Burnan Pty Ltd & Anor v Bolton & Anor [2008] QDC 32

DISTRICT COURT OF QUEENSLAND CITATION: Burnan Pty Ltd & Anor v Bolton & Anor [2008] QDC 32 PARTIES: BURNAN PTY LTD First Appellant AND KEITH ROLSTON Second Appellant AND KENNETH BOLTON AND ANITA BOLTON Respondents FILE NO/S: BD1191/07 DIVISION: Civil PROCEEDING: Appeal ORIGINATING COURT: Magistrates Court, Brisbane DELIVERED ON: 1 February 2008 DELIVERED AT: Brisbane HEARING DATE: 29 August 2007 JUDGE: Nase DCJ ORDER: 1. Appeal allowed; 2. The orders made by her Honour Ms Roney, Magistrate, in the Magistrates Court at Brisbane on 30 March 2007 dismissing an application for a stay of proceedings under s 20 Service and Execution of Process Act 1992 (Cth) are set aside; and 3. The claim in proceedings number M409/07 pending in the Magistrates Court at Brisbane be stayed until further ordered by a court. -- 1 of 16 -- 2 CATCHWORDS: PRACTICE AND PROCEDURE – exclusive jurisdiction clause - whether a court of another State with jurisdiction to determine the dispute is the appropriate court - whether proceedings should be stayed Service and Execution of Process Act 1992 (Cth), s 20 Cases considered Bankinvest AG v Seabrook (1988) 14 NSWLR 711 Safe Effect Technologies Ltd v Hood Group Holdings (2006) 24 ACLC 684 Savcor Pty Ltd v State of New South Wales (2001) 52 NSWLR 587 St George Bank Ltd v McTaggart [2003] QCA 59; [2003] 2 Qd R 568 World Firefighters’ Games Brisbane v World Firefighters’ Games Western Australia Incorporated & Ors (2001) 161 FLR 355 COUNSEL: Mr J Wagner for the applicants Mr S Carius for the respondents SOLICITORS: McKays Solicitors for the applicants Anderson Brady for the respondents Introduction [1] The parties to the appeal are Burnan Pty Ltd, Keith Rolston, who is a director of Burnan, and Kenneth and Anita Bolton. Mr and Mrs Bolton are the plaintiffs and Burnan and Mr Rolston are the defendants in an action pending in the magistrates court at Brisbane. -- 2 of 16 -- 3 [2] The appeal is from a refusal by a magistrate to stay the action. The stay application was brought under s 20 Service and Execution of Process Act 1992 (Cth). Burnan and Mr Rolston are the appellants, and Mr and Mrs Bolton are the respondents to the appeal. [3] Mr Rolston resides in Perth, Western Australia, with his wife. At the time of the stay application before the magistrate he was 70 years of age and intending to retire soon. He is a director, and, as I understand it, effectively the proprietor of Burnan. The activity (business) carried on by Burnan is that of preparing resumes (I assume for job applicants) in Perth, Western Australia. [4] Burnan also sells the “business knowledge” required to operate a successful resume service business to anyone interested in developing their own resume service business. On 25 June 2005 Mr and Mrs Bolton attended a presentation by Burnan (Mr Rolston). Two days later the Boltons agreed to purchase the “business knowledge” with the intention of starting a resume business in Brisbane. Their agreement with Burnan is set out in a deed dated 27 June 2005. The cost of the “business knowledge” was $22,000. Under the deed Burnan agreed to impart the knowledge over a period of one week’s intensive training, followed by a period of three months advisory assistance. [5] On 26 January 2007 Mr and Mrs Bolton commenced proceedings in the Brisbane Magistrates court against Burnan and Mr Rolston. The claim against Burnan is for breach of the contract for the supply of the “business knowledge” and, in the alternative, for damages for breach of the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1989 (Qld). The claim against Mr Rolston is for knowingly assisting Burnan’s breaches of the Trade Practices Act. As the agreement of 27 June 2005 contained an exclusive jurisdiction clause in favour of the courts of -- 3 of 16 -- 4 Western Australia, both Burnan and Mr Rolston applied to a magistrate for a stay of the Queensland proceedings under s 20 Service and Execution of Process Act 1992 (Cth). On 30 March 2007 a magistrate dismissed the application for a stay. The appeal before me is from the magistrate’s decision to refuse the stay application. [6] Mr and Mrs Bolton claim Burnan breached its contractual obligations by: “(A) Selling an excessive number of businesses into the same market thereby diminishing the earning potential of individual business opportunity operators; (B) Not undertaking adequate market research before making promises and representations about the profitability and risk of the business opportunity; (C) Contrary to the warranties of the first defendant, the plaintiffs did not start earning between $300 and $500 per week immediately after the training had finished; (D) Contrary to the warranties of the first defendant, the plaintiffs, in running the business as a husband and wife team, did not obtain earnings of $43,200 and $20,000 = $63,200 per year; and (E) Contrary to the warranties of the first defendant, the plaintiffs did not obtain earnings of $43,200 per year, despite this being the theoretical minimum for an individual working part-time.”1 1 Amended pleadings paragraph 10. -- 4 of 16 -- 5 [7] For the alternative claim based on the Trade Practices Act (Cth) and the Fair Trading Act (Qld), the warranties alleged to have been breached ((C), (D), and (E) above) are recast as representations which in the circumstances, they say, are false and misleading in breach of the Commonwealth and State Acts. [8] As the only express obligation on Burnan in the agreement executed by the parties was to provide a week of intensive training followed by a period of advisory support (three months), proof of the terms said to be breached relies upon proof of a collateral contract (or warranties) and the implication of additional terms in the deed. The representations on which the claims are based are said to be made in the promotional material (including an income chart included in a presentation folder) and orally by Mr Rolston when conducting the first week training session. [9] Burnan and Mr Rolston filed conditional notices of intention to defend. In the circumstances it is unnecessary to refer to the claims or defences in any greater detail. The application for a stay [10] The application for a stay was brought under the Service and Execution of Process Act (Cth).2 The test under the section is simply whether a court of another State with jurisdiction to determine the dispute is the appropriate court. The section sets out a number of factors3 to be considered when exercising the discretion to stay the proceedings. [11] On the stay application the parties placed information before the magistrate of their places of residence and financial circumstances. Both these are relevant matters 2 Section 20 Service and Execution of Process Act 1992 (Cth). 3 Section 20(4) Service and Execution of Process Act 1992 (Cth). -- 5 of 16 -- 6 under the section. The parties also placed some evidence before the magistrate about witnesses who may be called at any trial. The places of residence of the witnesses are also a relevant matter under the section. On the Bolton side it was suggested that, apart from the Boltons, and perhaps an expert witness, an additional 4 to 10 witnesses would be called.4 The purpose of the witnesses is, as I understand it, primarily to prove the representations relied upon by the Boltons and to establish the representations are false or misleading. All of these witnesses are Brisbane based. On the other side it was asserted that, apart from Mr Rolston, it may be necessary to call about 6 Western Australian based witnesses to whom the “business knowledge” has been sold in order to give evidence “about the reasonableness of representations made to them and the extent to which … they have successfully operated their businesses”.5 On the pleadings to date both the proof of any representation and the issue of whether any representation was false and misleading are live issues between the parties; although at the hearing before the magistrate some uncertainty existed as to whether or not Burnan (and Mr Rolston) accepted the representations pleaded. The magistrate’s reasons [12] The magistrate, after argument, refused the stay application. The magistrate’s extempore reasons are shortly expressed6 but do communicate clearly the basis for her decision. After commenting that she was familiar with the section under which the application was brought, she said: 4 Affidavit of Tony Kurt Piccardi dated (TAPE DROPPED OUT). 5 Affidavit of Keith Rolston dated 22 February 2007 paras 8, 9. 6 She was not, of course, required to discuss each point relied upon by the parties. I think her reasons were sufficiently expressed simply because they communicated the basis of her decision. -- 6 of 16 -- 7 “On balance, I’ve determined that it’s appropriate not to grant the stay of proceedings, in other words, to refuse the application principally for these reasons. That the nexus to Queensland argument as the greatest appeal, based on the material in the form of the affidavit of Mr Piccardi about the existing witness pool, and in paragraph 4 of that affidavit, the probable witness pool. It would seem that this is a matter that witnesses will probably overwhelmingly come from Queensland, because it is the Queensland conditions that need to be considered, and while that is a matter, to some extent, which was foreseeable, I am not satisfied that the full extent of the witnesses, and the cause of action that is alleged by the plaintiff, is such that it can have been a matter that they could have fully contemplated at the time of the execution of the deed. The other important matter, in my discretion, are the personal circumstances of the plaintiff, as identified in Mr Bolton’s affidavit. They clearly have a very sick child. They have financial circumstances which suggest that their household is not plentiful, that the impact upon them of travelling to Western Australia will be significant, particularly having regard to the illness suffered by the youngest child. It seems probable to me that if they were compelled to travel to Western Australia, they would have to fund nursing care of this unwell child that absent of a relatively who had medical training that that would be the only consequence for them which -- 7 of 16 -- 8 would be a significant impost and may well mean that they could be in a position where they were unable to fund the proceedings at all. So, for these reasons, the order I make is to disallow the application. I presume someone will say something about costs in the matter. Mr Carius?”7 [13] In exercising the discretion in the section the magistrate balanced the connecting factors to Queensland against the connecting factors to Western Australia, and the personal and financial circumstances of Mr and Mrs Bolton against the exclusive jurisdiction clause. In general terms, this may be an acceptable approach. The exercise does involve balancing the relevant considerations in determining which of Queensland or Western Australia is the appropriate court system in which the litigation should be determined. Nevertheless, I am satisfied the magistrate did fall into error in her approach to the exclusive jurisdiction clause. I will try to explain why I have reached this conclusion. [14] An exclusive jurisdiction clause is often an important consideration when exercising the discretion of the section. It is important simply because the idea that the parties who have made a contract should keep to their contract is one of the underlying principles of the law of contract. Philippides J in World Firefighters’ Games Brisbane v World Firefighters’ Games Western Australia Incorporated & Ors (2001) 161 FLR 355 considered the importance of an exclusive jurisdiction clause in the context of the cross-vesting legislation. She concluded: 7 Transcript pp 18, 19. -- 8 of 16 -- 9 “The authorities favour the view that under the cross-vesting legislation, the exclusive jurisdiction clause remains a relevant consideration, on the basis that the ‘interests of justice’ require that due acknowledgement be accorded to such a clause as representing the bargain between the parties and that proper regard be given to the need to hold parties to their bargain. Nevertheless, in my opinion, in considering the weight to be given under the legislation to such a clause, one should not start from the position that such clauses should be viewed with the ‘strong bias’ in their favour previously accorded to them at common law. The weight to be given to such clause will vary depending on the other surrounding and countervailing circumstances.” I respectfully adopt these observations as an accurate statement of the law. [15] The magistrate, from her comments during the hearing, recognised the potential importance of an exclusive jurisdiction clause, but in weighing it against the other circumstances, she stripped it of weight because she was not “satisfied” that the “full extent” of the Queensland witnesses and the nature of the cause of action was “fully contemplated at the time of execution of the deed” by the Boltons. [16] The exclusive jurisdiction clause in this case created a contractual obligation on Mr and Mrs Bolton to litigate any dispute in relation to their agreement in Western Australia. Although the clause does not deprive a Queensland court of jurisdiction, the clause itself is not dependent on the parties’ foresight of the nature or scope of any actual dispute at the time the agreement was entered. The reason the law attaches significance to an exclusive jurisdiction clause is simply because of the underlying principle that parties to a contract should be held to their bargain. This -- 9 of 16 -- 10 principle is not affected by the circumstance, as happened in this case, that the obligation is inconvenient for one party. [17] The only evidence before the magistrate about the level of Mr and Mrs Bolton’s foresight is that Mr Rolston probably discussed each clause, including the exclusive jurisdiction clause, with the Boltons before the deed was executed by them. Mr Bolton is described as an investor, and Mrs Bolton as a schoolteacher. As no claim of lack of foresight is advanced by Mr and Mrs Bolton in the material before the magistrate, the factual basis of the magistrate’s conclusion rests on an inference she drew from the number of probable and possible witnesses and the nature of the dispute. [18] In my opinion the learned magistrate erred in law when she discounted the exclusive jurisdiction clause. The circumstances Mr and Mrs Bolton did not anticipate the particular breach or the difficulty in litigating in Western Australia does not affect the validity of the clause, and therefore its weight. As a consequence the exercise of discretion miscarried, and it is appropriate I exercise the discretion in the section. The law [19] The appropriate state jurisdiction for the purposes of s 20 Service and Execution of Process Act is the state jurisdiction with the most real and substantial connection with the proceedings (the “natural forum” in which to bring the proceedings).8 The section sets out a non-exhaustive list of matters to be taken into account when determining the natural forum for the particular proceedings.9 The section does not distinguish between the matters listed in terms of importance. In this respect, the 8 St George Bank Ltd v McTaggart [2003] QCA 59; [2003] 2 Qd R 568 -- 10 of 16 -- 11 Service and Execution of Process Act reflects the cross-vesting legislation. Logically the section does not allow a court to consider the fact that proceedings have already been commenced in a particular jurisdiction when determining the appropriate jurisdiction. The correct approach to the section is discussed in a number of cases.10 The only additional comment that needs to be made at this point is that the appropriate jurisdiction is not necessarily the most convenient. That is because in any particular case the interests of justice may also be important in a decision about the appropriate forum. The stay application [20] Turning to the merits of the stay application, I propose to briefly consider the matters relating to the balance of convenience: the residence of the parties and the possible witnesses, and the financial circumstances of the parties. Any other connecting features will then be considered in order to reach a provisional conclusion on the natural forum for the particular proceedings. The effect of the exclusive jurisdiction clause affecting the proceedings against Burnan will be analysed next. Finally the impact on Burnan of the proceedings concerning Mr Rolston and the impact on Mr Rolston of the proceedings concerning Burnan will be discussed. The balance of convenience [21] There is an obvious advantage for each party in being able to conduct the litigation in the party’s own State. The disadvantage in conducting the proceedings in the other State is so great that it was suggested that the Boltons might not prosecute 9 Section 20(4) Service and Execution of Process Act 1992 (Cth) 10 World Firefighters’ Games Brisbane v World Firefighters’ Games Western Australia Incorporated & Ors (2001) 161 FLR 355, St George Bank Ltd v McTaggart [2003] 2 Qd R 568 -- 11 of 16 -- 12 their claim if forced to do so in Western Australia, and that Burnan would not have contracted with the Boltons but for the exclusive jurisdiction clause. The disadvantages in litigating in the other State is not merely the increased costs, but all of the practical difficulties involved in the communication of advice and instructions by telephone. As far as I can determine on the material, the parties’ relative financial circumstances is not a significant area of difference. Nor are the different places of residence of the parties: Burnan and Mr Rolston are in Western Australia, and Mr and Mrs Bolton are in Queensland. A greater number of witnesses, as the magistrate thought, may be resident in Queensland. However, if ultimately the representations are admitted, which is a distinct possibility as the representations (or some of them) are in written form, the balance of Queensland and Western Australian witnesses may be closer in number. The issues between the parties are not finally identified, and the parties are a long way from making final decisions about the witnesses to be called at trial. Nonetheless, because of the need to prove the representations (if still in dispute at trial), and because the business was in Brisbane, at this stage it is probable a greater number of Brisbane-based witnesses will be called at trial. [22] Mr and Mrs Bolton’s youngest child has suffered from chronic renal failure, and at the date of the stay application required catheterisation every four hours. The magistrate was informed that in the next six to eight months he will require a kidney transplant. The Magistrate took this circumstance into account in determining the appropriate jurisdiction for the proceedings. I think it is a matter that does add to the difficulties faced by the Boltons in commencing the proceedings in Western Australia, and I do not agree with the submission to me that it is irrelevant. The personal circumstances of the parties may be relevant in any particular case. In this -- 12 of 16 -- 13 case the personal circumstances of Mr and Mrs Bolton are subordinate to the exclusive jurisdiction clause since the agreement to submit any dispute to the Western Australian courts was presumably made with knowledge of their personal circumstances. Other connecting factors [23] In my view the places of residence of the parties and witnesses, and the financial and personal circumstances of the parties largely balance one another out. Nonetheless, the facts the agreement (or agreements) and the alleged representations were entered or made in Brisbane, and that the agreement was performed in Brisbane (and therefore any breach occurred in Brisbane) point to Queensland as the natural forum for the proceedings. My conclusion, having regard to the matters so far discussed, is that the natural forum for the proceedings against both Burnan and Mr Rolston is Queensland. This analysis, however, is subject to the exclusive jurisdiction clause. [24] The exclusive jurisdiction clause only affects the proceedings between Burnan and Mr and Mrs Bolton. Clause 12 of the agreement is a choice of law provision.11 Whether the proceedings are governed by the law of Western Australia or of Queensland is not a significant consideration as there is no relevant difference between the law of Western Australia and of Queensland. The exclusive jurisdiction clause (clause 13) then provides: 11 Clause 12 provides as follows: “This deed shall be construed in accordance with the laws of Western Australia”. -- 13 of 16 -- 14 “The parties to this deed shall submit to the exclusive jurisdiction of the courts of competent jurisdiction in Western Australia with respect to any issue or dispute in relation to this deed.” The language chosen by the draftsman is apt to include any alleged contractual representation and covers the claim brought under the Trade Practices Act and the local Fair Trading Act. [25] In executing the deed, Mr and Mrs Bolton agreed to litigate any dispute caught by the clause in Western Australia. While every application must be assessed on its own facts, an exclusive jurisdiction clause may be an important consideration. When Mr and Mrs Bolton agreed to the clause they did so with knowledge of all the facts which otherwise pointed to Queensland as the natural forum. 12 In those circumstances the significance of those factors is moderated by the exclusive jurisdiction clause, and, I believe the appropriate jurisdiction is Western Australia. [26] The conclusions reached so far are that the appropriate jurisdiction for the proceedings against Burnan is Western Australia, but the appropriate jurisdiction for the proceedings against Mr Rolston is Queensland. Underlying the section, however, is the idea that the States of Australia are part of the one national system of law. 13 In circumstances such as the present, a court faced with a stay application must chose an appropriate jurisdiction for both proceedings. In logic, that must be the purpose of the requirement that on a stay application the court must consider whether a similar or related proceeding has been commenced against the person or another person (s 20(4)(f) Service and Execution of Process Act). 12 Essentially that Queensland was both the place of contract and place of performance. 13 See Bankinvest AG v Seabrook (1988) 14 NSWLR 711. Although Bankinvest was concerned with the cross-vesting legislation, s 20 Service and Execution of Process Act represents an application of the same principles in a different context. -- 14 of 16 -- 15 [27] The section does not provide any guidance for the exercise of the discretion in these circumstances. Obviously it must be exercised in a way which avoids splitting proceedings, in which the same or similar issues arise, between different jurisdictions. In some of the cases referred to me, the court declined to stay the proceedings to avoid the same or essentially the same issues being determined by courts in different jurisdictions. [28] If Mr Rolston, by his own actions in Queensland, is liable in damages under s 82 Trade Practices Act (Cth) and s 99 Fair Trading Act (Qld), and Queensland rather than Western Australia is the natural forum for the claim, it is difficult to see why the Boltons should be barred from prosecuting their claim against him in Queensland. [29] On the other hand, as the principal claims are against Burnan, and the appropriate jurisdiction in which to conduct those proceedings is Western Australia, then Western Australia may be the appropriate jurisdiction for the claims against both Burnan and Mr Rolston. [30] Two decisions were drawn to my attention by counsel.14 The decision in each case reflected the practicalities of the particular situation. In some cases a useful approach may be to ask which is the dominant or principal claim, and require both proceedings be determined in the appropriate jurisdiction for the dominant or principal claim. In other cases, there may be no reasonable basis for preventing the related proceeding continuing in its appropriate jurisdiction, or the decision may be governed largely by the practicalities of the particular situation. 14 Safe Effect Technologies Ltd v Hood Group Holdings (2006) 24 ACLC 684; Savcor Pty Ltd v State of New South Wales (2001) 52 NSWLR 587 -- 15 of 16 -- 16 [31] In the case before me, if the Boltons wish to pursue a claim against both Burnan and Mr Rolston, they should be required to do so in Western Australia, as the claim against Burnan is the principal claim, and I cannot see any basis for another order. [32] Accordingly the following orders are made: 1. The appeal is allowed. 2. The orders made by her Honour Ms Roney, Magistrate, in the Magistrates Court at Brisbane on 30 March 2007 dismissing an application for a stay of proceedings under s 20 Service and Execution of Process Act 1992 (Cth) are hereby set aside. 3. It is now ordered that the claim in proceedings number M409/07 pending in the Magistrates Court at Brisbane be stayed until further ordered by a court. -- 16 of 16 --