New South Wales Supreme Court CITATION : National Australia Bank v Grose [2006] NSWSC 979 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 24/07/06, 28/07/06, 15/09/06 JUDGMENT DATE : 15 September 2006 JURISDICTION : Common Law JUDGMENT OF : Adams J at 1 DECISION : Matter transferred to the Supreme Court of Queensland; costs in favour of the defendant. CATCHWORDS : Cross-vesting - significance of jurisdiction clause in contract - relevant considerations Courts (Cross-Vesting) Act 1987 LEGISLATION CITED : Courts (Cross-Vesting) Act 1987 (Cth) Property Law Act 1975 (Qld) Uniform Civil Procedure Rules 2005 Bankinvest AG v Seabrook (1988) 14 NSWLR 711 CASES CITED : BHP Billiton Limited v Schultz 221 CLR 400 Freeman & Anor v Kellerbellin Farmers Cooperative Company Limited & Ors [2003] NSWSC 1105 West's Process Engineering Pty Ltd v Western Sands Limited (unreported NSWCA Rolfe J 6 August 1997 PARTIES : National Australia Bank (Plaintiff) David John Grose (Defendant) FILE NUMBER(S) : SC 12348/2005 COUNSEL : Mr J Stoljar (Plaintiff/respondent) Mr J Miller (Defendant/applicant) SOLICITORS : Mallesons Stephen Jaques (Plaintiff) Swaab (Defendant) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ADAMS J 15 September 2006 12348/2005 NATIONAL AUSTRALIA BANK v GROSE JUDGMENT 1 HIS HONOUR: The National Australia Bank commenced proceedings in this Court on 2 June 2005 against David John Grose under a guarantee given by him in relation to the provisions of financial accommodation to Starr Investments (Australia) Pty Limited (Starr Investments), which was the trustee for the Wynnum Property Trust (Property Trust). Starr Investments was deregistered before the commencement of the action. The basic liability under the guarantee is a sum in excess of $580,000 plus interests and the usual costs. It is alleged that Starr Investments defaulted in its obligations to the Bank. As at 30 May 2005 it is alleged that the defendant was in indebted to the plaintiff in respect of the guarantee in a sum in excess of $1.2 million. On 7 October 2005 the defendant filed a defence in which, in substance, he said he was unable to recall whether he entered into the guarantee arrangement as alleged, is unable to admit that he received the required demand under the guarantee, alleged that financial accommodation was made available to Starr Investments through Sandhurst Trustees Limited (Sandhurst), an entity related to and under the control of the plaintiff and that, exercising its power of sale as a mortgagee over the assets of Starr Investments, it failed to take reasonable care to ensure that the property was sold at market value and was reckless as to whether it was sold for its market value or not, with the consequence that it was sold at over $600,000 less than the principal of the debt advanced to Starr Investments and substantially less than the alleged market value of $4 million. The defendant, accordingly, alleged in substance that the sale of the land was in breach of the plaintiff's equitable duty (as Sandhurst's controlling entity) to the defendant to protect, maintain and preserve any assets of the defendant with the possession of which it obtained under the mortgage. The statement of claim makes no reference to Sandhurst. At the same time as filing the defence, the defendant commenced a cross-claim against the Bank and Sandhurst. The defendant relied on the matters contained in his defence. 2 The defendant seeks a transfer of the action to the Supreme Court of Queensland pursuant to rule 44.5 of the Uniform Civil Procedure Rules 2005 applying in the local context the provisions of the cross-vesting legislation entered into by the States and the Commonwealth by virtue of the jurisdiction of Courts (Cross-Vesting) Act 1987 and the jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth). In Bankinvest AG v Seabrook (1988) 14 NSWLR 711 at 713-714 Street CJ said – "The cross-vesting legislation passed by the Commonwealth, the States and the Territories both conferred on each of the ten courts Australia-wide jurisdiction and set up a mechanism regulating the transferring of proceedings from one of these ten courts to another. In relation to transfer, the common policy reflected in each of the individual enactments is that there must be a judicial determination by the court in which proceedings are commenced either to transfer or not to transfer the proceedings to one of the other nine based, broadly speaking, upon consideration of the interests of justice…It calls for what I might describe as a 'nuts and bolts' management decision as to which court, in the pursuit of the interests of justice, is the more appropriate to hear and determine the substantive dispute." 3 Street CJ went on to emphasise the importance of considering the question of transfer in a practical way with "no principle to be enunciated other than the necessity of applying the specific considerations stated in the cross-vesting legislation, primary amongst which is the pursuit of the interests of justice. Since the essential question is a decision as to where, in the interests of justice, the proceedings should be conducted, it follows that there is no presumption that the court where the proceedings have commenced should be positively found to be an inappropriate forum, nor is there any onus on the person seeking a transfer to establish that an order ought to be made. These matters have recently been considered in the High Court in BHP Billiton Limited v Schultz 221 CLR 400 in which, although there was some difference of approach by the members of the Court, that taken in Bankinvest was approved. It is evident that a decision of this kind is very much a matter of fact and degree. 4 Furthermore, since the decision needs to be made for obvious reasons at an early stage in the litigation, the available material may well be incomplete to a significant degree and very much requiring a commonsense assessment of the real and practical issues in the case. This matter is underlined by the requirement in Part 44.5 of the Rules requiring the application to be made "as soon as practicable after commencement of the proceedings". The plaintiff has submitted that the defendant did not comply with this requirement. I do not accept this submission. In the circumstances, I think that that the defendant acted reasonably and has complied with the Rule. 5 From the plaintiff's point of view, proof of its case is relatively simple. For obvious reasons, its case will be largely documentary although in light of the possibility that the defendant will rely, to a greater though I rather think lesser extent, on misleading representations as to the parties to the transaction, some limited oral evidence might be necessary. The relevant witnesses, it may readily be accepted, are in Sydney. The defendant's case, except in so far as it depends upon the alleged misrepresentation to which I have referred, is almost entirely centred on Queensland, in particular persons familiar with and able to give evidence about the commercial and valuation issues explicit and implicit in its cross-claim. These were summarised, and I think fairly, by Mr Miller, counsel for the defendant, as being focused on the failure by the receivers properly to maintain the incidence of the business relationship between the tenants and the landlord of the shopping centre. It appears that a number of tenants became dissatisfied, for some reason or other, with the relevant arrangements and accordingly did not continue with their tenancy of the centre. The departure of substantial tenants, of course, impacted upon the commercial marketability and thus value of the premises. It is self-evident that to maintain competitiveness landlords of shopping centres need to maintain and appropriately refurbish common areas, provide adequate services for tenants, negotiate the refitting that a tenant may seek as a precondition to continuing occupation and the like. Furthermore, when tenants depart, appropriate marketing needs to be undertaken in order to fill the vacant space as soon as possible. It is obvious that long standing vacancies not only reduce the rental income from premises but also make it less attractive for other tenants. 6 The defendant has claimed that it will be necessary to call evidence of real estate agents, property developers and other valuers and consultants who reside and work in Brisbane and are familiar with the commercial realities in the area served by the shopping centre. The property is situated in Tingalpa, about ten kilometres from the Brisbane CBD. It needs hardly to be said, I think, that the factual issues raised in the defence and cross-claim can only be satisfactorily determined by reference to the local commercial environment, a matter which one would expect is very much in the knowledge of persons actively undertaking relevant commercial activity in that environment. 7 The defendant's solicitor refers to a number of witnesses who, it is expected, will be called by the defendant on trial. They presently number nine and each of them both live and work in southeast Queensland. The defendant himself, who, of course, is a relevant witness, resides in Sydney but often spends time in Brisbane. An affidavit by a solicitor having day to day conduct of the matter on behalf of the second cross-defendant says, in effect, that all the relevant documents for the second cross-defendant are located in Sydney and all relevant witnesses for the second cross-defendant are located either in Bendigo or Melbourne, Victoria. It is said that, were proceedings to be transferred to Queensland, significant costs would be incurred by the second cross-defendant in briefing new solicitors based in Sydney and properly instructing them, briefing counsel based in Queensland and moving the documentary material from Sydney to Queensland. 8 In addition to the usual matters agitated in an applications of this kind, the plaintiff relies on clauses in the guarantee and indemnity to the following effect – "27.1 This guarantee and indemnity is governed by the laws of the place where the Bank's branch or other place of business to which you give it is located except where you give it in a foreign country in which case this guarantee and indemnity is governed by the laws of Australia. 27.2 You submit to the non-exclusive jurisdiction of the courts in the capital city of that place. 27.3 You waive any rights you have to object to an action being brought in those courts for any reason including inconvenience and lack of jurisdiction." 9 The effect of such a clause is somewhat problematical. It is clear that the jurisdiction of the court to manage its business cannot be determined by agreement of the parties. Furthermore, it is part of the jurisdiction of the court itself to cross-vest where it is in the interests of justice to do so and accordingly submission to the jurisdiction of the court necessarily involves the possibility that the court might exercise its jurisdiction to transfer the case to another court. Indeed, the court is empowered to do this even of its own motion. I do not think that the waiver contained in 27.3 takes the matter much further. The nature of the application is not an objection nor are inconvenience or a lack of jurisdiction grounds upon which the application is made. At the same time, such a clause is not immaterial, I think for the obvious reason that the doing of justice between the parties must encompass as a relevant factor what they themselves have agreed to do in the event of a dispute. In West's Process Engineering Pty Ltd v Western Sands Limited (unreported NSWCA Rolfe J 6 August 1997) his Honour said that a jurisdiction clause, though not determinative should be given substantial weight as "it represents the bargain of the parties". His Honour commented that, "The one with the advantage of it should not be subject to the inconveniences…unless the other relevant factors are powerfully in favour of another jurisdiction". This view has been applied in a number of decisions of this Court which are referred to by Shaw J in Freeman & Anor v Kellerbellin Farmers Cooperative Company Limited & Ors [2003] NSWSC 1105, where his Honour also decided that he should take the same approach. 10 The plaintiff submits, furthermore, that the evidence of the proposed witnesses may not give rise to significant factual disputes since the property was sold by public tender and contends that it would be reasonable to adduce their evidence by video link. In the alternative, it is submitted that if the witnesses were ultimately required to attend in person, the plaintiff would meet their reasonable travel and accommodation expenses, basis that such expenses were treated as costs in the cause. 11 Obtaining evidence by video link is increasingly utilised to avoid the necessity for requiring witnesses to travel. However, the more complex the factual questions and, I think, the greater the extent of the opinion evidence which needs to be called, the less useful is this mode of taking evidence. Experts frequently need to be in court to listen to the evidence of other experts, as a case unfolds, the hypotheses upon which expert evidence depends can change significantly and the need for consultations between those presenting the case and the experts increases. Precision in predicting the course of litigation such as the present is impossible and one must approach the issues in a practical way. My judgment is that the calling of evidence as envisaged by the defendant cannot be adequately managed by the use of video link. 12 So far as the reasonable travel and accommodation costs are concerned, of course they are not the only costs associated with the calling of witnesses. Continuing consultations are likely to be necessary and the presence of a witness is plainly not limited to the occasion on which they give evidence. Furthermore, whilst a witness give evidence for an hour or so or even several hours, it is one thing to undertake a relatively short trip from the witness's place of business to the court and quite another to fly interstate. In this respect, the realities of conducting litigation and the practical need to obtain the voluntary services of witnesses (for that compulsory process is available) need to be borne in mind. 13 The plaintiff also relies on the provisions of the Property Law Act 1975 (Qld) but the need to apply this provision would not, I think, be a significant factor requiring transfer to Queensland. 14 On 28 July 2006 I informed the parties that I had formed the clear view that, in the interests of justice, the matter should be transferred to the Supreme Court of Queensland and ordered costs in favour of the defendant. I stated that I would give reasons for this order if one or other of the parties required it. The plaintiff having required reasons, I now publish the same. The order of the Court is as I indicated on 28 July 2006. ********** 20/09/2006 - Mr Stoljar's name spelt incorrectly - Paragraph(s) Coversheet 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.