HIS HONOUR: On 23 and 24 July 2018, I heard a dispute between the parties as to whether there had been an "Event of Default" for the purposes of an Amended Note Issue Deed made on 14 May 2015 and varied on 2 April 2015. The parties agreed that there were three issues for decision. The first was whether what it is convenient to call the "Interstage Loan" was required, by the terms of cl 17.1(e) of the Amended Note Deed, to bear interest and be secured. The second was whether there had been a breach of the obligation, so construed, because the Interstage Loan did not bear interest and was not secured. The third was whether there had been an Event of Default for the purposes of clause 9.1(b) of the Amended Note Terms.
It was common ground that the fundamental question was whether there had occurred an Event of Default. It was equally common ground that if the defendants were to succeed in their contention that there had been an Event of Default, all three of the issues that I have summarised must be answered in their favour.
For reasons that I gave, I took the view that the expedient course for the swift resolution of the real dispute was to assume, without deciding, that the first two issues should be answered in favour of the defendants, and then to turn to the third. I did that in substance because there were independent arguments as to the occurrence of an Event of Default which in my view led to the conclusion that there was not such an event, and that that conclusion would stand even if the first two issues had been answered in favour of the defendants.
In consequence, having decided for the independent reasons to which I have just referred that there had been no Event of Default, I granted appropriate declaratory relief. That was done in my reasons of 3 August 2018: GPG Fortitude Valley v Thakral Capital Australia [1] .
Some 14 days after those reasons were given, the defendants filed a Notice of Motion by which they sought leave pursuant to UCPR r 9.1 to file and serve a cross-claim. They sought, further, pursuant to r 9.10, that the cross-claim be dealt with notwithstanding that the substantive dispute had been resolved.
Initially, the plaintiffs opposed that relief. They put a number of submissions as to its lack of utility. When I raised the question of whether there would be a submission that the cross-claim was in effect to be decided by virtue of estoppels arising out of the judgment that I had given and the declaration that I had made, the plaintiffs changed their position somewhat, and said that they did not oppose the grant of leave.
Leave is required because, by virtue of r 9.1, where a proceedings is commenced by summons, the cross-claim is to be "made" before the return date of the summons unless the Court allows further time for its filing. As I have indicated, if a cross-claim is filed (either as of right or pursuant to leave under r 9.1), it may proceed even if judgment has been entered on the originating process.
The arguments that the cross-claim seeks to advance are in substance the first two of the issues that were raised for decision in the proceedings. That is to say, the cross-claim would seek to have the Court decide, rather than simply assume, the answer to those questions. It is no doubt the case that if the Court were to conclude that the Interstage Loan should have borne interest, then there may be some impact on the "Additional Return" payable, in due course, to the defendants. I noted that possibility at [52] of my earlier reasons. A decision as to what that Additional Return might be would require a determination as to the appropriate rate of interest. The parties were at odds, on the hearing of the Notice of Motion, as to whether this was something that could be dealt with pursuant to the terms of the arrangements between them or whether it too would require decision by the Court.
I should note that shortly after the summons was filed on 7 March 2018, the parties discussed "a stand-alone commercial arrangement to resolve a range of outstanding issues between them". Those words come from a letter dated 10 April 2018 from Arnold Bloch Leibler, the plaintiffs' solicitors, to Cornwall Stodart, the defendants' solicitors. The letter makes it clear that the "arrangement" included, but was not limited to, the consequences of this Court's decision on the question of interest. The parties agreed that if the effect of the decision were that interest is not payable, then the Interstage Loan was to be paid within nine months after Stage 2 practical completion, with a proviso that can be put to one side. If the effect of the Court's decision were that interest was payable, the date would be 15 months after Stage 2 practical completion, again with a proviso that can be put to one side.
The parties agreed, further, that if interest were payable, it will be payable from the proceeds of the Stage 2 development in accordance with the existing agreement of the parties.
On that basis, the defendants in effect agreed that they would not seek to act on their argument that there had been an Event of Default at least until this Court decided that fundamental question.
It is therefore apparent that a decision on the interest question will have some practical consequences. One of those consequences will be to decide in effect when the Interstage Loan is repayable. Another will be the impact on the amount of the Additional Return payable to the defendants. But because the arrangements to which I have referred (and I should have said that they were accepted by a letter of 13 April 2018 from Cornwall Stodart to Arnold Bloch Leibler) are part of the apparent "stand-alone commercial arrangement" that had been reached, it is quite clear that there may well be other consequences as well.
At present, the utility of the declaration now sought is somewhat limited. It may help to resolve the date of repayment of the Interstage Loan. But there may be other questions that remain to be resolved. I am not at all persuaded that it is appropriate to make a declaration which may have consequences beyond those sought without knowing the full extent of the controversies between the parties which, one way or another, the declaration being sought would resolve.
There is, further, the consideration that the defendants made a conscious decision not to cross-claim when the proceedings were under way. No doubt, they did that because the plaintiffs themselves had sought declaratory relief. However, in my view, it was always apparent that the Court might do as I had done, and cut through to the real dispute and deal with that. If the defendants had taken the view that there was some utility to be gained by what might be called the intermediate declarations, over and above the decision on the real question of the occurrence of an Event of Default, it was in my view incumbent upon them to raise that at the time and have it resolved at the time.
In short, this seems to me to be a matter where two considerations suggest that leave should be refused. The first is that not all the real consequences of the declaration sought have been spelled out. The second is that it would permit the defendants to run their case in a different way to the way that they elected to run it at the hearing of the summons.
As against that, it is said that the parties have spent a lot of money to get to the stage they are now at, and that the determination of the question now would give them some further benefit for that expenditure.
If leave is refused, the parties submit, they will have to come back to court and incur further expense in doing so.
That does not seem to me to be a particularly significant matter. The work has been done. If in due course the parties seek to reagitate the question, one or other of them could commence fresh proceedings. The material is available. The submissions are available. The parties could then do as they seek now to do, and have that question decided upon the basis of the existing evidence (perhaps rebadged or repackaged) and the existing submissions.
However, if the consequences of the decision are to go further, they will need to be addressed separately in any event and the question of expense becomes of somewhat less significance. But even in that event, at least the initial stages of that possible future dispute could be dealt with in the way that I have just suggested.
There was also some suggestion that there would be estoppels arising out of the decision that I have given. I do not think that this is correct. There is certainly no estoppel per rem judicatam. That is because the very issues that the defendants seek to have resolved have not been resolved by the decision the court has given. The "res" has not merged in the judgment.
Nor can there be any issue estoppel in the strict sense. That is because, for the reasons I have explained, the decision to which I came on the occurrence of an Event of Default did not necessarily decide, in favour of one side or the other, the answer to the question of whether the Interstage Loan should bear interest and be secured.
That leaves the question of Anshun [2] estoppel. The question would be whether the matters now sought to be advanced by the cross-claim could and should have been advanced by a cross-claim in the proceedings that I have dealt with. The requirement that they "should" have been dealt with really draws attention to what it was that the parties sought to have decided and why it was that the defendants took the course they did, in deciding not to proceed by way of cross-claim.
As I see the matter at present, it is very hard to understand how an Anshun estoppel could arise in circumstances where the parties collaborated to have a swift and efficient hearing that would resolve the fundamental question of whether there had been an Event of Default.
True it is that the parties sought to have determined also the intermediate questions. However, it would seem to me, the very fact that I took the approach I did, of assuming without deciding those intermediate questions in favour of the defendants, suggests that there could be no Anshun estoppel.
In all the circumstances, I do not think that there is any insuperable obstacle to refusing leave for the moment, and allowing the defendants to reagitate the question, presumably by their own initiating process, when there are real controversies (as opposed to disputes as to the proper construction of the Amended Note Deed and Terms in the events that have happened) that divide them. To put it another way, the appropriate time to resolve the dispute that the defendants seek to agitate by their cross-claim will arise when all the practical consequences of that dispute become clear.
For those reasons I decline to grant leave. The appropriate order is that the notice of motion filed on 17 August 2018 be dismissed. Since the plaintiff did not oppose the grant of leave, it would be seem to me to be appropriate that there should be no further order as to costs but I will hear counsel on that.
[Counsel addressed.]
I make no order as to the costs of the notice of motion.
[3]
Endnotes
[2018] NSWSC 1196.
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.
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Decision last updated: 07 September 2018