Davidovic v Vesuvius Australia Pty Ltd

The nature of the proceedings 11In general terms, the dispute between the Company and Vesuvius involves dealings between them in relation to the development and subsequent leasing by the Company to Vesuvius of certain lands owned by the Company (referred to as the Doyle Land, and the Sylvester Land). 12It is alleged in the proposed amended Statement of Claim that in October 2007, the Company and Vesuvius entered into a Deed whereby Vesuvius was given the option to take a lease of the Doyle Land, and that such option was exercised in January 2008. It is then alleged that discussions were held concerning Vesuvius' need for additional space, and the Sylvester Land was identified as a better site for Vesuvius' needs. It is alleged that in the course of discussions which followed, the Company proposed certain terms upon which Vesuvius would become the lessee of the Sylvester Land, and that on or about 30 June 2008, an agreement to lease that land was made. One of the terms of the alleged agreement was that Vesuvius would lodge an additional $184,000 over and above the $560,000 it had paid as a security deposit pursuant to the Deed in respect of the Doyle Land. 13It is alleged that the Company thereupon ceased to carry out its obligations under the Deed in respect of the Doyle Land. It is alleged that in about January 2008 Vesuvius informed the Company that 30 March 2010 would be a suitable date for commencement of occupation. The date of occupation was apparently a matter which the parties had left for subsequent agreement. It is then alleged that the Company carried out certain works upon the Sylvester Land in preparation for Vesuvius taking occupation. 14It is alleged that in April 2010 Vesuvius repudiated the agreement for lease by commencing the 2010 proceedings and seeking recovery of the security deposit paid pursuant to the Deed in respect of the Doyle Land. It is contended, in the alternative, that Vesuvius is estopped from denying that it was obliged to enter into a lease of the Sylvester Land on the terms of the agreement reached, in circumstances where Vesuvius' conduct led the Company to assume that it and Vesuvius would enter into a lease of the Sylvester Land upon the agreed terms. Damages for breach of the agreement for lease are sought, as well as equitable compensation in respect of the alleged detriment sustained by the Company in acting in reliance upon Vesuvius' conduct.

Grounds of opposition to grant of leave 15Vesuvius opposes the grant of leave for the filing of the amended Statement of Claim on a number of grounds. These grounds are summarised below. 16First, Vesuvius submits that an issue estoppel binds the Company (and the plaintiff as a privy of the Company) which precludes any assertion that a binding agreement for lease was entered into between the Company and Vesuvius in respect of the Sylvester Land. The issue estoppel is said to arise from the decision made in the 2010 proceedings by Biscoe AJ, to which reference has already been made, that Vesuvius was entitled to summary judgment on its claim to be repaid the security deposit. 17Second, Vesuvius submits that insofar as the amended Statement of Claim alleges that there was an agreement for lease in respect of the Sylvester Land, it is an abuse of process because it would be a direct challenge to a finding made in the 2010 proceedings that there was no such agreement. As I understand the submission, it is primarily based upon the judgment of Hallen AsJ in Cookson Plibrico Pty Limited v V & M Davidovic Pty Limited (supra). His Honour there said (at [14]): "At the hearing of the Amended Notice of Motion, the Defendant [the Company] accepted that: (a) the only binding agreement(s) between the Plaintiff and the Defendant were the Deed and the Lease of the Doyle Avenue Property; [...] and (c) despite there having been lengthy negotiations for, and steps taken towards, the parties entering into the lease for the Sylvester Avenue property, no binding agreement between the parties for lease in relation to the Sylvester Avenue property had ever come into effect." 18The paragraph set out above was also referred to in the judgment of Biscoe AJ on appeal (see Vesuvius Australia Pty Ltd v V & M Davidovic Pty Ltd (supra) at [30]). 19Third, Vesuvius submits that there could be no enforceable or binding agreement for lease in respect of the Sylvester Land as alleged because: (a)the alleged agreement does not comply with the requirements of s 54A of the Conveyancing Act 1919 (NSW); and (b)the alleged agreement does not, in its terms, fix the date from which the term of the lease is to commence. 20Fourth, Vesuvius submits that the amended Statement of Claim contains no proper pleading of an equitable estoppel. It is contended, relying principally upon Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 (at 584E, 585C, 602E-F, 605C-F and 610E-F) that there can be no equitable estoppel because there is no enforceable agreement for lease in respect of the Sylvester Land disclosed in the pleading, and, further, there is no allegation that Vesuvius created or encouraged an assumption in the Company that an interest in land would be granted to the Company. Rather, the prospective interest was to be granted to Vesuvius. 21Fifth, Vesuvius submits that there has not been a valid or effective assignment of anything that would permit the plaintiff to bring these proceedings. It was put that upon its proper construction, the Deed of Assignment does not assign any choses in action, but merely assigns the fruits of choses in action, and whatever was assigned was limited to something to be prosecuted within the framework of the 2010 proceedings. It was further submitted that if rights of action were assigned, the assignees, including the plaintiff, were not shown to have a "genuine commercial interest" in taking the assignment and pursuing those rights for their own benefit in the sense described in the authorities. Reference was made to Trendtex Trading Corporation v Credit Suisse [1982] AC 679 at 702F-703G; Monk v Australia and New Zealand Banking Group Limited (1994) 34 NSWLR 148 at 151E-G, 152F-153D; National Mutual Property Services (Australia) Pty Limited v Citibank Savings Limited (1995) 132 ALR 514 at 538-540 and Campbells Cash and Carry Pty Limited v Fostif Pty Limited; Australian Liquor Marketers Pty Limited v Berney [2006] HCA 41; (2006) 229 CLR 386 at [73]. 22Sixth, Vesuvius submitted that in circumstances where the proposed second defendant, Mr Miroslav Davidovic, is a bankrupt, his rights under the Deed of Assignment are vested in his trustee in bankruptcy. Accordingly, the trustee would be the proper party to be joined, not Mr Miroslav Davidovic. It was further submitted that the plaintiff on his own has no rights to bring the proceedings, and leave should not be given to file any amended pleading unless the proceedings are properly constituted. 23Finally, Vesuvius submitted that given the history of these proceedings and the 2010 proceedings, if any leave was granted to the plaintiff, it should be subject to a condition that the outstanding costs the subject of orders made in the 2010 proceedings in favour of Vesuvius be paid. Alternatively, it was submitted that the proceedings should be stayed until all such costs are paid. 24I will deal in turn with each of the grounds of opposition to leave.

Issue estoppel 25Biscoe AJ allowed an appeal from the judgment of Hallen AsJ refusing the application made by Vesuvius for summary judgment. Hallen AsJ had concluded at [76]: "In light of the conclusion reached in Lean v Tumut River Orchard Management Limited, and the authorities referred to in the case, namely that it is reasonably arguable that rights under a contract (the Deed) could be set off against misleading or deceptive conduct, or unconscionable conduct amounting to a contravention of the Trade Practices Act, keeping in mind the strong reluctance of the court to give summary judgment, and exercising the extreme caution which must be exercised in making such a determination, I have, hesitatingly, come to the conclusion that the case advanced by the Defendant on the Plaintiff's claim for the return of the security deposit should proceed." 26It is apparent from [68] and [74]-[77] of his judgment that Hallen AsJ would have held that Vesuvius was entitled to summary judgment were it not for the possibility that the Company's claims for damages raised in its cross-claim (or proposed Further Amended Cross-Claim) might give rise to rights of set-off. 27On appeal, Biscoe AJ referred at [30] to certain paragraphs of the judgment of the primary judge where "findings on relevant facts and other matters that were not in dispute or were otherwise conceded during the hearing" were set out. These included the paragraph, set out at [17] above, in which it was noted that the Company accepted that the only binding agreements were the Deed and a lease of the Doyle Land, and that no agreement for lease had ever been made in relation to the Sylvester Land. 28At [38]-[39], Biscoe AJ noted that "the set off finding" made by Hallen AsJ (at [75]-[77]) was the sole basis upon which the application for summary relief was refused, and that such finding was based on the proposition that set-off is available as a defence where, as was the case before him, there are no cross-demands for money or damages between the parties. Biscoe AJ disagreed with that proposition, and allowed the appeal accordingly. 29It is established by Blair v Curran [1939] HCA 23; (1939) 62 CLR 464 that an issue estoppel covers only those matters which a prior judgment, decree or order necessarily established as the legal foundation or justification of its conclusion. As stated by Dixon J (as his Honour then was) at 532: "Nothing but what is legally indispensable to the conclusion is thus finally closed or precluded. In matters of fact the issue estoppel is confined to those ultimate facts which form the ingredients in the cause of action, that is, the title to the right established. Where the conclusion is against the existence of a right or claim which in point of law depends upon a number of ingredients or ultimate facts, the absence of any one of which would be enough to defeat the claim, the estoppel covers only the actual ground upon which the existence of the right was negatived. But in neither case is the estoppel confined to the final legal conclusion expressed in the judgment, decree or order. In the phraseology of Coleridge J in R v The Inhabitants of the Township of Hartington Middle Quarter, the judicial determination concludes, not merely as to the point actually decided, but as to a matter which it was necessary to decide and which was actually decided as the groundwork of the decision itself, though not then directly the point at issue. Matters cardinal to the latter claim or contention cannot be raised if to raise them is to necessarily assert that the former decision was erroneous." 30In the present case, it was decided that in accordance with clause 13 of the Deed in respect of the Doyle Land, Vesuvius was entitled to be repaid the security deposit. In so deciding, the Court was proceeding on the basis that the Deed in respect of the Doyle Land, and no other agreement, was the agreement that governed the question whether Vesuvius was entitled to be repaid. Biscoe AJ then rejected the defence raised by the Company to the effect that the claims for damages it made in its cross-claim might give rise to a set-off that could be raised against Vesuvius' entitlement to be repaid the security deposit. 31In my view, it cannot be said that such conclusion gives rise to an issue estoppel that would preclude the Company (or its privies) from any assertion that a binding agreement for lease was entered into in relation to the Sylvester Land. The conclusion reached by Biscoe AJ that there was no such agreement was not something that was necessarily established by, or something that was legally indispensable to, his Honour's conclusion. It is true that the parties were then proceeding on the basis that there was no such agreement, and indeed the Court noted that position. However, that matter was not one that was necessary to decide, and neither was it actually decided as part of the groundwork for the decision itself. Moreover, an assertion that such an agreement exists is not necessarily an assertion that the decision of Biscoe AJ was erroneous. 32In my view, a matter that was necessarily established by the decision of Biscoe AJ was that the Deed in respect of the Doyle Land (and no other agreement) governed the question whether Vesuvius was entitled to be repaid. I think that an issue estoppel was created to that extent. However, the propounding of the agreement for lease in respect of the Sylvester Land, as pleaded in the amended Statement of Claim, does not seem to be clearly inconsistent with the notion that the terms of the Deed in respect of the Doyle Land continued to govern the question whether Vesuvius was entitled to be repaid. There is no doubt room for debate on that question. For present purposes, it is sufficient to note that I do not accept the broad submission that any assertion that a binding agreement for lease was entered into in respect of the Sylvester Land is precluded by an issue estoppel.

Abuse of Process 33I also do not think that alleging the existence of an agreement for lease in respect of the Sylvester Land amounts to a direct challenge to findings made in the 2010 proceedings such as to amount to an abuse of process. The Court did not itself make any findings about that matter. The Court merely noted that the Company accepted that no binding agreement to lease in relation to the Sylvester Land had been reached. I would not take that as anything more than a concession made for the purposes of the hearing then taking place. There has undoubtedly been a change in position since. However, there is no suggestion that the change in position inflicts any substantial prejudice upon Vesuvius. In my view, making the allegation does not involve any abuse of process.

No enforceable or binding agreement for lease 34The points raised by Vesuvius concerning s 54A of the Conveyancing Act and contractual uncertainty are matters that might ultimately found good defences to the claims sought to be advanced by the plaintiff. I accept that it is appropriate for Vesuvius to raise such matters as reasons why leave should not be given to file an amended pleading. However, I do not think that it has been shown that these matters effectively make the claims untenable. 35As for s 54A, it is alleged in the pleading that proposed terms for an agreement for lease were contained in a document sent to the general manager of Vesuvius, and that the making of the agreement was evidenced by emails sent by that general manager. The relevant documents were not adduced in evidence on the present application. 36As for contractual uncertainty, it is pleaded that when the agreement was reached, the date of occupation by Vesuvius remained a matter to be fixed. It is further pleaded that some six months later, Vesuvius informed the Company that a suitable occupation date for it would be 30 March 2010 and the Company, in reliance upon that information, carried out works on the Sylvester Land. It is then pleaded that Vesuvius subsequently informed the Company that it was considering varying the occupation date. 37At this stage, and on the basis of the limited evidence before the Court, it is not possible to express any considered view about the strength of these foreshadowed defences.

Equitable estoppel 38It follows from the above that I do not think that Vesuvius has shown that the alleged agreement is not enforceable or binding. Moreover, the pleading contains allegations to the effect that, based upon the conduct of Vesuvius, the Company assumed that it and Vesuvius would enter into a lease of the Sylvester Land (see paragraphs 46 and 48), and that departure from the assumption would cause it to suffer detriment (see paragraphs 47, 52 and 54). 39Whilst some criticism of the form of the pleading can be made, I agree with the submission made by Counsel for the plaintiff that a claim based upon an equitable estoppel is adequately pleaded. I note, however, that in the course of the hearing, the Court was informed by Counsel for the plaintiff that paragraphs 55 and 56 of the pleading were no longer pressed.

Assignment 40By clause 2.1 of the Deed of Assignment, the Company assigned to the plaintiff and Miroslav Davidovic "all its rights title and interest in the Proceedings". The Proceedings was defined in clause 1.1 to mean (unless otherwise indicated by the context) "Matter No. 2010/84991 in the Supreme Court of New South Wales, Equity Division ... and includes all rights and entitlements to the verdict or settlement monies (if any) and costs orders (if any)". 41It is apparent from other provisions of the Deed of Assignment that the parties contemplated that the assignees would continue the Proceedings to their conclusion (see clauses 3.1 and 3.4 - 3.6 and Recital F). Nevertheless, the subject matter of the assignment is essentially governed by clause 2.1. There is ample scope for argument as to the true construction of that provision. In my view it is arguable that the assignment is an assignment of the Company's interest in Matter No. 2010/48991, and thus consists of the choses in action the Company has against Vesuvius which arise from the dealings between them and are the subject of "Matter No. 2010/84991", not merely the fruits of choses in action. That construction gains some support from the concluding words of the definition of the Proceedings, by which all rights and entitlements to a verdict or settlement monies are included within the broader concept of the Proceedings. 42I also do not think that whatever was assigned was only to be prosecuted within the framework of the 2010 Proceedings. Whilst that was undoubtedly contemplated to occur, there is nothing in the Deed of Assignment to suggest that any other mode of prosecution was prohibited. 43As for the contention that the plaintiff has not shown (either himself, or together with Mr Miroslav Davidovic) a "genuine commercial interest" in taking the assignment, I do not consider that this is something the plaintiff is required to demonstrate at this stage when the only question is whether leave should be given to file the amended Statement of Claim. It is a matter that will ultimately be determined on the basis of whatever evidence is adduced on the issue. I note that the assignees were not merely directors of the Company; they were also shareholders.

Mr Miroslav Davidovic not a proper party 44It seems clear that the other assignee, Mr Miroslav Davidovic, being a bankrupt, is not the proper party to be joined to the proceedings in his capacity as an assignee. This was accepted by Counsel for the plaintiff who then submitted that Mr Miroslav Davidovic could be deleted from the pleading without affecting the validity of the proceedings, and that this would cause no prejudice to Vesuvius. That may be so, but in my view, the presence, as parties, of all who have an interest in what has been assigned, is necessary in order for the proceedings to be properly constituted. That is something that needs to be attended to, sooner rather than later.

Conclusion 45For the reasons outlined above, I do not think that any of the grounds advanced by Vesuvius in opposition to the grant of leave have been made out, save for the complaint concerning Mr Miroslav Davidovic. Accordingly, I have come to the conclusion that it is appropriate in all the circumstances to grant leave to the plaintiff to file an amended Statement of Claim. However, the Court will require the plaintiff, as a condition of such leave, to undertake to forthwith take appropriate steps to ensure that all who have an interest in what has been assigned under the Deed of Assignment are made party to the proceedings. 46I have also decided that the proceedings should be stayed pursuant to s 67 of the Civil Procedure Act 2005 (NSW) until Vesuvius is paid the assessed costs of $95,728.75. I was informed that those costs are largely if not wholly concerned with the summary judgment aspect of the 2010 proceedings. That aspect was determined favourably to Vesuvius on the merits, albeit summarily. In circumstances where the Company is apparently insolvent and the plaintiff, effectively standing in the shoes of the Company, has now commenced fresh proceedings against Vesuvius, I think that it is in the interests of justice that Vesuvius not have to contend with these further proceedings whilst those costs, that are undoubtedly owing to it, remain unpaid. 47I will not impose any stay in relation to the payment of the other costs which remain unpaid. Those costs, which I was informed are largely concerned with the Company's cross-claims in the 2010 proceedings, have not yet been assessed. The Company provided a fund of in excess of $80,000 as security for such costs, although it appears that the ability of Vesuvius to obtain those funds may be defeated by the prior claims of the holder of a charge. The situation in relation to these costs is therefore unclear at the present time. 48The plaintiff accepts that any grant of leave ought be subject to an order that the plaintiff pay Vesuvius' costs of the Notice of Motion. Such an order will be made. 49On 28 March 2014, Kunc J ordered the plaintiff to pay Vesuvius' costs of its Notice of Motion filed on 31 January 2014. Vesuvius seeks an order that those costs, as well as the costs of the present Notice of Motion, be ordered to be paid forthwith. It was submitted that it was appropriate to make that order given that the plaintiff, by filing an amended Statement of Claim "will be effectively starting these proceedings afresh". I am prepared to make such an order, but only in relation to the costs of the Notice of Motion filed on 31 January 2014. I do so because it was conceded by Counsel for the plaintiff that the plaintiff's then pleading was obviously deficient. There was thus an unnecessary incurring of costs. I will not make such an order in relation to the costs of the plaintiff's Notice of Motion filed on 28 May 2014. I do not think that such an order is warranted merely by the fact that the plaintiff is effectively starting the proceedings afresh. 50The orders of the Court are: (1)Subject to the condition that the plaintiff undertake to the Court to forthwith take appropriate steps to ensure that all who have an interest in what has been assigned under the Deed of Assignment are made party to the proceedings, grant leave to the plaintiff to file an amended Statement of Claim in the form of the amended Statement of Claim that is annexed to the affidavit sworn by the plaintiff on 28 May 2014, save for the deletion of the second defendant as a party (and any appropriate amendments consequential upon such deletion), and the deletion of paragraphs 55 and 56; (2)The proceedings are stayed pursuant to s 67 of the Civil Procedure Act 2005 (NSW) until the defendant, Vesuvius Australia Pty Ltd, is paid the sum of $95,728.75, being the costs the subject of the four certificates of determination sent on 4 April 2014 in the sums of $82,633.35, $11,401.40, $1,020.25 and $673.75; (3)Order the plaintiff to pay the costs of Vesuvius Australia Pty Ltd of the plaintiff's Notice of Motion filed on 28 May 2014; and (4)Order that the costs the subject of the costs order made by Kunc J on 28 March 2014 be payable forthwith.

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