Steller Developments - Case Update

An application to transfer a hearing from Sydney to Melbourne has been rejected notwithstanding that the bulk of the witnesses to be examined reside in Melbourne and the relevant deed of guarantee is governed by Victoria law and provides that the parties to the deed submitted to the non-exclusive jurisdiction of Victorian courts.

The issue arose in the long-standing and contentious liquidation of property group Steller Developments, which collapsed in 2020 midway through restoring and expanding Sorrento’s Continental Hotel. Liquidator Richard Stone of RSM commenced proceedings against the company’s co-founders, Nicholas Smedley and Simon Pitard, and two other former directors, seeking to enforce personal guarantees worth over $120 million allegedly owed to investors.

Mr Smedley brought an application seeking to transfer the hearing from Sydney to Melbourne. He argued that, of the six witnesses likely to be examined, four are based in Melbourne, one is based in Sydney, and one is based in Queensland. He also relied on the choice of law and choice of forum clauses in the deed of guarantee, which provide that the deed is governed by Victoria law, any proceeding in relation to the deed may be brought in a Victorian court, and the parties to the deed submitted to the non-exclusive jurisdiction of Victorian courts. Mr Smedley also pointed to the fact that the events that were the subject of the proceeding occurred in Victoria.

The Court was not persuaded by these arguments and dismissed the application. Although the provisions of the deed of guarantee cited by Mr Smedley were relevant, they were not determinative, particularly as the jurisdiction was non-exclusive.

With respect to the location of witnesses, the Court found that the exercise was not simply quantitative, and some qualitative analysis was necessary. None of the witnesses had provided any evidence suggesting any prejudice in attending a hearing at Sydney.

Further, the main evidentiary contest will be between Mr Smedley and one other witness, Mr Burstin. Mr Smedley does not propose to attend the first four to five days of the hearing, and Mr Burstin has instructed his own Sydney-based legal representatives and has taken a neutral stance.

Finally, the Court was critical of Mr Smedley’s delay in seeking the transfer. Applications of this kind should be made promptly, including because of the obligation on parties to conduct the proceeding in a way that is consistent with the overarching purpose facilitating the just resolution of disputes as quickly, inexpensively and efficiently as possible. The Court rejected Mr Smedley’s argument that no prejudice has been caused by the delay, finding that various parties’ lawyers have prepared for trial on the basis that it would take place in Sydney.

Read the decision here.

Professionals involved:

• Counsel for Steller Developments: Amelia Smith of Tenth Floor Chambers

• Solicitor for Steller Developments: Hogan Lovells

• Counsel for Nicholas Smedley: Nicole Papaleo of List G Barristers

• Solicitor for Nicholas Smedley: Lander & Rogers

• Solicitor for James Cirelli: James Kerr of Kerr and Kerr Partners

• Solicitor for the Third and Fourth Cross-Respondents: Colin Taylor of Holding Redlich