789TEN v Westpac

Supreme Court of NSW|2004-06-15|Before: McDougall J, Rolfe J, Dougall J

Introduction 1 The nature of the application 4 The mediation 8 Analysis: abuse of process 12 Analysis: must the claim fail? 32 The first version of the cross-claim 32 Damages the gist of the action 33 Analysis 34 The amended cross-claim 39 The claim under Part 31 r 2 49 Conclusion and orders 50

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

50167/03 789TEN PTY LTD v WESTPAC BANKING CORPORATION & ANOR JUDGMENT

Introduction 1 By its amended summons filed on 27 February 2004, the plaintiff ("789TEN") claims from the first and second defendants ("Westpac" and "Mr Alexander" respectively) an amount in excess of $9.9 million, together with interest, "expenses" and costs. 2 At all times material to the action, 789TEN conducted a bank account with Westpac. Mr Alexander, a director of 789TEN, was authorised, together with Messrs Kevin Carter and (the late) Dale Austin, also directors of 789TEN, to operate on that account. The authority given to them was that any one of them could operate up to $4,999, and any two could operate for $5,000 and above. 3 The plaintiff alleges that, between 19 November 1998 and 23 November 2001, Mr Alexander operated on the account in excess of his authority (and without the authority of either of his fellow directors), and that the Bank made payments accordingly. The total amount paid away is said to exceed $11.6 million, of which an amount in excess of $1.7 million has been recovered. Westpac has filed a cross-claim. The cross-defendants are Mr Alexander, Mr Carter and 789TEN. For present purposes, the cross-claims against Messrs Alexander and Carter individually (paragraphs 1 to 9 of Part C of the cross-claim) may be disregarded. It is the cross-claim against the three cross-defendants (paragraphs 10 to 20 of Part C) with which I am concerned. The nature of the application 4 By notice of motion filed on 4 June 2004, Mr Alexander sought an order pursuant to Pt 13 r 5(1) that paragraphs 10 to 20 be dismissed. He sought alternatively an order pursuant to Pt 15 r 26 that those paragraphs be struck out. He sought in the further alternative an order pursuant to Pt 31 r 2 that the claim alleged in those paragraphs be heard and determined separately from, and after the determination of, the balance of the proceedings. 5 In substance, the relevant paragraphs alleged a conspiracy between the three cross-defendants. Mr Alexander said that Westpac came to know much of the information that is alleged as material facts in those paragraphs only from privileged and confidential communications made for the purposes of or in the course of a mediation during which the parties attempted, unsuccessfully, to resolve the matter. Accordingly, he said, either because of the express terms of the mediation agreement, or because of the general law relating to privileged communications, the paragraphs should be struck out as an abuse of process. 6 Alternatively, Mr Alexander said, the conspiracy claim has no prospect of success because "by its very nature, the conspiracy claim is not one in which Westpac will be able to demonstrate any damage as at the date of judgment" (written outline of submissions dated 11 June 2004, paragraph 19). Alternatively, he said, since the only relief claimed was damages, and since the very basis of the claim was that if Westpac succeeds it will not recover damages, "Westpac could not hope to execute and make any recovery under" the relevant paragraphs (ibid, paragraph 20). 7 In the course of argument, counsel for Westpac indicated a desire to amend the cross-claim, so as to seek to overcome some of the complaints. An amended cross-claim was filed in Court on 2 July 2004, pursuant to leave granted by Bergin J on that day. The parties were content to treat Mr Alexander's notice of motion as applying to the amended cross-claim. They made further submissions in writing, directed specifically to the amended cross-claim. The mediation 8 From about October 2003, the parties discussed resolution of the dispute. In about November 2003, the parties agreed to mediate their differences and that the Honourable Trevor Morling QC should be mediator. A mediation agreement was signed in November 2003 (the precise date of signature does not appear, but is not relevant). 9 The parties relied on the terms of clauses 11 and 12, which I set out: " 11. CONFIDENTIAL INFORMATION

The Parties agree that the Mediator must: 11.1 keep confidential all confidential information disclosed to him during the Mediation; 11.2 not disclose confidential information to another party unless compelled by law to do so or with the consent of the party who disclosed the confidential information; 11.3 not use confidential information for a purpose other than the Mediation; and 11.4 at the conclusion of the Mediation, return all documents provided to him in the course of or for the purposes of the Mediation. 12. PRIVILEGE 12.1 The following will at all times be kept confidential and will be privileged, and the parties will not disclose or rely upon or issue or cause to be issued any subpoena to give evidence or to produce documents concerning: 12.1.1 any settlement proposal, whether made by or on behalf of a party unless such settlement proposal is accepted resulting in a settlement; 12.1.2 the willingness of a party to consider any such proposal; 12.1.3 any statements, admissions or concessions made by a party or on their behalf; 12.1.4 any statement or document made by the Mediator; 12.1.5 any document prepared for use in or in connection with the Mediation; 12.1.6 any document produced by a party which would otherwise be confidential and/or privileged; and 12.1.7 this agreement, except to enforce it. 12.2 All copies of any document provided by any party referred to or disclosing the matters referred to in clause 12.1 above will be returned to the party which provided it at the conclusion of the Mediation unless otherwise agreed. 12.3 Where a person: 12.3.1 is a person who has a direct interest in the outcome of the Mediation; or 12.3.2 is not present at the Mediation in his or her capacity as a legal adviser to a party but is (with the agreement of the parties or the Mediator) to be present at the Mediation or any part thereof; and 12.3.3 is not a party to this agreement, ("Interested Party") any of the Parties may disclose information or documents of the type referred to in clause 12.1 to the Interested Party provided that the party on whose behalf the Interested Party is present or with whom the Interested Party is associated, or who provides such information or documents to the Interested Party, has ensured that the Interested Party has, prior to attendance at the Mediation or receipt of the information or documents, agreed to keep confidential and treat as privileged, and not to disclose or rely upon or issue or cause to be issued any subpoena to give evidence or to produce documents concerning, all such information and documents." 10 Mr Alexander sought to adduce affidavit evidence from his solicitor of matters discussed at or in connection with or for the purposes of the mediation. Westpac objected to that evidence. It was received on the voir dire, subject to Westpac's objection. In substance, the affidavit looked at the allegations made in paragraphs 10 and 11, and part of paragraph 14, of the statement of contentions in the cross-claim. It sought to tie the material facts alleged in those paragraphs back to information disclosed for the purposes of or in the course of the mediation. It was not suggested that any privileged or confidential communication (by which I mean, any document or oral communication made by one party to the other for the purposes of or in connection with the mediation) was in terms referred to in the relevant paragraphs. The claim was that information derived from privileged or confidential communications was alleged. 11 I am prepared to decide this aspect of Mr Alexander's claim upon the assumption that the matters that I have set out in the previous paragraph are correct. I should however record that Westpac submitted that some of the material facts alleged in the relevant paragraphs were not derived from communications made for the purposes of or in the course of the mediation. Analysis: abuse of process 12 I do not think that the matter comes within clause 12 of the mediation agreement. It does not fall within any of sub clauses 12.1.1 to 12.1.7. 13 Mr Elliott of Counsel, who appeared for Mr Alexander, submitted that clause 12.3 made it clear that clause 12.1 prohibited the disclosure not only of documents but also of "information". I do not think that this is correct. I think that the phrase "information or documents of the type referred to in clause 12.1" is intended only to be a comprehensive summary of the particular subjects referred to in sub clauses 12.1.1 to 12.1.7. Three of those subjects - those comprised in sub clauses 12.1.5 to 12.1.7 - are in terms "documents". Another - that comprised in sub clause 12.1.4 - may or may not be a document. The subjects referred to in sub clauses 12.1.1 to 12.1.3 may be, but are not necessarily, comprehended in documentary form. I think that the word "information" in clause 12.2 is a reference back to matters such as a settlement proposal (sub clause 12.1.1), an indication of willingness (sub clause 12.1.2), or a concession (sub clause 12.1.3). I do not think that the word "information" was intended to expand the normal meaning of "document" so that it should be taken to include information contained in a document. 14 Further, as was submitted by Mr Douglas QC, who appeared with Mr Dowdy of Counsel for Westpac, the contrast between clauses 11 and 12 is, in my judgment, significant. Clause 11 requires the mediator to keep confidential, and not disclose or use, "confidential information" (the exceptions are irrelevant). It also requires the mediator, at the conclusion of the mediation, to return all "documents" provided to him. The distinction between information and documents is clear and, I think, intentional. It shows that the parties to the mediation agreement understood the distinction. I see no reason to impute to them any intention to blur the distinction in the very next clause of their agreement. 15 Nor do I think that the claim based upon the general law can succeed. 16 In AWA Limited v Daniels (Rolfe J, 5029 of 1991, 18 March 1992, unreported: BC 9201994), the defendants served notices to produce on other parties. The parties on whom the notices were served alleged that the defendants became aware of the documents, production of which they sought, because of information conveyed to them for the purposes of or in the course of a mediation. Accordingly, they sought to set aside the notices to produce. 17 Rolfe J (I use the BC pagination) noted, at 6, the analogy between the mediation process and without prejudice discussions, although there were, as he said, some significant differences. He said at 7 that one of those differences was that "the nature of the procedure [mediation] perhaps demands a greater degree of frankness and disclosure than in other forms of settlement negotiations". That having been said, his Honour concluded at the same page that "there is a marked similarity between mediation and other attempts at achieving settlement". They were conducted "on a without prejudice basis", in circumstances where generally "confidentiality attaches" and where there was a "need for some degree of frankness and disclosure inter partes". It followed, as his Honour said of both processes at 8, "that in the course of each the other party may, and probably will, become aware of matters of which it may not have been cognisant previously, or as in this case, a view or belief held may be confirmed as a fact". That gave rise to a problem where there was no settlement, namely "as to the extent to which the recipient of the information may take advantage of it in the subsequent litigation". 18 Against that background and statement of the issue, his Honour said this, at 9-10: "I must say at the outset that I find it a somewhat surprising submission that if in the course of mediation or settlement negotiations a party learns about a matter or has a matter as to which it had a belief or opinion confirmed, and the mediation or settlement negotiations fail, that party cannot "use" the information thus obtained to further its case. That does not mean it can lead evidence that at mediation a party made an admission or statement. Rather it seeks to prove the subject matter of the admission aliunde. It may cross-examine or take other legitimate forensic steps to prove or disprove the fact. If the party could not do this an absurd position could arise. A party could make admissions about all manner of things going directly to the issues in the proceedings and then object to any attempt by the other party to prove them on the hearing by legitimate means. That consequence would more completely stifle mediation and settlement negotiations than allowing the matters to be proved by admissible evidence. This throws up the tension between the two schools of thought. On the one hand the plaintiff submits that if information gleaned at mediation can then be used parties will not agree to mediation for that reason. On the other hand the defendant says that if any information given at mediation could not be used as the basis for calling admissible evidence if mediation fails, there would be the sterilising effect to which I have referred. Further, as I have said, how is the Court to know when and how a party becomes seized [sic] of information and whether that is a legitimate enquiry into which the Court should enter. In my view each party points up a potential difficulty for mediation. I consider both views can be accommodated within accepted legal principles and without in any way jeopardising or inhibiting the mediation process or discouraging litigants from resorting to it. The law is stated succinctly in the joint judgment of Dixon CJ, Webb, Kitto and Taylor JJ in Field v Commissioner of Railways for New South Wales (1957) 99 CLR 285 at 291 and at 292. After stating that a party could not rely on an admission in settlement negotiations their Honours said: "This form of privilege, however, is directed against the admission in evidence of express or implied admissions … It is not concerned with objective facts which may be ascertained during the course of negotiations. These may be proved by direct evidence." In my respectful view this represents the law for present purposes and, therefore, it is binding upon me. On the evidence the defendants are not seeking to prove any admission or statement made at Mediation. They are following, by the service of appropriate process, a line of enquiry about which they learned at Mediation, the Mediation process having failed. In due course they will seek to prove the matter. Whether they succeed will depend upon the usual considerations relating to the admissibility of evidence. They will not fail, however, because of the circumstances in which they became aware of the matter." 19 It will be noted that the evidence in that case suggested that the defendants had held a belief as to the relevant matter before the mediation, and that the belief was confirmed by something that was said for the purposes of the mediation. His Honour made it clear, at 10, that the distinction was not relevant: "At whichever level one approaches the problem I do not consider that as a matter of principle the issue of the notices to produce is vitiated." 20 Accordingly, his Honour concluded at 12: "The reasons for dismissing the notice of motion is that I do not consider that the notices to produce are in any way an attempt to circumvent the confidentiality of and without prejudice nature of the Mediation. They do not seek to prove directly or indirectly what was said at Mediation. They seek to prove, by admissible evidence, a fact to which reference was made at Mediation not by reference to the statement but to the factual material which sourced the statement. A finding to the contrary would mean that irrespective of relevance to issues the statement at Mediation made the factual material upon which it was based immune from subsequent consideration by the Court. I have already referred to the potential problems this approach would raise for the mediation process." 21 Finally, his Honour made it clear "that nothing in these reasons is intended to cast doubt upon the proposition that admissions or statements made at Mediation, which is being carried out on a confidential and without prejudice basis, or at without prejudice settlement negotiations, can be proved in Court unless, of course, the parties consent." 22 In AWA Ltd v Daniels (1992) 7 ACSR 463, Rogers CJ Comm D considered the admissibility in evidence of documents produced pursuant to the notices to produce that Rolfe J had declined to set aside. His Honour admitted the deeds into evidence, although he did so on the narrow basis that the defendants were "alive to the possibility of the existence of the objective material before the mediation", and upon the alternative basis that "if relevant the deeds should have been discovered": at 469. On the wider basis that Rolfe J comprehended (ie, on the assumption that the defendants only became aware of the information in the course of the mediation), Rogers CJ Comm D said at 467-468: "Rolfe J was prepared to take the view … that objective evidence will not be excluded merely because the defendants learnt of the relevant facts in the course of the mediation. With very great respect I would prefer to consider that question further if, and when, it arises on some future occasion. If the fact be that the other side has absolutely no inkling of some matter, which, if known about is capable of being established by objective evidence, but which would not ordinarily come to the knowledge of the other side in the normal progress of litigation and its existence is revealed only by a statement made in the course of, and for the purposes, of the mediation, I would hesitate long before concluding that the objective evidence so revealed is admissible." 23 His Honour noted the arguments for and against admissibility on that assumption. 24 One point of significance that emerged from the judgment of Rogers CJ Comm D, at 467, is that his Honour considered that the decision in Field "concerned the admissibility of an admission and not of objective evidence to which earlier reference had been made". Accordingly, his Honour said that the proposition upon which Rolfe J had relied as stating the law, as to proof by extrinsic evidence, was strictly obiter. Rogers CJ Comm D said: "In my respectful view the judgment of the High Court is not determinative of the present question although, without a doubt, a judge at first instance is hardly likely to take a view different from a statement, even if obiter, in a joint judgment in the High Court." 25 The decisions of Rolfe J and Rogers CJ Comm D were consider by Young J in Lukies v Ripley (No 2) (1994) 35 NSWLR 283, 288-289. His Honour expressed no view upon the apparent difference of opinion between them. 26 The two decisions were also considered by Lee J in Williamson v Schmidt [1998] 2 Qd R 317, 332-336. His Honour quoted extensively from each decision and referred to the decision of Young J in Lukies. At 336, his Honour adopted the approach of Rolfe J. He concluded that the plaintiff was "entitled to prove if it can by admissible evidence, subject to any without prejudice considerations, the existence of any fact or matter disclosed at the mediation proceedings, although the plaintiffs cannot lead in evidence, in those later proceedings, anything done or said or any admission made at the mediation proceedings." 27 I think that the analogy between without prejudice discussions and mediation is compelling. I do not think that the relative formality of the latter process affords a relevant ground of distinction. Nor do I think that the perceived need for greater frankness in the latter process does so. There is no compulsion on a party to disclose information for the purposes of mediation. If a party wishes to protect itself from the consequences of disclosure, it is open to it to seek to do this by an appropriately drafted mediation agreement. If the parties do not do so, I do not think that, on policy grounds, the Court should do it for them. 28 I, therefore, like Rolfe J take the statement by the High Court in Field, to which his Honour referred, as being decisive. I do not need to consider whether, as Rogers CJ Comm D suggested, that statement was strictly obiter because, as his Honour pointed out, a judge at first instance is hardly likely to take a different view. 29 In any event, if I were to consider the matter on the basis that I was not bound, in the circumstances of this case, by the statement of principle in Field, I would conclude that the relevant privilege requires a distinction to be drawn between communications (written or oral) and the information contained in them. I think that the balancing considerations to which both Rolfe J and Rogers CJ Comm D pointed require that conclusion. Any attempt to extend the common law privilege from statements or documents to information contained in them would raise well nigh insuperable problems. They would include both the sterilising effect to which Rolfe J referred and the diversion of court resources into lengthy, complex and perhaps insoluble enquiries into the nature and sources of information that a party to mediation possessed apart from the information said to have been provided under the protection of the mediation. Further, I think that acceptance of the proposition for which Mr Alexander contends would have the practical effect of discouraging parties from mediating early, so as to avoid the sterilising effect of disclosure at mediation. The inevitable consequence would be that parties would feel compelled to prepare their cases fully before attempting mediation. That would be likely to make mediation less acceptable, and less likely to succeed for at least two reasons: namely, the substantial expense incurred in preparation, and the inevitable entrenchment of attitudes that preparation produces. Particularly where the parties have not sought by the terms of their bargain to protect information, as opposed to statements or documents, I do not think that the law should contemplate the diversion of curial resources and the diminution of the appeal of early mediation by imposing a more restrictive standard. In short, with respect, I adopt the reasoning of Rolfe J. 30 I therefore conclude that the relevant paragraphs of the cross-claim should not be struck out as being an abuse of process. 31 In the circumstances, given that 789TEN sought (among other things) to enforce the mediation agreement, I think that the better course is to admit the relevant affidavit, namely that of Gregory James Henry sworn 4 June 2004, but to order that it be kept confidential and that it be placed in a sealed envelope, not to be opened or inspected without the leave of a Judge of the Court. I also think it appropriate to admit into evidence the exhibit to that affidavit, which was marked for identification 1, but to order that it likewise be kept in a sealed envelope, not to be opened or inspected without the leave of a Judge of the Court. Analysis: must the claim fail? The first version of the cross-claim 32 The alternative relief sought under Pt 15 r 26 requires some understanding of the detail of the relevant allegations. Westpac alleged, in the cross-claim as originally drafted:

(1) Messrs Alexander and Carter and 789TEN were aware from about June 2001 that 789TEN had suffered or might suffer loss by reason of the matters complained of in the amended summons (paragraph 10).

(2) Mr Carter and 789TEN asserted to Mr Alexander that he had a legal liability to the plaintiff for damages for breach of authority (paragraph 11).

(3) From about June 2001, Messrs Alexander and Carter and 789TEN intended that 789TEN would claim reimbursement from Westpac, and knew that it was likely that Westpac would claim indemnity or contribution from Mr Alexander (paragraph 12).

(4) "In these circumstances Alexander, Carter and the plaintiff unlawfully and fraudulently conspired and agreed together to cheat and defraud the Bank with the purpose or object of ensuring that in the event that the Bank was successful in obtaining judgment in an action against Alexander the shares that Alexander had in the plaintiff would not be available to the Bank in any execution of that judgment, or would be valueless in any event, thereby hindering or preventing the Bank from being able to effectively enforce and execute against Alexander upon any judgment entered in this proceeding against him on behalf of the Bank" (paragraph 13).

(5) Paragraph 14 alleges overt acts done by the three pursuant to the alleged conspiracy: including causing 789TEN to cease to trade and divert its business to another company in which Messrs Alexander and Carter and their wives had beneficial interests (paragraph 14(a), (b)); and Mr Alexander agreeing to transfer his shareholding in the plaintiff to another company in which Mr Carter and his wife had a beneficial interest (paragraph 14(d)); and agreeing that the three of them "would share in any settlement with or judgment obtained against the Bank … in excess of $9,000,000" (paragraph 14(e)).

(6) It is thus alleged that "the Bank will be prevented from effectively executing and recovering upon any judgment which may be entered against Alexander and any judgment will remain unsatisfied whereby the Bank will suffer loss and damage" (paragraph 15).

(7) Allegations are made pursuant to the Fair Trading Act and the Trade Practices Act (paragraphs 16 and 17).

(8) Allegations are made of estoppel and set-off and as to limitation of liability under s 87 of the Trade Practices Act (paragraphs 18 to 20). Damages the gist of the action 33 It was accepted that damages are of the gist of an action for conspiracy. This is clearly correct, as Lord Diplock made plain in Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173, 188. His Lordship's statement of principle was applied in Lonrho Plc v Fayed (No 5) [1993] 1 WLR 1489, 1494 (Dillon LJ); 1501 (Stuart-Smith LJ); 1508 (Evans LJ). See also McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409, 435 [134], 436 [140]-[141]. Analysis 34 The question is, therefore, whether the facts alleged in the cross-claim show that Westpac has suffered damage. Westpac says, and Mr Alexander accepts, that this requires Westpac to demonstrate damage "as at the date of judgment" (written outline of submissions for Mr Alexander, dated 11 June 2004, paragraph 19). 35 The submissions for Westpac asserted that the cross-claim was not premature because "[i]t is … common practice for cross-claims to be made by defendants against third parties without all the elements of the causes of action pleaded therein having arisen" (outline of submissions dated 11 June 2004, paragraph 13). However, the examples that were given are all examples where the entitlement would be complete as at the date of judgment. That is to say, at the date of judgment, there would be no missing element. 36 The resolution of this issue requires two assumptions:

(1) that 789TEN succeeds in its claim against Westpac; and

(2) that Westpac succeeds in its claim for contribution or indemnity against Mr Alexander. 37 On those assumptions, Westpac will have both a liability and an entitlement at the date of judgment. But it will not know whether its entitlement (ie, the hypothetical entitlement against Mr Alexander) can be satisfied until it seeks to enforce it. It may recover in full from Mr Carter. It may recover in part from Mr Carter and in part from Mr Alexander. It may recover in full from Mr Alexander. It may not recover, either wholly or in part, from either of them. If it does not recover, wholly or in part, then a question would arise as to whether it would have recovered, wholly or in part, from Mr Alexander but for the matters alleged in the conspiracy claim. But it is only at the stage that Westpac can show that it has suffered damage because it has not recovered what it could have recovered as a result of the alleged conspiracy that it suffers damage. 38 In my judgment, paragraphs 10 to 20 of Westpac's cross-claim as originally drafted did not allege a complete cause of action and were therefore liable to be struck out. The amended cross-claim 39 Paragraph 15 of the statement of contentions (see para [32(6)] above) has been replaced by an allegation that, as a result of the conspiracy and the overt acts done in pursuance of it that are pleaded, Mr Alexander has lost the value of his 50% shareholding in 789TEN. It is said that accordingly, even taking into account his other assets, "he is unable to satisfy and cannot discharge and the Bank will be prevented from effectively executing and recovering upon any … judgment which may be entered against him and any judgment will remain unsatisfied whereby the Bank has and will suffer [sic] and sustain [sic] loss and damage" (paragraph 17 - the numbering has changed by reason of some earlier, but presently irrelevant, amendments). 40 Further, the claims for relief under the Trade Practices Act and the Fair Trading Act now include a claim for "such orders … as will compensate the Bank for any loss and damage that it has sustained or is likely to sustain" (paragraph 19). 41 Finally, it is alleged that the diversions and transfers of assets that are said to have occurred (see para [32(5)] above summarising the former paragraph 14, now paragraph 16 of Westpac's contentions) are voidable pursuant to s 37A of the Conveyancing Act 1919 (NSW) because they are alienations of property with the intent to defraud creditors. 42 In my judgment, the amendments do not cure the essential defect in the conspiracy claim. They do not allege material facts that show that Westpac has suffered damage as a result of the conspiracy. Nor, even on the assumption that judgment is given in favour of 789TEN against Westpac, and in favour of Westpac against Mr Alexander, do they allege material facts that show that Westpac will have suffered damage, at the time judgment is entered, as a result of the conspiracy. The analysis in para [37] above remains applicable. 43 But that is not the end of the matter. The claim under s 37A of the Conveyancing Act is relied upon to support declaratory relief. In principle, I think, that is capable of being a presently justiciable dispute. If the material facts alleged by Westpac were proved, they would be capable of supporting an inference that the transactions in question were entered into with the purpose alleged. It was not submitted that Westpac did not have standing to seek declarations that the transactions are voidable at its instance. Nor do I think that it could be said that the declarations are wholly hypothetical. On the assumptions that 789TEN recovers judgment against Westpac on its claim, and Westpac recovers judgment against Mr Alexander and Mr Carter on its cross-claim, Westpac would be a judgment creditor of one of the allegedly fraudulent transferors. The s 37A issue would be real, not hypothetical; and this would be so regardless of their ability, at that time, to satisfy any such judgment from other assets. (In this context, it is necessary to bear in mind that Westpac could recover against Mr Alexander and Mr Carter even if, for whatever reason, its conspiracy case against them failed.) 44 The difficulty with the s 37A claim is that it seeks to attack the rights of third parties who are not parties to the cross-claim. They are the transferees. I do not think that it would be appropriate to entertain the claim that Westpac presses under s 37A without joining those transferees as cross-defendants. Thus, although the claims may be capable of being good in law, they are presently defective for want of necessary parties. 45 The point is one that can be cured. I propose to consider the balance of the issues upon the basis that it is cured, in the hope that the parties will be spared yet further expense. 46 The facts that Westpac relies upon for its s 37A case are the same facts that it relies upon for its conspiracy case. The alleged conspirators are parties in any event: as to 789TEN because it is a plaintiff; and as to Messrs Alexander and Carter, because Westpac claims contribution from them in equity (and, in the case of Mr Alexander, indemnity pursuant to s 68 of the Fair Trading Act.) The relevant factual matters will be raised in any event, because they are relied upon in support of the s 37A case which, in my judgment, would not be susceptible of being struck out but for the present want of necessary parties. 47 In those circumstances (and assuming that all necessary parties are joined as cross-defendants), I would see no utility in striking out the conspiracy case. No useless expense will be saved thereby (Wentworth v Rogers (No 5) (1986) 6 NSWLR 534, 536; Rajski v Powell (1987) 11 NSWLR 522, 525). To adapt the words of Kirby P in Wickstead v Browne (1992) 30 NSWLR 1, 5, the marginal utility to Mr Alexander of preventing Westpac from proceeding would be minimal, but the marginal cost of doing so would be very great if (contrary to my present view) Westpac were able to establish at trial that it had suffered some present or actual loss as a result of the alleged conspiracy. (I note that the decision in Wickstead went to the High Court, with the application for special leave and the appeal being heard together and the appeal being allowed. The Court expressed its "general agreement with the reasons given by Justice Kirby in the Court of Appeal" for his Honour's conclusion that the claim in negligence should not have been struck out: (1993) 10 Leg Rep at SL 2.) 48 For those reasons, I would not strike out the conspiracy claim alleged in the amended cross-claim if that cross-claim were properly constituted (ie, if the parties necessary to enable the s 37A case to be determined were joined as cross-defendants). However, since the s 37A case is defective for want of parties, and since it is only that case that would save the conspiracy claim, that latter claim is at present susceptible of being struck out, and I think that I should do so. The claim under Part 31 r 2 49 In the circumstances, I do not propose to express a concluded view on the claim under Pt 31 r 2. Since I propose to strike out the relevant paragraphs of the amended cross-claim, there is no present utility in deciding the Pt 31 r 2 point. If Westpac files a further amended cross-claim (which I will give it leave to do) the parties may consider their position. In this context, I note that 789TEN and Mr Carter have filed a notice of motion to strike out the amended cross-claim, and for associated relief; but that they wish to consider these reasons before deciding whether to pursue that application. Conclusions and orders 50 I therefore make the following orders:

(1) Order that the affidavit of Gregory James Henry sworn 4 June 2004, and exhibit GJH 1 thereto (marked MFI 1 in the hearing before me), be placed in a sealed envelope or envelopes, not to be opened or inspected without the leave of a Judge of this Court.

(2) Order pursuant to Pt 15 r 26 that paragraphs 12 to 24 both inclusive of Part C of the amended cross-claim filed by Westpac Banking Corporation on 2 July 2004 be struck out.

(3) Grant Westpac Banking Corporation leave to file a further amended cross-claim substantially in the form of its amended cross-claim filed in Court on 2 July 2004 but naming, among others, Interco Pty Ltd and Jennifer Carter Real Estate Pty Ltd as cross-defendants; any such further amended cross-claim to be filed and served within 7 days. 51 I will hear the parties on costs.

Last Modified: 08/03/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

CITATION : 789TEN v Westpac [2004] NSWSC 594 HEARING DATE(S) : 15 June 2004, 15 July 2004 JUDGMENT DATE : 28 July 2004

CATCHWORDS : PRACTICE & PROCEDURE - abuse of process - where cross-defendants allege cross-claimant aware of information alleged as material facts in cross-claims only as result of privileged and confidential communications made for purposes of or in course of mediation - where mediation agreement contained confidentiality clause - analogy between without prejudice discussions and mediation - whether paragraphs should be struck out for abuse of process - whether conspiracy claim has no prospect of success - whether facts alleged in cross-claim show that cross-claimant has suffered damage - whether claim should be dismissed pursuant to Pt 15 r 26 LEGISLATION CITED : Supreme Court Rules AWA Limited v Daniels (Rolfe J, 5029 of 1991, 18/3/92, unrep) AWA v Daniels (1992) 7 ACSR 463 Lukies v Ripley (No 2) (1994) 35 NSWLR 283 CASES CITED : Williamson v Schmidt [1998] 2 Qd R 317 Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173 Lonrho Plc v Fayed (No 5) [1993] 1 WLR 1489 McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409 789TEN Pty Ltd (Plaintiff) PARTIES : Westpac Banking Corporation (First Defendant) Colin Alexander (Second Defendant) FILE NUMBER(S) : SC 50167/03 M R Elliott (for 789TEN) COUNSEL : F M Douglas QC/P J Dowdy (for Westpac) M D Broun QC/A Harper (Solicitor) (for Alexander) Laurence & Laurence (for 789TEN) SOLICITORS : Henry Davis York (for Westpac) Turtons Lawyers (for Alexander)

At a glance

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Before

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Judgment (19 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (8)

Cited By (2)