Supreme Court New South Wales Medium Neutral Citation: Giddy v Rocky Castle Finance Pty Ltd & Anor [2016] NSWSC 314 Hearing dates: 26 February 2016 Decision date: 24 March 2016 Before: Fullerton J Decision: 1. Summons dismissed. 2. Plaintiff to pay defendants' costs. Catchwords: PRACTICE AND PROCEDURE - Transfer of proceedings - cross-vesting scheme - interests of justice Legislation Cited: Civil Procedure Act 2005 (NSW), s 140(1) Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW), s 5(2) Cases Cited: Asciano Services Pty Ltd v Australian Rail Track Corp Ltd [2008] NSWSC 652 BHP Billiton Ltd v Schultz [2004] HCA 61; 221 CLR 400 Bankinvest AG v Seabrook (1988) 14 NSWLR 711 Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; 218 CLR 471 Morony v Reschke & Ors [2011] NSWSC 1139 McCormick v BP Australia Ltd [2003] NSWSC 690 Patrick Badges Pty Ltd v The Commonwealth [2002] NSWSC 221 Rocky Castle Finance Pty Ltd v Taylor [2014] SASCFC 1; 118 SASR 349 Taurus Funds Management Pty Ltd v Aurox Resources Ltd [2010] NSWSC 1223 Volkswagen Financial Services Australia Ltd v City Prestige Service Centre Pty Ltd [2007] NSWSC 203 Category: Principal judgment Parties: Stuart Giddy (Plaintiff) Rocky Castle Finance Pty Ltd ATF Rocky Castle Finance Trust (1st Defendant) Koonara Management Pty Ltd ATF Koonara Management Trust (2nd Defendant) Representation: Counsel: D Weinberger (Plaintiff) G Stapleton (Defendants) Solicitors: Makinson d'Apice Lawyers (Plaintiff) Piper Alderman (Defendants) File Number(s): 2015/279550 Publication restriction: Nil Judgment 1. HER HONOUR: By the filing of amended statements of claim on 15 July 2015 Rocky Castle Finance Pty Ltd ("Rocky Castle") and Koonara Management Pty Ltd ("Koonara") commenced separate proceedings in the District Court of New South Wales for damages and other consequential relief. Each claim is within the jurisdictional limit of the District Court. Stuart Giddy is the plaintiff in both proceedings. 2. Rocky Castle's cause of action arises under a loan agreement ("the Loan Deed") dated 30 June 2000 to which both Rocky Castle and Mr Giddy are parties. Under the Loan Deed, Rocky Castle claims to have advanced various monies, at Mr Giddy's direction, to Australian Harwood Management Ltd ("AHM Ltd"), the responsible entity and manager under a registered managed investment scheme entitled the "Coonawarra Wine Grape Project" in South Australia. Under the terms of the Loan Deed Mr Giddy was obligated to repay the monies advanced with accrued interest. The Loan Deed makes no express provision for any governing law applicable to its interpretation. 3. The project involved the establishment and operation of a vineyard in Coonawarra, in South Australia. Mr Giddy was one of a large number of members/investors in that project and was party to a Joint Venture Agreement ("the JVA") (also dated 30 June 2000) with AHM Ltd and another entity, Coonawarra Property Holdings Ltd, as landowner, pursuant to which the project was to be carried out. The JVA provides that: This Deed shall be governed by and construed in accordance with the laws of the State of South Australia and the parties hereto submit themselves, but are not limited to the jurisdiction of the courts of South Australia. 1. Koonara's cause of action is as the assignee of a debt Mr Giddy owed AHM Ltd under the JVA. The debt is said to result from a financial liability which Mr Giddy assumed as an investor in the project for the payment of annual management fees to AHM Ltd for the provision by them of management services to the project. The finance Mr Giddy obtained under the Loan Deed from Rocky Castle discharged his liability to AHM Ltd for the first five years of the project. Koonara claims, as assignee, the unpaid fees that have accrued since that time. Mr Giddy is not a party to the Deed of Assignment. Under the Deed of Assignment, the governing law is the law of New South Wales. 2. Mr Giddy (who is ordinarily resident in New South Wales) has not filed a defence in either of the District Court proceedings. It is not suggested by either party that there is any reason to expect there will be any application to join other parties to either proceeding. 3. On 31 July 2015, South Australian solicitors, at that time retained by Mr Giddy to act for him in the District Court proceedings, invited Rocky Castle and Koonara to consent to the transfer of the proceedings to what was styled in the letter as "a court of competent jurisdiction in South Australia". For reasons they set out in the letter, they proposed a South Australian court as the most appropriate forum to hear and determine the proceedings. One of the reasons cited was the non-exclusive jurisdiction clause in the JVA. Other reasons included the fact that the registered offices of Rocky Castle and Koonara are in South Australia and, as they saw it, the only witnesses who would be likely to be called in the proceedings would be Mr Reschke, the director of both companies, who is a resident of South Australia, and Mr Giddy, who would be prepared to travel to South Australia for the purpose of the litigation. It was also asserted by the solicitors that, as they saw it, the only connection with New South Wales was that Sydney-based solicitors had been retained to act for the plaintiff companies. It would appear that they overlooked the fact that Mr Giddy is a resident of New South Wales. 4. Neither of the plaintiff companies acceded to the request that the proceedings be transferred. 5. By summons filed in this Court, Mr Giddy sought the following orders: 1. An order that two District Court proceedings ("the Proceedings") be transferred to the Supreme Court pursuant to s 140(1) of the Civil Procedure Act 2005 (NSW); and 2. An order that the Proceedings, when transferred into the Supreme Court, be transferred to the Supreme Court of South Australia pursuant to s 5(2) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW) ("the Cross-vesting Act"). 1. Rocky Castle and Koonara oppose the orders sought in the summons. 2. An affidavit from Matthew Gerathy, a solicitor practicing in Sydney and who now has carriage of the proceedings on Mr Giddy's behalf, was read in support of the summons. He repeated much of what had been asserted in the letter sent in July 2015 by Mr Giddy's former solicitors. 3. The defendants relied upon an affidavit from Burke Reschke, sole director and shareholder of Rocky Castle and Koonara. He was required to attend for cross-examination. In his affidavit, Mr Reschke refers to a number of other debt recovery actions brought by Rocky Castle and Koonara against other investors in the project, each of whom is a resident of New South Wales. At the time of swearing his affidavit there were eighteen sets of proceedings on foot in New South Wales. 4. Some of those investors were plaintiffs in proceedings brought in this Court and which were, again at the time of swearing the affidavit, listed for trial on 15 February 2016 before White J ("the Morony proceedings"). The proceedings were brought by various investors (eight individuals and five companies) under the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) and sought relief for what was alleged to be the unconscionable conduct of the defendants in breach of the JVA. 5. At an interlocutory stage of the proceedings, White J refused an application brought by Rocky Castle and Koonara as the third and fourth defendants/cross-claimants in the Morony proceedings to transfer the proceedings to South Australia (Morony v Reschke & Ors [2011] NSWSC 1139). Although that decision does not bind me, there are many features his Honour took into account in refusing the application that I am asked to take into account by the defendants on this application. It is also submitted that I would treat as persuasive his Honour's reasoning to the conclusion that it was in the interests of justice that the proceedings not be transferred to South Australia. I note that one feature upon which Mr Giddy places very considerable reliance on the application before me is the non-exclusive jurisdiction clause in the JVA, a matter which was not raised for his Honour's consideration in the Morony proceedings. 6. Mr Reschke gave evidence that although there are some differences in the nature of the claims the subject of the Morony proceedings and the District Court proceedings pending against Mr Giddy (largely the product of circumstances particular to the Morony proceedings), the context in which the claims arise and the underlying factual matrices are similar. In addition, Sydney-based senior and junior counsel were briefed for the purposes of the Morony proceedings and corporate counsel is also based in Sydney. Despite the fact that the Morony proceedings have since settled, Mr Reschke gave evidence that a decision was made at the time of instituting the proceedings against Mr Giddy that it was both practical and cost effective for debt recovery proceedings against other investors arising out of the project also to be initiated in New South Wales. Mr Reschke also gave evidence that he expected the defendants would call directors of the responsible entity to the project as witnesses in the proceedings, in particular Mr Knox, the managing director, who is resident in New South Wales. 7. Finally, he said that whilst he is domiciled in Adelaide, he is a frequent traveller to Sydney and has travelled and stayed in Sydney in concentrated periods over the recent past in connection with the Morony proceedings. 8. Mr Reschke was cross-examined as to his contention that the principal factor in his decision to bring proceedings against Mr Giddy in New South Wales was the Morony proceedings and the litigation involving other investors. It was put to him that the real reason motivating him to give instructions for Rocky Castle and Koonara to commence proceedings in New South Wales was to avoid the precedent set by the Full Court of the Supreme Court of South Australia where the construction of both the Loan Deed and the JVA resulted in a decision adverse to his interests (Rocky Castle Finance Pty Ltd v Taylor [2014] SASCFC 1; 118 SASR 349). 9. The following question was asked of him in cross-examination: What you [are] really seeking to achieve is to avoid litigating the underlying agreement with which the dispute with Mr Giddy is concerned in South Australia because you are concerned that any South Australian Court will follow the decision of the Full Court, aren't you? 1. Mr Reschke denied that was his intention. He explained that, on the advice of senior counsel, the litigation which commenced in the Magistrates Court of South Australia was structured in a particular way to avoid the need to rely upon a volume of supporting documentation. He said it was his understanding that the claims against the two investors, which were successful in the Magistrates Court but reversed on appeal, was in large part because the attempt to adduce fresh evidence or further evidence on the appeal was refused. He denied under cross-examination that by commencing proceedings in New South Wales he was deliberately "forum shopping". 2. He also confirmed in cross-examination that it was his view that it would be necessary to call Mr Knox as a witness in the District Court proceedings and that, despite having a solicitor from Adelaide at his disposal, he wished to retain the Sydney-based counsel who had appeared in the Morony proceedings in the proceedings against Mr Giddy, given their exposure to the complexities of the agreements and transactions underlying Rocky Castle's action in debt and Koonara's action under the Deed of Assignment. 3. Section 140(1) of the Civil Procedure Act relevantly provides: The Supreme Court may, of its own motion or on application by a party to proceedings before the District Court ..., order that the proceedings, including any cross-claim in the proceedings, be transferred to the Supreme Court. 1. The Court has a discretionary power to make an order under s 140(1) of the Civil Procedure Act. The Court may make an order whenever it considers that removal of the proceedings is appropriate, in the circumstances (see McCormick v BP Australia Ltd [2003] NSWSC 690 at [20]). 2. Section 5(2) of the Cross-vesting Act relevantly provides: (2) Where: (a) a proceeding (in this subsection referred to as the relevant proceeding) is pending in the Supreme Court (in this subsection referred to as the first court), and (b) it appears to the first court that: (i) … (ii) … (iii) it is otherwise in the interests of justice that the relevant proceeding be determined by the Supreme Court of another State or of a Territory, the first court shall transfer the relevant proceeding to that other Supreme Court. 1. There is no onus on the plaintiff to establish that the proceedings should be transferred to South Australia. What the Court is required to do is to endeavour to predict, on the available material, which of the New South Wales District Court and the Supreme Court of South Australia appears to be the more appropriate forum having regard to the interests of justice. In Bankinvest AG v Seabrook (1988) 14 NSWLR 711 at 714, Street CJ said of s 5(2)(b)(iii) of the Cross-vesting Act: ... 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… 1. In BHP Billiton Ltd v Schultz [2004] HCA 61; 221 CLR 400 at [14], Gleeson CJ, McHugh and Heydon JJ stated: … There is a statutory requirement to exercise the power of transfer whenever it appears that it is in the interests of justice that it should be exercised. It is not necessary that it should appear that the first court is a "clearly inappropriate" forum. It is both necessary and sufficient that, in the interests of justice, the second court is more appropriate. 1. In the plaintiff's written submissions the crucial question under both the Civil Procedure Act and the Cross-vesting Act was identified as whether it is in the interest of justice that the proceedings be determined by the Supreme Court of South Australia, citing Volkswagen Financial Services Australia Ltd v City Prestige Service Centre Pty Ltd [2007] NSWSC 203 at [6]. 2. The defendants submitted that the plaintiff's reliance on Volkswagen Financial Services (where, at [6], Adams J identified the "crucial question" in the context of the Cross-vesting Act to be the "interests of justice" involved in transferring the proceedings in that case from the District Court of New South Wales to the Supreme Court of Victoria) carried with it the risk of eliding the statutory tests under s 140(1) of the Civil Procedure Act and s 5(2) of the Cross-vesting Act. The defendants submitted that in this case there was a need to ensure that the discrete considerations relevant to the decision whether to transfer a case from one State court to a higher State court pursuant to s 140(1) of the Civil Procedure Act (in this case from the District Court to this Court) are not subsumed by the question whether the power in the Cross-vesting Act should be invoked. Those considerations include: whether the relief sought in the District Court exceeds the jurisdictional limit of the Court; whether related proceedings are being carried on in another Court; and whether there are difficult questions of fact or law in issue which need to be determined by this Court. 3. While consideration of those questions will also likely inform the question whether it appears to me that it is more appropriate, having regard to the interests of justice, that the proceedings be transferred for cross-vesting purposes, I accept they are discrete matters. However, on this application, the contentious issue was whether the proceedings should be transferred to the South Australian Supreme Court under the Cross-vesting Act, with the transfer into this Court under the Civil Procedure Act simply a necessary step in that process. 4. The plaintiff relied upon what were said to be three connecting factors which indicate that South Australia is the more appropriate forum: first, the project involved the operation of a vineyard in Coonawarra, South Australia; second, AHM Ltd, as the responsible entity and manager of the project, is (or was) located in South Australia; and, third, the owner of the land upon which the vineyard was to operate is also in South Australia. 5. While these factors are part of the underlying and historical context in which the disputes the subject of the District Court proceedings are said to arise, as I read the pleadings I do not understand that they will have any material bearing on the resolution of the issues in dispute. Accordingly, I do not regard these factors, either alone or in combination, as assisting in resolving the question whether the proceedings should be transferred to South Australia as the more appropriate forum. 6. The plaintiff also placed considerable reliance upon the non-exclusive jurisdiction clause in the JVA, and the weight he submitted a clause expressed in those terms should carry on the question whether the Court the subject of the clause is the more appropriate forum on a cross-vesting application. He cited Asciano Services Pty Ltd v Australian Rail Track Corp Ltd [2008] NSWSC 652 as authority for the proposition that persuasive weight should be afforded such a clause in a contract between commercial parties, recording, as it does, an agreement between them that litigation arising from their agreement will be resolved in accordance with the substantive law of the nominated forum, and by the courts of that forum, regardless of the inconveniences which may be occasioned to each of them. I was also referred to Taurus Funds Management Pty Ltd v Aurox Resources Ltd [2010] NSWSC 1223 where, in reviewing both Asciano and the earlier judgment of Howie J in Patrick Badges Pty Ltd v The Commonwealth [2002] NSWSC 221 referred to in Asciano, Einstein J held that the non-jurisdictional clause in that case should be regarded as "a critical and decisive factor". 7. The defendants acknowledged the authorities upon which the plaintiff relied but submitted that in the circumstances of this case, the non-exclusive jurisdictional clause in the JVA, while a factor to be considered amongst other considerations, should not be treated as dispositive of the application. Although it was accepted by the defendants' counsel that the contractual relations between Mr Giddy and AHM Ltd provide the context in which he is alleged to be both indebted to Rocky Castle and liable for unpaid fees to Koonara, he submitted there are no questions of construction of the JVA which will have any necessary bearing on the outcome of the District Court proceedings. Further, the plaintiff has not identified any question arising under the substantive law of South Australia, or any South Australian statute, as essential to the resolution of the issues in dispute such as to require the transfer of proceedings to the South Australian Supreme Court in the interests of justice. 8. It was counsel's further submission that the fact that there has been litigation in other Courts (including in the Supreme Court of South Australia and in this Court) where the construction of the JVA and/or the Loan Deed and/or the Deed of Assignment was in issue, and in which Koonara and/or Rocky Castle were involved as parties (as plaintiffs in the proceedings in South Australia and defendants/cross-claimants in the Morony proceedings) does not advance the question whether, viewed prospectively, South Australia is the more appropriate forum to hear and determine the claims, when no defences have been filed by Mr Giddy and, that being the case, it is by no means certain that the issues that were litigated in South Australia, on the evidence assembled in those proceedings, will be the way the parties litigate the claims the subject of the District Court proceedings. 9. I have given consideration to the decision of the Full Court of the Supreme Court of South Australia and the issues to which the proceedings commenced in that jurisdiction have given rise. It is neither necessary nor appropriate, for the purposes of this application, that I do more than note that the question at issue there was whether the execution and delivery of a promissory note by Rocky Castle to AHM Ltd and its acceptance (one of three forms of transactions with which the proceedings were concerned) constituted an "advance" or a "payment" as comprehended by the Loan Deed and whether the primary judge was correct in distinguishing Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55; 218 CLR 471. In considering that question, the Court also had regard to the law as to promissory notes, including s 91(1) of the Bills of Exchange Act 1909 (Cth) and the common law. 10. In its approach to the question of construction of the relevant documents, the Full Court noted that the Loan Deed refers to the JVA and the Constitution and each are cross-referenced to the other and, for that reason, in construing the Loan Deed (and the Application Form) it was appropriate to refer to the JVA. I do not understand Rocky Castle or Koonara will take a different position in the District Court proceedings. In fact, both statements of claim (in particular, the proceedings brought by Rocky Castle) refer to the JVA in terms. However, as noted by Blue J (with whom Stanley J agreed) it was not the construction of the JVA that he considered critical, but the terms of the Loan Deed, although the JVA did provide the overall context in which the Loan Deed should be construed (see [106]-[127]). 11. If Mr Giddy proposes to defend Rocky Castle's claim brought pursuant to the Loan Deed on the basis that there was no "advance" or "payment" within the operative clause of the Loan Deed (and, I emphasise, I am unaware as to whether he will or not, no defence having been filed), he will have the comfort of a decision of a superior court of a State on that discrete issue. I should also note that Blue J disallowed Rocky Castle's claim to be entitled to judgment in restitution, it having not been a cause of action pleaded in the Magistrates Court or the subject of a notice of contention in the appeal to the primary judge. An application for an order remitting the matter to the Magistrates Court for hearing and determination of the claim in restitution ab initio was also refused. Rocky Castle's claim in the District Court proceedings pleads a claim in restitution in the alternative. 12. No submission has been advanced by the plaintiff that Koonara's claim has been the subject of prior determination in the South Australian courts or in this Court. Rather, the argument is advanced that those proceedings should be transferred to South Australia with the proceedings brought by Rocky Castle so that they may "travel together". 13. As White J observed in Morony v Reschke & Ors [2011] NSWSC 1139, it is legitimate to enquire on whom would be imposed the greater hardship if the claims were litigated in South Australia, as proposed by the plaintiff, or New South Wales as the defendants propose. 14. The plaintiff did not submit he would suffer any hardship were the proceedings to remain in this jurisdiction where they were regularly commenced. He is both resident here and has retained Sydney lawyers to act for him. On the other hand, the defendants claim hardship, at least measured in cost efficiency terms, were the proceedings to be transferred to South Australia, in particular where, on the advice of counsel, they have commenced proceedings in this State as part of a course of litigation in which they have been involved for some years. I do not accept that Mr Reschke has done other than to seek, legitimately, to advance and pursue his corporate interests on legal advice and that neither he nor his legal advisers have been involved in "forum shopping", in the sense of seeking to obtain an unfair or improper advantage by commencing the proceedings here. 15. Taking into account the range of matters ventilated in the hearing of the summons and applying the discretionary calculus that is engaged in the application of both s 140(1) of the Civil Procedure Act and s 5(2) of the Cross-vesting Act, I consider, as a "nuts and bolts" management decision, it is more appropriate, having regard to the interests of justice, for the proceedings to be determined in the District Court of New South Wales. In my view, the proceedings which have been properly commenced in this jurisdiction (inter alia because Mr Giddy is a resident of this State) are more appropriately continued in this jurisdiction (and in the Court where they were commenced), there being nothing in the likely course of proceedings or the substantive law which will, or might be applied, including the evidence that will be called, that requires their removal either to this Court and/or their transfer to the Supreme Court of South Australia in the interests of justice as the more appropriate forum. 16. Accordingly, the application under s 140(1) of the Civil Procedure Act 2005 (NSW) and s 5(2) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (NSW) is refused. 17. I make the following orders: 1. The summons is dismissed. 2. The plaintiff is to pay the costs of the first and second defendants. ********** 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. Decision last updated: 31 March 2016