|
|
[Home]
[Databases]
[WorldLII]
[Search]
[Feedback]
Federal Court of Australia |
Last Updated: 28 April 1999
PIHA Pty Ltd v Vinidex Tubemakers Pty Ltd [1999] FCA 132
SECURITY FOR COSTS - trustee company - proceedings not by way of defence albeit claim for unpaid payment in State Supreme Court - security ordered.
Trade Practices Act 1974 (Cth) s 82, s 87(1A)
Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) s 5(4)
Bankinvest AG v Seabrook (1988) 14 NSWLR 711 applied
Cascade Group Ltd v Carlton & United Breweries Ltd (1992) ATPR 41-172 applied
Teserioro v Matstar Pty Ltd (1990) 93 ALR 607 discussed
T. O'Connor and Sons Pty Ltd v Clough Pty Ltd (Unreported, Federal Court No. SG 89 of 1995, Branson J) discussed
National Dairies WA Ltd v Wesfarmers Ltd (Unreported, Federal Court No NG 509 of 1996, Tamberlin J) applied
PIHA PTY LTD v VINIDEX TUBEMAKERS PTY LTD
W 9/1999
FRENCH J
22 APRIL 1999
PERTH IN THE FEDERAL COURT OF AUSTRALIA BETWEEN: Applicant AND: Respondent JUDGE:
WESTERN AUSTRALIA DISTRICT REGISTRY W 9 OF 1999
PIHA PTY LTD
VINIDEX TUBEMAKERS PTY LTD
FRENCH J DATE OF ORDER: 22 APRIL 1999 WHERE MADE: PERTH
THE COURT ORDERS THAT:
On the Respondent's amended motion filed 20 April 1999:
1. The proceedings are to be transferred to the Queensland District Registry of the Federal Court with effect from 24 May 1999.
2. The applicant is on or before 23 May 1999 to provide security for costs in the sum of $50,000 in a form agreed with the respondent or otherwise by the provision of a bank guarantee to the Western Australian District Registrar of the Court in a form approved by the Registrar.
3. The action will be stayed from 24 May 1999 if the security for costs has not been provided by that time.
4. There is liberty to the respondent to apply to increase the security after the action has been listed for trial.
5. Costs of the motion in the cause provided that the parties may apply by written submissions within seven (7) days for a variation of this order as to costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| WESTERN AUSTRALIA DISTRICT REGISTRY | W 9 OF 1999 |
|
BETWEEN: | PIHA PTY LTD
Applicant |
|
AND: | VINIDEX TUBEMAKERS PTY LTD
Respondent |
JUDGE:
FRENCH J DATE: 22 APRIL 1999 PLACE: PERTH
FOR TRANSFER OF PROCEEDINGS AND FOR SECURITY FOR COSTS
1 On 3 February 1999 PIHA Pty Ltd (PIHA) filed an application seeking a declaration that pipeliner material supplied to it by Vinidex Tubemakers Pty Ltd (Vinidex) under contract was not in accordance with that contract, damages at common law and damages pursuant to s 82 of the Trade Practices Act 1974 (Cth). There is also a claim for an order under s 87(1A) of the Trade Practices Act 1987 that Vinidex indemnify PIHA for losses caused to it arising out of the supply of polyethylene pipe by PIHA.
2 The application was accompanied by a statement of claim in which it is said that Vinidex is a trading corporation and the supplier of polyethylene product in trade or commerce. It is asserted that by a contract dated 20 May 1998 PIHA agreed with Transfield Pty Ltd to supply and install polyethylene liner of Grade PE80C for use inside a steel slurry pipeline associated with the Century Zinc project in North Queensland. The slurry pipeline is to transport mined material from the Century mine site to the Karumba Port, a distance in excess of 300 kilometres. Transfield was the main contractor for the project which is being constructed for Pasminco Century Mine Ltd.
3 It is said that by an agreement in writing Vinidex agreed to supply 304,000 metres of high density polyethylene pipe of Grade PE80C to PIHA for the purpose of lining the pipeline. The agreement was contained in letters of 21 May 1998 and 22 May 1998 from PIHA to Vinidex and from Vinidex to PIHA respectively, together with PIHA's purchase order 14856 of 23 May 1998. PIHA says it was an express term of the contract that the supply of the pipeliner would be in accordance with its standard terms and conditions. Terms and conditions of the master contract for the Century Zinc project between Pasminco and Transfield were incorporated where not otherwise inconsistent with the terms and conditions of the contract between PIHA and Vinidex. Moreover it is said to have been an express term of the contract that Vinidex would provide PIHA with a comprehensive quality assurance package and plan suitable for the supply of polyethylene pipe of Grade PE80C for the purpose of lining a slurry pipeline.
4 PIHA's standard terms and conditions at the time provided, inter alia, that the law of Western Australia would be the proper law governing the order for goods and that the parties accepted and submitted to the jurisdiction of the courts of Western Australia. They also contained a warranty by the supplier that the goods would conform with the description and specifications in the order and that they would be of good merchantable quality and fit for the known purpose for which they were supplied. The quality assurance plan provided by Vinidex to PIHA in late May 1998 adopted what turned out to be superceded Australian standards. The relevant applicable standards were said to require polyethylene to pass a "notch fracture" toughness test. Vinidex is said to have breached the contract by failing to provide a suitable quality assurance plan for the supply of the pipe. Between July 1998 and October 1998 it is alleged Vinidex, in breach of the contract, supplied polyethylene pipe which was of a lower strength, grade and quality than Grade PE80C, did not have the performance characteristics of that grade, was unsuitable for the Century Zinc slurry pipeline and was not in accordance with the relevant Australian Standard as it did not meet the requirements of a notch fracture test.
5 Referring back to the letters and purchase order constituting the contract, it is pleaded in the statement of claim that Vinidex, by its statement that the pipeliner was of Grade PE80C in its letter of 22 May 1998 and by its conduct in supplying the pipeliner, represented that it was of a particular standard, quality and grade and had the performance characteristics of polyethylene Grade PE80C. In reliance on these alleged representations PIHA says that it accepted delivery of the product and between August 1998 and November 1998 lined about 120 kilometres of the slurry pipeline with the material supplied.
6 Because of the inadequacies of the pipeliner PIHA says it was obliged to remove it and replace it with a suitable polyethylene liner. The representations made in the contract document and by the actual supply of the polyethylene are said to have been false in respect of the strength, grade, quality and performance characteristics of the product and its unsuitability to line the Century Zinc slurry pipeline.
7 PIHA asserts that it has suffered loss and damage as a result of Vinidex's representations.
8 Vinidex filed a conditional notice of appearance on 17 February and on the same day filed a motion seeking security for costs from PIHA and for an order that the application be removed from the Western Australian District Registry of the Federal Court to the Brisbane District Registry. The motion was amended on its return day to seek transfer of the action to the Supreme Court of Queensland. An order for removal to the Federal Court's Brisbane Registry was sought in the alternative.
Other Matters Relevant to the Transfer Motion
9 Affidavit evidence was put before the Court upon the hearing of the motion for transfer which was said to be relevant to its disposition.
10 There is a question whether PIHA's standard terms and conditions apply and, in particular, that term which provides for the application of Western Australian laws and the subjection of the parties to the jurisdiction of the courts of Western Australia. There was evidence that Vinidex never received nor was referred to PIHA's standard terms and conditions. And the terms of the "Master Contract" between Pasminco and Transfield which were incorporated to the extent of their consistency with the Vinidex and PIHA contract, provided that the laws of the State of Victoria should be the proper law of the contract. The Heads of Agreement between PIHA and Transfield contained a clause providing that the agreement should be governed by and construed in accordance with the laws of Queensland.
11 No doubt the question of the proper law of the contract would require some factual inquiry. I accept, however, the submission for Vinidex that there is no real suggestion that the laws of Western Australia are relevantly different to the laws of Queensland in so far as they apply to this litigation. Certainly no material differences were identified by counsel for PIHA.
12 The dispute was well established when these proceedings were issued. There had been problems with the performance of the pipeliner in 1998. They seem to have involved leakage during hydrostatic testing. PIHA had not met payments claimed by Vinidex for pipeliner material supplied in 1998 and on 17 December 1998 Vinidex's solicitors wrote to PIHA's solicitors demanding immediate payment of $1,995,994.60 they said was then owing. It was stated in the letter that if payment were not received by close of business on 22 December 1998 Vinidex would take immediate steps to recover the money. In a letter dated 23 December 1998 from PIHA's solicitors reference was made to an agreement between officers of the two companies that until 20 January 1999 they would "jointly focus their energies upon resolving the issues relating to the polyethylene pipe rather than pursue claims against one another". The letter referred to a management meeting between all parties which had been scheduled for 20 January 1999 and confirmed agreement that Vinidex would not pursue its claim for payment against PIHA until after 20 January 1999. This agreement was confirmed by a letter from Vinidex's solicitors of 24 December 1998 accompanied by the threat that if a satisfactory arrangement for payment were not forthcoming by 20 January Vinidex would "vigorously pursue the matter".
13 PIHA and Vinidex and other participants in the project established a technical committee to try to ascertain the reasons for the problems experienced with the pipe. An independent expert report by Dr R.W. Truss was commissioned to review the technical committee's findings. That report was presented on 21 January 1999. It appears from the report that the leakage failure under hydrostatic testing was attributed to inappropriate welding of sections of the pipeliner. It appears also however that the pipeliner may not complied with current Australian standards in relation to a notch fracture pressure test which tests slow crack growth resistance. It is suggested in the report however that this was not a matter relevant to leakage under hydrostatic pressure testing. A further draft report prepared by Dr Truss to similar effect was also put before the Court.
14 The observations I make about these reports are not based upon any close analysis of them nor have they been tested in cross-examination or by reference to any other expert assessment. Suffice it to say that they indicate that technical investigation of the pipeliner difficulties was well underway in January 1999 and that pending the outcome of that investigation there was a temporary delay in the initiation of enforcement action by Vinidex against PIHA in relation to unpaid invoices for pipeliner supplied. On the other hand, the technical reports appear to have provided the inspiration for PIHA's claim that the pipeliner supplied did not comply with relevant standards albeit there may be a question whether the non-compliance played any part in the difficulties observed which, on Vinidex's case, would seem to be attributable to welding practices applied by PIHA.
15 In the event these proceedings were issued by PIHA out of the Western Australian District Registry of the Federal Court on 3 February 1999. On 17 February Vinidex commenced action by writ issued out of the Supreme Court of Queensland. By its writ Vinidex claimed the sum of $3,191,795 as the price of goods sold and delivered to PIHA. The amount is said to represent the balance owing from invoices issued between July and November 1998 for a total sum of $4,568,295.02. I accept that the outcome of the present motion does not depend upon any consideration of priority in time. Each party has chosen, to all intents and purposes contemporaneously, to institute proceedings in the court which it regards as most convenient to it.
16 In an affidavit sworn in these proceedings on 15 March, Christopher James Ellison, the Managing Director of PIHA, said that his company would instruct its solicitors to engage Queensland agents to enter a conditional appearance in the Queensland Supreme Court action and apply to strike out that action as an abuse of process and, in the alternative, apply to transfer the action to the Federal Court to be heard with this action.
17 A conditional appearance was entered in the Supreme Court of Queensland on 24 March 1999. On 30 March the solicitors for Vinidex advised PIHA's solicitors that if their client failed to file and serve an unconditional appearance by 31 March Vinidex would take out a summons to set aside the conditional appearance. On 6 April such a summons was filed in the Supreme Court and on 8 April PIHA took out a summons in the Supreme Court seeking a stay of the Vinidex action. The application to set aside the conditional appearance and the application for a stay were heard at the same time before Wilson J on 12 April 1999. In the event PIHA did not persist with its conditional appearance and undertook to file an unconditional appearance by 4pm on 12 April. It did not apply for a transfer of the Supreme Court of Queensland proceedings at that hearing but pursued its application for a stay of proceedings. It was submitted by counsel for Vinidex in the Supreme Court of Queensland that it would have been proper for PIHA to apply to the Supreme Court of Queensland for an order under the Jurisdiction of Courts (Cross-vesting) Act (Qld) transferring the proceedings to the Western Australian District Registry of the Federal Court rather than to seek a stay. No such application was made.
18 On 19 April 1999, Wilson J dismissed PIHA's summons for a stay. The Vinidex summons became academic upon PIHA's undertaking to file an unconditional appearance.
19 PIHA submitted to Wilson J that the action in the Supreme Court of Queensland ought to be stayed as vexatious and as an abuse of process of that court. That submission was evidently made on the basis that Vinidex, having by that time filed a full defence in the Federal Court together with a motion for security for costs and transfer of the action and having foreshadowed a motion for summary judgment, had made an election that the Federal Court should decide where the case would be tried. Wilson J did not accept that argument. Vinidex had not cross-claimed in the Federal Court. Wilson J therefore held that the action in the Supreme Court of Queensland was not a duplication of proceedings pending the Federal Court notwithstanding that there was a common substratum of fact. Her Honour said:
In the event Wilson J was not persuaded that the Vinidex action in the Supreme Court should be stayed.
"This is not a case of the plaintiff (Vinidex) having elected to take action in the Federal Court; rather it took steps necessary to defend proceedings brought against it there. Its application for removal or transfer of the proceedings and for security for costs can hardly be described as an election to litigate in the Federal Court."
20 The position at present therefore is that there are two actions on foot in different courts dealing with what is undoubtedly one matter in dispute.
Principles Governing Transfer
21 Vinidex's motion for transfer of the proceedings to the Supreme Court of Queensland relies upon s 5(4) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) which provides:
"5(4) Where:22 The language of s 5(4) reflects the wider legislative policy that cross-vesting of jurisdiction should not involve any significant departure from the patterns of litigation in the various courts. In particular it contemplates that the courts will exercise restraint and mutual respect for each others responsibilities in deciding whether or not to exercise a jurisdiction conferred by virtue of the cross-vesting laws.
(a) a proceeding (in this sub-section referred to as the "relevant proceeding") is pending in the Federal Court or the Family Court (in this sub-section 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 a State or Territory and it is more appropriate that the relevant proceeding be determined by that 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 a 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-sub-paragraph (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 Supreme Court; or
(iii) it is otherwise in the interests of justice that the relevant proceeding be determined by the Supreme Court of a State or Territory,
the first court shall transfer the relevant proceeding to that Supreme Court."
23 Beyond recognition of that principle of mutual respect the judgment whether to transfer proceedings to another court is a practical one, "a "nuts and bolts" management decision" - Bankinvest AG v Seabrook (1988) 14 NSWLR 711 at 714.
24 It was said at one time that the Federal Court has special expertise in applications involving the provisions of Part V of the Trade Practices Act. Reference has been made to the "substantial body of doctrines and principles which give guidance as to how the Division, particularly section 52, is to be interpreted and applied" - Cascade Group Ltd v Carlton and United Breweries Ltd (1992) ATPR 41-172 at 40,365 per Sheppard J.
25 But with the cloning of the Trade Practices Act into State Fair Trading Acts in the late 1980s and the extensive invocation of s 52 in misrepresentation cases brought in State courts it can no longer be said that the Federal Court has a special claim to exercise jurisdiction in relation to such applications, certainly not a claim that would provide a ground for preferring the Federal Court to State Supreme Courts where such actions may be brought. Both Branson and Spender JJ have observed in different cases that the Federal Court is no longer to be regarded as necessarily a more appropriate court than a State or Territory Supreme Court to hear a claim pursuant to Part V of the Trade Practices Act - Teserioro v Matstar Pty Ltd (1990) 93 ALR 607 at 608 and T. O'Connor and Sons Pty Ltd v Clough Pty Ltd (Federal Court, Unreported No. SG89 of 1995, Branson J). On the other hand it can also be said that the spread of Federal Court jurisdiction through some 125 federal statutes as at 1998 illustrates its evolution from an initial conception as a specialist body dealing with a narrow band of federal statutes to one which has attracted characterisation as effectively "...a superior court of general jurisdiction in Australia" - Crawford, Australian Courts of Law 3rd Edition OUP 1995 at p 168. This is subject to the qualification that the jurisdiction is predominantly civil.
26 Where a claim is largely based upon breach of contract or other causes of action arising under State law, and particularly where it involves the construction of laws peculiar to the State in question, then the State court may be the more appropriate forum. That is so notwithstanding that such State claims can be heard within the accrued jurisdiction of the Federal Court where the primary claim is based, for example, on Part V of the Trade Practices Act 1974 (Cth). Tamberlin J observed in National Dairies WA Ltd v Wesfarmers Ltd (Unreported, Federal Court No NG 509 of 1996, Tamberlin J), that where likely questions for determination in the proceedings involve the application and interpretation of State regulatory statutes that is a task best suited to a State court.
27 The instant case presents largely as a contract case with the supportive invocation of s 53 of the Trade Practices Act. That is a factor which weighs in favour of a transfer to the Supreme Court of Queensland. On the other hand a significant element of the claim arises under Federal jurisdiction and plainly the case has a national character. One party is based in Perth, the other is based in New South Wales. The relevant production facility is in Queensland. There are witnesses in three States of Australia and overseas witnesses. No doubt the Supreme Court of Queensland has the facilities to hear the evidence of such witnesses in a reasonably convenient way. The Federal Court, being a national court, does have the facility for splitting trials so that they may be conducted partly in one centre and partly in another.
28 There are strong Queensland elements in this case, that State being the location of the project and the production, supply and installation of the pipeliner in question.
29 In considering the application of s 5(4) of the Jurisdiction of Courts (Cross-vesting) Act it is important to have regard to the various factors which that section requires the Court to weigh up. The first question is whether the proceeding in this Court arises out of or is related to the proceeding pending in the State Supreme Court. There can be no real debate against an affirmative answer to that question.
30 In deciding whether it is more appropriate that the proceeding in this Court be determined by the Supreme Court of Queensland it is necessary to have regard to whether the proceeding in this Court or a substantial part of it would have been incapable of being instituted in this Court and capable of being instituted in the Supreme Court of the State. Cross-vesting legislation apart, the contract claims appear on the face of it to be cognisable by this Court pursuant to its accrued jurisdiction. This is not therefore a proceeding which would have been incapable of being instituted in this Court apart from State cross-vesting legislation.
31 The Court is also required to have regard to the extent to which the matters for determination in the proceeding are matters arising under or involving questions as to the application, interpretation or validity of a law of the State. There is however no real indication that the proceedings in this Court would involve questions as to the application, interpretation or validity of the laws of the State of Queensland.
32 In the event I am influenced by the national character of this litigation and the fact that a significant element of the claim does arise under federal legislation albeit the common law elements are able to be encompassed by the accrued jurisdiction. While it may be said that the Federal Court can no longer be regarded as possessing any special claim as a preferred forum in relation to Part V of the Act, it may also be said, as I have observed, that the jurisdiction of the Federal Court generally has been so far widened as to take it well beyond the category of a specialist statutory court. This is a national claim and the Federal Court, in my opinion, is particularly suited to deal with its multi-state aspects in a way that is convenient to the parties. Having said that, I do not accept that the Perth Registry is necessarily the most convenient Registry through which the case should be conducted. I propose therefore to accede to the alternative proposal in the motion for transfer of the action to the Brisbane District Registry of the Court.
33 This requires consideration of the other element of the motion which seeks an order for security for costs. In my opinion the proceedings commenced in this Court by PIHA involve more than simply a defensive response to the threatened recovery action on the part of Vinidex. There is a major attack upon Vinidex's entitlement to receive any money which does not stop at a challenge to that entitlement but seeks consequential losses. PIHA is a trustee company with a limited issued capital. On the face of it PIHA itself may be unable to meet an order for costs made against it were it to be unsuccessful in pursuing its claim at the hearing. The estimated cost of the proceedings on the part of Vinidex is said to exceed $300,000. I accept that such estimates are difficult but plainly this is going to be an expensive piece of litigation. In my opinion it is appropriate that Vinidex have some partial protection in respect of the costs of the action initiated in this Court by PIHA. On the material presently before me, Vinidex has a reasonable chance of success in its defence to PIHA's claims. That is not to say that PIHA's claim is weak. However the basis for it and its linkage to claimed loss and damage will undoubtedly benefit from refinement and clarification. I therefore propose to order that PIHA provide security for costs in the sum of $50,000 within one month of the date of this order. The form of the security may be as agreed between the parties or by lodgment of a bank guarantee with the Court in a form approved by the Registrar. The proceedings will be stayed if after one month the security has not been provided. There will be liberty to Vinidex to apply to increase the security after this matter is listed for trial.
|
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable
Justice French. |
Associate:
Dated: 22 April 1999
|
Counsel for the Applicant: | Mr M. Bennett |
| Solicitor for the Applicant: | Bennett & Co. |
| Counsel for the Respondent: | Mr H. Fraser QC with Mr P.G. Mead |
| Solicitor for the Respondent: | Carter Newell |
| Date of Hearing: | 20 April 1999 |
| Date of Judgment: | 22 April 1999 |
AustLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.austlii.edu.au/au/cases/cth/FCA/1999/132.html