Paul Ernest Simmons -v- Protective Commissioner of NSW also known as NSW Trustee and Guardian [2012] NSWSC 455

Supreme Court of NSW|2012-04-19|Before: Hammerschlag J, Windeyer J

ation v Akhil Holdings Ltd (1990) 169 CLR 279 Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 Super 1000 Pty Ltd v Pacific General Securities Ltd (2008) 221 FLR 427 Mills v Stokman (1967) 116 CLR 61 Dey v Victorian Railways Commissioners (1949) 78 CLR 62 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Webster v Lampard (1993) 177 CLR 598 Rajski v Powell (1987) 11 NSWLR 522 Expo-Net Danmark A/S v Buono-Net Australia Pty Ltd (No 2) [2011] FCA 720 QS Holdings Sarl v Paul's Retail Pty Ltd [2011] FCA 853 Polar Aviation Pty Ltd v Civil Aviation Safety Authority (No 4) [2011] FCA 1126 Green v Lord Penzance (1880-81) LR 6 App Cas 657 Ex parte Walsh; In re Yates (1925) 37 CLR 36 Papps v Mahon [1966] NZLR 288 Dennis v Australian Broadcasting Corporation [2008] NSWCA 37 Commonwealth of Australia v Griffiths (2007) 70 NSWLR 268 Australian Executor Trustees Ltd v Pachovski [2011] NSWCA 23 Cf Hudson Investments Group Ltd v Atanaskovic [2010] NSWSC 1055 Livestock Transport (Sydney) Pty Ltd v Commonwealth of Australia [2011] NSWSC 7 Casella v Salfinger [2011] NSWSC 1444 Bott v Carter [2012] NSWCA 89 Texts Cited: Ritchie's Uniform Civil Procedure New South Wales Category: Principal judgment Parties: Paul Ernest Simmons - Plaintiff Protective Commissioner of NSW also known as NSW Trustee and Guardian - First Defendant Raymond John Henwood - Second Defendant Dorothy Frances Simmons - Third Defendant Representation: Counsel: P.E. King - Plaintiff T.L. Wong - First Defendant J.A. Darvall - Second Defendant S.F. Hughes - Third Defendant Solicitors: Stuart Percy & Associates - Plaintiff Crown Solicitor's Office - First Defendant Denniston & Day - Second Defendant Boyd House & Partners - Third Defendant File Number(s): 2011/79920

BACKGROUND 2To facilitate an understanding of the applications, it is necessary to recount some aspects of the background to the proceedings. 3The plaintiff is the son of the late Agnes Mary Simmons, who died on 2 December 1995. I shall refer to the deceased as Agnes, with no disrespect intended. On 21 July 1992 the management of Agnes' affairs was committed to the Protective Commissioner, of whom the first defendant, NSW Trustee and Guardian ("the Commissioner"), is the statutory successor. 4Agnes owned a significant grazing property, comprising a number of separate holdings, near Brewarrina in the State of New South Wales, and known as "Goonoo". Title was in the form of a series of perpetual Western Lands leases, registered under the Real Property Act 1900 (NSW) ("the Act"). 5Part of Goonoo was occupied by the third defendant, Dorothy Frances Simmons, Agnes' daughter-in-law (by way of marriage to another son of Agnes). I shall refer to her as Dorothy, also without any disrespect intended. In February 1992 Dorothy (as plaintiff) commenced proceedings in this Court against Agnes and the plaintiff in relation to a notice which Dorothy had received to quit Goonoo. A number of cross-claims were brought in those proceedings, relevantly, one by the plaintiff against Agnes claiming a half interest in Goonoo and seeking that she transfer to him as joint tenant such an interest, based on an oral agreement which he alleged they had made. He relied, amongst others, on the fact that Agnes had earlier executed transfers to him and herself as joint tenants. All disputes in those proceedings, except for the plaintiff's cross-claim, were concluded by consent orders or by discontinuance. 6The plaintiff's cross-claim proceeded to hearing before Windeyer J and was determined by his Honour in a judgment delivered on 28 September 1993; Simmons v Simmons (Supreme Court of New South Wales, Windeyer J, 28 September 1993, unreported, No 1661/92). His Honour dismissed the cross-claim. The plaintiff appealed. 7The appeal was heard by the Court of Appeal on 24 March 1994. The Court of Appeal gave judgment on 14 November 1994, upholding the appeal on the basis that there was an operative equitable estoppel in favour of the present plaintiff (as Appellant) grounding the relief which he sought; Simmons v Simmons by her Tutor the Protective Commissioner of New South Wales [1994] NSWCA 368. 8The substantive orders of the Court of Appeal were the following:

Appeal allowed.
Judgment and orders below set aside.
In lieu thereof. (a) DECLARE that the appellant has, since the execution of the transfer of Folio Identifiers 2163/764276, 2688/764769, 6133/768981, 6490/760647 and 3989/766462 by Agnes Mary Simmons and himself, dated 29 August 1989, been entitled to have carried through the registration of that transfer in accordance with the Real Property Act subject to any ministerial consent necessary in accordance with the Western Lands Act 1901; (b) ORDER that the Protective Commissioner of New South Wales to whose management the estate of Agnes Mary Simmons has been committed do all things and take all steps necessary to have the title to the property known as "Goonoo" registered in the names of Agnes Mary Simmons and the appellant, Paul Ernest Simmons, as joint tenants; 9However, on 24 December 1993, unbeknown to the Court of Appeal (and to the plaintiff, it may for present purposes be assumed) the Commissioner (on behalf of Agnes) had exchanged contracts to sell Goonoo to the second defendant. On 28 June 1994 that sale was completed and registration of the transfer to the second defendant took place on 24 August 1994, both after the hearing of the appeal but prior to judgment. Additionally, on 24 October 1994 the second defendant transferred a small part of Goonoo to Dorothy for consideration. 10In the light of these events, on 9 August 1995 the Court of Appeal varied the orders which had earlier been made; Simmons v Simmons by her Tutor the Protective Commissioner of New South Wales [1995] NSWCA 430. 11The judgment is brief, and given its centrality to the argument here, it is appropriate to set it out in full: Gleeson CJ, Kirby P and Priestley JA: The court made orders in this appeal on 14 November 1994. The reasons then published contain the facts known to the court in the course of the appeal. The substance of the court's decision was that the appellant was entitled to obtain the registration of a transfer of certain land from his mother to his mother and himself as joint tenants. O3(a) and O3(b) were made to implement that decision. Unknown to the court was the fact that after Windeyer J had decided the case at first instance, and before the hearing of the appeal from his decision began, contracts for the sale of the land had been exchanged (24 December 1993), and the sale had been completed (28 June 1994) after the argument but before judgment in the appeal. Windeyer J had ordered, on 1 February 1994 that the Protective Commissioner as manager of the mother's estate should be restrained from dealing with the net proceeds of sale until determination of the appeal to this court. Upon these matters being made known to the court, the court indicated it would make supplementary orders so that effect could be given to the substance of its judgment in the changed circumstances of the case. For this purpose it is sufficient to say: In lieu of sub para(a) and para(b) of para3 of the declaration and orders made on 14 November 1994 the court (a) declares that the net proceeds of the sale of "Goonoo" are held by the respondent in trust for Paul Ernest Simmons and Agnes Mary Simmons as joint tenants, and (b) orders that the Protective Commissioner deal with the said net proceeds accordingly. It is also necessary to add to para3 the following: (f) the costs of and incidental to the making of the further declaration and orders varying those made on 14 November 1994 are to be part of the appellant's costs of the appeal. 12On 11 March 2011 (that is, more than 15 years after the final orders made by the Court of Appeal) the plaintiff commenced these proceedings by suing out the Statement of Claim.

THE PLEADED CASE 13The Statement of Claim pleads an oral agreement between the plaintiff and Agnes in July 1987 for the transfer of Goonoo to herself and him as joint tenants and that he was entitled to have registration of the transfer carried through, subject to any Ministerial consent necessary. It pleads the existence of a partnership between the plaintiff and Agnes for the purpose of carrying on a farming and grazing business on Goonoo as equal partners. It pleads the exchange of contracts for the sale of Goonoo between the first defendant and the second defendant and completion of the sale. It pleads that Agnes executed a will leaving the whole of her estate to the plaintiff. 14Paragraphs [19]-[22] of the Statement of Claim are in the following terms: 19 The entry into the contract as alleged in paragraph 15 and the sale of the property to the second defendant was made in breach of trust OR IN THE ALTERNATIVE in breach of the first defendant's fiduciary duty or obligation in equity to the plaintiff. Particulars (a) At the time of the sale of the property to the second defendant the first defendant had notice and was aware of the plaintiff's unregistered interest in the property. (b) FURTHER OR IN THE ALTERNATIVE by operation of the Partnership Act (1892) the first defendant was a partner and a fiduciary of the plaintiff in respect of the partnership property. 20 As a result of the first defendant's breach of trust OR IN THE ALTERNATIVE breach of fiduciary duty or obligation in equity to the plaintiff the plaintiff suffered and continues to suffer loss and damages. 21 Upon the first defendant's receipt of the proceeds of sale of the property the first defendant held such proceeds on trust OR IN THE ALTERNATIVE as the fiduciary or upon an obligation in equity for the plaintiff and Mrs Simmons as joint tenants until her death on 2 December 1995 and therafter absolutely for the plaintiff. 22 The first defendant disbursed and/or dealt with the proceeds of sale of the property in breach of trust OR IN THE ALTERNATIVE in breach of its fiduciary duty or obligation in equity to the plaintiff Particulars (a) The plaintiff will provide particulars after discovery and interrogatories herein. 15As against the second defendant, the Statement of Claim pleads as follows: Cause of action as against second defendant 23 At the time of the sale of the property to the second defendant the second defendant had notice and was aware of the plaintiff's unregistered interest in the property and purchased the property knowing there was a risk that the plaintiff had a subsisting interest in the property to which his interest was subject. 24 In the premises the sale of the property to the second defendant was and is void or voidable and should be set aside. 25 Prior to purchasing the property or shortly thereafter the second defendant entered into an informal arrangement or agreement with the third defendant to transfer by way of sale or reimbursement or remittance a portion of the property to the third defendant. 26 Within weeks of the sale of the property to the second defendant having been completed the second defendant took steps to transfer that part of the property concerning an area of land in the order of 485.6 hectares having Certificate of Title 6490/760647 and subject to WL 1598 to the third defendant including: (a) Requesting the consent of the Western Lands Commissioner to the transfer of the WL lease on 18 August 1994; (b) obtaining the Minister's consent to the transfer on 7 September 1994; (c) Executing a transfer in appropriate form under the Real Property Act 1900 on 24 October 1994; (d) Registering the said transfer subsequently. 27 The consideration for the transfer was: (a) $28,608; and (b) was subsequently less than the market value of that part of the property at the time the transfer occurred. 28 In the premises the second defendant holds the property upon constructive trust for the plaintiff. 16As against Dorothy, the Statement of Claim pleads as follows: Cause of action as against third defendant 29. The plaintiff repeats paragraphs 23-28 herein as against the third defendant. 30. At the time of the transfer of that part of the property from the second defendant to the third defendant the third defendant had notice and was aware of the plaintiff's unregistered interest in the property and received that part of the property knowing that there was a risk that the plaintiff had a subsisting interest in that part of the property to which her interest was subject. 31. In the premises the subsequent transfer of that part of the property to the third defendant was and is void or voidable and should be set aside. 32. In the premises the third defendant holds that part of the property upon constructive trust for the plaintiff. 17The Statement of Claim seeks various declarations and other orders. It seeks declarations that at all material times, the Commissioner held Goonoo and the funds received "in respect thereof" on trust, or as fiduciary of, or upon an obligation in equity, for the plaintiff and Agnes as joint tenants until her death on 2 December 1995, and thereafter absolutely for the plaintiff. It seeks a declaration that the sale of Goonoo by the Commissioner was void or voidable or should be set aside. It seeks an order for tracing, or alternatively, that an account be taken. It claims compensation and damages, including aggravated and exemplary damages, from the Commissioner only. 18The only direct substantive relief sought against the second defendant is a declaration that the second defendant "holds the land upon constructive trust for the plaintiff". The only direct substantive relief sought against Dorothy is a declaration that she "holds the land upon constructive trust for the plaintiff". 19By letter dated 11 August 2011, the second defendant's solicitors sought the following further particulars from the plaintiff: As you know we act for the second defendant. We refer to the directions hearing on 29 July and note we have still not been served with a sealed copy of the statement of claim. We assume you will do so as soon as it is returned to you from the registry, however for the purposes of this letter, we assume that the filed copy of the statement of claim will be in identical form to the copy served under cover letter dated 18 July 2011. On that basis, we make the following request for particulars of your client's claim:-

We enclose a copy of the Court of Appeal decision in Simmons v Simmons dated 9 August 1995. We assume you are unaware of the decision. In view of the Orders therein, please articulate the basis upon which your client brings and seeks to maintain the action against out client.
The relief sought against our client appears to be limited to prayer 6 of the statement of claim being a claim for a declaration that our client holds the land upon constructive trust for your client. We invite you to outline the basis upon which your client says that it is entitled to such a declaration.
We refer to paragraph 23 and note your client alleges our client had "notice and was aware of your client's unregistered interest". Please particularise "notice". Does your client allege fraud on the part of the second defendant in taking title to the property? We await your urgent reply. 20By letter dated 9 September 2011, the following particulars were provided: We refer to your letter dated 11 August 2011 and respond to your numbered paragraphs as follows:-
The basis of the plaintiff's action against your client is articulated adequately in the Statement of Claim and we rely on same.
This is not a request for particulars. In any event, the plaintiff says that the second defendant assumed title to the property with the knowledge alleged in paragraph 23 of the Statement of Claim such that the second defendant holds his interest in the property on trust for the plaintiff on the basis that he knowingly participated and was involved in the first defendant's breach of fiduciary duty to the plaintiff, or on the basis that the remedy of a declaration of a constructive trust is the appropriate remedy in the circumstances alleged (see Bofinger v Kingsway Group Ltd (2009) 239 CLR 269). In the alternative to a declaration that the second defendant holds the property upon constructive trust for the plaintiff together with orders for the transfer of the property the plaintiff will seek equitable compensation.
"Notice" means what it says. That is to say, the second defendant took the land from the Protective Commissioner with knowledge and in circumstances as alleged in paragraphs 23-28 of the Statement of Claim. In the circumstances, we see no reason why your client cannot file a defence and we require it to do so.

APPROACH 21UCPR Pt 13 r 13.4 is entitled Frivolous and vexatious proceedings. It provides: (1) If in any proceedings it appears to the court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings: (a) the proceedings are frivolous or vexatious, or (b) no reasonable cause of action is disclosed, or (c) the proceedings are an abuse of the process of the court, the court may order that the proceedings be dismissed generally or in relation to that claim. (2) The court may receive evidence on the hearing of an application for an order under subrule 1. 22UCPR Pt 14 r 14.28 is entitled Circumstances in which court may strike out pleadings. It provides: (1) The court may at any stage of the proceedings order that the whole or any part of a pleading be struck out if the pleading: (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading, or (b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or (c) is otherwise an abuse of the process of the court. (2) The court may receive evidence on the hearing of an application for an order under subrule (1). 23The motions were heard together. The Commissioner played no part. 24The second defendant and Dorothy put both that no reasonable cause of action had been disclosed by the plaintiff and that the proceedings were an abuse of the process of the court. They initially put, but did not press, submissions that the claim is statute barred. 25For the reasons which follow I consider that both of these submissions should be upheld. 26I have approached the matter on the footing that so far as the failure to disclose a cause of action is concerned, it is incumbent on the second defendant and Dorothy to show that there is no real question, whether of fact or law, to be tried so that the plaintiff's proceedings are so clearly untenable that they cannot possibly succeed. 27This is in accordance with the well known and oft quoted authorities which have adopted formulations of the test which an applicant for summary determination (whether by way of summary judgment, summary dismissal or striking out) must meet and which the majority of the High Court recently, in Spencer v Commonwealth of Australia (2010) 241 CLR 118 ("Spencer"), described as amounting to demonstrating that there is a certainty of failure on the part of the losing party. 28However, as is set out below, I consider that there is a compelling argument that, having regard to the specific wording of UCPR Pt 13 r 13.4(1)(b) and to the provisions of s 56(1) and (2) of the Civil Procedure Act 2005 (NSW), it is not incumbent on an applicant under this particular rule to establish certainty of outcome, but rather that the applicable test is whether a defendant has demonstrated that a plaintiff's case has no reasonable prospects of success. In the present case, the difference between the two tests does not matter because the second defendant and Dorothy have met the stricter one; Shaw v New South Wales [2012] NSWCA 102 at [133]-[134] per Barrett JA.

WHY THE PLAINTIFF CANNOT SUCCEED 29The uncontested evidence included title searches establishing that the second defendant is the registered proprietor of Goonoo, except for that part transferred to Dorothy and that Dorothy is the registered proprietor of the part transferred to her. 30The plaintiff's claims as against the second defendant and Dorothy depend on the plaintiff being able to establish the present existence of an equitable interest in the land which is Goonoo, which interest is presently held on constructive trust by the second defendant and Dorothy and which could be the subject of declarations in his favour. 31However, on 9 August 1995, orders were made by the Court of Appeal, by which the plaintiff's beneficial or equitable entitlement in respect of Goonoo was recognised in the form of declarations that the net proceeds from the sale to the second defendant were held for him and Agnes. These orders have never been challenged. 32Whatever beneficial entitlement the plaintiff may have had in the land which is Goonoo passed into that judgment, and now consists exclusively of an entitlement to the sale proceeds as reflected by the Court's orders. The plaintiff, therefore, cannot assert a beneficial entitlement to the land itself; see Blair v Curran (1939) 62 CLR 464 at 531-2; Onerati v Phillips Constructions Pty Ltd (1989) 16 NSWLR 730. 33He cannot have any cause of action in respect of such an entitlement against the second defendant and Dorothy. 34It is also the case that the present proceedings are an abuse of process because they are an attempt to litigate or re-litigate the central issue decided in the proceedings culminating in the Court of Appeal judgment. The orders in the plaintiff's favour not only represent the entirety of his entitlement, they implicitly recognise the efficacy of the transfer of Goonoo to the second defendant (and, for that matter, to Dorothy). It does not matter that the second defendant and Dorothy were not party to the earlier proceedings because the issue of the nature of the plaintiff's entitlement in the land was determined in them. Maintenance of the present claim is in direct conflict with the final judgment of the Court of Appeal and cannot stand together with it; Rippon v Chilcotin Pty Ltd (2001) 53 NSWLR 198; Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404. 35The plaintiff's claim must fail for a further reason. As counsel for the plaintiff accepted, the plaintiff cannot succeed against either the second defendant or Dorothy unless he pleads and establishes fraud on their part. 36Section 42(1) of the Act relevantly provides that: Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded ... 37Both the second defendant and Dorothy are the registered proprietors, respectively, of their interests in Goonoo. It follows that the plaintiff, who is claiming an interest in the land, must establish the fraud exception in s 42(1) of the Act. It may be observed that the plaintiff brings no claim in personam against them for equitable compensation but that if he had done so, it would have been incumbent upon him to plead and establish assistance on their part with knowledge in a dishonest and fraudulent design on the part of the Commissioner; Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at 164-6 [179]-[186]. 38In a somewhat surprising submission, counsel for the plaintiff put that the Statement of Claim read together with the further particulars provided by letter alleges fraud on the part of the second defendant and Dorothy. 39UCPR Pt 15 r 15.3 provides that a pleading must give particulars of any fraud on which a party relies. Fraud must be pleaded specifically and with particularity. Particulars of the fraud must be exactly given; see Banque Commerciale S.A., En liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 and Wentworth v Rogers (No 5) (1986) 6 NSWLR 534. Fraud, for the purposes of s 42 requires dishonesty or moral turpitude and not what is called constructive or equitable fraud, where there is no dishonesty or intention to cheat; see Super 1000 Pty Ltd v Pacific General Securities Ltd (2008) 221 FLR 427 at 461, [162] and following. 40There is no fraud for the purposes of s 42 if a person does no more than acquire title and become the registered proprietor with notice of a prior unregistered interest and assert that his or her title is free of that interest; Mills v Stokman (1967) 116 CLR 61 at 78. 41On no fair reading is what the plaintiff has pleaded against either the second defendant or Dorothy fraud. Nothing which is pleaded alleges any form of dishonesty or intention to cheat. As it happens, no dishonest or fraudulent intent on the part of the Commissioner is alleged either. 42In paragraph 3 of the letter from the second defendant's solicitors of 11 August 2011, the following particulars were sought: We refer to paragraph 23 and note your client alleges our client had "notice and was aware of your client's unregistered interest". Please particularise "notice". Does your client allege fraud on the part of the second defendant in taking title to the property? 43The response was: "Notice" means what it says. That is to say, the second defendant took the land from the Protective Commissioner with knowledge and in circumstances as alleged in paragraphs 23-28 of the Statement of Claim. 44Far from alleging fraud, I consider that the plaintiff, by his response, communicated that he declined to do so. Having regard to the pleading itself and to the further particulars, it is presently difficult to see how those who prepared the pleading could, on that material, have satisfied themselves that fraud could legitimately have been pleaded. 45Counsel for the plaintiff proffered no analysis revealing how these hurdles might be overcome, whether by amendment or otherwise. The proceedings against the second defendant and Dorothy are properly to be dismissed. It is not necessary to consider whether the Statement of Claim should be struck out.

REASONABLE PROSPECTS OF SUCCESS 46The test which an applicant for summary determination must satisfy has been described in numerous formulations in the authorities. These include that the loser's case must be "so obviously untenable that it cannot possibly succeed", "manifestly groundless" or "hopeless; see for example Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129 and Webster v Lampard (1993) 177 CLR 598. See also Rajski v Powell (1987) 11 NSWLR 522 at 524. 47An examination of the authorities reveals that they have developed a general approach of principle resting on the notion that a party should not be improperly deprived of the opportunity for the trial of its case by the appointed tribunal, rather than adopted an approach based on an examination of the terms of any applicable specific rule of court or other statutory enactment providing for summary determination. 48However, in Spencer the High Court gave consideration to the specific terms of s 31A of the Federal Court of Australia Act 1976 (Cth), inserted by amendment in 2005, which is in the following terms: Summary judgment (1)The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is prosecuting the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding. (2) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is defending the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding. (3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be: (a) hopeless; or (b) bound to fail; for it to have no reasonable prospect of success. (4) This section does not limit any powers that the Court has apart from this section. (5) This section does not apply to criminal proceedings. 49At [55], in the joint judgment of Hayne, Crennan, Kiefel and Bell JJ, their Honours pointed out that the type of formulations in the authorities I have earlier referred to in effect all require demonstrable certainty of outcome. 50At [56], their Honours said that: Because s 31A(3) provides that certainty of failure ("hopeless" or "bound to fail") need not be demonstrated in order to show that a plaintiff has no reasonable prospect of prosecuting an action, it is evident that s 31A is to be understood as requiring a different enquiry from that which had to be made under earlier procedural regimes. It follows, of course, that it is dangerous to seek to elucidate the meaning of the statutory expression "no reasonable prospect of successfully prosecuting the proceeding" by reference to what is said in those earlier cases. 51At [57]-[60], their Honours went on to observe that no paraphrase of the expression "no real prospect of success" can be adopted as a sufficient explanation of its operation, let alone definition of its content. They further observed that full weight must be given to the expression as a whole, and that whilst it may be accepted that the power to dismiss an action summarily is not to be exercised lightly, the elucidation of what amounts to "no reasonable prospect" can best proceed in the same way as content has been given, through a succession of decided cases, to other generally expressed statutory phrases, such as the phrase "just and equitable" when it is used to identify a ground for winding up a company. Their Honours concluded with the following observation: At this point in the development of the understanding of the expression and its application, it is sufficient, but important, to emphasise that the evident legislative purpose revealed by the text of the provision will be defeated if its application is read as confined to cases of a kind which fell within earlier, different, procedural regimes. 52The effect of Spencer has been considered in a number of decisions of the Federal Court, including Expo-Net Danmark A/S v Buono-Net Australia Pty Ltd (No 2) [2011] FCA 720 (Bennett J) ("Expo-Net"), QS Holdings Sarl v Paul's Retail Pty Ltd [2011] FCA 853 (Kenny J) and Polar Aviation Pty Ltd v Civil Aviation Safety Authority (No 4) [2011] FCA 1126 (Kenny J). Bennett J's judgment in Expo-Net Danmark, at [8], contains a useful and concise summary of what emerges from Spencer, including that there is a discretion reposed in the judge hearing an application to grant summary judgment, the power should be attended with caution and involve a high degree of certainty about the ultimate outcome of the matter if it were to go to trial, more complex cases are unlikely to be capable of being resolved by summary judgment without discovery and oral evidence, s 31A(2) of the Federal Court of Australia Act 1976 (Cth) requires that practical judgment be made and the inquiry is whether there is a reasonable prospect of prosecuting the proceedings, not whether a certain and concluded determination could be made that the proceedings would necessarily fail. 53UCPR Pt 13 r 13.4(1)(b) is enlivened where no reasonable cause of action is disclosed. This may be compared to UCPR Pt 13 r 13.1 which is entitled Summary judgment and is in the following terms: (1) If, on application by the plaintiff in relation to the plaintiff's claim for relief or any part of the plaintiff's claim for relief: (a) there is evidence of the facts on which the claim or part of the claim is based, and (b) there is evidence, given by the plaintiff or by some responsible person, that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part of the claim, or no defence except as to the amount of any damages claimed, the court may give such judgment for the plaintiff, or make such order on the claim or that part of the claim, as the case requires. (2) Without limiting subrule (1), the court may give judgment for the plaintiff for damages to be assessed. (3) In this rule, a reference to damages includes a reference to the value of goods. 54The summary judgment rule specifies no requirement of reasonableness. The learned authors of Ritchie's Uniform Civil Procedure New South Wales, at [13.4.15], citing Spencer, express the view that it is at least arguable that the criterion of reasonableness introduces a permissive qualification that is not found in the terms of the summary judgment power. 55A cause of action is any suit, action, matter or other similar proceeding competently brought before and litigated in a particular court; Green v Lord Penzance (1880-81) LR 6 App Cas 657 at 671 per Lord Selborne LC; Ex parte Walsh; In re Yates (1925) 37 CLR 36 at 131. It is all the facts and circumstances necessary to give rise to a right to relief in law or equity; Papps v Mahon [1966] NZLR 288 at 292. A given set of alleged facts and circumstances will either give rise to a cognisable cause of action or it will not. 56What then amounts to a failure to disclose a reasonable cause of action, as opposed to a failure to disclose any cause of action at all? 57Section 56(1) and (2) of the Civil Procedure Act 2005 (NSW) provide as follows: (1) The overriding purpose of this Act and of rules of court, in their application to a civil dispute or civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule. 58UCPR Pt 13 r 13.4(1)(b) must now to be interpreted as operating subject to the statutory duty imposed by s 56(2); Dennis v Australian Broadcasting Corporation [2008] NSWCA 37 at [29] per Spigelman CJ. 59It would be inimical to the legislative intent disclosed by the wording of s 56(2) to construe the rule in a manner which requires judicial resources to be devoted to the resolution of issues which are not real. Issues are not real if they are fanciful. 60In Spencer, at [25], French CJ and Gummow J observed that: Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a "fanciful" prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this Court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success (emphasis added). 61Both s 31A of the Federal Court of Australia Act 1976 (Cth) and UCPR Pt 13 r 13.4(1)(b) include the descriptor "reasonable". Just as a party's prospect of successfully prosecuting a proceeding will not be reasonable if that prospect is no more than fanciful, a cause of action whose prospects of success are no more than fanciful will likewise not be reasonable. 62Whilst UCPR Pt 13 r 13.4 does not expressly provide (as does s 31A of the Federal Court of Australia Act 1976 (Cth)) that a proceeding need not be hopeless or bound to fail to have no reasonable prospects of success, the combination of the inclusion of the word reasonable and the operation of s 56(2) sufficiently clearly indicates, in my view, that the approach to exercising the power to dismiss under the rule is the same as that elucidated by the High Court in relation to the federal enactment. 63It is to be borne in mind that a potential plaintiff (as opposed to a defendant, which might be the object of a summary judgment application) has at its disposal the rules which provide for preliminary discovery to assist in determining whether or not it is entitled to make a claim for relief; see UCPR Pt 5 r 5.3. 64It should no longer be the case, if it ever was, that court resources may properly utilised in permitting a plaintiff to prosecute proceedings where a defendant demonstrates that those proceedings do not have reasonable prospects of success and all the plaintiff is able to do is demonstrate that the proceedings meet the bare threshold of not being certain to fail. 65In Commonwealth of Australia v Griffiths (2007) 70 NSWLR 268 at 299-300, [155], Young CJ in Eq said that: The only other comment I need to make is that whilst I agree that the present claim should be struck out under the traditional test laid down in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129, I wish to reserve the position I tentatively took during argument that the overriding purpose stated in s 56 of the Civil Procedure Act 2005 may well warrant Courts striking out proceedings on less substantial grounds than those stated in General Steel Industries. See too Australian Executor Trustees Ltd v Pachovski [2011] NSWCA 23 at [76]. Cf Hudson Investments Group Ltd v Atanaskovic [2010] NSWSC 1055 at [51]-[52], Livestock Transport (Sydney) Pty Ltd v Commonwealth of Australia [2011] NSWSC 7 and Casella v Salfinger [2011] NSWSC 1444 at [27]. 66Even more recently, the issue was averted to, but not decided, by the Court of Appeal in Bott v Carter [2012] NSWCA 89, in which at [13] and [14] Basten JA said the following: 13 According to established principle, proceedings should not be dismissed generally if there is "a real question to be tried". As has been explained by the High Court, "great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his cause by the appointed tribunal": General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; 112 CLR 125 at 130 (Barwick CJ). However, as that case itself demonstrated, where upon full legal argument it is established that there was no legally tenable cause of action, summary dismissal is an appropriate course. 14 A question has been raised as to whether that approach is affected by s 56 of the Civil Procedure Act 2005 (NSW) requiring a court, in exercising a discretionary power, to facilitate the "just, quick and cheap resolution of the real issues in the dispute or proceedings": s 56(1) and (2). Clearly the provision imposes substantial obligations on parties and lawyers as well as the courts; it is not merely exhortatory: compare Migration Act 1958 (Cth) s 420, discussed by Lindgren J in Sun Zhan Qui v Minister for Immigration and Ethnic Affairs (FCA, 6 May 1997, unrep) approved by Gummow J in Minister for Immigration and Multicultural Affairs v Eshetu [1999] HCA 21; 197 CLR 611 at [106]-[109]. It has been suggested that s 56 might warrant courts striking out proceedings on "less substantial grounds" than those stated in General Steel: Commonwealth v Griffiths [2007] NSWCA 370, at [155] (Young CJ in Eq). In the present case, the primary judge referred to this possibility, but did not rely upon it. Another view might be that s 56 does not reduce the conditions for the engagement of the power conferred by r 13.4, but limits the circumstances in which the court, satisfied that the power is available, might be inclined to refuse relief on discretionary grounds. 67Although expressed in the negative, I understand that the alternative approach which his Honour had in mind is that s 56 expands the spectrum of circumstances in which the court might on discretionary grounds be inclined to grant relief by way of dismissal under UCPR Pt 13 r 13.4.

CONCLUSION 68The proceedings as against the second defendant are dismissed. The plaintiff is to pay the second defendant's costs. 69The proceedings as against the third defendant are dismissed. The plaintiff is to pay the third defendant's costs.

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. Decision last updated: 09 May 2012

New South Wales Court of Appeal Uniform Civil Procedure Rules 2005(NSW)

Migration Act 1958(Cth)s 420, discussed

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