[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
[2]
Judgment
THE COURT: The defendants to pending proceedings in the Equity Division seek leave to appeal from the reserved decision of the primary judge, Lindsay J, dismissing an application for a permanent stay or summary dismissal, based on an alleged abuse of process, and granting the plaintiff leave to amend its statement of claim: Pages Property Investments Pty Ltd v Boros [2018] NSWSC 986. The decision being interlocutory, leave to appeal is required: Supreme Court Act 1970 (NSW), s 101(2)(e).
The plaintiff, Pages Property Investments Pty Ltd ("PPI"), which is the respondent to the present application for leave to appeal, owns land at Punchbowl. The first applicant, Mr Atilla Boros, is a minority shareholder in the plaintiff/respondent, but he was its sole director and secretary when it executed a five year lease of the Punchbowl land to a lessee owned and controlled by him, Pages Equipment Holdings Pty Ltd ("PEH"). PEH was joined as the second defendant as a consequence of the decision of the primary judge. It is the second applicant on this application for leave.
By way of overview, the background is as stated by the primary judge at [2]-[6]:
"[T]he plaintiff is the registered proprietor of the Punchbowl property, presently subject to an unregistered, long term lease in favour of a related company (Pages Equipment Holdings Pty Ltd or "PEH") which the defendant caused to be executed on or about 15 June 2016 at a time when, following the death of Mr Page in 2003, he was: (a) the sole director and secretary of the plaintiff; and (b) a director and the secretary of the lessee. The plaintiff, under the control of Mr Page's widow as its sole shareholder, alleges that the defendant, in his own interests, caused the lease to be entered for a below-market rental.
The indebtedness of the Page Group of corporations the ANZ Bank is cross-collateralised. Under the defendant's management of the business, during 2016 the liability of the plaintiff to the Bank was increased by about $1.65 million, and changed from that of one of several sureties to that of a principal debtor. The plaintiff alleges that the defendant, in his own interests, changed the nature and amount of the plaintiff's liability to the Bank by using money of the plaintiff to discharge PEH's indebtedness to the Bank.
The Bank is pressing for the debt of the Page Group owed to it to be paid out. That is a sum in excess of $7 million.
With a view to meeting demands of the Bank, the plaintiff contracted to sell the Punchbowl property to a third party. The contract provides for a sale with vacant possession, with a right of rescission if vacant possession was not available by 16 June 2018. Anticipating an exercise of that right, the purchaser recently commenced separate proceedings against the plaintiff and PEH to restrain any purported exercise of the plaintiff's ostensible right of rescission; to compel PEH to vacate the Punchbowl property; and to enforce the contract for sale.
The defendant (and Mr Thatcher) have a competing aspiration to purchase the property."
The main point sought to be raised in support of a grant of leave concerns the way in which the primary judge addressed the notice of motion based on abuse of process. Proposed grounds of appeal 1-4 are directed to this. A secondary point is based upon the decision to grant leave to amend the statement of claim; this is the subject of proposed ground 5.
The hearing in this Court, and before the primary judge, followed an unusual course. Before the primary judge, the plaintiff's application to amend, and Mr Boros' application for summary dismissal or a stay, came on in the Applications List. That, as we understand it, is a list for relatively short matters. The parties read 7 affidavits in a court book comprising 2 lever arch folders. Only two of those affidavits were in the materials in the White Folders before this Court. Those two affidavits (made by Mr Timothy Gerard Page the sole director of the plaintiff and Mr Boros the defendant) were 198 pages and 503 pages long respectively. The former explained the circumstances in which the litigation was commenced, including the concerns he had as to the actions taken by Mr Boros when he was sole director of the plaintiff, his removal as a director, and the application which was made in November 2016 requiring Mr Boros to provide books and records of the company, in support of his company's application for an amendment. The latter asserted that:
"For the reasons I will detail in this affidavit, I say not only are the plaintiff's claims contrary to the facts, but the plaintiff has commenced and continued this litigation for the improper purpose of exerting pressure on me, in my capacity as director of PEH, to cause PEH to surrender its lease so that the plaintiff can complete the Conditional Contract of Sale by providing vacant possession to the purchaser".
All of the evidence was read without objection, and without any application to cross-examine any deponent. That occurred on the basis that the evidence on each motion was evidence on the other motion.
The matter was not concluded by the afternoon. The primary judge had also suggested, following submissions from junior counsel who appeared for the plaintiff, that Mr Boros had agreed to surrender his company's lease, that consideration might be given to making allegations to that effect in the pleading. The matter was adjourned until 10 May 2018. So far as we can see, the transcript of that hearing was not included in the materials before this Court. The matter was thereafter adjourned again until 22 June 2018. At either the second or third hearings, four solicitors' affidavits were read. Those affidavit occupy some 380 pages. One of them, sworn by Mr Seamus Dominic Jones Ryan, an employed solicitor with carriage of the matter on behalf of Mr Boros, exhibited two affidavits which had been filed in other proceedings brought by the purchaser of the Punchbowl property. There was no evidence that those affidavits had been read in the other proceedings, and it may well be that they had not been read. If so, then it was a prima facie breach of the principles stated in Harman v Secretary of State for The Home Department [1983] AC 280 for them to be employed in separate proceedings by Mr Boros: see Hearne v Street (2008) 235 CLR 125; [2008] HCA 36 at [96]. The transcript of the third hearing does not appear to have been included in the appeal books. This Court was told that there was no objection to those affidavits, and that the Court was not alerted to the Harman problem.
The parties were no less verbose in their submissions than in their testimonial evidence. Mr Boros supplied 5 sets of written submissions to the primary judge (dated 30 January, 16 March, 20 April, 7 May and 15 June). One was contained in the White Folders; the other four were supplied in a 5th folder at the hearing. The plaintiff also relied on 4 sets of submissions (dated 10 January, 16 March, 30 April and 1 June). Only one of these was in the White Folders; the balance were supplied shortly after the conclusion of the hearing for leave. The hearing in this Court occupied slightly more than 2 hours.
The volume of material, some of which was supplied at and after the hearing in this Court, required judgment to be reserved. These reasons are longer than is ordinarily appropriate in an application for leave. Notwithstanding the nature of the case sought to be advanced, it is very much to be doubted that in preparing the White Folders, sufficient attention was directed to the obligation to include those, and only those, documents which were necessary to determine the question of leave. The opportunity accorded for oral address, and the length of these reasons, should not be regarded as a precedent in other cases.
[3]
Abuse of process
The primary judge addressed the submissions based on abuse of process at [15]-[17]:
"The plaintiff alleges that it only exchanged contracts for the sale of the Punchbowl property, and agreed to a new ANZ Bank facility, after it had secured from the defendant, on behalf of PEH, an agreement that PEH would surrender its lease and vacate the property, giving rise to a claim in estoppel, if not contract, when PEH (under the control of the defendant) refused to do so. The defendant denies that he ever gave to the plaintiff, or the Bank, an unqualified assurance that PEH would surrender its lease. He contends that he agreed that PEH would vacate the property if only if it could re-locate to an alternative property near Moorebank, a contingency which failed to occur.
The defendant's characterisation of the plaintiff's claim for a surrender of the lease as futile is misdirected. There is no deficiency in the plaintiff's proposed pleading of its claim in estoppel. There is a triable issue of fact about the content and timing of the defendant's assurances about surrender of the lease.
I am not satisfied that there is anything sinister in delays attending the pleading of the plaintiff's claim for the lease to be surrendered. Whatever their variant forms, the plaintiff's claims for relief have been, and remain, directed towards obtaining a proper accounting between the different interests of the Page Group. This is a practical necessity in order, both, to satisfy the ANZ Bank's demands for repayment of moneys owed to it, and to disengage the several interests of the families in the Group. The plaintiff's claims cannot be summarily dismissed, or stayed, as an abuse of process consequent upon a finding of improper purpose not made. The plaintiff's claim for surrender of the lease is now explicit, and pleaded in detail."
In support of the proposed appeal against the dismissal of the notice of motion based on an abuse of process, two discrete points were advanced. The first is that, so it was said, there is an important and unresolved question of law as to whether:
"it is a complete answer to a claim that a proceeding is an abuse of process that the plaintiff is able to plead causes of action in circumstances where the evidence of an abuse of process remains uncontradicted and unanswered".
Secondly, the applicants pointed to a variety of matters preceding and in the course of this litigation which are said to support the conclusion that it is an abuse of process. They said that the primary judge erred in so far as his Honour did not address any of those matters directly. It is true that the reasons of the primary judge do not descend to the level of detail at which the applicants couch their submissions.
The abuse of process complained of, as it was put orally in this Court by Mr Tokley SC, who with Mr Segal appeared at first instance and in this Court, had four bases.
1. First, it was said that when the plaintiff originally commenced proceedings against Mr Boros, it made no claim concerning the lessee or the rent payable; it is to be inferred, so it was said, that the plaintiff considered that the lease was valid and should not be set aside.
2. Secondly, it was said that the plaintiff "waited nearly a year to join PEH as a defendant and to amend its statement of claim to plead that the rent payable under the 2016 Lease was substantially below market rent". The delayed joinder of the lessee was brought about "only because it was running out of time to give vacant possession before June 2018". It was said that there was "no explanation or affidavit" explaining the delay.
3. Thirdly, the applicants pointed to the absence of any report of an independent expert that the rent under the 2016 lease was "substantially below market".
4. Fourthly, the applicants complained that there was alleged against him an "undertaking" and then an "agreement" to vacate the premises, but the pleading is inconsistent with the evidence.
The applicants pointed to evidence filed by them, not considered by the primary judge, which is said to demonstrate that the plaintiff considered the 2016 lease to be valid and that other companies with an interest under a contract of sale urged them to advance an argument that the rent was substantially below market rent.
Against those matters, Mr White SC, who appeared in this Court but not at first instance, submitted that there was an explanation for the delayed amendment, to be found in (a) the fact (to be inferred by the original summons which sought Mr Boros to provide company documents) that the plaintiff was not fully in possession of the facts when it commenced proceedings, (b) the fact that there were without prejudice negotiations (described in Mr Page's affidavit) between March and August 2017 and (c) insofar as a claim based on estoppel was included that was a consequence of a suggestion by the primary judge.
It is trite that the onus lying upon the party alleging an abuse of process is "a heavy one" and the power to grant a permanent stay is one to be exercised "only in the most exceptional circumstances": Williams v Spautz (1992) 174 CLR 509 at 592; [1992] HCA 34. The consequence is to prevent a plaintiff who has invoked a court's jurisdiction from having a case heard and determined on the merits. Open access to justice is an important civil right, to which courts have long given high regard: see for example the decisions mentioned in Perera v Genworth Financial Mortgage Insurance Pty Ltd (2017) 94 NSWLR 83; [2017] NSWCA 19 at [55]-[56].
There is, with respect, force in the applicants' submissions that the primary judge failed fully to deal with the claimed abuse of process. Mr White did not seek to be heard to the contrary. However, a deficiency in the reasons does not warrant a grant of leave unless it be shown that there is a sufficient prospect that a different outcome would be reached if the appeal were heard.
There are four, independent reasons why no real prospect of any different outcome has been made out.
The first turns on the way the application was made. There was not a final hearing of a separate question as to whether the issue raised on the defence of abuse of process was made out. Instead, there was an interlocutory hearing of Mr Boros' notice of motion seeking a stay or dismissal based on an abuse of process. At that hearing, Mr Page's affidavit was read without objection. There was no application to cross-examine him.
Yet Mr Boros sought the Court to find that the plaintiff company had instituted and was maintaining the litigation for an improper purpose, such that the litigation should be dismissed or stayed.
The applicants acknowledged that it was necessary, had the question arisen at a final hearing, to put the allegation of improper purpose squarely to Mr Page. They were correct to acknowledge as much; any other course would be basally unfair. In the absence of that occurring, no finding of the relevant improper purpose could be made, and the application would necessarily fail.
The same was true at the interlocutory hearing, at least unless it was clear that Mr Page and his company had waived their entitlement to be confronted with the serious allegation of impropriety. But that did not occur.
Secondly, it is clear from Williams v Spautz that it is necessary to determine the predominant purpose of instituting and maintaining the proceedings, and in doing so it is necessary to have regard to whether the plaintiff is seeking relief for which the law provides. As it was put at 526:
"The existence of the ultimate purpose cannot constitute an abuse of process when that purpose is to bring about a result for which the law provides in the event that the proceedings terminate in the prosecutor's favour."
It is difficult to see how the applicants could establish that the plaintiff could not obtain the relief sought in the proceeding. There is no unarticulated collateral purpose. The plaintiff landowner seeks to challenge its lessee's right to exclusive possession of its land. If it can make out a case that the lessee was estopped from backing out of a documented (although not executed) deed of surrender, then it may be entitled to do so. If it can make out a case that the lease was entered into by Mr Boros in breach of his fiduciary obligations, once again it may be entitled to do so. There is no abuse of process in the plaintiff seeking to vindicate its rights at law or in equity.
Thirdly, it is very difficult to see how the evidence to which the applicants point could rise sufficiently high to sustain the heavy threshold of establishing that litigation has been instituted and maintained for an improper purpose. It was said that something turned on the failure by Mr Page to disclose the contract for sale at paragraphs 50 and 51 of his affidavit; however, there is force in Mr White's submissions that those paragraphs are directed to supporting the proposition that the rent paid by Mr Boros' company was under market. The affidavits which were served in other proceedings, concerning the negotiations between the plaintiff and the purchaser, do not necessarily point unequivocally to the plaintiff having the state of mind that the lease was unable to be set aside for breach of duty or because of an agreement to surrender. Mr Boros' affidavit, insofar as it alleged an abuse of process, was expressed to be a submission as to what he said was the motivation of the plaintiff. It was not admissible, and although it was admitted, it is of no weight and did not require an answer, at least for the purposes of the interlocutory application.
Mr Tokley placed a great deal of weight upon the decision of UBS AG v Tyne as trustee for the Argot Trust [2018] HCA 45, and in particular what was said as to the need for courts to be astute to protect litigants and the system of justice against abuses of process (at [45]), which was to be read in conjunction with the commands in s 56 of the Civil Procedure Act 2005 (NSW). The decision does not assist. That was a case where there had already been a determination of the same issues between the same parties in another court. Here, Mr Boros seeks to prevent there being any hearing on the merits.
Further, the inferences sought to be drawn by the applicants are far from self-evident. Insofar as they rely upon the delay in making the amendment, and earlier statements consistent with the validity of the lease which Mr Boros caused the respondent to grant, significant amendments are commonly made in litigation for a wide range of reasons, falling short of an improper motive. Likewise, the need to join parties can be overlooked, even after a hearing (see for example John Alexander's Clubs Pty Ltd v White City Tennis Club (2010) 241 CLR 1; [2010] HCA 19). The absence of expert evidence of valuation may contribute to the inference which the applicants seek to draw, but it is not self-evident. True it is that there is "unanswered" and "uncontradicted" evidence, but it has not been tested and there has not as yet been an occasion for its being answered, because there was merely an interlocutory hearing, without cross-examination.
There is a fourth reason telling against the grant of leave, although this is of a different nature from the first three. The applicants have in their defence alleged that the litigation has been brought as an abuse of process, and in due course it may be that that question is determined. Indeed, the plaintiff cannot ultimately succeed, so long as that aspect of the defence is pressed, without a determination of that issue in its favour. If and when that occurs, an appeal will lie as of right. And it is an appeal that will be determined by way of rehearing on the basis of the evidence adduced at a final hearing.
It follows that even if everything the applicants say is correct, the only prejudice they will have suffered by refusing leave to appeal from the interlocutory decision is the prejudice in having the plaintiff's claims, as well as their own claims, decided on a final basis at a final hearing in the ordinary way. Further, the question of principle which is at the forefront of the applicant's submissions in support of leave may at that stage have crystallised.
Whether or not an abuse of process is a complete defence to an otherwise well-pleaded statement of claim is not an issue that presently arises. The issue which arose on the applicants' notice of motion was whether they had, at an interlocutory stage, made out an abuse of process such as to enliven the Court's discretion to either stay or dismiss the proceedings.
It follows that, in relation to proposed grounds of appeal 1-4, we are not persuaded that the question of principle asserted by the applicants in fact presently arises, nor that the applicants have made out a case of injustice which is reasonably clear: Be Financial Pty Ltd, as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164 at [32]-[38]; The Age Company Ltd v Liu (2013) 82 NSWLR 268; [2013] NSWCA 26 at [13].
[4]
Amendments to the Statement of Claim
Proposed ground 5 was very much in the background of the oral submissions in support of leave.
In relation to the orders permitting an amendment, the most substantial amendments (and the only one addressed in the written submissions) appear to be new paragraphs 47-50, which make allegations of breach of statutory and fiduciary duties made by Mr Boros when causing PPI to enter into the lease with a claim of knowing involvement by PEH in those contraventions and breaches. The complaints that are made are that "a proper pleading should address the totality of the dealing between it and the related companies in the group", the amendments are "conclusory allegations and do not elaborate or articulate how and in what way the duties are breached", and the failure to quantify any claim for damages or compensation.
It is accepted that Mr Boros owed the plaintiff statutory and fiduciary obligations. It is alleged that causing the plaintiff to grant a lease to a company he controlled, at a rent under market, was a breach of duty, in which his company was involved. We do not regard those allegations as unclear. We do not think that the actual market rent alleged by the plaintiff is a material fact. Nor do we think that any more elaborate pleading is necessary. In a case where both parties have demonstrated a capacity to produce hundreds of pages of evidence and submissions on interlocutory issues, it is as well to bear in mind that the pleading is required by the rules to contain facts, not evidence, and to be as brief as the nature of the case allows: UCPR rr 14.7, 14.8.
We do not consider that there is a proper basis for the grant of leave to challenge the decision of the primary judge which is a discretionary decision on a matter relating to practice and procedure.
[5]
Orders
The result is that the summons seeking leave to appeal filed on 15 August 2018 is dismissed with costs.
[6]
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.
Decision last updated: 13 November 2018