Manitowoc Crane Group Asia Pte Ltd & Anor v Preston Erection Pty Ltd & Ors

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

3108/04 Manitowoc Crane Group Asia Pte Ltd & Anor v Preston Erection Pty Ltd & Ors JUDGMENT - ex tempore 1 His Honour: In this matter I have had the benefit of substantial and thorough submissions on behalf of the applicants/plaintiffs from Mr Kell of counsel and also from Mr Preston, who represents the defendant corporations. I am grateful to both representatives for them because it enables me to deliver my reasons for the conclusion to which I have come without delay. 2 By their Further Amended Notice of Motion filed 25 November 2004 the plaintiffs seek an order, firstly, that Mr John Preston be restrained from continuing to represent the defendants/cross-claimants in proceedings number 3108 of 2004 (these proceedings), and ancillary or consequential relief if that order is made. As already recorded, the orders sought in paragraphs numbered 2, 3, 4 and 5 of that pleading are no longer pressed. The application is supported by the affidavit of Stephanie Marina Bronk sworn 9 November 2004 and the exhibit to that affidavit, which is exhibit A in these proceedings. 3 Mr John Preston is a director of each of the three defendant corporations and he caused to be filed a notice of appearance on 10 June 2004. He has had the conduct of all the proceedings for the defendants thereafter. 4 The nature and history of the proceedings are conveniently summarised in the affidavit of Miss Bronk. Shortly stated, the statement of claim filed 26 May 2004 alleges an agreement reached between the plaintiffs and the defendants between about the 12th and 27th of June 2003 for the settlement of a series of disputes. Relief is sought by the plaintiffs which includes an order for specific performance of what has come to be described as the settlement agreement. 5 On 10 June 2004 a defence was filed and also a cross-claim. From those pleadings it is apparent that the agreement is in dispute and the relief sought by the plaintiffs is opposed. It is also plain that it is inevitable that Mr Preston would be a significant witness of fact in the proceedings. The present issues would indicate the likelihood, at least at this stage, of Mr Preston being required to give evidence on behalf of the defendants. 6 The history to which I have been referred in submissions also indicates that the matter came before Mr Justice Hamilton in this Court on 26 July 2004, who dealt with a number of processes in relation to various pleadings that had been filed and with complaints about them. It will be seen from his Honour's judgment of 26 July 2004 that the plaintiffs successfully applied for orders striking out various paragraphs of the defence which included allegations that were found to be incomprehensible, some of them; scandalous, some of them; embarrassing, some of them. Leave was granted to replead. Other orders were made relevant to the future conduct of this matter. 7 The history also showed that the defendants have launched a number of claims against the plaintiffs in the Local Court at Parramatta for royalties which are the subject of the cross-claim in this Court. It should be noted that during the course of the proceedings before me Mr Preston indicated that the proceedings in that Local Court would be discontinued, if they have not already been discontinued. 8 The history also showed that on 17 August 2004, at least from the perception of the plaintiffs' solicitors, Mr Preston threatened to cut into pieces and, in effect, cause to be scrapped the twenty-four Superdecks the subject of the proceedings unless, apparently, some rent or fee for the storage of those Superdecks was paid as requested by the defendants. That indication from Mr Preston led to some correspondence between the parties which led to a request for an undertaking from the defendants not to cut up and scrap the Superdecks. That undertaking was refused. It apparently necessitated the plaintiffs' proposal to apply to the Court for an order to restrain Mr Preston and/or the defendants from carrying out the threat. It appears that this issue was resolved at the last minute. Apparently on 20 August 2004, when the matter was about to come to Court Mr Preston provided the required undertaking. Since that time directions have been made by consent and it is contended that in some respects the directions and timetable for the continuing conduct of the matter have not been complied with. 9 On the material before me it is claimed that Mr Preston will be a principal witness for the defendants in any final hearing and his involvement in the proceedings is very evident from the history to which I have referred. In support of this application the plaintiffs contend that Mr Preston's personal involvement in the litigation is so extensive as to deprive him of the independence and objectivity for the proper conduct of the defendants' case which is required for the administration of justice in the proceedings. 10 It is put that his conduct of the defendants' case to date demonstrates a lack of independence and an obvious inability to understand what is required of him as their representative. It is also put that the interest of the defendants can only be properly served if they are represented by a person whose judgment is not clouded by personal interest. 11 It is necessary to turn to the relevant rules which are in Pt 11. Rule 1A states: "Except as provided by this rule or by or under any Act a corporation (other than a solicitor corporation) may not enter an appearance in, or defend, any proceedings otherwise than by a solicitor."

Sub r 2 relevantly provides: "A corporation may enter an appearance in, or defend, proceedings by a director if"

and then certain conditions are set out in the remainder of that sub-rule which incorporates sub-rule 3.

It is accepted that the requirements of sub-rules 2 and 3 have been complied with.

Sub r 6 provides: "These rules apply to a corporation which enters an appearance in, or defends, proceedings by an authorised director as if the corporation were a party defending in person."

Sub r 7 provides: "A corporation that has complied with sub r 2 in any proceeding may, by the authorised director, make a cross-claim in the proceedings."

It is also relevant to refer to r 1 of Pt 11 which, so far as is relevant provides, that subject to r 1A any person may enter an appearance and may defend proceedings by a solicitor or in person. 12 The applicant submits that the Court has an overriding inherent jurisdiction to supervise the conduct of litigation which would extend to prohibiting a corporation being represented by a director if the interest of justice required it. Reliance was placed on, for example, Grimwade v Meagher [1995] 1 VR 446 which held that the Court has inherent jurisdiction to ensure the due administration of justice and to protect the integrity of the judicial process and, as part of that jurisdiction, to prevent a member of counsel appearing for a particular party in order that justice should not only be done but be seen to be done. In what was described as the unique, extraordinary and highly exceptional circumstances of the case, it was found that there was a real and sensible risk of a lack of objectivity by the first defendant which led the Court to exercise its inherent jurisdiction and make an order restraining the first defendant from appearing as counsel in the proceedings. 13 Reference was also made to Bhagat v Global Custodians Limited (No 1) [2001] NSWSC 720 where Young CJ In Equity recognised that the Court has an overriding inherent jurisdiction to supervise the conduct of litigation and may exercise that power and prohibit counsel from appearing in a particular case where it appears that the conduct of counsel outside the Court might have a bearing on the conduct of it. He referred to Grimwade but came to a different conclusion in the circumstances of the case before him. He made plain the underlying basis of the rule and said: "I fully understand the rule that barristers and solicitors who have personal involvement in litigation should, as a general rule, step aside as they do not have the independence." 14 Reference was also made to Damjanovic v Maley (2002) 55 NSWLR 149 in which the Court of Appeal explains the principles relevant to the refusal of leave to an unqualified person to represent a party in proceedings in the Courts. 15 Reference was also made to cases decided prior to the amendment of the Supreme Court Rules which led to the inclusion of r 1A on 23 May 1997. These dealt with the question whether a corporation should be permitted to carry on proceedings otherwise than by a solicitor. 16 It seems clear to me that upon the proper construction of the whole of r 1A, this application must be refused. Sub r 2 authorises a director to appear for and/or defend proceedings in which the corporation is a party. Importantly, sub r 6 equates the corporation with a litigant in person so that in a practical sense the director authorised to represent a corporation is to be regarded as having as much entitlement to carry on the proceedings as has a litigant in person. 17 It seems to me that it follows that considerations of personal involvement, lack of objectivity and/or competence and/or understanding of what might be expected of a qualified person are not grounds for disqualification, and thus the considerations which led to the decisions in cases such as Grimwade and Damjanovic would not apply to a situation expressly allowed by r 1A, namely that a director who is unqualified may act as the corporation's representative. 18 It may be that the amendment was made with regard to the common experience that in very many cases the corporation for which the director appears is his or her alter-ego. This may explain why sub r 6 provides, in effect, that such director should have the same standing as a litigant in person. The present rule expressly allows for an unqualified person to represent a corporation with all the consequences that follow. 19 I would think that the matters relied upon by the applicant in this case may well provide grounds for disqualification of one who may be described as an offending representative in cases where counsel or solicitor are acting or where leave is sought by an unqualified person to represent, or to continue to represent, a party. It may be that Pt 11 r 1A does not affect the inherent jurisdiction of the Court to which I have referred which may be exercised in the proper case. I would accept that the jurisdiction remains and that the effect of this rule is not to oust it. Without finally deciding the matter I would conclude that support for that proposition is found in the language of r 1A sub r 2 in which the opening phrase is "A corporation may enter an appearance", which, when read with sub r 1, may be understood as preserving the Court's discretion. 20 In light of sub r 6 it is somewhat difficult to envisage the circumstances in which the discretion would be exercised to prevent an authorised director from appearing or continuing to appear. Nevertheless, and assuming special or extraordinary circumstances would be required for the exercise of jurisdiction where a party is self represented, I would not consider that the matters relied upon by the applicants in this case would constitute sufficient circumstances to justify the order sought. It is the sad experience of the Courts and of opposing parties that such matters as are relied upon in this case are often the ordinary incidents of cases involving litigants in person which require the Court to manage them as best it can. In saying that I make no finding or cast no reflection upon Mr Preston in this case. 21 In any event, and assuming jurisdiction in an appropriate case to prohibit a director from continuing to appear for a corporation, matters which I regard as determinative of this application in all the circumstances are the statement made by Mr Preston in open Court today that the defendants will be represented by qualified persons at the hearing, and the contents of paragraph 7 of his written submissions in which he states that: "The defendants … (b) Will definitely employ a solicitor and a barrister only after the appropriate timing best suitable to the proceeding, usually after all the facts are known and all rubbish has been extracted and the real issues are known, which is usually after discovery. (c) Will definitely not appear at a hearing of the main case without a solicitor or a barrister, because we are aware of `a person who is his own solicitor is a fool". 22 As I have indicated, in my view the present state of the evidence does not establish sufficient grounds to justify the order sought. It may be that between now and the time of the hearing Mr Preston's conduct in representing the defendants may be shown to be such that the interests of justice require the Court's intervention so as to deprive them of his representation. However, that situation has not yet arisen. 23 Accordingly, the order is that paragraph 1 of the Further Amended Notice of Motion be refused. 24 I also refuse the ancillary orders sought in paragraphs 1B, 1C and 1D of the Further Amended Notice of Motion. 25 In my opinion, the just order to make in all of the circumstances is that each of the parties bear its costs of and incidental to this notice of motion. It is apparent that the matter which took up the time in court related to an issue on which the plaintiffs failed. It is certainly arguable that the orders sought in paragraphs 2 to 5 of the motion may not have been necessary but for the failure to provide adequate particulars by the defendants prior to the filing of the notice of motion. It does seem to me, however, that when one endeavours to balance the successes and failures of the parties in relation to the relief sought in this notice of motion and having regard to the circumstances in which it was brought that the order which should be made is that each party bear it's own costs, and I so order. Orders 26 (1) The Further Amended Notice of Motion be dismissed.

(2) Each party pay its own costs. **********

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