FEDERAL COURT OF AUSTRALIA Novo Tank Pty Ltd (In Liquidation) v Formaction Concrete Civils Pty Ltd (No 1) [2014] FCA 260 Citation: Novo Tank Pty Ltd (In Liquidation) v Formaction Concrete Civils Pty Ltd (No 1) [2014] FCA 260 Parties: NOVO TANK PTY LTD ACN 050 210 823 (IN LIQUIDATION) and RICHARD ALBARRAN AND STEVEN ARTHUR GLADMAN IN THEIR CAPACITY AS LIQUIDATORS OF NOVO TANK PTY LTD (IN LIQUIDATION) ACN 050 210 823 v FORMACTION CONCRETE CIVILS PTY LTD ACN 121 583 266, and UNITED INDUSTRIES (WA) PTY LTD ACN 097 788 344 File number: NSD 1982 of 2013 Judge: PERRAM J Date of judgment: 24 March 2014 Catchwords: PRACTICE AND PROCEDURE – application to transfer proceeding to Western Australia District Registry – Federal Court of Australia Act 1976 (Cth) s 48 – balance of convenience – no greater inconvenience to either party Legislation: Corporations Act 2001 (Cth) Pt 5.3A, s 588FA, s 588FF Federal Court of Australia Act 1976 (Cth) s 48 Cases cited: National Mutual Holdings Pty Ltd v Sentry Corporation (1988) 19 FCR 155 considered Date of hearing: 24 March 2014 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 19 Counsel for the Plaintiffs: Mr CD Freeman Solicitor for the Plaintiffs: Nelson McKinnon Lawyers Counsel for the Fifth Defendant: Mr RM Foreman Solicitor for the Fifth Defendant: Metaxas & Hager Lawyers IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1982 of 2013 BETWEEN: NOVO TANK PTY LTD ACN 050 210 823 (IN LIQUIDATION) First Plaintiff RICHARD ALBARRAN AND STEVEN ARTHUR GLADMAN IN THEIR CAPACITY AS LIQUIDATORS OF NOVO TANK PTY LTD (IN LIQUIDATION) ACN 050 210 823 Second Plaintiff AND: FORMACTION CONCRETE CIVILS PTY LTD ACN 121 583 266 Second Defendant UNITED INDUSTRIES (WA) PTY LTD ACN 097 788 344 Fifth Defendant JUDGE: PERRAM J DATE OF ORDER: 24 MARCH 2014 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The fifth defendant's interlocutory application filed 18 December 2013 be dismissed. 2. The fifth defendant pay the plaintiffs' costs of the interlocutory application. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1982 of 2013 BETWEEN: NOVO TANK PTY LTD ACN 050 210 823 (IN LIQUIDATION) First Plaintiff RICHARD ALBARRAN AND STEVEN ARTHUR GLADMAN IN THEIR CAPACITY AS LIQUIDATORS OF NOVO TANK PTY LTD (IN LIQUIDATION) ACN 050 210 823 Second Plaintiff AND: FORMACTION CONCRETE CIVILS PTY LTD ACN 121 583 266 Second Defendant UNITED INDUSTRIES (WA) PTY LTD ACN 097 788 344 Fifth Defendant JUDGE: PERRAM J DATE: 24 MARCH 2014 PLACE: SYDNEY REASONS FOR JUDGMENT (Revised from transcript) 1 By an application dated 18 December 2013, the fifth defendant, United Industries (WA) Pty Ltd ('United'), seeks orders whose effect will be to transfer the present proceedings, which are situated in the New South Wales Registry of this Court, to its Western Australian Registry. Apart from United and the second defendant, who I will refer to as Formaction, the proceedings have otherwise settled against the other defendants. One of the plaintiffs in the proceedings is Novo Tank, which is in liquidation. It was originally contracted by a construction firm, John Holland Pty Ltd, to help build a fuel farm at RAAF Base Pearce, which is about 50 kilometres north of Perth in Western Australia. Novo Tank retained United to do the steelwork in that venture, and Formaction to do the concreting. 2 At some point, Novo Tank appears to have become financially distressed and to have fallen behind, for example, in payment of taxes and superannuation. As a result, United was experiencing difficulties in obtaining payment for the services it was providing to Novo Tank for the steelwork. Formaction was experiencing similar issues. In January 2010, United threatened to leave the site to assist Novo Tank in making the decision to pay it. In those perhaps not unusual circumstances, on 26 March 2010, Novo Tank appointed the present liquidators as its administrators, pursuant to Part 5.3A of the Corporations Act 2001 (Cth). On 10 May 2010, that administration was transformed into a liquidation. 3 I was informed that in the winding up there are a number of priority creditors, the principal one of which is the Department of Education, Employment and Workplace Relations. It has become a priority creditor pursuant to rights of subrogation arising from its actions in having paid out certain employees of Novo Tank their employee entitlements under the scheme known as GEERS. Following an extension granted by Brereton J in the Supreme Court as to the time within which preference proceedings might be begun, the present proceedings were commenced in this Court in September 2013, and they are, broadly speaking, preference proceedings pursuant to ss 588FA and 588FF of the Corporations Act. 4 Originally, five potential defendants were identified in the proceedings, but as a result of a number of settlements which have taken place since the commencement of the proceedings, the only claims now remaining on foot are those against United and against Formaction. The claim against United is for a sum of approximately $2,050,000. To assist them in pursuing the claims, Novo Tank and its liquidators have entered into a funding agreement which was in evidence before me. It is not necessary to set out the terms of that agreement. It suffices, for present purposes, to observe that under it the funder is obliged to meet the ongoing legal costs of the plaintiffs. 5 In the preference proceedings now remaining on foot against United and Formaction there are, as the argument was developed before me, substantially three issues which remain in play. They are, first, the question of solvency; that is to say when did Novo Tank become insolvent; secondly, the question of whether the payments it is alleged that Novo Tank made to United were in fact made; and thirdly, the question of whether the actions of United in receiving the payments, and in the circumstances surrounding them, are ones which can attract a defence based on good faith. 6 It will be obvious from the basic subject matter of the proceedings, namely a fuel farm 50 kilometres north of Perth, that the underlying subject matter of the proceedings is located in Western Australia. It may also be accepted, I think, that insofar as a federal cause of action arises in a State, the present proceedings can probably be said to arise in Western Australia. The contract under which United operated with Novo Tank was subject to a proper law clause which made it subject to the law of Queensland. I do not place any particular significance upon that, and I do not think it affects any of the discretionary questions which presently arise. 7 From the perspective of United, it anticipates the calling of a number of witnesses located in Western Australia. This was the burden of the evidence placed before me, on its behalf, by Mr Julian Monaco, in an affidavit sworn on 18 December 2013. He identified, at paragraph 28 of that affidavit, that the witnesses who would need to be called from Western Australia on United's behalf would be: (a) himself as the chief executive officer of United; (b) a Mr Daniel Walters, who was United's onsite manager. He was needed because he received instructions from Novo Tank's representatives. Mr Walters is in Perth, and no longer works for United. According to Mr Monaco, he will need to be subpoenaed; (c) the financial controller of John Holland in Osborne Park, Perth. He was said to be necessary because, at least at the time the affidavit of Mr Monaco was sworn, there was no evidence that one of the payments had been received. Subsequent to that, by the time of the present hearing, it was now accepted that that payment had been received, and I conclude, in those circumstances, that the financial controller of John Holland will not be necessary; (d) Mr Daniel Hicks and his immediate supervisor, Mr Lyndsay Moyle, who issued instructions on site to United, and approved United's invoices. It was said that it would be necessary to subpoena Mr Moyle. I accept that in all likelihood it will be necessary for United to call these persons as witnesses. 8 On the other hand, I also accept the evidence prepared on behalf of the plaintiffs, that they have witnesses who they will need to call from at least New South Wales and Queensland. They nominated three in particular: Mr Robert Kemp and Mr Francis Hale, both of whom were directors of Novo Tank, and also Mr Erik Hansen who was one of the company's former employees. It seems that Mr Kemp and Mr Hansen are both located in New South Wales: the former in Northmead and the latter in Marsfield. In the case of the director, Mr Hale, however, it appears that he is located in Tugun, Queensland. 9 In addition to those matters, the liquidators of the plaintiffs are, of course, themselves located in New South Wales, although I accept, as Mr Foreman submitted that I should, that the firm of which they are partners, Hall Chadwick, is a national firm operating across the country, including in Perth. Nevertheless, I accept that both the liquidators are based in New South Wales. In addition, I also accept that, quite apart from the liquidators themselves, the plaintiffs will in all likelihood need to call, or at least have present, at the proceedings, Mr Edwin Narayan, who is a supervisor within Hall Chadwick and who, I infer, is the person who in fact has the day-to-day carriage of the winding up, subject to the supervision of the liquidators themselves. 10 The plaintiffs also submitted that it would be necessary for them to engage an expert on the issue, at least of insolvency, and that they were currently minded to do so, calling an identified person from KordaMentha in Sydney. I again accept Mr Foreman's submission on behalf of United that KordaMentha is a national firm and could be utilised in Western Australia. However, I nevertheless conclude that, at least as things currently stand, the engagement is likely, from a practical perspective, to be one which is conducted through the Sydney office. 11 The picture, at least on its face, of the inconvenience which is therefore painted is one in which it is difficult to be dogmatic about which party is more inconvenienced than the other. Certainly, if one looks simply at the number of interstate witnesses which both sets of parties will be put to in the event that there is no change in venue, then, no doubt, United is at least one witness ahead. However, I am not so sure that the scope of the evidence which is before me allows me to be as precise about the ambit of that inconvenience as that raw arithmetic might suggest. For example, to do so would be to proceed upon an assumption that the scope and ambit of each witness was equal, whereas reality seems to me to suggest that it is rather difficult to be precise about matters such as those, particularly at this early time in the proceedings. If matters were to rest there, I would not accept that it was demonstrated that it was in fact more inconvenient for the proceeding to be conducted in Sydney than it was for it be conducted in Perth. 12 I also take into account as a relevant matter that the trial which is contemplated under the present proceedings would be a three-day trial, and would be attended with the usual kind of litigation inconvenience which follows from one party having to move its advisors and witnesses from one jurisdiction to another. A three-day hearing is a relatively modest hearing, having regard to the quantum of the claim which is made, which appears, even taking into account the fact that the fifth defendant will be entitled to prove in the winding up, to be in the order of, perhaps, around 1.5 to 2 million dollars. 13 I am not satisfied that it would be necessary for there to be, for example, a change of solicitors or counsel for whichever party ends up being on the losing end of this application. In modern times there are no particular difficulties with counsel being retained in the city where the trial is being conducted and solicitors being retained in the home state. That is perhaps a roundabout way of saying that I am not sure that, at least in the running of the day-to-day business of litigation, dislocation caused by having the venue in a different state is as high as it has perhaps in the past been. 14 United made an additional point, however, which was not based on matters of that kind. It submitted that it was a small to medium sized business and that if it was compelled to be involved in litigation on the eastern seaboard for a period of three days this would place upon it a degree of unfairness, or at least inconvenience, which was a matter which should be taken into account. I do take it into account, but I am not sure that the degree of dislocation is as large as it might appear on its face. 15 Regardless of where the trial is going to be conducted, the management of United are going to be involved in a considerable degree of disruption. But the true comparison is not just for disruption caused by the trial process in New South Wales, rather, one needs to take into account the trial process itself, wherever it takes place. It seems to me that once one takes out of account the fact that the trial will itself be inconvenient, the degree of disruption caused by the fact that the trial might happen in Sydney tends towards the lower end of the spectrum. In all those circumstances, I do not accept that it has been demonstrated that it is in fact going to be more inconvenient to conduct the trial in Sydney than it would be to conduct it in Western Australia. 16 The relevant statutory power is located in s 48 of the Federal Court of Australia Act 1976 (Cth), which is in the following terms: '(1) 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) Subject to section 80 of the Constitution and sections 68C, 70 and 70A of the Judiciary Act 1903, subsection (1) extends to criminal proceedings.' 17 The operation of this provision has been explained in very many authorities, all of which have emphasised the open-ended and unfettered nature of the discretion. In the Full Court's decision in National Mutual Holdings Pty Ltd v Sentry Corporation (1988) 19 FCR 155, a Full Court, comprising Bowen CJ and Woodward and Lockhart JJ, said the following at 162 of the discretion involved: 'The power conferred on the Court or a judge by s 48 is in terms wholly unfettered. It should be exercised flexibly having regard to the circumstances of the particular case. It would be regrettable and unwise if the Court were to circumscribe the general power conferred by s 48 with inflexible rules or impose inelastic constraints upon its exercise. As the power may be exercised subject to conditions, the Court or a judge is in a position to mould orders under the section to take account of the many and varied circumstances that arise in particular cases. The power conferred by s 48 recognises the national character of this Court. The factors which the Court is entitled to take into account in considering whether one city is more appropriate than another for interlocutory hearings or for the trial itself are numerous. The Court must weigh those factors in each case. Residence of parties and of witnesses, expense to parties, the place where the cause of action arose and the convenience of the Court itself are some of the factors that may be relevant in particular circumstances. The balance of convenience will generally be a relevant consideration, but not necessarily determinative of each case. … It should be noted that the Court may exercise its powers under O 30, r 6 either on the application of a party or of its own motion. The Court must, however, be satisfied, after considering all relevant matters, that there is sound reason to direct that the proceeding be conducted or continued elsewhere. … 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.' 18 Some debate took place before me as to whether, having regards to the terms of that passage, it is sufficient simply to conclude that the balance of convenience favours one party or the other, or whether, instead, as a gateway question, it was first necessary to consider whether a sound reason was shown. Tempting though it is to resolve that engaging question, it seems to me that my factual conclusion that the balance of convenience does not favour Perth over Sydney, or Sydney over Perth, means that that question is strictly irrelevant to my decision. I propose to apply the 'sound reason' interpretation of s 48 referred to in their Honours' reasons, but in doing so, however, I do not regard myself as doing any more than applying the text of s 48 itself. 19 As presently advised, I can see no good reason to transfer these proceedings to the Western Australia Registry of this Court. No doubt, wherever this matter is heard it is going to be inconvenient, but it does not seem to me that the inconvenience occasioned to United is any greater than the inconvenience which will be occasioned to the plaintiffs. In addition to that, of course, as the plaintiffs correctly submitted, they quite properly commenced the proceedings in the Sydney registry of this Court as the identity of the earlier defendants shows. In any event, it was not suggested that there was anything inappropriate or improper for the administration to have taken place in New South Wales, or for the winding up which thereafter ensued by operation of law to be taking place in this State either. In those circumstances I dismiss the application with costs. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. Associate: Dated: 3 April 2014