade the Court in an evidentiary sense: see Buckley v Gibbett (1996) 69 FCR 554 per Nicholson J at 559, Linter (in Liq) v Price Waterhouse (1992) 9 ACSR 346 at 353 and Bankinvest AG v Seabrook per Street CJ at 714 and Rogers AJA at 727. The task of the Court is to consider all the relevant factors and decide whether the requirements prescribed by the language of the section are satisfied. 12 The question whether a court is an appropriate court must not be approached on the basis that there is any judicially established set of criteria or controlling principles such as those which might govern forum non conveniens issues. While considerations relevant to such issues, as they arise in the test of more appropriate forum established by the House of Lords in Spilada Maritime Corporation v Consulex Ltd [1987] 1 AC 460, can be taken into account as relevant they are not controlling: see Bankivest AG v Seabrook per Rogers AJA 727-729; cf Voth v Manildra Flour Mills Ltd (1990) 171 CLR 538, Schmidt v Won [1998] 3 VR 435. It is the criteria prescribed by the language of the Act, viewed in the light of its purpose, which is determinative. The purpose of the legislation is clearly to provide throughout Australia an integrated court system which transcends legal and political state boundaries, and to avoid sterile, expensive and undesirable fragmentation of litigation. The circumstance that the disputes are between residents of different states must be taken into account in deciding if the Federal Court is the appropriate court but it is not a controlling consideration. The unacceptable alternative is to have litigation fragmented in a number of courts throughout the Federal and State judicial systems with the potential for differing decisions on the same dispute, ultimately resulting in a loss of confidence on the part of the community in the judicial system. The purposes, general scheme of the cross-vesting, and operation of the legislation were considered by the New South Wales Court of Appeal in Bankinvest AG v Seabrook (1988) 14 NSWLR 711 at 713-715, 723-6 and 729-730. The present proceeding in the Federal Court and those in the State courts cover the same land and involve the same projects and call for the consideration of the same underlying agreements and loan agreements. There is also considerable overlapping as to parties. The two sets of proceedings are clearly related within the meaning of the Act. The nature and extent of the related matters between the federal and state proceedings is set out in an affidavit of the solicitor for the respondents, dated 13 October 1998, which was filed in the Victorian cross-vesting application proceeding. Taking into account all of these matters, it is obvious that the proceedings should if possible be heard by the one Judge. 13 There is of course no appeal from the decision of Beach J (see s 13 of the Act), with the consequence that if the present proceedings remain in this Court then there must be two determinations on related matters. The judgment of Beach J in relation to the refusal to transfer the Victorian proceedings is a consideration of considerable cogency on the application before me. As discussed in PIHA v Vinidex Tubemakers [1999] FCA 132 at 7-8, s 5(4) contemplates that the courts will give due weight to the responsibilities of each in deciding whether or not to exercise jurisdiction under the cross-vesting laws. 14 The respondents have referred to the fact that some of the issues raise questions as to the operation of s 42 of the Real Property Act 1901 (NSW) and of s 115A(2)(c) of the Conveyancing Act 1919 (NSW), and it is said that because the land in question is situated in New South Wales it is apt that the proceedings should be heard together, perhaps in the Supreme Court of New South Wales as the appropriate forum. As Beach J has pointed out, there is no special feature of a dispute in relation to s 42 of the New South Wales Real Property Act which necessitates that it should be determined by a New South Wales Court. There is a corresponding Act in Victoria so that no particular difficulty is raised by this consideration. On questions of title it is not uncommon for reliance to be placed on decisions of courts in other states on equivalent sections in other sections: see Bahr v Nicolay (1988) 164 CLR 604 at 615. There is, I understand, no equivalent section in the Victorian legislation to s 115A(2)(c) of the New South Wales Conveyancing Act, but this is not a controlling consideration. Merely because the property in question is located in New South Wales, it does not follow that the question cannot be appropriately dealt with by a superior court judge sitting in Victoria. This is the very issue contemplated by s 11(1)(b) of the Act, which provides that where the matter involves a right of action conferred by the law of another State the Court must apply the law of that other State. There is no reason to apprehend that a Supreme Court Judge of one State cannot fully and correctly apply a claim brought under a property statute of another state. It is that specific situation which the Act is designed to overcome. 15 A submission was made that the law of evidence in the Supreme Court of Victoria was not as comprehensive as the law which could be applied by the Federal Court pursuant to the Evidence Act 1995 (Cth). This circumstance, however, is provided for by s 11(1)(c) of the Act which provides that rules of evidence to be applied by the transferee court will be such that the court considers appropriate in the circumstances, being rules that are applied in a superior court in Australia. The latter description of course includes the Federal Court so that the transferee court will have the opportunity, if it thinks it appropriate, to apply the provisions of the federal Evidence Act. 16 As indicated above, there was a suggestion by the applicants that the Supreme Court of New South Wales was the appropriate forum. This scenario envisages a situation where numerous proceedings are commenced in one State court and another proceeding is much later commenced in the Federal Court. Both the State and federal proceedings are then said to be brought in inappropriate courts so that the proceedings should be stayed to enable the transfer of all proceedings to a third forum. Such a result epitomises the essential mischief which the cross-vesting legislation was designed to prevent. In this matter it is essential to take a practical approach so as to ensure that the parties are not encumbered with an outdated, technical application of the Act based on unwarranted procedural refinements which frustrate its primary objective: see Bankinvest AG v Seabrook (1988) 14 NSWLR 711 at 714. 17 In my view, the present case is a clear instance where an order should be made to transfer the proceeding before me to the Victorian Supreme Court. In reaching this conclusion, I rely on the reasons given above and on the considerations against transfer to the Federal Court itemised in the reasons of Beach J. Since the date of that decision, the case for transfer to the Victoria has been strengthened by the fact that inspection of a large number of documents has taken place in Victoria, and also by the further detailed control exercised by the Victorian Court in an attempt to give the litigation some prospect of a comprehensive and efficient hearing of all relevant issues in a single forum. 18 The essentially non-federal nature of the majority of issues raised in the federal proceeding is also an important consideration. To the extent that misleading and deceptive conduct is alleged there is no special reason why the Federal Court should hear such claims. There are corresponding provisions in State legislation. The concepts in that Act are not unknown to State Supreme Court judges and there has been developed substantial doctrine and principle in case law with respect to the application of the relevant provisions: see PIHA v Vinidex Tubemakers, Cascade Group Ltd v Carlton and United Breweries Ltd (1992) ATPR 41-172 at 40, 365 per Sheppard J. It has been established that the Federal Court is not to be regarded as necessarily a more appropriate court than a State or territory Supreme Court to hear a claim pursuant to Part V of the TPA: see PIHA v Vinidex Tubemakers, T O'Connor & Sons v Clough [1996] FCA 263 and Teserioro v Matstar Pty Ltd (1990) 93 ALR 607 at 608. Nor, should I add, is the Federal Court necessarily a more appropriate forum to hear issues concerned with State land law legislation. The other causes of action depend on the application of well known legal and equitable principles and no particular difficulty would be experienced in their application by the State court. 19 An important consideration is, of course, the avoidance of the possibility of conflicts arising from different decisions on the same issues and between the same parties. This possibility, along with the consideration of undue delay, costs and duplication, can only serve to lower the respect for courts in the public perception. The Act is a remedial measure and no steps should be taken to augment the manifest difficulties already inherent in the massive litigation presently before the courts by permitting parallel determinations in two superior courts. Conclusion 20 For the above reasons and taking into account the considerations referred to, I consider that the application for removal of this proceeding to the Victorian Supreme Court should be granted. I do not consider that there are any circumstances which warrant the making of any order other than the usual order as to costs. The applicants on the Notice of Motion having been successful, should have their costs. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin. Associate: Dated: 11 May 1999 Counsel for the Applicant: P M Biscoe QC P Brereton Solicitor for the Applicant: Lees Marshall Warnick Counsel for the Respondent: F G A Beaumont QC A A Nolan Solicitor for the Respondent: Michell Sillar Date of Hearing: 29 April 1999 Date of Judgment: 11 May 1999