NRMA LTD & ORS v MORGAN & ORS

Judgment (13 paragraphs)

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New South Wales Supreme Court CITATION : NRMA LTD & ORS v MORGAN & ORS (No 3) [1999] NSWSC 768 CURRENT JURISDICTION : Equity Division Commercial List FILE NUMBER(S) : 50257/95 HEARING DATE(S) : 23 & 26 July 1999 JUDGMENT DATE : 4 August 1999

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PARTIES : NRMA LTD & ORS MORGAN & ORS JUDGMENT OF : Giles J

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N J O'Bryan - NRMA B C Oslington QC & M R Speakman - Allen Allen & Hemsley R J Ellicott QC & G K Burton - Abbott Tout COUNSEL : A J Meagher SC & P R Whitford - Mr Heydon F M Douglas QC & W G Muddle - Ms Booth, Mr Burrows, Mrs Callaghan, Mr Douglass, Mr Jack, Mr Kirby, Dame Leonie Kramer, Mr Lawson, Mr Mackay, Ms Ralph, Dr Vanderfield, Dr Werner ("Majority Directors") J J J Garnsey QC & B Camilleri - Miss Fraser & Mr Talbot R R I Harper - Mr Farr-Jones M B Oakes SC - Ms Singleton Norton White - NRMA Blake Dawson Waldron - Allen Allen & Hemsley Ebsworth & Ebsworth - Abbott Tout SOLICITORS : Corrs Chambers Westgarth - Mr Heydon Deacons Graham & James - Majority Directors Brian Camilleri - Miss Fraser & Mr Talbot Garland Hawthorn Brahe - Mr Farr-Jones Kabos Business Lawyers - Ms Singleton CATCHWORDS : INTEREST - Supreme Court Act s 94 - whether plaintiffs' delay in prosecuting proceedings - whether no interest for period of delay: Bennett v Jones (1977) 2 NSWLR 355 and Perri v Flavell (No 2) (NSWCA, 20 September 1995, unreported) referred to. COSTS - follow event - but can make other order if successful party failed on dominant or separable issues - whether other order: Cretazzo v Lombardi (1975) 13 SASR 4; Hughes v Western Australian Cricket Association (1986) ATPR 40-748; Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261; Waters v P C Henderson (Australia) Pty Ltd (NSWCA, 6 July 1997, unreported); Lenning v Alexander Proudfood Company World Headquarters (NSWCA, 22 April 1991) and Rosniak v Government Insurance Office (1997) 41 NSWLR 608 referred to. CROSS-CLAIMS - leave to file - after reasons published - whether prospect of Anshun estoppel if not filed - objective of cross-claim procedure - new cross-defendants not bound by findings and conclusions in reasons - delay and potential for changed or inconsisent findings and conclusions - whether leave: Port of Melbourne Authority v Anshun (1981) 147 CLR 589; Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287; Rahme v Commonwealth Bank of Australia (NSWCA, 20 December 1991, unreported); Foodco Group Pty Ltd v Northgan Pty Ltd (1998) 83 FCR 356; Barclays Bank v Tom (1923) 1 KB 221; Standen v G H Varley Ltd (1956) 56 SR 346; Godfrey v The Nominal Defendant (1963) 63 SR 412; Sandtara Pty Ltd v Abigroup Ltd (1997) 42 NSWLR 5, and Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543 considered. Astley v Austrust Ltd (1999) HCA 6; Ellesmere Brewery Co v Cooper (1896) 1 QB 75; Street v Retravision (NSW) Pty Ltd (1995) 135 ALR 168; Bialkower v Acohs Pty Ltd (1998) 154 ALR 534; Bains Harding Construction & Roofing (Aust) Pty Ltd v McCredie Richmond & Partners Pty Ltd (1988) 13 NSWLR 437; Arthur Young & Co v WA Chip & Pulp Co Pty Ltd (1989) WAR 100 and Smith v New South Wales Bar Association (1992) 176 CLR 256 referred to. DECISION : (1) Dismiss with costs the second defendants' notice of motion filed on 8 April 1998; (2) Dismiss with costs the first defendants' notice of motion filed on 28 July 1998; (3) Dismiss with costs the second defendants' notice of motion filed on 20 May 1999; (4) Judgment for the plaintiffs against each of the defendants for $32,068,910; (5) Order that the defendants pay two thirds of the plaintiffs' costs; (6) Dismiss the cross-claims by the defendants against the plaintiffs; (7) Order that each of the defendants recover from each of the other defendants contribution of one third of the amounts payable pursuant to orders (4) and (5).

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THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

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1 GILES J: Some matters were outstanding following publication of my reasons of 13 May 1999. In what follows I assume knowledge of the earlier reasons, and use the acronyms and abbreviations there used. 2 There were five matters, namely - (a) Interest; (b) Costs; (c) AT's cross-claim against directors; (d) AAH's cross-claim against directors; and (e) AT's further cross-claim against Mr Heydon.

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(a ) Interest 3 I found that each of AAH, AT and Mr Heydon was liable in damages to the NRMA for $21,193,828 plus interest. Interest had to be calculated. The interest was interest to be included in the sum for which judgment is given pursuant to s 94 of the Supreme Court Act 1970. 4 The NRMA claimed interest calculated to 3 June 1999 at $10,539,412 and continuing at $5,414.04 per day. The defendants agreed with the calculation as a calculation, but raised three issues. 5 First, AAH submitted that interest should not run between 10 June 1997 and 25 May 1998. If that were so, the corresponding figures were agreed as a calculation at $8,472,615 and $5,414.04. Secondly, AT submitted that there should be additional interest on a component of the damages. If that were so, the corresponding figures were agreed as a calculation at $10,655,461 and $5,544.14. Thirdly, Mr Heydon submitted that interest should not run for the last eleven months to judgment. If that were so, the corresponding figures (treating 13 May 1999 as judgment) were agreed as a calculation at $8,658,781 and $5,414.04. The effect of the second issue could be cumulative on the effect of the first or third issues, but the first and third issues were alternatives. It was not suggested that judgment after 13 May 1999 would affect the calculation for the third issue. 6 The first and third issues were different manifestations of the same argument, that the NRMA should not have interest referable to what was said to be a period of delay occasioned by its late joinder of Mr Heydon as a defendant. 7 The NRMA brought the proceedings in late 1995. It joined only AAH and AT as defendants. On 11 September 1996 the proceedings were fixed for hearing to commence on 9 June 1997. On 15 May 1997 that hearing was vacated, amongst other reasons because the NRMA said that it was considering joining Mr Heydon as a defendant. The NRMA decided to join Mr Heydon as a defendant, and leave to join him was given on 20 June 1997. On 25 July 1997 the proceedings were fixed for hearing to commence on 2 February 1998. On 7 August 1997 that hearing was vacated and the proceedings were fixed for hearing to commence on 25 May 1998, the change being for reasons of counsels' availability. 8 There were, of course, directions hearings with a view to the preparation of the proceedings for hearing, initially for the hearing to commence on 9 June 1997 and then, with the additional involvement of Mr Heydon, for the hearing to commence on 25 May 1998. AAH and AT did not comply with the directions given for service of witness statements prior to the hearing to commence on 9 June 1997. They served substantial witness statements of Messrs Morgan, Simpson and Bateman and Mrs Castle at the end of April 1997. One of the NRMA's contentions on 15 May 1997 was that, because of the need to interview potential witnesses and respond to the witness statements, there was insufficient time for the NRMA properly to prepare its case for the hearing. 9 The witness statements included proposed evidence from Messrs Morgan, Bateman, Simpson and Mrs Castle of communications with Mr Heydon in relation to describing the shares as free shares and the significance of Gambotto's case to the proposal. The other of the NRMA's contentions on 15 May 1997 was to the effect that it had not until then been in a position responsibly to join Mr Heydon as a defendant, that it was communicating with Mr Heydon's solicitors with a view to Mr Heydon providing a statement, and that subject to what might come from that communication it thought it could then properly make the allegations in due course made against Mr Heydon. 10 For these reasons the NRMA proposed on 15 May 1997 that the hearing to commence on 9 June 1997 be vacated. It is possible that, with a late start some time at the end of June 1997, the hearing could have been retained notwithstanding the difficulty in which the NRMA had been put by the defaults of AAH and AT. But it had been put in a difficult position, and was likely to suffer prejudice. Mr Heydon submitted before me that the NRMA had been in possession of sufficient information, via particulars and discovered documents, to enable it to decide whether or not to join him no later than August or September 1996, but I consider that the direct (proposed) evidence of Messrs Morgan, Simpson and Bateman and Mrs Castle was an important matter in deciding whether or not to make the allegations in due course made against Mr Heydon. 11 I was the judge principally involved in the directions hearings, and the judge who vacated the hearing to commence on 9 June 1997. The looming prejudice to the NRMA and the need to have settled the position of Mr Heydon in my view gave good grounds for vacating the hearing, and I do not think that the loss of the hearing to commence on 7 June 1997 was due to default, delay, or unreasonable attention to the proceedings or its claims on the part of the NRMA. The occasion for changing the refixed hearing from 2 February 1998 to 25 May 1998 was certainly no fault of the NRMA, but rather against its wishes. 12 Interest is awarded in the exercise of the discretionary power in s 94 of the Supreme Court Act 1970. The power is to be exercised in order to provide compensation, not to punish, and on the basis that the defendant has had the benefit of not paying the capital sum and the plaintiff has had the detriment of not having it: Bennett v Jones (1977) 2 NSWLR 355 at 367-70. Delay occasioned by a plaintiff, while relevant, does not mean no interest during the period of delay, and some particular economic disadvantage occasioned by the delay and material to the exercise of the discretion must be shown; ibid; Perri v Flavell (No 2) (NSWCA, 20 September 1995, unreported). 13 In the present case there was no evidence of particular economic disadvantage, and none was suggested in submissions. AAH and Mr Heydon relied only on asserted delay by the NRMA (AT did not take up either of these issues). 14 If there were to be an exercise of the discretion by excluding a period from the time for which interest is to run, in principle the exclusion should be of the last eleven months to judgment. The proper manifestation of the argument was as the third issue, rather than the first issue, on the basis that, but for the asserted delay, judgment would have been given eleven months earlier. But I do not think that there should be any break in the running of interest. 15 Even assuming in favour of AAH and Mr Heydon that the NRMA acted unreasonably in failing initially to join Mr Heydon as a defendant, that is, that the NRMA had information warranting his joinder from a time in the latter part of 1996 and could and should have joined him then, I do not think that the proper exercise of the discretion calls for such a result. But I do not think that the NRMA acted unreasonably in that respect, and in any event the hearing to commence on 9 June 1997 was compromised by the defaults of AAH and AT. On the principles earlier stated, and in the circumstances in which the vacation of the hearing came about and the eleven months "delay" occurred, I do not think sufficient reason has been shown to decline to award interest for the period in question or any part of it. 16 The second issue was rather curious. The NRMA had not paid some of AT's fees for its legal services in connection with the proposed demutualisation. Its claim included the amount in question, $256,392, and so it recognised a liability to AT. AT argued that when it was paid the $256,392 it was entitled to receive interest of $116,049 on that sum, apparently as some equivalent to s 94 interest and not as a contractual entitlement. So, AT said, the NRMA's damages should include additional interest of $116,049. 17 Interest of $116,049 payable to AT would not be s 94 interest to be included in the sum for which judgment is given. If to be included in that sum, it would be as a capital item in the damages. The NRMA did not claim it. There was no cross-claim by AT to recover the $256,392. Payment of the $256,392 by the NRMA to AT is not part of these proceedings, and the additional interest of $116,049 should not be awarded. 18 The interest calculated to the date of these reasons is $10,875,082, and the sum for which judgment should be given including that interest is $32,068,910.

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(b) Costs 19 The NRMA submitted that it had succeeded in the proceedings and should have an unqualified order that the defendants pay its costs. The defendants' submissions were predictably otherwise, and varied. It was common ground that any order for costs should be a global order, not distinguishing between claims and cross-claims and, if less than an unqualified order in favour of the NRMA, not requiring a taxing officer to attribute costs to issues or some other differentiating factor stated in the order. 20 AAH submitted that the order as to costs should reflect that the NRMA had failed in relation to free shares/disadvantages and some discrete matters of damages (internal service providers' costs and distribution of the Grant Samuel report); reflect that Gambotto liability was only brought into the proceedings by amendment in March 1996; and include orders in favour of AAH for the costs thrown away by reason of the vacation of the hearing date of 10 June 1997 and of a directions hearing on 6 June 1997 adjourned because the NRMA was still deciding whether to join Mr Heydon as a defendant. In the result, AAH said that there should be no order as to costs, as I understand it in the end on the basis that any separate order for costs in its favour would be unnecessary. 21 AT submitted that the order as to costs should reflect that the NRMA had failed in relation to free shares/disadvantages and "all issues which were abandoned", or alternatively, that the NRMA should have its costs only on Gambotto liability. It was more adventurous than AAH, saying that the NRMA should pay one third of the defendants' costs, but with fall-back positions to no order as to costs or at worst that the defendants should pay one third of the NRMA's costs. 22 Mr Heydon submitted that the order as to costs should reflect that the NRMA had failed in relation to free shares/disadvantages; that Gambotto liability was only brought into the proceedings by amendment in March 1996; that he was not joined in the proceedings until June 1997; that a number of claims or bases of claim against him were abandoned at a late stage and the case against him was narrowed as the hearing continued; and that the case against him on free shares/disadvantages "suffered from many fundamental flaws". He said that the defendants should pay 40 per cent of the NRMA's costs and the NRMA should pay 60 per cent of the defendants' costs, or alternatively, that there should be no order as to costs. 23 By s 76 of the Supreme Court Act costs are in the discretion of the Court. The discretion is a judicial discretion, to be exercised on proper grounds and not at whim. The starting-point is prescribed by Pt 52 r 11 of the Rules, that costs follow the event unless it "appears to the court that some other order should be made as to the whole or any part of the costs". 24 Principles according to which some other order may be made are fairly well established. If a party fails on some issues, the circumstances may make it reasonable that he be deprived of the costs of those issues, or even be ordered to pay the other party's costs of those issues. For this purpose, issues may be issues in a pleading sense of bases of claim, or may be disputed questions of fact or law. But it must be remembered that parties should not be dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case, and unless a particular issue or group of issues is clearly dominant or separable from the balance of the proceedings it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between the issues on which he was successful and those on which he failed. It is sufficient to refer to Cretazzo v Lombardi (1975) 13 SASR 4 at 12; Hughes v Western Australian Cricket Association (1986) ATPR 40-748 at 48,136; Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 271-2; and Waters v P C Henderson (Australia) Pty Ltd (NSWCA, 6 July 1997, unreported). 25 If an order reflecting success or failure on issues is made, it is appropriate to have regard to the time referable to the issues, although necessarily without mathematical precision (Lenning v Alexander Proudfood Company World Headquarters (NSWCA, 22 April 1991, unreported)). It is not necessary that the issue or issues on which the party failed was or were raised by him unreasonably (Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 615). 26 The major element in the defendants' submissions was the NRMA's failure in relation to free shares/disadvantages liability. That contest was largely discrete from the contest in relation to Gambotto liability. Although there was overlapping to an extent, in particular because some knowledge of the free shares question and the disadvantages question was background to Gambotto liability and because the defendants' case that the majority directors were intent on demutualisation come what may required regard to all the questions, a deal of the time in the hearing was devoted to it. Many documents, a number of witnesses, and the detailed examination of the drafting of the prospectus and the events of early August 1994 were to do with the contest on which the NRMA failed. In the absence of other information, I see no reason to conclude that the preparation for the hearing did not also reflected the discrete contest. The NRMA's failure in relation to free shares/disadvantages liability included what I held to be unavailable reliance on the notion of wasted expenditure, and was a failure on grounds for which the NRMA did not have the encouragement of the decision of the Full Court of the Federal Court as well as on the ground on which it had that encouragement: in this last respect, what was said in Rozniak v Government Insurance Office is pertinent. 27 I was provided with some analyses of time spent on issues. I do not think that the NRMA's failure in relation to free shares/disadvantages liability calls for anything like the apportionments of costs suggested by the defendants. As an illustration only, but a significant one, of much time spent in relation to Gambotto liability a lot of time was spent in the defendants' endeavour to establish the majority directors' unyielding commitment to demutualisation and determination to proceed notwithstanding the Gambotto advice. I am nonetheless satisfied that, in doing justice between the parties, there should be departure from the starting-point of costs following the event. 28 Precision is impossible. In my view, there will be appropriate recognition that the NRMA was not wholly successful in the proceedings if the defendants pay two thirds of its costs of the proceedings. I do not think that any further allowance for some undoubted narrowing of the NRMA's case from its case as pleaded, both in the manner it was conducted and in the abandonment of some matters, should be made, they being part of the ebb and flow of litigation such as these proceedings and matched by changes in the stances of at least AAH and AT. 29 In this I allow for the other matters on which all the defendants relied: the period until March 1996 for which the NRMA asserted only free shares/disadvantages liability, and the NRMA's failure on some aspects of damages (not particularly time-consuming in the hearing, although the out of court attention to agreement on figures must not be overlooked). If my understanding concerning a separate order for costs in favour of AAH is incorrect, I would in any event not make such an order. AAH already has an order that the NRMA pay the costs thrown away by reason of the amendments to the points of claim when Mr Heydon was joined as a defendant, and I do not think anything more should be done in that connection. 30 Although the submissions all treated the defendants as in the same position, I have considered whether Mr Heydon's position is materially different from that of AAH and AT. He was joined late, but the NRMA's costs prior to June 1997 must have been in general for work taken up in the case presented against him. The case against him was initially a little narrower than the case against AAH and AT, and was narrowed as the hearing continued, but that was in relation to free shares/disadvantages liability which is accommodated by the two thirds estimation. This accommodation can not be enlarged by describing the free shares/disadvantages case against Mr Heydon as fundamentally flawed. I do not think that any different order as between the NRMA and Mr Heydon is warranted. 31 As between the defendants, the costs payable to the NRMA should be borne in the same proportion as the judgment sum.

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(c) AT's cross-claim against directors 32 On 8 April 1998 AT filed a notice of motion seeking leave to cross-claim against directors of the NRMA. The directors were all but a few of the persons holding office in Association, Insurance and Holdings over the period May-August 1994. AT claimed contribution pursuant to s 5(1)(c) of the LR Act, on the ground that the directors had breached their duties owed to the NRMA under "the general law" and ss 232(2) and 232(4) of the Law by failing to disclose to AT, as the NRMA's solicitors involved in drafting the prospectus, all the disadvantages of the proposal they perceived or ought reasonably to have perceived. 33 The application came before Hunter J on 22 April 1998. It had been made at a remarkably late stage in the proceedings, and was opposed by the other parties and by the directors because of the delay, the effect on the hearing to commence a month later, and (from the directors' point of view), the weakness of the particularised case against them. 34 In the reasons he gave on that day his Honour said that the only reason for the application was "a prudent avoidance by [AT] of being Anshun estopped in any separate proceedings brought against the directors"; that the lateness was because AT had not adverted to the possibility of such Anshun estoppel until a date in March 1998; that it was not easy to see how AT could be Anshun estopped in any separate proceedings brought against the directors; that there was little doubt that the directors could not prepare to meet the cross-claim for the hearing to commence on 25 May 1998; that leave should not be granted with the effect of aborting the fixed date for hearing; and that if leave were to be granted, it could only be on strict conditions including an order for the separate hearing of the proposed cross-claim. Expressing the view that the application "can be looked at as simply a holding one, to keep the Anshun estoppel point at bay", his Honour adjourned the hearing of the application until after reasons for judgment in the proceedings but prior to the entry of judgment. He recorded that when he proposed that course to the parties it "met with no objection … subject to the directors' counsel making it clear that such a course was not the desired course". 35 The references to Anshun estoppel were to the principle, stemming from the statement by Wigram VC in Henderson v Henderson (1843) 3 Hare 100 at 115; 67 ER 313 at 319 and achieving prominence in Port of Melbourne Authority v Anshun (1981) 147 CLR 589, whereby a party may be precluded from maintaining a cause of action in proceedings if he unreasonably did not raise it in earlier proceedings. Hunter J said that AT's concern was that a passage in the reasons of the Full Court of the Federal Court in Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287 at 295 could mean that there could be Anshun estoppel where the party unreasonably did not cross-claim against a third party, as distinct from defend or cross-claim defensively against the opposite party to the proceedings. 36 On the return to the application as envisaged by his Honour AT had revised its cross-claim. The contribution was now pursuant to s 5(1)(c) of the LR Act "or in equity". There were added to the breaches of duties owed to the NRMA allegations that directors contravened s 996 of the Law, were involved in contraventions by Association, Insurance and Holdings of s 52 of the TP Act and ss 995 and 996 of the Law, and breached fiduciary duties. The allegations were mainly to do with disclosure of disadvantages, but now including some disadvantages going beyond those identified by the Full Court of the Federal Court or on which the NRMA had relied in these proceedings. But the allegations now went beyond disadvantages, and new paras 28 and following included breach of duty in failing to disclose matters material to taking the scheme of arrangement route rather than the resolutions in general meetings route. Some differences between directors were recognised. The framing of the cross-claim was far from satisfactory, but it is not necessary to go further into it. 37 With respect, Hunter J correctly doubted whether AT could be Anshun estopped in any separate proceedings brought against the directors. Neither the facts in Bryant v Commonwealth Bank of Australia nor the passage in question lend support to that view, and the Full Court cited with approval the analysis in Rahme v Commonwealth Bank of Australia (NSWCA, 20 December 1991, unreported) whereby Port of Melbourne Authority v Anshun was authority for the propositions - " …1, that Wigram VC's extended principle as stated in Henderson is accepted as good law by the High Court; 2, that the principle 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 3, 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 ." (emphasis added) 38 Shortly after the application was before his Honour it was held in Foodco Group Pty Ltd v Northgan Pty Ltd (1998) 83 FCR 356 that Anshun estoppel did not operate in a manner which would preclude AT from cross-claiming against the directors. Miba Pty Ltd brought proceedings against Foodco alleging misleading conduct in relation to franchising a food outlet in a shopping centre. It was held that Foodco had misstated the average weekly sales of a food outlet operator in the shopping centre. Foodco had obtained sales figures from Northgan. After being found liable to Miba Pty Ltd, Foodco brought proceedings against Northgan, alleging misleading conduct in the provision of the sales figures and claiming recovery of the amount payable to Miba Pty Ltd. Northgan applied to stay or dismiss the proceedings, amongst other grounds because of Anshun estoppel: it said that the claim should have been litigated as a cross-claim in the proceedings brought by Miba Pty Ltd. The application was rejected, not only because it was arguable that there was no Anshun estoppel (at 362) but because on the law as it presently stood Anshun estoppel did not "apply to a non-party" (at 360-1). 39 In the present case the directors declined to concede that they could not rely on Anshun estoppel against AT, but were less than forthright in propounding its application. Such taking of positions is perhaps understandable, but regrettable. I was not asked to rule on the matter. As at present advised I regard the prospects of an Anshun estoppel should AT bring the cross-claim by way of fresh proceedings as remote, if not ephemeral. 40 But for a strained attempt to extend the cross-claim to Gambotto liability via the allegations about failure to disclose matters material to taking the scheme of arrangement route rather than the resolutions in general meetings route, it was concerned with free shares/disadvantages liability. When the NRMA failed on free shares/disadvantages liability most of the proposed cross-claim could lead nowhere, because even if there had been breaches of duty it would not provide contributory responsibility for AT's liability to the NRMA, and I have difficulty in seeing how the attempted extension to Gambotto liability could lead to contributory responsibility if there had been breaches of duty. My findings in the reasons of 13 May 1999 would not be encouraging to AT in asserting the breaches of duty in either respect. Up to a point AT acknowledged these matters, in saying that the cross-claim should not be heard until after any appeals from my decision in the proceedings as between the NRMA and the defendants had been resolved. It proposed a course of declarations rather than judgments, expressing what I regard as a misplaced concern that, even if the proposed cross-claims were filed pursuant to a grant of leave, judgments as between the NRMA and the defendants would render me functus officio. 41 In what immediately follows I will assume that there is a prospect of Anshun estoppel against AT of more substance than remote or ephemeral, and that there is an arguable case for obtaining contribution from the directors. Even with those assumptions in favour of AT, I would not grant leave to file the cross-claim against the directors. 42 The key to the cross-claim procedure (in earlier times the third party procedure) is that the cross-defendant will be bound by the result as between the plaintiff and the defendant; as well, there will normally be the practical advantage that the rights and obligations of all concerned are determined in the least disruptive and most cost efficient manner in the one hearing, even if the hearing involves separation to some extent of the trial of issues as between various parties. That has been trite legal knowledge at least since Barclays Bank v Tom (1923) 1 KB 221 per Scrutton LJ at 223-4 - "Now I think it is important to keep clearly in mind what the third party procedure is. A plaintiff has a claim against a defendant. The defendant thinks if he is liable he has a claim over against a third party. With that matter between the defendant and the third party the plaintiff has obviously nothing to do. He is not concerned with the question whether the defendant has a remedy against somebody else. His remedy is against the defendant. But the defendant is much interested in getting the third party bound by the result of the trial between the plaintiff and himself, for otherwise he might be at a great disadvantage if, having fought the case against the plaintiff and lost, he had then to fight the case against the third party possibly on different materials, with the risk that a different result might be arrived at. The object of the third party procedure is then in the first place to get the third party bound by the decision between the plaintiff and the defendant. In the next place it is directed to getting the question between the defendant and the third party decided as soon as possible after the decision between the plaintiff and the defendant, so that the defendant may not be in the position of having to wait a considerable time before he establishes his right of indemnity against the third party while all the time the plaintiff is enforcing his judgment against the defendant. And thirdly, it is directed to saving the extra expense which would be involved by two independent actions." 43 This description of the objective of the third party procedure was taken up by the Full Court in this State in Standen v G H Varley Ltd (1956) 56 SR 346 at 348, and in Godfrey v The Nominal Defendant (1963) 63 SR 412 at 414 it was said that it is of the essence of third party procedure that the common issues should be tried together in a single proceeding to which all the interested persons are parties. Sections 63 and 78 of the Supreme Court Act accord with this, and the description of the objective was also taken up in relation to the cross-claim procedure in Sandtara Pty Ltd v Abigroup Ltd (1997) 42 NSWLR 5 at 8-9. 44 Because AT sought to bring the cross-claim late, and then concurred in the deferral of its application until after the reasons for judgment in the proceedings, the objective can not be realised. The lateness of AT's application is marked when Bryant v Commonwealth Bank of Australia was decided in 1995, and no satisfactory explanation for it was given. The directors are not bound by the findings or conclusions in my reasons of 13 May 1999. If AT were now permitted to cross-claim against the directors, everything in the proceedings would be open as between AT and the directors, even if some common ground flowed from what has already occurred. And, given the prospect of appeals from my decision, the cross-claim can not be decided (if decision be necessary) for some time, with inevitable waste of resources and detriment to a proper hearing. 45 Further, whatever might come out in an additional hearing as between AT and the directors, including as to credibility of the directors who gave evidence before me, could be material to the findings or conclusions in the reasons of 13 May 1999. There is the prospect of either revisiting the claims as between the NRMA and the defendants, possibly as between the defendants themselves, or having inconsistent findings and/or conclusions in the same proceedings. I do not think that is to be countenanced. 46 If AT wishes to claim over against the directors, subject to Anshun estoppel it will be in no worse position by doing so in separate proceedings brought against them. Any Anshun damage has already been done, in that there has been a hearing and reasons for judgment without the raising of the cross-claim, and that there remains only the step of formal judgment. In the circumstances I have described I can see no sufficient reason to save AT from any Anshun estoppel which there might be, due to its lateness and concurrence earlier mentioned, by granting leave to cross-claim against directors in the present proceedings. This is quite a different situation from that in Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543, to which AT referred (see at 546, 554, 556, 558, 562), where there had not been reasons for judgment and adjournment of the hearing was possible. 47 If either of the assumptions I have made be unfounded, for that reason as well the application for leave to cross-claim should be refused. It is sufficient to address the assumption in relation to Anshun estoppel. The remote, if not ephemeral, prospect of an Anshun estoppel is in itself such that in the exercise of discretion I would in any event refuse leave - I consider the assumption so close to unfounded as to make that a proper course given the other circumstances I have described. 48 The difficulties in AT's application were great on 22 April 1998; when the application was left for determination after the delivery of reasons in the proceedings as between the NRMA and the defendants, they became insuperable. I do not find it necessary to refer to evidence from a number of the directors as to hardship they would suffer if the proposed cross-claim were permitted. That could only support refusal of leave to file the cross-claim, but the significance of the evidence is undermined by acceptance by all parties that, subject to any Anshun estoppel, AT could bring separate proceedings against the directors. 49 AT's application for leave to cross-claim against directors should be dismissed with costs.

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(d) AAH's cross-claim against directors 50 If AT's application for leave to cross-claim against directors was remarkably late, AAH's similar application was astoundingly late. It was made by notice of motion filed on 28 July 1998, more than two months into the hearing. At least as ultimately maintained, the directors were the same as the directors the subject of AT's application. 51 AAH's cross-claim was similar to, but not the same as, AT's cross-claim. It claimed contribution pursuant to s 5(1)(c) of the LR Act and on principles of co-ordinate liability, alleged breaches by the directors of fiduciary duty, involvement in conduct in contravention of s 52 of the TP Act and ss 995 and 996 of the Law, and breaches of general duties of care. It put the obligation of the directors at the level of ensuring that there was full disclosure in the prospectus of everything material to enable members to decide how to vote, not to mislead them, and to present a fair and balanced picture, which was wider than AT's cross-claim. It did not have the further allegations in paras 28 and following of AT's cross-claim, and so did not attempt to extend to Gambotto liability. 52 In the notice of motion filed on 28 July 1998 AAH asked that the hearing of the motion be adjourned to a date after delivery of reasons in the proceedings and before the entry of judgment. The notice of motion was first returned on 14 August 1998, but with incomplete service. All concerned were present on 28 August 1998, when by consent the application was adjourned to be dealt with at the same time as AT's application for leave to cross-claim against directors. 53 AAH's application could be in no better position than that of AT - indeed, its prospects would not be enhanced by the facts that AAH opposed AT's application and then took months to decide to jump on the band wagon. 54 AAH recognised that, in the light of my reasons of 13 May 1999, there was no present need to prosecute the cross-claim because it was confined to free shares/disadvantages liability: the cross-claim would be relevant only if there were a successful appeal from my decision in relation to free shares/disadvantages liability. It submitted that its application should be stood over generally, or to a fixed date well into the future, or should be now granted but with the hearing of the cross-claim stood over to a fixed date in the future, against the possibility that the NRMA's failure in relation to free shares/disadvantages liability did not survive an appeal. 55 AAH acknowledged that it could simply commence fresh proceedings against the directors, but raised the spectre of Anshun estoppel while saying that it seemed quite unlikely that any Anshun estoppel argument could succeed. The reasons I have given in relation to AT's application mean that I do not think that leave should be given, nor do I see any reason to postpone the determination of the application. AAH's application for leave to cross-claim against directors should be dismissed with costs.

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(e) AT's further cross-claim against Mr Heydon 56 AT had cross-claimed against Mr Heydon for indemnity or contribution, see para 159 of the reasons of 13 May 1999. Following publication of the reasons of that date it announced that it was considering a further cross-claim against him. Pursuant to directions then given, on 20 May 1999 AT filed a notice of motion seeking leave to file the further cross-claim. 57 The cross-claim, in its later revised form, alleged breach of a duty of care owed by Mr Heydon to AT, said to be a duty of care "in substantially similar terms" to the duty of care alleged by the NRMA to be owed by Mr Heydon to the NRMA; it alleged that Mr Heydon was in breach of that duty of care, both in relation to Gambotto's case and in relation to free shares (the conjunction with the disadvantages question was unclear), and that AT suffered loss by reason of the breach of duty being the amount of its liability to the NRMA. The framing of the cross-claim may well have been deficient in many respects, but this was its substance and it is unnecessary to go into the deficiencies. 58 Through the affidavit of Mr Peter Kennedy sworn 20 May 1999, it was said that the High Court delivered judgment in Astley v Austrust Ltd (1999) HCA 6 on 4 March 1999; that the parties in the present proceedings were given leave on 23 March 1999 to lodge supplementary written submissions on that decision by 13 April 1999; and that - "Until such submissions were called for, it was not considered necessary to examine directly the liability of the Third Defendant to the Second Defendants independently of the claim for indemnity or contribution made in the Third Cross-Claim. Once the immediate consequences of the decision in Astley v Austrust Ltd became apparent, I instructed Counsel to advise on this liability. Counsel have advised that the Third Cross-Claim may not, in certain circumstances permit the Second Defendants to claim contribution from the Third Defendant and for more abundant caution the Second Defendant should seek the leave of the Court to file a Further Cross-Claim."

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59 The last sentence in this extract was objected to, but was allowed on the basis that I would pay regard to the documentary evidence revealing what counsel had advised rather than to Mr Kennedy's summation. 60 The description in submissions of the occasion for the further cross-claim was to the following effect. Each of AAH, AT and Mr Heydon cross-claimed against the other for contribution. If the NRMA were contributorily negligent, before Astley v Austrust Ltd each could expect the same reduction in its liability to the NRMA. The contribution between AAH, AT and Mr Heydon would then operate on common liabilities to the NRMA. As a result of the decision of the High Court in Astley v Austrust Ltd, if the NRMA were contributorily negligent AAT and AT could not have reductions in their liability to the NRMA, but Mr Heydon could. The contribution between AAH, AT and Mr Heydon would operate on different liabilities to the NRMA, and it was possible, if not likely, that AT would end up with a greater ultimate burden than it would otherwise have had because Mr Heydon would start with a lesser liability to the NRMA. An analogy with Ellesmere Brewery Co v Cooper (1896) 1 QB 75 was drawn: Street v Retravision (NSW) Pty Ltd (1995) 135 ALR 168 and Bialkower v Acohs Pty Ltd (1998) 154 ALR 534 were also referred to. So it was necessary for AT to find a way to obtain greater contribution from Mr Heydon and lessen its ultimate burden, and so the cross-claim. 61 When application for leave to file a cross-claim is first made after reasons for judgment have been published, an explanation for the time at which it is made is called for. This explanation is unsatisfactory. 62 First, if indeed the decision of the High Court in Astley v Austrust Ltd was the occasion for the further cross-claim against Mr Heydon, AT gave no thought for itself to the significance of the decision, and was only caused to do so by the Court's invitation to provide further submissions. It then did not act promptly, but announced and made its application only after the publication of the reasons of 13 May 1999. The delay meant that findings and conclusions were made and reached, and published, without the consideration or the opportunity for consideration of the evidence material to the cross-claim. 63 Secondly, the further submissions were provoked by the High Court's holding that contributory negligence is not available as a defence to a claim for breach of contract. It is plain that AT's cross-claim goes beyond rectifying a perceived consequence of the decision of the High Court. If successful, the cross-claim would give AT complete indemnity, regardless of what might have been an appropriate contribution from Mr Heydon, and contributory negligence on the part of AT would not necessarily bring its ultimate burden to a pre-Astley v Austrust Ltd position. The documentary evidence revealing what counsel had advised was rather obscure, but the cross-claim was a way of reducing AT's ultimate burden which could have been taken up when the existing cross-claim for contribution was filed. 64 There is something of a parallel here with an element of Gambotto liability in these proceedings. There had long been doubt about reduction of damages for contributory negligence on the part of the plaintiff where the defendant was concurrently liable in contract and tort for breach of a duty of care. Decisions could be found either way as recently as the last decade (for example, Bains Harding Construction & Roofing (Aust) Pty Ltd v McCredie Richmond & Partners Pty Ltd (1988) 13 NSWLR 437 yes, Arthur Young & Co v WA Chip & Pulp Co Pty Ltd (1989) WAR 100 no). The special leave to appeal to the High Court in Astley v Austrust Ltd, from the decision of the Full Court of the Supreme Court of South Australia (1996) 67 SASR 209, was granted on 11 December 1997. A High Court decision could settle the matter, and could go either way. It might have been argued that it was incumbent on AT to pay regard to the possibility that the High Court might decide as it did, and to protect itself from a possible holding whereby it could not have a reduction in its liability to the NRMA but Mr Heydon could, by including in its existing cross-claim for contribution (which was filed some months after 11 December 1997) this way of reducing its ultimate burden. Needless to say, Mr Heydon eschewed such an argument. I put it aside. 65 In my opinion AT's application for leave to further cross-claim against Mr Heydon should be refused. The late time at which it was made, without satisfactory explanation, does not of itself bring that outcome. Nor do I treat as of itself bringing that outcome the fact that, if the description of the occasion for the further cross-claim be taken at face value, there is presently no need for the cross-claim because I have found that the NRMA was not contributorily negligent: for reasons I have given, the description can not be taken at face value, and the cross-claim could arise for consideration quite apart from a successful appeal on contributory negligence. AT was equivocal in submissions about dealing with the cross-claim even before any appeal, and for reasons to come I do not think that could be excluded. 66 The cross-claim is not just a different legal framework for or use of facts and issues already in the proceedings. Whether Mr Heydon owed a duty of care to AT, and its terms, was no part of the proceedings. Whether AT relied on Mr Heydon was part of the proceedings, in the sense that AT's defence as filed to the NRMA's claims included that it was not retained to advise in relation to Gambotto's case or its impact on the proposal and that the NRMA relied on the advice of AAH and Mr Heydon and not on the advice of AT in that respect, and in the further sense that Mr Bateman's evidence was to the effect that he left that matter to AAH (see paras 319-328 and 764-769 of the reasons of 13 May 1999). The cross-claim raises new facts and issues, including a major issue to some extent inconsistent with AT's case at the hearing. 67 What has earlier been said about the objective of the cross-claim procedure may be recalled. AT and Mr Heydon are bound by my findings and conclusions already stated, but that provides its own difficulty. The additional issues would give rise to possible inconsistent findings or conclusions, or at least to further evidence which might lead to different findings or conclusions there being a similarity in this respect to the AT cross-claim against directors. Whatever might come out in an additional hearing as between AT and Mr Heydon, including as to the credibility of (for example) Mr Bateman, could be material to the findings or conclusions in the reasons of 13 May 1999. I see no reason to ignore the submission by counsel for Mr Heydon that it is likely that aspects of Mr Heydon's case, specifically the cross-examination of Mr Bateman, would have been conducted differently had the cross-claim been on foot. There is the prospect noted in relation to the AT cross-claim against directors, and it is no more to be countenanced in relation to the further cross-claim against Mr Heydon. 68 In my opinion that is a substantial reason for refusing the leave sought. That the application is made after the publication of the reasons of 13 May 1999 works strongly against it, and I do not accept that AT was confronted on 4 March 1999 with a new set of ground rules justifying the late grant of leave: the rather remote analogy with a more stringent test for reopening after delivery of judgment invoked by Mr Heydon, see Smith v New South Wales Bar Association (1992) 176 CLR 256 at 266-7, is unnecessary. At the last minute AT suggested that it might suffer an Anshun estoppel. There is more to be said for that than in the case of the cross-claims against directors, but I express no view. Even assuming that there is a prospect of Anshun estoppel against AT, again any Anshun damage has already been done, and Mr Heydon as an individual involved in these proceedings for some years should not be further exposed (beyond, of course, by the exercise of appellate rights and their consequences) to the strain of litigation. In the circumstances I have described, again I see no sufficient reason to save AT from any Anshun estoppel there might be, weighed against the reasons for refusing the leave sought 69 AT's application for leave to further cross-claim against Mr Heydon should be dismissed with costs.

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Orders 70 As noted in the reasons of 13 May 1999, the proceedings were conducted on the basis that it did not matter which of Association, Insurance or Holdings retained the solicitors (see para 101). No one suggested that it mattered whether judgment was in favour of one or other, or all, of the plaintiffs. The judgment will be in favour of all the plaintiffs, but of course with payment in total of no more than the judgment sum. 71 The orders to conclude these proceedings at first instance are as follows: (1) Dismiss with costs the second defendants' notice of motion filed on 8 April 1998. (2) Dismiss with costs the first defendants' notice of motion filed on 28 July 1998. (3) Dismiss with costs the second defendants' notice of motion filed on 20 May 1999. (4) Judgment for the plaintiffs against each of the defendants for $32,068,910. (5) Order that the defendants pay two thirds of the plaintiffs' costs. (6) Dismiss the cross-claims by the defendants against the plaintiffs. (7) Order that each of the defendants recover from each of the other defendants contribution of one third of the amounts payable pursuant to orders (4) and (5). ________

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Last Modified: DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

(1997) 41 NSWLR 608

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Cases Cited (14)