Dresna Pty Ltd v Linknarf Management Services Pty Ltd

REASONS FOR JUDGMENT 1 On 20 July 2005, I dismissed an application brought by the first and second respondents ("Franklins"), seeking leave to file cross-claims in relation to this proceeding. The application was brought pursuant to O 6, r 2 of the Federal Court Rules. Franklins sought to have Misu Nominees Pty Ltd and Kandara Pty Ltd (hereafter described, for convenience, as "the Lessor"), and Coles Myer Limited ("Coles") re-joined as respondents. I indicated that I would publish my reasons for refusing that application at a later date. These are those reasons. 2 This matter has had a somewhat chequered history. It was originally commenced in the Supreme Court of Victoria on 16 October 2001. At that stage the two Franklins companies were plaintiffs in the proceeding, together with the current applicant, Dresna Pty Ltd ("Dresna"). The Lessor companies were the defendants. Subsequently, after learning more about the case, Dresna joined Coles. Shortly thereafter, the Franklins companies were made defendants. 3 On 13 December 2002, the proceeding was transferred to this Court. The background to that decision, and what occurred thereafter, is summarised in my earlier decision dealing with various pleading points: Dresna Pty Ltd v Misu Nominees Pty Ltd [2003] FCA 1537. 4 In summary, Dresna's claim relates to the managed sell-down by Franklins, a large supermarket operator (now in liquidation), of its assets in Australia in 2001. Dresna contends that it sustained significant loss and damage by reason of the actions of various parties that had the effect of depriving it of the benefit of acquiring a Mentone store then owned by Franklins. 5 The present statement of claim is the last in a long line of pleadings that have been filed on behalf of Dresna. Over the years, Dresna has alleged many different causes of action. Some causes of action have been abandoned, and then reinstated in later versions of the statement of claim. Among Dresna's various claims have been the following: · conspiracy between Coles and the Lessor; · conspiracy between Coles and Franklins; · inducing breach of contract, pleaded against Coles; · breach of the terms of the Mentone lease, pleaded against the Lessor; and · misleading or deceptive conduct, pleaded against both Coles and Franklins. 6 There were various attempts at mediation in late 2004. They were not successful. However, in about April 2005, those attempts were resumed. For reasons that are not entirely clear, Franklins did not participate in that renewed mediation process. However, Franklins was aware that the mediation had resumed. 7 The second attempt at mediation was successful. Dresna settled with the Lessor and Coles, and on 20 May 2005, Registrar Agnew ordered that Dresna's claims against those parties be dismissed, with no order as to costs. She also ordered Dresna have leave to amend the title to the proceeding to delete the Lessor and Coles, and leave to amend the Further Amended Statement of Claim to reflect the settlement that had been achieved. 8 Regrettably, Dresna's proceeding against Franklins did not settle. The trial of that proceeding is scheduled to commence on 22 August 2005. It is estimated to run for several weeks, but might take longer. 9 It was common ground before me that Franklins became aware, in general terms, that there had been a settlement between Dresna, and the Lessor and Coles, shortly before being officially notified of that fact on about 18 May 2005. 10 Following the settlement, Dresna revised its pleading, as it had to do, to reflect the fact that the two Franklins companies would be the only respondents to the proceeding. Following this, Franklins brought a strike out application, claiming that a number of the allegations contained in the pleading were untenable. At the 15 June 2005 hearing of Franklins' strike out application, I rejected most of Franklins' contentions regarding the form of the pleading. During the course of the hearing, Franklins foreshadowed the possibility, for the first time, that an application might be made for leave to re-join the Lessor and Coles by cross-claims. It is important to note that at no stage, throughout the period 2001 to June 2005, had any respondent, past or present, filed any contribution notice or cross-claim, whether in relation to other respondents, or anyone else. 11 On 21 June 2005, Franklins notified the Court and Dresna of their intention to pursue cross-claims against the Lessor and Coles. On 30 June 2005, the matter came before Merkel J, as duty judge. His Honour ordered that Franklins have leave to amend their motion seeking leave to file cross-claims by limiting those cross-claims to those "based on the allegations contained in the applicant's Statement of Claim in the form it was in as at 19 May 2005". He also gave directions for the filing and service of affidavits and outlines of contentions on the Lessor and Coles, the parties proposed to be joined as cross-respondents. 12 When the matter came before me on 20 July 2005, Franklins contended that if they were refused leave to bring the cross-claims, and Dresna were to succeed against them at trial, Franklins would have no choice but to issue fresh proceedings against the Lessor and Coles. The issues raised in such proceedings would closely mirror those that would arise in Dresna's case against Franklins. In other words, a second trial would inevitably mean that the evidence would have to be heard again, at considerable cost to the parties, and through wasted court time to the community as well. There would also be a risk of inconsistent findings, particularly if, as was likely, a different judge heard the second trial. Accordingly, Franklins submitted, it was highly desirable, in the interests of justice, to grant leave to bring the cross-claims, and thereby avoid these potential consequences. Franklins acknowledged that there might be some prejudice to Dresna as a result of the inevitable delay that would be brought about by permitting the cross-claims to be brought. However, that prejudice could easily be overcome. On the other hand, Franklins would suffer irreparable harm if it were denied the right to have their proposed cross-claims dealt with at the same time as Dresna's claims were determined. 13 Not surprisingly, Dresna vigorously opposed Franklins' application for leave to re-join the Lessor and Coles. The Lessor and Coles were also strongly opposed. All of the parties opposing leave complained that Franklins had failed to comply with Merkel J's orders, noting that the proposed cross-claim departed in material respects from the allegations made in Dresna's "Statement of Claim in the form it was in as at 19 May 2005". 14 Both the Lessor and Coles provided lengthy and detailed submissions as to why the proposed cross-claims were untenable. In effect, they approached this matter as though it was a pleading summons. It was not possible to deal with their contentions in the time available. Indeed, it would have taken a great deal of time to hear full argument regarding the various issues raised, and the history of this matter strongly suggested the need for a reserve judgment, with the distinct possibility of interlocutory appeals. Plainly, it was impractical to deal with the matter on this basis. It should be noted, however, that Franklins conceded that there were some aspects of the proposed cross-claims that were deficient, and as a result, would have to be further amended. 15 Dresna submitted that leave to cross-claim should be refused because Franklins had provided no explanation, or at least no adequate explanation, for the delay in bringing cross-claims shortly before the commencement of the trial. Dresna argued that Franklins had chosen to conduct its case in that way, possibly for tactical reasons, and having elected to defend the case without cross-claiming, it should be bound by that decision. Dresna claimed that it would suffer significant prejudice if leave were granted. The trial date, which had been fixed for some time, would have to be vacated. It might be anything up to a year, or possibly longer if, as anticipated, the Lessor and Coles took pleading points on appeal, before the case could be heard. 16 In my view, Dresna's contentions should be accepted. Franklins has had literally years in which to bring cross-claims against the Lessor and Coles, but has chosen, for whatever reason, not to do so. Merkel J stressed, when the matter was before him, the importance of Franklins explaining why no steps to seek such contribution were taken until June 2005, given that the trial of this proceeding might have to be vacated if leave were granted. It must be said that the explanation finally proffered was singularly unsatisfactory. 17 It appears from the evidence that the possibility of cross-claims had been under active consideration by Franklins in 2004. That is hardly surprising. Indeed, Franklins approached the Lessor and Coles with a view to reaching agreement about this matter. The fact is, however, that no agreement was reached, and Franklins did nothing to protect its position. On one view, it simply put the issue of whether to bring cross-claims to one side. Although my decision to allow Dresna to proceed with its statement of claim, as formulated, on 15 June 2005, may have played some role in finally persuading Franklins to bring cross-claims, it was unlikely to have been a decisive factor. Senior counsel for Franklins properly conceded as much. 18 In my view, Franklins' explanation for the delay in seeking to cross-claim against the Lessor and Coles was quite unsatisfactory. It was entirely foreseeable, when it became clear that the mediation would resume in May 2005, that the matter might settle as between Dresna, and the Lessor and Coles. Had Franklins brought cross-claims that were simple and straightforward, even at that late stage, their position would have been protected. It is possible that the trial date could have been preserved. Instead, Franklins waited until mid-June, and then produced proposed cross-claims reintroducing a range of complex causes of action, some of which had been abandoned by Dresna, thereby necessitating a lengthy adjournment of the trial if leave were granted. These causes of action included claims of conspiracy, which have already been the subject of serious dispute in this proceeding. Their introduction into this case would, in my view, complicate, and probably significantly lengthen, the trial. That would be to the considerable detriment of Dresna. 19 It is true that Dresna has hardly been a model litigant throughout this sorry saga. Many of the difficulties associated with this case are directly attributable to the form of its earlier pleadings, and the numerous amendments that this has necessitated. I am fully mindful of this fact. Nonetheless, Franklins sought the indulgence of the Court in being permitted to bring in additional parties, by way of contribution, long after the time provided for in the Federal Court Rules. No adequate explanation has been provided for that delay. 20 It is important to note that Franklins is not shut out from seeking relief against the Lessor and/or Coles should Dresna be successful in the forthcoming trial: cf Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146. There would be no "Anshun estoppel" to prevent this from happening: Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589. It follows that the worst that may happen, so far as Franklins is concerned, is that there may have to be another trial, on related issues, with all the attendant difficulties, and extra cost, that this would entail. Again, I gave full weight to that matter. On balance, however, I determined that, in the unusual circumstances of this case, the leave sought by Franklins to bring the cross-claims should be refused. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg.