Plaintiff v Defendants

PRACTICE AND PROCEDURE - Defendants' application to stay or dismiss proceedings as abuse of process - Concurrent proceedings based on similar factual matrix - Delay as abuse of process - Whether second proceeding is abuse of process by invoking claims that should have been litigated in earlier proceeding - Application refused.

1 This is the return of two summonses, the first issued by the second, third and fourth defendants (Mr William Jason Harbinson also known as Jason Harbinson, Mr Joseph Dale Harbinson also known as Dale Harbinson and Mr David Malone respectively) (collectively, the defendants) for orders, inter alia, that this proceeding (the 2018 proceeding) be dismissed, struck out or permanently stayed. Further that the statement of claim be struck out.

2 Second, there is a summons issued by the plaintiff, Euromark Ltd (Euromark), that the 2018 proceeding be consolidated with, or tried at the same time as, another proceeding, being proceeding S ECI 2015 00478 (the 2015 proceeding).

3 The defendants have helpfully conceded that, even if their application is unsuccessful, the Court need not determine Euromark's application.[1] At the hearing, the defendants also did not object to orders for consolidation.[2] I consider such orders are appropriate given the overlap in factual issues and witnesses, for the avoidance of inconsistent findings, and by reason of the efficiencies to be achieved consistent with the overarching purpose.[3]

4 The issues for determination are therefore whether the statement of claim ought be struck out. Further, whether the 2018 proceeding ought be dismissed, struck out or stayed as an abuse of process.

5 However, a preliminary issue arose as to the admissibility of an exhibit in the case, which will be resolved below.

6 Euromark is a company incorporated and registered in England.

7 On 22 December 2015 Euromark commenced the 2015 proceeding against Smash Enterprises Pty Ltd (Smash) seeking damages for alleged breaches of a written agreement during 2012, which Euromark entered with Smash in July 2011 (Agreement).

8 Pursuant to that Agreement, Smash appointed Euromark as the exclusive distributor of Smash products in the UK for an initial fixed period of three years to expire on or around 4 July 2014. Smash's products include children's food storage, feeding and 'back to school' products.

9 In its statement of claim dated 22 December 2015, Euromark rely on the Agreement and allege that during 2012 Smash breached the terms of the Agreement by, inter alia, soliciting Euromark's customers and establishing its own branch in the UK to supply its products directly to UK customers; wrongfully purporting to terminate the Agreement in October 2012; and failing to act in good faith towards Euromark. Further, that Smash's breaches entitled Euromark to terminate the Agreement which Euromark did by letter dated 23 December 2012.

10 By reason of those breaches, Euromark alleges that it has suffered loss and damage for loss of profits, as well as losses for the remaining 2 years of the Agreement (an expert Mr Greg Blashki has provided an estimate of damages at £2,653,527).

11 In its Defence and Counterclaim, Smash generally denies the alleged breaches and claims Euromark was itself in breach by, inter alia, presenting products to customers under its own 'Zoom' brand. It further seeks a declaration that by its letter of 23 December 2012, Euromark repudiated the Agreement which was accepted by Smash on 28 December 2012.

12 On 8 June 2018 orders were made setting down the 2015 proceeding for trial commencing on 18 February 2019.

13 Up until this time Euromark had no concerns regarding Smash's ability to pay the full amount of any damages which might be awarded.

14 However, Euromark developed such concerns as a result of correspondence sent by Smash in June and July 2018.

15 Thus, by way of an email sent on 19 June 2018 directly from Jason Harbinson, director of Smash (apparently without legal input) to Euromark's Chairman, Mr Michael Harrison, Jason Harbinson wrote:

We also have come on hard times. It has been six long years since this all started and we are in one of the hardest markets in the world. This case, on top of everything else we have tried to deal with over these six years have taken their toll, and has unfortunately been too much.

Michael, this all will become academic as there is no money. Maybe six years ago if Mark would have listened to me on the phone and been reasonable something commercial could have been worked out but as I said six years is a long time in this retail space ... (emphasis added)

16 In further correspondence sent on 2 July 2018 (the subject of objection) certain 2017 financial statements were provided, as well as a 2017 tax return, which suggested that the position of Smash had deteriorated since 2017 i.e. it was making a tax loss of $1,168,236, an operating loss of $1,082,800.46 (compared with a profit of $324,740.26 in 2016) and had negative net assets of $97,532.69 (compared with equity of $985,267.77 in 2016).

17 On reviewing both the email dated 19 June 2018 and the documents sent on 2 July 2018, Mr Harrison formed concerns as to Smash's ability to pay any damages that it might be ordered to pay to Euromark.

18 He thereafter requested Euromark's solicitors to consider whether Euromark could make claims against other parties to recover its losses.

19 As stated by Mr Wang, solicitor of Tisher Liner (TLFC) for Euromark:[4]

In those circumstances, TLFC prepared the document which became the 2018 Proceeding statement of claim. On 22 October 2018, Euromark commenced the 2018 Proceeding, rather than applying for leave to amend the writ in the 2015 Proceeding to add further defendants, due to concerns that any application to amend the writ would be opposed, and would not be determined before 22 October 2018, being the earliest arguable date by which the limitation period for the claims in the 2018 Proceeding might have expired (being 6 years after the telephone discussion between Stephen Harrington of Smash to Mark Harrison on 22 October 2012 in which Mr Harrington first stated that Smash intended to terminate the Agreement).

20 The details of this 2018 proceeding will be referred to below. However, the proceeding was brought against not only Smash, but also against Jason Harbinson, Dale Harbinson, former director and CEO of Smash, and Mr Malone, former International Marketing Manager for Smash.

21 The claims arise out of the same factual matrix as the 2015 proceeding relating to the Agreement. Euromark claims that the defendants have failed to disclose Smash's plans to directly supply UK customers and solicit customers. It claims proper disclosure would have enabled it to avoid the loss of business income. It alleges that the defendants have engaged in misleading and deceptive conduct in breach of s 18 of the Australian Consumer Law as well as unconscionable conduct in contravention of s 21 of the Australian Consumer Law.

22 On 30 November 2018 orders were made in the 2018 proceeding for Euromark to discontinue its claims against Smash. On the same day, orders were made vacating the trial set down for 18 February 2019 in the 2015 proceeding.

23 An issue arose as to whether Exhibit SW-2 to the affidavit of Mr Wang of 9 April 2019 is admissible.

24 Exhibit SW-2 contains a letter dated 2 July 2018 from Smash's solicitors. It is marked 'without prejudice save as to costs' and 'confidential' and includes the following:

As you are aware, our client proposes that the parties attend a further mediation and our client is prepared to provide Smash's 2017 Financial Statement to assist in these settlement negotiations.

We enclose, on a confidential basis and for the sole purpose of seeking to resolve this dispute, our client's 2017 Financial Statement.

Please let us know whether your client is prepared to attend a further mediation in this proceeding. If it agrees to do so then we can discuss making the necessary arrangements for this mediation to take place.

25 The letter attaches unaudited financial statements for 2017 as well as a 2017 tax return. Note 1 of the financial reports indicates that they were prepared to meet the needs of the members. They are also dated 4 April 2018.

26 Counsel for the defendants submitted that the letter dated 2 July 2018 and the enclosures were not admissible and could not be relied on by Euromark pursuant to s 131(1) of the Evidence Act 2008 (Vic) (the Act). In oral submissions, Counsel clarified that the defendants sought to rely on s 131(1)(a) of the Act as the basis for their objection.[5]

27 Counsel accepted that the financial material did not, of its nature, contain admissions.[6] However, it did not matter that the enclosures to the letter contained objective facts as the communication was made in direct connection with an attempt to negotiate settlement of the dispute.

28 Counsel sought to distinguish the present case from the decision in Airtourer Co-operative Ltd v Millicer Aircraft Industries Pty Ltd.[7] He submitted that there were two separate and distinct statements made in Airtourer whereas in the present proceeding, there was only the one communication.

29 Counsel for the plaintiff relied on Airtourer and submitted that s 131(1) did not apply to Exhibit SW-2 as the documents contained statements of objective facts as to Smash's financial position and contained no admissions. Further, that the communication did not have the requisite connection with any attempt to negotiate a settlement.

30 Alternatively, if s 131(1) did otherwise apply, the plaintiff relied on the exception contained in s 131(2)(g).

31 Sections 131(1)(a) and 131(2)(g) of the Act provide:

Exclusion of evidence of settlement negotiations

(1) Evidence is not to be adduced of -

(a) a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute...

(2) Subsection (1) does not apply if -

(g) evidence that has been adduced in the proceeding, or an inference from evidence that has been adduced in the proceeding, is likely to mislead the court unless evidence of the communication or document is adduced to contradict or to quantify that evidence ...

32 The provision contains the statutory form of the 'without prejudice' exclusion considered in the High Court decision of Field v Commissioner for Railways for New South Wales.[8]

33 The case of Field concerned an action for negligence. An appointment was made for the plaintiff to attend the rooms of a medical specialist for examination to enable an estimate of his injuries. Although this was arranged by way of 'without prejudice' correspondence, the High Court found that an admission made by the plaintiff at that examination (as to the manner in which the relevant accident was caused) was admissible because it was not reasonably incidental to the negotiations. Rather, it was made 'without any proper connexion with any purpose connected with the settlement of the action.'[9]

34 In the course of so finding, their Honours Dixon CJ, Webb, Kitto and Taylor JJ stated:[10]

As a matter of policy the law has long excluded from evidence admissions by words or conduct made by parties in the course of negotiations to settle litigation. The purpose is to enable parties engaged in an attempt to compromise litigation to communicate with one another freely and without the embarrassment which the liability of their communications to be put in evidence subsequently might impose on them... This form of privilege, however, is directed against the admission of express or implied admissions ... It is not concerned with objective facts which may be ascertained during the course of negotiations. These may be proved by direct evidence. But it is concerned with the use of the negotiations or what is said in the course of them as evidence by way of admission.

35 In Biovision 2020 Pty Ltd v CGU Insurance Ltd[11] Judd J stated that the concept of 'connection' adopted by the High Court was embraced by s 131, highlighting that the focus of the protection was preventing the admission in evidence of express or implied admissions.[12]

36 Other cases have also stated that there must be a _direc_t connection for the provision to apply.[13]

37 The decision in Airtourer (cited by both parties) concerned statements made during the course of a 'without prejudice' telephone conversation that the applicant could not consider paying the respondent $50,000 to settle the dispute as it 'couldn't even pay half of that amount' and that it 'had no funds.'

38 Beaumont J found that the statements made as to the solvency of the applicant were admissible as they were not admissions but were objective facts ascertained during the course of the negotiations.[14]

39 The material contained at Exhibit SW-2 similarly falls outside the protection provided by s 131(1)(a). The correspondence was apparently sent to confirm the statements made in the earlier correspondence that Smash had 'no money' such that it could (presumably) not pay anything to Euromark (similar to the position in Airtourer). No settlement offer or admission is included. Rather the letter amounts to a request to commence negotiations at a proposed mediation and not a communication directly 'in connection with' an attempt to negotiate a dispute. However, even if the letter constitutes such a communication, the attached statements themselves were prepared without any connection to the settlement of the action and contain objective facts - rather than admissions - as referred to in Field, above.

40 I am therefore not satisfied that s 131(1)(a) applies to Exhibit SW-2 which may be admitted into evidence.

41 In terms of s 131(2)(g), Euromark did not clearly identify which evidence had been adduced which was likely to mislead the court absent admission of Exhibit SW-2. In fact the unchallenged evidence before the court was that the 2018 proceeding was commenced given concerns as to Smash's financial position. In such circumstances s 131(2)(g) would not appear to have application, though it is unnecessary to finally determine this issue given the finding that s 131(1)(a) does not apply.

42 There were a range of complaints made in written submission. However, in oral submission, Counsel for the defendants suggested that the complaints were framed in three ways:

(a) that a concern about recovery did not constitute an acceptable explanation for the delay;

(b) the claims were 'misconceived'; and

(c) the statement of claim did not properly articulate the claims being made against the three individual defendants.

43 The second point was said to be 'the main complaint'. In fact, the latter two complaints appeared to take up substantial time in submission. In circumstances where no application for summary judgment was made, they appeared to be solely directed to deficiencies in the statement of claim (despite the fact that the defendants had not given notice in submission of the deficiencies as ultimately framed).

44 However, the second two complaints will be considered together under the general topic of whether the claim ought be struck out.

45 The first point was then advanced as part of a general complaint that there was delay in the issue of the 2018 proceeding constituting an abuse of process. This will be dealt with separately, below.

46 The statement of claim alleges that in July 2011 Euromark and Smash entered the Agreement which contained the express and implied terms as alleged in the 2015 proceeding (at [6] - [8]).

47 Paragraph 10 is entitled 'the Planning Conduct' and reads as follows:

During 2012 Smash, without informing Euromark:

(a) planned to supply Smash products from late 2012 to Euromark's customers, either directly or through a Smash branch to be established in the UK, and to service Euromark's customers from that Smash branch; and

(b) took active steps to develop and implement that plan, including by the conduct referred to in paragraphs 11 to 13 below;

((a) and (b) together the Planning Conduct).

48 The statement of claim goes on to allege, similar to the pleading in 2015 proceeding, that Smash purported to terminate the Agreement in October 2012 (at [14]).

49 Paragraph 15 then deals with the alleged 'Solicitation Conduct' and reads as follows:

Between 22 October 2012 and 23 December 2012, Smash, without informing Euromark:

(a) directly communicated and met with Euromark's customers in the UK and solicited sales of Smash products to those customers; and

(b) during those communications and meetings, informed Euromark's customers that the relationship of Smash with Euromark had ceased or would cease and continuity of supply of Smash Products from Euromark had either been interrupted or could not be guaranteed;

((a) and (b) together the Solicitation Conduct) by conduct including that set out in paragraphs 16 to 21 herein.

50 The pleading then contains substantially identical paragraphs to the 2015 proceeding of Solicitation Conduct (at [16]-[21]). It is then alleged that by letter dated 23 December 2012 Euromark was entitled to, and did, terminate the Agreement for breach (at [24]) (similar to the 2015 proceeding).

51 The 2018 proceeding then goes on to allege as follows:

1. In order to discharge its obligation under clause 8.2 of the Agreement to act towards Euromark dutifully and in good faith, Smash was obliged to disclose to Euromark, the Planning Conduct and the Solicitation Conduct.
2. In respect of the period prior to 22 October 2012, Smash, by:

(a) failing to inform Euromark of the Planning Conduct when it had an obligation to disclose the Planning Conduct pursuant to the express good faith obligation in clause 8.2 of the Agreement referred to in sub-paragraph 7(j) herein; and

(b) dealing with Euromark in a manner which purported to demonstrate compliance with the terms of the Agreement, whilst concealing the implementation of the Planning Conduct in breach of its obligations under the Agreement to disclose the Planning Conduct, including its obligations under clause 8.2 referred to in sub-paragraph 7(j) herein;

by its conduct represented to Euromark during that period that Smash was complying with and would continue to comply with its obligations under the Agreement, including its obligations under clause 8.2 of the Agreement referred to in sub-paragraph 7(j) herein, and that no conduct inconsistent with the Agreement, including the Planning Conduct, was occurring (the Performance Representation) ...

During the period in which the Performance Representation was made, Smash did not intend to be bound by the Agreement, and continued during and after that period to engage in the Planning Conduct.

(a) informing Euromark (by letter from Smash's solicitors) that Smash withdrew all previous statements purporting to terminate the Agreement and intended to be bound by the Agreement; and

(b) failing to disclose to Euromark at that time the fact that Smash was continuing to engage in the Solicitation Conduct, when Smash had an obligation to disclose that conduct pursuant to the express good faith obligation in clause 8.2 of the Agreement referred to in sub-paragraph 7(j) herein;

represented to Euromark that Smash was performing, and intended to be bound by, the Agreement (the First Affirmation Representation).

(a) informing Euromark that Smash intended to be bound by the Agreement and that Smash had written to a number of Euromark's customers stating that Euromark remained the exclusive UK distributor of Smash Products; and

(b) failing to disclose to Euromark at that time the fact that Smash was continuing to engage in the Solicitation Conduct, when Smash had an obligation to disclose that conduct;

represented to Euromark that Smash was performing, and intended to be bound by, the Agreement (the Second Affirmation Representation).

1. Each of the First Affirmation Representation and the Second Affirmation Representation was false.

Particulars

At the times of making the First Affirmation Representation and Second Affirmation Representation respectively, Smash did not intend to be bound by the Agreement, and continued at and after those times to engage in the Solicitation Conduct.

1. In reliance on each of the Performance Representation, First Affirmation Representation and Second Affirmation Representation, Euromark performed and continued to perform its obligations under the Agreement.

52 The pleading goes on to allege that the Performance Representation, the First Affirmation Representation and the Second Affirmation Representation were all misleading or deceptive; that Euromark relied on these representations and suffered loss ([33]-[38]). Further, that by engaging in the Planning Conduct, the Solicitation Conduct and making the Representations, Smash engaged in unconscionable conduct ([40]). Finally, that each of the defendants were relevantly involved in the offending conduct ([45]-[50]).

53 A number of matters of complaint were raised about this pleading as follows:

(a) it was not sustainable to suggest that there was any obligation of good faith which consisted of an obligation to positively advise Euromark that it might be about to breach a contract;

(b) the emails cited in the particulars at paragraph 26 did not support the alleged making of the representation pleaded;

(c) there was no solicitation allegedly continuing as at 3 December 2012 and 11 December 2012 for the purposes of paragraphs 28 and 29;

(d) the reliance pleading was unsustainable given the tenor of certain correspondence read to the court of 12 December 2012; and

(e) the unconscionability claim was without substance.

54 In relation to whether the obligation of good faith might import an obligation to disclose information, Counsel for Euromark provided the decision of Macquarie International Health Clinic v Sydney South West Area Health.[16]

55 The defendants submitted that the circumstances in Macquarie were very different given in that case, the party withheld critical information relevant to the viability of the subject matter of ongoing negotiations. Here the 'plan' to supply products directly to customers in the UK was formulated in circumstances where Smash was dissatisfied with Euromark's performance under the Agreement. Further, that the obligation, as pleaded, was not limited by time in any way.

56 The Macquarie decision concerned agreements between a developer and respondent land owner for the construction of a private hospital on the respondent's land. A critical aspect of the project was that there be a physical link between the existing public hospital and the proposed private hospital. In circumstances where the land owner had appointed consultants to undertake an asset strategic plan that did not involve any relevant link, an issue arose as to whether the land owner was obliged to disclose that in the planning process. The New South Wales Court of Appeal found that the obligation of good faith did import such a duty to disclose. Thus Allsop P (as he then was) stated that, depending on the facts, the duty 'may require a party to disclose information to the other, listen to the other and negotiate in good faith about the working out of the contract in its living performance.'[17]

57 The factual context in Macquarie case is different and all the facts at trial will need to be assessed to determine the extent of any duty to disclose in this case. However, the complaint that the 2018 proceeding is 'fundamentally flawed' is not established given the Macquarie decision provides support for the proposition that the obligation of good faith may require disclosure of certain conduct (as alleged here in [25]).

58 The failure to inform of the Planning Conduct, when taken together with various other matters in respect of the period prior to 22 October, 2012, allegedly gives rise to a representation by conduct that Smash was complying with, and would continue to comply with its obligations under the Agreement, and that no conduct inconsistent with the Agreement was occurring (at [26] being the Performance Representation). Similarly, the failure to inform of the Solicitation Conduct also gives rise to representations by conduct (at [28]-[29] being the First and Second Affirmation Representations).

59 I am not satisfied that claims framed in this way are misconceived. Thus, whether such representations are made out will need to be considered in the relevant factual context at trial.

60 In terms of the second complaint, it is true that the emails appear to generally amount only to mechanical type correspondence consistent with an ongoing contractual relationship. However, the representation is only partly based on these matters. It is also allegedly based on the non-disclosure of the Planning Conduct (in breach of the contract). The defendants did not demonstrate that, when taken together, these matters could not give rise to the representation by conduct as alleged.

61 In relation to the complaint that no solicitation was continuing on 3 and 11 December 2012, paragraph 15 alleges acts of solicitation up to 23 December 2012 'including' as set out in paragraphs 16 to 21. However, it is true that there appear to be no acts of solicitation from 10 December 2012 included therein.

62 Euromark ought therefore provide details of all Solicitation Conduct relied upon which ought occur by way of pleading further material facts (consistent with the current structure of the pleading).

63 In terms of reliance, the correspondence of 12 December 2012 read to the court suggested relations were severely strained and will be relevant to the question of any reliance at that time. However, in circumstances where the contract was still not terminated until 23 December 2012, reliance will be a matter for trial.

64 Similarly, the defendants failed to demonstrate that the claim of unconscionability could not be sustained at trial, bearing in mind that the conduct relied upon included conduct allegedly undertaken in breach of a duty of good faith.

65 A final complaint about the pleading was that, at paragraph 46, Euromark had failed to identify how each defendant was relevantly involved in the offending conduct.

66 There is merit in this complaint given paragraph 46 contains a rolled up summary statement that 'Each of Jason, Dale and Malone' engaged or participated in the relevant conduct without identification of precisely how each of them was individually responsible.

67 This complaint may, however, be met by provision of proper particulars.

68 Overall, then, I am unable to be satisfied that the claim is 'misconceived' such that it ought be struck out. Rather, Euromark ought provide a further statement of claim which contains proper particulars as part of a consolidated pleading consistent with these Reasons.

69 It remains to consider the other basis for the complaint that there was an abuse of process.

70 In written submissions, Counsel relied on abuse of process by reason of delay in commencing the 2018 proceedings.

71 In doing so, he placed particular reliance on the decision Reid International Pty Ltd v Ron Farris Real Estate Pty Ltd[18] of an Acting Master of the Western Australian Supreme Court.

(a) Euromark's delay in commencing the 2018 proceeding was unexplained;

(b) no previous notice was given of the claims;

(c) Euromark will not suffer prejudice given the claim had low prospects of success;

(d) Euromark will be still entitled to seek relief against Smash in the 2015 proceeding, the proper course being to seek leave to amend and add defendants to the 2015 Proceeding; and

(e) the defendants will suffer prejudice in circumstances where the conduct happened 6 years ago and where Mr Malone is no longer an employee of Smash.

73 In oral submission, Counsel submitted that non-recovery was always a risk and did not constitute an acceptable explanation for delay.

74 In so doing he cited the decision of AON Risk Services Australia Ltd v Australian National University[19] wherein the High Court was concerned with an application for adjournment for leave to amend a statement of claim to add a substantial new claim against the defendant on the third day of a four week trial. The Court considered that no reason for delay was provided, however, in the course of considering this matter stated as follows:[20]

One possibility is that ANU only decided to proceed against Aon when it realised the insurers would not settle for a higher sum. If so, that was the basis upon which it had determined to proceed to trial. The absence of explanation suggests the possibility that none which favoured ANU could be offered.

75 It was submitted that this passage suggests that concerns as to adequate compensation do not constitute an adequate explanation.

76 Counsel for the defendants also highlighted that there was no explanation for the delay between June 2018 to October 2018 in the context of a forthcoming trial date.

77 Euromark submitted the Acting Master in Reid did not refer to the Court of Appeal decision in Kermani v Westpac Banking Corporation[21] which contained the applicable principles for the case.

78 It further submitted that considerations of Smash's ability to meet any award of damages, together with the pending expiry of limitation periods, provided reasonable justification for commencing separate proceedings.

79 In the recent decision of the High Court in UBS AG v Tyne[22] Kiefel CJ, Bell and Keane JJ stated that the varied circumstances in which the use of the court's processes will amount to an abuse of process do not lend themselves to exhaustive statement but that either of two conditions enliven the power: where the use of the court's procedures occasions unjustifiable oppression to a party, or where the use serves to bring the administration of justice into disrepute.

80 It is however helpful to consider which existing category may be applicable since considerations may vary depending on the category. Thus in the UBS decision, the High Court determined that there was no abuse based on delay itself, but rather considered the claimed abuse lay in invoking the processes of a subsequent proceeding to litigate claims that could and should have been litigated in an earlier proceeding.[23] This latter basis will be considered further, below.

81 The leading case in relation to delay is that of Batistatos v Roads and Traffic Authority (NSW)[24] where the High Court held that the very great delay made the fair trial of the claim impossible.

82 Batistatos involved a claim for damages for serious injuries (quadriplegia) suffered as a result of an accident which occurred 29 years before the proceeding commenced. The defendants had sought to have the proceeding dismissed and were unsuccessful at first instance, but successful on appeal.

83 In concluding that there was no error in the judgment of the Court of Appeal the majority cited the factors relied upon by the defendants concerning the deterioration of the evidence. These included difficulty in locating records and witnesses as well as alteration in the physical state of the road.[25] The difficulties were such that, in what was described as a 'critical holding', Bryson JA had stated:[26]

No more than a formal enactment of process of hearing and determining the plaintiff's claim could take place; it cannot be expected that the process would be just.

... no useful evidence is available upon which to conduct a trial into the question whether the plaintiff's injuries were caused by negligence of the defendants, and no further search or inquiry is in any way likely to locate any such evidence...

... attention must be directed to the burdensome effect upon the defendants of the situation that has arisen by lapse of time. The Court of Appeal held that this was so serious that a fair trial was not possible. The result was that to permit the plaintiff's case to proceed would clearly inflict unnecessary injustice upon the defendants.

What Deane J said in Oceanic Sun Line Special Shipping Co Inc v Fay, with respect to the staying of local proceedings, is applicable also to a case such as the present one. His Honour emphasised that there was no 'requirement that the continuance of the action would involve moral delinquency on the part of the plaintiff'; what was decisive was the objective effect of the continuation of the action.

86 In terms of any 'burdensome effect', both Jason Harbinson and Mr Malone were able to, and did, file witness statements in the 2015 proceeding on 30 June 2017 and 28 July 2017. This is despite Mr Malone ceasing employment with Smash in February 2016.

87 In terms of Dale Harbinson (who ceased being a director in December 2014) Mr Feder, solicitor, claimed that he is 'unlikely' to recollect the relevant facts and does not have records since he has not had any involvement with Smash since December 2014. This latter statement is contradicted in Euromark's submissions which suggest that Dale Harbinson was Smash's sole client representative at a mediation held on 5 October 2016 (though this was not the subject of evidence). Further, that Dale Harbinson would have been inevitably called or subpoenaed as a witness in the 2015 proceeding, irrespective of the 2018 proceeding, given his central role in the alleged breaches of the Agreement.

88 Leaving aside his alleged ongoing involvement, there was no evidence that Dale Harbinson would be unable to recollect events and gain access to documents as the other two defendants appear to have done (in circumstances where Mr Malone also ceased employment in February 2016). The statement of claim in the 2015 proceeding also includes direct allegations against Dale Harbinson such that he may have been subpoenaed as Euromark suggests (e.g. see [12] and [16]).

89 Moreover, Counsel for the defendants fairly conceded that he could not point to anything 'over and above the usual' in terms of prejudice, which was that the defendants were individuals who were now, six years after an event, being asked to defend allegations of misleading conduct.[29]

90 It was certainly not suggested that the lapse of time was so serious that a fair trial was not possible.

91 This then distinguishes the case of Reid[30] where the court was satisfied that the 11 year delay (between the conduct in 2004 and the commencement of the action in 2015) led to the defendants suffering a real prejudice. In that case, the defendants provided detailed sworn affidavit to the effect that they had no real recollection of events and that all relevant paperwork had been destroyed. There was also no explanation for the delay in that case (which matter is considered further, below).

92 In such circumstances I am not satisfied that the defendants will be unable to obtain a fair trial such that the delay, of itself, constitutes an abuse of process.

Abuse of process by reason of multiple proceedings

93 In the decision of the Victorian Court of Appeal in Kermani,[31] the Court of Appeal upheld a decision of a trial judge who found that a second proceeding constituted an abuse of process, where the substance of the complaint had been raised in an earlier proceeding, notwithstanding that the plaintiffs were not identical (though they were connected).

94 The leading judgment of Acting Justice of Appeal Robson set out relevant principles relating to abuse of process. These included:[32]

• that it was prima facie vexatious to bring two extant civil actions where one would lie;

• in considering whether the rule ought apply, the court should consider whether there was 'no reasonable justification for the second proceeding based on legitimate considerations of convenience, cost or the like'.

95 His Honour also went on to cite certain comments of Lord Bingham of Cornhill in Johnson v Gore Wood & Co[33] that a 'broad, merits-based judgment' was appropriate, which remarks are considered further, below.

96 In the decision of UBS, the High Court considered abuse of process based on the litigation of claims that 'could and should have been litigated in [an earlier proceeding].'[34]

97 In that case, certain entities related to a Mr Tyne (a corporate trustee, Telesto and Mr Tyne) issued proceedings in the New South Wales Supreme Court (SCNSW). Mr Tyne and the trustee subsequently discontinued the SCNSW proceeding leaving only Telesto as a plaintiff. The proceeding was then finalised by way of a permanent stay on the ground that Telesto was seeking to re-litigate causes of action which in substance had been determined in earlier proceedings in the High Court of Singapore which gave rise to a res judicata estoppel.[35]

98 Some 23 months after the first proceeding was discontinued, Mr Tyne (who had become trustee of the trust) and his wife issued a further proceeding in the Federal Court arising out of the same facts and essentially making the same claims as were made in the earlier SCNSW proceeding.

99 The Court (Kiefel CJ, Bell, Keane and Gageler JJ with Nettle, Edelman and Gordon JJ dissenting) found that the trial judge was right to permanently stay the proceedings and allowed an appeal from the Full Court which had found that there was no abuse of process.

100 The plurality identified that Mr Tyne had deferred deciding whether to bring the second proceeding, stating: 'had Telesto "been made whole" in the SCNSW proceedings, Mr Tyne said, it was very likely that that outcome would have obviated the need for this proceeding.'[36] They were further of the view that Mr Tyne perceived a 'forensic advantage' to the Tyne-related parties in 'holding back the Trust's claim'.[37]

101 Various judgments in UBS made reference to the statements of Lord Bingham in Johnson in determining whether there was an abuse of process, which required a court to consider and make:[38]

a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not. (emphasis added)

102 Kiefel CJ, Bell and Keane JJ also highlighted that the timely, cost effective and efficient conduct of modern civil litigation takes into account wider public interests than those of the parties to the dispute.[39]

103 They said that 'hiving off' the trust's claim with a view to bringing it in another court after the determination of the SCNSW proceedings was contrary to the discharge of the duty imposed on parties to civil litigation.[40] Moreover, that permitting the claim to proceed would subject UBS to unjustifiable oppression which was found not only in the significant delay but at its core was the vexation of being required to deal again with claims that should have been resolved in the SCNSW proceedings.[41] Moreover, that for the Federal Court to lend its procedures to the staged conduct of the one dispute with the attendant duplication of court resources, delay, expanse and vexation was (as found by the trial judge) likely to give rise to the perception that the administration of justice was inefficient, careless of costs and profligate in the application of public moneys.[42]

104 Gageler J observed that the trial judge's conclusion that there was an abuse was based on four key considerations: that Mr Tyne was the controlling mind of the trustee and of Telesto; that the complex claims arose out of the same substratum of facts as those relied upon in the SCNSW proceeding; that there was no juridical disadvantage; and that there was no proper explanation.[43] He found that the first three factors were sufficient to justify the conclusion in the absence of a proper explanation. Further, that the primary judge's conclusion that no proper explanation was given was not only open but correct, stating:[44]

What was not reasonable having regard to the totality of the private and public interests involved was for Mr Tyne to take it upon himself to hold the claims of the Trust in abeyance with a view to pursuing them in separate proceedings if it turned out that Telesto's claims were for some reason not successful.

105 Given the decision in UBS came to the attention of the court after the date of the hearing, the parties were given an opportunity to file further submissions on the case.

106 Counsel for the defendants suggested, first, that the case supported the analogy with Anshun estoppel; secondly, that the issue needed to be determined with regard to the public interest not just the interests of the parties; thirdly, that the four factors identified by Gageler J were all present in this case. Finally, that, the decision supported the contention that the explanation in this case was not a proper explanation.[45]

107 Counsel for Euromark submitted that the facts in UBS were not analogous highlighting that, unlike in UBS, Euromark was not seeking to wait for the outcome of the 2015 proceeding before deciding whether to bring the 2018 proceeding (thus giving rise to successive proceedings); rather it was seeking for all its claims to be heard together so that the defendants would not be 'twice vexed' or unjustifiably oppressed. Further, that Euromark had provided a satisfactory explanation for the delay given the 2018 proceeding was triggered by 'Smash's backfired attempt in June 2018 to deter Euromark from continuing to prosecute its claim at all.'[46]

108 For reasons already identified, the defendants have failed to demonstrate that the claim is somehow misconceived or without substance.

109 The case is therefore to be considered in circumstances where, as in UBS, the claims are arguable and the delay has not made a fair trial impossible.[47]

110 Overall, and taking a 'broad, merits-based approach', I do not consider that there is an abuse of process by reason of the initiation of the 2018 proceeding.

111 First, I consider that the explanation for the second proceeding is generally reasonable.

112 Insofar as reliance is placed on the problems associated with recovering damages from Smash, it is true that non-recovery is always a risk. However, this explanation is proffered in circumstances where Smash has chosen to draw Euromark's attention directly to its financial difficulties. In fact, the unchallenged evidence of Mr Wang is that the 2018 proceeding was commenced as a direct consequence of Smash's own actions.

113 The case is therefore distinguishable from the case in UBS as Euromark did not engage in some deliberate strategy to hold back claims pending finalisation by a different court.

114 Further, the court in Aon did not have to fully consider any explanation since none was actually proffered. The context in which the remarks were made (in the passage cited by the defendants) was also in circumstances where the trial had already commenced (on day 3).

115 In terms of the four month delay, it is true that no clear explanation was offered on affidavit. However, given the general complexity of the pleading, I consider that it is self-evident that time was necessary to enable proper preparation of the matter.

116 Secondly, it is significant that there has been no determination of the 2015 proceeding. This is distinguishable from UBS where claims against the Trust were discontinued and the earlier proceedings were brought to an end by grant of permanent stay. This factor appeared crucial in the court's consideration of both the private and public interests at stake.

117 Thus, as observed by the majority: 'on the final determination of the SCNSW proceedings, it was reasonable for UBS to order its affairs upon the understanding that the dispute between it and Mr Tyne ... was at an end.'[48]

118 As also observed by Gageler J, the doctrine of abuse of process, in its application to the raising of issues in successive proceedings, is informed in part by considerations of 'finality' and fairness.[49] His Honour also highlighted that the relevant private interest was that UBS was compelled to respond to a process designed to vindicate a claim which should have been brought in the SCNSW proceeding which UBS had already gone to the time and expense of 'bringing to completion.' Further, that private interest was to be weighed with the 'public interest in the timely and efficient resolution of claims'.[50]

119 Thirdly, although it would ordinarily be preferable for an application to amend pleadings to be made on notice, Mr Wang explained that the proceeding was commenced on 22 October 2018 due to concerns that any application to amend would not be determined by that time (being the earliest arguable date the limitation period might have expired).

120 The particulars at paragraph 35 of the statement of claim suggest that, had the Planning Conduct been disclosed 'prior to 22 October', that steps would have been taken to avoid the loss of business and income suffered 'at the end of 2012.' It therefore appears that loss may have been suffered from 22 October 2012 for the purposes of the six year limitation period under ss 236 and 237 of the Australian Consumer Law.[51] In any event, the potential application of the limitation period was not challenged by the defendants, who do not even admit that the 2018 proceeding was brought within the limitation period.[52]

121 Such jurisdictional limits again distinguishes the case from UBS and, as highlighted by Gageler J, are appropriate for consideration.[53] Further, although delay is to be avoided under ss 9 and 25 of the Civil Procedure Act 2010 (Vic), a key consideration is whether parties have a sufficient opportunity to identify the issues they seek to agitate.[54] The overarching purpose and factors contained in s 9 of the Civil Procedure Act 2010 (which I have taken into account) also include consideration of the just determination of the proceeding (at s 9(1)(a)).

122 Finally, insofar as the defendants raise prejudice in preparing for two proceedings, orders will be made that the two proceedings be consolidated. This will also avoid any inconsistent findings.

123 Overall, then, I consider that Euromark is not abusing the process of the court by seeking to raise issues which should have been raised before. I further accept that there are considerations of 'convenience, costs or the like' which explain the initiation of the new proceeding.

124 I am therefore not satisfied that the use of the court's processes is occasioning 'unjustifiable oppression' to the defendants, nor does the 2018 proceeding generally serve to bring the administration of justice into disrepute.

125 Having regard also to the fact that the jurisdiction should only be exercised with the utmost caution,[55] I am not satisfied that any abuse of process is established.

126 The two proceedings will be consolidated with orders for service of a consolidated statement of claim, properly particularised, consistent with these Reasons.

127 The defendants' summons dated 1 April 2019 will otherwise be dismissed.

128 The parties are invited to provide a form of order to give effect to these Reasons.

[1] William Jason Harbinson, Joseph Dale Harbinson and David Malone, 'Second, Third and Fourth Defendants' Submissions', Submission in Euromark Ltd v Smash Enterprises Pty Ltd, S ECI 2018 01872, 26 April 2019, [36].

[2] Transcript of Proceedings, Euromark Ltd v Smash Enterprises, (Supreme Court of Victoria, Kennedy J, 26 April 2019) 101.

[3] And see Traditional Values Management Pty Ltd (In Liq) v Taylor [2012] VSC 299 [10]-[11].

[4] Affidavit of Sining Wang sworn 9 April 2019, [23].

[5] Transcript of Proceedings Euromark Ltd v Smash Enterprises, (Supreme Court of Victoria, Kennedy J, 26 April 2019) 67.

[7] [2004] FCA 948 ('Airtourer').

[8] [1957] HCA 92; (1957) 99 CLR 285 ('Field').

[11] [2010] VSC 589 ('Biovision').

[12] Ibid [35]; See also Airtourer (n 7) [36].

[13] See ASG Group Pty Ltd v State of Victoria [2017] VSC 720, [38] citing Seven Network Ltd v News Ltd [2006] FCA 343; (2006) 151 FCR 450, 461-2 [50] (per Graham J).

[15] Note that not all particulars have been included.

[16] [2010] NSWCA 268 ('Macquarie').

[17] Ibid at [16]; see also [148] per Hodgson J. See also North East Solutions Pty Ltd v Masters Home Improvement Australia Pty Ltd [2016] VSC 1 wherein Croft J cites Macquarie. Although Croft J's decision was reversed on appeal in Masters Home Improvement Australia Pty Ltd v North East Solutions Pty Ltd [2017] VSCA 88, the Court of Appeal found his Honour had correctly stated the law on the obligation of good faith.

[18] [2016] WASC 6 ('Reid').

[19] (2009) 239 CLR 175 ('Aon Risk').

[21] [2012] VSCA 42; (2012) 36 VR 130 ('Kermani').

[22] [2018] HCA 45, [1] ('UBS').

[23] Ibid [41] (per Kiefel CJ, Bell and Keane JJ).

[24] [2006] HCA 27; (2006) 226 CLR 256 ('Batistatos').

[25] Ibid 273, [37] (per Gleeson CJ, Gummow, Hayne, and Crennan JJ).

[29] Transcript of Proceedings, Euromark Ltd v Smash Enterprises, (Supreme Court of Victoria, Kennedy J, 26 April 2019) 20.

[33] [2002] 2 AC 1, 31 ('Johnson').

[38] Johnson (n 33) cited in UBS (n 22) [7] (per Kiefel CJ, Bell and Keane JJ); see also [67] (per Gageler J).

[45] William Jason Harbinson, Joseph Dale Harbinson and David Malone, 'Second, Third and Fourth Defendants' Supplementary submissions', Euromark Ltd v Smash Enterprises Pty Ltd, S ECI 2018 01872, 13 May 2019.

[46] Euromark Ltd, 'Plaintiff's Submissions - UBS AG v Tyne [2018] HCA 45', Euromark Ltd v Smash Enterprises Pty Ltd, S ECI 2018 01872, 10 May 2019, especially at [14].

[48] Ibid [58] (per Kiefel CJ, Bell and Keane JJ).

[51] The statutory cause of action arises when the loss or damage occurs: see Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514.

[52] William Jason Harbinson, Joseph Dale Harbinson and David Malone, 'Second, Third and Fourth Defendants' submissions', Euromark Ltd v Smash Enterprises Pty Ltd, S ECI 2018 01872, 26 April 2019, [32]-[33].

[53] See also Moore v Inglis (1976) 9 ALR 509, 515.

[54] Aon Risk (n 19) 217, [112] cited in UBS (n 22) [38] (per Kiefel CJ, Bell and Keane JJ).

[55] Jago v The District Court (NSW) [1989] HCA 46; (1989) 168 CLR 23, 76 (Gaudron J); See also Kermani (n 20) 153-4_,_ [97].