[1959] HCA 8
Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361
[2000] EWCA 25
Moore v Inglis (1976) 50 ALJR 589
9 ALR 509
Moubarak by his tutor Coorey v Holt (2019) 100 NSWLR 218
[2019] NSWCA 102
Murakami v Wiryadi (2010) 268 ALR 377
Source
Original judgment source is linked above.
Catchwords
[1959] HCA 8
Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361[2000] EWCA 25
Moore v Inglis (1976) 50 ALJR 5899 ALR 509
Moubarak by his tutor Coorey v Holt (2019) 100 NSWLR 218[2019] NSWCA 102
Murakami v Wiryadi (2010) 268 ALR 377[2010] NSWCA 7
O'Shane v Harbour Radio Pty Ltd (2013) 85 NSWLR 698[2013] NSWCA 315
Photios v Photios (2019) 372 ALR 264
[2019] NSWCA 158
PPK Willoughby v Baird [2019] NSWCA 48
Qantas Airways Ltd v Rohrlach [2021] NSWCA 48
[2015] HCA 28
Toronto (City) v C.U.P.E Local 79 [2003] 3 SCR 77
SCC 63
UBS AG v Tyne (2018) 265 CLR 77
[2018] HCA 45
Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2014] AC 160
Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538
[1990] HCA 55
Walton v Gardiner (1993) 177 CLR 378
Wigmans v AMP Limited (2019) 103 NSWLR 543
[2019] NSWCA 243
Williams v Spautz (1992) 174 CLR 509
Judgment (26 paragraphs)
[1]
er (1993) 177 CLR 378
Wigmans v AMP Limited (2019) 103 NSWLR 543; [2019] NSWCA 243
Williams v Spautz (1992) 174 CLR 509; [1992] HCA 34
Texts Cited: J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia (8th ed, 2016, LexisNexis)
Category: Principal judgment
Parties: CBRE (V) Pty Limited (Applicant)
Trilogy Funds Management Limited as trustee and responsible entity of the Pacific First Mortgage Fund (Respondent)
Representation: Counsel:
J Stoljar SC / A Avery-Williams (Applicant)
J C Giles SC / B G Curtin (Respondent)
[2]
Solicitors:
MinterEllison (Applicant)
Banton Group (Respondent)
File Number(s): 2021/235883
Decision under appeal Court or tribunal: Supreme Court of New South Wales
Jurisdiction: Equity - Commercial List
Citation: [2021] NSWSC 883
Date of Decision: 21 July 2021
Before: Williams J
File Number(s): 2021/104179
[3]
[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.]
[4]
HEADNOTE
[This headnote is not to be read as part of the judgment]
In 2021 Trilogy commenced proceedings as the trustee and responsible entity of the Pacific First Mortgage Fund ("the Fund") against CBRE in relation to an allegedly negligent property valuation by CBRE of a marina, which Trilogy alleges caused loss to the Fund ("the 2021 Proceedings"). CBRE sought summary dismissal of the 2021 Proceedings on the basis that they are an abuse of process. That is because proceedings had previously been brought in 2015 against CBRE by City Pacific, a previous responsible entity of the Fund, also in connection with the valuation of the marina by CBRE, which City Pacific (by its final pleading) said caused loss to it personally ("the 2015 Proceedings"). Two weeks after the commencement of the 2021 Proceedings by Trilogy, judgment was handed down in the 2015 Proceedings awarding damages to City Pacific.
In essence CBRE contends that Trilogy should have sought to have had its claims in the 2021 Proceedings heard and determined at the same time as the 2015 Proceedings, and that there is an overlap between the issues in the two sets of proceedings of such extent that it would be oppressive to CBRE, and contrary to the public interest, for them to be pursued independently.
The primary judge rejected CBRE's argument that the 2021 Proceedings were an abuse of process and dismissed CBRE's application for summary dismissal. Her Honour found that the claims in the two sets of proceedings were "properly made by different plaintiffs … in respect of different losses arising from different transactions, incurred at different times" (at [78]).
CBRE then sought leave to appeal to this Court. The key issues on appeal were: (1) the nature of the claims made in the two sets of proceedings and the extent to which the issues in them should be regarded as the same; (2) the correctness of the primary judge's inferences as to Trilogy's knowledge of the 2015 Proceedings in and prior to July 2019; and (3) whether the primary judge had appropriate regard to s 56 of the Civil Procedure Act 2005 (NSW).
The Court granted leave but dismissed the appeal.
Per Macfarlan JA (Bell P and Basten JA agreeing):
(1) The general principles applicable to CBRE's abuse of process allegation are sufficiently identified in UBS AG v Tyne (2018) 265 CLR 77; [2018] HCA 45 (at [1], [45]): [82]. In relation to Issue (1): the 2021 Proceedings overlap with the 2015 Proceedings so far as the attack on the 2006 Valuation is concerned but the claim is one by a different party for a different loss: [85]. In relation to Issue (2): the evidence did not warrant an inference being drawn that Trilogy was aware, by at least 30 July 2019, of the 2015 Proceedings and the detail of them: [88]. The primary judge did not err in failing to draw a Jones v Dunkel inference against Trilogy in this regard: [90]. In relation to Issue (3): the primary judge was correct that s 56 of the Civil Procedure Act did not of itself resolve the issue raised by CBRE's application for summary dismissal: [93].
(2) In light particularly of its duties as a representative of the Fund, it was not unreasonable for Trilogy to act cautiously before commencing proceedings: [99]. If CBRE wished to have all of the issues dealt with by a court at the same time, it could have taken relevant steps: [100]. When these circumstances are considered, and there is an absence of any decisive overriding consideration of public interest, the conclusion at which the primary judge arrived must be regarded as correct: [102].
Additional observations per Bell P (Basten JA agreeing):
(3) In relation to the nature of the appellate review: it might be doubted that the primary judge's decision was appropriately characterised as involving the exercise of discretion on a matter of practice and procedure (though it was undoubtedly interlocutory): [6], [10]. In the current case, nothing turned upon this because the nature of the arguments advanced warranted the grant of leave to appeal and her Honour's reasons were clearly correct: [9].
Murakami v Wiryadi (2010) 268 ALR 377; [2010] NSWCA 7; Wigmans v AMP Limited (2019) 103 NSWLR 543; [2019] NSWCA 243, referred to.
(4) Where a plaintiff (the second plaintiff) commences a proceeding against a defendant who had already been sued by a party unrelated to the second plaintiff on legally or factually overlapping claims, in order to constitute an abuse of process the second plaintiff's conduct must be so unreasonable or the continuation of the proceedings would be so unjustifiably oppressive to a party as to bring the administration of justice into disrepute: [31].
Tomlinson v Ramsey Food Processing Pty Limited (2015) 256 CLR 507; [2015] HCA 28; UBS AG v Tyne (2018) 265 CLR 77; [2018] HCA 45, referred to.
[5]
Judgment
BELL P: In these proceedings, leave to appeal should be granted but the appeal should be dismissed with costs. The primary judge's decision was plainly correct and, it might be added, delivered with admirable despatch.
In what follows, I wish to add some observations to the reasons of Macfarlan JA with which I agree. His Honour has set out with great clarity the not uncomplicated background to the application for a permanent stay of proceedings on the grounds of abuse of process and the primary judge's reasoning on that question.
My analysis presupposes familiarity with Macfarlan JA's description of that background and the circumstances in which Trilogy Funds Management Ltd (Trilogy) became aware of the 2015 Proceedings brought by City Pacific Ltd (City Pacific) against CBRE (V) Pty Ltd (CBRE) in the months prior to the commencement of their hearing before Walton J in early September 2019.
[6]
Nature of the appellate review
Mr Stoljar SC, who appeared for CBRE, accepted that the nature of the primary judge's decision dismissing CBRE's application for a permanent stay of proceedings on the grounds of abuse of process was an interlocutory decision involving an exercise of discretion on a question of practice and procedure.
Decisions having this character present a high hurdle for applicants for leave to appeal. In PPK Willoughby v Baird [2019] NSWCA 48 at [5], Simpson AJA and I observed that:
"Discretionary decisions, whether in the context of substantive or procedural relief, also engage the strictures against over-ready appellate interference and the correlative need for 'added restraint' associated with House v R (1936) 55 CLR 499 with the consequence that a 'heavy burden' lies on an applicant seeking leave to appeal from a discretionary judgment on a question of practice or procedure: see, for example, Oswal v Burrup Fertilisers Pty Ltd (recs and mgrs apptd) [2011] FCAFC 117 at [8] and [11]; see also Warragamba Winery Pty Ltd v State of New South Wales [2010] NSWCA 174 at [6] where the task of an applicant seeking leave to challenge such a decision was described as a 'difficult' one; see also Cicek v The Estate of the Late Mark Solomon [2014] NSWCA 278 at [69]-[70]; Dank v Cronulla Sutherland District Rugby League Football Club Ltd [2014] NSWCA 288 at [73]-[75]; Treadtel International Pty Ltd v Cocco [2016] NSWCA 360; 117 ACSR 176 at [29]; Mei Zhang v Ye Cheng [2018] NSWCA 299 at [12]."
Whilst the primary judge's decision was undoubtedly interlocutory in nature and thus required leave to appeal, it might be doubted that it was appropriately characterised as involving the exercise of discretion on a matter of practice and procedure. Her Honour was asked to find that Trilogy's conduct amounted to an abuse of process. That did not involve questions of discretion and the essence of the draft Notice of Appeal is that her Honour erred in not finding that Trilogy's conduct was an abuse of process.
In Murakami v Wiryadi (2010) 268 ALR 377; [2010] NSWCA 7, Spigelman CJ made a similar point in relation to the Voth test for a stay of proceedings on "clearly inappropriate forum" grounds: see Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538; [1990] HCA 55. What the then Chief Justice said at [33]-[34] was that:
"33 In my opinion, the application of the "clearly inappropriate forum" test raises a real issue in this respect. An appellate court is in as good a position as a trial judge to formulate the judgment for which the Voth test provides. The making of an order for a permanent stay can be said to involve the exercise of a discretion. (See, eg, Oceanic Sun Lines supra at 247-248; Garsec Pty Ltd v His Majesty the Sultan of Brunei [2008] NSWCA 211; (2008) 250 ALR 682 at [93]-[94]; Bank of America v Bank of New York [1995] ATPR 40,334 (41-390) at 40,336; McGregor v Potts [2005] NSWSC 1098; (2005) 68 NSWLR 109 at [35].) However, the word 'discretion' is often adopted in circumstances where the word 'judgment' would be more appropriate.
34 It is not necessary in every case that requires a process of balancing conflicting considerations to conclude that what is involved is a discretion in the House v The King sense. (See, eg, Perpetual Trustee Co Ltd v Khoshaba [2006] NSWCA 41; 14 BPR 26,639 at [35] and the authorities referred to therein; New South Wales Crime Commission v Vu [2009] NSWCA 349 at [7] and the authorities referred to therein; Director of Public Prosecutions v El Mawas [2006] NSWCA 154; (2006) 66 NSWLR 93 at [64]-[70]; Dwyer v Calco Timbers Pty Ltd [2008] HCA 13; (2008) 234 CLR 124 at [37]-[40].)"
[7]
Abuse of process
CBRE submitted that it was in substance being vexed by having to defend the 2006 Valuation in two sets of proceedings in circumstances where it would have been more efficient, both from its private point of view and in the public interest, that there only be one set of proceedings relating to the valuation. CBRE called in aid s 56 of the Civil Procedure Act 2005 (NSW) in this regard.
In essence, CBRE's claim was that Trilogy, being aware of the 2015 Proceedings, should have sought to be joined in those proceedings; inferentially, had not done so for "strategic reasons"; and now should be permanently restrained from bringing its own proceedings which had at their heart the same complaint that had been made in the earlier proceedings, viz. that the 2006 Valuation had been negligently prepared and/or was misleading or deceptive.
CBRE formulated its argument with close reference to the reasoning of the majority in UBS AG v Tyne (2018) 265 CLR 77; [2018] HCA 45 (UBS). It contended that, notwithstanding that a heavy onus lies on a party seeking a permanent stay of proceedings on grounds of abuse of process (see Williams v Spautz (1992) 174 CLR 509 at 529; [1992] HCA 34), it was incumbent on Trilogy to supply an explanation to the Court as to why it did not seek to be joined in some way to the 2015 Proceedings brought by City Pacific. In the absence of such an explanation, CBRE submitted that adverse inferences should be drawn against Trilogy to the effect that it deliberately held back and chose not to seek to join the 2015 Proceedings and that this "strategic" forensic conduct should preclude it from seeking relief against CBRE in the proceedings which it commenced in 2021 and in respect of which CBRE has sought a permanent stay.
As matters transpired, Walton J delivered his judgment in relation to the 2015 Proceedings on 30 April 2021, some two weeks after the commencement by Trilogy of the present proceedings: City Pacific (in liq) v CBRE (V) Pty Ltd [2021] NSWSC 456.
[8]
Four observations
Before turning to consider UBS, and CBRE's argument based on it, in more detail, four matters should be observed in addition to the observations by the primary judge and Macfarlan JA (at [95]-[97] below) as to Trilogy's special position and obligations as a responsible entity under s 601FC of the Corporations Act 2001 (Cth), matters which bore upon its ability to take the procedural course to be joined in the 2015 Proceedings with the speed and in the manner which CBRE's abuse of process arguments would have required.
First, implicit in CBRE's argument is that Trilogy could and would have been joined in the 2015 Proceedings in which City Pacific was the plaintiff pursuant to r 6.19 of the Uniform Civil Procedure Rules 2005 (NSW) had it applied to do so once it had become apprised of their existence, which the evidence suggested was not earlier than July 2019. It is by no means clear that this would have occurred.
Whether or not City Pacific and CBRE, for that matter, would have agreed or been amenable to that course, especially if to permit it to occur would have required the vacation of the early September 2019 hearing dates for the 2015 Proceedings is far from self-evident. It would ultimately have been a matter for the Common Law Division and Walton J, as the judge to whom the 2015 Proceedings had been assigned. Plainly enough, four years had passed since those proceedings had been commenced and it may be doubted whether a further delay would have been acceptable either to the parties and/or the Court in order to accommodate Trilogy's case and claim.
Secondly, it was equally open to CBRE, had it been concerned as to the potentiality of a claim being brought against it by Trilogy as the successor of the responsible entity of the Fund to which CBRE had furnished its 2006 Valuation, to bring a third party cross-claim in the 2015 Proceedings seeking a negative declaration or a declaration of non-liability in respect of that valuation. In Messier-Dowty Ltd v Sabena SA [2000] 1 WLR 2040; [2000] EWCA 25 at [36], Lord Woolf MR observed that "[t]he use of negative declarations domestically has expanded over recent years", that "[i]n the appropriate cases their use can be valuable and constructive" and (at [41]) that:
"… where a negative declaration would help to ensure that the aims of justice are achieved the courts should not be reluctant to grant such declarations. They can and do assist in achieving justice."
See also Qantas Airways Ltd v Rohrlach [2021] NSWCA 48; (2021) 304 IR 218 at [46]; Challenger Group Holdings Ltd v Concept Equity Pty Ltd [2005] NSWSC 374 at [42]-[43]; McKinnon v Adams [2003] VSC 116 at [68].
[9]
UBS and Tomlinson
It is against this background that attention must be turned to UBS and the High Court's earlier decision in Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507; [2015] HCA 28 (Tomlinson). Reliance was placed by CBRE on the following observation of the majority in that case at [26]:
"Accordingly, it has been recognised that making a claim or raising an issue which was made or raised and determined in an earlier proceeding, or which ought reasonably to have been made or raised for determination in that earlier proceeding, can constitute an abuse of process even where the earlier proceeding might not have given rise to an estoppel. Similarly, it has been recognised that making such a claim or raising such an issue can constitute an abuse of process where the party seeking to make the claim or to raise the issue in the later proceeding was neither a party to that earlier proceeding, nor the privy of a party to that earlier proceeding, and therefore could not be precluded by an estoppel." (footnotes omitted; emphasis added)
The reason why the second sentence of [26] of Tomlinson was of such significance for CBRE's argument was that Trilogy was neither related to nor a "privy" of City Pacific. But that sentence is informed by the authority cited in support of it.
That authority was O'Shane v Harbour Radio Pty Ltd (2013) 85 NSWLR 698; [2013] NSWCA 315 at [99]-[111] (O'Shane), "and the cases there cited", with the majority in Tomlinson also noting to similar effect Reichel and Virgin Atlantic Airways Ltd v Zodiac Seats UK Ltd [2014] AC 160 at [25], explaining Johnson v Gore Wood & Co [2002] 2 AC 1.
Of the cases referred to in O'Shane, the decision of the Supreme Court of Canada in Toronto (City) v C.U.P.E Local 79 [2003] 3 SCR 77; SCC 63 (Toronto City) is the only one which, on my review, lends direct support to the apparent breadth of the second sentence of [26] of Tomlinson. In Toronto City at [47], Arbour J had said that there is "no reason to constrain the doctrine of abuse of process only to those cases where the plaintiff has initiated the relitigation" of a matter already subject to a judicial finding. Viewed in isolation, that is perhaps a surprisingly broad statement. But it should not be viewed in isolation. The reference to "relitigation" is significant and her Ladyship went on immediately to say that "[t]he designation of the parties to the second litigation may mask the reality of the situation." The result in UBS was also informed by robust cut-through reasoning, focussed on the substance rather than the form of the dispute and the manner in which it was being sought to be reagitated.
[10]
Section 56 of the Civil Procedure Act and abuse of process
Section 56(3) of the Civil Procedure Act imposes important obligations on parties to proceedings in the Supreme Court. Those obligations are extended by s 56(4) to legal practitioners and any person with a relevant interest in the proceedings. By s 56(6), a person will have a relevant interest in civil proceedings if that person:
"(a) provides financial assistance or other assistance to any party to the proceedings, and
(b) exercises any direct or indirect control, or any influence, over the conduct of the proceedings or the conduct of a party in respect of the proceedings."
However, the very important obligations imposed on parties, legal practitioners and persons with a relevant interest in proceedings pursuant to s 56 of the Civil Procedure Act do not apply prior to the commencement of proceedings. Accordingly, Trilogy was not subject to a duty in mid-2019, imposed by s 56(1) of the Civil Procedure Act, "to facilitate the just, quick and cheap resolution of the real issues in the proceedings" as it was simply not a party to the 2015 Proceedings brought by City Pacific. The present case was readily distinguishable from UBS where the plurality said at [55]:
"Mr Tyne perceived a forensic advantage to the Tyne-related parties in holding back the Trust's claim. This was a decision that, were Telesto's claim to be stayed, would lead to duplication of resources and increased cost, and would delay the resolution of the dispute between the Tyne-related parties and UBS. Hiving off the Trust's claim, with a view to bringing it in another court after the determination of the SCNSW proceedings, was the antithesis of the discharge of the duty imposed on parties to civil litigation in the Supreme Court of New South Wales and in the Federal Court. That duty is to conduct the proceedings in a way that is consistent with the overriding/overarching purpose." (footnotes omitted)
Mr Stoljar, for CBRE, ultimately accepted that s 56 did not operate to impose any obligations on Trilogy prior to the commencement of its own proceedings in April 2021.
UBS was a very different case from the present as, in that case, Mr Tyne was the "controlling mind and will" of each of the relevant plaintiffs. The same may not be said in respect of Trilogy and City Pacific. The party whose proceedings were stayed as an abuse of process in UBS had also been party to the first set of proceedings but its claim had been "hived off". True it is that in the 2015 Proceedings in the present case, City Pacific had purported to make a claim in its capacity as responsible entity of the Fund but withdrew such a claim, seemingly upon CBRE pointing out that City Pacific was not entitled to pursue that claim as it was no longer the responsible entity. That was not done for tactical reasons but because it was the appropriate thing to do.
[11]
The events of 2006 and 2007
On 25 May 2006 City Pacific engaged CBRE to provide a valuation of the marina and associated properties owned by Marina Cove Pty Ltd ("Marina Cove"), of which City Pacific was the ultimate parent company.
On 1 June 2006 Mr Nicodimou of CBRE provided an indicative valuation of the properties ("the Indicative Valuation") and on 30 June 2006 CBRE provided the 2006 Valuation, valuing the properties at $34.8 million. Also on 30 June 2006 Marina Cove sold the properties to two companies in the Indigo Group for $30.473 million, the purchasers being financed by a loan of $27.84 million from the Fund and vendor finance (from Marina Cove) of $6.88 million. The former finance was provided by means of City Pacific, as responsible entity, causing the custodian of the Fund, the Public Trustee of Queensland ("PTQ"), to apply Fund assets that it held to make the loan.
After receiving a further valuation from the Indigo Group, also conducted by CBRE, dated 30 January 2007 ("the Amended Indigo Valuation"), City Pacific (in its own right, and not on behalf of the Fund) obtained a call option to purchase (or nominate a person to purchase) the marina from the Indigo Group for the sum of $30 million. City Pacific paid a call option fee of $2.1 million and on 8 October 2007 City Pacific's nominee Martha Cove Marina Pty Ltd ("Martha Cove", a wholly owned subsidiary of City Pacific) entered into a purchase contract with the relevant Indigo Group company. City Pacific later made two further payments (through Martha Cove) to bring its total payments to $11.1 million (the "Martha Cove Property Monies").
The contract was not completed and in 2009 liquidators were appointed to City Pacific and Martha Cove, and receivers and managers were appointed to the relevant Indigo Group companies ("IHPO" and "ILO"). Trilogy replaced City Pacific as responsible entity of the Fund on 7 July 2009 and in May 2015 ILO sold the marina to a third party for about $12.95 million.
[12]
The original Statement of Claim
In this Statement of Claim, City Pacific and Martha Cove, as plaintiffs, alleged against CBRE and Mr Nicodimou as defendants that when the latter submitted the 2006 Valuation to City Pacific, they knew that the properties valued were worth substantially less than the values stated, knew that the valuation was not an honest and reliable one and knew that the valuation would assist Mr Matt Gillam and Mr Stephen McCormick and other officers of City Pacific to dishonestly and fraudulently breach their duties to the plaintiffs in connection with the plaintiffs lending money to the Indigo Group to purchase the marina and associated properties. The plaintiffs thus alleged that the defendants knowingly assisted in dishonest and fraudulent breaches of fiduciary duties that the officers owed to the plaintiffs.
The plaintiffs also alleged that the defendants made representations as to the honesty and reliability of the valuation that were misleading or deceptive and in contravention of s 52 of the Trade Practices Act 1974 (Cth), s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) and s 42 of the Fair Trading Act 1987 (NSW).
Under the heading "Conduct caused by breaches and contraventions", the plaintiffs recited the payment of the Martha Cove Property Monies totalling $11.1 million referred to in [53] above, that the marina and associated properties had not been transferred back by the Indigo Group to either of the plaintiffs, that none of the $11.1 million had been repaid and that the loan of $27.84 million referred to in [52] had not been repaid.
The loss suffered as a result of the defendants' conduct was pleaded as follows:
1. City Pacific lost the "[p]rofit that would have been earned by lending the money advanced to the Indigo Group to a different borrower". (It was not stated whether that profit would have been earned by City Pacific in its personal capacity or on behalf of the Fund and there was no claim for the loss of any part of the $27.84 million that the Fund lent to Indigo Group.)
2. Martha Cove (and/or City Pacific) lost the $11.1 million Martha Cove Property Monies.
[13]
The Amended Statement of Claim filed 11 December 2017
By this Amended Statement of Claim, claims against the defendants for breaches of duties of care were added and the defendants' conduct of which complaint was made was extended to the Indicative Valuation and the Amended Indigo Valuation. Otherwise, the allegations, so far as relevant for present purposes, remained substantially unchanged.
[14]
The Further Amended Statement of Claim of 4 September 2019
City Pacific and Martha Cove obtained leave from Walton J on 4 September 2019 to file a Further Amended Statement of Claim. Relevantly, this Further Amended Statement of Claim removed from the Amended Statement of Claim:
1. the knowing assistance claims;
2. the allegations of reliance on the Indicative Valuation;
3. the allegation that City Pacific relied on the 2006 Valuation in causing PTQ to lend $27.84 million to the Indigo Group;
4. the allegation that City Pacific's loss included the "[p]rofits that would have been earned by lending the money advanced to the Indigo Group to a different borrower".
The Defence filed on 4 September 2019 pleaded, as had earlier filed Defences, that the plaintiffs' claims were statute-barred. Unlike the earlier Defences it however also pleaded that the first plaintiff's (City Pacific's) claims were not maintainable in light of s 601FS of the Corporations Act 2001 (Cth). That section relevantly provides that, subject to exceptions, the rights, obligations and liabilities of a responsible entity in relation to a registered Managed Investment Scheme become those of the new responsible entity if the responsible entity changes.
[15]
Communications in July and August 2019
In a without prejudice letter dated 9 July 2019 tendered before Williams J, the plaintiffs' solicitors in the 2015 Proceedings (Squire Patton Boggs, "SPB", with Ms Amanda Banton as responsible partner) said to the defendants' solicitor (Mr Chris Finn of Kennedys) that, by reason of s 601FS of the Corporations Act, the knowing assistance claims pleaded in the Amended Statement of Claim in the 2015 Proceedings "may have vested in Trilogy upon its commencement as the responsible entity of" the Fund. They said that for the purposes of settlement "no amount of money is [therefore] sought [by way of settlement] for the alleged loss in relation to this claim".
In an open letter of 26 July 2019 to SPB, Kennedys asserted that all of the claims made by City Pacific in the Amended Statement of Claim became rights of Trilogy on its appointment in 2009 as the responsible entity of the Fund.
On 30 July 2019 Ms Banton sent an email to Mr Rodger Bacon of Trilogy in the following terms:
"We have received a letter from CBRE solicitors [maintaining] that part of the claim vested with Trilogy.
Can you confirm if you wish to instruct us to write to them and say you are considering joinder or commencing fresh proceedings and would welcome a mediation or settlement conference."
On 30 July 2019 Ms Banton sent an email to Mr Philip Ryan of Trilogy after Mr Ryan queried the terms of Ms Banton's earlier email (which contained a mistake in its language). In the further email Ms Banton said:
"They have written and said part of the claim has vested with trilogy under the corporations act with the transfer of RE.
So we have to elect really whether to drop that claim or not and identify if you wish to pursue it."
Mr Ryan responded on Wednesday 31 July 2019 by saying that Mr Bacon was absent from the office until the following Tuesday. Ms Banton wrote back saying:
"Are you content for me to tell cbre lawyers that we are waiting to hear from you regarding joinder or any involvement and in the mean time you are happy to attend a mediation."
Ms Banton then sent a letter to Mr Finn on 5 August 2019 stating, in relation to Mr Finn's contention that the knowing assistance claim had vested in Trilogy, "we are taking instructions from Trilogy about their joinder to the proceedings. Unfortunately, the relevant decision maker has been and is away until early this week. Once we hear from Trilogy we will revert to you about this part of the claim".
[16]
The 2021 Proceedings
After the communications in 2019 above recounted, neither City Pacific nor Trilogy sought Trilogy's joinder to the 2015 Proceedings which, as noted above, proceeded to hearing and judgment. Apart from evidence of a retainer letter dated 11 November 2019 from SPB to Trilogy, there was no further evidence concerning Trilogy's position until that of its commencement of the 2021 Proceedings on 15 April 2021. The retainer letter was directed to Trilogy as the responsible entity of the Fund and relevantly stated:
"You have asked us to act for Trilogy in relation to their claim against CBRE (V) Pty Ltd and Mr Christopher Nicodimou (CBRE). You have asked us to undertake preliminary investigations into Trilogy's claim, including engaging a financial expert to determine the amount of Trilogy's claim, and to issue a letter of demand to CBRE prior to Trilogy determining whether it will commence proceedings.
…
Trilogy has not entered into any funding agreement for the costs relating with the work referred to … above. Please let us know if you are interested in entering into a funding agreement."
Trilogy's claims against CBRE as stated in its Commercial List Statement ("CLS") attached to its summons commencing the 2021 Proceedings are to the following effect. It did not join Mr Nicodimou as a defendant.
1. Trilogy states that its claims are made as trustee and responsible entity of the Fund.
2. Trilogy alleges that CBRE owed duties of care to City Pacific in relation to the provision to it of the 2006 Valuation and that CBRE was negligent, and therefore in breach of those duties, in relation to the preparation of the valuation.
3. Trilogy alleges that by providing the 2006 Valuation, CBRE made various representations ("the Valuation Representations") as to its soundness which were misleading or deceptive.
4. It alleges that, in reliance on the 2006 Valuation and the Valuation Representations, City Pacific caused PTQ as custodian of the Fund to lend $27.84 million to companies in the Indigo Group, ILO and IHPO, to finance their purchase of the marina and associated properties (the "Indigo Loan"). [1]
5. Trilogy alleges that a substantial portion of the Indigo Loan remains unpaid and that ILO and IHPO are incapable of repaying the amount owing.
6. Under the heading "Causation", Trilogy alleges that CBRE's negligence and misleading or deceptive conduct caused the Fund to make the Indigo Loan and, under the heading "Loss and damage", refers to the making of the Indigo Loan and the irrecoverability of its balance outstanding.
7. Trilogy alleges that upon its appointment as responsible entity of the Fund in 2009 the right to bring the claims the subject of the proceedings on behalf of the Fund vested in it.
[17]
The judgment of Walton J
By his 217 page judgment of 30 April 2021, Walton J found that the 2006 Valuation was negligently prepared and that CBRE had engaged in misleading or deceptive conduct in relation to it. His Honour found that the plaintiffs had relied on it in making the payments totalling $11.1 million referred to in [53] above. He found that City Pacific was therefore entitled to judgment for that amount, although subject to a 60% deduction in respect of the third of the payments (of $7 million), by reason of City Pacific's contributory negligence. His Honour found that the claims of Martha Cove failed because they were time-barred.
[18]
THE JUDGMENT OF WILLIAMS J
Williams J summarised as follows the bases on which CBRE contended that an order should be made dismissing Trilogy's proceedings as an abuse of process:
"(1) there is an extensive overlap between the allegations pleaded by Trilogy in these proceedings and matters determined in proceedings commenced by City Pacific and another plaintiff against CBRE in 2015 and determined by this Court on 30 April 2021 (the 2015 proceedings) and it is oppressive for CBRE to be vexed twice with the same allegations;
(2) whilst Trilogy was not a party to the earlier proceedings, it had notice of the allegations and claims made by City Pacific and elected not to apply to be joined to the earlier proceedings to prosecute within those proceedings the claims that are now pleaded in the present proceedings; and
(3) because of the extensive overlap between the issues pleaded in these proceedings and the matters determined in the earlier proceedings, there is a risk that any judgment in these proceedings will be inconsistent with the judgment of the Court in the earlier proceedings."
In respect of the first of these bases, her Honour rejected CBRE's submission that the same claims were made in both sets of proceedings, saying that instead "[t]hey are claims properly made by different plaintiffs, one suing for its own benefit and the other suing for the benefit of Scheme members, in respect of different losses arising from different transactions, incurred at different times".
In relation to the second basis, her Honour held that the evidence did not support the inference for which CBRE contended that in July or August 2019 Trilogy took a "calculated decision" not to either apply to be joined to the 2015 Proceedings or to commence separate proceedings and that this involved "forensic manoeuvring for tactical advantage".
Her Honour continued:
"[81] Whilst the tone of the email correspondence between Ms Banton and the Trilogy representatives of 30 July 2019 suggests that there may have been some prior communication between them about Trilogy being the proper plaintiff in respect of some of the claims pleaded in the 2015 proceedings, there is no evidence that Trilogy had engaged any legal representative to act for it in relation to any such claims as at July - August 2019. Ms Banton's unchallenged evidence is that Trilogy first engaged Squire Patton Boggs to act for it in relation to such claims in November 2019. The letter of retainer dated 11 November 2019 records that Squire Patton Boggs was engaged in the first instance to undertake preliminary investigations in relation Trilogy's claim against CBRE and Mr Nicodimou." (Emphasis in original.)
[19]
RELEVANT LEGAL PRINCIPLES
The general principles applicable to CBRE's abuse of process allegation are sufficiently identified by reference to the following passages from the judgment of Kiefel CJ, Bell and Keane JJ in UBS AG v Tyne (2018) 265 CLR 77; [2018] HCA 45:
"[1] … The varied circumstances in which the use of the court's processes will amount to an abuse, notwithstanding that the use is consistent with the literal application of its rules, do not lend themselves to exhaustive statement. Either of two conditions enlivens the power: where the use of the court's procedures occasions unjustifiable oppression to a party, or where the use serves to bring the administration of justice into disrepute. [Citations omitted.]
…
[45] The courts must be astute to protect litigants and the system of justice itself against abuse of process. It is to hark back to a time before this Court's decisions in Aon [Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175; [2009] HCA 27] and Tomlinson [Tomlinson v Ramsey Food Processing Pty Limited (2015) 256 CLR 507; [2015] HCA 28] and the enactment of s 37M of the FCA [Federal Court of Australia Act 1976 (Cth)] to expect that the courts will indulge parties who engage in tactical manoeuvring that impedes the 'just, quick and efficient' resolution of litigation. … Given that this is the central concern, the circumstance that the abuse is effected by the use of multiple entities orchestrated by a single mind and will is no reason to tolerate it."
[20]
DETERMINATION OF THE APPEAL
CBRE's challenge to the primary judgment focussed on three issues as follows:
1. The nature of the claims made in the 2015 and 2021 Proceedings and the extent to which the issues in them should be regarded as the same.
2. The correctness of the primary judge's inferences as to Trilogy's knowledge of the 2015 Proceedings in and prior to July 2019.
3. Whether the primary judge had appropriate regard to s 56 of the Civil Procedure Act 2005 (NSW).
I address these issues seriatim.
[21]
Comparison of the issues in the 2015 and 2021 Proceedings
In the 2015 Proceedings (see [55]-[61] and [74] above), as finally pleaded, City Pacific and Martha Cove claimed damages in respect of the $11.1 million Martha Cove Property Monies which City Pacific (through Martha Cove) had paid to the Indigo Group as part of its unsuccessful attempt to repurchase from that Group the marina sold by Marina Cove (City Pacific's subsidiary) to the Indigo Group the previous year. Although this claim depended in part on an attack on the 2006 Valuation, it depended also on an attack on the Amended Indigo Valuation of 2007 which had been supplied a year later and after the time of the Indigo Group's purchase of the properties from Marina Cove. The claims were made by City Pacific and Martha Cove in their personal capacities and not, in the case of City Pacific, as a representative of the Fund. The alleged loss was not one suffered by the Fund.
In contrast, Trilogy's claim in the 2021 Proceedings is a representative claim on behalf of the Fund in respect of a different loss, namely its inability to recover a substantial part of the $27.84 million lent by the Fund to the Indigo Group on 30 June 2006. There is an overlap with the 2015 Proceedings so far as the attack on the 2006 Valuation is concerned but the claim is one by a different party for a different loss.
The picture is not altered when City Pacific's further claim in the 2015 Proceedings is taken into account. That claim (which was in fact abandoned by the Further Amended Statement of Claim of 4 September 2019) was for the "[p]rofits that would have been earned by lending the money advanced to the Indigo Group to a different borrower". On its face, this claim was capable of relating to the loan of $27.84 million from the Fund to the Indigo Group. The claim did not however extend to the loss allegedly suffered by the Fund as a result of the irrecoverability of the loan, but only to the loss of profit described. That seems to have been a profit that City Pacific alleged it lost in its personal capacity. Its seeming lack of merit was reflected in its later abandonment.
CBRE submitted that the primary judge failed to recognise the substantial overlap between the issues in the two sets of proceedings. Her Honour however undertook a detailed examination of the issues arising in the proceedings and in doing so recognised that many of the same issues arose in both. Her conclusion that, despite this, the proceedings were in respect of "different losses arising from different transactions, incurred at different times" was correct. As I have described above, City Pacific in essence sought to recover its own losses arising from the 2007 repurchase of the subject properties from the Indigo Group whilst in the 2021 Proceedings Trilogy seeks to recover the Fund's loss incurred as a result of the irrecoverability of the full $27.84 million loan made by the Fund in 2006 to assist in the Indigo Group's purchase of the properties from Marina Cove. That City Pacific made, until its abandonment in early September 2019, another claim seemingly on its own behalf but related to the 2006 loan does not render this overall characterisation deficient.
[22]
Trilogy's knowledge in July 2019
CBRE submitted that the primary judge erred "in failing to draw an inference that the respondent was aware, by at least 30 July 2019, of the City Pacific Proceedings, including the detail of those proceedings and the allegations made therein". The evidence did not warrant such an inference being drawn but in any event, even if the asserted inference were drawn, it would not seem to be of particular significance to CBRE because it would not establish that Trilogy was aware of the detail of the 2015 Proceedings for any significant period prior to 30 July 2019 and it is undoubted that Trilogy came to acquire at least some knowledge of those proceedings on or soon after 30 July 2019.
The primary judge was well justified in attaching significance to the reference in SPB's retainer letter of 11 November 2019 to SPB's engagement at that time to undertake "preliminary investigations" in the future (see [71] above), suggesting that substantial investigations at least had not occurred by then. Moreover Trilogy's absence of production of any relevant documents dated prior to 30 July 2019 in answer to a Notice to Produce issued by CBRE is supportive of the conclusion which her Honour reached.
Central to CBRE's challenge under this heading was its contention that her Honour erred in failing to draw a Jones v Dunkel inference (see Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 at [63] and [64]) against Trilogy because of its failure to call witnesses to explain when Trilogy first engaged lawyers and, if so, when and whether it had made a decision not to be joined to the 2015 Proceedings. That submission should however be rejected because any inference drawn pursuant to those principles would not be that any evidence Trilogy could produce would be adverse to its interests, but only that any such evidence would not have assisted it ([64]). In circumstances where, for the reasons I have given, the evidence before the Court does not suggest that Trilogy had any detailed knowledge of the 2015 Proceedings before 30 July 2019, there was no need for it to call further evidence to rebut any contrary inference.
[23]
Section 56 of the Civil Procedure Act
CBRE submitted that the primary judge erred in stating:
"[87] It is also relevant to note that, as Trilogy submitted and as senior counsel for CBRE fairly accepted, Trilogy had no duty or obligation under s 56 of the Civil Procedure Act in relation to the 2015 proceedings because it was not a party to those proceedings and did not have a relevant interest in those proceedings: see s 56(3), (4) and (6)."
It asserted that these observations involved a misapplication of s 56 because her Honour failed to address the question which s 56 required regard to be had of "how best to give effect to [the] overriding purpose [stated in s 56] in considering how to resolve the issues raised by the Motion".
What her Honour said about the terms of s 56 was however correct. It indicated that s 56 did not of itself resolve the issue raised by CBRE's application for summary dismissal. Her Honour correctly reflected the role that s 56 had to play, as indicated by UBS at [34]-[46], by stating clearly in her judgment:
"[16] The determination of whether the bringing or continuance of proceedings is an abuse of process of the court, having regard to all of the facts of the particular case, must take into account all of the procedural law administered by the court: UBS v Tyne at [34] per Kiefel CJ, Bell and Keane JJ. In this case, that law includes ss 56-58 of the Civil Procedure Act 2005 (NSW)."
[24]
Conclusion - whether an abuse of process
Determining whether the 2021 Proceedings are an abuse of process involves at the outset consideration of the reasonableness of Trilogy's conduct in the circumstances proved by the evidence.
As the responsible entity of the Fund, Trilogy owes duties under s 601FC of the Corporations Act, including to exercise its powers and carry out its duties with "the degree of care and diligence that a reasonable person would exercise if they were in the responsible entity's position". Moreover, Trilogy is a trustee for scheme members of any assets of the Fund that it holds (s 601FC(2)). As a trustee, it can, and should in many circumstances, seek judicial advice under s 63 of the Trustee Act 1925 (NSW) before taking important steps, such as commencing major litigation (see for example J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia (8th ed, 2016, LexisNexis) at [21-34] and the cases cited therein, including in particular Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42).
Once apprised in or after July 2019 of the detail of City Pacific's 2015 Proceedings, Trilogy would have been aware that those proceedings had been on foot for some years and were fixed for a substantial hearing in the Common Law Division commencing on 2 September 2019, at most 4-5 weeks hence, depending on when Trilogy acquired its knowledge. It would also have become aware that the proceedings involved allegations of dishonest conduct by an employee of CBRE and by officers of its predecessor responsible entity of the Fund, City Pacific. Furthermore, it would also have been aware that whilst there would likely be overlap in issues with any proceedings Trilogy might bring on behalf of the Fund, City Pacific's claim was essentially for its own loss and not that of the Fund. Knowledge of the allegations of dishonesty on the part of officers and employees on both sides of the transaction between City Pacific and CBRE would have indicated that proof of the Fund's reliance on CBRE's 2006 Valuation would not be straightforward. Trilogy would need to consider whether proof of the Fund's loss might in these circumstances involve it needing to take the serious step of making allegations of dishonesty similar to those made by City Pacific.
[25]
ORDERS
For the reasons I have given, I propose the following orders:
1. Grant leave to appeal.
2. Dismiss the appeal.
3. Order the appellant to pay the respondent's costs of the appeal, including the application for leave to appeal.
[26]
Endnote
Under s 601FB of the Corporations Act, the responsible entity has power to appoint an agent or engage a person to do anything that it is authorised to do in connection with the scheme, including holding scheme property. The ASIC Class Order [CO 13/1409] defines (for certain provisions) "custodian" to mean a person engaged by the responsible entity to hold scheme property or assets on behalf of the responsible entity.
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Decision last updated: 14 December 2021
An application for a stay of proceedings on the grounds of abuse of process entails rather more than a matter of "practice and procedure" as that expression is used in authorities such as In the Will of Gilbert (1946) 46 SR (NSW) 318 and Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc (1981) 148 CLR 170; [1981] HCA 39; see also Photios v Photios (2019) 372 ALR 264; [2019] NSWCA 158 at [37]. In Wigmans v AMP Limited (2019) 103 NSWLR 543; [2019] NSWCA 243, I observed at [34]-[35] that:
"34 It may be that the decision to grant a permanent stay of proceedings does not sit comfortably within the dichotomy Sir Frederick Jordan drew in Re Will of F B Gilbert (dec) (1946) 46 SR (NSW) 318 at 323; (1946) 63 WN (NSW) 176, namely between 'an exercise of discretion on a point of practice or procedure', on the one hand, and 'an exercise of discretion which determines substantive rights', on the other hand.
35 Plainly the primary judge's decision did not determine any substantive rights; it was also rather different, however, in its effect from a decision to award security for costs of the kind under consideration in, for example, PPK Willoughby Pty Ltd v Baird [2019] NSWCA 48 (PPK Willoughby), or a decision in relation to the amendment of a pleading or the resolution of a dispute over categories of discovery. And, as Spigelman CJ pointed out in Murakami at [33], although many decisions, including in the High Court and in this Court, have characterised the grant of a stay of proceedings on clearly inappropriate forum grounds as involving the exercise of a discretion, it may in truth be that the word 'judgment' is more appropriate than 'discretion' cf. the evaluative judgment required by the first 'jurisdictional' stage in Singer v Berghouse (1994) 181 CLR 201; [1994] HCA 40."
In the current case, nothing turned upon Mr Stoljar's acceptance of Trilogy's contention that the primary judge's decision was a discretionary one on a matter of practice and procedure because the nature of the arguments advanced, involving as they did the attempted extension of principle to a novel factual situation, warranted the grant of leave to appeal and, whether or not the primary judge was involved in a discretionary exercise or an exercise in the nature of an evaluative judgment, her Honour's reasons were, in my view, clearly correct.
For my own part, given that a permanent stay of proceedings on the grounds of abuse of process should only be ordered in exceptional circumstances (and will ordinarily require the applicant for a stay to establish that the continuation of the proceedings would be vexatious or oppressive in the sense that it would be "seriously and unfairly burdensome, prejudicial or damaging"), what is involved is far more than a matter of mere practice and procedure: see also Moubarak by his tutor Coorey v Holt (2019) 100 NSWLR 218, [2019] NSWCA 102 at [68]-[71].
CBRE was not unalive to the potentiality of a claim by Trilogy, such potential being flagged by Trilogy's willingness to participate in the July 2019 mediation: see Macfarlan JA's reasons at [64]-[69] below. In other words, if CBRE was concerned about the prospect of being "vexed twice" in relation to the 2006 Valuation, there was a procedural course open to it which could have salved that forensic anxiety. Whilst CBRE is not to be criticised for not pursuing that course, its availability undermines CBRE's complaint as to Trilogy's conduct which, for the reasons given by the primary judge and Macfarlan JA, was entirely reasonable in the circumstances.
Thirdly, the primary judge correctly recognised that the categories of abuse of process are not closed and that there may be an abuse of process where a later set of proceedings does not involve precisely the same parties as the initial proceedings. Usually, however, that will involve a circumstance where the same plaintiff (or a related party) sues a defendant in a second set of proceedings that has either already been sued or is related to or associated with the (successful) defendant in an earlier set of proceedings. An example fitting this paradigm is Moore v Inglis (1976) 50 ALJR 589; 9 ALR 509.
A variation on this pattern is supplied by the famous case of Reichel v Magrath (1889) 14 App Cas 665 (Reichel) where Reichel, who had resigned as the vicar of a parish and was replaced by Magrath, brought proceedings unsuccessfully against the bishop for a declaration that his resignation was null and void. Magrath subsequently commenced proceedings against Reichel seeking a declaration as to the validity of his appointment. In these proceedings, Reichel raised a defence identical to that which had been rejected in the earlier proceedings. The House of Lords upheld the striking out of Reichel's defence as an abuse of process, holding that "it surely must be in the jurisdiction of the Court of Justice to prevent the defeated litigant raising the very same question which the Court has decided in a separate action": at 668.
Critically, in the present case, the primary judge pointed out that, although Trilogy was City Pacific's successor as responsible entity for the Fund, City Pacific's claim, at least as finally maintained, was not brought in its capacity as responsible entity for the Fund: primary judgment (PJ) at [76]. This was not, therefore, a case where the same party (or different parties in the same capacity or related parties) were suing the same defendant in respect of the same loss. That would represent an archetypal case of abuse of process. Nor was it a case where any person or party associated with or in control of Trilogy had ever brought proceedings against CBRE previously.
This leads to the fourth observation. At least in the Court's inherent jurisdiction, an important distinction can and has been drawn between regulating the conduct of a person who has commenced proceedings so as to prevent the Court's processes from being abused, on the one hand, and impeding a particular person in the exercise of his or her rights of access to the courts, on the other hand: see Commonwealth Trading Bank of Australia v Inglis (1974) 131 CLR 311 at 319; [1974] HCA 17. Trilogy was not under any express or implied duty to commence proceedings against CBRE because it knew of the 2015 Proceedings and the possibility of a common issue in proceedings which it may wish to commence in the future. For reasons explained below, the Civil Procedure Act did not impose any such obligation.
The logic of CBRE's argument was that not only was Trilogy obliged to seek to be joined in the 2015 Proceedings (at risk of having any subsequently commenced proceedings stayed as an abuse of process) but that it should have done so even if it was not ready to sue and/or, for example, wished to bring its proceedings other than in the Supreme Court of New South Wales, such as in the Federal Court of Australia or the Supreme Court of Victoria.
The primary judge put the matter extremely well at [92] of her decision:
"It would unquestionably have been preferable for CBRE if City Pacific's claims and Trilogy's claims, involving the common allegations of negligence and misleading or deceptive conduct concerning the 2006 valuation, had been heard and determined at the same time. That would also have been a more efficient utilisation of the publicly funded resources of the Court. However, for the reasons I have explained above, the evidence does not establish that this alternative course could have been taken by Trilogy in July or August 2019 without sacrificing the care and diligence required to verify the pleading of any claims that it decided to pursue and without undermining the legitimate interests of Scheme members in not incurring legal costs and exposing the Scheme assets to liability for other parties' legal costs by litigating claims without appropriate investigation and advice".
Paragraph 26 of Tomlinson was quoted with approval by the plurality (Kiefel CJ, Bell and Keane JJ) in UBS at [43]. Mr Stoljar, for CBRE, placed particular emphasis on the following paragraphs of their Honours' reasons:
"43 [It] is not to say that in England or here the circumstance that a claim could have been raised in earlier proceedings makes the raising of it in later proceedings an abuse of process. It is to recognise that in some circumstances the bringing of a claim which should have been litigated in an earlier proceeding will be an abuse and that that may be so notwithstanding that the later proceeding is not precluded by an estoppel. So much is made plain in Tomlinson. …
[paragraph 26 of Tomlinson was then set out omitting footnotes]
44 The circumstance that the Trust's claim has not been heard on its merits, and that a fair trial may still be had, cannot be determinative of whether the proceeding is unjustifiably oppressive to UBS or whether its continuance would bring the administration of justice into disrepute.
45 The courts must be astute to protect litigants and the system of justice itself against abuse of process. It is to hark back to a time before this Court's decisions in Aon and Tomlinson and the enactment of s 37M of the Federal Court Act [the cognate provision of s 56 of the Civil Procedure Act 2005 (NSW)] to expect that the courts will indulge parties who engage in tactical manoeuvring that impedes the 'just, quick and efficient' resolution of litigation. To insist, for example, on 'inexcusable delay' as a precondition of the exercise of the power to stay proceedings as an abuse of process is to fail to appreciate that any substantial delay is apt to occasion an increase in the cost of justice and a decrease in the quality of justice. Further, there is no reason why the courts should tolerate attempts to manipulate other parties and the courts themselves by the deployment, by a single directing mind and will, of different legal entities under common control for such a purpose. The concern is as to whether the processes of the court are being abused. Given that this is the central concern, the circumstances that the abuse is effected by the use of multiple entities orchestrated by a single mind and will is no reason to tolerate it.
46 Nor does the undue vexation which a stay of proceedings is concerned to prevent arise only when proceedings in respect of the same issue have been concluded by a judgment on the merits. Serial proceedings discontinued prior to judgment would be an obvious example of an abuse of process. The pursuit of substantially the same claim by serial proceedings conducted by different entities under common control is no less obviously an abuse of process."
To the extent that Tomlinson, and UBS following it, contemplate that there may be an abuse of process where a plaintiff (the second plaintiff) commences a proceeding against a defendant who had already been sued by a party unrelated to the second plaintiff on legally or factually overlapping claims, the question arises as to what must be established to justify a conclusion that the second set of proceedings constitutes an abuse of process. The answer must be that the second plaintiff's conduct is so unreasonable or the continuation of the proceedings would be so unjustifiably oppressive to a party as to bring the administration of justice into disrepute: see Walton v Gardiner (1993) 177 CLR 378 at 393; [1993] HCA 77; Rogers v The Queen (1994) 181 CLR 251 at 286; [1994] HCA 42; Batistatos v Roads and Traffic Authority (NSW) (2006) 226 CLR 256; [2006] HCA 27 at [15]; PNJ v The Queen (2009) 83 ALJR 384; [2009] HCA 6 at [3]; Tomlinson at [25]; UBS at [69]-[72]. This is a difficult standard to satisfy, and the reason why a permanent stay of proceedings is an exceptional remedy is because it results in the shutting out of a prima facie arguable claim. Access to the courts is not lightly to be denied.
I do not understand the statement in the second sentence of [26] of Tomlinson, as picked up in UBS at [43], to support the broader proposition which CBRE sought to derive from it, namely that a second plaintiff bringing a factually or legally overlapping claim against a defendant against whom an unrelated plaintiff has already, to the second plaintiff's knowledge, brought similar proceedings commits an abuse of process unless the second plaintiff explains why he, she or it did not join in the first set of proceedings and that explanation is acceptable to the Court.
As to the related concept of an abuse of process founded in "tactical manoeuvring", the plurality in UBS made the following observation at [52]:
"Where discontinuance of proceedings brings the proceedings to an end, the later commencement of fresh proceedings may work no unfairness to the defendant. Here, the discontinuance of the Trust's claim did not bring the SCNSW proceedings to an end. Those proceedings were prosecuted to a final determination on the issues before the Court by a plaintiff controlled by Mr Tyne to recover the loss that the Trust claims as its loss in these proceedings. Mr Tyne provided an explanation for the decision not to maintain the Trust's claim in the SCNSW proceedings. The primary judge considered that it was not a 'proper' explanation". (emphasis added)
CBRE drew upon that observation to argue that it was incumbent upon Trilogy to provide an explanation for its decision not to participate in the 2015 Proceedings, and that it had failed to do so. This was said to be an aspect of the consideration of the "reasonableness" of Trilogy's conduct, as part of the inquiry as to whether its proceedings involved an abuse of process.
For the reasons given by Macfarlan JA at [94]-[99], it was not incumbent upon Trilogy to supply an explanation as to its conduct, and the lack of any such explanation did not mean that Trilogy had acted so unreasonably that its claim should have been stayed.
As a party unrelated to City Pacific, it was open to Trilogy to bring such proceedings as it saw fit, within the limitation period supplied by the Limitation Act 1969 (NSW), for the causes of action it sought to pursue.
Further, no provision of the Civil Procedure Act required Trilogy to commence proceedings earlier than was required by the Limitation Act. It is to the argument based on s 56 of the Civil Procedure Act that attention is now turned.
A further answer to CBRE's complaint that the primary judge should have found that it was being "doubly vexed" by Trilogy's proceedings is that, to the extent that City Pacific purported to bring claims in the 2015 Proceedings which were in truth those of the responsible entity, it abandoned those claims in the course of the hearing before Walton J and formally amended its Statement of Claim to delete them on the condition that City Pacific pay CBRE's costs thrown away by those amendments. Whilst costs are not always a full or complete salve for procedural prejudice, it remains the fact that CBRE obtained a costs order which entitled it to receive the costs of having prepared to defend claims made by the previous responsible entity purportedly in that capacity. Such an award would at least to some extent have ameliorated the oppression of which CBRE complained, that is, being subject to a second set of proceedings dealing with a common issue.
CBRE submitted that:
"the question to which the primary judge was required to have regard pursuant to s 56 was how best to give effect to overriding purpose in considering how to resolve the issues raised by the Motion. The overriding purpose was not facilitated enabling the same factual and legal issues to be litigated to final hearing twice".
The short answer to this submission was that the 2021 Proceedings did not seek to agitate "the same factual and legal issues" as had been litigated in the 2015 Proceedings. The primary judge was correct to characterise the claims made in the 2021 Proceedings as "properly made by different plaintiffs", with Trilogy not suing for its own benefit but "for the benefit of Scheme members, in respect of different losses arising from different transactions, incurred at different times": PJ at [78].
BASTEN JA: I agree with the orders proposed by Macfarlan JA and with the reasons of Bell P and Macfarlan JA. Those reasons are entirely consistent with the reasoning of Williams J.
MACFARLAN JA: By a summons filed in this Court on 17 August 2021 CBRE (V) Pty Ltd ("CBRE") seeks leave to appeal from a judgment dated 21 July 2021 of Williams J given in the Commercial List of the Equity Division ([2021] NSWSC 883). The summons was heard concurrently with the hearing of the appeal that would lie if leave were granted. By that judgment her Honour dismissed a notice of motion filed by CBRE seeking summary dismissal of Equity Division proceedings commenced against it by the present respondent ("Trilogy") on 15 April 2021 ("the 2021 Proceedings").
Trilogy brings the 2021 Proceedings as the trustee and responsible entity of the Pacific First Mortgage Fund ("the Fund") in relation to loss allegedly suffered by the Fund in consequence of reliance by its then responsible entity ("City Pacific") on a valuation provided to it in 2006 by CBRE in the course of its valuation business ("the 2006 Valuation"). Trilogy claims that in reliance on the 2006 Valuation the Fund lent $27.84 million to companies in the Indigo Group to assist them to purchase a marina and associated property known as the Martha Cove development situated at Safety Beach on the Mornington Peninsula in Victoria.
CBRE sought summary dismissal of the 2021 Proceedings on the ground that they are an abuse of process in light of an opportunity that Trilogy had in 2019, but did not take, to have its claims against CBRE heard and determined at the same time as proceedings against CBRE brought by City Pacific in the Common Law Division of the Court ("the 2015 Proceedings"). City Pacific was Trilogy's predecessor as the responsible entity of the Fund, which was then known as City Pacific Mortgage Trust. Both the 2015 and 2021 Proceedings include claims against CBRE for negligence in preparation of the 2006 Valuation. CBRE alleges that there is an overlap between the issues in the two sets of proceedings of such extent that it would be oppressive to CBRE, and contrary to the public interest, for them to be pursued independently.
The 2015 Proceedings were heard by Walton J on 2 to 5 September and 24 October 2019, with judgment being delivered on 30 April 2021 ([2021] NSWSC 456). To give effect to his findings, his Honour made orders on 9 August 2021, giving judgment for City Pacific against CBRE and Mr Christopher Nicodimou (a former employee of CBRE) for $6.9 million. The judgment is the subject of an as yet undetermined appeal to this Court.
For the reasons given below, I consider that Williams J was correct to dismiss CBRE's application for dismissal of the 2021 Proceedings. As the application for leave to appeal to this Court raises important questions concerning the dismissal of proceedings on the ground that they are an abuse of process, and both the leave application and appeal have been fully argued, leave to appeal should be granted. The appeal should however be dismissed, with costs.
In that letter Ms Banton contested that City Pacific's other claims had vested in Trilogy, stating that City Pacific had entered into the transactions and acted on the valuations in its own capacity (not in its capacity as responsible entity of the Fund). Ms Banton said that Trilogy was however prepared to attend a meeting to discuss possible settlement of the proceedings.
By a without prejudice letter of 8 August 2019 Ms Banton told Mr Finn that Trilogy "is considering whether it will seek leave to be joined to these proceedings" and confirmed that Trilogy was agreeable to attending a settlement meeting. A settlement conference was held on 23 August 2019 but the 2015 Proceedings did not settle.
On 28 August 2019 the plaintiffs in those proceedings served a draft Further Amended Statement of Claim which presaged that for which leave to file was given on 4 September 2019 (see [60] above). This was the third day of the hearing of the proceedings before Walton J.
The date of commencement of the 2021 Proceedings was two days prior to the expiration of six years from the date, being 17 April 2015, when ILO exchanged contracts with a third party for the sale of the marina to it at a price of about $12.95 million (see [54] above). This may well have been thought to be a relevant date for the purposes of the limitation defence raised by CBRE in the 2015 Proceedings and no doubt anticipated to also be raised by CBRE in the 2021 Proceedings.
Her Honour also held that there was no evidence "that it was improper for Trilogy to take time to investigate the subject matter of the claims" and that proceeding "without undertaking its own investigation of those claims and their merits, would not have been consistent with Trilogy's obligations to Scheme members as responsible entity". As well, her Honour noted that on 26 July 2019 CBRE's solicitors had contended that the 2015 Proceedings were "untenable" for reasons independent of the identity of the plaintiff.
As to the third basis of CBRE's application, her Honour said:
"[90] In my opinion, the risk of some inconsistent findings does not bring the administration of justice into disrepute in circumstances where the two proceedings in which the inconsistent findings may be made have been brought by different plaintiffs, neither of whom controls the other, and in relation to different claims. The risk of inconsistent findings does not arise by reason of the plaintiff in the later proceeding (Trilogy) mounting any collateral attack on or seeking to undermine the findings made in the earlier proceeding. As senior counsel for Trilogy submitted, it will be contending for findings to the same effect as those made in the 2015 proceeding concerning the 2006 valuation."
Her Honour concluded her judgment with the following observations:
"[91] In my opinion, it would bring the administration of justice into disrepute if Trilogy were precluded from maintaining its claims for the benefit of Scheme members merely because City Pacific's claims made for its own benefit, but involving some common issues, have already been litigated. That is particularly so in circumstances where Trilogy did not act unreasonably in deciding not to endeavour to have its claims determined at the same time as City Pacific's claims, for the reasons I have explained above.
[92] It would unquestionably have been preferable for CBRE if City Pacific's claims and Trilogy's claims, involving the common allegations of negligence and misleading or deceptive conduct concerning the 2006 valuation, had been heard and determined at the same time. That would also have been a more efficient utilisation of the publicly funded resources of the Court. However, for the reasons I have explained above, the evidence does not establish that this alternative course could have been taken by Trilogy in July or August 2019 without sacrificing the care and diligence required to verify the pleading of any claims that it decided to pursue and without undermining the legitimate interests of Scheme members in not incurring legal costs and exposing the Scheme assets to liability for other parties' legal costs by litigating claims without appropriate investigation and advice. In all of the circumstances of this case, the fact that CBRE will be required to engage twice with the question of whether the 2006 valuation was negligent or misleading does not constitute unjustifiable oppression and the fact that the Court will have to engage with those questions in two different proceedings does not render the present proceeding an abuse of process." (Emphasis in original.)
A further matter that Trilogy would have been required by its duties to consider would be the practicality and expense of intervening in existing litigation that was close to a final hearing. It would not have been simply a matter of having Trilogy added as a plaintiff in existing proceedings. Trilogy's claim on behalf of the Fund was different to that of City Pacific and Martha Cove in their personal capacities, and would have required not only careful investigation but full pleading to which the opposite party (CBRE and perhaps also Mr Nicodimou, against whom City Pacific claimed) would need to respond. As well that says nothing about any other steps preliminary to a hearing that would be required to be taken.
It is almost inevitable that the existing hearing would have had to be vacated if Trilogy's claims were to be heard with those of City Pacific. There was thus an exposure to Trilogy of the possibility of an order for payment by it of substantial costs for having brought that about.
In these circumstances, the primary judge was correct to conclude that Trilogy "did not act unreasonably in deciding not to endeavour to have its claims determined at the same time as City Pacific's claims …". In light particularly of its duties as a representative of the Fund, it was not unreasonable for Trilogy to act cautiously before commencing proceedings.
I turn to CBRE's position. As the hearing of the 2015 Proceedings approached, it ought to have been apparent to CBRE that it was facing a claim by a former responsible entity of the Fund to whom CBRE had provided a valuation, with a claim confined, or at least substantially confined, to the former responsible entity's own loss, without a claim being made by the current incumbent, which was at least arguably the proper plaintiff, in respect of the Fund's equal, if not greater, loss. This loss was the balance outstanding of the $27.84 million loan which CBRE knew (at least because of the terms of the 2015 Statement of Claim, if for no other reason) was allegedly made in reliance on CBRE's 2006 Valuation. If CBRE had wished to have all of the issues dealt with by a court at the same time, it could have brought this circumstance to the attention of City Pacific (and/or Trilogy) prior to July 2019, or at some stage sought in proceedings against Trilogy a declaration as to CBRE's freedom from liability.
In these circumstances, only limited weight can be attached to CBRE's proposition that it suffers disadvantage because it might be vexed twice in relation to the issues common to the two sets of proceedings.
When that circumstance is considered with the absence of unreasonable conduct on the part of Trilogy, and the absence of any decisive overriding consideration of public interest, the conclusion at which the primary judge arrived must be regarded as correct. This Court was not referred to any authority that suggested a different result. In the present case Trilogy did not for example engage "in tactical manoeuvring" such as was referred to in UBS at [45], nor was there any "abuse … effected by the use of multiple entities orchestrated by a single mind" as was also referred to in UBS at [45]. CBRE referred to MCC Proceeds Inc v Lehman Bros International (Europe) [1998] 4 All ER 675 as an indication that an abuse can occur where an assignee of a right of action seeks to relitigate issues that have already been litigated at the instance of the assignor. A conclusion as to the existence of an abuse of process is however very much fact dependent and the position of the assignee in that case did not have ameliorating features comparable to that of Trilogy in the present case.