CITATION : Ghose v CX Reinsurance Company Ltd & ors [2010] NSWSC 110
[2]
HEARING DATE(S) : 8 December 2009, 4 and 18 February 2010
[3]
Order that the notices of motion for joint hearing filed on 1 October 2009 in each of proceedings No 00175282 of 2004 (Legacy No 50081 of 2004) and 00290411 of 2008 (Legacy No 50040 of 2008), and the notice of motion for joint hearing filed on 26 November 2009 in proceedings No 00259074 of 2005 (Legacy No 2518 of 2005), be dismissed.
DECISION : 2. Order that the costs of the motion be costs in the cause of each of the proceedings mentioned in Order 1.
3. Stand the proceedings mentioned in Order 1 into the Corporations List on Monday 15 March 2010, with the intention that the three proceedings should travel together in the Corporations List for the time being.
[4]
CATCHWORDS : PRACTICE AND PROCEDURE - complex litigation concerning insurers' purported avoidance of D & O policy and liquidator's claim against directors for insolvent trading - respondent settles insolvent trading claim with liquidator but seeks indemnification from insurers for settlement money paid - application for joint hearing of proceedings - whether appropriate for same judge to determine insolvent trading proceedings and decide whether settlement was reasonable - whether common issues in the proceedings - whether prejudice to respondent
[5]
Civil Procedure Act 2005 (NSW), s 56
LEGISLATION CITED : Corporations Act 2001 (Cth), ss 588G, 588M
Uniform Civil Procedure Rules, Part 28 Rule 5, Part 2 Rule 3(k)
[6]
A Goninan & Co Ltd v Atlas Steel (Aust) Pty Ltd [2003] NSWSC 956
Arab Bank Plc v Zürich Insurance Co [1999] 1 Lloyd's Rep 262
Aristocrat Technologies Australia Pty Limited v Global Gaming Supplies Pty Limited [2007] FCA 943
ASIC v Rich & Ors (2003) 44 ACSR 682; [2003] NSWSC 186
ASIC v Rich & Ors (2004) 50 ACSR 500; [2004] NSWSC 836
Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd [2005] FCA 524
Australian Securities & Investments Commission v Axis International Management Pty Ltd [2009] FCA 250
Australian Securities & Investments Commission v Somerville [2008] NSWSC 788
Bishop v Bridgelands Securities (1990) 25 FCR 311
Bolwell Fibreglass Pty Ltd v Foley [1984] VR 97
Buckley v The Herald and Weekly Times Pty Ltd [2009] VSCA 118
Cameron v McBain [1948] VLR 245
Carnie v Esanda Finance Corp Ltd (1996) 38 NSWLR 465
CGU Insurance Ltd v AMP Financial Planning Pty Ltd (2007) 235 CLR 1
Cousins v Cousins (1948) 51 WALR 57
Dean v Phung [2009] NSWSC 201
Dean-Willcocks and Another v Air Transit International Pty Ltd and Others (2002) 55 NSWLR 64
CASES CITED : Dehsabzi & Dehsabzi v John Fairfax Publications Pty Ltd (No 3) [2008] NSWDC 273
Fong Consultants Pty Ltd v ATI Management Pty Ltd (1992) 108 FLR 140
Fox v Olsen & The State of South Australia [1999] SASC 411
Goold & Porter Pty Ltd v Housing Commission [1974] VR 102
Green v CGU Insurance Ltd (2005) 215 ALR 612
Horwood v British Statesman Publishing Co Ltd [1929] WN 38
Humphries v Newport Quays Stage 2A Pty Ltd [2009] FCA 699
International Advisor Systems Pty Ltd v XYYX Pty Ltd & Anor (No 3) [2008] NSWSC 430
Jendas Pty Ltd v Jolly [1997] 2 VR 106
Lewis v Daily Telegraph Ltd (No 2) [1964] 2 QB 601
Maher v Spedley Securities Ltd (in liq) and others (1992) 26 NSWLR 411
Main-Rd Property Group Pty Ltd v Pelligra & Sons Pty Ltd [2007] VSC 43
Muller v Human Rights and Equal Opportunity Commission (Federal Court of Australia, 17 July 1997, unreported, Moore J);
Pegasus Gold Inc v Bateman Project Engineering Pty Ltd [1999] FCA 490
Re Ling; Ex parte Ling v Commonwealth (1995) 58 FCR 129
SCI Operations Pty Ltd v Australian Paper Manufacturers Ltd (1983) 51 ALR 365
Thompson v HFA Asset Management Ltd [2008] FCA 1926
Wilson v Minister for Land and Water Conservation for the State of New South Wales and Others (2003) 126 FCR 500; [2003] FCA 307
[7]
2008/00290411
Udayan Daniel Ghose (Plaintiff/Respondent)
CX Reinsurance Company Ltd & ors (Defendant/Applicant)
2004/00175242
PARTIES : Azmin Firoz Daya (Plaintiff)
CX Reinsurance Company Ltd & ors (Defendants)
2005/00259074
New Cap Reinsurance Corporation Ltd (in liq) & anor (Plaintiffs)
Azmin Firoz Daya & ors (Defendants)
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST
[12]
2008/00290411 UDAYAN DANIEL GHOSE V CX REINSURANCE COMPANY LTD & ORS
2004/00175242 AZMIN FIROZ DAYA V CX REINSURANCE COMPANY LTD & ORS
2005/00259074 NEW CAP REINSURANCE CORPORATION LTD (IN LIQ) & ANOR V AZMIN FIROZ DAYA & ORS
JUDGMENT
1 HIS HONOUR: This judgment relates to equivalent applications by the CX Reinsurance Company Limited and others ("the Insurers") in four sets of proceedings, filed on 1 October 2009 (in one case 26 November 2009). The applications seek the following orders:
(1) an order under Part 28 Rule 5 of the Uniform Civil Procedure Rules 2005, that the four proceedings be tried at the same time;
(2) an order under Part 2 Rule 3(k) of the UCPR that evidence in any one of the four proceedings shall stand as evidence in all of those proceedings;
(3) an order under Part 2 Rule 1 of the UCPR that the four proceedings be case managed concurrently in the Corporations List;
(4) an order that the costs of the motion be costs in the cause of each of the four proceedings.
2 The four proceedings are as follows:
(a) Commercial List Proceedings No 50081 of 2004 between Azmin Daya ("Mr Daya") and the Insurers ("the Daya Proceedings");
(b) Commercial List Proceedings No 50121 of 2004 between Peter Aroney ("Mr Aroney ") and the Insurers ("the Aroney Proceedings");
(c) Commercial List Proceedings No 50040 of 2008 between Udayan Daniel Ghose ("Mr Ghose") and the Insurers ("the Ghose Proceedings");
(d) Corporations List Proceedings No: 2518 of 2005 between New Cap Reinsurance Corporation Limited (in liquidation) and its Liquidator and Messrs Daya, Peck, Williams and the Insurers ("the Insolvent Trading Proceedings"). The Insolvent Trading Proceedings include a cross-claim filed by Paul Williams ("Mr Williams") against the Insurers ("the Williams Cross-Claim") and a cross-claim filed by William Peck ("Mr Peck") against the Insurers ("the Peck Cross-Claim").
3 The Liquidator's insolvent trading claim against Mr Ghose has been settled, but the Insolvent Trading Proceedings remain on foot against the other defendants. More recently the Aroney Proceedings have also been settled, On 18 February 2010, I made an order by consent dismissing the application for joint hearing in that matter. Consequently the only remaining proceedings in which the plaintiffs seek relief against the Insurers' avoidance of the D & O Policy are the Ghose Proceedings and the Daya Proceedings, which I shall refer together as "the Avoidance Proceedings". At the hearing on 18 February 2010 the Insurers informed the Court that they press the application with respect to the remaining three proceedings, namely the two Avoidance Proceedings and the Insolvent Trading Proceedings.
4 The attitude of the other parties to the application is as follows. Mr Ghose actively opposes the application, and has appeared by counsel at the hearing of the application. The Insurers submitted that, while neither the Liquidator nor Messrs Daya, Williams and Peck have formally consented to the application, each would submit to the order of the Court and would not actively oppose the application. In fact, there is some relevant evidence: by e-mail dated 5 December 2009 the solicitor whom I take to be acting for Mr Daya said that Mr Daya's position was that he would neither consent to nor oppose the motion for concurrent hearings (Ex A1). None of those parties sought to appear at the hearing of the application.
5 I have had the benefit of very good written submissions prepared by counsel for the Insurers and Mr Ghose. I have relied on the written submissions fairly substantially in the sections of this judgment headed "Facts and Pleadings" and "Relevant Legal Principles".
6 Counsel for the Insurers submitted that their application is made on the basis that the proceedings all have a significant issue in common, namely the validity of the avoidance by the Insurers of an indemnity in a contract of directors' and officers' liability insurance. The Insurers submitted that, in the exercise of its broad discretion under r 28.5, the Court ought order that the proceedings be heard together. They contended that the Court should be satisfied that making such an order would avoid the risk of inconsistent findings of fact that might otherwise arise from a multiplicity of proceedings, and provide an efficient means of dealing with evidence in the proceedings, thereby furthering the overriding purpose set down in s.56(1) of the Civil Procedure Act 2005 (NSW) of achieving the just, quick and cheap resolution of the real issues in each set of proceedings. They invited the Court to conclude that these factors weigh heavily against any alleged prejudice pointed to by Mr Ghose, especially given that the ultimate trial judge can make any appropriate orders or directions to protect any legitimate concerns raised by Mr Ghose.
7 Counsel for Mr Ghose submitted that the Insurers, in their submissions, oversimplified the extent to which common issues would arise between the Ghose Proceedings and the Insolvent Trading Proceedings, as well as asserting that the order sought by the Insurers would prejudice his interests.
Facts and Pleadings
8 On 20 October 1998, the Insurers entered into a contract of insurance - International Directors' and Officers' liability policy number DI-095723 ("the D&O Policy") - in favour of the former directors and officers of New Cap Reinsurance Holdings Corporation ("NCRH") and its subsidiary companies.
9 On 21 April 1999, a subsidiary of NCRH, New Cap Reinsurance Corporation Limited ("NCRA"), was placed into administration and subsequently into liquidation. Prior to its administration, NCRA had engaged in capital raising by way of a convertible note issue for US$40 million. Those notes were fully subscribed by a number of investment companies associated with Mr Saville, including Ingot Capital Investment Pty Limited. Their investment was lost when NCRA went into administration and liquidation, and they brought proceedings in the Commercial List of this Court (No 50169 of 2001) against the former directors and officers of NCRA including, relevantly, Messrs Ghose, Daya, Aroney, Peck and Williams ("the Ingot Proceedings").
10 Messrs Ghose, Daya, Aroney, Peck and Williams sought indemnification from Insurers under the D&O Policy in respect of any liability arising in the Ingot Proceedings (including defence costs).
11 By letters dated 6 July 2004, Insurers have avoided the D&O Policy against those former directors. The asserted basis of the avoidance was the preparedness of the directors to enter into sham transactions to dress up the 30 June 1998 half yearly accounts, so as to give the erroneous impression of compliance with a minimum net worth covenant, and the non-disclosure by the directors and officers of NCRA of the deception to Dresdner Bank in relation to NCRA's minimum net worth covenant.
12 In 2004, Mr Daya and Mr Aroney brought, respectively, the Daya Proceedings and the Aroney Proceedings against the Insurers in the Commercial List of this Court, challenging the validity of the Insurers' avoidance. Both the Daya Proceedings and (until settlement) the Aroney proceedings seek indemnification under the D&O Policy for any liability arising in respect of the Ingot Proceedings. The Response filed by the Insurers pleads that had a number of matters - concerning the net worth covenant binding NCRA - been disclosed, the Insurers would not have agreed enter into the D&O Policy.
13 While the Aroney Proceedings had settled, the Daya Proceedings are yet to be determined. Whilst directions were made in 2005 regarding the service of evidence, the Court has subsequently made orders to the effect that the proceedings stand adjourned until the Ingot Proceedings have been concluded.
14 In 2005, the Liquidator of NCRA brought the Insolvent Trading Proceedings against Messrs Daya, Ghose, Peck and Williams in the Corporations List of the Supreme Court, seeking declarations that each had engaged in insolvent trading contrary to 588G(2) of the Corporations Act 2001. Those proceedings are also yet to be determined, although the claim against Ghose was discontinued on 1 September 2006 pursuant to a settlement reached between those parties.
15 Mr Ghose first agitated his dispute with the Insurers in relation to the D & O Policy by proceedings commenced in the State of New York in May 2004, shortly prior to the Insurers formally avoiding the Policy. The Insurers sought to challenge those proceedings on forum non conveniens grounds and there were interlocutory and Appeal Court decisions in the State of New York (as deposed to in the affidavit of Diana Chang made on 1 December 2009 at [3] to [15]).
16 In accordance with orders made in the New York proceedings, Mr Ghose commenced the Ghose Proceedings in 2008. Mr Ghose seeks indemnification under the D&O Policy in respect of the settlement that he made with the Liquidator, covering (inter alia) both the Ingot Proceedings and the Insolvent Trading Proceedings. The Response filed by the Insurers pleads that had a number of matters - concerning the net worth covenant binding NCRA - been disclosed, the Insurers would not have agreed enter into the D&O Policy. The Insurers have also filed a cross-claim against Mr Ghose for the costs advanced by them on a reservation of rights basis; the cross-claim proceeds on the basis that as the Insurers are entitled (according to their case) to avoid liability under the D&O Policy, these costs are repayable.
17 Recent amendments to the summons in the Daya Proceedings are to the effect that he seeks indemnification under the D&O Policy for any liability arising in respect of the Insolvent Trading Proceedings as well as the Ingot Proceedings.
18 On 31 March 2007, judgment was delivered by McDougall J in the Ingot Proceedings in favour of each defendant. On 3 December 2008, the NSW Court of Appeal delivered judgment dismissing all appeals other than in respect of Mr Daya, who was found liable to the Ingot parties in the amount of $37,763,660.85. Both the Ingot parties and Mr Daya sought leave to appeal to the High Court of Australia; leave was refused on 4 September 2009.
19 On 20 July 2009, Bergin J made consent orders in the Insolvent Trading Proceedings, granting the Liquidator leave to amend its claim to join the Insurers as additional defendants, pursuant to s 6(4) of the Law Reform (Miscellaneous Provisions) Act 1942 (NSW). In the amended statement of claim in those proceedings, the Liquidator seeks declarations that Messrs Daya and Peck are entitled to indemnity under the D&O Policy for any liability arising in respect of the Insolvent Trading Proceedings, or, alternatively, pursuant to s 31 of the Insurance Contracts Act 1984 (Cth), that the Insurers are not entitled to avoid the insurance contract in the circumstances.
20 On 29 June 2007, Mr Williams filed a cross claim in the Insolvent Trading Proceedings. On 13 February 2008, Barrett J handed down reasons for judgment and on 21 February 2008 made orders dismissing certain parts of the claim as disclosing no viable cause of action and granting Mr Williams leave to re-plead. Mr Williams filed a notice of discontinuance against Mr Aroney. On 28 October 2009, Mr Williams filed his "second statement of cross-claim" ("the Williams Cross-Claim") against the Insurers. By his cross-claim, Mr Williams seeks declarations that he is entitled to indemnity under the D&O Policy for any liability arising in respect of the Insolvent Trading Proceedings and for the costs incurred in the Ingot Proceedings.
21 On 10 November 2009, the Peck Cross-Claim against the Insurers was filed in the Insolvent Trading Proceedings. Mr Peck seeks declarations that he is entitled to indemnity under the D&O Policy for any liability arising in respect of the Insolvent Trading proceedings and for the costs incurred in the Ingot Proceedings.
22 On 20 November 2009, the Insurers filed and served verified defences to the Williams Cross-Claim and the Peck Cross-Claim.
[13]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Parties
Applicant/Plaintiff:
Ghose
Respondent/Defendant:
CX Reinsurance Company Ltd & ors
Legislation Cited (6)
Law Reform (Miscellaneous Provisions) Act 1942(NSW)
Relevant Legal Principles
23 Rule 28.5 relevantly provides:
"28.5 Consolidation etc of proceedings
If several proceedings are pending in the court and it appears to the court:
(a) that they involve a common question, or
(b) that the rights to relief claimed in them are in respect of, or arise out of, the same transaction or series of transactions, or
(c) that for some other reason it is desirable to make an order under this rule,
the court may order those proceedings to be consolidated, or to be tried at the same time or one immediately after another, or may order any of them to be stayed until after the determination of any other of them.
Note . See also Division 5 of Part 6 with respect to joinder of causes of action and joinder of parties."
24 In the present case the Insurers do not seek to consolidate the three remaining proceedings. There might be plausible grounds for consolidating the Daya Proceedings and the Ghose Proceedings, but the Insolvent Trading Proceedings are of a different character with substantially more parties, so that consolidation would at least be extremely difficult and probably not feasible. Instead of seeking consolidation, the Insurers seek to recognise that the common issue of validity of avoidance of the D & O Policy arises in all three proceedings and therefore, they say, the proceedings should be heard together with evidence in one being evidence in the others.
25 While the form of wording is slightly different, r 28.5 is relevantly in the same terms as Order 29.5 of the Federal Court Rules 1979 (Cth), and authorities as to the exercise of the discretion under that rule are also of assistance. Counsel for the Insurers have assembled what seem to me to be quite comprehensive submissions, which trace through the case law as to the principles that govern the Court's exercise of the power to order consolidation or joint trial of proceedings under those rules. Counsel for Mr Ghose has informed the Court that he does not disagree with the Insurers' submissions on the relevant legal principles.
26 In my view a useful description of the correct judicial approach to an application under r 28.5 was given by Wolff J (as he then was) in Cousins v Cousins (1948) 51 WALR 57, at 60:
"In my opinion, consolidation is desirable and should be allowed where, as here, the issues are substantially the same, and the evidence is to all intents and purposes identical. I would, however, hesitate to lay down any inflexible rule. Consolidation is intended to save time and expense, as well as to avoid the awkward consequences of contrary findings on the same set of facts. Because it cannot be shown to have been done before in a like instance, it does not follow that the course of procedure which was ordered is not a proper one."
(See also Bishop v Bridgelands Securities (1990) 25 FCR 311, at 314 per Willcox J; Re Ling; Ex parte Ling v Commonwealth (1995) 58 FCR 129 at 134 per Hill J; Muller v Human Rights and Equal Opportunity Commission (Federal Court of Australia, 17 July 1997, unreported, Moore J); Aristocrat Technologies Australia Pty Limited v Global Gaming Supplies Pty Limited [2007] FCA 943, at [25] per Jacobson J; Dean v Phung [2009] NSWSC 201, at [21] per Hall J.)
27 Although his Lordship speaks of consolidation, in my view the same principles apply where the application is for a joint hearing. His Lordship's observations make it clear that the Court's essential task is to work out pragmatically whether the most efficient course consistent with the requirements of fairness would be consolidation, a joint hearing, immediately sequential hearings, entirely separate hearings, or something else (such as determination of separate questions prior to or after the hearing of the remainder of the proceedings). A pragmatic approach requires close attention to the nature of the claims in each set of proceedings and the likely course of the litigation if the proceedings are consolidated or jointly heard, compared with the course of litigation if the proceedings remain separate. A pragmatic approach involves the Court bringing to bear its experience in the conduct of hearings and case management, taking into account such matters as the potential savings of time and expense of one outcome compared with the other, and also the basic imperative that every litigant is entitled to a fair opportunity to present his or her case to the Court. I was referred to s 56(1) of the Civil Procedure Act 2005 (NSW), but in my view the articulation of the overriding objective of facilitating the just, quick and cheap resolution of the real dispute between the parties simply confirms the approach to be taken to such matters as consolidation or joint hearing of proceedings.
28 Modern courts do not confine the power to order consolidation or joint hearing to cases where there several actions have been brought which could have been joined in a single writ: see, for example, Re Ling; Ex parte Ling v Commonwealth (1995) 58 FCR 129, at 134 per Hill J; Aristocrat Technologies Australia Pty Limited v Global Gaming Supplies Pty Limited [2007] FCA 943, at [25] per Jacobson J. It is not necessary that the parties in the separate proceedings be the same parties: Horwood v British Statesman Publishing Co Ltd [1929] WN 38 (where two persons who claimed to have been defamed by the same New Statesman article brought separate proceedings for libel, which were then consolidated). The fact that a plaintiff in one set of proceedings is a defendant in another does not preclude an order for consolidation or, a fortiori, joint hearing: A Goninan & Co Ltd v Atlas Steel (Aust) Pty Ltd [2003] NSWSC 956, at [36]-[37].
29 It is of some utility to identify the factors that a court is likely to take into account in the exercise of its discretion on an application for consolidation or joint hearing. For example, Besanko J listed some nine matters to be considered, in the course of determining whether it was appropriate that eight proceedings be tried together (Humphries v Newport Quays Stage 2A Pty Ltd [2009] FCA 699 at [11]):
"1. Are the proceedings broadly of a similar nature?
2. Are there issues of fact and law common to each proceeding?
3. Will witnesses (lay and expert) in one proceeding be witnesses in one or more of the other proceedings?
4. Has there been an alternative proposal put forward that there be a test case and have the parties agreed to abide the outcome, or, at least, the determination of common issues of fact and law?
5. Is there a prospect of multiple appeals with substantial delays if the proceedings are not tried at the same time?
6. Will there be a substantial saving of time if the proceedings are tried at the same time, compared with each proceeding being tried separately?
7. Will an order that the proceedings be tried at the same time create difficulties in terms of trial management, complexity of procedural issues and difficulties in determining cross-admissibility of evidence?
8. Is one proceeding further advanced in terms of preparation for trial than the others?
9. Are there parties to one or some only of the proceedings who will be inconvenienced if all of the proceedings are tried at the same time ? "
30 Item 4 raises the question of alternative proposals. Often the savings of cost and time can be achieved, without creating the procedural complexities that arise when formal consolidation is ordered, by ordering that the proceedings be heard together, and perhaps also the evidence in one be received as evidence in the other: see, for example, Thompson v HFA Asset Management Ltd [2008] FCA 1926. If two or more the proceedings raise a common question of law, while there are some different matters of facts, the court has power to make an order for separate determination of the question: UCPR 28.2; and see International Advisor Systems Pty Ltd v XYYX Pty Ltd & Anor (No 3) [2008] NSWSC 430, at [8] per Brereton J.
31 Some other factors were identified by Hely J in Wilson v Minister for Land and Water Conservation for the State of New South Wales and Others (2003) 126 FCR 500; [2003] FCA 307. His Honour observed at [46] that a highly relevant factor in determining whether claims ought be consolidated is whether pursuing two claims, rather than a combined claim, is an abuse of process; and he also considered at [46] that a relevant factor pointing against consolidation was that it would force parties to be involved in a much larger set of proceedings relating to areas in which they had no interest. These considerations are relevant if the application is for joint hearing rather than consolidation, though in most circumstances they would be less weighty.
32 An important limiting principle is that an order under r 28.5 should not be made, if the order would be likely to expose a party to a substantial risk of real prejudice: Cameron v McBain [1948] VLR 245 at 247; Buckley v The Herald and Weekly Times Pty Ltd [2009] VSCA 118; Fong Consultants Pty Ltd v ATI Management Pty Ltd (1992) 108 FLR 140; A Goninan at [29]. In Buckley, the plaintiff in defamation proceedings was exposed to a substantial risk of real prejudice where a consolidation order had the potential to halve the potential value of the plaintiff's rights, by reason of a statutory maximum on damages recoverable in proceedings. Another example of prejudice was considered in A Goninan, at [58]-[59], namely the prejudice arising from the loss of a legitimate forensic advantage, such as the loss of a party's position as plaintiff; but the loss of the party's position as plaintiff is a factor that may be outweighed by other considerations.
33 Prejudice may also arise from consolidation or the joint hearing of proceedings, if the joinder of plaintiffs requires them to employ the same solicitor and counsel. This issue warrants further exposition, because of its potential relevance to the present application. While UCPR 7.25 does not impose such a requirement, there is a rule of practice that, without leave, separate representation of plaintiffs is not permitted.
34 The leading case on the issue is Lewis v Daily Telegraph Ltd (No 2) [1964] 2 QB 601, where the English Court of Appeal refused to permit the separate representation in libel proceedings of Mr Lewis and his co-plaintiff, a company of which he was director. Pearson LJ noted at 620-21 the problems caused by separate representation, finding that it was not consistent with proper or regular practice for two plaintiffs to be separately represented. His Lordship acknowledged that it was not an impossibility, but held (at 620) it was "not very easy to envisage such cases" and in the context of a libel case before a judge and jury it would be "extremely inconvenient and awkward" to have separate representation (at 619-621).
35 Russell LJ, concurring (at 622-623), noted that the basis of the rule is fairness to the defendant:
" Prima facie , co-plaintiffs, whether in one original action or in an action consisting of consolidated actions, must be jointly represented by solicitor and counsel. In a proper case, an order may be made authorising severance in point of representation; but this must be, I think, rare and should only be done to avoid injustice."
36 Although there Lordships in Lewis were directing their attention to separate representation in single proceedings, whether initiated as single proceedings or consolidated, the "extremely inconvenient and awkward" consequences of separate representation would also be capable of arising if separate proceedings are jointly heard.
37 In Australia, in Carnie v Esanda Finance Corp Ltd (1996) 38 NSWLR 465, at 470, Young J said it was clear under the rules of court that all plaintiffs must act by the same solicitor and counsel, and he said that the Court will waive this rule only in the most extreme circumstances, and that different views of plaintiffs in representative proceedings are not such a circumstance (referring to Goold & Porter Pty Ltd v Housing Commission [1974] VR 102, and SCI Operations Pty Ltd v Australian Paper Manufacturers Ltd (1983) 51 ALR 365).
38 Notwithstanding the strong expression of opinion by Young J in Carnie, it appears that there is no absolute rule that would prevent co-plaintiffs in a consolidated action, and a fortiori in separate proceedings jointly heard, from being separately represented. This was emphasised by the South Australian Full Court in Fox v Olsen & The State of South Australia [1999] SASC 411, where Mullighan J (with whom Doyle CJ and Wicks J agreed) stated at [19]:
"[I]t is clear that there can be no hard and fast rule. The usual requirement of common representation may be dispensed with in the appropriate case: Riebolge and Anor v Hynd Andary Pty Ltd & Anor: Hambros Australia Ltd & Ors v Hynd & Ors (1994) 176 LSJS 172 is an example. It is not without significance that in the present case the defendants sought the order that the actions be tried together. It seems that they do not perceive any prejudice to them. Obviously the learned Judge will have to establish, by directions, suitable procedures for conducting the trial. Questions of representation may have to be resolved depending upon how the plaintiffs propose to conduct the case. However, in cases such as the present which are complex and will involve a lengthy trial, the mere fact of different legal representation at the pre-trial stage, and even at trial, does not have the consequence that the discretion to order a joint trial miscarried."
(See also Dehsabzi & Dehsabzi v John Fairfax Publications Pty Ltd (No 3) [2008] NSWDC 273, at [7] per Gibson DCJ.)
39 In the present case, of course, the order for joint hearings is sought by the defendants in the Daya and Ghose Proceedings.
40 Fox v Olsen was a case in which orders were made that proceedings be heard together (not consolidated). More recently, in Thompson v HFA Asset Management Ltd [2008] FCA 1926, at [6], Jagot J listed a series of obstacles to consolidation, including the issue of whether the applicants should be permitted to be represented separately, and concluded that "the Court could not be 'affirmatively satisfied' that the orders would not result in unfairness to [the relevant party]". Her Honour took the view that much of the prejudice that would arise from consolidation, including prejudice as regards separate representation of plaintiffs, would be avoided if the order was simply that the proceedings be heard together.
41 Hely J noted in Wilson that a reason for refusal of consolidation was the possibility that it might impede the prospects of a negotiated settlement, or unnecessarily complicate a mediation process. However, in an earlier case, Pegasus Gold Inc v Bateman Project Engineering Pty Ltd [1999] FCA 490, at [8], Beaumont J was inclined to give this consideration little weight in the balancing process:
"In my view, there is considerable force in the respondents' contentions because of the inconvenience and inefficiencies potentially inherent in the concurrent conduct of hearings of similar factual issues between (in corporate group terms) virtually identical parties. On the other hand, whilst reasonable compromise is always to be encouraged by courts, it is, in truth, no more than a collateral consideration in the present context, and as a factor here is thus entitled to little weight in the balancing process."
42 Finally, it is to be noted that in an appropriate case, a de-consolidation order, or an order was sending an order for a joint hearing, can be made: Lewis v Daily Telegraph Ltd (No 2) [1964] 2 QB 601 and Bolwell Fibreglass Pty Ltd v Foley [1984] VR 97, at 119. The availability of a mechanism to reverse an order for consolidation or joint hearing might be a factor supporting the making of such an order, in a case where the Court is at present inclined to make the order but has some concerns about unforseen difficulties that might arise in future.
The Submissions on behalf of Mr Ghose
43 Counsel on behalf of Mr Ghose submitted that the application should be dismissed for the following reasons:
(a) it would be inappropriate for the judge who is to determine liability on the main claim in the Insolvent Trading Proceedings also to determine whether settlement of those claims by Mr Ghose was reasonable;
(b) there is insufficient commonality of issues between the various proceedings;
(c) Mr Ghose will be prejudiced by a joint hearing:
(i) by having determination of the Ghose Proceedings delayed as a consequence of a joint hearing being ordered;
(ii) by having to be involved in the hearing of proceedings that are much larger, will take longer to determine and in which he has no interest;
(iii) because he will inevitably be dragged back into a case he has already settled;
(d) it will be impractical and inappropriate for evidence in all proceedings to be admitted as evidence in the other proceedings.
44 I shall consider each of these matters in turn, and then I shall consider two other issues to which the Insurers appealed as strong advantages of a joint hearing: the saving of costs and time, compared with separate hearings; and reduction of the risk of inconsistent findings of fact or law.
Inappropriate for same judge to decide liability on the main claim in the Insolvent Trading Proceedings and whether the settlement of those claims by Mr Ghose was reasonable
45 If the Insurers' application is successful, a single judge will hear together the Ghose and Daya Proceedings and also the Insolvent Trading Proceedings. That judge will have to decide whether insolvent trading liability has been established against the remaining defendants in the Insolvent Trading Proceedings, namely Messrs Daya, Peck and Williams, though not against Mr Ghose who has settled that claim.
46 In a civil insolvent trading case brought by a liquidator, the liquidator must prove under ss 588G(1) and (2) and 588M(1) and (2) that:
(a) the defendant was a director of the company at the time when the company incurred a debt;
(b) the company was insolvent at that time, or became insolvent by incurring the debts;
(c) at that time, there were reasonable grounds for suspecting that the company was insolvent or would so become insolvent;
(d) the defendant failed to prevent the company from incurring the debt;
(e) either the defendant was aware at that time that there were grounds for suspecting insolvency or a reasonable person in a light position in a company in the company's circumstances would be so aware;
(f) the creditor has suffered loss or damage because of the company's insolvency;
(g) the debt was wholly or partly unsecured;
(h) the company has been wound up.
47 I understand it is not in contention that Messrs Ghose, Daya, Peck and Williams were directors of NCRA at relevant times. Assume that the Liquidator's insolvent trading claim is contested at the hearing of those proceedings by one or more of Messrs Daya, Peck and Williams, and that the Court finds that at a relevant time the company was insolvent and that there were reasonable grounds for suspecting insolvency. In that event, the Court will be required to make findings as to whether each remaining defendant was aware of the grounds for suspecting insolvency, or a reasonable person in his position in a company and the company's circumstances would be so aware.
48 If the proceedings are heard together, the same judge will also have to decide contemporaneously, in the Ghose proceedings, whether Mr Ghose is entitled under the D & O Policy to indemnification in respect of the settlement he has made with the Liquidator covering, inter alia, the Insolvent Trading Proceedings. If the judge concludes that the D & O Policy has not been validly avoided, the judge will then have to determine Mr Ghose's entitlement to indemnification under the Policy. The Court will need to determine the reasonableness of Mr Ghose's settlement of the various claims to which the settlement the relates and whether Mr Ghose conducted himself as a prudent uninsured in entering into the settlement deed (see Insurers' Response to Second Further Amended Summons, at [11(e)] and [11(f)]). In determining whether Mr Ghose's settlement was reasonable, the Court will need to consider the objective reasonableness of the settlement: CGU Insurance Ltd v AMP Financial Planning Pty Ltd (2007) 235 CLR 1 at [39].
49 Counsel for Mr Ghose submits that having to decide, at the same hearing, whether Mr Ghose is liable for insolvent trading and whether a settlement of that insolvent trading claim is a reasonable one, creates embarrassment, and potentially an appearance of injustice, that the Court should avoid.
50 The terms of the settlement made by Mr Ghose with the Liquidator have been tendered in a confidential exhibit, and it is unnecessary to disclose them here. Counsel's point can be explained in hypothetical terms: suppose that Mr Ghose has settled the insolvent trading claim by agreeing to pay the Liquidator a very large amount of money. That fact will be in evidence before the judge when he comes to consider whether Mr Ghose's co-directors, who have not settled, are liable to the Liquidator in respect of corresponding insolvent trading claims.
51 Counsel for Mr Ghose has referred to cases in this Court and the Federal Court of Australia where, in proceedings against multiple parties, one of whom has agreed to settle and to seek consent orders, the task of making the orders to give effect to the settlement has been referred to a judge other than the trial judge of the proceedings against the remaining defendants. For example, when two of the four defendants in the proceedings in the Equity Division in ASIC v Rich, No 5934 of 2001, agreed with the plaintiff to settle, the applications for the making of agreed declarations and orders consequent upon those settlements were referred to a judge other than the trial judge: see ASIC v Rich & Ors (2003) 44 ACSR 682; [2003] NSWSC 186 (relating to Mr Keeling); ASIC v Rich & Ors (2004) 50 ACSR 500; [2004] NSWSC 836 (relating to Mr Greaves).
52 A similar approach was taken by Allsop J in Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd [2005] FCA 524. In that case the Commission complained of contraventions of the Trade Practices Act against two respondents. The first respondent and the Commission reached agreement as to the resolution of the issues between them, and asked the Court to make orders that would involve acceptance by the first respondent of certain contraventions. Allsop J made an order referring the application for consent orders to another judge. He explained (at [10]) that he was concerned not to take any steps in relation to the consent application that might give rise to an argument that the contested hearing had miscarried or amounted to an inappropriate course of conduct in the administration of the judicial power of the Commonwealth. He continued (at [11]):
"In particular, my concern is that it might be said that, by being satisfied to the requisite standard of the existence of contravention based on admissions as to purpose of the first respondent, there was a residual apparent inability to deal with the same issues on a different body of evidence in the contested matter before [the second respondent]".
53 The Rich and Liquorland cases were both regulatory cases in which, notwithstanding settlement between the plaintiff and a defendant, the Court was required to hear evidence and make determinations on the basis of agreed facts, as the basis for declarations of contravention of a statute. In the present case, which is civil litigation between private parties, there is no requirement for a court to approve the settlement of the insolvent trading claim negotiated between Mr Ghose and the Liquidator, let alone to make a declaration of contravention, or to hear evidence for that purpose. That might be thought to distinguish the present case from the regulatory cases.
54 However, Mr Ghose also relies on Maher v Spedley Securities Ltd (in liq) and others (1992) 26 NSWLR 411, which was not a regulatory case. In that case the same judge heard a series of cases regarding the Spedley group, in which the same or similar issues were dealt with. In some of the proceedings he made findings that were critical of the recollection and credit, and the commercial conduct, of certain parties. He refused an application not to hear further related matters. On appeal, it was held that the judge should disqualify himself from hearing related matters in which the same issues and the credit of the same witnesses would arise for determination, on the ground of reasonable apprehension of bias by pre-judgment.
55 In my view the Spedley case is plainly and obviously distinguishable from the present case. Here, the settlement of the insolvent trading claim against Mr Ghose has already taken place, by virtue of a deed of settlement made in October 2005 and reflected in the simple filing of a Notice of Discontinuance on 1 September 2006. No court hearing was needed, no evidence was adduced, and there was no declaration or other orders by the Court. The only occasion that the Court will have to hear evidence and make findings of credit will be at the final hearing of the Insolvent Trading Proceedings, either in isolation or in combination with the Avoidance Proceedings. There is no ground for concern that actual or apprehended bias will be displayed at any future time.
56 In Spedley, Kirby P remarked (at 422-3):
"It should be noted that, in other contexts, it is not at all unusual for one judge to conduct interlocutory proceedings leaving the conduct of the trial to a judge who is unaffected by earlier opinions and unembarrassed by having given voice to those opinions. Within the same court it is by no means unusual for a judge to direct that an issue (for example, one of settlement requiring approval) should be dealt with by another judge to avoid just such embarrassment. Of course, the conclusion and perhaps the reasons of the other judge may come to the notice of the judge of trial. But the risk of bias and of the reasonable apprehension of bias are significantly reduced by adopting such expedients."
57 The practice that his Honour described was, at least in part, a practice adopted in regulatory proceedings where declarations of contravention may be required on agreed facts. His remarks indicate that in other cases, the question is whether the expedient of having some interlocutory matters determined by a judge other than the trial judge should be adopted in order to avoid any reasonable apprehension of bias on the part of the trial judge. In my opinion, if the three proceedings were to be heard jointly in the present case, there would be no sensible basis for a contention of bias or apprehended bias arising out of the fact that the same judge would be required to determine insolvent trading liability in the case of some directors and the reasonableness of a settlement of the insolvent trading claim against another director.
58 If, for example, the trial judge were to conclude that the remaining defendants had no insolvent trading liability because the company was not insolvent at relevant times, or there were no reasonable grounds for suspecting insolvency, or there were reasonable grounds but none of the remaining defendants were aware or should have been aware of them, the judge would nevertheless have no difficulty in considering as a separate matter whether it was reasonable in October 2005 to enter into the settlement that Mr Ghose in fact made. That is the case, a fortiori, if the trial judge were to conclude that one or more of the remaining defendants had some insolvent trading liability.
59 In summary, I reject Mr Ghose's objection to the application on this ground.
Common issues
60 According to the Insurers, the common issue between the Avoidance Proceedings and the Insolvent Trading Proceedings, justifying orders for a joint hearing, is the validity of the avoidance of the D & O Policy by the Insurers. At the final hearing or hearings, the general issue of validity of the avoidance of the Policy will depend upon whether the precise factual grounds upon which the Insurers have relied, in relation to each defendant, have been established by the evidence.
61 The Policy is a composite policy - that is, it is in character a bundle of separate contracts: Arab Bank Plc v Zürich Insurance Co [1999] 1 Lloyd's Rep 262, 277; Green v CGU Insurance Ltd (2005) 215 ALR 612 at [24]-[27]. Consequently the Insurers have stated their grounds for avoidance of the Policy separately for each director, in their English solicitors' letter dated 6 July 2004 to the solicitors for each of Messrs Ghose, Daya, Peck and Williams. Similarly, in their various Responses or Defences the Insurers have pleaded the knowledge and actions of each particular director to whom the pleading relates.
62 Though separately made, the Insurers' allegations against each director appear to me to be virtually identical. This can be seen most readily in the letters of avoidance dated 6 July 2004. Each letter sets out facts of which the Insurers are said to be satisfied. The statement of facts is quite complex and a proper understanding would demand more background knowledge than I presently have. It is clear enough, however, that the Insurers claim that:
(a) a deceptive scheme was adopted in respect of financial statements for June 1998 with the intention of engineering the figures so as to conceal a breach of a minimum net worth covenant given to Dresdner Bank;
(b) the driving force behind the scheme was Mr Daya; Mr Peck and Mr Aroney were the chief architects of the scheme; Mr Williams consented to the scheme being put into effect subject to certain conditions; and Mr Ghose was consulted and kept fully informed of what was going on and why;
(c) the auditors, PricewaterhouseCoopers, were not fully consulted about the way the scheme was devised and put into effect;
(d) the adoption of the scheme could not have taken place without knowledge on the part of each of Mr Ghose, Mr Daya, Mr Peck, Mr Aroney and Mr Williams;
(e) the scheme was not disclosed to the Insurers, and the non-disclosure was material because the Insurers would not have been prepared to issue a D & O Policy to a company where any director or officer of that company was prepared to behave in such a manner.
63 The letters of 6 July 2004 were written after the Insurers had previously communicated the basis upon which they were minded to avoid the Policy for non-disclosure, and had received representations. In the letters of 6 July, the Insurers' solicitors commented briefly on some specific arguments that had been raised in the directors' responses, observing that there was "a similarity in the points of objection raised".
64 The factual issues addressed in this part of the letters were, in summary:
(i) the question of the level of the minimum net worth covenant, specifically whether there had been an agreement to reduce it from USD140 million to USD125 million;
(ii) whether Dresdner Bank was on notice that there would be failure to comply with the minimum net worth covenant by virtue of a letter written by Mr Ghose on behalf of NCRH dated 11 May 1998, in circumstances where (according to the Insurers) it was perceived by the directors and expressly stated in the letter that the minimum net worth covenant was for USD175 million rather than USD140 million or USD125 million;
(iii) whether the directors had no concern that there might be a breach of covenant, because Dresdner Bank had recognised that the covenants were draconian and there had historically been many breaches of covenant that Dresdner Bank had agreed to waive; or whether, conversely, the directors at all relevant times were "not sanguine" about the potential consequences of a breach of covenant and preferred not to face up to telling Dresdner Bank that on 30 June 1998 they were in breach of a covenant to which they had agreed only four days earlier;
(iv) whether a representative of Dresdner Bank, in a letter of 11 October 1998, acknowledged or consented to certain aspects of the scheme;
(v) whether the same letter constituted evidence that the Bank knew that there was a breach of the minimum net worth covenant;
(vi) whether it had been open to the directors to avoid breach of the minimum net worth covenant by stating the value of reserves at a lower figure, or whether to do so would have been deception of another kind.
65 I note that there are also issues for determination concerning the effect of the Insurance Contracts Act 1984 (Cth).
66 For present purposes, two things are notable about the Responses/Defences and the letters of 6 July 2004. First, they indicate that from the Insurers' perspective there is a very large degree of commonality of fact and law as to the central factual and legal propositions on which the Insurers rely in their primary case in each set of proceedings. Second, because there are separate allegations against each of the remaining directors, depending upon the director's state of mind in each case, there can be no assurance that the cases presented by the individual directors at the final hearing or hearings will have an equivalent level of commonality, and consequently there is a risk of substantial divergences in fact and even in law.
67 In the written submissions made on their behalf, the Insurers allege (para 41) that the proceedings proposed to be jointly heard raise common questions of fact and law as to:
(a) the facts upon which the Insurer's avoidance is based (the non-disclosure);
(b) the circumstances in which the D & O Policy was entered into;
(c) the interpretation and application of Section X clause 4 of the D & O Policy;
(d) the interpretation and application of the Insurance Contracts Act to the circumstances in which the D & O Policy was entered into and the relevant clauses of the Policy.
68 As to (a) and (b), a potential obstacle to determining to what extent these questions of fact will be common to all proceedings is that up to the present time, neither side has served all of their evidence. The affidavits of Mr McGrath for the Insurers and Ms Chang for Mr Ghose on the present application indicate that the process of pleading has been a large and lengthy undertaking, which appears at last to be complete or near-complete in each of the proceedings. The Insurers have only become parties to the Insolvent Trading Proceedings relatively recently. There has been discovery, at least the Ghose Proceedings, but it is not clear to me that the process of discovery is complete in any or all of the proceedings. There are no active directions for the filing and service of affidavits or witness statements or experts' reports at this time. It appears that in the absence of such directions, affidavit evidence has not yet been served.
69 Mr McGrath has deposed that the Insurers will have at least two lay witnesses and at least three expert witnesses, and that they anticipate relying on those same witnesses in each set of proceedings, with 10-20 lever-arch volumes of the same documentary material in each set of proceedings. Counsel for Mr Ghose submitted that this evidence is so lacking in content that it should not be accepted. Mr McGrath's evidence is strikingly vague, and gives no real indication of the likely content of the evidence that will be relied upon at the trial. But the general shape of the evidence can be deduced, I think, from a review of the pleadings and in particular, the letters of 6 November 2004, when combined with Mr McGrath's description. I therefore do not reject the evidence of Mr McGrath, though I agree with counsel for Mr Ghose that the Court is not in a position to assess the extent to which the evidence at the trial will be controversial, nor how long each witness will take to give evidence and be cross-examined. I also note that the Court will expect the Insurers to comply with the Court Rules regarding expert evidence, a process which is likely to require one or more joint reports.
70 Counsel for Mr Ghose challenged the assertion in the Insurers' written submissions that evidence from other directors concerning information said to be available to all directors may be relevant to the Court's assessment of the state of knowledge of an individual director. Admissibility will, of course, depend upon the specific evidence to be adduced, but it seems to me reasonably likely that some evidence about the information available to all directors will be relevant to the determination of the individual director's state of knowledge. The issue as to relevance is likely to be whether the evidence as a whole provides a basis for an inference that the information shown to be available to all directors is likely to have been known to the individual director.
71 Counsel for Mr Ghose submitted that at the present time, the Court is not in a position to conclude that the lay, underwriting and expert evidence foreshadowed by the Insurers will go to a common issue or be in contest, since the content of that evidence is unknown. I think that submission overstates the difficulty as regards the Insurers' evidence, given the evidence of Mr McGrath, the pleadings and the Insurers' letters dated 6 July 2004. In my view the Court can infer that the Insurers' primary affidavit evidence, lay and expert, will raise common, indeed almost identical, questions of fact in each of the proceedings as to the matters described in items (a) and (b).
72 However, I have a substantial concern, at the present stage in the proceedings, that the factual issues concerning each director's state of knowledge will spin off in different directions once the evidence of each director is known and the Insurers have had an opportunity to respond to it. In part, that concern arises out of the letters of 6 July 2004, para 16.4, from which it appears that there are some important differences in the positions of each of the directors: Mr Daya is said to be the driving force, Mr Peck and Mr Aroney are said to be the chief architects, Mr Williams is said to have consented to the scheme and Mr Ghose is said to have been consulted and kept informed. The risk is that, say, a substantial volume of evidence will be tendered by Mr Ghose and Mr Williams, respectively, about their contemporary conversations and the documents they saw at the time, going to the question whether they respectively were adequately consulted and informed, which would have little or no relevance to the position of any other director than the director who adduces the evidence. For all we know at this stage, such evidence may become the central focus of the hearing so far as it relates to that director.
73 In their written reply submissions and supplementary reply submissions, the Insurance submitted that there will be a common and detailed "overarching actual matrix (including common documents)" in the three proceedings. They said that each case the Court would be required to make findings of fact as to the matters within that common factual matrix, going to the existence of the facts relating to the alleged deceptive conduct irrespective of whether individual directors knew the facts. My difficulty with this submission is that it is too early to tell whether, at the hearings, how much of the "common factual matrix" will be really in issue, and how much the central issues at the hearings will relate to the states of knowledge of the respective individual directors. The same, it applies to the alleged common factual matters relating to what a prudent insurer would have done had the facts been known at the time the policy was written.
74 There does seem to be a common issue, on which the parties disagree, as to whether the D & O Policy is governed by Bermudan law or Australian law, and if Bermudan law, the content of that law. There may also be a common issue about the proper construction of clause 4 of Section X of the D & O Policy, noted below. But those matters are patently insufficient to justify ordering a joint hearing of cases in which some major factual issues may turn out to be very different from one another.
75 As to (c), Section X clause 4 of the Policy says:
"Any person who or entity which was not a party to the Proposal (or was a party to the Proposal only by reason of the COMPANY's having effected the Policy for their benefit) shall be treated as having subscribed to the declarations contained in the Proposal for the purpose of determining the availability of coverage for their interests, to the sent that the INSURERS shall not be prejudiced in relation to any CLAIM affecting such interests by any non-disclosure of material circumstances within the knowledge of any such persons or entities seeking to benefit from this Policy."
Counsel for Mr Ghose submitted that the Insurers have not indicated precisely what question of fact or law they have in mind about the interpretation and application of clause 4. I agree with this submission, and I would add that if the issue of interpretation relates to the meaning of the terms "non-disclosure of material circumstances" and "knowledge", the particular ambiguity to be resolved may vary from director to director depending upon the evidence of the state of knowledge of each of them.
76 As to (d), once again the precise issues arising out of the interpretation and application of the Insurance Contracts Act had not been identified by the Insurers, and it is possible that different issues will arise in respect of different directors.
77 In my view, therefore, the two Avoidance Proceedings and the Insolvent Trading Proceedings did not have a sufficient commonality of issues to warrant an order for joint hearing at this stage. Conceivably, the problem of lack of commonality of issues might disappear when the affidavits and tender materials of the parties have all been served; conversely, however, the service of the remainder of the evidence might accentuate the differences between the proceedings and reinforce the desirability of separate hearings.
Prejudice
78 It was submitted that Mr Ghose would suffer prejudice of three kinds if an order for joint hearing were made.
79 First, it is said that the order for a joint hearing would cause delay in the hearing and determination of the Ghose Proceedings, compared with the time that would be taken if they were to be heard separately. It seems that the Ghose Proceedings are substantially further advanced than the Insolvent Trading Proceedings, partly because of the relatively recent joinder of the Insurers. Additionally is an as yet unresolved application by the Liquidator for leave to examine Mr Williams. Quite apart from the time taken in examining Mr Williams of the application succeeds, the resolution of the application could easily lead to further interlocutory applications, such as an application against the Insurers under s 6(4) of the Law Reform (Miscellaneous Provisions) Act 1942 (NSW) in their capacity as insurers of Mr Williams, which would presumably be followed by a further round of pleadings. Therefore ordering a joint hearing would probably result in a delay, probably of some months, in the hearing and determination of Ghose Proceedings. That would be prejudicial to Mr Ghose.
80 Second, it is submitted that if a joint hearing were ordered, Mr Ghose would be required to be involved in a significantly larger and more complicated case than the Ghose Proceedings, much of which would have nothing to do with him because he has settled the Liquidator's insolvent trading claim against him.
81 I agree with this submission. Even if there were substantial common issues in the Ghose Proceedings and the other proceedings, there would also be some important, possibly crucial issues, that are not common issues between the Ghose Proceedings and the others. In particular, in the Insolvent Trading Proceedings the Liquidator must prove that NCRA was insolvent from a particular point of time (s 588G(1)(b)), that there were reasonable grounds to suspect insolvency at relevant times (s 598G(1)(c)), and that the defendant directors were aware of those reasonable grounds or reasonable persons in their shoes would have been aware (s 588G(2)). Those issues ("the insolvency issues") need not be determined in the Ghose Proceedings and are not of interest to Mr Ghose because he has settled the Liquidator's claim against him. They are questions that will be contested in the Insolvent Trading Proceedings and there will in all probability be substantial evidence on the insolvency issues which will take considerable time to hear on a contested basis.
82 There are some other issues raised in the defences of Messrs Daya, Peck and Williams in the Insolvent Trading Proceedings that will not need to be decided in the Ghose Proceedings, including:
whether there are any estoppels against NCRA in the Insolvent Trading Proceedings, in light of issues raised and determined in the Ingot Proceedings;
if NCRA was insolvent from a specified point in time, what debts were incurred after that time;
whether there are any statutory defences available to those defendants.
83 Given the presence of these issues and, in particular, the insolvency issues, if there were a joint hearing of the Avoidance Proceedings (including the Ghose Proceedings) and the Insolvent Trading Proceedings, Mr Ghose would be required to endure a substantially longer trial than would be needed to resolve the Ghose Proceedings alone.
84 Mr McGrath gave evidence in his affidavit of 24 November 2009 that the insolvency issues in the Insolvent Trading Proceedings (as opposed to the D & O Policy issues) would take hearing time of about one to two weeks, but after cross-examination he said the that his estimate was too low, and on the basis of the assumptions in his affidavit the correct figure would be approximately double the estimate he had made. Presumably Mr McGrath would make the same estimate of the amount of time to be devoted to the insolvency issues in a joint hearing. That means that in a joint hearing, some 2-4 weeks of the hearing time would be taken up on insolvency matters in which he would not be directly interested. To that should be added the amount of time taken up the issues about estoppel, the incurring of debts and the statutory defences, and also the amount of time taken up in ascertaining the states of mind of Messrs Daya, Peck and Williams.
85 There was a suggestion in submissions that Mr Ghose could be excused from attendance at some of the hearing, and possibly even that some issues that did not concern him could be determined as separate questions. Reference was made to cases in which, in large and complex proceedings, the Court has arranged the trial in stages, so as to make it unnecessary for all parties to attend all parts of the hearing (citing Australian Securities & Investments Commission v Axis International Management Pty Ltd [2009] FCA 250 at [27]; Australian Securities & Investments Commission v Somerville [2008] NSWSC 788 at [48]-[50], [57]; Dean-Willcocks and Another v Air Transit International Pty Ltd and Others (2002) 55 NSWLR 64 at [70]; Main-Rd Property Group Pty Ltd v Pelligra & Sons Pty Ltd [2007] VSC 43 at [25]; Jendas Pty Ltd v Jolly [1997] 2 VR 106 at 107.
86 The main problem with adopting those suggestions in the present case is that it would be very difficult to be sure that at any particular time the evidence before the Court (to be admitted in all proceedings) would not involve Mr Ghose. For example, evidence as to whether the remaining directors were aware of reasonable grounds to suspect insolvency could very easily overlap with evidence bearing on whether the directors were aware of the allegedly fraudulent scheme to defraud Dresdner Bank. Another potential problem would be that witnesses who had something to say both on matters not concerning Mr Ghose, and on matters that did concern him, might have to be called to give evidence twice if the trial were to be conducted in stages.
87 The third aspect of prejudice to Mr Ghose is said to be that there is something intrinsically unfair and prejudicial in a defendant who has settled the particular claim by the plaintiff being, in effect, dragged back into that case years later by virtue of orders for a joint hearing and for the evidence in each to be admitted in every set of proceedings. I generally agree with this submission, though I am not sure that it identifies a separate category of prejudice. It seems to me that the prejudice identified by the submission is that Mr Ghose would be required at least to keep a watchful eye on the whole of the joint proceedings, even those parts in which he was not interested, because of the order that the evidence in one set of proceedings was to be evidence in each other set of proceedings. That basic prejudice would arise if a joint hearing were ordered in circumstances where a large component of the joint hearing never had any connection with the party objecting to the order. Where the position is that this component of the joint hearing was once of interest to the objecting party but has ceased to be because the objecting party has negotiated a settlement, presumably at some cost, the prejudice of having to be involved in that component of the joint hearing is exacerbated.
88 In their reply submissions, the Insurers contended that by the terms of the confidential deed of settlement entered into by Mr Ghose, Mr Ghose accepted obligations that are said to have the effect that the Ghose Proceedings are now being prosecuted for the benefit of the Liquidator. It seems to me that the commercial effect of the deed of settlement is not a matter be gleaned solely from reading the document. That issue is collateral to the application. Before I could confidently conclude that Mr Ghose has become simply a proxy for the Liquidator in the Ghose Proceedings, I would need to give the affected parties the opportunity to adduce evidence addressing the true commercial relationship between those parties. This submission invites the Court to jump to a conclusion without proper investigation, a step that would be unfair to Mr Ghose and possibly also to a Liquidator, who has not appeared on the application. Therefore I reject the submission.
89 In summary, an order for joint hearing the Ghose Proceedings, the Insolvent Trading Proceedings and the Daya Proceedings would in all probability lead to a substantial delay in the hearing of Mr Ghose's case, to his prejudice; and it would require him to participate in all keep under scrutiny substantial parts of the case, perhaps of more than four weeks duration, which no longer concerned him, to his further prejudice. That prejudice would be exacerbated by the fact that he had negotiated a settlement of the issues no longer of concern to him, and the effect of the joint hearing would be to drag him back into those issues.
Impracticality of evidence in each set of proceedings being evidence in every other
90 The Insurers submitted that it was unlikely that there would be any difficulty in relation to the cross-admissibility of evidence. But counsel for Mr Ghose strenuously objected to such an order. For reasons I have given, a substantial amount of the evidence necessary to establish the relevant facts in one set of proceedings will necessarily be different than that required to establish the relevant facts in the other proceedings. I have identified the insolvency issue and the question of the state of knowledge of each individual director, and also some questions of estoppel, questions about when debts were incurred and questions concerning the statutory defences to insolvent trading liability. It seems to me inappropriate for the Court to order that evidence on those matters be admitted in the Ghose Proceedings where those issues are not raised at the evidence may have some collateral significance. I agree with counsel for Mr Ghose that it would be impossible as a practical matter for the Court to manage this problem by limiting the use of certain parts of the evidence in the joint proceedings under s 136 of the Evidence Act 1995 (NSW).
Saving of costs and time
91 Mr McGrath estimated that if there were separate trials, each of the Ghose Proceedings and the Daya Proceedings would require a hearing off 3-4 weeks, and the Insolvent Trading Proceedings would requiring a hearing of 5-8 weeks (3-4 weeks for evidence and argument going to the Insurer's avoidance of the D & O Policy, and 2-4 weeks for evidence and argument going to insolvent trading).
92 Mr McGrath did not estimate the amount of time that would be saved if a joint hearing were ordered. The Insurers simply submitted that the saving would be "substantial". Counsel for Mr Ghose submitted that:
"One would have expected that any evidence given by the Insurers on these matters would have been given on a detailed and considered basis, and addressing detailed questions as to the nature of the evidence that a particular witness would be expected to give, the identity of the witness, and the time that that evidence would take to be given, as is commonly done in applications such as for security for costs."
93 I agree that more detailed evidence or submissions by the Insurers may well have been of assistance, but nevertheless one can infer from materials currently before the Court that if there have to be three separate hearings to deal with the Ghose Proceedings, the Daya Proceedings and the Insolvent Training Proceedings, and on each occasion 5 or 6 witnesses on behalf of the insurers must be heard and 10-20 volumes of evidence tendered, the whole process will take substantially longer than hearing the witnesses and receiving the evidence on a single occasion. To the extent that counsel are able to cross-examine witnesses in the later hearings by reference to their (possibly inconsistent) evidence on an earlier occasion, one can anticipate that the total hearing time for the three proceedings will be even greater.
94 Therefore I am persuaded that there would be worthwhile savings in terms of costs and time if an order for joint hearing were made, provided that the trial could be conducted relatively straightforwardly and without interruption.
Inconsistent findings
95 If substantially similar questions have to be resolved in three sets of proceedings, with substantially similar evidence adduced separately on three occasions, there will be a risk of conflicting decisions on questions of fact. That risk could be avoided by ordering a joint hearing before a single judge. But it is correctly pointed out on behalf of Mr Ghose that the risk of inconsistent findings is one of the factors to be weighed up by the Court in exercising its discretion on an application for a joint hearing. Eliminating every possibility of inconsistent findings is not an overriding imperative.
96 In their reply submissions the Insurers contended that while the avoidance of inconsistent findings may be one of a number of factors that the Court will consider, the importance of this factor cannot be overstated, and in an applications such as this it should be treated as a significant or even determinative factor. They cite no fewer than eight cases to support these propositions. But the cases do not say more, in my view, than that this is an important matter. I have done my best to take it into account but I believe, in the circumstances of this case, that other factors outweigh it.
97 It was contended on behalf of Mr Ghose that the Insurers will succeed in the Ghose Proceedings only if the Court makes findings that are in substance inconsistent with the findings made by McDougall J in the Ingot Proceedings. It seems to me unnecessary to deal with this submission. The point seems to be that there is already a risk of inconsistent findings. If that is so, nothing that I can do in dealing with this application will avoid the risk. But the possibility that I might avoid further inconsistency of findings is still a factor to be weighed up in deciding whether to make the order for a joint hearing.
Conclusions
98 Doing my best to weigh up all the factors I have specifically discussed, and other matters addressed in submissions but not expressly mentioned in these reasons for judgment, I have reached the conclusion that at this stage, no order for joint hearing should be made, and no order should be made that evidence in each set of proceedings be evidence in every other. The consideration to which I give most weight is that, although superficially there seems to be a major common issue in the proceedings, concerning the validity of the Insurers' avoidance of the D & O Policy, on analysis that issue comes to depend on a complex factual inquiry that includes determining the state of knowledge of each individual director at relevant times. I am not persuaded that at this factual level there has been shown to be sufficient commonality of issues to justify a joint hearing. That is so particularly when one considers the complexities that would be involved in managing the joint hearing of these commercial proceedings, and the prejudice that would be suffered by Mr Ghose in the ways that I have identified.
99 I have acknowledged the possibility that when all the affidavit evidence has been served, and hence the factual issues to be resolved concerning the directors' state of knowledge have become clearer, the Court might be able to make an order for joint hearing with more confidence. On the other hand, the serving of evidence might demonstrate why it would be unwise to do so; and moreover, it may be that by the time that stage has been reached, the Ghose Proceedings will be ready for separate trial and the Court will not wish to make an order that would delay those proceedings for the sake of a joint hearing.
100 In part, my decision to reject the application depends upon matters peculiar to Mr Ghose. There may be a case for hearing the Daya Proceedings and the Insolvent Trading Proceedings jointly, while allowing the Ghose Proceedings to go to separate trial (earlier, one would hope, than the joint hearing). I would not be prepared to order a joint hearing of the Daya Proceedings and the Insolvent Trading Proceedings at this stage, in the absence of some clarity about how the issues concerning the states of knowledge of Mr Daya, Mr Peck and Mr Williams respectively are to be addressed in evidentiary terms. If there are major separate issues about each of those parties, it may continue to be unsuitable to require a joint hearing.
101 The applications in the three sets of proceedings also seek an order under Part 2 Rule 1 of the UCPR that the three proceedings be case managed concurrently in the Corporations List. In my view it is desirable that the three proceedings travel together, at least for the time being, and that they be case managed by the Corporations Judge. All that I need to do to achieve that outcome is to stand the proceedings into the Corporations List, where the Corporations Judge will decide, with the assistance of counsel, what should be done next in order to bring the matters efficiently to their respective hearings and to deal with any further interlocutory issues that may arise.
102 I am acutely aware that the Insurers are encountering and seeking to address a major difficulty about this litigation, namely that unless something can be done, they will be forced to conduct three sets of proceedings in which they will adduce evidence from their witnesses (some of whom may have to travel from overseas) three times and tender the same documents, directed to broadly the same factual area (though as I have found, some important issues may emerge from the evidence that are not common issues). I have therefore considered whether there might be some other procedure to ameliorate their difficulties. At the hearing of the application there was discussion about whether some identified common questions might be addressed by ordering their determination as separate questions prior to the final hearings. But when counsel had the opportunity to give full consideration to this possibility, there was no enthusiasm for it at either end of the bar table. Indeed, senior counsel for the Insurers handed up a note setting out reasons why such an approach would be inappropriate to the circumstances of the present case. It is unnecessary to go through the matters explored in the note, given that neither side seeks such an order.
103 Another possibility would be to treat one of the cases as a test case. If the Ghose Proceedings make the progress towards final hearing that I have been led to believe they will make, and the Insolvent Trading Proceedings bump along from interlocutory application to interlocutory application, a decision in the Ghose Proceedings may become available before the Insolvent Training Proceedings (and perhaps also the Daya Proceedings) are ready for trial. Judgment in the Ghose Proceedings could provide grounds for the parties to reconsider their approach to the other cases.
104 Therefore I shall dismiss the applications for joint hearings and other relief filed on 1 October 2009 in the Ghose Proceedings and Daya Proceedings and on 26 November 2009 in the Insolvent Trading Proceedings, and stand each of those matters into the Monday Corporations List in a few weeks' time. I expect the Corporations Judge will be particularly interested in bringing the Ghose Proceedings speedily to trial.
105 As to costs, the application originally sought an order that the costs of the motion be costs in the cause in each of the (then) four proceedings. Although both parties who contested the application subsequently sought costs against the other, in my view the order originally sought is the correct one. I think there were some plausible arguments supporting the application under r 28.5, though I have decided not to make the orders sought. These are very complex proceedings, and the parties should be encouraged to bring forward any coherent proposals to bring the litigation to a just, quick and cheap resolution. An order that costs be costs in the cause better reflects those considerations than an order requiring the unsuccessful party to pay the successful party's costs.