Leto v Coffey Projects

Judgment

1. HIS HONOUR: By his Statement of Claim filed on 28 October 2014, Mr Leto claims a declaration and damages under the Trade Practices Act 1974 (Cth) in respect of a transaction that took place in September 2008. Unfortunately, the transaction was fraudulent, of a type which has already been brought to my attention in a matter involving other parties, see Khoury v Coffey Projects (Australia) Pty Ltd [2015] NSWSC 591 ("Khoury") and on appeal Khoury v Coffey Projects (Australia) Pty Ltd [2015] NSWCA 371.
2. According to the Statement of Claim, the facts are similar to those in Khoury. A Mr Bevitt, who, at the relevant time, it would appear, was an employee of the Defendant, Coffey Projects (Australia) Pty Ltd (Coffey) convinced the Plaintiff and others that if they were to deposit a large sum of American dollars (in Mr Leto's case, US$600,000, the equivalent at that stage of AU$887,311.45) for one month with the World Humanitarian Aid Foundation, that investment would yield a return of $5,000. It would appear that Mr Leto borrowed his "investment" from a Mr Ange. He made his investment and the money was completely lost.
3. The evidence filed by the Plaintiff on the current Motion is that the Plaintiff has a son, Vince Leto. Between 2003 and 2008, Vince Leto, together with the Plaintiff's brother-in-law, Antony Severino, conducted a business through the corporate vehicle Hazeforn Pty Ltd (Hazeforn), a wholesale fruit and vegetable supply business which traded as Southside Food Service. In August 2008, Hazeforn decided to buy a food importation business for $1.7 million plus stock on hand of $1 million, to be paid by instalments. As there was going to be difficulty in paying this amount, more funds were needed. The Plaintiff thought that by borrowing money and investing it in accordance with Mr Bevitt's suggestion, he would earn a large amount of interest which would help his son in the business. I am not finding that these are the facts, I am merely saying that these are what were put forward by the Plaintiff as the facts.
4. On 3 July 2012, Mr Ange commenced proceedings against the Plaintiff and Coffey. His claim was against the Plaintiff for $900,000 for money had and received. The Plaintiff did not file a Defence and Mr Ange, in due course, obtained default judgment in the amount of $1,211,638.76.
5. Mr Ange also claimed, in the same proceedings, against Coffey and its employee. The basis was that when the Plaintiff asked him "for a loan" he found that it was to be invested in a scheme which had been introduced by Mr Bevitt. Coffey was responsible for Mr Bevitt's fraud and this was the cause of Mr Ange's loss in that Mr Leto could not repay the loan.
6. On 25 February 2014, the claims of Mr Ange against Coffey were settled. The settlement contained a confidentiality clause.
7. By Notice of Motion filed 27 November 2014 ("first Notice of Motion"), Coffey seeks an order striking out the proceedings, or perpetually staying them, under the principle set out in the judgment of the High Court in Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; 147 CLR 589 ("Anshun"). Alternatively, that the proceedings be struck out because of undue delay on the part of the Plaintiff, or alternatively again, that security for costs be provided.
8. The matter had been in the list several times and on 31 August 2015 the Plaintiff appeared in person, or rather, appeared by his wife. Mr K Andronos SC appeared for Coffey. The Plaintiff had a Notice of Motion for extension of time to comply with the Court's directions. I said I would grant a very last final adjournment. The matter was adjourned to 10 September 2015 for hearing.
9. On 10 September 2015, Mr S A Gregory and Mr G Doherty of Counsel appeared for the Plaintiff. Mr Andronos SC again appeared for Coffey.
10. It would seem quite clear that Messrs Gregory and Doherty, and the present solicitor on the record, had taken up Mr Leto's case on a pro bono basis. They made submissions of sufficient gravity for me to set the final hearing of the Notice of Motion down before me on 5 November 2015.
11. On 5 November 2015, I not only heard the first Notice of Motion but also a second Notice of Motion filed by Coffey on 30 October 2015 seeking an order that it be at liberty to disclose, in the current proceedings, details of the confidential settlement between it and Mr Ange ("second Notice of Motion").
12. Mr Ange appeared on the second Notice of Motion. He made it clear that he had only very recently received notice and he was really unprepared. He opposed the lifting of the confidentiality agreement. Essentially he said that he was all ready to sell his story to the newspapers for a considerable sum of money, but, because he was persuaded that the only way he could get a settlement would be to have a confidentiality agreement, he gave in. Now he thinks it is completely unfair that when confidentiality is proving inconvenient to Coffey, Coffey can disregard the agreement. In due course the second Motion was adjourned.
13. Mr Gregory addressed the Court then Mr Andronos SC in reply, and I reserved my decision.
14. So far as the Anshun point is concerned, Mr Andronos SC put that it was incumbent on Mr Leto in the first case to put on a cross-claim with what he is now claiming in the present action. He did not do that and Coffey has been prejudiced by the fact that he did not do that. It was reasonable for him to have done that and he is now estopped under the Anshun principle from bringing the present claim.
15. Mr Leto claims that he could not afford to do anything about the earlier claim, as he did not have any funds. Mr Andronos SC says that this is nothing more than a bald assertion, unsupported by evidence, and that, in any event, it is irrelevant.
16. Early on in the discussion of the ambit of the Anshun principle, doubt was thrown on the proposition as to whether the Anshun principle would ordinarily apply to cross-claims. In Tanning Research Laboratories Inc v O'Brien [1990] HCA 8; 169 CLR 332, at 346, Brennan and Dawson JJ considered that the principle would not ordinarily so apply. However, they made an exception in cases where relief claimed in the second proceedings was inconsistent with the judgment in the first.
17. The matter was reviewed by the Full Federal Court (Beaumont, Wilcox and Moore JJ) in Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287, at 297-298. The Full Court said that there may well be cases where there is no policy justification for forcing defendants to litigate their claims as cross-claims rather than principal claims in separate actions. They continue, at 298: "But, where, as here, a defendant's claim is intimately connected with that of the plaintiff, in the sense that each arises, substantially, out of the same matters of fact, there is every reason to require that both be litigated at the one time; thereby minimising costs and avoiding the possibility of inconsistent judgments… We agree… that this is such a case."
18. In a subsequent Full Federal Court decision of Ling v Commonwealth (1996) 68 FCR 180, Wilcox J, with whom Whitlam and Sundberg JJ agreed, said at 183: "The decision in Bryant does not mean that it will always be appropriate to apply the Anshun principle to cross-claims. Some cross-claims have little or no connection with the claim in the action. They may be no more than an identicality of parties. It is difficult to see any justification for applying the Anshun principle to a case of that kind. Some cross-claims overlap the facts of the principal claim but involve additional facts. Where this occurs, a question of degree arises. It would be wrong to say that the Anshun principle is excluded whenever there are additional facts; to go so far would be to render it nugatory. However, where the additional facts are substantial, it may be appropriate to accept the reasonableness of separate proceedings. I think the present case is of this type."
19. Mr Andronos SC points to the fact that the basal facts in the two pieces of litigation are identical. In both cases the focus was on the conduct of Mr Bevitt and his alleged promise that if an investment was made, the investment would be safe and would produce substantial interest.
20. In his address on 5 November 2015 on the first Notice of Motion, Mr Gregory put that this is a case where Coffey was seeking, unjustifiably, to use the principle of Anshun for a purpose different than the rationale for its existence, and sought to apply the principle in circumstances different to those in which it is characteristically applied. The justice of the situation is intertwined with the principle that Anshun only applies if it is reasonable that the later action should have been combined with the earlier action.
21. Mr Gregory referred to, and applied, the decision in Rahme v Commonwealth Bank [1991] NSWCA 230, as cited by D Kirby J in Anthony Developments Pty Ltd v Marsden [1999] NSWSC 472.
22. In Rahme, Priestley JA, with whom Meagher JA and Hope AJA agreed, said that Anshun was authority for the proposition that the extended principle, as stated in Henderson v Henderson (1843) Hare 100; 67 ER 313 at 319: "… applies, inter alia… to a proceeding in which a party is asserting a cause of action which could have been raised, but was not, in a previous proceeding in which the same party was asserting a different cause of action based on substantially the same facts against the same party as the second proceeding is being brought [and] that the extended principle of Henderson will be applied to the second proceeding when it was unreasonable for the party asserting the cause of action in that second proceeding to refrain from raising it in the earlier proceeding against the same opponent party."
23. Rahme was applied by D Kirby J in Marsden. That was a case where Marsden had hired a car from Anthony. Marsden was involved in an accident with Handley. Handley sued Marsden and Anthony. Marsden settled the claim by Handley and then commenced proceedings against Anthony. Anthony sought to have the proceedings dismissed or stayed on the Anshun principle.
24. D Kirby J dismissed an appeal from a Magistrate who had found against that decision. His Honour said that the Anshun principle depended on two ideas: (a) fairness and efficiency; that is, a party should bring before the Court its whole case at the one time; and (b) consistency; if a party's case comes before the Court piecemeal, there is a danger that any judgment given in the first proceedings will conflict with that in the second. Then in analysing the facts before him, his Honour said that in the original proceedings, there was no issue between Marsden and Anthony, they were simply two parties named by Handley in the one action. Secondly, there was no risk of inconsistency. Thirdly, in terms of the objection of fairness and efficiency, which his Honour thought underpinned the Anshun estoppel, the separation of the two actions was neither inefficient nor unfair.
25. Mr Gregory also put that the basis of the Anshun principle is that there should not be an abuse of process and that, in commencing a second proceeding where there is an abuse of process, the Court should act to restrain the party attempting to do so. He refers to the fourth edition of Spencer Bower and Handley's Res Judicata. With respect, I do not consider that this analysis takes the case any further. The alleged abuse of process seems to get one back to the basal principles of reasonableness, uncertainty and possible conflict of decisions. Accordingly, I merely note this point and move on.
26. Picking up the words of Priestly JA in Rahme and the decision on the facts made by D Kirby J, Mr Gregory submits that the present case is not a case where the Plaintiff is asserting a cause of action which could have been raised, but was not in fact raised in a previous proceeding in which the same party was asserting a different cause of action based on substantially the same facts against the same party.
27. Mr Gregory points out that in the earlier proceedings there was no action between the Plaintiff and Coffey. In those proceedings Mr Ange was suing the Plaintiff for debt and the Plaintiff did not defend the claim. Mr Ange was suing Coffey over the same facts, in one sense, that are now being alleged by Mr Leto but there was no contest between Coffey and Mr Leto in the earlier proceedings.
28. Mr Gregory acknowledges that it is just possible that the present Plaintiff could have put on a cross-claim against Coffey in the earlier proceedings. However, he says that the justification for any such joinder is very weak. Section 22 of the Civil Procedure Act 2005 (NSW) does confer on a Defendant an entitlement to a cross-claim. The section permits the Court to grant a Defendant any relief that might have been granted in separate proceedings commenced by the Defendant provided that any relief granted against a person other than the original Plaintiff relates to, or is connected with, the subject matter of the original Plaintiff's claim: see s 22(2). Mr Gregory says that the original Plaintiff's claim "must be the claim by Mr Ange against the Plaintiff for money he hadn't received". Although had he been successful in the putative cross-claim against Coffey, he would have had sufficient monies to satisfy Mr Ange's claim and accordingly the relief could be said to be connected with the subject matter of Mr Ange's claim. The causes of action the Plaintiff pleads against Coffey in the present action are quite different to that which Mr Ange pleaded against the Plaintiff.
29. Whichever way one looks at it, there is no question of the claims of the Plaintiff against Coffey giving rise to a judgment inconsistent with the judgment Mr Ange obtained against Coffey, assuming there was one. Nor is there any prospect of the claims of the present Plaintiff against Coffey giving rise to a judgment inconsistent to the judgment that Mr Ange obtained in the earlier action.
30. Accordingly, there are three factors involved, which can be answered as follows: (a) whether there is any possible inconsistency between judgments and the two actions, the answer is "no", (b) whether it is reasonable for Mr Leto not to have brought proceedings by way of cross-claim, bearing in mind what was said in Ling, and what I have just said about the peripheral nature of such a putative cross-claim, the answer must again be "no"; and (c) if fairness and efficiency is different to reasonableness, the answer again must be "there is no reason in fairness and efficiency to prevent the Plaintiff from bringing the present claim". Accordingly, the application by Coffey to dismiss the proceedings under the Anshun principle must be dismissed.
31. Therefore, it is not necessary to consider whether Coffey has suffered prejudice because of the failure of Mr Leto to have brought the present proceedings before it settled with Mr Ange in the earlier proceedings. Mr Gregory put that the prejudice to the Defendant is not something which the authorities show is a relevant matter to consider. I am not at all sure that that is correct because "fairness and efficiency" would seem to involve a consideration of the prejudice that had been caused to the parties in the present proceedings. One of the factors that Coffey relies on is that it would not have settled with Mr Ange in the way it did had Mr Leto brought his present claim at that time. There is no substantial evidence of this, though the claim is made.
32. This is the reason for bringing the second Notice of Motion. I was asked to dispense with the confidentiality clause so that I could be told what the settlement was with Mr Ange. However, knowing what the settlement is will really not take Coffey far enough. There would need to be substantial evidence which could be tested by cross-examination that the settlement (without saying what it was) was only brought about because Coffey believed that that would wrap up the entire affair. That material was not put on.
33. Accordingly, the Motion, in so far as it seeks dismissal or stay of the proceedings on the Anshun principle, must be dismissed.
34. The backup claim is for the proceedings to be dismissed for lack of prosecution.
35. There certainly have been delays, indeed, the present Motion was filed over a year ago and did not come on for final hearing until last month.
36. However, one has got to balance this with the probabilities that Mr Leto was impecunious. Mr Andronos SC says that that is a bald assertion but, looking at the whole of the material before me, it seems to be me that whilst it might be said to be an assertion, it is not a bald assertion because until Mr Gregory, Mr Doherty and their instructing solicitor came into the matter, Mr Leto was not able to mount what I have held to be a successful defence to the Motion. The fact that Mr Leto lost a very large sum of money out of the transaction, and the information that I do have on affidavit as to his family's financial position, support the fact that he was unable to properly fund the litigation. His behaviour in the earlier proceedings confirms this.
37. It is a very weighty matter to deprive a litigant of his or her rights to a final hearing of an arguable cause of action. It does not seem to me that there is any sufficient prejudice to Coffey through the delay, to make this a case where I should dismiss the proceeding for want of prosecution.
38. Then security for costs is sought. One does not get security for costs merely because the Plaintiff is poor, and indeed, Mr Andronos SC does not seek it on that basis. What he seeks is an order for security on the basis that the action is really not Mr Leto's, but Hazeform's or Hazeform's liquidator. While it is true that Mr Leto only went into the transaction, on his own evidence, in order to provide finance for Hazeform to take over a new business, I cannot see sufficient evidence to show that it was not Mr Leto personally who went into the transaction with Mr Bevitt and that certainly it was Mr Leto personally who borrowed monies from Mr Ange and who suffered a judgment against him because he could not repay the monies. There is no sufficient basis for saying that this action is an action brought on behalf of another person.
39. When Messrs Gregory and Doherty came into the case, they obtained leave to re-open to call further evidence.
40. Mr Andronos SC submitted that insofar as costs were increased by this, the Plaintiff should pay costs.
41. In my view, this event did not increase costs. The case was lost for the Applicant on the material originally before the Court.
42. Accordingly, the Motion of 27 November 2014 should be dismissed with costs, and I so order.
43. There are some outstanding questions between the parties. It seems fairly clear that Mr Leto's claim will have to be amended in the light of the advice now given by Mr Gregory and Mr Doherty. Mr Andronos SC says that he is entitled to the costs thrown away by such amendment and that indeed would seem to be the ordinary result. However, I do not consider that I should deal with that matter in this judgment which is focussed solely upon the two Notices of Motion to which I have already referred.

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