Plaintiff v Defendants

(1) The court set aside the orders of Associate Justice Daly dated 7 March 2008 in Proceeding 9046 of 2003 on the grounds that there is fresh evidence and that they were procured on the basis of false and misleading affidavits and fraud.

(2) The defendants repay with penalty interest, all moneys paid to them by the plaintiff as a result of the orders set aside.

(3) The defendants pay costs, expenses and damages incurred by the plaintiff due to the enforcement of orders and in defending applications and enforcement actions made by the defendants in relation to the orders set aside. Such costs, expenses and damages to be assessed by the court.

2 The summons that was filed on behalf of the defendants sought to set aside two subpoenas that had been issued and served. The first was directed to the proper officer of the first defendant, Yarranova Pty Ltd, requiring that person to attend and give evidence and produce the documents specified in the schedule. The schedule specified four categories of documents as follows.

(1) All documents, minutes of directors meetings, company articles of association and company ASIC compliance records, including but not limited to, statements and memoranda, relating to the identity of, and the authority of the owners of Yarranova Pty Ltd during the period 1 May 2000 to 30 July 2008.

(2) All financial statements, documents, letters, emails and file notes including, but not limited to, statements and memoranda relating to losses and legal expenses incurred by Yarranova as a result of the caveat lodged on behalf of the plaintiff, John Shaw, in 2003 and the subject of the damages assessment before Associate Justice Daly.

(3) All financial statements, documents, letters, emails and files notes including, but not limited to, statements and memoranda relating to the transfer and application of funds taken from the ABL controlled St George Bank account No.000.0593000128 to Yarranova from during the 27th March 2008 to 30 July 2008 [sic].

(4) All financial statements, documents, records and emails that identify Yarranova's bank transactions using ANZ account No.8372-19549 from the period December 2003 to July 2008.

3 The second subpoena was addressed to the proper officer of the second defendant, Newquay Stage 2 Pty Ltd. That subpoena also required the proper officer to attend and give evidence and produce the documents specified in the schedule. In the second subpoena, the schedule of documents to be produced was in the same terms as the first subpoena and need not be repeated.

4 The date for attendance in the case of each subpoena was 22 September 2012.

5 The orders that were made by the associate judge noted, 'Other Matters: See the court's reasons as published to the parties on 19 October 2012', and ordered that:

(1) The plaintiff's summons filed 4 September 2012 be dismissed without adjudication on its merits.

(2) The subpoenas filed 18 September 2012 by the plaintiff are set aside.

(3) The plaintiff pay the defendants' costs of and incidental to the plaintiff's summons filed 4 September 2012 and the defendants' summons filed 26 September 2012.

Paragraph 4 of the order is not relevant for the present purposes.

6 The appeal was initiated prior to the amendment of Rule 77.06 of the Supreme Court (General Civil Procedure) Rules 2005. Accordingly, as an appeal that was initiated prior to the amendment of the rule, it remains in this court to be dealt with as a rehearing de novo of the applications that were made to the associate judge, which I have set out.

7 Notwithstanding the plaintiff is not obliged to show error on the part of the associate judge, the reasons of the primary court were not subject to any criticism in argument other than Mr Shaw's disappointment in the result. Those reasons provide valuable and relevant information on the hearing of this appeal. However, the appeal will be resolved on the basis of the material that was before the associate judge together with two exhibits that were tendered by consent.

8 The material that was before the associate judge consisted firstly of an affidavit of the plaintiff sworn on 2 September 2012 together with five exhibits, secondly an affidavit of the plaintiff sworn 15 October 2012 with two further exhibits and thirdly, an affidavit of Alexander William King sworn 16 October 2012 filed on behalf of the defendants.

9 Objection was taken by Mr Shaw to the affidavit of Mr King principally on the ground of relevance. However, I am satisfied that the matters deposed to in that affidavit are relevant to the application and I will admit that affidavit.

10 At the outset I drew the plaintiff's attention to the terms of paragraph 1 of the court's orders and the opportunity that was presented to Mr Shaw by the fact the summons was dismissed without adjudication on the merits. That opportunity had been explained by the associate judge in his reasons at paragraphs 22 to 25.

11 The associate judge ruled that there is a general rule that where an application is made to set aside a judgment that was obtained by fraud, such application is to be made by an independent proceeding. Mukhtar AsJ set out the origin of the rule and the basis for it and I need not repeat what was said. The associate judge expressed the view that there were, in these circumstances, clearly very strong reasons why that course should be here undertaken and effectively invited the plaintiff to accept the dismissal of the summons in order to commence the proceeding to set aside the assessment judgment of Daly AsJ by a separate proceeding.

12 In particular, the associate judge referred to the opportunity that is presented by that course of action in properly pleading and particularising the allegations which are made and which must be established at trial, pointing out that to proceed on the basis of the broad assertions made in affidavits will only create delay and difficulty.

13 Mr Shaw complained that the process by summons was not unacceptable and he was now unreasonably burdened by a costs order. In adopting this course, the associate judge acted correctly as a matter of principle and presented the plaintiff with an opportunity to establish an arguable claim.

14 There is a further reason that is evident as to why that approach is desirable and it is that an action commenced by writ entitles the parties to discovery. The plaintiff clearly regards discovery as necessary in order to establish the allegations that he makes. Not only does he directly state that fact in his submissions to this court but it is evident from the subpoenas.

15 I will now turn to the subpoenas. In my view, the subpoenas are, on their face, an abuse of process. Either they are being used for an impermissible purpose, namely a fishing expedition, or they are being used for the purpose of obtaining discovery from a party. They are oppressive requiring the recipient to undertake a broad search for a very large number of documents in a number of different categories in circumstances where the relevance of the documents to be discovered to the allegations being made (as opposed, for example, to a rehearing of the assessment on other or different evidence by way of a second attempt) cannot be assessed.

16 The subpoenas require all source documents that identify Yarranova's bank transactions using a particular account for a period of four and a half years. Yet those documents are not relevant to the allegations that are contained in the summons and the affidavits about the fraud that is said to have induced the assessment made by the associate judge. Plainly, the bank accounts are not fresh evidence. In my view, each of the categories of documents set out in the subpoena are oppressively wide and inappropriate, and demonstrate both the sense in which the subpoenas are an abuse of the process and that the proper procedure for allegations of this sort is an independent proceeding by way of writ. The alternative purpose of the subpoenas is to discover documents relevant to the assessment, a fishing exercise.

17 Returning to the principal order that was made by the associate judge, it is clear that by proceeding by an appeal, as he has, the plaintiff has eschewed the opportunity provided by the associate judge to recast his claim. It is of some significance that the associate judge, helpfully for the plaintiff, recited the principles by which the courts evaluate an application to impugn a judgment on the grounds of fraud. It was not suggested that these principles were wrongly stated or are inapplicable. However, it appears that Mr Shaw has paid them no heed. Mr Shaw has squandered the opportunity to commence a separate proceeding. No reason emerges for that opportunity to be offered again and in my view it is pointless to do so.

18 Before returning to the particular grounds that Mr Shaw alleges as the basis for the relief he seeks, I will deal with his submission that the principles evident in the Civil Procedure Act 2010 warrant a departure from the line of authorities that establish that the proper way to proceed with an application to set aside a perfected judgment on the grounds of fraud, is by an independent writ proceeding. Mr Shaw suggested that the old authorities state that this can be done by motion within the original proceeding, or by instituting new proceedings and the provisions of the Civil Procedure Act override the 'old thinking' that 'a separate new proceeding is preferable'.

19 In my view, the provisions of the Civil Procedure Act fully support the process that is described in the authorities. The court is required to give effect to the overarching purpose of the Civil Procedure Act in the exercise of any of its powers or the interpretation of those powers.[1] The overarching purpose is to facilitate the just, efficient, timely and cost effective resolution of the real issues in dispute. The plaintiff submitted that that purpose is best achieved by the process that he has adopted; namely, a summons supported by an affidavit. The particular objects that are to be taken into account when the court's power to further the overarching purpose is in issue are set out in s 9. They include: (A) The just determination of the civil proceeding. (B) The efficient conduct of the business of the court. (C) The efficient use of judicial and administrative resources. (D) Minimising any delay beyond that reasonably required for interlocutory steps necessary for the fair and just determination of the real issues in dispute and preparation of the case for trial. There are of course of other objectives, but these seem to be the principal objectives relevant in these circumstances.

20 There are like provisions in the Uniform Civil Procedure Rules that operate in New South Wales. In Teoh v Hunters Hill Council (No.5),[2] the New South Wales Court of Appeal had occasion to consider the practice of requiring independent proceedings for applications to impugn a perfected judgment on the ground of fraud and the court traced that practice through the English authorities from 1896, noting in particular the seminal High Court decision of McDonald v McDonald[3], and more recent cases. At least in New South Wales, there is a line of authority from 1896 to 2012 in support of the practice referred to by the associate judge, that continues notwithstanding recent procedural reforms.

21 In my opinion, that practice remains entirely proper and appropriate in Victoria, especially for ensuring that the allegations that must be met when dealing with a serious matter of setting aside a perfected judgment on the grounds of fraud are detailed and particularised and that necessary interlocutory processes are available in the determination of such allegations. That involves proceeding by way of writ. It is not to the point that the court might fashion by directions an ad hoc process to effectively achieve the same result. The practice identified in Teoh applies in Victoria and is freshly mandated, if that be needed, by the provisions of the Civil Procedure Act 2010.

22 It is perfectly open to the associate judge to have exercised his discretion to determine the proper and appropriate procedure for the court to deal with these allegations in the manner that he did. Were this appeal a rehearing proceeding governed by the new procedure under the recent amendments to O 77, I would not consider that it was open to me to interfere with that order.

23 I would go further and say that the discretion was correctly and appropriately exercised by the associate judge, and as the matter is proceeding by a rehearing de novo, it is my view that the proper and appropriate exercise of discretion is to require that a proceeding of this sort be instituted and continued as a writ, with pleadings and discovery.

24 There is a further reason why, in this case, that course is apposite. Annexed to the reasons for judgment of the associate judge is a schedule of the proceedings that have followed the assessment by Daly AsJ of the damages payable to pursuant to the undertaking. It is clear that there has, in the intervening period of more than five years, been considerable activity in the court that would be affected if the assessment order were set aside.

25 Further, the plaintiff seeks by oral application to add to his claim an application to set aside two further judgments, being the judgment of Bell J on 23 February 2006 and the judgment of Harper J on 21 October 2009 and what is described as 'related orders'. The complexity of the application in these circumstances justifies the exercise of a discretion that the proceeding be by writ rather than a summons in the original action.

26 For these reasons, I would have dismissed the appeal.

27 There is, however, a further issue that arises and that is whether it is futile to permit the plaintiff another opportunity by an independent proceeding to seek relief. On the one hand, it may be that the plaintiff is entitled to issue a fresh proceeding, because his rights to do so have not been barred or otherwise limited. I cannot comment further about that but for my part, I am reluctant to encourage the plaintiff to proceed with this matter on the basis that the summons is dismissed 'without adjudication on the merits'. No 'merits' are evident.

28 At the outset, I raised with the plaintiff the fact that as a rehearing de novo, the court would consider and rule upon the applications that were originally made to the associate judge.

29 The applications before the primary court included an application of which notice was given in correspondence shortly prior to the hearing by the solicitors for the defendants in these terms:

Yarranova Pty Ltd and Newquay Stage 2 Pty Ltd, consider your application to be vexatious and/or an abuse of process. They reserve their rights to seek to have your application struck out summarily, or otherwise, and to seek their indemnity costs of and incidental to that process, including in relation to the two subpoenas that you have had issued to them.

30 The application that was foreshadowed is in essence an application under s 62, which reads:

A defendant in a civil proceeding may apply to the court for summary judgment in the proceeding on the ground that a plaintiff's claim or part of that claim has no real prospect of success.

That application remains unresolved. Further, s 63(2)(c) of the Civil Procedure Act provides that the Court may give summary judgment in any civil proceeding on the court's own motion, if satisfied that it is desirable to summarily dispose of the civil proceeding. Were it not for the fact that there is an application by the defendants, I would be content to act on the court's own motion.

31 In Ottedin Investments Pty Ltd v Portbury Developments Co. Pty Ltd,[4] I identified what I consider to be the principles that apply on applications for summary dismissal under Part 4.4 of the Civil Procedure Act. In my view the extent to which the law in relation to summary dismissal may or may not have been relaxed by the terms of the Civil Procedure Act, does not arise in this instance. That is because for the reasons which I will shortly explain, the claim is hopeless, untenable, bound to fail or could not possibly succeed, being the epithets commonly used to describe the old test. All that is required now is a practical judgment by the court as to whether a claim has a more than fanciful prospect of success.

32 I specifically take into account that the power of the court to order summary dismissal is to be exercised with great care, as trial upon evidence of issues raised is the well settled approach to the determination of litigation. When proceeding on a summary judgment application to assess the prospects of success, a judge ought to feel confident that an assessment can properly be made of whether the overarching purpose under the Civil Procedure Act is facilitated on dismissal of the impugned claim.

33 I also specifically take into account what was said by Kirby P, (as he then was), in Wentworth v Rogers (No 5).[5]

The appellant being a litigant now appearing in person, care must be taken to ensure that this significant disadvantage does not deprive her of the opportunity to have her claim, if any, determined according to law. Persons unfamiliar with the rules of pleading and the technicalities which surround the drafting of a statement of claim in adequate and permissible legal form are inevitably, if unrepresented, at a disadvantage. Courts should approach the pre-emptory termination of the litigation with special care to ensure that, within the possibly ill expressed and unstructured statement of the legal claim sought to be ventilated, there is no viable cause of action which, with appropriate amendment of the pleading and a little assistance from the Court, could be put into proper form. If this can be done, the Court should avoid the summary termination of the proceedings for this will prevent the Court from examining any merits of the case, once the statement of claim is struck out.

34 Bearing those matters in mind, I am satisfied that Mr Shaw's claims that the assessment by Daly AsJ could be set aside for fraud is fanciful, with no real prospect of success. His material disclosures a failure to appreciate the basis on which such a claim might succeed. I will indicate the basis upon which I am now proceeding to examine the allegations that might be put by the plaintiff. In McDonald v McDonald,[6] Barwick CJ stated the relevant principle in these terms.

The discovery subsequent to verdict of admissible credible evidence, which could not have been sooner discovered by the exercise of reasonable diligence in the circumstances, and which is of such probative value and significance that, taken with the evidence already given at the trial, it will in all probability be decisive of the issues between the parties in a sense opposite to that of the verdict, is a ground for the granting of a new trial.[7]

More recently, the New South Wales Court of Appeal in Wentworth, to which I have already referred, reviewed the authorities and stated the established principles which govern proceedings of this kind.[8] It was to these principles that the associate judge referred the plaintiff in his reasons for judgment.[9]

35 The broad allegations that the plaintiff seeks to make are these:

(a) officers of MAB Corporation Pty Ltd deposed in the assessment hearing before Daly AsJ that the respondent companies were wholly owned subsidiaries of MAB Corporation Pty Ltd;

(b) an historical company search in September 2011 showed that the defendant companies were not wholly owned by MAB Corporation Pty Ltd;

(c) the ASIC records show that 'ABL Partners are 50 per cent shareholders of Hilgarth P/L that owns 50 per cent of the second defendant company (Newquay Stage P/L)';

(d) Mr Ian Michael Smith, the chief financial officer of MAB Corporation Pty Ltd who made that representation to the court would have, or should have, known these matters;

(e) Mr Calvi, (MAB general counsel), would have or should have known these matters;

(f) The solicitor, Ms Peterson's affidavit, 'is untenable and if based on fraudulent instructions, the affidavit was reckless and misleading and/or fraudulent'.

(g) The assessment was obtained on false evidence about the relationship between MAB Corporation Pty Ltd and the defendants.

I assume, for the purposes of this proceeding, that the allegations of fact Mr Shaw makes can be proved.

36 The damages assessment involved, in part, issues of monetary loss based on being deprived of proceeds of sale that would have been used for the purposes of the MAB Group. It is sufficient to identify three flaws in these contentions which show that the claim to have the perfected judgment set aside on the grounds of fraud, has no real prospects of success and is fanciful.

37 Mr Shaw produces part only of an historical company extract in respect of the first defendant, Yarranova. It shows that the shares in Yarranova were held not by MAB Corporation Pty Ltd, but by MAB Docklands Pty Ltd, and that is Mr Shaw's point. Until I was handed, during the course of the hearing, by consent, an historical company extract obtained on 22 September 2011, there was no evidence of the ownership of MAB Docklands Pty Ltd. The shares in MAB Docklands Pty Ltd are owned by individuals who are the directors of that company. Those individuals are beneficially entitled to the shares in MAB Docklands Pty Ltd. That structure may not be inconsistent with a corporate group.

38 The critical point is that MAB Docklands Pty Ltd. is not the beneficial owner of the shares in Yarranova. Mr Shaw makes no allegation about the true beneficial owner of Yarranova. There is no explanation of the precise corporate structure adopted and in these circumstances, the allegations that are made, namely that the representation by Mr Smith that the respondent companies were wholly owned subsidiaries of MAB Corporation is false, does not have a proper basis.

39 It is not open, in my view, to seek to draw any relevant inferences of dishonesty and impropriety from the fact that a company search of Yarranova does not show MAB Corporation Pty Ltd as the owner of the shares.

40 However, what is more significant is that the company extract shows that the information concerning the present ownership of the defendant companies, and I am referring to both Yarranova and Newquay Stage 2, was provided to the register by the 2002 annual return for each of those companies. It follows that this information was available on a publicly searchable register for a substantial period of time prior to the application for assessment of the damages to be paid on the undertaking that had been given to the Court of Appeal.

41 Further, on that assessment, the defendants' evidence was challenged by Mr Shaw, and he cross-examined witnesses, including Mr Smith. Manifestly, the evidence that is now identified as the fresh evidence upon which is contended that the judgment for the assessment was procured by a fraud, is not fresh evidence. Mr Shaw's affidavit states that he conducted a search of the ASIC records in September 2011, but his knowledge of the state of those records between say the end of 2003, by which time the 2002 annual return would have been filed and September 2011, is not explained.

42 There was a factual debate before me in which Mr Shaw proffered from the Bar table the excuse that he only became aware of the opportunity to conduct company searches and to obtain this information during the course of taxation of costs hearings in this proceeding at a later point in time. In an affidavit of documents that he swore on 3 December 2004, he stated that he had a copy of an ASIC historical extract in respect of each defendant company in his possession, custody or power.

43 Mr Shaw suggested, from the Bar table, that all that his affidavit of documents showed was the knowledge of his solicitors rather than his own knowledge, a proposition which I am not prepared to accept. As against a third party, in this case the defendants to this proceeding, the law imputes to a principal knowledge gained by his agent, that is to Mr Shaw knowledge gained by his solicitors, in the course of and which is material to the transaction in which the solicitors are employed on his behalf. Under such circumstances it is the duty of the solicitors to communicate it to their client. The solicitor is to be regarded as the alter ego of the client and the rights of the other party in the litigation cannot be made to depend upon the diligence or lack of diligence exhibited by the solicitor in his dealings with the client.[10]

44 While it may have been the case that the company extracts referred to in the affidavit of documents were in fact held by the solicitor on behalf of Mr Shaw, I do not accept that Mr Shaw was not aware of the existence of the ASIC company register and the opportunities that may exist to search it at the time of the hearing of the assessment of the damages due on the undertaking. In my view, to suggest that the company searches conducted in September 2011 are capable of being described as evidence which could not have been sooner discovered by the exercise of reasonable diligence in the circumstances is fanciful.

45 Next, what is required to establish that a perfected judgment has been obtained by fraud is a tenable contention that the relevant statements by the respondents' witnesses were wilfully false or made in the absence of a genuine belief that they were true. The allegations that are made against the defendants by Mr Shaw fall well short of this. They assert without any detail, or particulars, both knowledge and constructive knowledge by the defendants' witnesses, clearly inadequate to make out the claim that the plaintiff seeks to establish. Is there any basis upon which the plaintiff could properly particularise that the defendants had actual knowledge that the allegations were wilfully false? None was demonstrated and in my view, in the circumstances as they are disclosed on the whole of the material before the court including the matter to which I now turn, I do not consider that it is possible for that aspect of the necessary proofs to ever be appropriately alleged or made out.

46 Next, the fresh evidence must be such as would in all probability be decisive of the issues between the parties in a sense opposite to the decision that is the basis of the assessment. The material that constitutes this claim does not include the full reasons for decision of Daly AsJ. There is, however, one page of those reasons exhibited, which demonstrates several relevant matters. First, that her Honour did give considered reasons. Second, the defendants relied on the evidence of Mr Smith, the chief financial officer of the MAB Group. Mr Smith's expertise was challenged by Mr Shaw and that challenge was overruled.

The evidence was that the proceeds of sale would have been applied to debts incurred by other companies within the MAB Group, were used to finance other projects being developed by other entities within the MAB Group, with quite different financial consequences, depending upon the approach taken. There is some force in Mr Shaw's submissions that the process would not have been retained or used by the actual vendor company. While I accept that it would have been the practice of the company to remit any proceeds to its head companies or other companies within the MAB Group, it is not clear that there was any liability imposed upon the vendor to remit the funds to any particular entity. However, the Court of Appeal in its orders clearly intended the vendor to be compensated for the loss of use of the sale proceeds of the property.

48 This extract from the reasoning of the associate judge is sufficient to demonstrate that it is not the fact that the defendants were subsidiaries of MAB Corporation Pty Ltd that was relevant or influential in the assessment of the loss that was made. Rather, the MAB companies operated as a group. MAB Corporation Pty Ltd was the group treasurer. Although Mr Shaw submitted that company groupings of this sort are not formally recognised by the Corporations Act and that transfers of funds between companies in such a group is impermissible, I do not accept this proposition to be correct. That the companies were part of a group is not alleged to be a false allegation while the allegedly false allegation, that the defendants were wholly owned subsidiaries of MAB Corporation Pty Ltd was irrelevant to the reasoning of the associate judge on the assessment.

49 The consequences that follow are that, by reason of the joint allegation of knowledge and constructive knowledge against the officers of these companies, the allegation of fraud is not just speculation, it is a speculative suspicion of fraud and no more. Further, Mr Shaw cannot demonstrate any causal link between the evidence that founded the court's assessment of the damages payable on the undertaking and any fraud that might be established by what he describes as newly discovered evidence.

50 Mr Shaw's second affidavit sworn 15 October 2012 does not take these issues any further. Rather, it refers to similar generalised and scandalous allegations that the court was misled on other and different occasions. The affidavit concludes with a promise of further affidavits in evidence prior to the hearing. In that respect, nothing was proffered.

51 Mr Shaw submitted that ultimately further affidavits and evidence would be provided. But at no stage has it ever been indicated what would be established by such further affidavits or evidence. There are no material allegations that are to be the subject of such further affidavits or evidence. The defendants would be faced with the need to continue to defend themselves against very serious allegations of fraud and perjury without knowing how those allegations are to be put.

52 Further, it is, in my view, plain from the subpoenas and the way that they are expressed, that the plaintiff is fishing for the opportunity to further establish allegations of that sort, hoping that the material that might be produced on subpoena will bait his hook. Such a process, in my view, is in conflict with the overarching obligations and with the clear process specified by the authorities for dealing with serious allegations of this sort.

53 There is no basis to anticipate that the allegations can be made out, if a further opportunity is given to Mr Shaw to develop a statement of claim. For example, if I was to order that the summons stand as a writ, and that within 28 days Mr Shaw file and serve a statement of claim, nothing that has been placed before me by way of evidence or submission today indicates that allegations could properly be made in support of the relief he seeks.

54 In all of these circumstances, I have concluded that any application to set aside the assessment of Associate Justice Daly on 7 March 2008 has no real prospect of success and I will summarily dismiss the plaintiff's application pursuant to Part 4.4 of the Civil Procedure Act.

[1] See, s 8 Civil Procedure Act 2010.

[2] [2012] NSWCA 75.

[3] [1965] HCA 45; (1965) 113 CLR 529.

[4] [2011] VSC 222, [18].

[5] (1986) 6 NSWLR 534, 536.

[6] [1965] HCA 45; (1965) 113 CLR 529, 532.

[7] See also the judgment of Menzies J at 540, 542.

[9] See also In the matter of Re Wan Ze Property Development (Aust) Pty Ltd (In Liquidation) [2013] NSWSC 189 (13 March 2013) [16].

[10] (See generally the observations of Mason J (as he then was) in Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634, 658-9.