Reported Decision : 49 ACSR 697 New South Wales Supreme Court CITATION : Carlovers Carwash v Southmore [2004] NSWSC 466 HEARING DATE(S) : 24/5/04 & 26/5/04 JUDGMENT DATE : 8 June 2004 JURISDICTION: Equity JUDGMENT OF : Campbell J DECISION : Proceedings not transferred CATCHWORDS : CORPORATIONS - practice and procedure - whether claim by administrator to be transferred to Supreme Court of Western Australia LEGISLATION CITED : Corporations Act 2001 (Cth) Jurisdiction of Courts (Cross-vesting) Act 1987 Carlovers Carwash Limited (Subject to a Deed of Company Arrangement) - First Plaintiff Stuart Karim Ariff - Second Plaintiff PARTIES : Southmore Pty Limited - First Defendant Innercity Pty Limited - Second Defendant Arcane Pty Limited - Third Defendant FILE NUMBER(S) : SC 2578/04 COUNSEL : C R C Newlinds SC; R Francois - Plaintiffs M K Minehan - Defendants SOLICITORS : Clayton Utz - Plaintiffs Letherbarrow - Defendants IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST CAMPBELL J 8 JUNE 2004 2578/04 CARLOVERS CARWASH LIMITED (SUBJECT TO A DEED OF COMPANY ARRANGEMENT) AND ANOR v SOUTHMORE PTY LIMITED AND ORS JUDGMENT HIS HONOUR: Nature of the Application 1 This is an application by the defendants for the proceedings to be transferred to the Supreme Court of Western Australia, either under section 1337H Corporations Act 2001 (Cth), or section 5(2) of the Jurisdiction of Courts (Cross-vesting) Act 1987. Circumstances Leading to the Application 2 The First Plaintiff ("Carlovers") is one of a group of companies which operated self-service carwashing facilities at numerous sites throughout Australia. On 10 July 2003 the Second Plaintiff, Mr Stuart Ariff, was appointed as voluntary administrator of the companies in that group. 3 Carlovers was, at the time of Mr Ariff's appointment, lessee of three pieces of real estate in Western Australia. From Southmore Pty Limited ("Southmore") it was the lessee of land at O'Connor. From Innercity Pty Limited ("Innercity") it was the lessee of land at Belmont. From Arcane Pty Limited ("Arcane") it was the lessee of land at Warwick. The three lessor companies are the defendants in these proceedings, who seek the transfer of the proceedings to the Supreme Court of Western Australia. Each of the lessor companies carries on business in Western Australia, and has its principal place of business there. Mr Jim Low, a Western Australia resident, is a director of all three lessor companies and has acted for them in the events from which this application arises. 4 On 16 July 2003 Mr Ariff executed a Notice of Administrator's Intention not to Exercise Property Rights, pursuant to section 443B(3) Corporations Act 2001 (Cth), concerning each of the O'Connor, Belmont and Warwick sites. He arranged for such a notice to be sent to each of the lessor companies. He did this because he formed the view that the rental payable for the three sites made them unprofitable. 5 On 23 and 24 July 2003 three people from Mr Ariff's firm (Ms Yazni Ariff, Mr Andrew Hamilton, and Mr Heydon Moore) had a meeting at the Sheraton Hotel, Perth, with Mr Low. Mr Ariff contends that following that meeting, on 28 July 2003, an agreement was reached between Ms Ariff and Mr Low whereby Carlovers would remain in occupation of the sites, but the lessors would accept a reduced rental for the period of the voluntary administration, namely $7,000 per month in respect of the O'Connor site, $2,000 per month in respect of the Belmont site, and $5,000 per month in respect of the Warwick site. It was a common understanding, according to Mr Ariff, that the parties would negotiate lease terms which were more favourable for Carlovers if Carlovers continued in occupation after the voluntary administration period. Mr Low contends that no such agreement was reached. 6 On 28 July 2003 Mr Ariff's office issued a purchase order to each of the lessor companies, for rental at the rate which Mr Ariff contends had been agreed, for the period up to 31 December 2003. Mr Ariff paid rental at that reduced rate for the period of the voluntary administration, and the defendants accepted rent at that reduced rate. 7 By September 2003 Mr Ariff was not hopeful that negotiations for a reduced rental, once the administration had ended, would come to fruition. On 29 September 2003 he caused Carlovers to vacate the premises at Belmont leased to it by Innercity. 8 On 18 November 2003 a meeting took place at a restaurant in Victoria Park, Western Australia, to discuss Carlovers' obligations under the lease agreements. Attending for the defendants were Mr Low and Mr Brian Letts, the manager of Westpoint Realty (the defendants' managing agent with respect to the leased properties). The evidence does not otherwise disclose the substance of what either side to this dispute alleges transpired at that meeting. 9 Negotiations continued concerning the sites at O'Connor and Warwick. In connection with the O'Connor and Warwick sites, Mr Ariff's solicitors prepared agreements for the sale of the fixtures on the sites, and Deeds of Surrender of the leases. A settlement, which had been fixed for 5 December 2003 between the solicitors for Mr Ariff and the solicitors for the defendants did not proceed when it became clear that the defendants would not execute a Deed of Surrender which released certain rights against Carlovers. 10 Meanwhile, this Court had extended the convening period for the second meeting of creditors of Carlovers. The second meeting of creditors was held on 3 November 2003, and resolved that the company should enter a Deed of Company Arrangement. The administration ended when such a Deed was executed on 5 December 2003. 11 Carlovers eventually vacated the premises at Warwick and O'Connor on 31 January 2004. 12 On 19 February 2004 six sets of proceedings were filed in the District Court of Western Australia. Innercity was the plaintiff in two of them, Southmore the plaintiff in another two, and Arcane the plaintiff in the final two. Each of those plaintiffs brought one set of proceedings against Mr Ariff personally, and one set of proceedings against Carlovers. Insofar as the proceedings were brought against Mr Ariff personally, each plaintiff claimed that, pursuant to section 443B(2) of the Corporations Act 2001 (Cth), Mr Ariff was liable to pay the contractual rate of rental and outgoings under the lease from that plaintiff to Carlovers for the period of the administration. All three of the plaintiffs sought from Mr Ariff the amount of rental and outgoings which had been underpaid during the period of the administration, plus interest. In addition, Innercity sued Mr Ariff in detinue and conversion, arising from an alleged removal of certain equipment from the Belmont land when Carlovers vacated that site on 29 September 2003. The primary relief claimed for the detinue or conversion was an order for delivery up of the goods, with a claim for damages to the extent that delivery up was not ordered. Insofar as each plaintiff brought proceedings against Carlovers, it was a claim for rental and outgoings, at the contractual rate under the leases, accruing in the period after the administration ended, plus interest. The amounts claimed, exclusive of interest and costs, are as follows: Innercity from Carlovers - rent and outgoings $45,299.18 Southmore from Carlovers – rent and outgoings $45,861.03 Arcane from Carlovers – rent and outgoings $41,415.26 Innercity from administrator – rent and outgoings $62,802.37 Innercity from administrator – conversion $92,210.16 Southmore from administrator – rent and outgoings $49,583.99 Arcane from administrator – rent and outgoings $37,453.56 TOTAL $374,625.55 13 Even though those proceedings were filed on 19 February 2004, they were not served. On 16 April 2004 Mr Low had a telephone conversation with Ms Yazni Ariff, in which he told her that he had been instructed to issue legal proceedings, but was going slow, to see if an agreement could be reached. He said he did not want to issue them, but that he had some draft documents. Ms Ariff asked that he fax her the draft documents, which Mr Low did, on the same day. Those documents were a copy of draft writs, suitable for filing in the District Court of Western Australia, but not bearing any court stamp. Mr Low agreed that he would hold off instituting the legal proceedings until 28 April 2004. 14 On 23 April 2004 Carlovers and Mr Ariff filed the Originating Process in these proceedings. That Originating Process sought, in substance: 1. A declaration that Mr Ariff was not liable, pursuant to section 443B(2) Corporations Act 2001 (Cth), or at all, for the amounts alleged by the defendants to be owing in relation to Carlovers' lease of premises at Warwick, O'Connor and Belmont during the period 10 July 2003 to 5 December 2003; 2. Alternatively, an order that Mr Ariff be excused from liability under sections 443B(8) and 1318(1) of the Act for any amounts alleged by the Defendants to be owing in relation to Carlovers' lease of the premises at Warwick, O'Connor and Belmont during the period 10 July 2003 to 5 December 2003; 3. A declaration that the lessors are estopped from contending that either Carlovers or Mr Ariff are indebted to the Defendants in any way; 4. An Order pursuant to section 447A of the Act that Part 5.3A of the Act is to operate in relation to Carlovers and Mr Ariff as if section 443B(5)(b) did not apply to Carlovers' occupation of the premises at Warwick, O'Connor and Belmont for the period 10 July 2003 onwards; and 5. An order that the defendants be precluded from relying on section 443B(5) of the Act and from seeking payment from Carlovers and Mr Ariff in relation to Carlovers' occupation of the premises at Warwick, O'Connor and Belmont for the period 16 July 2003 onwards. 15 It was only on 4 and 5 May 2004 that Mr Ariff was actually served with the six writs from the District Court of Western Australia. Current Proceedings 16 On 17 May 2004 the defendants filed the Interlocutory Process with which I am now dealing. An affidavit of Mr Low filed in support of it revealed to Mr Ariff a contention of Mr Low, of which Mr Ariff had not previously been aware. It was that, when Mr Ariff sent the Notice of Administrator's Intention not to Exercise Property Rights, on 16 July 2003, concerning each of the three sites, it had been sent by facsimile to Westpoint Realty, the managing agent who dealt with the three sites. A signed original of each Notice was also posted, but was not received by the managing agent until at least 18 July 2003. The administration commenced on 10 July 2003, and by section 443B(3) allowed seven days for the service of the notices. Thus, Mr Low will, it seems, be contending that the faxed notice was inadequate, and the actual signed notice was received too late to protect Mr Ariff from personal liability to pay rent for the leased sites. 17 To deal with that contention, Carlovers and Mr Ariff filed an Amended Originating Process on 21 May 2004 seeking, in substance, orders, additional to those in the Originating Process, validating the service of those Notices. 18 Section 1337H Corporations Act 2001 (Cth) confers on this Court a discretionary power to transfer these proceedings to the Supreme Court of Western Australia. One condition for the exercise of that discretion arises under section 1337H(2), namely, "… if it appears to the transferor court that, having regard to the interests of justice, it is more appropriate for [the proceeding] to be determined by" the Supreme Court of Western Australia. Another condition on the making of the transfer arises under section 1337L Corporations Act 2001 (Cth), which provides: "In deciding whether to transfer under section 1337H … a proceeding … a court must have regard to: (a) the principal place of business of any body corporate concerned in the proceeding …; and (b) the place or places where the events that are the subject of the proceeding … took place; and (c) the other courts that have jurisdiction to deal with the proceeding …" 19 The matters which the applicant relies upon in seeking transfer of the matter to the Supreme Court of Western Australia include the following: (i) the three lessors have their registered offices, their principal place of business, and their books and records in Western Australia. (ii) the lessors are already plaintiffs in the District Court of Western Australia matters. (iii) the events that are the subject of the dispute took place in large part in Western Australia. The leased properties were all in Western Australia. The meetings on 23/24 July 2003 and 18 November 2003, which are central to the dispute about whether there was an agreement for rental reductions, took place in Western Australia. The proposed settlement of 5 December 2003, which aborted, was to have taken place in Western Australia. The alleged conversion of equipment at Belmont took place in Western Australia. (iv) The proceedings in New South Wales will not dispose of all the issues in the Western Australian proceedings, because the claim for detinue or conversion would remain outstanding. While it would be possible for the defendants to file cross-claims in the New South Wales proceedings, raising the same issues as those in the proceedings already filed in the District Court of Western Australia, it would not be appropriate to place the defendants under a practical compulsion to do so. (v) Each of the leases contains a clause to the following effect: "(a) The Lessee irrevocably submits to and accepts generally and unconditionally the non-exclusive jurisdiction of the courts and appellate courts of the State of Western Australia; (b) The Lessee irrevocably waives any objection it may now or in the future have to the venue of any such action or proceedings, and any claim it may now or in the future have that any such action or proceeding has been brought in an inconvenient forum." Even though Mr Ariff is not a party to the leases, section 443B(2) makes him liable for the rent payable under the lease, in consequence of which he is bound by this clause. (vi) the defendant's witnesses are located in Western Australia. Mr Low identifies those witnesses as being himself, Mr Brian Letts, and other employees of Westpoint Realty, all of whom reside in Western Australia. (vii) the defendants already have Western Australian solicitors and counsel, who are familiar with the matter. 20 The plaintiffs oppose the transfer to Western Australia, on the following grounds: (a) Carlovers and its subsidiaries have their registered offices in New South Wales; (b) Mr Ariff is located in New South Wales and is conducting the administration of Carlovers from his office in New South Wales; (c) Though some meetings relevant to the dealings with the leases took place in Western Australia, as well there were telephone conversations, facsimiles, and correspondence passing between that State and New South Wales; (d) The case involves the exercise of federal jurisdiction, because a claim (and, as it happens, the most significant claim) is made under the Corporations Act 2001 (Cth), a Commonwealth statute; (e) The plaintiff's books and records are located in New South Wales; (f) The plaintiffs have approximately eight witnesses, five of whom are (or are believed to be) New South Wales residents, one of whom is resident in Victoria but spends the majority of her time in New South Wales, while the remaining two are residents of Malaysia; (g) Mr Ariff has Sydney solicitors and counsel already involved in the matter, and in the administration generally; (h) The Deeds of Company Arrangement have a provision that the governing law of each Deed is the law of New South Wales; (i) Significant cost for travel and accommodation would be involved if the proceedings were to be transferred to Western Australia, and the court ought not impose such expense on the creditors; (j) This Court has a specific list designed to deal with matters under the Corporations Act 2001 (Cth) expeditiously and efficiently; and (k) Before a transfer of these proceedings to the Supreme Court of Western Australia could achieve the result that all matters in dispute would be dealt with in the one court, it would be necessary for the existing six proceedings in the District Court of Western Australia to themselves be transferred into the Supreme Court of Western Australia. There is no application to make such a transfer presently on foot, and if one were to be made, its outcome is not certain. 21 The details which the plaintiffs give concerning their witnesses is set out in an affidavit of Mr Ariff. The only people he deposes to as being ones he anticipates will be required to give evidence are Yazni Ariff and Andrew Hamilton. Ms Ariff lives partly in Melbourne and partly in Sydney, but spends the majority of her time in Sydney. Mr Hamilton resides in New South Wales. Other people he identifies as ones which the plaintiffs may require evidence from are himself, Simon Raftery of his firm, Heydon Moore (a former employee of his firm), John Sewerle (National Operations Manager of Carlovers), Frances Lee (a director of companies in the Carlovers group), and Derek Chin (legal counsel to the majority shareholder in those companies). Both Mr Lee and Mr Chin are resident in Malaysia but fly to Sydney from time to time to attend to business of the companies in the group, or its majority shareholder. Those two men met with Mr Low in Perth during the period 4 and 7 November 2003 in an attempt to reach an agreement with him. All the others are resident in New South Wales. 22 In broad terms, it seems as though the issues likely to arise in the dispute will include: (a) the validity of the Notices of Intention not to Exercise Property Rights; (b) if those notices are invalid, whether they should be validated; (c) whether there was an agreement to accept a lower rent, or an estoppel about accepting a lower rent; (d) if there was no such agreement or estoppel, whether Mr Ariff should be excused under section 443B(8), 447A, 1318(1) or 1322(4) Corporations Act 2001 (Cth) from what would otherwise be his liability; (e) whether there has been an effective termination or surrender of the leases; (f) whether it is open to the lessors to sue for rent accruing after the termination of the administration, given that the Deeds of Company Arrangement contain a provision in Clause 20 prohibiting creditors from bringing legal proceedings while the Deed is on foot; (g) whether there was a conversion of the equipment at the Belmont site, and if so, whether some or all of that equipment should be ordered to be delivered up, and what is the value of any equipment not ordered to be delivered up. 23 If these are the issues, it is only issue (c) which might possibly involve significant factual dispute between witnesses. So far as issue (g) goes, it is common ground that Mr Ariff caused some equipment to be removed from the Belmont site at the time he vacated. The question of whether his action in doing so was wrongful seems likely (at least at present) to turn upon legal argument concerning a tenant's right to remove fixtures. It is not apparent at this stage of the case whether there would be any significant dispute about what the consequences should be if Mr Ariff's removal of that equipment was held to be wrongful. 24 The location of the parties, of their respective books and records, and of their previously instructed legal teams, seem to me factors which cancel each other out. Further, neither the Supreme Court of New South Wales, nor the Supreme Court of Western Australia, is intrinsically better suited to resolving the type of issues involved in the dispute. 25 The choice of law clauses, in both the leases and the Deeds of Company Arrangement, do not advantage either party – the Supreme Court of Western Australian can ascertain and apply the law of New South Wales, insofar as it needs to, just as easily as the Supreme Court of New South Wales can ascertain and apply the law of Western Australia, insofar as it needs to. 26 The choice of jurisdiction clause in the leases is expressly stated to be a non-exclusive jurisdiction. Further, while section 443B(2) imposes on an administrator a liability "for so much of the rent or other amounts payable by the company under the agreement", it does not bind the administrator to all the covenants contained in the lease. In particular, Mr Ariff is not bound by the covenant concerning submission to jurisdiction contained in the leases. 27 I bear in mind that the proceedings in this court were ones which were begun at a time when the plaintiffs knew that the defendants were contemplating bringing proceedings against them. The proceedings in this Court are ones designed to remove or limit the capacity of the defendants to bring proceedings of a type like the proceedings which have been commenced in the District Court of Western Australia. However, the present proceedings are of a type which could only have been brought in a Supreme Court, or the Federal Court – they could not have been raised as a defence or cross-claim in the District Court of Western Australia. 28 The most significant factor in choosing an appropriate forum for these proceedings is convenience to the majority of witnesses. While I would not expect all those people identified as potential witnesses by either side to be called, it seems on present indications more likely that it will be the plaintiffs who will have the larger number of witnesses, and that they are witnesses for whom Sydney would be a more convenient location. The number of witnesses of the defendants is, by comparison, small. 29 While the allegations of detinue or conversion are a part of the dispute which logically ought be tried in the same place as the rest of the allegations, I am not persuaded that it will be a large part of the dispute, in terms of court time or effort in preparation. 30 In all these circumstances, the interests of justice seem to me to favour the proceedings remaining in this Court. 31 An alternative basis on which the defendants sought the transfer of the proceedings to the Supreme Court of Western Australia was under section 5 of the Jurisdiction of Courts (Cross-vesting) Act 1987. Transfers of proceedings from this Court to the Supreme Court of another state are authorised by section 5(2) of that Act. However, before section 5(2) can operate, there must already be another proceeding pending in the Supreme Court of another State or territory, and the proceedings in the Supreme Court of New South Wales must arise out of or be related to those other proceedings. In the present case, there are no proceedings already pending in the Supreme Court of Western Australia. Thus, section 5(2) does not provide an alternative ground for transfer of the proceedings. 32 I also mention that while the Interlocutory Process also sought an order that these proceedings be stayed, that order was not pressed in argument. 33 I order the Defendants' Interlocutory Process filed 17 May 2004 be dismissed. I order the Defendants to pay the costs of the plaintiffs of that Interlocutory Process. 34 After 28 days the exhibits may be returned. ********** Last Modified: 06/10/2004 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.