Solicitors:
Bridges Lawyers (Plaintiff/Respondent)
Clyde & Co (Second Defendant)
Baker & McKenzie (Fourth and Fifth Defendants)
File Number(s): 2017/137955 (012)
[2]
Judgment - ex tempore (revised 8 august 2018)
By Interlocutory Process filed on 24 July 2018, the Applicant, Mr Choy, who is the Second Defendant in these proceedings, applies for a stay of an Originating Process filed in May 2017 and a Statement of Claim filed in March 2018 in these proceedings, as against Mr Choy and the Third to Fifth and Seventh to Eighth Defendants, under s 67 of the Civil Procedure Act 2005 (NSW), pending the determination of an application for leave to appeal from my earlier interlocutory judgment in these proceedings ([2018] NSWSC 828) ("Earlier Judgment"), and pending the determination of certain proceedings brought by Mr Choy against his directors' and officers' liability insurer in the Federal Court of Australia ("Insurance Proceedings").
Mr Izzo, who appears for Mr Choy, indicated that he mentioned the matter on behalf of the Third Defendant, who supported the orders sought by Mr Choy. Mr Bender, who appears for the Fourth and Fifth Defendants, and mentions the matter for the Seventh and Eighth Defendants, indicated that they also supported the orders sought. Those other Defendants who would be the beneficiary of the stay sought by Mr Choy, but not by them, therefore indicated that they seek to take the benefit of that stay.
The application is, as I noted, brought under s 67 of the Civil Procedure Act and Mr Izzo indicated it was also brought in the Court's inherent jurisdiction. That section relevantly provides that the Court may, at any time and from time to time, stay any proceedings before it, either permanently or until a specified day. Mr Izzo submits that the application does not seek a stay of the effect of the Earlier Judgment, so far as it determined certain matters, or the orders made to give effect to that judgment. On that basis, Mr Izzo submits that the principles identified by the Court of Appeal in Alexander v Cambridge Credit Corporation Limited (1985) 2 NSWLR 685 ("Alexander") are not relevant, and that what is being sought is rather in the nature of an exercise in case management. If the principles identified in Alexander were to be applied, the overriding question would be what the interests of justice require; there would be relevant questions as to whether there were reasonably arguable grounds for an appeal, and also as to the risk of damage to Mr Choy if the stay that is sought was not granted; and Mr Choy would not need to establish special or exceptional circumstances in order to establish a stay, and it would be sufficient that he established that there was reason or an appropriate case for the exercise of the discretion to grant such a stay in his favour: Alexander above at 694; New South Wales Bar Association v Stevens [2003] NSWCA 95 at [83]; and see my review of the relevant authorities in Yoo v Toppro Pty Ltd [2016] NSWSC 734 at [4].
Mr Izzo submits that what is sought by Mr Choy is analogous to a decision by the Court, as a matter of case management, that no further steps should be taken in the proceedings, pending the determination of the application for leave to appeal in the Court of Appeal, and the determination of the Insurance Proceedings. Mr Izzo also accepted that, to the extent that the stay raised issues of that character, then it was to be determined by reference to ss 56-60 of the Civil Procedure Act and specifically the overriding purpose and the objectives of case management. Section 56 of the Civil Procedure Act provides that the overriding purpose of the Act and the Rules, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in dispute in the proceedings. Section 58 provides that the Court, in deciding whether to make an order, including the order for the stay that is sought, must act in accordance with the dictates of justice. The Court must have regard to the provisions of ss 56 and 57, and may have regard to specified matters, including the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction, in determining to make that order or direction. I also have regard to the fact that those principles reflect, as Allsop ACJ noted in Hans Pet Construction Pty Ltd v Cassar [2009] NSWCA 230 at [37], recognition that the provision of timely individual justice is an important aspect of the provision of justice in proceedings, and that delay, at least once proceedings are commenced, can be corrosive of the provision of justice in those proceedings.
The parties read affidavit evidence which indicates the history of the proceedings, and the background to this application. Mr Choy relied on the affidavit of his solicitor, Ms McLennan, dated 24 July 2018 which referred both to the application for leave to appeal brought in the Court of Appeal in these proceedings, and to the Insurance Proceedings, and to the matters which arose in those respective proceedings. Ms McLennan indicated her expectation that the application for leave to appeal and any appeal in the Court of Appeal and the Insurance Proceedings were likely to be determined in the second half of this year. Mr Izzo also fairly recognised, in the course of submissions, that the Insurance Proceedings were brought in that Court's Insurance List, which identifies its function as providing the timely provision of insurance disputes and that, in those circumstances, it may be anticipated that that list would be able to deal with those proceedings promptly, if these proceedings are not stayed. I will return to the significance of that matter below.
The Plaintiff, Tiaro Coal Limited (in liq) ("Tiaro"), the respondent to the application, in turn relied on the affidavit dated 1 August 2018 of its solicitor, Mr Calabria, which referred to the history of the proceedings, including the application to set aside service of the Originating Process which was the subject of the Earlier Judgment, the next steps in the application for leave to appeal to in the Court of Appeal and in the Insurance Proceedings. Ms McLennan, in her affidavit in response dated 3 August 2018, referred to correspondence between the parties and to steps which had been taken by Mr Choy, and it appears several other Defendants, to seek to resolve the question of indemnity with their insurer prior to the commencement of the Insurance Proceedings.
I have had the benefit of written submissions by both parties, together with the oral submissions of Mr Izzo. I did not hear oral submissions from Mr Sulan, who appears for Tiaro, since I was satisfied that it was not necessary for Tiaro to be heard beyond what had been put in its written submissions. The parties' written submissions also address the factual background and procedural history of the matter, involving the application brought before me, the delivery of the Earlier Judgment in June 2018, and the subsequent application filed on 29 June 2018 for leave to appeal from that judgment. The submissions also refer to the circumstances in which the Defendants' directors' and officers' insurers declined to indemnify them for defence costs in these proceedings in December 2017 and to the subsequent steps taken in the Insurance Proceedings.
Mr Izzo identifies several reasons why, he submits, a stay should be granted, although that submission should be understood in the sense that Mr Izzo explains, namely as contemplating no further steps would be taken in these proceedings pending the determination of the Insurance Proceedings and the application for leave to appeal from the Earlier Judgment, rather than as a stay of the orders made following the Earlier Judgment.
First, Mr Izzo submits that, if the application for leave to appeal and any appeal are successful, the proceedings will be at an end and the time and money spent on preparation of Mr Choy's Defence and any subsequent steps which the Court orders to be taken will be wasted. Mr Izzo submits that this is not a case where the application for leave to appeal and appeal could be said to be without prospects, so far as it raises a question about a suggested interaction of the Supreme Court (Corporations) Rules 1999 (NSW) and the Uniform Civil Procedure Rules 2005 (NSW). Second, Mr Izzo refers to the fact that, while the Insurance Proceedings are unresolved, Mr Choy, relevantly, is uninsured for defence costs, and Mr Izzo extends that submission to the several other Defendants who did not bring this application. Mr Izzo refers to evidence that costs incurred in the conduct of these proceedings, at least in the second half of this year, may be significant, and submits that the question as to defence costs should be clarified before the Defendants are required to take further steps to defend the claim. Third, Mr Izzo submits that these considerations are not outweighed by the inconvenience to the Plaintiff of the stay being granted where, he submits, there is "no urgency" in the proceedings, which were not commenced until close to the end of the limitation period, and not served for some time thereafter, in the circumstances set out in the Earlier Judgment. Mr Izzo submits that the relevant delay is not likely to be substantial, where, as I noted above, Ms McLennan's evidence is that she anticipates that the leave application in the Court of Appeal and the Insurance Proceedings could be determined in the second half of this year.
In written submissions, Mr Sulan refers to the principles in Alexander which, as I noted, Mr Izzo submits do not apply. Mr Sulan also refers to the fact that the several Defendants, including Mr Choy, had been unsuccessful in a number of aspects of the application to set aside service of the Originating Process before me. Of course, it does not follow that they could not be successful in obtaining leave to appeal from the Earlier Judgment or in an appeal from that judgment. No doubt, the prospect of such success will differ in respect of aspects of the judgment, including, on the one hand, questions of construction of the Supreme Court (Corporations) Rules and the Uniform Civil Procedure Rules, and on the other hand, discretionary matters, where Mr Izzo fairly accepts that the discretion exercised by the Court in the Earlier Judgment was of a nature which would invoke the principles in House v The King (1936) 55 CLR 499. A success on the question of construction would not assist Mr Choy unless an error in my discretionary determination as to relief is also established.
Mr Sulan also points to the fact that, so far as the Defendants incur costs in preparing Defences, and if an appeal is successful, then that is a matter that would be addressed by an order for costs. Mr Sulan submits that the Defendants' unresolved claim for insurance cover is not a compelling justification for granting a stay, where there is no evidence that Mr Choy or other Defendants are unable to fund their legal costs in the absence of indemnity by the insurer.
It seems to me that, approaching the matter on the basis on which Mr Izzo submits it should be approached, namely as an exercise in case management by reference to ss 56-58 of the Civil Procedure Act, or alternatively approaching it by reference to the principles applicable to a stay, as identified in Alexander, and having regard to the interests of justice in the grant of a stay, a stay or a deferral of further steps in the proceedings should not be granted in these circumstances. There are several reasons why I take that view.
First, dealing with the position of the application for leave to appeal from my Earlier Judgment, I recognise that a first instance judge is not in the best position to assess the prospects of such an application, and that is a matter which need only be approached on a broad level here. I assume that the construction questions raised in my Earlier Judgment are, as Mr Izzo puts it, matters as to which different views could be taken. It may be more difficult for Mr Choy to establish a basis for leave to appeal in respect of the discretionary consideration as to the remedy which should be granted, which was addressed in my Earlier Judgment, although I recognise that the significance of whether the proceedings continue or do not continue would be a relevant matter in that respect. Even assuming that there are arguable prospects of an application for leave to appeal or an appeal, it does not seem to me that the proceedings should be stayed or further steps in them deferred, for the reasons noted below. First, where Mr Choy points to the prospect that the application for leave to appeal may well be determined within the second half of this year, and possibly more promptly if these proceedings are ongoing, all that is likely to occur in these proceedings in that period is the filing of Defences, as to which there have already been delays by at least some of the Defendants, and steps taken in the preparation and filing of the Plaintiff's evidence in chief.
Second, Mr Izzo fairly points to the fact that the conduct of proceedings may or will involve stress and commitment of effort by individual Defendants. That is a matter that seems to me to tell against the grant of the stay, rather than in favour of it. If the stay that is sought were granted, and Mr Choy were ultimately unsuccessful in the application for leave to appeal, and unsuccessful in the Insurance Proceedings, then the case would continue, in circumstances that he would not be indemnified for defence costs, but its duration would then have been extended by the period which had been lost to the stay. The stresses faced by Mr Choy and other Defendants from the continuance of these proceedings would then be extended, rather than reduced, by the stay. While it is true to say, as Mr Izzo does, that Mr Choy would not be required to undertake any work while the stay was in place, that seems to me to pay too little attention to the fact that, if the proceedings then continue, he would be required to recommence that work at a later date, and continue it over an extended period.
Third, it also seems to me that, so far as the just, quick and cheap determination of the proceedings are concerned, that is likely to be promoted, rather than undermined, by the continuance of the steps which are being taken to date, by way of filing Defences, and by the filing of the Plaintiff's evidence in chief, while the application for leave to appeal to the Court of Appeal and the Insurance Proceedings are determined. Recognising that there was a delay in the commencement of these proceedings, to the end of the limitation period, and a further delay in service, it does not follow that the proceedings should now be further delayed, rather than carried on with such expedition as is reasonable in the circumstances. In that respect, it seems to me that this application is not different from many applications in respect of an interlocutory decision of some significance, which may have the effect, if reversed, that proceedings would not continue. I am not persuaded that the just, quick and cheap resolution of such proceedings would be promoted by suspending the proceedings in each case that there is an application for leave to appeal from an interlocutory decision of that character.
Fourth, so far as the costs of further steps in the proceedings are concerned between now and the end of the year when any appeal could be determined, on Ms McLennan's estimate, it was not suggested that the Plaintiff (which now has access to litigation funding) (or, if applicable, the liquidator) would not be able to meet a judgment for costs, if the Defendants are ultimately successful in their appeal. Questions of security for costs are being addressed in the proceedings in respect of several parties, and there was no suggestion that those matters, as they now stand, had any impact on whether a stay should be granted.
Fifth, it seems to me that there would be real detriment in the grant of a stay or the deferral of further steps, so far as that involves all parties ceasing work in the proceedings, and additional costs would then be incurred by recommencing that work, if it ultimately became necessary to do so. The period for which the delay would continue could also be extended if, contrary to expectations, it took longer to resolve either the question of leave to appeal, or the appeal, or the Insurance Proceedings.
I now turn to the Insurance Proceedings, where Mr Izzo's submissions was ultimately put, with admirable clarity, as amounting simply to the proposition that Mr Choy, and possibly other Defendants, would prefer not to incur the costs of the defence of these proceedings themselves, in circumstances that they contend that their directors' and officers' liability insurer should do so. Mr Izzo accepted that no evidence had been led by Mr Choy that he was unable to pay those costs for himself, or indeed that he would suffer any particular hardship by doing so, and funding an amount, in the interim, for which he claims indemnity from his insurer by way of costs. I infer that any evidence that might have been led by Mr Choy in that respect would not have assisted this application.
It seems to me that there will be many cases before this Court where, in the background, disputes arise between insureds and insurers of various kinds, often extending to the costs of conduct of those proceedings. Those disputes may arise, for example, in the case of directors' and officers' liability insurance, as appears to be the case here, or in the case of professional indemnity policies. There will, no doubt, be cases from time to time where an insured considers that it should be indemnified by its insurer for the costs of the defence of the proceedings and its insurer takes a different view. Mr Izzo did not identify any case law indicating that substantive proceedings should generally be stayed, merely because there was a dispute between the insurer of a party or parties and that party or parties as to which should pay the costs of its defence. It seems to me that, generally, the interests of justice would not be served by staying proceedings, merely because an insured and its insurer were not in agreement that the insurer should presently fund the conduct of these proceedings, at least where the insured does not contend it is unable to do so for itself. In this case, there is nothing to suggest that there is any particular disadvantage to Mr Choy from the continuance of the proceedings on that basis, where Mr Choy does not suggest that he is unable to fund the proceedings, in the interim, and rely on his indemnity against his insurer by way of reimbursement, if his right to indemnity is ultimately established in the Insurance Proceedings.
It seems to me that it is also significant that, as Mr Izzo accepted, the Federal Court is likely to be able to accommodate its hearing of the Insurance Proceedings to the progress of the substantive proceedings, just as this Court would have done, had the application in respect of the insurance issues been brought in this Court. Where these proceedings are ongoing, then one might expect that the Federal Court will give expedition to determining the Insurance Proceedings, because they will have a degree of urgency that they would not have had if these proceedings were stayed. It also seems to me that the just, quick and cheap resolution of the real issues in dispute would not be promoted by a stay, in the nature of a downing of tools, where that would also have the consequence of bringing about a longer delay if, contrary to the parties' expectations, the Insurance Proceedings were not then progressed promptly.
For all these reasons, it does not seem to me that this matter is one in which either the interests of justice generally, or the just, quick and cheap resolution of the matters in dispute, would be promoted by the grant of a stay or a suspension of directions for the future conduct of the proceedings. For these reasons, Mr Choy's Interlocutory Process filed on 24 July 2018 is dismissed with costs.
Following further discussions with the parties I also made the following directions:
Extend the time for the Second to Fifth Defendants and the Seventh to Eighth Defendants to file and serve their Defences to 4pm on 17 August 2018.
List the matter for directions in the Corporations Directions List at 10am on 27 August 2018.
The Second to Fifth and Seventh to Eighth Defendants have leave to file and serve any Interlocutory Process dealing with security for costs to be returnable in the Corporations Motions List on 27 August 2018.
[3]
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Decision last updated: 27 August 2018