Johnston v Vintage Developments Pty Limited [2006] FCAFC 171 | Case summary

RELEVANT PROVISIONS 15 Critically, s 51 of the Federal Court of Australia Act 1976 provides: '(1) No proceedings in the Court are invalidated by a formal defect or an irregularity, unless the Court is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of the Court. (2) The Court or a Judge may, on such conditions (if any) as the Court or Judge thinks fit, make an order declaring that the proceeding is not invalid by reason of a defect that it or he or she considers to be formal, or by reason of an irregularity.' Although lengthy it is helpful to set out the relevant provisions of the rules. Order 6 r 2 Joinder of parties generally Two or more persons may be joined as applicants or respondents in any proceeding: (a) where: (i) if a separate proceeding were brought by or against each of them, as the case may be, some common question of law or of fact would arise in all the proceedings; and (ii) all rights to relief claimed in the proceeding (whether they are joint, several or alternative) are in respect of or arise out of the same transaction or series of transactions; or (b) where the Court gives leave so to do. 4 Leave under rule 2 and subrule 3 (2) (1) The Court may grant leave under rule 2 before or after the joinder and may grant leave under subrule 3 (2) before or after the non-joinder. (2) An applicant may apply for leave under rule 2 or subrule 3 (2) either before or after the filing of his originating process and may apply without serving notice of the motion on any person on whom the application has not been served. 8 Addition of parties (1) Where a person who is not a party: (a) ought to have been joined as a party; or (b) is a person whose joinder as a party is necessary to ensure that all matters in dispute in the proceeding may be effectually and completely determined and adjudicated upon; the Court may order that the person be added as a party and make orders for the further conduct of the proceeding. (2) A person shall not be added as an applicant without the person's consent. 13 r 2 General (1) Subject to the following provisions of this rule, the Court may, at any stage of any proceeding, order that any document in the proceeding be amended, or that any party have leave to amend any document in the proceeding, in either case in such manner as the Court thinks fit. (2) All necessary amendments shall be made for the purpose of determining the real questions raised by or otherwise depending on the proceeding, or of correcting any defect or error in any proceeding, or of avoiding multiplicity of proceedings. (3) Where an application to the Court for leave to make the amendment mentioned in subrules (4), (5) or (6) or paragraph (7) (a) is made after any relevant period of limitation current at the date of commencement of the proceeding has expired, the Court may, nevertheless, grant such leave in the circumstances mentioned in that subrule if it thinks it is just to do so. (7) An amendment may be made even if the effect of the amendment is to add a new claim for relief or foundation in law for a claim for relief (whether by way of substitution for an existing claim for relief or foundation in law or not) if the new claim for relief or foundation in law: (a) arises out of the same facts or substantially the same facts as those already pleaded to support an existing claim for relief by the party applying for leave to make the amendment; or 3 Amendment of pleading without leave (1) A party may, without leave, amend any pleading of his once at any time before the pleadings are closed. (2) A party may further amend any pleading of his before the pleadings are closed and without the leave of the Court if he obtains the consent of all other parties. (3) Subject to subrule (4), an amendment may be made even if: (a) the effect of the amendment is to add a new claim for relief or foundation in law for a claim for relief, whether by way of substitution for an existing claim for relief or foundation in law or not; or (b) the amendment pleads a fact or matter that has occurred or arisen since the commencement of the proceeding. (4) Subrule (3) does not permit an amendment that would have an effect inconsistent with any statute that limits the time within which an action or a proceeding of a particular kind may be brought or instituted. 3A Date when amendment takes effect Unless the Court otherwise orders, an amendment of a document that is made under rule 2 or 3 takes effect: (a) if the amendment is made under paragraph 2 (7) (b), subrule 2(8) or subrule 3 (3) - on the date when the amendment is made; and (b) in any other case - on the date when the document was first filed.'

CONSIDERATION 16 Order 4 r 1(1) provides that except as otherwise provided in the rules, all proceedings in the Court's original jurisdiction are to be commenced by filing an application. Order 1 r 5A(1) provides that a document that is required by the rules to be filed may be presented to a registry when it is open for business. The word 'filed' is the word traditionally used to describe the act or process of placing documents in the records of a court or registry: Purden Pty Limited v Registrar in Bankruptcy (1982) 64 FLR 306 at 309-310; 43 ALR 512 at 515 per Bowen CJ, Fisher and Lockhart JJ; Hong v Minister for Immigration and Multicultural Affairs (1998) 82 FCR 468 at 471C-D, 473B per Burchett, Lehane and Finkelstein JJ. In this context the act of filing a document is the act of the Court, as opposed to the act of lodging it, which is the act of a party. 17 There can be no doubt that the amended application and further amended statement of claim were filed in the Court on 2 December 2005 for they bear the Court's 'filed' stamp on that date together with its seal. It follows, that when the amended application and further amended statement of claim including the names of Donald and Grant Johnston as respondents were presented to the registry and accepted by it, proceedings were commenced against them by force of O 4 r 1(1). 18 In a practical way this accords with the view that her Honour took. She said that while the further amended statement of claim may have had some formal defects, it was 'considered' as an amended document, or in effect, a fresh pleading filed within O 13 r 3A. Her Honour reasoned that O 13 r 2(1) permitted the document in the proceedings to be amended by an order granting leave to do so in such a manner as the Court thought fit and that Order 13 r 3A enabled the amendment to have effect from the date on which it was filed, 2 December 2005. 19 Grant Johnston submitted that the amended application and further amended statement of claim filed on that date were nullities. That argument should not be accepted. In Berowra Holdings Pty Limited v Gordon (2006) 228 ALR 387 at 389-390 Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ noted the doctrine that acts by superior courts of record in excess of jurisdiction cannot be characterized as invalid until quashed or set aside on appeal (228 ALR at 389 [11]). They continued (228 ALR at 390 [13]): 'There is also a very real difficulty in characterising proceedings as "invalid". The institution of an action or other proceeding is the exercise by the litigant of the freedom to invoke the jurisdiction of the judicial arm of government to determine a dispute. That step engages the procedural law appurtenant to the Court, which in modern times is found primarily in the Rules.' 20 They went on to explain that even where a procedural rule was expressed in mandatory form, if the party to whom it was addressed chose to disregard it, '… the normal outcome is that a choice accrues to the other party either to do nothing or to seek an appropriate order from the Court' (228 ALR at 390 [14]). And, significantly, they said: 'Generally there is, in law, no restriction upon a person's right to start an action and to carry it on to the point which a choice is cast upon the defendant to make some response in order to avoid judgment in default. Once the procedural law has been engaged, all parties to the litigation are subject to it. None of the above denies the possibility of a defendant denying the plaintiff's right to invoke the jurisdiction of a court, for example, where the plaintiff's right is conditional upon there being an action cognisable within the jurisdiction. However, the material point is that that denial must be made within the structure of the relevantly engaged procedural law and not outside it.' (228 ALR at 390 [15]-[16]) (emphasis added) 21 In National Mutual Holdings Pty Limited v Sentry Corporation (1989) 22 FCR 209 at 217, Gummow J had to deal with a similar position. Cross-claims were filed in existing proceedings well outside the time in which the rules permitted that filing without leave. He said that the cross-claims were irregularly filed. His Honour considered but rejected an application under O 1 r 8 that the Court dispense with the requirements of the rules after the cross-claims had been filed and struck them out so that a substantive application for leave to file them could thereafter be made (22 FCR at 218). 22 In Crayford Freight Services Ltd v Coral Seatel Navigation Co (1998) 82 FCR 328 at 335C-D Burchett, Ryan and Marshall JJ referred to Gummow J's approach and said that it was consistent with their view that s 51 of the Federal Court of Australia Act 1976 (Cth) could be availed of to correct a defect arising from the irregular filing of a cross-claim, filed without leave, when leave was required. The Court granted leave nunc pro tunc saying that the failure to obtain leave before filing a cross-claim and after the time fixed for the filing of a defence, is a formal defect. They held it to be an irregularity which could be remedied by an order of the Court granting leave to file the cross-claim with effect from the date on which it had been filed (82 FCR at 334B-C). They continued: 'It should also be noted that the word "proceedings" is used in s 51(1) of the [Act]. The use of the plural rather than the singular supports the view that any irregularity or formal defect in relation to a step taken in prosecution of a controversy justiciable by the Court may be remedied.' 23 We agree with this approach. The arguments advanced by Grant Johnston as to prejudice that would flow to him from granting leave nunc pro tunc and avoiding the expiry of the limitation period should not be accepted. The cross-claim was irregularly filed before the expiry of the limitation period. As McHugh J pointed out in Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 555, if the action has been brought within time, difficulties of recollection and all the other issues as to prejudice to which Grant Johnston pointed would be of no present relevance. Once it is accepted that the filing of the cross-claim on 2 December 2005 was not a nullity, the prejudice to Vintage and Errol would be incurable if the cross-claim were struck out because the limitation period has by now expired. As Bowen LJ said in the well known passage in Cropper v Smith (1884) 26 Ch D 700 at 710 (cited with approval in Queensland v JL Holdings Pty Limtied (1997) 189 CLR 146 at 152-153 per Dawson, Gaudron and McHugh JJ): '… it is a well established principle that the object of courts is to decide the rights of the parties, and not to punish them for mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their rights. … I know of no kind of error or mistake which, if not fraudulent or intended to overreach, the Court ought not to correct, if it can be done without injustice to the other party.' 24 Given that no possible reason for refusing leave to file the cross-claim on 2 December 2005 could have been advanced by Grant Johnston had the application been made on that day, he can suffer no relevant prejudice by the regularisation of that irregular filing. 25 Here, the relevant procedural requirements are supplied by s 51 of the Federal Court of Australia Act 1976 (Cth) and the relevant provisions of the rules. The rules contemplate, especially in O 6 r 4, that leave to join a party can be granted after the applicant has filed in the Court an amended pleading which in fact joins the party. The rule contemplates, in effect, that the Court can confirm the prior acts of the parties in presenting, and of the registry of the Court in accepting, a document, by making an order granting leave to have done so after the actual joinder has taken place. Likewise, under these procedural provisions, the Court can refuse leave, thereby setting aside the prior joinder. But unless and until the filing of the document is set aside it has an operative effect, albeit subject to the possibility of disallowance under the rules. 26 An irregularity occurred because the joinder was to an existing proceeding and no leave had been sought to authorize either the joinder or the amendments which pleaded causes of action against either of Donald or Grant Johnston. An order granting leave to amend the application or statement of claim so as to conform with the documents actually filed on 2 December 2005 ought to have been made. The failure to make that order was a procedural irregularity which was capable of being cured both within the provisions of the rules themselves (with or without the use of the power to dispense with compliance under O 1 r 8) or by granting leave under O 6 r 2(b), O 4(1), O 13 r 2(1) or O13 r 3A. Each of these provisions authorises the Court, procedurally, to permit what happened on 2 December 2005. 27 Mr Chapple, the solicitor for Vintage and Errol, gave unchallenged evidence that explained how the documents came to be filed on 2 December 2005 without leave. Whether or not prudence would have suggested applying ex parte to the duty judge or the docket judge for leave to file the documents in the form they were against the proposed new respondents, including Grant Johnston, is not to the point. The documents were filed and accepted by the Registry as parts of the records of the Court thereby engaging its jurisdiction to hear and determine the matter pleaded against Grant Johnston. The failure to obtain prior leave of the Court was an irregularity which the rules themselves contemplate could be cured, as does s 51 of the Federal Court of Australia Act 1976 (Cth). 28 In Harkness v Bell's Asbestos and Engineering Ltd [1967] 2 QB 729 at 736A-B (and see too at 735B-C) Lord Denning MR said that the effect of a rule, in broader terms than s 51, had the effect that it was not possible for an honest litigant to be defeated by a mere technicality, any slip or any mistaken step in his litigation. Diplock LJ said, somewhat appositely to the present proceedings (at [1967] 2 QB at 736C-D): 'Thomas William Harkness, retired boiler-lagger, if he had followed, as I have no doubt he has, the intricacies of the interlocutory proceedings in the case, must have thought that "the law is a [sic] ass". I am not sure that this judgment will change his opinion, but at any rate he will not feel that it is such an unjust ass as he must have felt before.' 29 Grant Johnston argued that there was a substantive prejudice to him were leave to be granted in that he would lose any right to plead a limitation defence based on the failure to file with leave on 2 December 2005. In our opinion, there is no prejudice to Mr Johnston, since an amended application and further amended statement of claim were in fact filed joining him to the proceedings on that date. 30 Grant Johnston argued that the filing on 2 December 2005 was akin to the situation in Fernance v Nominal Defendant (1989) 17 NSWLR 710. There, a Master had granted leave to join a defendant, without granting leave to amend the pleadings. There was no draft pleading before the master at the time of the making of the order. The limitation period expired after the grant of leave had been made without any originating process being filed joining the new defendant. Subsequently, an amended statement of claim was filed. Gleeson CJ and Clarke JA held that the rules could not operate to save the proceedings against the new defendant from being defeated by a limitation defence and that therefore the proceedings against the new defendant should be dismissed. Gleeson CJ pointed out that a particular form of amendment existed by way of the addition of a new party, but that the general power to amend the proceedings had, as its source, another provision of the rules (namely the analogues of Orders 6 and 13) 31 As Gleeson CJ noted, the analogue to s 51, s 81 of the Supreme Court Act 1970 (NSW), gave the Court power to overlook or rectify irregularities. But, he said that in that case there had not been a failure to comply with the requirements of the Supreme Court Act 1970 (NSW) or of the rules, but merely a failure by the plaintiff to take advantage of an opportunity, limited in point of time, created by the consent order to file a pleading joining as a defendant a new party (17 NSWLR at 723E-G). And, as he noted, s 81 could not operate to avoid the substantive effect of the Limitation Act 1969 (NSW) which extinguished the plaintiff's cause of action against the new defendant in the event that there had not been a pleading filed within the time provided by the latter legislation (17 NSWLR at 723G-724B). This situation is not analogous to that in which the parties found themselves on 2 December 2005 and thereafter. 32 In Emanuele v Australian Securities Commission (1997) 188 CLR 114, the majority (Dawson, Toohey and Kirby JJ) upheld the subsequent grant of leave to apply for an order that a company be wound up in insolvency notwithstanding that when the order had been made leave had not been sought. They referred to the long standing powers of courts to grant leave nunc pro tunc (see at 188 CLR at 125 per Dawson J agreeing with Toohey J and applying Scholl J in Re Testro Bros Consolidated Limited [1965] VR 18 at 33-35, Toohey J at 128 and 132 and Kirby J at 153). Toohey J referred with approval to what Lord Eldon LC had said in Donne v Lewis (1805) 11 Ves Jun 601 [32 ER 1221 at 1222], namely: 'The Court will enter a Decree nunc pro tunc, if satisfied from its own official documents, that it is only doing now what it would have done then.' 33 Had an application been made on 2 December 2005 for leave to file and serve the amended application and further amended statement of claim against Grant Johnston, there can be no doubt that leave would have been granted. Grant Johnston would then have been made a party to the proceedings in a regular way, notwithstanding that he may later have applied to set aside the grant of leave and his joinder. Any procedural irregularity flowing from the failure to seek such leave, should be cured by an order now regularizing the matter. 34 Although the joinder was irregular, it could not have been a nullity for the reasons given in Berowra Holdings Pty Limited v Gordon (2006) 228 ALR 387. For these reasons, her Honour ought to have ordered that leave be granted to file and serve the amended application and further amended statement of claim filed in the Registry on 2 December 2005 to the extent that they joined Grant Johnston and pleaded causes of action and claims of relief against him (see also Queensland v JL Holdings Pty Limited (1997) 189 CLR 146 at 154-155). 35 It follows that leave to appeal should be granted and the substantive appeal dismissed. But it is necessary to regularize the actual filing of the amended application and further amended statement of claim by granting leave for those documents to have been filed with effect from 2 December 2005. This will protect any rights Grant Johnston has to plead a limitation defence for events which occurred more than six years prior to the time of filing. 36 Leave should be granted to Grant Johnston to file a notice of appeal in the form of a document filed in Court on the hearing of the appeal. Grant Johnston should pay the costs of Vintage and Errol of the application for leave and the appeal. Grant Johnston should be ordered to file the notice of appeal in the form handed up to the Court at the hearing of the appeal within 7 days. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Tamberlin, Jacobson and Rares.

Johnston v Vintage Developments Pty Limited

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