New South Wales Supreme Court CITATION : Talisman Technologies Inc v Queensland Electronic Switching Pty Ltd [2001] NSWSC 512 CURRENT JURISDICTION: Equity Division Commercial List FILE NUMBER(S) : SC 55053/01 HEARING DATE(S) : 1 June 2001 JUDGMENT DATE : 21 June 2001 PARTIES : Talisman Technologies Inc -v- Queensland Electronic Switching Pty Limited & Bank of Queensland Limited & Compaq Computer Australia Pty Ltd JUDGMENT OF : Hunter J COUNSEL : Applicant/First & Second Defendants: H Fraser QC Respondent/Plaintiff: J Sheahan SC & A S Bell SOLICITORS : Applicant/First & Second Defendants: Clayton Utz Respondent/Plaintif: Atanaskovic Hartnell CATCHWORDS : Practice & Procedure - application to transfer proceedings out of juridiction - "interests of justice" ground - overlapping issues with issues in Queensland Supreme Court proceedings - order for early determination of separate question in Queensland proceedings - avoidance of two tribunals exercising jurisdiction over related issues. LEGISLATION CITED : Jurisdiction of Courts (Cross-Vesting) Act 1987 Trade Practices Act 1974 DECISION : The proceedings be transferred into the Supreme Court of Queensland. Costs of the application to be costs in the proceedings. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST HUNTER J THURSDAY 21 JUNE 2001 50053/01 TALISMAN TECHNOLOGIES INC -v- QUEENSLAND ELECTRONIC SWITCHING PTY LIMITED & ORS REASONS FOR JUDGMENT 1 This is an application by Queensland Electronic Switching Pty Ltd (QES) and Bank of Queensland Ltd (BOQ) for the transfer of these proceedings to the Supreme Court of Queensland pursuant to s 5(2) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (the Act). That section is in the following terms: " (2) Where - (a) a proceeding (in this subsection referred to as the "relevant proceeding") is pending in the Supreme Court of a State or Territory (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 another State or Territory and it is more appropriate that the relevant proceeding be determined by that other 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 another 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-subparagraph (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 other Supreme Court; or (iii) it is otherwise in the interests of justice that the relevant proceeding be determined by the Supreme Court of another State or Territory; the first court shall transfer the relevant proceeding to that other Supreme Court." 2 The only basis upon which a transfer of these proceedings is sought is on the "interests of justice" ground. Primarily, what has given rise to this application is the institution of proceedings in the Supreme Court of Queensland by QES for the winding up of Australian Company Number ACN 091 907 443 Pty Ltd (the Company) on the just and equitable ground (the Queensland proceedings). 3 The Company is the subject of a joint venture agreement dated 31 March 2001 (the agreement) between QES, BOQ, Talisman Technologies Inc. (Talisman), Saracen Financial Services (Saracen), Compaq Computer Australia Pty Ltd (Compaq), and the Company. 4 The recitals of the agreement were as follows: "RECITALS A. As at the date of this agreement, the sole shareholder of the Company is …[QES], which holds one Share…[BOQ] has reserved the company name EBANKOZ.COM on behalf of Talisman. B. ...[QES], Talisman, Saracen and Compaq wish to enter into a joint venture pursuant to which each of them will provide certain services and technology to the Company in return for Shares. C. Each of …[QES], Talisman, Saracen, and Compaq have agreed to subscribe for Shares constituting 49.9%, 22.5% and 5% of the Company respectively on the basis set out in this agreement. D. This agreement records the terms and conditions agreed by the Parties for the management and control of the Company and the contribution of certain services and technology to the Company by the Shareholders." 5 The agreement was subject to four conditions subsequent, namely, the adoption of a business plan as defined: the adoption of a budget as defined: the obtaining of satisfactory funding for the business of the Company and the obtaining of all "regulatory approvals" required in respect of the parties' obligations under the agreement. 6 The business of the Company was defined as meaning "providing ATM Services" throughout some eighty one locations of BOQ and some "two hundred and nineteen new ATMS to be acquired by the Company in accordance with the Business Plan". 7 Clause 2.2 of the agreement imposed obligations upon the parties to use their best endeavours to ensure the satisfaction of those conditions subsequent and contained an acknowledgment that the parties had entered into the "transaction on utmost good faith and on the reliance that [they would] duly perform their obligations under [the] agreement". 8 Under cl 3 Talisman agreed to license or procure the licence for the Company of "the Non-ATM Technology that the Company [required] to fulfil the Business Plan". Under cl 4 Saracen undertook a similar obligation in relation to ATM technology. 9 QES was obliged by cl 5 to license to the Company certain intellectual property rights which it or BOQ owned or were able to provide to the Company, and agreed to pay a transaction fee in respect of a shortfall in monthly transactions per ATM (over the initial five year period of the business of the Company) below 3,500 transactions. 10 The intention of that clause was expressed as follows: "5.7 Intention of clause 5.5 The Parties acknowledge the underwriting by …[QES] under clause 5.5 is intended to provide security to the Company's financiers that the Company will have the capacity to meet its repayment obligations under its financing documents." 11 The objectives of the parties in entering the agreement was expressed in cl 8 in the following terms: "8. OBJECTIVES 8.1 Objectives The objectives of the Shareholders in entering this agreement are: (a) to use their respective business skills, know how and experience and expertise to manage and conduct the Business; (b) to outline the decision making procedures for the Company; and (c) to ensure that the Business is managed to maximise the value of the Company. 8.2 Carrying out objectives To carry out the objectives, each Shareholder must: (a) be just and faithful and provide full information to each other in relation to the affairs and activities of the Business; (b) do or cause to be done all things necessary or desirable to carry out this agreement including casting votes as Shareholders and causing their nominees to the Board to carry out this agreement; and (c) not unreasonably delay any action, approval, direction, determination or decision required under this agreement." 12 Under the equity funding provision (cl 10), QES was to apply for and be allocated 4989 shares at the issue price of one dollar. Control of the Company at board level reflected the percentage share holding of the participants (cl 11). Talisman and Saracen, each held 2,255 shares and Compaq 500 shares resulting in a paid up capital of $10,000 (QES holding one share at the date of the agreement) 13 Cl 12.3 imposed a restriction on decisions of shareholders such that certain decisions could only be made by a unanimous vote of all shareholders. The subject matter of such decisions included "winding up the Company". 14 Certain decisions could only be taken by directors who represented shareholders holding more than 75% of the Company's shares (cl 12). That applied to approval or amendment of the business plan; the acquisition of an asset in excess of the value of $100,000; sale of the major undertaking of the Company; any change in the "strategic direction of the Company" and, more pertinently, "the Company entering into any arrangement to borrow money [or] entering into any arrangement to give any guarantee, mortgage, charge or other security over the assets of the Company". Restrictions were imposed by cl 18 on transfer of shares with pre-emptive rights given to shareholders. 15 Cl 35 provided that the applicable law was the law of Queensland and recorded that each party submitted to the non-exclusive jurisdiction of the courts of Queensland. 16 During the course of the hearing of this application leave was granted to Talisman to file in court a notice of motion returnable instanter, seeking leave to join Saracen as a plaintiff in the proceedings. It was stated by senior counsel on behalf of Talisman that the joinder of Saracen would not expand the matters upon which Talisman relied in opposing the transfer of these proceedings to the Queensland Supreme Court. It was accepted that the application to transfer the proceedings should be treated on the basis that Saracen was a party, without making any order to that effect. 17 By its summons Talisman contends that the conditions subsequent were satisfied and that BOQ and QES were in breach of the agreement and of alleged fiduciary duties arising out of the agreement. In particular it is alleged that QES and BOQ were in breach of their obligations to act in good faith, especially in relation to their failure to consider financing proposals for the funding of the Company's business plan. Similar allegations were made the foundation of a cause of action based on s 52 of the Trade Practices Act 1974 (Cth). 18 These proceedings were instituted by summons filed on 24 April 2001, the day after the filing of the application by QES in the Queensland proceedings. The affidavit filed in support of that application is that of Robert Anthony Hines sworn 23 April 2001. I do not think it is useful to recount the substance of that affidavit. It is a very detailed one with voluminous annexures which detail the history of the venture. The substance of the affidavit is contained in pars 5, 6, 71 and 72 in the following terms: "5. For the reasons stated in this affidavit, it has proved impossible to conduct the business for which the company was formed. There has also been a breakdown of trust and confidence between the shareholders and directors of the company. 6. As explained later in this affidavit, the differences between the parties to the agreement and amongst the shareholders and officers of the company relate to fundamental aspects of the venture. To date, the extensive efforts by the relevant parties to resolve these differences have not been successful. I have no reason to believe that there is any prospect of these differences being resolved in the future. … 71 QES/BOQ's position is that : (a) … Talisman has not explained: … (v) How it is proposed to secure finance for the construction phase of the project given that any obligations on QES/BOQ to provide security do not commence until after completion of construction. … (b) QES/BOQ no longer trust Talisman or its officers or have any confidence in them having regard to: (i) The failure by Talisman to provide proper responses to the issues raised by QES/BOQ. (ii) The unfounded allegations of misconduct by QES/BOQ and/or its officers. (iii) The purchase by Talisman of all of the assets of Saracen and the appointment of Talisman's CEO (Gary Judd) as Saracen's nominee director to the company so that Saracen is no longer an independent shareholder. 72. There has been a breakdown of trust and confidence between the shareholders of the company and between the parties to the agreement. There is no prospect that such trust and confidence can be restored." 19 The defence and cross claim of QES and BOQ in these proceedings mirror, in substance, the allegations raised in support of QES's application in the Queensland proceedings. The defence denied satisfaction of the conditions subsequent, alleged false representations on the part of Talisman as to its ownership of technology to be made available to the Company and as to the engagement of System Integration Services to act as project manager in the installation of the ATMs contemplated by the agreement. QES and BOQ denied that Talisman ever submitted for the consideration of the board "proposals for complete project funding" and denied particular allegations as to a lack of utmost good faith in their conduct in relation to performance of the agreement. 20 If the exercise of a discretion simply required an examination of the nature of the Queensland proceedings and that of these proceedings the exercise I think would be a comparatively simple one, in that : (a) I think it is reasonably clear that the issues raised in these proceedings and in the Queensland proceedings should be determined by the one tribunal. (b) Having regard to the location of the great preponderance of witnesses who may be called in relation to those issues, the most appropriate venue for the determination of those issues is in this Court. 21 The affidavit of Michael Milne sworn 25 May 2001, he being a director of Talisman, identified the areas of evidence relevant to the proceedings as advised by the solicitors for Talisman. In relation to those issues he particularised the persons who may be called to give evidence on behalf of the plaintiffs in these proceedings, assuming Saracen to be one. 22 The schedule to his affidavit identified some fifty persons with knowledge of the matters the subject of the issues raised by QES and BOQ in their defences. The description of the issues in his affidavit is, on the face of it, a satisfactory general description of the principal issues. While the number of possible witnesses as identified by him will undoubtedly be pared down, it is a reasonable inference that a large number of those persons would eventually be required as witnesses. It is also clear that nearly all of those potential witnesses are situated in Sydney. There are three residents of Melbourne, one from Seattle, Singapore, San Francisco and Auckland and two from Los Angeles. Most of those potential witnesses are third parties in the sense that they are not officers or members of Talisman or Saracen. 23 By comparison, the affidavit of Robert Anthony Hines and that of Justin John Otto Marschke, sworn respectively 2 and 30 May 2001, in support of this application, identify fourteen potential witnesses for the defendants, one of whom is a resident of London, another of Melbourne - the remaining twelve being Brisbane residents. They are made up of employees or officers of BOQ, "Legal counsel involved in drafting [the] agreement" and a consultant. 24 Factors, such as the parties' choice of Queensland law as the proper law under the agreement: the acknowledgment by the parties of the non-exclusive jurisdiction of Queensland courts: the location of the ATMs contemplated by the agreement and which I assume would be located, mainly, in Queensland: the domicile of the parties (Talisman is a Virgin Islands entity) and where the Company operated, in my view, have little bearing on the determination of the question of what is required in the interests of justice in this application. 25 It is common ground that no law peculiar to the State of Queensland is involved in these proceedings. The acknowledgment of the non-exclusive jurisdiction of the Queensland courts is of marginal utility and may have been thought desirable having regard to the foreign domicile of Talisman. The conduct of the affairs of the Company appear to have taken place by way of board meetings in both Brisbane and in Sydney. The location of the ATMs is a matter of little significance to the issues raised in these proceedings. 26 If the matters so far referred to in these reasons were the only matters that required consideration I would have little hesitation in rejecting the application, subject to Talisman undertaking to apply for a stay or a transfer of the Queensland proceedings to the Supreme Court of New South Wales. 27 However, steps have been taken by QES in relation to the Queensland proceedings which I think bear heavily upon the exercise of the discretion required in this application. 28 The significance of the steps taken by QES in the Queensland proceedings I think needs careful examination. On 29 May 2001 proceedings took place before Holmes J who heard and determined an application by Talisman, as the second respondent in the Queensland proceedings, that those proceedings be adjourned, or stayed, pending the determination of the application in these proceedings. 29 The terms of Talisman's opposition to the winding up application are as follows: "1. The application for the winding up of the first respondent (" JV Co ") has as its basis an alleged irretrievable break down of relationship between the parties which the applicant (" QES ") says renders the proposed joint venture unworkable. 2. The second respondent has commenced proceedings in the Supreme Court of New South Wales against QES and Bank of Queensland Limited in which it alleges that QES and BOQ have breached their obligations under the Subscription and Shareholders Agreement (the "Joint Venture Agreement "), their fiduciary duties and implied contractual obligations. If the second respondent's allegations in the NSW Proceedings succeed, then it will contend that by alleging an irretrievable breakdown of relations to found a winding up application QES is taking advantage of its wrong to achieve a remedy. 3. Further in the NSW Proceedings the second respondent also seeks specific performance of the Joint Venture Agreement. For that remedy to have any utility, JV Co the subject of the current winding up application must be in existence. 4. These proceedings have been commenced by the Applicant in breach of the Joint Venture Agreement. 5. The relief sought be (sic) the Applicant in these proceedings should be refused on the ground that the Joint Venture Agreement provides adequate protection for the shareholders of JV Co see clause 18 of the JV Agreement. 6. The second respondent is also the largest creditor of JV Co in the amount of $295,876.00. As discussed in paragraph 3 above the second respondent also seeks specific performance of the JV Agreement in the NSW Proceedings. If such relief is granted then the continued existence of the JV Co will mean that it is likely the second respondent will recover its debt from the JV Co. This will not be the case if JV Co is wound up." 30 I assume that the reference to the proceedings being brought in breach of the agreement is a reference to par 12.3 quoted earlier in these reasons. Clause 18 referred to in par 5 of those grounds provides for a restriction on the transfer of shares in the Company, as earlier noted. 31 The transcript of the proceedings before Holmes J on 29 May 2001 was put in evidence by the applicants in the application before me. The upshot of the hearing before Holmes J was the setting aside of three days, commencing 31 July 2001, to determine an undefined separate question in the winding up application and which, so far as the transcript of the proceedings of 29 May 2001 disclosed, is described as "the funding question". Presumably, an attempt will be made to isolate that question from the allegations against QES and BOQ concerning the breach of the duty of utmost good faith and of their obligations under cl 8 of the agreement, in particular, in the context of proposals of finance necessary for the operation of the Company's business. 32 There are some disconcerting aspects of the approach adopted by QES in the Queensland proceedings in pressing for a hearing of a separate question and the stance adopted by QES and BOQ in the application before me. 33 Before Holmes J it was contended on behalf of QES that the 'funding' question could be determined separately without any involvement of questions of credit and that, in the circumstances it should be determined separately from the issues raised in these proceedings. For example, it was submitted by Mr Keane QC for QES as follows: "… It's a question of whether in themanagement of the application to wind this company up, the Court is able to come to the conclusion that for reasons not associated with breach on our part, the company cannot proceed. And if the Court is in a position to come to that view after a short hearing which doesn't involve credit , the Court being able to come to that view in the course of managing our application in this Court, then the Court can proceed to deal with our application on that point ." "We submit that the position then is that there is no reason to adjourn or stay these proceedings and, your Honour, it's really, with respect, a little disingenuous to say they're just being adjourned until Friday or the outcome of Friday. In truth they're being adjourned so that the outcome - or their being adjourned so that they will be determined following the outcome of the New South Wales proceedings, whether that's up here or down there. For our part we say that they can be determined separately . They should be , having regard to the problems which we have, and they ought to be determined in these proceedings because all the parties are here in ours, and because the parties have agreed to submit to the jurisdiction of this Court . Now, if the New South Wales Court decides to keep our learned friend's proceedings down there we would, nevertheless, urge that our proceedings here should proceed and, of course, your Honour understands that there are currently - there is currently before this Court no application by anyone to transfer these proceedings down there." (T27:5 - T27:14….T13:31- T13:51) Emphasis added. 34 It was accepted by senior counsel for the applicants before me, I think correctly, that questions of credit may well arise in the determination of a separate question in the Queensland proceedings which could disqualify Holmes J from determining other issues in the Queensland proceedings and, presumably, the related issues raised in these proceedings. 35 I note in relation to the proceedings of 29 May 2001 that Mr Keane QC for QES appears to have accepted that the determination of the issues raised in these proceedings would involve a "very large trial with the fifty witnesses investigating everything in the case of this company". 36 At a later point senior counsel for QES and BOQ relied upon the fact that the determination of the New South Wales proceedings would involve a "very large trial with fifty witnesses either in New South Wales or [Queensland and that] the objective [was] to delay resolution of [the Queensland] proceedings". 37 Before me it was challenged by QES and BOQ that the determination of these proceedings would involve such a collection of witnesses, although no evidence was placed before me to support that submission. 38 It was also submitted by QES in the proceedings before Holmes J that there was some urgency in having the Queensland proceedings "determined promptly". 39 Again, it was put to Holmes J that there were "circumstances of urgency which genuinely displaced the considerations of a measured, leisurely management of the process, and which do suggest that if it is possible to resolve [the Queensland] proceedings without the expense of investigation and trial that [the] proceedings in New South Wales invites then that should happen". I am unaware of evidence of the "circumstances of urgency" there relied upon. No such evidence was advanced in the application before me. 40 It was also submitted on behalf of QES in the Queensland proceedings that : "Whether or not [QES and BOQ] were at fault for [the inability of the parties "to agree on the funding of the construction phase of the project"] is a question of construction of the joint venture agreement and …. that the answer to that question is readily attainable by looking at the joint venture agreement." (T10:46 - T10:51) 41 In support of that submission it was put that QES and BOQ "were under no obligation to underwrite the funding of the construction of [the subject] ATM's (sic)." As earlier stated, I do not understand that to be the true issue between the parties or at least that is not an issue that is capable of effectively being isolated from related questions. At the very least there is likely to be involved an examination of the several alleged financing proposals advanced for the consideration of QES and BOQ in the context of their respective obligations to act in utmost good faith in respect of their obligations under the agreement. 42 In what appears to me to undermine the proposition that a separate question may be successfully extracted from the issues in the Queensland proceedings and effectively determined in a separate hearing, it was submitted by senior counsel for QES and BOQ before Holmes J: "That the company is moribund and that it is moribund in the sense that the venture is impossible of performance for the reason that there is no money and if it's right to say that there is no money to enable it to go ahead for reasons which are not our fault , then the fundamental proposition on which… [Talisman relies] that we would refuse to (sic) winding up because our breaches of contract caused an impossibility of performance so the venture is incorrect". (T11:48 - T11:56) Emphasis added 43 That description of the issue between the parties only emphasises my view that the entanglement of the obligation to act with utmost good faith and the conduct of the parties in relation to financing proposals for the company are inextricable from the 'funding' question. 44 On the face of the agreement, the parties contemplated the raising of substantial finance in order to put in train a business plan as defined by the agreement. The Company's paid up capital was a mere $10,000. It is likely that the 'funding' question would involve questions of the conduct of BOQ and QES in relation to the attempts by the Company to put in place satisfactory financial facilities - assuming that the remaining conditions subsequent of the agreement had been, or could be, satisfied. 45 Moreover, the hearing of any separate question, however described, involves a construction of the agreement. It would be bizarre in my view to have that question examined in the Queensland proceedings, while the issues raised in these proceedings stand apart from the Queensland proceedings. 46 It also appears to me that, in the proceedings before Holmes J on 29 May, no reference was made to the limitation under the agreement upon a voluntary winding up of the company. To the extent that such a provision may bear upon the issues raised in the Queensland proceedings, it is difficult to see how the utmost good faith obligation would not intrude into that area. 47 In examining the possibility of extracting a separate question for determination which would, if decided one way, determine the whole proceedings, the following exchange took place before Holmes J: "[MR KEANE]: All the parties affected by our application are at present in these proceedings but not in New South Wales. The application we make is not opposed by any participant of the joint venture other than Talisman and the substantive basis for the opposition is that we have caused the impossibility of performance of the joint venture. That proposition depends on whether there is some money and whether we are obliged to provide it, and we submit that the point that we are not obliged to provide it is crystal clear . HER HONOUR: Is it as simple as the question of your not providing the funding? Is there no other breach alleged against you? MR KEANE: Your Honour, they allege a number of breaches on our part but if - if it's correct to say that their allegation that we are in breach in not providing security for the financing of the construction stage, then one is inevitably left with the position that the company is moribund for reasons which are not our fault and that ---- HER HONOUR: So that any other breaches are by the by, you say?" (T:12:31 - T12:56) Emphasis added 48 As to the relationship between the Queensland proceedings and these proceedings it was further submitted by Mr Keane QC as follows: "If your Honour thinks it's not appropriate though to proceed today to a winding up then it's our submission that your Honour should give directions which indicate that your Honour does not accept that our application should depend on the determination of the New South Wales proceedings. In particular we would ask that your Honour make directions for an early hearing of the winding up application. For our part we don't see that that involves discovery or pleadings, but that is perhaps another matter. We ask that your Honour make those directions plainly on the footing that your Honour does not regard this application as depending on the outcome of the New South Wales proceedings … That may well be so. It may be convenient that they be managed together, but it does not follow that they need to be finally heard and determined together . The management of the cases may indeed involve the determination of the separate point or a separate point, or a number of separate points, but on no view in our submission, on no view should these proceedings, the proceedings before this Court be fixed to a timetable where they cannot be resolved independently of the New South Wales proceedings. For them to be fixed into such a timetable would be inconvenient, it would be unnecessary and it would be distinctly unjust to our side." … (T18:22 - T18:51) Emphasis added 49 In relation to the passages emphasised I make two observations: (a) the true issue between the parties is whether QES and BOQ are in breach of their obligations under cl 8 of the agreement in relation to the financing of the Company's alleged business plan - not whether QES and BOQ were obliged to "provide security for the financing of the construction stage"; (b) where questions of mala fides are raised I would have thought that the process of discovery was essential. 50 However, the following exchanges between Holmes J and counsel reflect an apparent acceptance by the Court of QES's description of the 'funding issue' : "HER HONOUR: I must say though, Mr Sheahan, the joint venture seems to be going nowhere and it seems to me a proper basis for seeking a winding up on the just and equitable ground that that's the case. The only thing that might stop it though is whether the position that it's in is brought about by any breach by the Bank of Queensland of its obligations to - under 5.5, if they go so far as requiring it to guarantee the Rentworks proposal, given that it's said to start from - in that e-mail - I've forgotten the expression already. There might be a live question about that. Whether there was an obligation under 5.5 which would have meant then that it should have been considering that proposal as expressed and varied by the e-mail. But apart from that issue, why wouldn't the fact that the financing seems dead in the water be enough to wind up? MR SHEAHAN: Well, we say the financing isn't dead in the water. As at December Talismans was assured that it had three financing proposals, independent finance proposals and in relation to at least one of them it didn't require BOQ to provide any security at all until the turnkey date, I think was the expression in the letter. And that if the project failed or was frustrated or stalled at that point it was because - it was simply because of BOQ's failure to honour its obligations to make all reasonable endeavours to bring back the satisfaction of the condition subsequent. Now, what our learned friends are asking your Honour to do is to decide on a summary basis, on an adjournment application, that those contentions are clearly untenable. HIS HONOUR (sic): Well, I'm reluctant to do it, as you say, on a summary basis because I think there's argument to be had about what 5.5, 5.6 and 5.7 mean and what the actual implications of the e-mail are and where that all ends you up. But taking that to be the case why can't that be sorted out in a very short time frame. MR SHEAHAN: Well, if what your Honour is talking about is halving (sic) off a separate question. HER HONOUR: It's a separate question which may well dispose of the whole thing because if there was no obligation on the Bank of Queensland to provide such security as Rentworks wanted then it means that there was no funding proposal which fitted the bill which means that there is no funding for the company and isn't that the end of the matter really?" (T22:47 - T23:37) … HER HONOUR: Isn't it just a question of the availability of funding for the construction case" MR SHEAHAN: Well, in part, your Honour being --- MR KEANE: Your Honour, we can assist here. We would agree to confine it to the funding question." (T:28:45 - T28:51) 51 I am satisfied that the issues raised in the Queensland proceedings and in these proceedings should be dealt with in the one tribunal. But for the decision of the Queensland Supreme Court to embark on a hearing of some of those issues at the end of July I would have little hesitation in reaching the conclusion that on the interests of justice ground that these proceedings should remain in New South Wales, particularly noting that, in the proceedings before Holmes J, senior counsel for QES and BOQ accepted that these proceedings will involve the calling of witnesses as contended for by Talisman in this application. 52 However, since I am satisfied that only one court should be seized of the issues raised in the Queensland Supreme Court and in these proceedings, with some reluctance I have come to the conclusion that if the Queensland Supreme Court is to embark upon an early hearing of any issues which relate to the issues in these proceedings, then these proceedings should be transferred into the Queensland Supreme Court, and I so order. The costs of the application will be costs in the proceedings. 53 Since the dictation of these reasons, as foreshadowed during the course of the hearing of the application, the parties have informed me of the outcome of a further hearing in the Queensland proceedings on 6 June 2001 in which the following orders were made: "1. Application for winding up on the just and equitable ground be heard by the Court particularised as follows:- (a) The main object of the first respondent was to conduct "the business" as defined in the subscription and shareholders agreement dated 31 march (sic) 2000; and (b) This object is impossible of performance because there is no reasonable prospect of the company achieving funding for the Business in accordance with the subscription and shareholders agreement". 54 The formulation of that question only serves to emphasise my inability to accept that such a question can be determined discretely from issues concerning the obligations of the parties in relation to the establishment of working capital necessary for the Company's business, and, in particular, their obligations to act in the utmost good faith in relation to the cl 8 objectives of the agreement. In those circumstances I think it is unlikely that the determination of that question will be free from questions of credit. 55 Moreover, the transcript of the proceedings before Holmes J on 6 June 2001 which the parties forwarded to me following the hearing on this application, does nothing to dispel that view. That may be illustrated from the following exchanges between Holmes J and senior counsel for QES and BOQ: "HER HONOUR : Thankyou. Mr Keane, just to start with I have set down the application on the basis that the argument is about the availability of funding . There is, as Mr Sheahan reminds me, your alternative ground that there's a breakdown in the relationship. MR KEANE: Yes. HER HONOUR: Now, really the conclusion I'd come to was that the one could be dealt with in advance of anything else but the other not. MR KEANE: Yes. HER HONOUR: On that assumption that the breakdown in the relationship issues go well off into the never never pending the trial of the action ---- MR KEANE: And I think on the basis as your Honour said to us tha t they are by the way if the principal object of the company fails because of the want of funding through no fault on our part. That there has been or has not been a breakdown of trust and confidence is by the way and we continued to urge your Honour to that view. HER HONOUR: All right. Well, if that's the case though why do you need to keep the application alive any further than the hearing on the basis of the absence of funding if those - what I've described as the by the way issues are to be canvassed anyway in the proceedings that are presently in New South, is there any need to keep the application on foot beyond this hearing? MR KEANE: Well, your Honour, no, the answer is no… HER HONOUR: Well, is the thrust of that then your (sic) content to have your application for winding up finally determined by a hearing in July? MR KEANE: Yes, yes, yes, it is, your Honour. HER HONOUR: So that you never get to argue about breakdowns of relationships in the context of winding up? MR KEANE: Yes. HER HONOUR: All right. That resolves that aspect. But Mr Sheahan says that the bad faith aspect embraces all sorts of things that will have to be canvassed on this hearing, what do you say about that? MR KEANE: Your Honour, our learned friend has mentioned that our submission is becoming a little strident and it may be that he's right about that. One of the reasons for that is that as we said to your Honour last time we have asked them - we asked them in relation to the winding up proceedings to give us their affidavit material. They didn't. They condescend to nothing more than these extraordinary notices of grounds of objection which Mr Milne swears in a general way are his grounds of objection. They have not put on any affidavit material. They still have not. … HER HONOUR: The greater concern may be though, rather than questions of immediate dispute, the fact that they say the context in which it should all be examined is the entirety of the bank's conduct . MR KEANE: Well, your Honour, I suppose one of the things that Judges, in terms of various statements about convenience and the circumspection that must be exercised in exercising the powers which the Courts have … And if our promises did not involve an obligation to underwrite the funding of the venture, then all the investigation, either the toings-and froings, to see whether we were using our best endeavours, just doesn't matter because we were never under an obligation to use our best endeavours to underwrite the funding of the venture. That is why the question is fundamentally one of construction of the joint venture agreement, and particularly clause 5 as we submitted last time. … You don't put the cart before the horse and say, what were we obliged to do in terms of reasonable endeavours or good faith? You ask, first of all, what were our obligations in relation to which we had to exercise reasonable endeavours and act in good faith? Those are matters of construction of the document … And if I understand your Honour aright, what your Honour is saying is that, perhaps, one needn't be too concerned about formulating the question as we have done in paragraph 1, it's really just a question of setting the matter down on the ---- HER HONOUR: I don't know that I meant that. We do need to limit it to the funding question. MR KEANE: Yes. Well, in that respect, your Honour, we'd accept that. … HER HONOUR: Well, Mr Sheahan did raise an argument that the bank's withdrawal of the willingness to give security which it's said existed was a breach of good faith. The question of whether there was available funding alternative independent of the proposals, whether the refusal of the proposal was in good faith. MR LOGAN: And, your Honour, no doubt if they actually have a case about that, they could put an affidavit on that says it. To the extent that they want to point to documents and our material would say it, there's no issue about the facts. The question is what complexion do they bear." (T15:25- T16:50…T17:25 - T17:28…T18:1 - T18:4…T18:23 - T18:31 T18:46 - T 18:51… T20:9 - T 20:20…T21:52 - T21:60 … T22:1 - T22:4) 56 I have significant misgivings in granting this application which I think involves a choice between the lesser of two evils, namely: (a) whether it is preferable to retain these proceedings in this Court which, absent the decision in the Queensland proceedings, in my view, is the appropriate forum: but that decision would have all of the disadvantages of two courts addressing overlapping issues between the parties: (b) whether these proceedings should be transferred into the Queensland Supreme Court where I think the decision to order determination of a separate question has arisen out of grounds advanced on behalf of QES that are, in my view, flawed and possible the progeny of the expediency of forestalling, successfully as it turns out, these proceedings. 57 Accordingly, I order that these proceedings be transferred into the Supreme Court of Queensland and that the costs of the application be costs in the proceedings. While seeing no reason why Saracen should not be joined as a plaintiff in these proceedings I think it is preferable to leave that matter to the Supreme Court of Queensland. ********** Last Modified: 06/28/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.