BHAGAT v SMITH & ORS

THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL 40395/99 HANDLEY JA SHELLER JA

1 THE COURT: This is a summons for leave to appeal from an interlocutory order of Young J pronounced on 6 May 1999 by which he struck out the claimant's statement of claim. He also refused leave to amend so that his order was final in effect. 2 The amended statement of claim drafted by the claimant, who has appeared for himself throughout, runs to 78 pages. The relief sought included the setting-aside for fraud of an interlocutory judgment of Studdert J of 5 June 1996 given in a defamation action pending against the claimant, exemplary damages, and consequent on findings of fraud sought against the third and fifth defendants, their respective removals as Manager of the Meridian Investment Trust, and as Managing Director of the third and fourth defendants. 3 The fraud of the defendants alleged in the statement of claim was that they procured the judgment of Studdert J through false evidence allegedly given by Miss Mountford, a solicitor who was a member or employee of Cowley Hearne. Where the alleged fraud is perpetrated on the Court itself, the relief available in an action such as the present is rescission, that is, an order setting aside the earlier judgment, and not damages. See Nicholls v Carpenter [1974] 1 NSWLR 369, 375 per Glass JA. 4 The principles which govern an application to set aside a judgment for fraud are not in doubt, and the claimant accepted the statement of those principles by Kirby P in the passage from Wentworth v Rogers [No 5] (1986) 6 NSWLR 534, 539 quoted by Young J in his reasons for judgment. 5 The amended statement of claim is repetitious and prolix but paragraph 56 for example alleges that the first defendant, i.e. Ms Mountford, fraudulently gave "evidence on oath, contrary to the facts, that the only reason the Second Defendant was forced to resign as Managing Director of Global by the Global Board and resigned from the Board of Global and lost his rights to participate in the Global Executive Share Option Plan was because of the plaintiff's defamatory statements and for no other reason". The particulars appended to this paragraph were: "The evidence given on oath by the Second Defendant (sic) in the proceedings before Mr Justice Studdert on 24 April 1996 was fraudulent on account of the following, which contradicted the said evidence on oath by the First Defendant on the alleged instructions of the Second Defendant as a joint plaintiff together with the Third and Fourth Defendants: (i) The facts and matters set out in the articles published in the leading newspapers from 28/10/94 to 4/3/95 as set out in paragraph 31; (ii) The letter dated 13 January 1995 from Mr G W Dewar, the Chairman of the Fourth Defendant to his shareholders, since it was also released to the Australian Stock Exchange; (iii) The relevant minutes of the Global Board Meetings dealing with his termination as Managing Director and his removal from the Board of Global and the cancellation of his rights to participate in the Global Executive Share Option Plan". 6 The claimant informed the Court at the hearing that he wished to add as further particulars that on 26 September 1995 Ms Mountford had knowingly supplied false particulars in the defamation action, and that her affidavit of 23 April 1996 in the motion before Studdert J was also knowingly false. 7 Young J at pp 5-6 of his reasons referred to particulars furnished by the claimant on 24 February 1999 shortly before the hearing on 19 March which alleged that the second defendant had instructed Ms Mountford as to the existence of certain facts which instructions "were false and exaggerated to the knowledge of Mr Smith (it is not alleged that Ms Mountford knew them to be false)". The Judge concluded that any allegedly inaccurate material conveyed by Ms Mountford to the Court "was on instructions which one can assume she believed were factually correct". Mr Bhagat complained that the Judge had overlooked his letters of 6 and 8 April 1999 in which he had amended the particulars furnished on 24 February. The letter of 6 April to Messrs Cowley Hearne read: "Kindly refer to my letter dated 24 February 1999. There has been a slip on page 5 (ah). Kindly delete '(it is not alleged that Ms Mountford knew them to be false)'." 8 In his written submission by letter dated 8 April, the claimant wrote "There was a slip on page 5 paragraph (ah) of my letter dated 24 February 1999 in defamation proceedings No. 20930 of 1994. This has been corrected in my letter dated 6 April 1999 addressed to Cowley Hearne, a copy of which is enclosed". 9 The amendment to the letter of 24 February was made after the oral hearing on 19 March which would have alerted the claimant to the importance of the original statement. The claim that the original statement was a slip is implausible, and reminiscent of the evolution of the claims of fraud in Lawrance v Norreys (1890) 15 App Cas 210, described by Lord Herschell at 219-20. 10 The Judge said that the statement of claim also appeared to allege that the second defendant knew that the information he gave Ms Mountford was wrong and this might also involve the third and fourth defendants, but that the only allegation against the fifth defendant was when he found out about the matter he did nothing, but took the benefit of the judgment. 11 The Judge referred to the judgment of Master Harrison who on 29 May 1998 ordered that the statement of claim against the first defendant, Cowley Hearne, be struck out and refused leave to amend. The Master said that Studdert J did not refer in his judgment to the evidence given by Ms Mountford during her cross-examination. She added that even if the giving of that evidence did constitute a fraud "it was not material in Studdert J reaching his decision and it would not provide a reason for setting aside the judgment". She concluded that the plaintiff's allegation of fraud was based on nothing more than suspicion and she was satisfied that the claim was hopeless and should be struck out. 12 Young J agreed with the Master's reasons and added "Since the Master gave those reasons we have the additional fact that there is no allegation that Ms Mountford knew what she said to be false". The claimant criticised this statement and said that the Judge had overlooked the terms of his letter of 8 April 1999. The Judge's statement was however perfectly correct. The claimant had withdrawn his concession that Ms Mountford did not know that her evidence was false. He had not attempted to substitute an allegation that she knew her evidence was false. 13 The statement of claim contained general allegations of fraud in many places but "Fraud must be pleaded specifically and with particularity" (Banque Commerciale SA en liquidation v Akhil Holdings Ltd (1990) 169 CLR 279, 285). Moreover the "mere allegation of fraud without showing facts to support it is not a matter to which the Court will pay serious attention". See Wallingford v Mutual Society (1880) 5 App Cas 685, 697 and W Scott Fell & Co v Lloyd (1906) 4 CLR 572, 576. 14 Paragraph 8 of the statement of claim alleges that the plaintiff discovered the fraud in late June 1996 "on reading the judgment of Mr Justice Studdert dated 5 June 1996 and on comparing the transcript of the proceedings before Mr Justice Studdert on 24 April 1996 with a letter dated 13 January 1995 of Mr G W Dewar, the then Chairman of the Fourth Defendant and the articles published in the leading newspapers of Sydney from 28/10/94 to 4/3/95". None of these matters could possibly constitute new facts discovered since the hearing before Studdert J on 24 April 1996 or the delivery of his judgment on 5 June 1996. 15 On 3 November 1998 Hulme J refused to further extend the time for an appeal to a Judge in a Division from the decision of Master Harrison striking out this statement of claim against the first defendant, Cowley Hearne. An application for leave to appeal to this Court which was pending when Young J gave his judgment was heard on 27 September 1999 and dismissed, Mason P perceiving "no reason why Master Harrison erred in striking out what she correctly perceived to be a manifestly hopeless pleading in these proceedings". 16 The claimant's statement of claim was deficient in that it failed to allege fraud with any clarity or particularity. It did not plead facts which, if proved, would establish that any errors in Ms Mountford's evidence were material in securing the decision of Studdert J of 5 June 1996, and it failed to allege the discovery, since that judgment, of fresh facts, not previously known to the claimant, which, if proved, would establish a prima facie case of fraud in procuring that judgment. 17 During the hearing before Young J on 19 March 1999 the claimant had asked the Judge to disqualify himself for ostensible bias. The Judge declined to do so and his refusal to disqualify himself was raised as a ground of appeal by the claimant. At the hearing he very properly withdrew this ground of appeal and there is no need to say anything further on that topic. 18 The claimant did press a submission that he had been denied procedural fairness by Young J during the hearing on 19 March. A considerable number of procedural motions in which the claimant was concerned had been listed before the Judge that day "for directions", and the claimant said that he was taken by surprise and found himself under-prepared when the motion by the present opponents to strike out his statement of claim came on for hearing. 19 The Judge dealt with this difficulty by permitting the claimant to file supplementary written submissions before the end of April, and reserving his decision until 6 May (T 19/3/99 p 31). The claimant availed himself of this opportunity by lodging a written submission by letter dated 8 April. In our judgment any possible procedural unfairness involved in the hearing of this pleading application on 19 March was cured by this opportunity, given to the claimant, to place further written submissions before the Judge. 20 In the light of the history of these proceedings we would be pardoned for thinking that the judgment of Studdert J was a final judgment which disposed of some claim by or against the claimant. The nature of the common law proceedings, and the judgment of Studdert J, were not dealt with in any detail in the judgments of Master Harrison, Hulme J, Young J, or this Court. The judgment of Studdert J was not included in the voluminous material placed before us on this application. 21 The Court was surprised therefore when, in answer to questions from the bench, we were informed that the judgment of Studdert J was interlocutory, and involved the dismissal of a motion by the claimant that a defamation action pending against him be dismissed for abuse of process or want of prosecution. That action is still pending and awaits a trial on its merits. While, in theory, there is power to set aside an interlocutory decision for fraud, the jurisdiction is rarely, if ever, invoked where the underlying proceedings remain on foot awaiting a trial on the merits. The present proceedings constitute satellite litigation of an extreme kind and were, potentially at least, an abuse of process. The setting aside of the judgment of Studdert J of 5 June 1996 would not, in itself, lead to the dismissal of the defamation action against the claimant but would simply lead to a rehearing of the claimant's motion that the action be dismissed. The fact that Studdert J did not even refer to the supposedly false evidence given by Ms Mountford demonstrates the utter futility and hopelessness of the present proceedings. 22 The summons for leave to appeal should be dismissed with costs.

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.