Plaintiffs v Defendants

Supreme Court of Victoria|2013-08-28|Before: ELLIOTT J

PRACTICE AND PROCEDURE - Whether concession made by counsel as to future conduct of proceeding - Principles relating to withdrawal of concession - Whether plaintiffs have suffered relevant prejudice - Whether alleged concession amounted to acceptance of plaintiffs' claim or offer in respect of plaintiffs' claim - Whether court's orders amounted to referral to special referee - Supreme Court (General Civil Procedure) Rules 2005, Order 50 - Whether court has jurisdiction to refer hypothetical question to special referee - Conduct of parties following alleged concession - Civil Procedure Act 2010 (Vic), ss 1(1)(c), 7.

**1 This is an oppression case. The plaintiffs, Giorgio Massimo Ubertini ("Ubertini") and Ubertini Investments Pty Ltd, allege oppressive conduct against the 1st defendant, Saeco International Group SpA Societa A Socio ("Saeco International"). Saeco International allege oppressive conduct by the plaintiffs.

2 The company in which each of them own shares is the 2nd defendant, Saeco Australia Pty Ltd ("Saeco Australia"). The plaintiffs together own 36% of the shares. Saeco International owns 60% of the shares.

3 As a result of a case management conference conducted as long ago as 25 October 2010, this matter was set down for trial.

4 At the start of this trial, which has been set down for hearing for 3½ weeks, the plaintiffs' senior counsel informed the court that there was a preliminary matter which needed to be raised.

5 In essence, he submitted the trial could not go ahead as ordered by the court, and agreed by the parties, because of a concession that was made by Saeco International on 10 November 2006. It was submitted that by reason of this concession, the only issue to be determined between the parties concerned the valuation of the plaintiffs' shares in Saeco Australia. Somewhat ironically, that was the only issue that was ordered not to be before the court at this trial.

6 No prior notice was given to the court of this preliminary issue. Saeco International was only made aware of the matter very recently.**

7 The plaintiffs identified the issue for determination as follows:

In 2006 [Saeco International] consented to the primary relief sought by the plaintiffs and the court made consent orders to value the plaintiffs' shares. After a change of lawyers, the plaintiffs conducted the proceeding unaware the concession had been made.

If [Saeco International] is held to the concession the case is significantly narrowed and no new issue arises for determination. Are the plaintiffs barred from relying on the concession?

C. The alleged concession of Saeco International

8 The concession alleged arises out of a statement made to the court by Saeco International's counsel on 10 November 2006 at the first directions hearing of the proceeding before Dodds-Streeton J. What was said at the directions hearing by him included the following:[1]

We have some orders that we've agreed upon, if I may hand over a copy of those. There are some matters I think I should draw to Your Honour's attention, first of all our clients are an Italian company, they are willing to buy the plaintiff's (sic) shares, they don't admit any wrongdoing, and they are also willing to have them determined on a fair market value by an independent expert, and that the first defendant (sic) who is the managing director, resign. That's their (sic) position in all of this proceeding and we want to state that publicly from the outset that that is the position of the first defendant.

**9 Stopping there for a moment, I have not been provided with a copy of what was said to be the agreed minutes of orders. No reliance has been placed on the contents of the document referred to; I am unaware of its contents.

10 Saeco International's counsel then referred to a number of other matters. They were:[2]**

(1) That Saeco International wanted discovery from Saeco Australia in relation to the issue of whether proper meetings of the board had been held.

(2) He said there were a number of complicated issues that needed to be resolved and in light of those matters it may be necessary to come back before the court.

(3) Saeco International itself wanted to bring an application for oppression against the plaintiffs.

Returning to the transcript the following exchange took place:[3]

Her Honour: [Ubertini] has received an offer, but he says it's too low, is that correct?

Counsel for Saeco International: Well he's made a proposal, my understanding, and that I think from the affidavit which he says he's received an offer, there's a dispute about that offer, however the position is, as I stated earlier, that the first defendant is quite willing to acquire the plaintiff's (sic) interests in the second defendant at fair market value to be determined by an independent expert.

11 Her Honour then handed counsel some draft orders of her own. She described them as:[4]

draft orders which Justice Hargrave frequently makes in oppression matters before they get off the ground, which essentially ask the parties to agree on a valuer, and to proceed to mediation.

(Emphasis added.)

12 Ultimately, the substance of those orders was accepted by the parties and orders were made by the court. They were not consent orders. The plaintiffs' counsel was unable to get instructions to agree to them, however, he expressed the opinion that her Honour's proposed orders had considerable merit. As part of the discussion which followed, her Honour enquired:[5]

[W]hat could be lost by taking this approach? What disadvantage is there from taking this approach of having an independent valuer get in from the ground up?

**13 No disadvantage was identified by counsel for the plaintiffs. Counsel for Saeco International said Saeco International fully supported the orders proposed by her Honour.

14 The matter was left on the basis that the parties would fill out the necessary dates by agreement, but otherwise the orders as suggested by the court would be made. Correspondence between the respective solicitors then followed and the dates were agreed. Nothing in that correspondence changed the nature of the orders made, namely, appropriate orders as suggested by the court rather than consent orders as agreed by the parties.[6]

15 Contrary to the plaintiffs' submission, they were not orders that were made as part of the concession alleged to have been made by Saeco International, albeit they were entirely consistent with the comments that were made by Saeco International's counsel.

16 Relevantly, the orders made on 10 November 2006 ("the 10 November 2006 Orders") were as follows:**

An independent person ("the Valuer") be appointed to express an opinion as to the value of the assets, including goodwill, of the second defendant ("the Company").
The Valuer be a person agreed upon by the parties by 4.00 pm on 20 November 2006 or, in default of such agreement, an official liquidator nominated by the Prothonotary who consents to act.

The Plaintiffs provide to the Valuer a copy of each document which the parties or any of them wish the Valuer to see for the purposes of the valuation by 4:00pm on 22 December 2006.
Any submissions which any party wishes to make to the Valuer be in writing and provided to the Valuer and to the other parties by 4:00pm on 22 December 2006.
The Valuer may inspect all or any of the books of the company (as the terms (sic) "books" is defined in s.9 of the Corporations Act 2001 (Cth)) for the purposes of the valuation.
Each party shall comply with the reasonable requests of the Valuer, including for the provision of any information or documents including copy documents, as soon as reasonably practicable after the making of such a request.
The Valuer shall complete the valuation and provide a copy to the parties and the Court by 4:00pm on 23 February 2007.
The parties shall pay the costs of the Valuer in equal shares in the first instance.

Liberty to apply is reserved to the parties and the Valuer on reasonable notice.

Her Honour also ordered the proceeding be referred to mediation after the valuation process was anticipated to be completed.

**17 It is necessary to identify the elements of what was said to be Saeco International's position as at 10 November 2006.

18 First, it was abundantly clear that Saeco International made an unqualified statement that at that point in time it was willing to buy the plaintiffs' shares at fair market value.

19 Secondly, although this statement was unqualified, it is also clear that Saeco International considered there were other matters that were live issues, which may require resolution by the court, that went beyond the exercise of simply valuing the plaintiffs' shares.

20 Thirdly, when confronted with the proposal from the court which involved a process of not only obtaining a valuation, but also referring all matters to mediation, Saeco International embraced that approach. The plaintiffs also acceded to this course.

21 In the circumstances, when the transcript is read as a whole, it cannot be said that Saeco International did anything more than state its then present position; namely, a willingness to acquire the plaintiffs' shares, subject to the ability to negotiate generally at the mediation which the court required the parties to attend.

22 I also note Saeco International's position was said to be subject to Ubertini resigning as managing director. Ubertini never resigned and, as I understand it, never offered his resignation. Perhaps the point is moot because his position was terminated on 21 February 2007, before the valuation process had been completed. However, in light of the conclusion I have reached as to the effect of what occurred on 10 November 2006, it is unnecessary to take this matter further.**

**23 If I am wrong about the effect of what was said on 10 November 2006 and if, in fact, as the plaintiffs contend, a concession was made to thereby shut out Saeco International from contesting any issues beyond those pertaining to the valuation of the plaintiffs' shares, there are further reasons why Saeco International is not bound to proceed on the basis that there was a concession.

24 A concession by counsel may be withdrawn provided no prejudice is caused by the making of the concession and its subsequent withdrawal.[7] The relevant prejudice cannot be the opposing party losing the advantage it otherwise would maintain if the concession remained. If that were so, no concession could be withdrawn.

25 Beyond pointing to the fact the plaintiffs will be required to prove their case in the usual way, no prejudice has been identified. If a concession were made and leave were necessary to withdraw that concession, I would grant it.

26 The plaintiffs also refer to the costs that were incurred in the valuation process. They suggest this gives rise to prejudice and also founds an estoppel which prevents Saeco International from resiling from the alleged concession.

27 There are 2 answers to this submission. First, the costs were incurred pursuant to the 10 November 2006 Orders made by the court. Those orders were the usual orders of the court at the time in relation to oppression cases. They were described by the plaintiffs' counsel at that time as being of considerable merit. In short, those costs were incurred independent of any concession made by Saeco International.

28 Secondly, such costs can be dealt with by the court making costs orders in due course, if warranted. They do not constitute a prejudice or make it just to require Saeco International to forego advancing its case on the merits. They certainly do not amount to detriment to establish an equity commensurate with the estoppel now contended for by the plaintiffs.[8]**

**29 The plaintiffs also submit a contract was formed. It was put on 2 bases. The first submission of the plaintiffs was that, by this proceeding, the plaintiffs were seeking a buy out of the shares. The plaintiffs contended that what was contained in their originating process by way of relief was effectively an offer, which was accepted on 10 November 2006. Secondly, and alternatively, what was said on 10 November 2006 was an offer which the plaintiffs accepted.

30 As to the first of these submissions, it has no merit. A substantial number of different forms of relief were sought by the plaintiffs at the time. To suggest a defendant may unilaterally choose 1 of them, and then bind the plaintiff to that course, only has to be said to be rejected.

31 As to the second submission, senior counsel for Saeco International before me did describe what was said on behalf of Saeco International on 10 November 2006 as an open offer. If that characterisation be correct, about which I say nothing, it was not something that was accepted by the plaintiffs.

32 I say that for a number of reasons. First, as already noted, the orders made were those proffered by the court as the usual orders. They were not tailored in any way to signify an acceptance by the plaintiffs. Equally, nothing was said by the plaintiffs' counsel on that day which amounted to an acceptance.

33 Secondly, subsequent events, which occurred before the valuation process was completed, were plainly inconsistent with any acceptance by the plaintiffs. I will elaborate on this second point.

34 This matter and a related matter came before the court in February 2007 on a total of 3 occasions. The valuation process was not completed until 29 June 2007, when a revised report was provided by the appointed expert. Accordingly, the 3 hearings (which occurred on 9, 15 and 21 February) were all conducted before the performance of the arrangement had been completed; and, of course, before the conduct of the mediation.

35 I do not propose to go to the detail of each of the hearings; suffice to say that it is perfectly clear that the plaintiffs' counsel, instructed by the same set of solicitors who were acting in November 2006, made submissions and observations which made it plain that the plaintiffs understood all potential relief, including the possible winding up of Saeco Australia, was still before the court.[9]

36 I pause here to refer to a submission of the plaintiffs concerning what was said to the court by Saeco International's senior counsel on 9 February 2007. On an occasion where the court was considering interlocutory applications in relation to a proposed meeting of the board of directors of Saeco Australia, senior counsel for Saeco International assured the court that the holding of a board meeting and dealing with issues relating to the insolvency of Saeco Australia at the meeting, would not affect the proposed valuation of the plaintiffs' shares in Saeco Australia. She also confirmed that the appointment of an administrator, if it were to occur, would not stifle the valuation process that was in place. This matter was expressly referred to in the ruling by her Honour, Dodds-Streeton J, that the plaintiffs had not established a serious question to be tried in seeking to prevent the proposed meeting from going ahead.

37 It was submitted by the plaintiffs that these statements made on behalf of Saeco International demonstrated that Saeco International accepted the issues outstanding were confined to valuation issues. In my view, they demonstrate nothing of the sort.

38 The statements made on 9 February 2007 are entirely consistent with conduct being engaged in by the parties pursuant to the usual orders of the court, as were made on 10 November 2006. The fact that the impending events were said not to affect the valuation says nothing about what other matters were still in issue between the parties.

39 Further, when the remarks that were made by Saeco International's senior counsel are seen in the context of statements also made by the plaintiffs' counsel it is plain that all parties considered there was no agreement in place which had limited the issues for any trial in the future.

40 In summary on this point, the conduct of both the plaintiffs and Saeco International at the hearings first held after 10 November 2006 make it plain that no one, including Dodds-Streeton J, believed a contract was on foot.**

**41 In light of what I have said about the hearings in February 2007, it is unnecessary for me to address submissions concerning a directions hearing that was held on 29 June 2007.

42 However, given that the plaintiffs' counsel were critical of the conduct of counsel on that occasion for not raising the alleged concession, I simply note that the history I have already set out shows there was no need to revisit the events of 10 November 2006. In short, the criticism is without substance.**

**43 Yet another submission was made in relation to the 10 November 2006 Orders. It was submitted they were made pursuant to order 50 of the Supreme Court (General Civil Procedure) Rules 2005.

44 It was further submitted that this indicated the court had accepted that the only remaining issue between the parties was the question of the valuation of the shares. The basis of this further submission was that the court had no jurisdiction to refer a matter out under order 50 if it was a hypothetical question. It was submitted that a referral out before the question arose for determination would be hypothetical and, therefore, an invalid exercise of judicial power. No authority on point was cited for this proposition. Rule 50.01(1) reads as follows:**

In any proceeding the court may, subject to any right to a trial with a jury, refer any question to a special referee for the referee to -

(a) decide the question; or

(b) give the referee's opinion with respect to it.

45 Unless the context or subject matter otherwise requires, "question" under the Supreme Court Rules means:[10]

any question, issue or matter for determination by the Court, whether of fact or law or of fact and law, raised by the pleadings or otherwise at any stage of a proceeding by the Court, by any party or any person not a party who has a sufficient interest.

**46 No submission was made to the court that the word "question" should be given a different meaning to that set out. Having looked at order 50, there is no apparent reason why the term as defined should not apply.

47 There are many questions which arise on the pleadings or otherwise that may ultimately turn out to be hypothetical. Causes of action are often pleaded in the alternative. Further, the obvious example, relevant to the present circumstances, is the question of loss. If liability is determined against a plaintiff, the question of loss becomes hypothetical. However, there are many instances where the court will determine the issue of loss in any event. There is nothing preventing the court from doing so. In many cases it may be of considerable assistance to the parties for that course to be adopted.

48 The authorities concerning declaratory relief such as the case referred to by the plaintiffs, Ainsworth v Criminal Justice Commission,[11] do not deal with the ability or otherwise of the court to determine questions on the pleadings (as opposed to giving declaratory relief in relation to hypothetical questions).

49 It would be a very inconvenient fetter on the court's power if it were not able to refer a matter out unless and until it was satisfied that a question which has arisen on the pleadings was definitely going to be a matter which required determination by the court in due course. (As may be seen from this case, the standard order in 2006[12] in relation to oppression cases was to appoint an expert to determine quantum, notwithstanding no determination had been made on any other issue.) I can see nothing in the rules, or as a matter of principle, which requires such a limited construction of order 50.

50 For completeness, I seriously doubt whether the 10 November 2006 Orders may be properly characterised as an order under order 50 in any event. They were standard orders made by the court at the commencement of the oppression case consistent with the court's practice in relation to oppression cases. The standard orders were a means by which the parties in an oppression case could properly understand the amounts potentially in dispute.

51 No mention of order 50 was made by her Honour or by counsel on 10 November 2006.

52 As a matter of form, the 10 November 2006 Orders did not address a number of matters. Taking them in turn:**

(1) They are not expressed so as to "refer" any "question": compare r 50.01.

(2) They did not "direct that the special referee make a report in writing" to the court: compare r 50.01(2)(b); they merely provided for a copy of the opinion to be provided to the court as well as the parties.

(3) They did not direct the valuer to state with reasons the valuer's decision: compare r 50.03(2)(b).

(4) No directions of the kind contemplated by r 50.02 were given, albeit such directions are not mandatory.

(5) It does not appear to have been contemplated that the court would give notice to the parties of receipt of the report by the court as contemplated by r 50.03(2)(a).

53 Although a number of these matters are strictly matters of form over substance, they do reflect a high probability that the court was not making orders by reference to order 50. If I were required to do so, I would so find.

**54 I now refer briefly to the history of this matter. In my opinion, for reasons already stated, in February 2007 at the very latest it is plain that all the issues were at large between the parties. If I am wrong about that, the plaintiffs accept that Saeco International made clear that that was its position at the directions hearing on 29 June 2007. It follows that for more than 6 years all parties have been conducting themselves on the basis that all questions raised, on what are effectively pleadings, are in issue.

55 The position now adopted by the plaintiffs can be described as being a dramatic and substantial change in their position. This is demonstrated by the steps taken since 2007. They include: discovery on issues going well beyond valuation issues; a case management conference where the plaintiffs were represented by experienced commercial senior counsel, who sought to ventilate all issues; 2 agreed lists of issues identifying the real issues between the parties, most of which relate to issues concerning oppression; outlines of evidence which go only to issues of oppression; the proofing of a large number of witnesses on oppression issues; and the preparation of a large and, no doubt, very expensive trial on oppression issues.

56 Notwithstanding this extended history of conduct, diametrically opposed to the position now adopted by the plaintiffs, they seek to justify their position based on what was said to be the ignorance of the plaintiffs' legal representatives of the concession made in November 2006.

57 I do not accept that submission for at least 2 reasons.

58 First, as already stated, in February 2007, the same solicitors were acting for the plaintiffs as had been acting on 10 November 2006. Those solicitors remained on the record until the end of May 2007. As I have said, the position adopted in February 2007 by the plaintiffs was inconsistent with the existence of any binding concession on the part of Saeco International.

59 Secondly, the solicitors who replaced the original solicitors on or about 29 May 2007, namely Mills Oakley, continued to be the plaintiffs' solicitors until December 2008. I have no evidence before me, not even hearsay evidence, to suggest that Mills Oakley were unaware of the events of 10 November 2006. In those circumstances, I am in no position to make any finding in that regard.

60 In short, the explanation for the change of the plaintiffs' position based on the lack of awareness of the plaintiffs' lawyers has not been made out.

61 If I am incorrect in each of my previous findings, the conduct of the plaintiffs overwhelmingly shows the plaintiffs (and Saeco International) have abandoned any arrangement that might have been in place since 2007.[13] The plaintiffs cannot now properly seek to resile from that position.**

62 Finally, submissions were made by the plaintiffs relying upon the overarching purpose imposed by operation of the Civil Procedure Act 2010 (Vic). It was submitted that the interests of the just, efficient, timely and cost effective resolution of the dispute[14] requires Saeco International to be held to its concession. It follows from what I have said that there is nothing to hold Saeco International to. In any event, the Act does not in any way countenance a court not dealing with the real issues between the parties that are properly before the court.

63 In conclusion, I answer the question posed by the plaintiffs as follows:

(2) If I am wrong about that, it has not been established that the plaintiffs' lawyers were unaware of the relevant facts at all relevant times.

(3) If the question is to be answered in any event, I would answer it yes, the plaintiffs are barred from relying upon the concession.

[6] The orders were recorded as being consent orders. However, counsel for the plaintiffs accepted that, in fact, they were not strictly made by consent. This was also acknowledged by the parties and the court on 21 February 2007: T23.25-24.10.

[7] H Clark (Doncaster) Ltd v Wilkinson [1965] Ch 694, 703 B-C.

[8] ACN 074 971 109 Pty Ltd (as Trustee for the Argot Unit Trust) v The National Mutual Life Association of Australasia Ltd [2008] VSCA 247; (2008) 21 VR 351, 393 [166]; Waltons Stores (Interstate) Limited v Maher [1988] HCA 7; (1988) 164 CLR 387, 423.4, 423.7-424.2.

[9] See transcript 9 February 2007 in proceeding 4609 of 2007: T12.05-.25; transcript 21 February 2007 in this proceeding: T23.25-24.10, 31.02-33.22; written submissions of the plaintiffs in proceeding 4609 of 2007, par 5.

[11] [1992] HCA 10; (1992) 175 CLR 564, 581.9-582.3 (Mason CJ, Dawson, Toohey and Gaudron JJ).

[12] In my view, there was nothing in the standard order to indicate it was a reference out to a special referee under order 50.

[13] Cf DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423, 434.5 (Stephen, Mason, Jacobs JJ).

Court (General Civil Procedure) Rules 2005

At a glance

Court

Decision date

Before

Source

Judgment (97 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (4)