Voth V. Manildra Notes

Voth v. Manildra

Facts

The two respondents (plaintiffs) are companies incorporated and resident in New South Wales. The appellant (defendant) is an accountant who is and was at all material times a citizen and resident of the United States of America, practising in the State of Missouri. He is a member of a partnership named Deloitte Haskins and Sells.

The respondents are members of a group of companies, known as the "Manildra Group", which carry on business related to the manufacture and sale of starches and starch products and are controlled by members of the Honan family. The activities of the Group extend beyond Australia. At all material times the first respondent was the principal operating company in the Group.

Neither respondent, according to the evidence, carries on business in the United States. The Group's operating company there was Manildra Milling Corporation ("MMC"), a corporation established under the laws of the State of Kansas. MMC is a wholly-owned subsidiary of the second respondent and it was to MMC that the appellant, in the ordinary course of his professional practice, provided accounting, auditing and related services.

Between 1976 and 1983 members of the Manildra Group sold starches and starch products to MMC which resold them in the United States. As a result, MMC became indebted to the first respondent and became obliged to pay it, or credit it with, interest

Internal Revenue Code of the United States imposed upon the first respondent liability to income tax in respect of the interest income derived by it from MMC and also imposed an obligation upon MMC to deduct and withhold the tax upon interest paid by it to the first respondent. This again was common ground. MMC was described in the amended statement of claim as being in this respect a "withholding agent". Failure to account to the Inland Revenue Service ("the IRS") for withholding tax exposed the "agent" to an obligation to pay interest on the tax, being interest in the nature of a penalty, until payment. The respondents claim that, under the Australian revenue laws, had MMC accounted to the IRS for withholding tax under the Internal Revenue Code, the interest which MMC paid to the first respondent would have constituted exempt income in the hands of that respondent.

As it happened, MMC did not make the required deductions and payments of withholding tax between 1976 and 1983. The respondents assert that this omission was the fault of the appellant or those for whom he was responsible….. The first respondent's case is that the appellant, or those for whose conduct he is responsible, acted without due care in failing to draw the attention of MMC, and of the other companies in the Manildra Group, to the requirement to pay withholding tax on MMC's interest payments to the first respondent.

Issue

The appellant's case in this Court is that Oceanic Sun should be reconsidered, that the approach accepted in Spiliada should be adopted on the stay application and that in any event that approach should be adopted in applications for leave to serve originating process outside the jurisdiction and in applications to set aside service so made.

Holding

Difference between “inappropriate forum” test and “vexation” test

The content of the "clearly inappropriate forum" test is more expansive than the traditional test applied by Brennan J. The former test, unlike the latter, recognizes that in some situations the continuation of an action in the selected forum, though not amounting to vexation or oppression or an abuse of process in the strict sense, will amount to an injustice to the defendant when the bringing of the action in some other available and competent forum will not occasion an injustice to the plaintiff. Thus, in order to obtain a legitimate advantage, the plaintiff may commence an action in the selected forum though the subject-matter of the action and the parties have little connection with that forum and the defendant may be put to great expense and inconvenience in contesting the action in that forum. On the application of traditional principles, a stay would be refused in such a case, notwithstanding that the selected forum was a clearly inappropriate forum.

Objections to Spiliada

Discouraging litigation at an interlocutory stage on complex questions: But it is important to recognize that the actual question posed for decision by Spiliada is: what is the natural and appropriate forum in the sense already discussed? In the light of all the potential factors which may be relevant to the resolution of that question, it is in some cases a question by no means easy to answer, particularly at an interlocutory stage of proceedings. Indeed, it is desirable to discourage the litigation of such a difficult issue as an interlocutory question by means of what has been described as a war of affidavits. The complexity of modern transnational transactions and relationships between parties is such as to indicate that in a significant number of cases there is more than one forum with an arguable claim to be the natural forum, that is, the forum with which the action has the most real and substantial connection.

“Clearly inappropriate” test focuses on the domestic tribunal and not a foreign court: The "clearly inappropriate forum" test is similar and, for that reason, is likely to yield the same result as the "more appropriate forum" test in the majority of cases. The difference between the two tests will be of critical significance only in those cases - probably rare - in which it is held that an available foreign tribunal is the natural or more appropriate forum but in which it cannot be said that the local tribunal is a clearly inappropriate one. But the question which the former test presents is slightly different in that it focuses on the advantages and disadvantages arising from a continuation of the proceedings in the selected forum rather than on the need to make a comparative judgment between the two forums....

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