Hudson Investment Group v Australian Hardboards Ltd; Australian Hardboards Ltd v Hudson Investment Group Ltd

Background 1 Hudson Investment Group Ltd commenced proceedings in the Commercial List within the Equity Division of the Court against Australian Hardboards Ltd and related companies and individuals in May 2004 with respect to rights arising under an Entitlement Deed dated 8 June 2001. In August 2005, Einstein J delivered judgment. In one respect, his orders were varied by the Court of Appeal on 6 June 2006. 2 On 19 July 2006, following fruitless correspondence between the parties, Hudson brought a notice of motion in the Commercial List proceedings before an Associate Justice seeking orders it says are part of the working out of the orders of Einstein J as varied by the Court of Appeal. 3 On 20 July 2006, Australian Hardboards commenced proceedings in the Equity Division of the Court for declarations and orders it says, in the most part, flow from the termination of the Entitlement Deed on 8 June 2006. 4 Before the Court are rival notices of motion by Hudson, on the one hand, to stay Australian Hardboard's proceedings, and by Australian Hardboards, on the other hand, to stay Hudson's notice of motion in the Commercial List proceedings. Stay of proceedings principles 5 It was common ground that a multiplicity of proceedings in relation to similar issues should be avoided. 6 In McHenry v Lewis (1882) 22 Ch 397 at 400, Jessel MR said that where two actions by the same man were brought in courts governed by the same procedure, and where judgments are followed by the same remedies, it was prima facie vexatious to bring two actions where one would do. In Williams v Hunt [1905] 1 KB 512 at 514, Collins MR said that where two separate remedies were possible and a start was made to put in force one of the remedies, it was an abuse of process of the Court to divide the remedy where there was a complete remedy in the Court in which the suit was first started. 7 In Reynolds v Reynolds [1977] 2 NSWLR 295 at 306, Waddell J cited both decisions and concluded that the existence of two proceedings was considered prima facie vexatious and one would, generally as of course, be stayed. His Honour said: "The general principle in relation to proceedings in two courts in the one country is stated by the Court of Appeal in McHenry v Lewis and in relation to proceedings in each of two divisions of the one court in Williams v Hunt again a decision of the Court of Appeal. In such cases the existence of two proceedings is considered prima facie vexatious, and the court will generally, as of course, put the plaintiff to his election, and stay one of the proceedings; or it may, as in the latter case, stay the proceedings which it considers to be inappropriate." 8 Beach J put it this way in Burbank Australia Pty Ltd v Luzinat [2000] VSC 128 at [28] - [30]: "Where a party to a proceeding institutes a second proceeding in a different form in relation to the same subject matter as the first proceeding, prima facie the second proceeding is vexatious and will be stayed: see McHenry v Lewis and Williams v Hunt. In such a situation the courts have for many years taken the view that a litigant already deeply involved in one piece of litigation would be unduly harassed if a second piece of litigation was to proceed at the same time as the first. And such a principle applies to proceedings whether they be before a court, a board or a tribunal. All the more so where there is a significant risk, as there is in the present case, that VCAT's findings and the Board's findings may be in conflict one with the other." 9 The issue before the Court was which of the proceedings was the appropriate one to go forward. The Entitlement Deed 10 Clause 2(a) of the Entitlement Deed provided that on its signing Australian Hardboards had to pay the deposit to Hudson. The deposit was defined in cl 1 to mean $3,500,000. 11 Clause 2(d)(i) of the Entitlement Deed provided that, subject to par (ii), Hudson was always entitled to the deposit. Clause 2(d)(ii) provided that Australian Hardboards was entitled to the deposit if the deed was terminated in a accordance with cl 3(e), which is irrelevant for present purposes, or no disposal occurred prior to the sunset date and Australian Hardboards had complied with its obligations under cl 6(a). 12 Clause 4 entitled Hudson to participate in the proceeds of sale of the development of the land the subject of the Entitlement Deed. It was in the following terms: "The parties agree that if the ultimate control over, or ultimate beneficial ownership in, the Land changes in any way (a "Disposal") on or before the Sunset Date, Hardboards must, on the date of the Disposal, pay Hudson the lessor of the following amounts: (a) $10,000,000 less the Deposit; and (b) the value of the aggregate consideration received by Hardboards in relation to the Disposal less the Deposit." 13 The sunset date was the fifth anniversary of the date of the deed, 8 June 2006. 14 Clause 6(a) required Australian Hardboards to use its best endeavours to develop and dispose of the land before the sunset date on the best possible commercial terms. Clause 6(b) and required it not to do anything, suffer, or permit anyone else to do anything, that might have the effect of diminishing the value of the land. The orders in the Commercial List proceedings 15 The relevant orders of Einstein J as amended in the Court of Appeal were as follows: "7 Order that the Entitlement Deed dated 8 June 2001 between the Plaintiff and the First Defendant be specifically performed by the First Defendant. 8 Order that the Third Defendant execute and deliver to the Plaintiff mortgages in favour of the Plaintiff in such form as the parties may agree or, in default of agreement within 21 days from 6 June 2006, as may be settled by an Associate Justice. 9 Order that the First Defendant exercise all of its powers in relation to the Third Defendant to cause the Third Defendant to execute the Mortgages in accordance with order 8 above. 10 Order that in the event of the Third Defendant failing to execute and deliver to the Plaintiff within 7 days the Mortgages, then the Principal Registrar of the Court is authorised and directed forthwith to execute and deliver the same in the name of and on behalf of the Third Defendant. 11 Order that the First Defendant forthwith to the extent not yet paid, pay to the Plaintiff the $3,500,000 deposit in accordance with the Entitlement Deed. 12 Reserve liberty to apply to an Associate Justice for the purpose of dealing with a matter involved in or arising in the course of working out the order. 13 Order reserving to an Associate Justice for further consideration further orders to give effect to the above orders for specific performance." Hudson's notice of motion in the Commercial List proceedings 16 So far as is material the orders sought by Hudson in its notice of motion are as follows: "1 An order that, for the purposes of Order 8 made by Justice Einstein on 13 September 2005 as varied by Order 2 made by the Court of Appeal on 6 June 2006, the mortgage be in the terms of the draft marked "SMB-1" and exhibited to the affidavit of Stephanie Bronk sworn 19 July 2006 or in the terms otherwise settled by an Associate Justice. 2 An order that the First Defendant pay the Plaintiff the sum of $10,000,000. 3 In the alternative to Order 2, an order that the First Defendant pay the Plaintiff the sum of $3,500,000. 4 An order that the First Defendant pay the Plaintiff a sum calculated as the amount of interest compounding on a principal sum of $3,500,000 at the rate of interest on an interest bearing account at Australia and New Zealand Banking Group Ltd for the period from 8 June 2001 to 4 August 2005 or to 16 May 2003." 17 The first order sought by Hudson is no longer in dispute. Australian Hardboards has indicated that, without prejudice to its position that there are no obligations under the Entitlement Deed which can be secured by the mortgage, it agrees to execute and deliver a mortgage in terms agreed upon, and in the event of non-agreement in terms settled by an Associate Justice. Australian Hardboard's notice of motion in the Commercial List proceedings 18 Australian Hardboards sought an order under the Civil Procedure Act 2005, s 67 or under the Court's inherent power staying Hudson's notice of motion pending the outcome of the proceedings in the Equity Division or, alternatively, an order that par 2 to par 7 of the notice of motion be dismissed under the Uniform Civil Procedure Rules 2005, r 13.4. That is, on the ground that the application is frivolous or vexatious. Australian Hardboards' Equity Division proceedings. 19 In terms of cl 4 of the Entitlement Deed, Australian Hardboards sought a declaration that ultimate control over, or ultimate beneficial ownership in, the land did not change in the period up to the sunset date and a declaration that on a proper construction of the Entitlement Deed no moneys are due by Australian Hardboards to Hudson. 20 In terms of cl 2(d)(ii) of the Entitlement Deed, Australian Hardboards sought an order that Hudson pay the deposit to it. 21 An order was also sought that Hudson execute and deliver to Australian Hardboards a withdrawal of its caveat over the land. Hudson's notice of motion in the Equity Division proceedings. 22 By its notice of motion, Hudson sought an order under the Civil Procedure Act 2005, s 67 or otherwise that the proceedings be stayed pending further or other order of the Court. The principles for working out a court order 23 It is appropriate that, subsequent to a final order, an application be made to deal with matters arising in the course of working out the order by making more specific provision for its implementation or by modifying its operation to take account of subsequent changes of circumstance. The power constitutes an exception to the principle of finality of judgments. The power exists whether or not a specific order for liberty to apply is made. In Phillips v Walsh (1990) 20 NSWLR 206 at 209-210, McLelland J explained the liberty as follows: "The question whether any particular application can properly be made in existing proceedings is a matter to be determined according to general law principles as modified by any relevant statutory provision. One such principle of the general law is that when proceedings have been disposed of by a final order which has been entered, the proceedings are at an end and cannot be revived: see generally Bailey v Marinoff (1971) 125 CLR 529; Gamser v Nominal Defendant (1977) 136 CLR 145; and FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268. There are a number of exceptions and qualifications to this principle but none that has any relevance to the present application, unless it be that subsequent to a final order application may be made for the purpose of dealing with a matter involved in, or arising in the course of, working out that order; for example, by making more specific provision for its implementation or by modifying its operation to take account of some subsequent change of circumstance or by enforcing it. This exception or qualification does not, however, extend to an application made for the purpose of giving substantive relief not sought in the statement of claim or which is substantially different to that given by the final order: see generally Haviland v McLeary (1894) 15 LR (NSW) (Eq) 22; 10 WN (NSW) 146; Poisson & Woods v Robertson & Turvey (1902) 86 LT 302; 50 WR 260; 46 Sol Jo 196; Dowdle v Hillier (1949) 66 WN (NSW) 155; Re Porteous [1949] VLR 383; [1950] ALR 89; Cristel v Cristel [1951] 2 KB 725 and Re Scott (1964) 82 WN (Pt 1) (NSW) 313; [1964-5] NSWR 1636. In a final order, liberty to apply is often expressly reserved as authority to make a subsequent application for the purpose of dealing with a matter involved in or arising in the course of working out the order; but the absence of an express reservation of liberty to apply does not preclude such an application: see Penrice v Williams (1883) 23 Ch D 353; Light v West & Sons Ltd [1926] 2 KB 238; Chandless-Chandless v Nicholson [1942] 2 KB 321; Re Porteous (at 385; 91)." Hudson's submissions 24 Hudson submitted that its notice of motion in the Commercial List proceedings should go forward. It was submitted that the orders sought are necessary in working out the general order for specific performance under the specific liberties to apply granted by Einstein J. It was submitted that no new issue or relief is raised that was not the subject of the original proceedings before Einstein J. 25 Prior to the proceedings before Einstein J, there had been a number of disposals of the land but, in total, they did not exceed $3.5million and cl 4 of the Entitlement Deed was not activated. Hudson maintained that cl 4 was triggered by further disposals after Einstein J's judgment and it is appropriate, under the liberty to apply, to adjust for those subsequent events. 26 I do not think that the order in the alternative, that Australian Hardboards pay Hudson $3.5 million falls into this category. An order to that effect has already been made, if the deposit has not been paid, and to make a second order in like terms lacks any utility. It was submitted that the existing order was qualified and could not be enforced because there is a debate between the parties whether the deposit was paid in accordance with the Entitlement Deed or not. But that does not ground an application for a further order in like terms. It seems to me that the appropriate way of working out the qualified order for payment of the deposit is under an order that an Associate Justice inquire whether or not the deposit has been paid and if so in what amount. 27 Hudson submitted that the matters raised by Australian Hardboards could all be raised in opposition to Hudson's notice of motion in the Commercial List proceedings with the exception of the order for the withdrawal of the caveat. Since that matter was intimately connected with the conduct of the Commercial List proceedings, Hudson indicated that it raised no objection to that matter being raised by Australian Hardboards under its notice of motion in the Commercial List proceedings. Australian Hardboards' submissions 28 Australian Hardboards submitted that the matters it wished to raise had only become available to it when the sunset date, 8 June 2006, was passed. But that does not exclude consideration of these issues under Hudson's notice of motion in the Commercial List proceedings. As was pointed out in Phillips, liberty to apply following a final order may be utilised to modify its operation to take account of some subsequent change of circumstance. 29 Australian Hardboards submitted that by its notice of motion, Hudson was attempting to raise new issues that were not before Einstein J. Reference was made to Muriti v Prendergast [2005] NSWSC 281 at [158] - [159] where White J held that orders for specific performance finally disposed of proceedings and a new claim for rectification could not be accommodated within the grant of liberty to apply for the purpose of working out the specific performance order. It was submitted that the determination of the question whether or not the deposit had been paid fell within the category of a new issue since there was no finding on that matter before Einstein J. 30 That was an argument that Australian Hardboards raised before the Court of Appeal. In its written submissions it said: "No issue was ever raised in the proceedings by HIG about payment of the Deposit." 31 There are two answers to that proposition. First, if there was a good reason for not paying the deposit, it should have been deployed in answer to the wider claim for specific performance. Secondly, there was no difficulty with the qualified order to pay the deposit. The judgment of the Court of Appeal was delivered by Santow JA. At [129] he said: "It was contended by the appellants that the order to pay the deposit should not have been made. It was argued that there was no issue at trial or any finding by the trial judge as to the deposit. There was an issue, in that the respondent claimed specific performance and if there was good reason for the deposit not to be paid it was incumbent on the appellants to raise the issue. I presently see no practical difficulty in compliance with the order made. If it be the case that the deposit has been paid, then there is nothing further to do. If the deposit has not been paid then it must be paid." 32 Far from an inquiry as to whether or not the deposit has been paid and in what amount raising a new issue, it constitutes the logical working out of an order to pay the deposit to the extent not yet paid. 33 Australian Hardboards argued that proceedings before an Associate Justice under Hudson's notice of motion in the Commercial List proceedings were unsatisfactory because there were difficulties associated with the grant of discovery and inspection of documents and the raising of the issue as to the caveat by way of cross claim. But, in my view, case management is not a bar to the proceedings and the manner in which the issues should best be handled, is a matter for the Associate Justice. 34 The major issue that Australian Hardboards wishes to agitate is as to the content of the order for specific performance by reason of the termination of the Entitlement Deed on the sunset date. But those matters can, in my view, readily be argued in opposition to the orders sought by Hudson in working out the specific performance order and the qualified order for payment of the deposit. 35 Australian Hardboards argued that not only had non-payment or otherwise of the deposit not been argued before Einstein J, but also nor had the question of any disposals of the land. But, as already indicated, the disposals that had taken place did not activate cl 4 of the Entitlement Deed. It was only as a result of further disposals after the proceedings before Einstein J that the argument arose in Hudson's favour that cl 4 had been activated. Conclusion 36 For the above reasons I am of the view that the orders sought by Hudson in its notice of motion in the Commercial List proceedings are appropriate to the working out of the order for specific performance and the qualified order for the payment of the deposit. I do not think it appropriate, however, to seek a further order that Australian Hardboards pay Hudson $3.5 million. The appropriate way to work out the order that Australian Hardboards forthwith, to the extent not yet paid, pay to Hudson the $3.5 million deposit is for the Associate Justice to inquire whether or not the deposit has been paid and if paid, to what extent. 37 I am also of the view that the matters raised by Australian Hardboards in its proceedings in the Equity Division may be accommodated in answer to Hudson's notice of motion in the Commercial List proceedings and the order for removal of the caveat is sufficiently connected with the original proceedings before Einstein J to make it appropriate that it be raised before the Associate Justice hearing Hudson's notice of motion. 38 It follows, in my view, that the appropriate proceedings to go forward are those brought by Hudson in the Commercial List proceedings and multiplicity of proceedings is to be resolved by an order staying the summons in the Equity Division proceedings. Orders 39 In matter numbered 50066 of 2004, I dismiss the defendants' amended notice of motion. I order the 1st, 2nd and 3rd defendants to pay the plaintiff's costs of the motion. 40 In matter numbered 3839 of 2006, I order that, pursuant to the Civil Procedure Act 2005, s 67 the proceedings be stayed until further order of the Court. I order the plaintiff to pay the defendant's costs of the motion.