Abacus Property Developments v Huang [2007] NSWCA 118 | Case summary

MENZIES & ANOR. V. CRCI PTY. LIMITED Judgment 1 HODGSON JA: On 25 July 2006, Christie DCJ dismissed an application by the claimants to file a cross-claim in proceedings in which the opponent had sued the claimants for amounts alleged to be due pursuant to a mortgage given by the claimants to the opponent. 2 On 2 August 2006, the claimants filed a summons for leave to appeal from that decision. 3 On 3 August, the claimants, by their counsel, applied for a stay of proceedings pending determination of the application for leave to appeal, and also applied for an adjournment of the hearing of the opponent's claim. Donovan DCJ refused those applications and proceeded to hear the case. 4 On 4 August, Donovan DCJ gave a decision in the case in favour of the opponent for $67,943.01 plus interest. The interest was subsequently determined at $13,016.99 and a judgment was given for $80,960. It appears that that judgment may have been actually made on 17 October 2006. On that day, Donovan DCJ also made an order with respect to the costs of the proceedings. 5 The claimants seek leave to appeal from the judgments of 25 July 2006, 3 August 2006 and 17 October 2006. The application for leave has been heard on the basis that if leave is granted, the appeal will be disposed of without further argument. 6 The dispute underlying the proceedings arises from dealings commencing in 1995 between the claimants and the opponent concerning some land at Wyong. It appears there was an agreement or agreements between them made in or about September 1995, and there was also a mortgage granted by the claimants to the opponent in October 1995 securing an advance of $175,000. 7 It appears also that from that time until July 1998, the claimants pursued the development of the land, but unsuccessfully. The claimants allege that the opponent was, during this period, in breach of the agreement or agreements made in September 1995, causing loss to the claimants. 8 The property the subject of the mortgage was sold by the opponent in 2002. The claimants alleged that the sale was at an undervalue. 9 On 13 August 2004, the opponent commenced proceedings in the District Court seeking a balance alleged to be due under the mortgage. Between that time and towards the end of 2005, the claimants sought to contest the proceedings without legal representation. There were various directions made about pleadings and evidence, and a number of cross-claims were filed, but all were struck out. 10 The matter was listed for hearing in sittings at Gosford commencing on 17 October 2005. They were not reached at those sittings and it was re-listed for hearing on 27 February 2006 in Gosford. 11 On 23 January 2006 the claimants, through solicitors, filed a notice of motion seeking orders vacating the hearing and giving leave to file a cross-claim within seven days of the orders, and to serve any further evidence within twenty-one days of the orders. 12 On 27 February 2006, Armitage DCJ made orders as sought by the claimants, and the matter was stood over for hearing at the next sittings at Gosford commencing on 24 July 2006. 13 On 15 March 2006, the claimants filed an amended defence but at that stage no cross-claim. 14 On 19 April 2006, the claimants submitted a draft cross-claim to the opponent with a request that the opponent consent to it being filed. 15 On 11 May 2006, the opponent refused consent, and on 6 July 2006, the claimants filed a notice of motion seeking leave to file a cross-claim. That was the application dismissed by Christie DCJ as indicated at the beginning of this judgment, and the matter then went ahead as recorded at the beginning of the judgment. 16 The application before this court has focused on two decisions, namely that of Christie DCJ on 25 July 2006 refusing leave to file the cross-claim, and that of Donovan DCJ on 3 August 2006 refusing an adjournment. I will consider these decisions in turn. 17 In relation to the decision of Christie DCJ, the claimants' notice of motion annexed a proposed cross-claim and was supported by an affidavit by a solicitor employed by the claimants' solicitors setting out communications between the parties, referring to the engagement of an expert, Mr Snedden, to provide evidence in relation to the development that was subject to the joint venture agreement, and referring to an expectation that his report would be finalised before 24 July 2006. The affidavit did not give any explanation of the non-compliance with the orders made by Armitage DCJ or any other information as to if and when any other evidence would be ready. 18 In his judgment dealing with the application Christie DCJ identified three reasons for refusing leave: (1) that it would set back the hearing which had already been delayed in a significant way; (2) that the matters raised in the cross-claim were likely to be statute-barred; (3) he was not satisfied that the matter in the cross-claim had to be heard together with the opponent's claim. 19 Mr Jones, appearing for the claimants before this court, submitted that there were grounds for appellate intervention within the principle stated in House v The King (1936) 55 CLR 499, because the primary judge did not apply the correct principles in determining the application, did not consider the prejudice to the claimants, and made a decision concerning a possible limitation defence when he should not have done so. 20 On the first point, Mr Jones submitted that leave to file a cross-claim should be given if the cross-claim discloses a cause of action referring to CIBC Australia v Parkston (1995) 18 ACSR 429 at 432. In so far as the lateness of the cross-claim could cause prejudice to the opponent, refusal of leave would be justified only if that prejudice could not be met by an adjournment and costs; and Mr Jones referred to State of Queensland v JL Holdings Pty Limited (1997) 189 CLR 146. 21 On the second point, Mr Jones submitted that Christie DCJ did not consider at all the profound prejudice that would be caused to the claimants by a refusal of leave, namely that their claim would be defeated without a hearing on the merits. 22 On the third point, he submitted that the judge's approach did not have regard to the decision of Wardley Australia Limited v Western Australia (1992) 175 CLR 514, to the effect that questions as to the effect of limitation statutes should generally not be decided on interlocutory applications. Further, Christie DCJ did not advert to the advantage to the claimants, if the cross-claim were permitted, because the effect of s.74 of the Limitation Act 1969 would have been to put the claimants in the position of in effect having commenced proceedings in August 2004. 23 Dealing first with the second and third points, in my opinion Christie DCJ was considering the question of prejudice to the claimants when he considered whether the proposed cross-claim would be affected by limitation questions, and whether the issues sought to be raised could be litigated separately. He did not advert to the effect of s.74 but that was not put to him; and in any event so far as can be gathered from the cross-claim and other material before the primary judge, most of the causes of action in the cross-claim in any event arose before August 1998. The only clear exception is the claim that the sale was at an undervalue, and that claim is still open to be brought and can be brought in separate proceedings. 24 In considering whether error is shown in Christie DCJ's reasons, it is pertinent to note that this was a case where the claimants were seeking an indulgence, so the onus was on them to prove facts relevant to prejudice if that indulgence was to be granted. 25 Further, in my opinion, it was clearly appropriate for a judge hearing such an application to make the best assessment he could, on the material provided by the claimants, of whether the claimants' case was of sufficient merit to justify granting the indulgence sought to the detriment of the other party. In my opinion, the comments by the High Court in Wardley were not intended to preclude that kind of assessment, but were rather directed to the correct approach where it is sought to obtain summary relief on the basis of limitation questions. 26 As regards the first point, I accept that the approach taken in CIBC would generally be appropriate where there is no issue that the late filing of the cross-claim causes prejudice to the other side; but in this case the late filing would have resulted in vacation of a hearing date that had been set at a time when the claimants had previously applied for vacation of an earlier hearing date, and previously sought the indulgence of the court as to putting on a cross-claim and putting on evidence. The claimants had not complied with the time limits they had then sought and had been granted, and had not offered any explanation for this. In those circumstances, the vacation of the hearing and opening up the possibility of further delays was a very major indulgence indeed being sought. 27 It was put that, in accordance with JL Holdings, the Court should grant an amendment, unless prejudice was caused to the other side that could not be met by an adjournment and costs, and that any prejudice in this case could have been so met. However, in my opinion, where an amendment would require vacation of a hearing date which was set to take place within a few days, generally there is prejudice through prolongation of the litigation that is not entirely met by costs, and the imposition of that prejudice on the other party needs to be justified by the strength of the case made for the indulgence by the party applying for it. I do not think this was made out in this case, for the reasons I have given, especially in circumstances where no explanation was given for not complying with the terms of the previous indulgence granted. 28 Turning to the decisions of Donovan DCJ, on 3 August 2006 counsel for the claimants applied for a stay of proceedings pending determination of the appeal from Christie DCJ's decision, application for leave for which had been filed on the previous day. This application was refused by Donovan DCJ, for reasons set out at pp 12-16 of the transcript of that day. He referred to the contention that to refuse the stay would deprive the claimants of their right to appeal and disagreed with that contention, I might say correctly so having regard to the decision in Clifton v Gerlach Bricks Pty Limited (2002) 209 CLR 478. He referred to the submission that a judgment in the case would impose burdens on the claimants, that a refusal of the stay would compromise the claimants' ability to test the evidence, and that the case involved difficult and complex issues. He went on to refer to what he called the sorry history of the matter including applications by the claimants for a stay in October 2004, the extension of time for filing a defence, the setting of times for the filing of evidence, the striking out of cross-claims, the orders of Armitage DCJ to which I have referred, and the non-compliance with those orders. He concluded this judgment as follows: It seems to me that in view of the various attempts by the defendants to bring documents forward at the last minute or bring documents forward late on many occasions and the attempts by the defendants to have the matter adjourned or put off for other reasons over a lengthy period of time are relevant to a question of whether a stay should be granted. The matters put forward by the defendant essentially are that the defendants would be unfairly prejudiced if there's a judgement against them at this stage. I do not agree. I do not think that the fact that there has been a summons filed in the Court of Appeal for leave to appeal sufficiently outweighs the rights of the plaintiff to have the case heard in particular in the context of the numerous delays which have been caused by the defendants. The matter will proceed today. I refuse the application for the stay. 29 Counsel then applied for an adjournment, firstly to seek a stay in the Court of Appeal and secondly because the claimants needed to file further evidence. In the course of discussion of that application Donovan DCJ asked, at p 17 of the transcript, "Why should I grant an adjournment because the evidence has not been filed in contravention of direction", and various submissions were made in response to that question. At the end of that discussion, the application was refused without further reasons being given. 30 Mr Jones submitted to this court that errors were disclosed in that Donovan DCJ gave no reasons for his decision, and did not weigh the prejudice that the refusal of the adjournment would cause to the claimants or take into account that prejudice to the opponent could be met by a costs order. He relied particularly on Frugtniet v State Bank of New South Wales [1999] NSWCA 458, at [84]-[89] for the proposition that it is only in extraordinary cases that the interests of justice will be served by refusal of an adjournment in a case where to hear the proceedings is likely to terminate the proceedings. He also referred particularly to Sali v SPC Limited (1993) 67 ALJR 841 and Abacus Property Developments v Huang [2007] NSWSC 47. 31 The questions of whether reasons were given must be considered in context. Donovan DCJ had just given judgment on a stay application in which he had recounted the history of the matter, including the history of directions as to the filing of evidence, culminating in the order made by Armitage DCJ as sought by the claimants for filing evidence within twenty-one days from his order. He asked the question to which I have referred, and plainly his reason for his decision was that he considered an insufficient answer to that question had been given. 32 In circumstances where there was no evidence to explain past failures to comply with directions, there was no explanation of why Mr Menzies was not then at court except that he was doing business elsewhere, and also where counsel had previously said that he would rely on evidence that had been filed, it can be seen that the primary judge's reason for refusal of the adjournment was the lack of a satisfactory answer to his question. 33 As regards the statement relied on from the case of Frugtniet, I am not certain that I would regard that as a statement of principle of completely general application; but in the present case I think it can be said to be extraordinary that an application for an adjournment to put on evidence be sought in circumstances where it is made at the hearing of the case where the principal party and principal witness concerned is absent without a reasonable explanation being given, where previous directions about evidence had not been complied with, again without a reasonable explanation, and where no material is offered as to precisely what evidence is to be put on or when it would be put on. 34 As regards prejudice to the other side, as I have already said, it seems to me that the prolongation of litigation by an application for adjournment at the hearing of a case is a prejudice that is not met by an order for costs. 35 No separate submissions were made in respect of other decisions. 36 For the reasons I have given, in my opinion the application for leave to appeal should be refused with costs. 37 TOBIAS JA: I agree with the order proposed by the presiding judge and with his reasons. 38 BASTEN JA: I agree that the application should be dismissed with costs for the reasons given by the presiding judge. 39 HODGSON JA: So that is the order of the court. **********

Abacus Property Developments v Huang

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