Professional Advantage Pty Ltd v Smart [2008] NSWSC 873 (25 August 2008)

Last Updated: 2 September 2008

NEW SOUTH WALES SUPREME COURT

CITATION:
Professional Advantage Pty Ltd v Smart [2008] NSWSC 873


JURISDICTION:
Equity

FILE NUMBER(S):
4238/08

HEARING DATE(S):
19/08/08, 21/08/08

JUDGMENT DATE:
25 August 2008

PARTIES:
Professional Advantage Pty Ltd - Plaintiff
Darren Christopher Smart - First Defendant
Lawrence George Cook - Second Defendant
Transform Solutions Pty Limited - Third Defendant

JUDGMENT OF:
Barrett J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
Mr J R Clarke - Plaintiff
Mr L A H Macinnis, Solicitor - Defendants

SOLICITORS:
Shanahan Tudhope Lawyers - Plaintiff
Dibbs Abbott Stillman - Defendants


CATCHWORDS:
PROCEDURE - cross-vesting - transfer of proceedings - whether it is in the interests of justice that the proceedings be determined by the Supreme Court of Queensland

LEGISLATION CITED:
Jurisdiction of Courts (Cross-vesting) Act 1987. s 5(2)(b)(iii)
Restraints of Trade Act 1976
Uniform Civil Procedure Rules 2005, rules 5.3, 44.5
Uniform Civil Procedure Rules 1999 (Qld). rule 229(1)(b)

CATEGORY:
Procedural and other rulings

CASES CITED:
Bankinvest AG v Seabrook (1988) 14 NSWLR 711
Bulldogs Rugby League Club Ltd v Williams [2008] NSWSC 822
James Hardie & Coy Pty Ltd v Barry [2000] NSWCA 353; (2000) 50 NSWLR 357
KA & C Smith Pty Ltd v Ward (1998) 45 NSWLR 702
Morton v Nylex Pty Ltd [2007] NSWSC 562
Pacific Century Production Pty Ltd v Natafim Australia Pty Ltd [200] QSC 63
PRD Realty Pty Ltd v King [2007] NSWSC 734
Techtronic Industries Pty Ltd v Mitre 10 Australia Ltd [2008] NSWSC 740

TEXTS CITED:


DECISION:
Order pursuant to s 5(2)(b)(iii) that the proceedings be transferred to the Supreme Court of Queensland



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION


BARRETT J

MONDAY, 25 AUGUST

4238/08 PROFESSIONAL ADVANTAGE PTY LTD v DARREN

CHRISTOPHER SMART & 2 ORS

JUDGMENT

1 I am dealing with the defendants’ application for an order under

s 5(2)(b)(iii) of the Jurisdiction of Courts (Cross-vesting) Act 1987 transferring these proceedings to the Supreme Court of Queensland.

2 The proceedings were commenced by summons filed on 15 August 2008. The plaintiff’s claims are based on employment contracts between itself as employer and the natural person defendants as employees. In the case of one natural person, it seems to be common ground that a comprehensive written contract was made. In the other case, there is apparently a question whether the contact document was ever actually signed, although the plaintiff maintains that the terms of the document were in any event accepted.

3 It is the plaintiff’s case that each natural person defendant, having left the service of the plaintiff, has breached an express term of the employment contract by inducing Mr Tony Deparlo, another employee of the plaintiff, to leave the plaintiff and join the corporate defendant, a newly formed company controlled by the natural person defendants. The plaintiff maintains that the actions of the natural person defendants constitute breach of express contractual terms and that the corporate defendant has induced or been complicit in the breaches.

4 The final relief sought by the plaintiff is principally by way of injunction. There are also claims for interlocutory injunctions.

5 The defendants moved promptly to initiate their cross-vesting application. This is in accordance with rule 44.5 of the Uniform Civil Procedure Rules 2005, the obvious intent of which is to ensure that, so far as possible, one court or the other has carriage of a particular proceeding throughout. It was for that reason that I indicated that the cross-vesting application should be dealt with before the claims for interlocutory relief.

6 The question to be determined upon the present application is whether, in terms of s 5(2)(b)(iii) of the Jurisdiction of Courts (Cross-vesting) Act, it appears to this court that it is in the interests of justice that the proceedings be determined by the Supreme Court of Queensland. The court’s main task, therefore, is to decide which of the two courts is the more appropriate: Bankinvest AG v Seabrook (1988) 14 NSWLR 711 at 714 and 727. It is not necessary to find that this court is an inappropriate forum. Rather, regard must be had to the whole of the circumstances so that, as Mason P noted in James Hardie & Coy Pty Ltd v Barry [2000] NSWCA 353; (2000) 50 NSWLR 357, at least the following matters are taken into account:

· application of substantive law;
· forensic advantage or detriment conferred by procedural law;
· the choice made by a plaintiff of a forum and the reasons for that choice;
· substantive connections with the forum;
· balance of convenience to parties and witnesses;
· convenience to the court system.

7 Spigelman CJ observed that, in a tort case, the place of the tort will “generally be determinative” of the “appropriate court”, although other factors may affect the decision as to where the interests of justice lie. In PRD Realty Pty Ltd v King [2007] NSWSC 734, Gzell J said that similar considerations should apply in a breach of contract case. The “appropriate court” issue is the principal consideration but may not be determinative of where the interests of justice lie.

8 The factors to which the defendants point in support of the proposition that the proceedings should be tried in Queensland are that:

(a) the natural person defendants are resident in Queensland;

(b) the corporate defendant has its principal place of business in Queensland;

(c) none of the defendants has assets in New South Wales;

(d) Queensland law must be regarded as the proper law of each employment contract alleged to have been breached;

(e) the conduct sought to be restrained (employment of Mr Deparlo) is conduct that will be engaged in Queensland, since both the prospective employer and the prospective employee are in Queensland and the prospective employee will work in Queensland;

(f) the defendants’ solicitors are in Brisbane;

(g) of the five affidavits filed by the plaintiff to date, two are of persons with Queensland addresses, two are of persons with New South Wales addresses and on is of a person with an address in Victoria; and

(h) the plaintiff has operations in Sydney, Melbourne, Brisbane and Perth and its registered office is in Melbourne.

9 Against this, the plaintiff points to the following factors:

(i) the plaintiff’s head office and principal place of business are in Sydney, with one of the two joint managing directors located there (the other is based in Melbourne);

(j) the plaintiff has chosen to use lawyers in Sydney;

(k) the defendants have appeared twice in court in Sydney through a Sydney solicitor from a firm that operates in both Brisbane and Sydney;

(l) the contractual terms are unrestricted as to area and therefore apply in New South Wales as well as elsewhere;

(m) the Supreme Court of New South Wales deals frequently with this kind of case;

(n) questions might arise as to the operation of the Restraints of Trade Act 1976 (a peculiarly New South Wales enactment), a matter with which the Supreme Court of New South Wales is best placed to deal.

(o) Otherwise, the applicable legal principles are the same in each State.

10 A matter to which both sides devoted attention in argument is the pendency in this court of what is formally a separate proceeding between the same parties. In that proceeding, the plaintiff seeks, as against the same three defendants, an order for preliminary discovery under rule 5.3 of the Uniform Civil Procedure Rules. It is necessary to refer briefly to the substance of that application.

11 The plaintiff has an apprehension that there may have been (or be threatened) a breach of a quite separate provision of the employment contract of each of the natural person defendants. The present proceedings involve, as I have said, a provision against inducing other employees of the plaintiff to leave the plaintiff’s service. The preliminary discovery application is concerned with a provision against soliciting clients or customers to leave the plaintiff. The plaintiff has been informed by a client in Tasmania that that client intends in future to obtain services from the corporate defendant instead of the plaintiff. It cites familiarity of the natural person defendants with its requirements and operations as a reason for this decision.

12 The plaintiff aims, by means of the preliminary discovery application, to obtain documents throwing light on communications between the present defendants and the Tasmanian client in order to decide whether a case of breach of the non-solicitation clause can properly be advanced against the present defendants.

13 It is convenient to discuss the relevance of the preliminary discovery application to the cross-vesting application before proceeding to consider the particular factors to which reference has already been made.

14 It is neither appropriate nor necessary, in the present context, to determine the merits of the preliminary discovery application. But it is necessary to consider certain aspects of it. The defendants say that the application is misconceived, in that the only legitimate purpose of preliminary discovery under rule 5.3 is to gather information to facilitate a decision “whether or not to commence proceedings against the prospective defendant”. In this case, the “prospective defendant” is all three of the present defendants. They are, of course, persons against whom proceedings have already been commenced, based on alleged breach of the contractual provision against inducing employees to leave the plaintiff’s service. If those proceedings were to be expanded by an amendment adding claims based on alleged breach of the provision against solicitation of clients or customers, the case would not be one of commencement of proceedings at all. On that basis it is said, the preliminary discovery application must fail.

15 The contrary view espoused by the plaintiff is that rule 5.3 is really about investigating or establishing the availability of “a claim for relief from the court” and that the reference to a decision whether or not to commence proceedings should be taken to extend to a decision whether or not to proceed on a new and distinct cause of action by way of amendment of an existing proceeding.

16 I am bound to say that, on the authorities (see the decision of White J in Morton v Nylex Pty Ltd [2007] NSWSC 562 and cases there cited), the defendant’s contentions in this respect are strong. But the particular point raised does not seem to have been addressed in any earlier case and the question must be considered at least arguable.

17 It is also relevant to note that preliminary discovery, in the rule 5.3 sense, is unavailable from the Supreme Court of Queensland. There is, however, provision in rule 229(1)(b) of the Uniform Civil Procedure Rules 1999 (Qld) for the delivery of interrogatories to a person who is not a party to an action to help decide whether a person would be an appropriate party to a proposed proceeding. In Pacific Century Production Pty Ltd v Natafim Australia Pty Ltd [200] QSC 63, Douglas J said (at [21]):

“Rule 229(1)(b), however, is not limited to issues already defined in existing pleadings. In that aspect it is more akin to an application for pre-action discovery to identify a defendant.”

18 His Honour added (at [22]):

“In that context r 229(1)(b) seems to me to be a power designed to enable both identity and information discovery by the use of interrogatories.”

19 If, as the preferable construction appears to indicate, rule 5.3 of the New South Wales rules is in truth available only to assist with a decision to commence a new and separate proceeding (as distinct from expending an existing proceeding by amendment), it is most unlikely that it will avail the present plaintiff. The coincidence or substantial overlap between the factual and legal issues surrounding the claim of inducing the fellow employee and those relevant to the claim of soliciting the client or customer will be so great that the plaintiff will not be allowed to maintain two separate actions against exactly the same parties – one based on a breach of one provision of each contract and the other based on breach of another provision. The plaintiff will be required to pursue both claims in one proceeding, being this present proceeding.

20 The Queensland rules of court, while not envisaging any process precisely corresponding with that created by rule 5.3, makes available procedures sufficiently similar to warrant the conclusion that the plaintiff will not be prejudiced in any material way if denied the ability to resort to the New South Wales procedure but given the ability to take advantage of the Queensland procedure.

21 I therefore regard the pendency of the plaintiff’s rule 5.3 application in this court as essentially neutral in the evaluation of the matters relevant to the defendants’ cross-vesting application.

22 Returning to the specific factors put forward by the parties as relevant to the present inquiry, I begin with the matter of the proper law of each employment contract. It is sufficient, at this point, to say that the proper law seems much more likely to be the law of Queensland than the law of New South Wales. The natural person defendants were retained in Queensland under contracts made in Queensland to work principally at the plaintiff’s premises in Queensland. Each contract made it clear that the employee might be required on occasion to travel “interstate or overseas”, thus confirming that the normal course of employment would entail the rendering of services in Queensland. Queensland thus seems to be the place with which each contract has its closest and most real connection.

23 If the proper law of the contract is the law of Queensland, the Restraints of Trade Act will play no part in the determination of the parties’ dispute. That Act operates only where the proper law is that of New South Wales: KA & C Smith Pty Ltd v Ward (1998) 45 NSWLR 702.

24 But even if the proper law were held to be the law of New South Wales so that the Restraints of Trade Act did apply, there would be no reason why the Queensland court could not or would not apply the Act as part of the governing law. The Act does not invest the courts of New South Wales with jurisdiction or confer powers on them. It merely defines the extent to which, as a matter of New South Wales law, the literal import and effect of restraints of trade are to be modified.

25 The proper law question and the possible applicability of the Restraints of Trade Act should be regarded as essentially neutral in approaching the question whether this court or the Supreme Court of Queensland is the more appropriate court to determine the present case. Either court must be regarded as perfectly capable of ascertaining and applying the relevant law. And each will approach the matter in the same way.

26 I consider next the point that the defendants have no assets in New South Wales. In putting that forward as a matter relevant to the cross-vesting application, the defendants referred to the recent decision of this court in Bulldogs Rugby League Club Ltd v Williams [2008] NSWSC 822. That, like this, was a case in which a plaintiff sought injunctive relief. The significance in that case of the fact that that the defendant had assets in New South Wales went to the question whether the grant of an injunction would be futile. But that was a case in which the defendant was in a foreign country. Here by contrast, the defendants are in Australia and the ability to serve process and enforce judgments throughout Australia is assured by the Constitution and laws made under it. The matter of the location of assets of the defendants within Australia is therefore a neutral in the present inquiry.

27 The same considerations render neutral the matter of the place in which the conduct to be restrained by any injunction will be engaged in.

28 The matters really calling for consideration are matters of practicality and convenience. When those matters are taken into account, it must be accepted that there is a preponderance of factors in favour of a Queensland venue.

29 The natural person defendants are Queensland residents. They have lived in Brisbane at all material times. They were recruited by the plaintiff in Brisbane, worked in Brisbane (albeit with contact with and visits to other places in the course of their duties) and resigned in Brisbane. It is in Brisbane that they have established the new venture that they are seeking to pursue through the corporate defendant. It is true that their employer has its head office in Sydney and its registered office in Victoria, but the administrative structure of which the natural person defendants were part seems to have been in Brisbane. In these circumstances, I think that the natural person defendants are entitled to think that disputes arising out of their employment are really Brisbane disputes.

30 When regard is had to application of substantive law and forensic advantage or detriment conferred by procedural law, there is really nothing to distinguish between New South Wales and Queensland. The conclusions I have expressed concerning the plaintiff’s application for preliminary discovery and the possible application of the Restraints of Trade Act of New South Wales contribute to this conclusion.

31 As to the plaintiff’s choice of forum and the reasons for it, there can be no real doubt that the plaintiff chose New South Wales because that is where its head office and most of its staff are. It was a matter of unilateral convenience to the plaintiff.

32 A search for substantive connections with New South Wales yields only the fact that the plaintiff’s head office and one of its two managing directors are located in Sydney. A search for substantive connections with Queensland yields the several matters I have said entitle the defendants to regard the present disputes as really Brisbane disputes.

33 The balance of convenience to parties and witnesses, in so far as it can be determined at this stage, favours Brisbane. All three defendants are there. The natural person defendants, being Brisbane residents, may be expected to give evidence. On the plaintiff’s side, there are, at this point, two Brisbane witnesses, two Sydney witnesses and one Melbourne witness. Both Brisbane and Sydney will involve travel for the Melbourne witness who may accordingly be ignored for the purposes of the present inquiry. That leaves a position in which two-thirds of the witnesses identified at this stage are located in Brisbane and one-third is located in Sydney. The balance of convenience must therefore be seen to favour Brisbane.

34 The availability of video link to take evidence is a factor that may be taken into account in a case such as the present: see, for example, Techtronic Industries Pty Ltd v Mitre 10 Australia Ltd [2008] NSWSC 740. But that, it seems to me, would not normally cause the balance to shift in a case involving a preponderance of the kind that exists here.

35 In relation to legal representation, the position is that the case is at an early stage and the factual background is neither extensive nor complicated. Neither side will be unduly inconvenienced by having to instruct lawyers in another place.

36 The question of convenience to the court system does not appear to raise any particular issue. From the perspective of the respective courts, there is nothing to suggest that either will be inconvenienced by having to hear the case.

37 My conclusion is that, because the preponderance of non-neutral factors in this case is as I have described it, it is in the interests of justice that this proceeding be determined by the Supreme Court of Queensland. There will therefore be an order that the proceeding be transferred to the Supreme Court of Queensland.

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LAST UPDATED:
25 August 2008