Khan as Trustee for The Khan Family Trust v Hadid & 2 Ors; Hadid & 1 Ors v Khan as Trustee for The Khan Family Trust & 5 Ors

Supreme Court of NSW|2007-04-04|Before: Rothman J, Mr P, Mr J, Ms J

CITATION : Khan as Trustee for The Khan Family Trust v Hadid & 2 Ors; Hadid & 1 Ors v Khan as Trustee for The Khan Family Trust & 5 Ors [2007] NSWSC 314

HEARING DATE(S) : 12/03/2007-16/03/2007, 19/03/2007-23/03/2007, 27/03/2007-30/03/2007, 02/04/2007, 04/04/2007

DECISION : That the application that there is no case to answer on the first cross-claim not be dealt with until the evidence of all of the other defendants in the proceedings had concluded.

Civil Procedure Act 2005 (NSW) LEGISLATION CITED : Fair Trading Act 1987 (NSW) Trade Practices Act 1974 (Cth) Uniform Civil Procedure Rules 2005 (NSW)

Buckman v Flanagan (1974) 133 CLR 422 CASES CITED : Menzies v AI&S (1952) 52 SR(NSW) 62 Project Blue Sky v ABA (1998) 194 CLR 355 Wickstead v Browne (1992) 30 NSWLR 1

10537/2003 - P: Abeeda KHAN as Trustee for The Khan Family Trust D1: Abdullah HADID D2: Sanaa HADID

20052/2003 - P1/4CC-CD6: Abdulla HADID PARTIES : P2: Sanaa HADID D1/1CC-CC1/2CC-CC2/4CC-CD1: Abeeda KHAN as Trustee for The Khan Family Trust D2/4CC-CD2: Response Finance Pty Ltd D3: Peter Fisher & Co D4/1CC-CD1/3CC-CC3/4CC- CC4: Lorenzo FLAMMIA D5/2CC-CD1/3CC-CC34CC-CD3: John HANCOCK D6/4CC-CD4: Anna Maria PALUMBO 3CC-CD1: American Re-Insurance Company Limited 4CC-CD5: Split Cycle International Pty Limited

10537/2003 - P: Mr P. Newton D1: Mr A. Rogers D2: Mr A. Rogers

20052/2003 - P1/4CC-CD6: Mr A. Rogers COUNSEL : P2: Mr A. Rogers D1/1CC-CC1/2CC-CC2/4CC-CD1: Mr P. Newton D2/4CC-CD2: D3: D4/1CC-CD1/3CC-CC3/4CC- CC4: Mr P.T. Taylor SC with Mr J. de Greenlaw D5/2CC-CD1/3CC-CC34CC-CD3: Ms J. Merkel with Mr T. Liebhold D6/4CC-CD4: 3CC-CD1: Mr D. Davies SC 4CC-CD5: Ms J. Merkel with Mr T. Liebhold

10537/2003 - P: Ms C. Chan (Heidtman & Co) D1: Mr E. Younan (Equity Lawyers) D2: Mr E. Younan (Equity Lawyers)

20052/2003 - P1/4CC-CD6: Mr E. Younan (Equity Lawyers) SOLICITORS : P2: Mr E. Younan (Equity Lawyers) D1/1CC-CC1/2CC-CC2/4CC-CD1: Ms C. Chan (Heidtman & Co) D2/4CC-CD2: D3: D4/1CC-CD1/3CC-CC3/4CC- CC4: Mr R. Qutami (Veritas Legal) D5/2CC-CD1/3CC-CC34CC-CD3: Mr J. Hancock (Hancocks Solicitors) D6/4CC-CD4: 3CC-CD1: Mr M. Newton (Ebsworth & Ebsworth Solicitors) 4CC-CD5: Mr J. Hancock (Hancocks Solicitors)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

10537/03 ABEEDA KHAN AS TRUSTEE FOR THE KHAN FAMILY TRUST v ABDALLAH HADID & 2 ORS

20052/03 ABDALLAH HADID & 1 ORS v ABEEDA KHAN AS TRUSTEE FOR THE KHAN FAMILY TRUST & 5 ORS

INTERLOCUTORY JUDGMENT 1 HIS HONOUR: The Court is in the process of hearing a controversy at the heart of which was the lending of money secured by a second mortgage over property. The money was lent by the Plaintiff in the first proceedings, Ms Abeeda Khan and the second mortgage was registered over property of the Plaintiff in the second set of proceedings, Mr and Mrs Hadid (hereinafter "the Hadids"). The Hadids allege that the mortgage was procured by a forgery, but not of Ms Khan or interests associated with her. Ms Khan sought a writ of possession for the purpose of satisfying the debt to which the mortgage is said to relate. As well as defending those initial proceedings the Hadids sue Ms Khan and her brokers, two solicitors and various other parties under various causes of action. Both matters are being heard together. 2 Involved in the proceedings are a number of cross-claims the effect of which is, apart from other things, to provide the Court with the necessary legal basis for apportioning damages, if any, arising from any finding. Other cross-claims are also involved. One of the cross-claims involves an issue relating to the insurance of one of the solicitors. In every sense that last mentioned cross-claim is wholly unrelated to the factual matrix of the fraud. It is concerned with whether, in performing the acts, the solicitor in question was "acting as a solicitor" and other such issues. 3 The first cross-claim to the action by the Hadids is a claim by Ms Khan against Mr Flammia (the Fourth Defendant in those proceedings) indemnifying Ms Khan in respect of any amounts ordered to be paid by her to the Hadids in those second proceedings. While other damages and orders are sought, that is the essential nature of the damages claim. The cross-claim is based upon causes of action under section 42 of the Fair Trading Act 1987 (NSW), section 52 of the Trade Practices Act 1974 (Cth) and the common law, for misleading and/or deceptive conduct, or conduct likely to mislead or deceive or representations that were misleading and/or deceptive and made negligently. 4 Each cause of action pleaded in the first cross-claim depends, for its success, on proof of reliance by Ms Khan on the representations of Mr Flammia (the Fourth Defendant). 5 It is necessary, unfortunately, even for the purpose of this interlocutory judgment, to set out some of the intertwined facts which are said to give rise to liability. The allegation centres on mortgage documents purportedly signed by the Hadids. It is said that the Fourth Defendant (Mr Flammia) witnessed the documents and, it is alleged, gave independent legal advice in relation to the documents. It is also said that the Fifth Defendant, Sixth Defendant and Seventh Defendant acted as mortgage brokers for the Hadid interests and, in the case of the Fifth Defendant, there is an allegation that he acted as a solicitor. There is a fourth cross-claim relating to whether LawCover is liable for the damage, if any, for which the Fifth Defendant, Mr John Hancock, is liable. 6 Because the major controversy is defined in the second set of proceedings the Hadids called evidence first. Thereafter, Ms Kahn, who is the plaintiffs in the first set of proceedings, adduced evidence. In the second set of proceedings the Khan interest are the First and Second Defendants. The Third Defendant is playing no part in the proceedings. Nor is the Sixth Defendant playing any part in the proceedings. 7 The evidence of the Khan interests having concluded (save for the Court having granted Ms Abeeda Khan leave to reopen on matters associated with the calculation of the amount owing), Mr Flammia (the Fourth Defendant), being the next party to call evidence, made application under the Uniform Civil Procedure Rules 2005 (NSW) and in particular Rule 29.10 that, to use former expressions, it had no case to answer on the first cross-claim (i.e. the claim for indemnity by Ms Kahn against Mr Flammia). 8 On that application a preliminary issue arose as to whether Mr Flammia (the Fourth Defendant) could make such an application under Rule 29.10 before all of the parties had concluded adducing their evidence. 9 The matter is not without difficulty and does not seem to have previously been the subject of judicial pronouncement. Rule 29.10 is in the following terms: "(1) An opposite party may apply to the court to give judgment for the opposite party, either generally or on any claim for relief in the proceedings, on the ground that, on the evidence given, a judgment for the beginning party could not be supported. (2) Such an application may be made at any time after the conclusion of the evidence for the beginning party in his or her case in chief. (3) The court may not give judgment under this rule unless the opposite party satisfies the court that, on the evidence given, a judgment for the beginning party could not be supported. (4) If the opposite party fails to satisfy the court that, on the evidence given, a judgment for the beginning party could not be supported, the opposite party may not adduce evidence or further evidence in the proceedings generally or on the claim for relief concerned, as the case may be, except by leave of the court. (5) If not all opposite parties apply to the court under subrule (1), the court must not deal with any such application before the conclusion of the evidence given for all parties." 10 Rule 29.10 of the UCP Rules follows directly on from 29.9 which is in the following terms: "(1) A defendant in proceedings in which the plaintiff is the beginning party may apply to the court for an order: (a) for the dismissal of the proceedings, or (b) for the dismissal of the proceedings to the extent to which they concern any cause of action relevant to the plaintiff's claim for relief against that defendant, on the ground that, on the evidence given, a judgment for the plaintiff could not be supported. (2) Such an application may be made at any time after the conclusion of the evidence for the plaintiff in his or her case in chief. (3) The plaintiff may argue, or decline to argue, the question raised by the application. (4) The court may not make an order under this rule unless the plaintiff argues the question raised by the application and the defendant satisfies the court that, on the evidence given, a judgment for the plaintiff could not be supported. (5) If the plaintiff declines to argue the question raised by the application, or if the defendant fails to satisfy the court that, on the evidence given, a judgment for the plaintiff could not be supported, the defendant: (a) may adduce evidence or further evidence, or (b) may make an application under rule 29.10. (6) If fewer than all defendants apply to the court under subrule (1), the court must not deal with any such application before the conclusion of the evidence given for all parties." 11 Rule 29.1 defines "beginning party" and "opposite party" and essentially defines these terms by reference to the ascertainment of the party on whom the burden of proof lies. If the burden of proof lies on the plaintiff on any issue, the plaintiff is the beginning party and the defendant, the opposite party. If, on the other hand, the burden of proof lies on the defendant on all issues, the defendant is the beginning party and the plaintiff, the opposite party. 12 The term "plaintiff" is defined in section 3 of the Civil Procedure Act 2005 (NSW) ("CP Act") as the "person by whom proceedings are commenced, or on whose behalf proceedings are commenced … and includes a person by whom a cross-claim is made". Defendant is similarly defined to include "a person against whom a cross-claim is made". Thus, in Rule 29.1 the beginning party is the cross-claimant in a cross-claim where, in relation to that cross-claim, the cross-claimant has the burden of proof on any issue. Likewise, the cross-defendant is the opposite party in a cross-claim unless, in relation to that cross-claim, the cross-defendant has the burden of proof on all the issues. 13 There are a number of other matters in the Rules to which reference needs to be made. Firstly, the Rules apply to a cross-claim in the same way as they apply to a statement of claim and summons and likewise in relation to any defence to a cross-claim (see UCP Rule 9.1). Another matter to which reference should be made are to the provisions of section 22 of the CP Act which deals with cross-claims generally and is in the following terms:

"(1) Subject to subsection (2), the court may grant to the defendant in any proceedings ("the first proceedings") such relief against any person (whether or not a plaintiff in the proceedings) as the court might grant against that person in separate proceedings commenced by the defendant for that purpose. (2) Relief may not be granted under this section against a person who is not a plaintiff in the first proceedings unless the relief relates to, or is connected with, the subject of the first proceedings. (3) A person against whom a defendant makes a claim for relief under this section: (a) has the same rights in respect of his or her defence against the claim as he or she would have in separate proceedings commenced against the person by the defendant, and (b) if not already a party to the first proceedings: (i) becomes a party to the first proceedings, and (ii) unless the court otherwise orders, is bound by any judgment (including a judgment by consent or by default) or decision (including a decision by consent) on any claim for relief in the proceedings (including a claim for relief in any cross-claim in the proceedings)." 14 From the above it is clear that Rule 29.10 of the UCP Rules applies to a cross-claim in the same way it applies to the statement of claim. Secondly, on the commencement of a cross-claim, the cross-Defendant has the same rights as he or she would have if separate proceedings had been commenced and, for all purposes, becomes a party to the "main proceedings". 15 I do not, in this judgment, deal with whether, approaching the matter as one must and giving the cross-claimant the benefit of inferences otherwise available, there is a case to answer. Without dealing with the issues in detail, given the allegations of agency, it may be that there is such a case. I deal in this judgment only with the question of whether the application under UCP Rule 29.10 is capable of being made at this time in the hearing. Different considerations may also arise where the cross-Claimant and cross-Defendant are otherwise not both parties to the initiating proceedings. 16 On one literal reading of the provisions of UCP Rule 29.10 the Fourth Defendant (Mr Flammia) is the opposite party in the cross-claim and the beginning party in the cross-claim is Ms Khan. While I have granted leave to re-open on a confined issue (which issue does not touch upon the issues raised in this proposed application), the beginning party, Ms Khan, has closed her case in chief. The question that arises as to whether or not the application may be made is whether, in proceedings such as the present, all of the parties to the proceedings opposed to the interests of Ms Khan would need to have concluded their evidence before any such application may be dealt with: see UCP Rule 29.10(5) above.

17 On the abovementioned literal meaning of the provisions of UCP Rule 29.10(5), the only opposite party is the Fourth Defendant (Mr Flammia). Such an approach treats the cross-claim separately from the remainder of the proceedings and seems to apply section 22(3)(a) of the CP Act. 18 The meaning and construction of the provisions of Rule 29.10(5) must be understood bearing in mind the purpose for which the legislation and the rules have been promulgated: Project Blue Sky v ABA (1998) 194 CLR 355 at [69], [70] and [78]. The High Court there said [in the joint judgment of McHugh, Gummow, Kirby and Hayne JJ]: "[69] The primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute [See Taylor v Public Service Board (NSW) (1976) 137 CLR 208 at 213, per Barwick CJ]. The meaning of the provision must be determined 'by reference to the language of the instrument viewed as a whole' [Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 320, per Mason and Wilson JJ. See also South West Water Authority v Rumble's [1985] AC 609 at 617, per Lord Scarman, 'in the context of the legislation read as a whole']. In Commissioner for Railways (NSW) v Agalianos [(1955) 92 CLR 390 at 397], Dixon CJ pointed out that 'the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed'. Thus, the process of construction must always begin by examining the context of the provision that is being construed [Toronto Suburban Railway Co v Toronto Corporation [1915] AC 590 at 597; Minister for Lands (NSW) v Jeremias (1917) 23 CLR 322 at 332; K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 309 at 312, per Gibbs CJ; at 315, per Mason J; at 321, per Deane J]. [70] A legislative instrument must be construed on the prima facie basis (1998) 194 CLR 355 at 382 that its provisions are intended to give effect to harmonious goals [Ross v The Queen (1979) 141 CLR 432 at 440, per Gibbs J]. Where conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions [See Australian Alliance Assurance Co Ltd v Attorney-General (Q) [1916] St R Qd 135 at 161, per Cooper CJ; Minister for Resources v Dover Fisheries Pty Ltd (1993) 43 FCR 565 at 574, per Gummow J]. Reconciling conflicting provisions will often require the court 'to determine which is the leading provision and which the subordinate provision, and which must give way to the other' [Institute of Patent Agents v Lockwood [1894] AC 347 at 360, per Lord Herschell LC]. Only by determining the hierarchy of the provisions will it be possible in many cases to give each provision the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme." 19 While in ordinary circumstances the policy and purposes of the statutory instrument will be found in its express provisions (see, inter alia, Buckman v Flanagan (1974) 133 CLR 422 at 427, per Barwick CJ), in this instance the legislature has expressly provided the objects of the Act and Rules and the manner in which those objects must be used in the determination of the construction of the Act and Rules and any judgment made thereunder. 20 Section 56 of the CP Act expressly provides that the overriding purpose of the Act and of the Rules is "to facilitate the just, quick and cheap resolution of the real issues in the proceedings" and requires the Court to give effect to that overriding purpose in the exercise of any power and in the interpretation of any provision of either the Act or the Rules. 21 A construction of Rule 29.10(5) that allowed one party to a proceeding before the Court to make application for a no case and have dismissed one particular cross-claim out of many, whilst still remaining a party to the proceeding, is not a course which, in the present circumstances would fit within the overriding purpose contained within section 56. 22 One may well imagine, in personal injury cases for example, where the evidence on one cross-claim may affect the success or otherwise of every other cross-claim and the main proceedings. To allow the one cross-defendant to that cross-claim to excise the cross-claim and thereby not give the evidence that would illuminate the factual matrix of the controversy before the Court would not be to do justice between all of the parties. 23 Ultimately the issue seems to depend upon the meaning of the words "the proceedings" because the opposite party may apply that there is no case to answer generally or on any claim for relief in "the proceedings". In those circumstances opposite parties and beginning parties takes on a different context. 24 While it may be that one or other cross-claim is unrelated to the factual matrix underpinning the controversy between the parties in the proceedings, that is not the case in relation to the first cross-claim. It may well be the case, for example, in relation to the issue of insurance that arises in the fourth cross-claim, but that is not an issue with which I am dealing. 25 In my view, the provisions of UCP Rule 29.10 must be understood in the context of the proceedings as a whole and do not allow a cross-defendant in one particular cross-claim, the evidence in which may be added to or detracted from by the evidence in the proceedings as a whole, to excise itself from the proceedings before the conclusion of all of the evidence of all of the opposing parties, at least in chief, in the proceedings. 26 It is not until all of the parties in the proceedings have concluded their evidence that the totality of the evidence in the proceedings is before the Court and it is only at that point that the evidence which may be utilised against the cross-defendant is known. 27 While the issues are different in relation to a no case to answer and summary dismissal and while there are differences between an application that may be made by a Defendant in the main proceedings and the cross-Defendant on a cross-claim, the principles of justice are similar. They were adumbrated by the Court of Appeal in Wickstead v Browne (1992) 30 NSWLR 1 at 11-12 (per Handley and Cripps JJA) said: "However, for another reason, which was first raised by the Court, the Respondent as one of a number of defendants cannot be entitled to summary dismissal before trial because of evidentiary deficiencies in the plaintiff's case. If at the close of the plaintiff's case at the trial there was no evidence against this respondent he would not be entitled at that stage to judgment if any other defendants intended to go into evidence: see Menzies v AI&S (1952) 52 SR(NSW) 62. The effect of this rule is now embodied in Supreme Court Rules Part 34 Rule 7(6) and Rule 8(5) [and UCP Rule 29.9]. The reason for the rules is clear and was explained in the decision referred to. At the close of the plaintiff's case there may be evidence against some defendants but not against others. The court will not entertain a motion for judgment by some only of the defendants because any gaps in the plaintiff's case against those defendants may be filled when the other defendants go into evidence. In particular one or more of the defendants going into evidence may seek to exculpate themselves by inculpating defendants against whom the plaintiff had no admissible evidence at the close of his case. If the respondent would not be entitled to succeed on a no evidence point at the trial until all the evidence has been called, including that from other defendants, it is clear that there can be no such entitlement on an application by one of several defendants for summary dismissal." 28 The rationale in Wickstead v Browne, supra, and Menzies v AI&S (1952) 52 SR(NSW) 62, applies with equal force to a defendant to a cross-claim in circumstances where that cross-claim forms part of the factual matrix underpinning the allegations and counter allegations between the actors in the controversy. 29 The current matter offers a prime example of the injustice that might flow from a different approach. In this cross-claim in these proceedings, as stated, the Khan interests seek indemnification of any damages and/or loss occasioned to them as a result of the success, if it were to occur, wholly or partially, of the Hadids. In those circumstances an essential ingredient is the loss and/or damage. Whether there is evidence of that loss or damage, at the close of the cases of the Kahn interests, will be the result of an accident of the order of the cases presented, not principle. Yet if the construction urged by Mr Flammia (the Fourth Defendant) were accepted, that accident of procedure may allow one or more parties to escape liability inappropriately. 30 The application of that rationale, in my view is, in such circumstances, the only means of achieving a just result and prevents an interpretation of Rule 29.10 that would allow the cross-defendant to make the application at this time. 31 In those circumstances I construe Rule 29.10 in the above manner and conclude that the Fourth Defendant (Mr Flammia) is not entitled to have such an application dealt with before the conclusion of the evidence given by all other parties to the proceedings, which, in this case, would include all other defendants. **********

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Trade Practices Act 1974(Cth)

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Legislation Cited (4)

Cases Cited (10)