FEDERAL COURT OF AUSTRALIA Rafferty v Time 2000 West Pty Limited [2008] FCA 1925 PATRICK CAMPBELL RAFFERTY, SANTORA HOLDINGS PTY LIMITED ACN 128 467 550 and KARAVILLE HOLDINGS PTY LIMITED ACN 009 439 178 v TIME 2000 WEST PTY LIMITED ACN 127 893 270, TIME 2000 SYSTEMS (AUSTRALIA) PTY LIMITED ACN 127 853 614, TIME 2000 OPERATIONS (AUSTRALIA) PTY LIMITED ACN 128 700 541, EMBLETON LIMITED (A COMPANY INCORPORATED IN HONG KONG) and STEPHEN GERARD DONOVAN SAD 122 of 2008 BESANKO J 17 DECEMBER 2008 ADELAIDE IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY SAD 122 of 2008 BETWEEN: PATRICK CAMPBELL RAFFERTY First Applicant SANTORA HOLDINGS PTY LIMITED ACN 128 467 550 Second Applicant KARAVILLE HOLDINGS PTY LIMITED ACN 009 439 178 Third Applicant AND: TIME 2000 WEST PTY LIMITED ACN 127 893 270 First Respondent TIME 2000 SYSTEMS (AUSTRALIA) PTY LIMITED ACN 127 853 614 Second Respondent TIME 2000 OPERATIONS (AUSTRALIA) PTY LIMITED ACN 128 700 541 Third Respondent EMBLETON LIMITED (A COMPANY INCORPORATED IN HONG KONG) Fourth Respondent STEPHEN GERARD DONOVAN Fifth Respondent JUDGE: BESANKO J DATE OF ORDER: 17 DECEMBER 2008 WHERE MADE: ADELAIDE THE COURT ORDERS THAT: 1. The application of the second to fifth respondents for an order transferring this proceeding to the Victoria District Registry be refused. 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 eSearch on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY SAD 122 of 2008 BETWEEN: PATRICK CAMPBELL RAFFERTY First Applicant SANTORA HOLDINGS PTY LIMITED ACN 128 467 550 Second Applicant KARAVILLE HOLDINGS PTY LIMITED ACN 009 439 178 Third Applicant AND: TIME 2000 WEST PTY LIMITED ACN 127 893 270 First Respondent TIME 2000 SYSTEMS (AUSTRALIA) PTY LIMITED ACN 127 853 614 Second Respondent TIME 2000 OPERATIONS (AUSTRALIA) PTY LIMITED ACN 128 700 541 Third Respondent EMBLETON LIMITED (A COMPANY INCORPORATED IN HONG KONG) Fourth Respondent STEPHEN GERARD DONOVAN Fifth Respondent JUDGE: BESANKO J DATE: 17 DECEMBER 2008 PLACE: ADELAIDE REASONS FOR JUDGMENT 1 This is an application by the second to fifth respondents for an order transferring this proceeding from the South Australia District Registry of this Court to the Victoria District Registry. The application is made under s 48 of the Federal Court of Australia Act 1976 (Cth) ("Federal Court Act") which provides as follows: The Court or a Judge may, at any stage of a proceeding in the Court, direct that the proceeding or a part of the proceeding be conducted or continued at a place specified in the order, subject to such conditions (if any) as the Court or Judge imposes. 2 At the present time, the proper place of the proceeding within the Federal Court Rules is the South Australia District Registry: O 1 r 4. The Court may make an order or a direction that a proceeding be transferred to another place at which there is a Registry: O 10 r 1(2)(f). The Court also has the power to make an order that a trial or part of a trial be held at a place other than the proper place: O 30 r 6(2). 3 The principles which govern the determination of an application under s 48 of the Federal Court Act are well known and may be briefly stated. The leading decision is the decision of the Full Court of this Court in National Mutual Holdings Pty Ltd v The Sentry Corporation (1988) 19 FCR 155. The Court made a number of points. The power in s 48 is wholly unfettered and should be exercised flexibly, having regard to the circumstances of the particular case. The power in s 48 should not be circumscribed by inflexible rules or inelastic constraints and, while the balance of convenience will generally be a relevant consideration, it will not necessarily be determinative of each case. Although there is no onus of proof on a party seeking a change of venue, there must be a sound reason to order a change of venue. No weight will be placed on a party's choice of venue if that choice was made capriciously. The Court said (at 162): The balance of convenience is important, but its weight must vary from case to case. Ultimately the test is: where can the case be conducted or continued most suitably bearing in mind the interests of all the parties, the ends of justice in the determination of the issues between them, and the most efficient administration of the Court. It cannot and should not, in our opinion, be defined more closely or precisely. 4 The Court identified some of the factors which are relevant when a Court is called upon to exercise the power in s 48. The factors include the residence of parties and of witnesses, expense to parties, the place where the cause of action arose, and the convenience of the Court itself. 5 I mention, without pausing to discuss, the other cases to which I was referred: Cycles & Wheelman Pty Ltd v Beltech Corporation Ltd (1988) 80 ALR 279; Australian Competition & Consumer Commission v Pauls Ltd [2002] FCA 71; Ogawa v Reynolds (2006) 229 ALR 655; Baxendale's Vineyard Pty Ltd v Geographical Indications Committee (2007) 156 FCR 444; Australian Competition and Consumer Commission v Terania Pty Ltd [2007] ATPR 42-173; Consolidated Byrnes Holdings Ltd v Hardel Investments Pty Ltd [2008] FCA 873; First National Group of Independent Real Estate Agents Ltd v Elyod Investments Pty Ltd [2008] FCA 1260. I have considered each of these cases. 6 The applicants in this proceeding are Mr Patrick Campbell Rafferty, Santora Holdings Pty Ltd ("Santora") and Karaville Holdings Pty Ltd ("Karaville"). Mr Rafferty and his wife own Karaville, and that company in turn owns all the shares in Santora. The respondents are Time 2000 West Pty Ltd ("T2W"), Time 2000 Systems (Australia) Pty Ltd ("T2S"), Time 2000 Operations (Australia) Pty Ltd ("T2O"), Embleton Ltd and Mr Stephen Gerard Donovan. T2W is the joint venture vehicle under the arrangements struck between the parties; it has to date taken no role in this proceeding. For convenience, I will refer to the second to fifth respondents as the respondents. T2S, T2O and Embleton are companies controlled by Mr Donovan. 7 It seems that Embleton is the owner of intellectual property rights, being patents, patent applications and trade marks, and that it had granted T2S an exclusive licence, capable of sub-licence, to use and exploit those intellectual property rights. Speaking generally, Mr Rafferty, and the companies associated with him, and Mr Donovan, and the companies associated with him, wished to establish a joint venture involving the incorporation of a company which would conduct a business involving the sale and marketing of modular building units within the State of Western Australia (but excluding an area comprising a radius of 15 km from the central business district of Perth) and the Northern Territory. As I have said, the first respondent, T2W was incorporated as the joint venture vehicle. Companies associated with Mr Rafferty and companies associated with Mr Donovan each took shares in T2W, and Mr Rafferty and Mr Donovan became directors of the company. The arrangement was effected by a number of agreements. These agreements were entered into in late 2007. First, there was a Heads of Agreement entered into on 8 October 2007 by Mr Rafferty, Mr Donovan, T2S and Embleton. Secondly, there was a Joint Venture and Shareholders' Agreement entered into on 23 November 2007 by Mr Rafferty, Santora, T2O and T2W. Thirdly, there was a Rights Agreement entered into on 19 December 2007 by Mr Rafferty, Santora, Karaville, T2S, T2W and Embleton. 8 The basis of the applicants' case is that the three agreements or, in the alternative, the Heads of Agreement and the Rights Agreement, constituted a "franchise agreement" and "franchise system" within the meaning of the Trade Practices Act 1974 (Cth) and cll 3(1) and 4 of the Franchising Code of Conduct, which is a schedule to the Trade Practices (Industry Codes — Franchising) Regulations 1998 (Cth). It is alleged by the applicants that T2S was a franchisor and T2W was a franchisee. It is further alleged that Mr Rafferty and Santora were franchisees, "or alternatively, Rafferty, Santora and Karaville [were] franchisees, being persons with an interest in the franchise within the meaning of 'franchisee' in clause 3(1) of the Franchising Code of Conduct". It is further alleged that Embleton and Mr Donovan were associates of T2S within the meaning of cl 3(1) of the Franchising Code of Conduct. 9 The applicants allege that T2S did not comply with its obligations as a franchisor and that they are entitled to various forms of relief. The applicants seek various declarations, including a declaration that "the Heads of Agreement, the Rights Agreement and the Joint Venture and Shareholders' Agreement are void ab initio, or, in the alternative, voidable and are hereby voided". The applicants also seek an order that the money paid by them under the three agreements be repaid to them. 10 As is not uncommon on applications of this nature, there is something to be said on both sides of the question of whether the proceeding should be transferred to the Victoria District Registry. 11 The applicants are a natural person (Mr Rafferty), who lives in Western Australia, and two companies (Santora and Karaville), each of which has its registered office and principal place of business in Western Australia. The law which forms the basis of the applicants' cause of action against the respondents is a law which applies throughout Australia, that is, the Trade Practices Act 1974 (Cth) Pt IVB and Trade Practices (Industry Codes — Franchising) Regulations 1998 (Cth), and no statute law of a particular state is identified in the pleadings as being relevant. The applicants' evidence is that the first applicant, Mr Rafferty, executed the following agreements in Western Australia: the Heads of Agreement, the Joint Venture and Shareholders' Agreement on his own behalf and on behalf of Santora (as did his wife who was the other director of Santora) and the Rights Agreement on his own behalf and on behalf of Santora, Karaville and T2W. Although the registered office of T2W is in Victoria, its principal place of business is said to be in Western Australia. The solicitors acting for the applicants have been the first applicant's solicitors for about 10 years and have acted in relation to his business interests during that time. The respondents assert that the first applicant signed the Joint Venture and Shareholders' Agreement in Melbourne. I cannot resolve this factual dispute on an application of this nature; in the end, I do not think the point is of particular significance. 12 The respondents are three companies and a natural person. The second and third respondents, T2S and T2O, each has its registered office and principal place of business in Victoria. The fourth respondent, Embleton, is a company incorporated in Hong Kong, and it has its registered office there. Almere, another company incorporated in Hong Kong, and which has its registered office there, is the sole corporate director of Embleton, and Almere's sole director is Mr Donovan. The fifth respondent, Mr Donovan, resides in Victoria. Clause 29.5 of the Rights Agreement provides that the agreement is to be read and construed according to the laws of Victoria and that the parties submit to the jurisdiction of that State. Clause 36 of the Joint Venture and Shareholders' Agreement is to similar effect, with a statement that the parties "irrevocably and unconditionally submit to the non-exclusive jurisdiction of the courts of Victoria". Madgwicks, lawyers based in Victoria, acted for the respondents in the transactions which are the subject of the three agreements and they are the principal solicitors for the respondents in this proceeding. Furthermore, Madgwicks received payment of the licence fee of $1 million into their trust account (under cl 4 of the Rights Agreement). 13 The respondents claim that the three agreements were "predominantly negotiated and executed in Victoria". They state that at the trial they intend to call 8 to 10 witnesses, all of whom reside in Victoria. These witnesses, it is said, will give evidence "as to the intention behind the agreements, and the intention of the parties in entering into the agreements", "the design and marketing stages of the joint venture" and "events occurring around the creation, execution and implementation of the agreements". I am prepared to accept that the respondents plan to call witnesses at the trial who reside in Victoria, although, until witness statements are filed and served, it is not possible to say how many witnesses are likely to be called or to assess with any precision the extent to which their evidence will bear on the issues or be in dispute. 14 The respondents also refer to the inconvenience of transporting company records of some of the respondents to South Australia and of instructing solicitors and counsel in both Victoria and South Australia. 15 In my opinion, the applicants' choice of venue was not a capricious one. The South Australia District Registry was chosen because that is where the applicants' solicitors of some 10 years are based. It was not chosen to vex or inconvenience the respondents. I think that this conclusion is supported by the fact that, had the applicants chosen the Western Australia District Registry on the basis that it is in the state in which they reside or are located, that choice, it may be assumed, would have caused greater inconvenience and cost to the respondents. 16 In circumstances where an applicant's choice of venue is not a capricious one, the respondent must show a sound reason for a change of venue. Having regard to the fact that the applicants' cause of action is based on a law applying throughout Australia and that a degree of inconvenience and cost will be occasioned to one or other of the applicants or respondents whichever venue deals with the proceeding, I think the question of whether the proceeding should be transferred to the Victoria District Registry turns on whether the fifth respondent's assertion that the respondents wish to call at the trial a number of witnesses who reside in Victoria is a sufficiently sound reason to order the transfer of the proceeding. Of course, I cannot make judgments as to whether witnesses will be necessary or important. However, some assessment of the respondents' assertion must be made. I am not convinced, having regard to the issues identified in the pleadings and the evidence before me, that the evidence of witnesses who reside in Victoria cannot be accommodated by taking the evidence from those witnesses by video link, or possibly by conducting part of the trial in Victoria. In my opinion, the respondents have not shown a sufficiently sound reason for transfer of the proceeding and their application must be refused. Conclusion 17 The application of the second to fifth respondents for an order transferring this proceeding to the Victoria District Registry is refused. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko. Associate: Dated: 17 December 2008 Counsel for the Applicants: Mr I C Robertson Solicitor for the Applicants: Cosoff Cudmore Knox Counsel for the Respondents: Mr T P Duggan Solicitor for the Respondents: Madgwicks Date of Hearing: 30 October 2008 Date of Judgment: 17 December 2008