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[2024] VSC 410
General information, not legal advice.
Supreme Court of Victoria
2024-07-12
Cosgrave J
Original judgment source is linked above.
01%20All%20ER%20630 "View LawCiteRecord"); Shannon v Lee Chun (1912) 15 CLR 257; Spitfire Nominees Pty Ltd v Ducco [1998] 1 VR 242; The Owners - Strata Plan No. 94784 v Mirvac Projects Pty Ltd [2024] NSWSC 741; Traffic Technique Pty Ltd v Burgmann [2020] VSCA 319; Ultra Thoroughbred Racing Pty Ltd v Those Certain Underwriters at Lloyd's, London [2011] VSC 370.
1 This hearing concerned three interrelated applications.
2 By summons dated 18 December 2023, the plaintiffs sought leave under rule 36.01(1) of the Supreme Court (General Civil Procedure Rules) 2015 ('the Rules') to amend its statement of claim.[1]
3 By summons dated 22 December 2023, the plaintiffs sought an order to reinstate the proceeding in circumstances where they failed to comply with a self-executing order.
4 By summons filed 22 August 2022, the defendants sought to dismiss or permanently stay the proceeding under rule 23.01 or 24.01 of the Rules, sections 28, 29 or 47 of the Civil Procedure Act 2010 (Vic) ('the CPA'), or the inherent power of the Court.
5 It should be noted that, in litigation governed by the CPA, I query how the parties can comply with the overarching purpose set out in the CPA when they take three full days to argue interlocutory disputes and produce a court book of more than 6,500 pages.
6 For the reasons that follow I will not grant the plaintiffs' reinstatement application. If I am wrong to disallow the reinstatement application, I would have denied the application to amend the statement of claim and granted the defendants' application to dismiss.
7 The plaintiffs' claim arises from a development project whereby the land which formerly comprised Pentridge Prison was to be redeveloped in stages to include both residential and commercial property.
8 On 15 June 1999, the Pentridge Village Joint Venture was formed ('the Joint Venture'). Its purpose was to establish an unincorporated joint venture to purchase, develop, manage, lease and sell the property and improvements on the Pentridge Village site. The Joint Venturers included Piero One Pty Ltd ('Piero One') and Pentridge Village Pty Ltd, the third plaintiff ('Pentridge Village').
9 Peter Chiavaroli and/or Leigh Chiavaroli (the fifth and sixth plaintiffs respectively) were directors of various plaintiffs at all material times.
10 Pentridge Village obtained funding of $167,364,229.00 from Capital Finance Australia Ltd ('CFAL') pursuant to a facility agreement entered into on 21 January 2008. Two years later Pentridge Village did not re-pay the facility in full and was in default. Its file was administered as a delinquent loan by CFAL's business support unit.
11 On 18 May 2012, Pentridge Village and the first plaintiff, Daimleigh Capital Pty Ltd (ACN 114 793 126) (Receivers and Managers Appointed) (In Liquidation) (in its personal capacity and as trustee of the Daimleigh Capital Unit Trust)) ('Daimleigh') were introduced to the first defendant, CVS Lane Capital Partners Pty Ltd ('CVS Lane').
12 By letter dated 21 June 2012, CVS Lane confirmed that it was prepared to conditionally offer a $15 million Bridging Loan Facility to Daimleigh. That offer was accepted on 28 June 2012 by Leigh Chiavaroli on behalf of Daimleigh, Piero One, West Homes Australia Pty Ltd ('West Homes'), Regent Way Pty Ltd ('Regent Way') and in his personal capacity.
13 It was a condition precedent of the offer that Daimleigh must fund $5 million of the subordinated debt or equity in order to receive the Bridging Loan Facility. Daimleigh could not obtain the whole of the debt from other sources and it eventually borrowed $4 million[2] from the third defendant, CVS Lane PV Mezz Pty Ltd ('CVS Mezz').
14 On 28 August 2012, Daimleigh and related entities entered in a series of transactions by which:
15 On about 28 February 2014, being the maturity date under both loans, Daimleigh was in default under both loan facilities. A standstill agreement was reached and Daimleigh agreed to pay standstill fees to CVS Mezz and CVS PV. Those fees, totalling about $100,000 per month, were debited to the Mezzanine Loan Facility and the Senior Bridging Loan Facility.
16 On about 28 February 2014, CVS PV required that Daimleigh pay CVS PV an $800,000 exit fee on the Bridging Loan Facility and such fee was debited to the Senior Bridging Loan Facility Account.
17 On about 24 June 2014, CVS PV and CVS Mezz required Daimleigh to pay $850,000 to CVS PV, debited to the Bridging Loan Facility, in order for CVS PV not to exercise the call option over Peter Chiavaroli's shares in Daimleigh.
18 On about 4 July 2014, CVS PV and CVS Mezz sold and assigned Daimleigh's outstanding debt to VP Investments LLC acting through its manager, Varde Partners Inc ('Varde'). On 17 July 2014, Varde appointed receivers and managers to Daimleigh, PVS5, Pentridge Village, West Homes and Pierora.
19 On 15 February 2015, the receiver, FTI Consulting, sold all of the secured property of the Pentridge Village site to another property developer, Future Estate Pty Ltd.
20 The plaintiffs seek inter alia damages pursuant to s 12GF of the Australian Securities and Investments Commission Act 2001 (Cth) ('ASIC Act') or alternatively s 991A(2) of the Corporations Act 2001 (Cth) ('the Corporations Act') (unconscionability) and for breach of contract.
21 The plaintiffs allege that the failure of the Pentridge Village project was caused by the defendants. The plaintiffs filed their writ and statement of claim in this proceeding on 27 August 2018 and an amended statement of claim on 10 February 2021. The plaintiffs filed a further amended statement of claim in October 2023 which contains allegations that, in requiring the plaintiffs to enter into various facilities, CVS Lane:
These kinds of allegations are repeated in the proposed further amended statement of claim, the subject of the plaintiffs' current amendment application.[3]
22 On 26 August 2019, the defendants received a letter from the plaintiffs enclosing a writ and a general endorsement of claim which had been filed on 27 August 2018. A letter accompanying the documents stated that it was intended that the proceeding be amended but the extent of these amendments was 'presently unknown'.
23 After the exchange of a series of letters between the parties, on 21 December 2019 the plaintiff served a statement of claim on the defendants' solicitor. It was dated 13 December 2019.
24 On 23 January 2020, the defendants filed an application seeking the following relief:
25 At the hearing of this application on 19 February 2020, Efthim AsJ acknowledged the defendants' concerns about a lack of funding for the plaintiffs to conduct this litigation. Efthim AsJ made the following orders:
(a) notify the solicitors for the defendants in writing whether that plaintiff intends to prosecute the proceeding, and as to the identity of its legal representative; and
(b) file any notice of change of solicitor or notice of discontinuance as appropriate.
- By 4:00pm on 4 May 2020, any application by any person for leave to be joined as a plaintiff be filed and served, and no such application be filed after this date without leave of the Court.
- The defendants file and serve any affidavit(s) in support of their application for security for costs by 4:00pm on 25 May 2020.
26 Again, there followed considerable correspondence between the parties and on 27 July 2020, the defendants filed an application seeking inter alia the following relief:
27 On the hearing of that application on 12 August 2020, Efthim AsJ made the following orders:
28 On 7 October 2020, the plaintiffs served a summons seeking orders that:
30 On 30 November 2020, the defendants received the PASOC and a summons from the plaintiffs.
31 At the hearing of the summons on 2 December 2020, counsel for the plaintiffs sought an adjournment because:
32 Efthim AsJ adjourned the hearing of the application to 15 December 2020. In his ruling, Efthim AsJ granted the plaintiffs leave to file an amended statement of claim, join the third and seventh plaintiffs, discontinue two of the plaintiffs' claims and join the third, fourth, fifth and sixth defendants three of whom were directors of the defendant companies. Broadly speaking, the plaintiffs were ordered to pay the costs of the defendant thrown away as a consequence of the discontinuances.
33 On 28 May 2021, Efthim AsJ ordered that the first to fourth and seventh plaintiffs provide security for the defendants' costs up to and including mediation in the sum of $180,000.
34 There was a directions hearing before Connock J in July 2021 when his Honour made timetabling orders agreed between the parties. Subsequently on 19 November 2021, his Honour made further timetabling orders. Pursuant to those orders, on 4 February 2022 the plaintiffs filed a 'Summary of Claims' document which purported to set out a clear summary of the plaintiffs' claims in the proceeding and to specify each claim, who it was made against and the relief sought in respect of each claim. The defendants contended that the summary was inadequate because, inter alia, it did not provide sufficient information to enable the defendants to adequately know the case which was being brought against them and which they had to meet.[4]
35 On 21 February 2022, the defendants' solicitors wrote to the plaintiffs' solicitors raising various deficiencies in the Summary of Claims. The defendants contended that the summary failed to draw the necessary connections between the alleged wrongdoing, causes of action, the applicable parties and the heads of loss and damage. They also contended that the summary failed to set out the opportunity which the plaintiffs allegedly lost. The defendants drew particular attention to their contention that the plaintiffs had failed to properly detail the relevant counterfactual they were contending for, namely, the position which they would have been in but for the allegedly unconscionable behaviour of the defendants.
36 On 4 April 2022, the plaintiffs filed their response to the defendants' request for further and better particulars. The plaintiffs provided the particulars approximately five weeks after the date prescribed for their delivery in the Court's orders dated 19 November 2021.
37 At the hearing before Connock J on 6 May 2022, because the state of the plaintiffs' pleading was unsatisfactory, his Honour ordered the plaintiffs to file and serve a document setting out in respect of each of the defendants:
38 On 30 June 2022, the defendants' solicitors wrote to A J & Co Lawyers (who were the solicitors then acting for the plaintiffs) requesting certain particulars which the defendants said were the minimum required for the purposes of attending a productive mediation with the plaintiffs. Having sought an extension of time and being granted that indulgence, on 18 August 2022 A J & Co Lawyers wrote to the defendants' solicitors saying that no further particulars would be provided.
39 On 19 August 2022, the defendants filed their summons seeking orders pursuant to the CPA and the Rules for the dismissal or permanent stay of the plaintiffs' proceeding.
40 The defendants' strike out application was first returnable on 11 November 2022 before Stynes J. In effect, the Court adjourned the strike out application until the plaintiffs had filed expert reports containing the evidence upon which they intended to rely. Her Honour noted at the hearing that she had concerns about the plaintiffs' pleading. On 25 November 2022 Her Honour ordered the plaintiffs to file and serve any expert report by 17 March 2023 and directed that a mediation take place by 28 April 2023.
41 Although A J & Co Lawyers provided details to the defendants' solicitor in February 2023 of the letter of instruction issued to the expert witness, Mr Jonathan Shakes, who the plaintiffs intended to engage, and Mr Shakes's curriculum vitae, A J & Co Lawyers did not serve the expert report within the time specified by the Court. Rather, on 17 March 2023, A J & Co Lawyers filed and served a notice of ceasing to act for the first, third, fourth, fifth, sixth and seventh plaintiffs. After some negotiation, the new solicitors, Alexander Law, obtained an extension of time in which to file and serve the expert report. The report was filed on 6 April 2023.
42 There was a further directions hearing before Stynes J on 15 June 2023. On that occasion, her Honour noted that although the plaintiff had put on expert evidence, it was apparent that it fell short of providing the particulars or material facts necessary to make good significant parts of the plaintiffs' claim. In particular, it did not establish any commercial opportunity which the plaintiffs had allegedly lost or its alleged value. In circumstances where the plaintiffs intimated that lay evidence may solve the problem, her Honour adjourned the defendants' strike out application and made other orders including:
43 In September and October 2023, the plaintiffs filed the expert report of David Ferrier together with three lay witness statements, a further amended statement of claim and a bundle of supporting material.
44 At the directions hearing before Stynes J on 18 October 2023, the defendants' strike out application was again adjourned. senior counsel for the plaintiffs requested a further adjournment on the basis that he recognised that the then current version of the statement of claim was inadequate and required further amendment.
45 As a result of the hearing on 18 October 2023, Stynes J made the following orders:
Defendants' application
The defendants' application filed 19 August 2022 [to dismiss or stay the proceeding] be adjourned to a date to be fixed not before Monday, 4 March 2024.
Plaintiffs' application
By 4.00pm on Monday, 18 December 2023, the plaintiffs:
file and serve an application to amend their statement of claim dated 9 February 2021 (and the amended statement of claim dated 13 October 2023 shall be disregarded);
file and serve any affidavit in support of that application; and
file and serve any and all further evidence on which they intend to rely at trial.
Each allegation made in any proposed further amended statement of claim must be supported by a footnote or other cross-reference referring to that part of the plaintiffs' evidence upon which they rely to substantiate the allegation.
The defendants file and serve any affidavits and submissions in response to the plaintiffs' application by 4.00pm on Friday, 9 February 2024.
The plaintiffs file and serve any affidavits and submissions in reply by 4.00pm on Friday, 23 February 2024.
The plaintiffs' application shall be fixed for hearing on a date to be fixed in accordance with paragraph 1 of this Order.
Costs
The plaintiffs must pay the defendants' costs of preparing submissions for, and counsel and instructors' appearance at, the hearing on 18 October 2023 (excluding the costs associated with the seventh affidavit of Mark Anthony Troiani dated 17 October 2023 which are reserved) in the amount of $56,316.44 (including GST) by 4.00pm on Monday, 18 December 2023.
Dismissal in the event of non-compliance
- If any part of paragraph 2 or paragraph 7 of this Order is not complied with by 4.00pm on Monday, 18 December 2023, the proceeding shall stand dismissed.
Plainly, minute 8 of the order was extremely important due to the consequences which would flow from non-compliance with the Order.
46 According to the plaintiffs' solicitor, Sameh Iskander ('Iskander'), he began receiving the final copies of the expert reports and other material to be filed less than an hour before 4.00pm on 18 December 2023. There is no dispute between the parties that the plaintiffs failed to meet the deadline of filing their amendment application and supporting material by 4.00pm on 18 December 2023. Iskander says that he filed the documents at court on that day between 4.04pm and 4.35pm.
47 The defendants' solicitor, Anthony Troiani ('Troiani'), said that at 5.47pm on 18 December 2023 he received an email from Iskander containing an electronic download link to the following documents: the plaintiffs' pleading amendment application; an affidavit of Iskander in support of the amendment application; a further expert report of Jonathan Shakes; a further expert report of David Ferrier; an outline of anticipated evidence from Romano Nenna; an affidavit by David Way together with a bundle of exhibits; an affidavit by Leslie Gamage together with a bundle of exhibits; and a second witness statement of Leigh Chiavaroli together with a supplementary bundle of exhibits.
48 On 19 December 2023, Troiani wrote to Iskander noting that the plaintiffs failed to serve any material on King & Wood Mallesons or their clients by 4.00pm on 18 December 2023 and accordingly, by reason of the failure to comply with the order of Stynes J, the plaintiffs' proceeding stood dismissed. He enquired whether the plaintiffs intended to make an application to reinstate the proceeding.
49 On 20 December 2023, Iskander wrote to Troiani requesting the defendants' consent to extend the time for compliance with the self-executing order.
50 On 21 December 2023, Troiani responded by refusing to agree to an extension of time. The letter noted that Iskander had provided no reason for why the Court's orders were not complied with and said that the plaintiffs' conduct was consistent with the idea that the non-compliance arose from the same kind of inattention to detail or laxity which caused the self-executing order to be made in the first instance.
51 On 22 December 2023, Iskander sent to Troiani an unsealed copy of the plaintiffs' application to reinstate the proceeding together with a supporting affidavit by Iskander.
52 On 1 March 2024, the parties received an email from the associate to Delany J. That email, among other things, noted that the plaintiffs' reinstatement application had not been filed with the Court. Subsequently, on 6 March 2024, the plaintiffs filed and served the reinstatement application upon the defendants.
53 As outlined above, there are three applications before me and therefore three main issues which require determination. The first is whether the plaintiffs should be granted leave to reinstate the proceeding in circumstances where they have failed to comply with a self-executing order. Secondly, if I were to allow the plaintiffs to do so, they seek an order under rule 36.01(1) of the Rules granting them leave to amend their statement of claim. Thirdly, if the proceeding is reinstated, the defendants seek an order that the proceeding be dismissed or permanently stayed under rule 23.01 or 24.01 of the Rules, sections 28, 29 or 47 of the CPA, or the inherent power of the Court.
54 I will deal first with the plaintiffs' reinstatement application and then, more briefly, with the amendment and dismissal applications.
Issue 1: The plaintiffs' reinstatement application
55 The law regarding the reinstatement of a proceeding which has terminated as a result of a self-executing order was set out by the Victorian Court of Appeal in Jorgensen v Slater & Gordon Pty Ltd.[5] There the Court said that when considering an application for reinstatement, the Court should have regard at least to the following matters[6]:
(a) the circumstances in which the self-executing order was made;
(b) the reasons for non-compliance with it;
(c) the prejudice to the defaulting party if relief were not granted; and
(d) the prejudice to the innocent party if relief were granted.
56 These criteria mean that the context is important because the Court must consider the history of the proceeding at least so far as it is relevant to the circumstances in which the self-executing order came to be made.
57 The Court of Appeal said that it was of the first importance to determine whether a party's failure to comply with the self-executing order was wilful and deliberate[7] or alternatively, whether the failure to comply occurred through a mistake or inadvertence or due to some supervening event.
58 A court should not be astute to make excuses for a party who fails to comply with a court order. But if a party can show that there was no intention to flout or ignore the Court's authority, then the party's conduct cannot be described as contumelious.[8]
59 At the same time, the Court should seek to maintain its authority and role in regulating society in accordance with the rule of law. It is crucial that all members of society respect the authority of the Court and that people do not, and are not encouraged to, undermine the authority of the Court.
60 It is important for the administration of justice that parties comply with orders made by the Court. Self-executing orders are usually only made in circumstances where the party subject to the order has failed to comply with earlier orders made by the Court. Generally, when it makes such an order, a court is granting a party a final opportunity to put its case in order. Hence, the proper administration of justice and the interests of the innocent party usually require that such an order is a final opportunity.
61 The nature of a self-executing order is such that:
62 Ultimately, the Court has to examine the circumstances of each case to give effect to the governing consideration of what the justice of the situation requires.[9] That means that the Court must exercise its discretion unfettered by conditions or guidelines referred to in other cases. A court is to examine the individual merits of each case with sufficient flexibility to safeguard the administration of justice while making due allowance in appropriate circumstances for matters such as accidents, errors and unexpected events.
63 Another relevant factor is whether the defaulting party has a reasonably arguable case or defence. There is no point in reinstating a proceeding in which the defaulting party's claim or defence is so weak or devoid of merit that it is bound to fail. However, the fact that a party's position has merit cannot necessarily save the party from the consequences of failing to comply with the Court's order.
Circumstances surrounding the making of the self-executing order
64 I have summarised earlier the factual and procedural history of the proceeding. A detailed history of the litigation is contained in the eight affidavits sworn by Mark Anthony Troiani and the submissions filed by the parties at the many directions hearings and applications made in this matter since its inception.
65 It is apparent from the Court file and the material referred to above that the plaintiffs have suffered some problems in advancing their case. Due to their conduct and the attitude of the Court in granting the plaintiffs multiple opportunities to frame their case, the litigation has proceeded very slowly.
66 First, various plaintiffs are either in liquidation or have receivers appointed to them. Apart from the issues inherently created by such a situation in terms of the directors of the company being able to conduct litigation, there was confusion and difficulty in arranging for the plaintiffs to be represented by a single set of solicitors. It seems that some plaintiffs retained Howard Bear of Howard Bear Legal Consulting Services as their solicitor in 2018. This was at a time when Enyo Lawyers also acted for other plaintiffs. After settling upon Howard Bear to represent all the plaintiffs from August 2020, the plaintiffs have subsequently changed solicitors several times. Piper Alderman succeeded Howard Bear in around July 2021. It appears that this may have been due to Bear's ill health as he subsequently died in 2022. Piper Alderman ceased acting for the plaintiffs in late-May 2022 to be succeeded by A J & Co Lawyers. This firm continued as the plaintiffs' solicitors until March 2023 when Alexander Law assumed that responsibility. Counsel did not explain the reasons for the changes.
67 Secondly, the fifth plaintiff, Peter Chiavaroli, the father of the sixth plaintiff, Leigh Chiavaroli, was a driving force in the plaintiffs' work of redeveloping the Pentridge Prison site. Peter died in July 2022. Accordingly, the plaintiffs have been deprived of his influence, evidence and future involvement in the litigation.
68 Thirdly, Leigh has suffered from mental illness following the death of his father and that of an aunt to whom he was close. Leigh says that this significantly affected his ability to work in the second half of 2022 and beyond. Leigh has attended the same medical practice in Niddrie for more than 20 years and sees either Dr Sestan or Dr Pereira. In a medical report exhibited to Leigh's affidavit, Dr Pereira says that, in his view, Leigh was not well enough between July 2022 and the end of January 2023 to perform his usual work duties or to give instructions and perform his duties as a litigant in complicated litigation.[10] Dr Sestan had earlier recorded that Leigh suffered from physical and emotional exhaustion, poor sleep, headaches, dizziness and numbness in parts of his body including his face and left arm and leg. Dr Pereira was of the view that by May 2023, Leigh's health had improved and he was in a better state of health and less affected by stress and anxiety. Dr Pereira expected that in the future, Leigh would be much more able to deal with the demands of the Court proceedings. I note that the evidence does not refer to Leigh being affected by any medical issues before July 2022.
69 As a general proposition, a court may well regard a delay of one to two hours in filing and serving material to be relatively insignificant when considering the operation of a self-executing order. However, the context is important. Here, the background and procedural history sections of the judgment show that the plaintiffs do not have a history of assiduously advancing this case to trial or of carefully complying with orders of the Court. There are repeated instances of the plaintiffs failing to plead their case in an informative manner consistent with the Rules, being late in the filing and serving of documents and seeking indulgences and adjournments in order to make good their failures to comply with the Rules or court orders. The plaintiffs have been far from model litigants.
70 At the hearing on 18 October 2023, Stynes J expressed the view that she wanted the plaintiffs to produce a pleading which was suitable for trial. The Court was also keen for the plaintiffs to file any further evidence, lay and expert, which they sought to rely upon at the trial. This occurred in circumstances where the judge in November 2022, had expressed a view that the plaintiffs' pleadings were inadequate and required improvement.[11] It also came after the pleading disputes which Efthim AsJ heard. Her Honour said at that earlier hearing that the plaintiffs needed to "pin their colours to the mast" and bring clarity to their claim. The orders made as a result of the October 2023 hearing[12] reflected another occasion on which the plaintiffs were given yet a further indulgence to do what they should have already done had they complied with earlier orders. Indeed, Connock J had also commented about the pleading and the issue of the counterfactual in November 2021. The defendants complained in October 2023 that the plaintiffs were given opportunities to amend their claim in November 2022 and June 2023 and they now sought another chance to remedy the problems besetting their case.
71 In summary, Stynes J made the self-executing order in a context where, more than five years after the issue of the writ, the plaintiffs had still not finalised the statement of claim which embodied their claims against the defendants. Because the proposed amendments and further and better particulars were unsatisfactory, the Court had ordered a "Summary of Claims" document[13] and then another document intended to spell out the details of each claim made by the plaintiffs.[14] Then, because none of the documents ordered was satisfactory and the plaintiffs indicated that their expert would give details of the quantum claimed, the Court ordered the plaintiffs to file their expert evidence. When the plaintiffs later suggested to the Court that lay evidence might solve evidentiary deficiencies in their case, the Court ordered in June 2023 that the plaintiffs file all the lay evidence they intended to rely upon at trial.
72 When the parties were before Stynes J again in October 2023, senior counsel for the plaintiffs sought another opportunity to fix evidentiary and pleading problems in the plaintiffs' case. And so it was that the Court adjourned, yet again, the defendants' application to dismiss or stay the proceeding and granted the plaintiffs another opportunity to put their house in order and file all the evidence they needed for trial.
73 The circumstances which the Court faced in October 2023 well justified the making of a self-executing order. The plaintiffs' conduct of the litigation had been far from satisfactory. In my
74 view, the plaintiffs were fortunate that no guillotine order had been made before October 2023.
Reasons for non-compliance with the self-executing order
75 In relation to the reason for non-compliance, the plaintiffs submitted that their interstate solicitor lacked the resources of a large firm like the defendants' solicitors. They said that while the solicitor did his best to compile, file and serve the significant volume of material in a short time, he was simply unable to meet the Court's deadline. He filed and served the material after 4:00pm on the day specified by the Court. After the plaintiffs' request for an extension of time was refused, Iskander notified the defendants' solicitor of the intent to apply to the Court for reinstatement.
76 In his affidavit, Iskander said that he used his best endeavours to have the material filed by the due date but he only received the final copies of the expert reports and other materials less than an hour before the deadline.
77 The plaintiffs' material gave no detail about what steps they or their solicitor took after the directions hearing before Stynes J in October 2023 to contact and confer with the proposed witnesses and experts who were to provide additional evidence on behalf of the plaintiffs.
78 Leigh's affidavit said that he believed the plaintiffs and their legal representatives had made a concerted effort to meet the Court's deadline by filing substantial additional material as expeditiously as possible. He said that there was no intention to flout the Court's orders.
79 For their part, the defendants filed an affidavit by Troiani which set out the steps which he would have taken to ensure compliance with the self-executing order.[15] He said that he would have:
(a) sourced and secured the requisite resources to comply with his professional obligations to his clients including finalising and filing the material;
(b) engaged promptly with experts and other witnesses within days of the order being made;
(c) maintained regular contact with the experts and witnesses to monitor progress in the production of the material;
(d) scheduled regular meetings with the experts and witnesses to monitor progress; and
(e) required the expert reports and witness statements to be finalised and provided for filing several days before the Court's deadline.
80 Troiani noted that all eight documents served on 18 December 2023 were dated that day. This suggested that none was finalised before the date of filing. He also observed that:
81 There was little direct evidence about what precise steps the plaintiffs and their solicitor had taken after the directions hearing in October 2023 to obtain the requisite material for filing. This is unsatisfactory for a couple of reasons. First, the information was specifically within the knowledge of the plaintiffs so they were the only source of information on the topic. Secondly, the plaintiffs are asking the Court to grant them a substantial indulgence in reinstating a proceeding which is currently dismissed. This requires the exercise of the Court's discretion in favour of the plaintiffs and against the interests of the defendants. In the circumstances, it is appropriate that the plaintiffs, as the parties seeking the indulgence, provide a detailed explanation to the Court about why the plaintiffs failed to comply with the self-executing order. The plaintiffs have chosen not to explain themselves.
82 In a recent case,[16] the New South Wales Supreme Court ordered that the plaintiff file by specific dates expert evidence it sought to rely upon at trial. The plaintiff filed the evidence late and applied to the Court for an extension of time in order to use the evidence at trial. Stevenson J said that in seeking to overcome the effect of the guillotine order, the party in default must provide an adequate, comprehensive and candid explanation of the failure to comply with the order. His Honour commented that:
His Honour said that he was not prepared to grant the plaintiffs' application for leave to rely upon the four additional expert reports but would not finally dispose of the plaintiffs' motion.[21]
83 From the plaintiffs' perspective, they said that the failure to reinstate the case would be catastrophic.[22] The plaintiffs say that they have now prepared a detailed statement of claim replete with references to supporting evidence and filed all the lay and expert evidence upon which they will rely at trial.
84 The plaintiffs make various claims against the defendants. The major claim arises from the alleged loss of opportunity to complete the redevelopment and sale of the Pentridge Village land. This claim totals approximately $350 million. In addition, the plaintiffs make other claims, including for:
85 Apart from the substantial damages claims which, in effect, would be dismissed without any adjudication on the merits, it should be noted that the plaintiffs say that they would be statute barred from reissuing proceedings against the defendants.
86 If the proceeding remains dismissed, then the plaintiffs will have wasted a substantial sum of money on the litigation. Leigh's affidavit of 18 March 2024 exhibits a letter from the accountant John Beattie of MVA Bennett confirming that the plaintiffs have incurred costs of approximately $2.087 million. This amount includes sums paid as costs to the defendants and an amount of $180,000 paid as security.
87 For their part, the defendants contend that the plaintiffs will suffer no prejudice if the case remains dismissed. This is because, if the proceeding were reinstated, the amendment application would fail and the defendants' strike out application would succeed.[23] I shall examine this argument later.[24]
88 Prima facie I accept that, for the reasons propounded by the plaintiffs, they would suffer prejudice if the proceeding were not reinstated. They would lose the opportunity to pursue their claims against the defendants and the claims are for many millions of dollars. But the size of the claim is not determinative. And the Court still has to decide whether the plaintiffs should be permitted to rely upon the proposed further amended statement of claim.
89 The defendants contended that they would suffer considerable prejudice if the proceeding were reinstated. In their submissions, the defendants referred to:[25]
90 The defendants' affidavit material sought to detail the prejudice which would flow if the proceeding were reinstated. They referred to the range of potential damages which the plaintiffs claimed in various iterations of the statement of claim. The damages totals ranged from nearly $1 billion in 2022 to around $400 million as the claim stood around October 2023. The first defendant is a privately owned business. While in October 2023 it had approximately $2 billion of funds under management from its investors, the company itself had a capital base or nett assets of approximately $5 million. The affidavit material said that there was no prospect of the first defendant satisfying a judgment significantly in excess of its capital base.[26]
91 Troiani said that he was instructed that the quantum of the claim had a significant negative impact upon the first defendant.
92 Next, Troiani said that the fourth to sixth defendants told him that they were highly distressed personally and professionally by:
Those defendants told him that the damaging allegations against them called into question their integrity and this had substantial consequences for the CVS group of companies.
93 In his most recent affidavit sworn on 21 March 2024, Troiani gave more details about the prejudice to the defendants. He said that Vasarelli told him that the first defendant was currently making applications for CVS Lane Capital Partners Property Funds to be admitted to certain funds management platforms. As part of the application, CVS Lane Capital Partners Property Funds were required to obtain a rating from an independent research agency. Due to the due diligence and research undertaken by the research agency and the prospective platforms, the fourth to sixth defendants were obliged to disclose the existence of the proceeding and the potential damages claim it made. Troiani said that the existence of the proceeding may negatively impact the rating which CVS Lane Capital Partners Property Funds was awarded or its admission to particular platforms. This would cause very significant losses to the CVS Lane corporate group and the relevant defendants in particular.[27]
94 Troiani also said that the existence of the proceeding hampered any merger or acquisition activity which the first, fourth, fifth and sixth defendants may seek to engage in, including joint ventures and partnerships. He said that the proceeding would have to be disclosed in any due diligence process. Vasarelli said to Troiani that this may cause real loss to the CVS Lane business and to the first, fourth, fifth and sixth defendants. Vasarelli also told Troiani that the prolonged nature of the litigation and the plaintiffs' failure to finalise the statement of claim put significant stress upon the business and those defendants.
95 Troiani opined that the selectively quoted internal correspondence in the latest version of the statement of claim was designed to embarrass the fourth, fifth and sixth defendants and attacked their professional reputations and good standing. The quoted material implied that the defendants acted improperly in their dealings with the plaintiffs.
96 If the proceeding is reinstated, then I acknowledge that this would be prejudicial to the interests of the defendants. The plaintiffs issued the proceeding in August 2018 making claims which largely concerned events occurring in 2012 and the year or two after that. If the matter could be listed for trial in the second half of next year,[28] that means the defendants will have to deal with issues which arose about 13 years ago. They, especially the individual defendants, will also have lived with the worry of the litigation for approximately seven years and also the distress caused by damaging allegations about their integrity. These are not insignificant matters.
97 To the extent that the Troiani affidavit material referred to possible problems with CVS Lane business entities being admitted to certain fund management platforms or being involved in mergers, partnerships or joint ventures, I regard the prejudice as more potential than real. The evidence did not, in my view, establish actual harm, only the possibility of harm.
98 In my opinion, the interests of justice are best served by not permitting the reinstatement of the plaintiffs' claim. In reaching this conclusion, I have relied upon a number of matters.
99 First, the context in which the self-executing order was made amply justified the making of the order. The plaintiffs filed the proceeding in August 2018 by way of generally indorsed writ. Many of the events complained of occurred in 2012-2014. The plaintiffs served the writ in August 2019 almost one year after issue. The plaintiffs did not file a statement of claim until December 2019. On the defendants' application, Efthim AsJ struck out the statement of claim in August 2020. In October 2020, the plaintiffs moved to replead. As set out earlier, the plaintiffs thereafter prepared a proposed amended statement of claim to which the defendants objected. At the hearing of the amendment application in December 2020, the plaintiffs applied to adjourn the application and about 10 days later, the Court made orders granting the plaintiffs leave to amend by joining some plaintiffs and some defendants and discontinuing part of the claim.
100 In 2021 and 2022, the parties engaged in correspondence about alleged deficiencies in the plaintiffs' pleading. The Court, through Connock J and Stynes J, made orders designed to improve the clarity of the plaintiffs' case so that all parties (and the Court) could understand:
101 Even after the various orders made by the Court giving the plaintiffs extra opportunities to amend their pleadings and file supporting evidence, when the plaintiffs appeared before Stynes J in October 2023, the Court yet again adjourned the defendants' strike out application because senior counsel for the plaintiffs sought another adjournment on the basis that he recognised the current version of the statement of claim was defective and required amendment. It is a rare case in which more than five years after issuing the writ, the plaintiffs have failed to finalise the pleading of their claims. Given the time elapsed since the issue of the writ, the history of indulgences granted and the orders designed to allow the plaintiffs to formulate their case in a manner which was readily comprehensible by the defendants and the Court, it was imperative that the plaintiffs should comply with the self-executing order made by Stynes J in October 2023.
102 The history of the proceeding and the plaintiffs' conduct was such that the plaintiffs ought to have appreciated the need for strict compliance with the self-executing order. While there is no specific evidence on the matter, I have little doubt that senior counsel would have explained to the plaintiffs the import of the order made by Stynes J and the need to comply with it. Indeed, due to the plaintiffs' behaviour in delaying the issue and service of the writ and then moving at a glacial pace to finalise the pleading, the plaintiffs should have been especially careful to ensure that they complied with the Court's order and did nothing which might further hinder or delay the progress of the action. Overall, the context in which the order was made underlines the importance of the plaintiffs complying with it. This same context emphasises how the plaintiffs need to adduce comprehensive and persuasive evidence in order to satisfy the Court that the justice of the situation makes it appropriate to reinstate the proceeding.
103 Secondly, it is of great importance to the administration of justice that court orders take effect in accordance with their terms and that litigants respect such orders. This is fundamental to the rule of law. These principles are of longstanding. Arguably they became more important after the passing of the CPA. This legislation was designed to effect change in the conduct of civil litigation in Victoria. It made explicit various duties and obligations which bound both litigants and their legal representatives in relation to the conduct of civil litigation in this State. A main aim of the CPA was to provide for an overarching purpose in relation to the conduct of civil proceedings to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.[29] The parties in civil litigation have various overarching obligations, one of which is the duty to use reasonable endeavours to act promptly and minimise delay in relation to civil proceedings. In my view, the plaintiffs' conduct is inconsistent with the overarching purpose and the said duty.
104 Thirdly, the evidence regarding the reason for non-compliance with the self-executing order was unsatisfactory. In the absence of a detailed explanation, it appears that the plaintiffs were not well organised to comply with the order and sought to do too much in too little time. It is insufficient to allege that the plaintiffs' solicitor operates from a small office and lacks the resources which a firm like King & Wood Mallesons can marshal. The defendants' solicitor set out the kind of process he would have established and followed if he had been in the plaintiffs' position.[30] The plaintiffs filed no evidence to suggest that they initiated any similar process to ensure that they complied with the Court's order. Notwithstanding their history of non-compliance with orders and the failure to set the pleading on a sound foundation, the plaintiffs appeared to take no appropriate measures designed to achieve compliance with the deadline. While I do not consider that the plaintiffs' failure to comply was intentional or deliberate, the failure did not arise from circumstances beyond the control of the plaintiffs. The fact that the plaintiffs filed the material late but on the correct day indicates that there was no reason why they could not have complied with the order.
105 The timing on the second expert reports by Ferrier and Shakes suggests that the plaintiffs lacked urgency in commissioning the work. The evidence indicates that the plaintiffs were too lax and did not apply themselves promptly and diligently to obtain the reports. The plaintiffs sought the second Ferrier report by letter dated 20 November 2023. That letter did not set out a timely deadline, or indeed any deadline, for the completion of the report. The plaintiffs failed to give the Court any explanation, much less one that was adequate, comprehensive and candid, about what took place between 18 October 2023 when Stynes J made her order and 20 November 2023.
106 Similarly, the plaintiffs sought another report from Shakes. They sent him two letters of instruction, one dated 12 December 2023 and the other 18 December 2023. Again, the plaintiffs did not explain the delay between the making of the self-executing order and the sending of the letters of instruction. And again, the 12 December 2023 letter did not specify a deadline for delivery of the report to the solicitor. But it did say that the report was due to be filed by 4:00pm on Monday, 18 December 2023 and asked Shakes to inform the solicitor by 13 December 2023 of the expected date of delivery of the report.
107 The plaintiffs did not explain their conduct in obtaining the additional lay evidence which they filed on 18 December 2023. The plaintiffs' failure to explain their conduct regarding the further expert reports and lay evidence did not assist their reinstatement application.
108 All eight documents which the plaintiffs filed and served on 18 December 2023 bore that date. This suggests that the plaintiffs did not begin the task of preparing the documents immediately after the 18 October 2023 hearing and working through them sequentially. If the plaintiffs had worked to an organised plan designed to have all the documents submitted to the solicitors and ready for filing some days before the due date, they could have sworn an affidavit to that effect. The rush to file the material on the due date suggests that the plaintiffs adopted an unduly lax attitude to compliance with the Court's order.
109 The position with Leigh Chiavaroli and his health is not material to the plaintiffs' situation. Even if it is accepted that Leigh suffered from mental health issues after the deaths of his father and his aunt, the medical evidence was that:
110 On the evidence before the Court, there was no reason to believe that the plaintiffs' ability to conduct the litigation was adversely affected by Leigh's health either before July 2022 or in and after October 2023.
111 I observe also that the reference to Leigh's poor mental health and its impact upon the plaintiffs appears to have been raised for the first time only after the plaintiffs failed to comply with the self-executing order and not earlier. This suggests it was not an important factor in explaining the dilatory and unsatisfactory conduct of the plaintiffs over a period of years.
112 Fourthly, the plaintiffs are entitled to a fair opportunity to present their case. They received that opportunity. However, they have no entitlement to appropriate the opportunities of other litigants to have their cases dealt with by the Court. The judicial resources of the State are a limited and valuable resource. This is recognised both at common law and under a statute like the CPA. It is incumbent upon litigants to conduct their litigation in a responsible and appropriate manner consistent with the obligations imposed by law. The Court conducted a series of hearings over a period of years dealing with this proceeding. Much of the time was spent addressing deficiencies in the plaintiffs' conduct of the litigation. The plaintiffs' consistently poor behaviour over a lengthy period does not warrant the grant of yet another indulgence. Especially is this so when the Court granted the plaintiffs multiple opportunities to put their house in order. Moreover, given the history of this proceeding, the Court has no assurance that this would be the last indulgence sought by the plaintiffs. The plaintiffs are responsible for how they conduct their proceeding. If they routinely fail to produce a pleading which conforms to the Rules and they do not comply with court orders, they must accept responsibility for their behaviour.
113 In relation to prejudice, while the harm to the plaintiffs is obvious if they cannot pursue their case to trial, there is harm too for the defendants if the proceeding is reinstated. In this context, it is important to recall that the plaintiffs are largely if not exclusively the authors of their own misfortune because they control the initiation and framing of their claim. Insofar as the plaintiffs were slow to issue the proceeding, slow to move it forward and failed to observe and comply with the Court's Rules and orders for the completion of interlocutory steps in the proceeding, these were matters within the control of the plaintiffs. Notwithstanding the multiple indulgences granted to them, the plaintiffs failed repeatedly to comply with orders, to file a compliant pleading and relevant supporting evidence.
114 By comparison, the defendants have had to endure the judicial process for years, frequently frustrated by the plaintiffs' delinquency and apparent indifference to the orders of the Court. The defendants have accrued substantial costs dealing with the various appearances and applications before the Court since 2018. Substantial parts of their expenditure have been unproductive because the Court's focus for a long time has been on encouraging the plaintiffs to produce a pleading and a claim which is readily understandable and complies with the Rules.
115 If the proceeding were reinstated, the defendants would face the threat of going to trial. This will entail considerable work, expense and inconvenience. Further, the individual defendants would suffer the continuing strain of the pendant litigation.
116 The defendants face prejudice in other ways as well.
117 First, in his third affidavit dated 8 December 2020, Troiani noted that CVS Lane Group has a practice of deregistering special purpose vehicle companies after the loan, which the special purpose vehicle company was created to facilitate, has been closed out. The loans here provided by CVS PV and CVS Mezz were closed out no later than February 2015. Because of these proceedings, CVS Lane Group has been unable to deregister CVS PV. Although the group deregistered CVS Mezz in early 2015 in accordance with usual practice, it was required to re-register the company in September 2018 for a related proceeding. Neither CVS PV nor CVS Mezz is actively engaged in any course of business. Nonetheless, because the companies remain registered, they incur ongoing auditing and other administrative costs which would otherwise not arise.
118 Secondly, another area of prejudice is the insurance cover required by CVS Lane Group. The group insures through London Australia Underwriting Pty Ltd. ('LAU').
119 In June 2018 CVS Lane, the first defendant, obtained the following insurance from LAU:
120 In September 2019, CVS Lane notified LAU of these proceedings. It advised the insurer of this proceeding and the related proceeding threatened by the liquidator of Pentridge Village. These were the only relevant litigious matters notified to the insurer for the period June 2018 to November 2019 and after issue of the 2018 policies.
121 On 30 November 2019, CVS Lane secured the following insurance cover from LAU:
122 The annual insurance cost was about $83,760. This represented a substantial premium increase for significantly less cover. LAU advised CVS Lane Capital Partners that it could obtain an additional $2.5 million professional indemnity cover from a top-up insurer at a cost of about $60,099. Had CVS Lane acted on this advice it would have paid about $143,859 for the same cover it obtained in June 2018 at a cost of $56,700.
123 Companies like CVS Lane are expected to maintain appropriate insurance cover and it could affect its future business if it did not have adequate professional indemnity and directors' and officers' cover.
124 Troiani said in his affidavit dated 17 October 2023 that the prejudice described in his third affidavit had increased in the intervening period.[31] He also said that the individual defendants told him that they were distressed personally and professionally by the ongoing litigation overshadowing their lives - the threat of major damages, the detrimental impact on their professional relationships and the prejudicial and selectively quoted correspondence which the plaintiffs released into the public domain. This correspondence implied that those defendants had acted improperly.
125 Finally, the defendants also claim to have suffered prejudice when the Court dismissed for want of prosecution a proceeding by some of the plaintiffs against the original lender to the Pentridge Project, CFAL. In substance, the plaintiffs claimed in that case losses very similar to those in the present case. If the plaintiffs had succeeded against CFAL then to that extent, they may well have been unable to claim the same damages against the current defendants. Due to the dismissal of the proceeding, the defendants have lost the chance to reduce their potential liability in the event that the plaintiffs enjoyed success against CFAL.
126 Also, while some might contend that a refusal to reinstate the proceeding works an injustice upon the plaintiffs, the Court cannot ignore the defendants or other litigants in weighing various discretionary factors. They are also entitled to consideration by the Court when deciding what justice requires in the circumstances.[32] The defendants have not conducted themselves in an improper or inappropriate manner. They have incurred substantial costs and been at risk for years on a claim exceeding $350 million. It is not unreasonable that the defendants should expect the plaintiffs to comply with the Rules and court orders and for the Court's orders to take effect in accordance with their terms. When the Court's resources are directed to conducting yet another hearing in this case, there are other litigants who, as a result, cannot be receiving judicial attention at that time.
127 The demands of justice commonly require courts to make allowance for illness, death, accidents and other extenuating circumstances. But courts should not allow parties to disobey the Rules of the Court and court orders in conducting litigation. Subject to an overriding duty to do what the justice of the situation requires, courts should, in fairness to all litigants and in recognition of the importance of respect for the rule of law, generally uphold the law and expect parties to act in accordance with the law. While making due allowance for special circumstances, courts should normally expect and encourage parties to abide by the Rules and orders made by courts. To do otherwise would reflect badly on the courts, undermine their authority and bring the administration of justice into disrepute.
128 Subject to some later comments in the judgment, the plaintiffs are prima facie prejudiced if the proceeding remains dismissed. However, there are compelling countervailing reasons to deny the plaintiffs' claim considering the circumstances in which the self-executing order were made, the plaintiffs' failure to provide a sufficient explanation as to why they failed to comply with the order and the not inconsequential prejudice the defendants have suffered and will continue to suffer.
129 Interlocutory decisions such as these are often difficult. Where the Court's discretion is involved, a mixture of factors will be present and reasonable individuals can adopt different views about what an appropriate outcome should be. The plaintiffs have had some difficulties to deal with but they were not so significant, individually or collectively, to justify the unsatisfactory manner in which the plaintiffs have conducted this litigation. If the plaintiffs are precluded from pursuing their case against the defendants, they will never have the chance to claim damages from the defendants for the alleged wrongful conduct which occurred in 2012-2014. Overall the matters relied upon by the plaintiffs are not sufficiently compelling to make it just in all the circumstances for the Court to allow the plaintiffs to reinstate the proceeding.
130 Accordingly, for the reasons outlined, I will not order that the plaintiffs be permitted to reinstate their claim. However, if I am wrong about this, I will consider whether leave should be granted for the plaintiffs to amend their statement of claim and, if leave were to be granted, whether the claim ought be dismissed or permanently stayed.
Issues 2 and 3: The plaintiffs' amendment application and the defendants' dismissal application
131 In Northern Health v Kuipers,[33] the Court of Appeal affirmed that the primary question that must be addressed in an application for leave to file an amended statement of claim is: what do the interests of justice dictate? It referred with approval to the observations made by J Forrest J in Ultra Thoroughbred Racing Pty Ltd v Those Certain Underwriters at Lloyd's, London ('Ultra Thoroughbred')[34] and said:
It has been said by this Court that Aon may have 're-invigorated the procedural paradigm' insofar as time, costs and limited judicial resources are relevant considerations in the determination of whether to allow certain interlocutory processes. However, as J Forrest J observed in Ultra [Thoroughbred], 'the primary question still remains: what do the interests of justice dictate?'; Aon reminds courts that 'the prism through which these interests are viewed is wider than just that of the moving party'.[35]
132 In Traffic Technique Pty Ltd v Burgmann,[36] Tate and Sifris JJA reaffirmed the primary question to be considered is: what do the interests of justice dictate? Their Honours stated:
His Honour's approach reflects that adopted by this Court as demonstrated by the endorsement in Kuipers, as mentioned above, of the observation of J Forrest J in Ultra Thoroughbred which, as mentioned, was to the effect that, post Aon, 'the primary question still remains: what do the interests of justice dictate?'. Clearly the interests of justice will vary depending upon the circumstances of one case to another; where the interests of justice lie cannot be judged by the application of a single universal rule. The thrust of Aon was to expand the range of interests to be taken into account (including the interests of non-parties who are litigants in other cases) in determining where the interests of justice lie and not to replace one almost universal rule with another. The judge's treatment of Aon shows that he had proper regard to its intent.[37]
133 In Northern Health v Kuipers, Kyrou and McLeish JJA also referred to the discretionary factors that are to be taken into account by the Court when determining whether to allow leave for an amended pleading to be filed. Their Honours said:[38]
The principles pertaining to an application to amend a pleading were explained in Aon Risk Services Australia Ltd v Australian National University. As set out in the reasons of J Forrest J in Ultra Thoroughbred Racing Pty Ltd v Those Certain Underwriters at Lloyd's, London, the factors that the High Court in Aon considered as relevant to an application to amend a pleading include:
(a) whether there will be a substantial delay caused by the amendment;
(b) the extent of any wasted costs;
(c) whether there is an irreparable element of unfair prejudice caused by the amendment;
(d) concerns of case management arising from the stage in the proceeding when the amendment is sought;
(e) whether the grant of the amendment will lessen public confidence in the judicial system; and
(f) whether a satisfactory explanation has been given for seeking the amendment at the stage when it is sought.
(1) For the purpose of -
(a) determining the real question in controversy between the parties to any proceeding; or
(b) correcting any defect or error in any proceeding; or
(c) avoiding multiplicity of proceedings -
the Court may, at any stage order that any document in the proceeding be amended or that any party have leave to amend any document in the proceeding.
135 A number of factors are relevant to the Court's discretion as to whether a party is allowed to amend their pleading. The starting point is generally to allow amendments as are necessary to enable the real questions in dispute to be decided,[39] and to avoid a multiplicity of proceedings.[40] However, forensic diligence is to be expected and encouraged with another consideration being whether there is a risk of prejudice to the responding party.[41] Furthermore, an amendment which is futile because it is obviously bad in law will not be allowed.[42] Ultimately, The Court should be guided by an assessment of where the interests of justice lie.
136 In their summons, the defendants seek an order, pursuant to sections 28, 29 or 47 of the CPA, Order 23.01 or 24.01 of the Rules or alternatively under the Court's inherent power, that the proceeding be dismissed or permanently stayed.
137 The defendants submit that the plaintiffs are in breach of sections 20, 22, 23 and 25 of the CPA being the obligations to co-operate in the conduct of a civil proceeding, to use reasonable endeavours to resolve a dispute, to narrow the issues in dispute and to minimise delay.
138 Sections 28 and 29 of the CPA provide that, in exercising any power in relation to a civil proceeding, a court make take into account any contravention of the overarching obligations.
139 Both ss 28 and 29 serve the purpose of enhancing the powers of the Court in relation to civil proceedings, but in different ways. Section 28(1) permits the Court to exercise its existing powers after taking into account any contravention of the overarching obligations.
140 Section 29 confers broad powers to sanction legal practitioners who fail to meet their overarching obligations. Section 29(1) confers a new power to make any order the Court considers appropriate in the interests of justice where a person has contravened an overarching obligation. This includes the power to make orders of the kind specified in subsections (a) - (f). Whether or not the Court previously possessed a power to dismiss a proceeding, it includes that power where the Court considers this to be appropriate in the interests of justice.
141 Under section 47, the Court may give any direction or make any order it considers appropriate for the purpose of ensuring that the proceeding is managed and conducted in accordance with the overarching purpose.
(1) Where a proceeding generally or any claim in a proceeding -
(a) is scandalous, frivolous or vexatious; or
(b) is an abuse of the process of the Court -
the Court may stay the proceeding generally or in relation to any claim or give judgment in the proceeding generally or in relation to any claim.
143 At a general level, r 23.01 empowers a court to permanently stay or dismiss a proceeding where that claim is bad in law, scandalous, frivolous, vexatious or amounts to an abuse of process.[43] Usually, a party seeking such an order will contend that the offending party's "claim so completely lacks foundation in fact or law that no legitimate pleading amendment could save it".[44]
144 The Court will not make such an order unless it is clear that the claim is unsustainable in fact or law.[45]
145 The distinction between scandalous, frivolous, vexatious and an abuse of process is now largely irrelevant.[46]
146 Robson AJA, with whom Neave and Harper JJA agreed, outlined a series of principles relating to stay applications on the grounds of an abuse of process. Relevant for the present circumstances are that:[47]
(a) the Court possesses an inherent jurisdiction to stay proceedings as an abuse of process if the proceedings are unjustifiably oppressive and vexatious or manifestly unfair or otherwise bring the administration of justice into disrepute among right-thinking people;
(b) the jurisdiction should only be exercised in exceptional cases or sparingly with the utmost caution;
(c) the jurisdiction to stay for abuse of process is not limited to cases where the proceedings have been brought for an improper purpose or where the Court is unable to provide the relevant party a fair hearing;
(d) the circumstances in which abuse of process may arise are extremely varied and the courts have refrained from limiting the circumstances to fixed categories; and
(e) in considering whether to grant a stay as an abuse of process, the Court should undertake a weighing process which involves the balancing of a variety of factors and considerations.
147 Under r 24.01, the Court may order that a proceeding be dismissed for want of prosecution if the plaintiff:
(a) being required to serve a statement of claim, fails to do so within the time limited; or
(b) does not within a reasonable time after the commencement of the proceeding -
(i) file and serve notice of trial; or
(ii) apply to have a date fixed for the trial of the proceeding; or
(c) fails to file and serve notice of trial within the time allowed to the plaintiff by the Court when fixing a date for the trial of the proceeding under r 48.02(b).
Nothing in this Order affects the inherent power of the Court-
(a) to dismiss any proceeding for want of prosecution; or
(b) to order that upon failure of a party to do any act or take any step which under these Rules the party is required to do or take or to comply with an order that the party do any such act or take any such step the proceeding shall be dismissed or the defence struck out and that judgment may be entered or that there be judgment accordingly.
149 In a recent related hearing, Stynes J canvassed the principles applicable to a dismissal or stay for want of prosecution as follows:[48]
(a) that the plaintiff's default has been intentional and contumelious, for example disobedience to a peremptory order of the Court or conduct amounting to an abuse of Court process; or
(b) that there has been an inordinate and inexcusable delay by the plaintiff or their solicitor and that:
(i) such delay gives rise to a substantial risk that it is not possible to have a fair trial of the issues in the action; or
(ii) the delay has caused or is likely to cause serious prejudice to the defendant, as between the plaintiff and defendant, or between the defendant and a third party.
- However, those principles are not immutable or incapable of adaptation to the circumstances of the case. The exercise of the Court's discretion to dismiss a proceeding for want of prosecution is not fettered by rigid rules. Ultimately, the guiding principle for the exercise of the discretion is that an order for dismissal will be made if the justice of the occasion demands it. Whether justice demands exercise of the discretion will involve a balancing of the prejudice to the respective parties.
- Nevertheless, the Court of Appeal of this state has since accepted that the remarks of Lord Griffith in Chris Smaller are 'extremely useful and important guidelines and in the great majority of cases will be found sufficient to dispose of the case.' While the Court did leave open the possibility that notwithstanding satisfaction of those guidelines, justice may demand refusing an application to dismiss a proceeding for want of prosecution, it recognised that such an determination would be 'extremely unlikely in practice'.
- Where delay has occurred, the extent and impact of, and explanation for, the delay are relevant factors in the Court's analysis. Relevant delay is not confined to periods of inactivity, and can include a failure to prosecute an action in a way that enables interlocutory steps to be concluded within a reasonable time.
- Proper and fair expedition is 'all the more necessary' in a complex case, 'lest it become out of control and remain a never-ending threat to the defendant'.
- A plaintiff's 'pre-issue' delay in commencing the proceeding is a relevant factor. Although a plaintiff is entitled to wait the full limitation period before commencing their action, the longer the delay in issuing proceedings, the more insistent courts have been that the plaintiff proceed thereafter with expedition, especially in circumstances where a plaintiff is aware of its potential rights.
- In Brisbane South Regional Health Authority v Taylor, McHugh J made the following relevant observations about the impact of delay in commencing proceedings on the availability of evidence (citations omitted):
The enactment of time limitations has been driven by the general perception that '[w]here there is delay the whole quality of justice deteriorates'. Sometimes the deterioration of quality is palpable, as in the case where a crucial witness is dead or an important document has been destroyed. But sometimes, perhaps more often than we realise, the deterioration in quality is not recognisable even by the parties. Prejudice may exist even without the parties or anybody else realising that it exists. ... '[W]hat has been forgotten can rarely be shown'. So, it must often happen that important, perhaps decisive, evidence has disappeared without anybody now 'knowing' that it ever existed. Similarly, it must often happen that time will diminish the significance of a known fact or circumstance ... The longer the delay in commencing proceedings, the more likely it is that the case will be decided on less evidence than was available to the parties at the time that the cause of action arose.
- If a plaintiff has left the issue of proceedings until very late in the limitation period', the Court should look at post-Writ delay critically and it may 'more readily [be] regarded as inordinate and inexcusable than would be the case if the action had been commenced soon after the accrual of the cause of action'.
- Case management considerations and questions of the proper use of court resources are also matters that can be taken into account in determining applications for the dismissal of proceeding.
- Other factors relevant to the exercise of the Court's discretion to dismiss a proceeding for want of prosecution include:
(a) whether a plaintiff was warned about the effects of its delay by the defendant or by the Court. Where the application for dismissal depends on delays involving more than mere inactivity, warnings can have 'particular significance' and 'the plaintiff cannot say that it was not given fair warning about its dilatory conduct'; and
(b) the hardship to the plaintiff if dismissal of the proceeding would leave the plaintiff's cause of action statute barred.
150 The Victorian Court of Appeal in Bishopsgate Insurance Australia Ltd (in liq) v Deloitte Haskins & Sells [49] said that with regard to delay, the Court must consider whether:
(a) there has been inordinate delay,
(b) any such delay is inexcusable, and
(c) the defendant has demonstrated prejudice arising, or likely to arise from such delay.
151 A critical consideration will generally be whether the plaintiff's conduct has caused, or is likely to cause, injustice to the defendants - that is, there is a substantial risk that there cannot be a fair trial of the proceeding due to the inordinate and inexcusable delay.[50] The risk of not having a fair trial includes the risk that the plaintiff's delay is likely to cause, or has already caused, serious prejudice to the defendant as between it and the plaintiff or as between the defendant and a third party. However, the Court's decisions on applications of this nature involve the exercise of discretion and an order for dismissal is appropriate only when the justice of the occasion demands it.[51]
152 These applications are intertwined. The defendants submit that, if the proceeding were reinstated, the plaintiffs' amendment application would fail and the defendants' strike out application would succeed. The plaintiffs submit that, absent a finding that the claims advanced are untenable and a waste of the Court's and parties' time, leave ought be granted for them to file the amended statement of claim and the matter should be permitted to proceed to trial. Another matter to bear firmly in mind is whether the plaintiffs need to make any further amendments or call any further evidence not filed before 19 December 2023. Given the orders already made and the history of the proceeding, if the plaintiffs need to do either of these things, that would be relevant in deciding whether to grant another indulgence.
153 In considering this hypothetical scenario of the proceeding going to trial, I will examine the following matters:
154 The main element of the plaintiffs' claim is that they lost the opportunity to earn substantial profits from the development of the land at Pentridge. A crucial aspect of this claim is that the plaintiffs can show that they suffered loss and damage only if they prove that by doing business with, and borrowing from, the CVS Lane parties, they lost an opportunity to obtain better terms from a different lender who would not have acted unconscionably. As a result, the plaintiffs missed the chance to make substantial profits from the development.
155 The plaintiffs claim that the defendants' conduct was unconscionable and in contravention of s 12CB(1) of the ASIC Act. The plaintiffs contend that, had the defendants not acted unconscionably, they would have acted reasonably and the plaintiffs would have suffered no loss.
156 In the proposed further amended statement of claim, the plaintiffs plead that, if the CVS Lane Parties had not acted unconscionably, the CVS Lane Parties would have done a number of things differently in their dealings with Daimleigh. For example, the plaintiffs say that a reasonable lender:
(a) would have structured the loan as a single $20 million loan;
(b) would not have charged the fees that the CVS Lane Parties did;
(c) would not have refused funding;
(d) would have taken alternative measures when costs overruns occurred such as:
(i) acting on Daimleigh's requests regarding the reallocation of the Project Budget;
(ii) not issuing a default notice dated 11 December 2012;
(iii) permitting Daimleigh to draw down funds from the Restricted Cash Account; and
(iv) not charging the fees it did.
(e) would have allowed access to the funds in the Restricted Cash Account and not claimed the interest earned on them;
(f) would not have withheld consent for townhouse and apartment sales;
(g) would not have restricted the plaintiffs' capacity to pursue planned development; and
(h) would not have engaged with external financiers from whom the plaintiffs sought finance without disclosing the same to Daimleigh and without varying the basis upon which it sold its loan to an external financier.
157 It is the plaintiffs' case that, had CVS Lane acted conscionably, the plaintiffs would not have incurred the fees they did, would have been able to continue the project, would have been able to stabilise the project such that it would have met the lending criteria of a mainstream Australian bank and then the plaintiffs would have been able to complete the project.
158 The plaintiffs particularise the loss and damage they say Daimleigh suffered due to the unconscionable conduct of the CVS Lane parties as:[52]
(a) a loss of opportunity to recover approximately $80 million in loans;
(b) interest paid to VPV Investments in the sum of approximately $4.62 million;
(c) fees and charges paid in cash to AET relating to an extension of time for settlement of $560,000;
(d) fees paid to CVS Lane, CVS Lane PV and CVS Lane PV Mezz of approximately $7.75 million;
159 The plaintiffs particularise the loss and damage they say Pentridge Village suffered as a result of the alleged unconscionable conduct of the CVS Lane parties as:[53]
(a) a loss of opportunity to have completed the development of the Pentridge Village Site of approximately $353 million; or alternatively
(b) a loss of the value of the englobo land if sold being approximately $76.5 million.
160 While I acknowledge that the major component of the plaintiffs' claim relies upon them establishing a lost commercial opportunity, there are a number of other additional claims for damages which the plaintiffs make. For example, the claims for fees, charges and interest do not rely upon the plaintiffs being able to establish a lost commercial opportunity. Rather, the plaintiffs would need to prove that the defendants' conduct was unconscionable in contravention of s 12CB(1) of the ASIC Act such that they were entitled to damages under s 12GF of the ASIC Act.
161 Furthermore, the plaintiffs claim inter alia that Peter Chiavaroli has suffered loss or damage of $1 million being the deposit paid by him for the purchase of the CFAL debt from AET[54] and that Leigh Chiavaroli has suffered loss or damage because he lost his Residential Builders Unlimited licence.[55] I accept that, as currently constituted, the plaintiffs will encounter substantial difficulties with regard to the claims made by Peter Chiavaroli. He died in 2022 and cannot continue his claim in his own name.
162 The main areas of dispute between the parties concerned the need for a counterfactual, proof of loss and the funding of the plaintiffs.
163 The plaintiffs argued that in relation to a claim for unconscionability, they did not need to plead or prove that there was a lender who would have lent to the plaintiffs on more reasonable or conscionable terms than the CVS Lane entities. They said that it was enough to prove how CVS Lane would have acted had they not acted unconscionably.[56] The focus was not on how someone else would have acted but on how CVS Lane would have acted if they had not acted unconscionably.[57] The plaintiffs contended that this was the correct doctrinal analysis of the legal issue and hence, there was no need for the plaintiffs to plead and prove the existence of a lender willing to lend on the terms which Shakes said were conscionable.
165 In PT Ltd, PT owned a shopping centre. Spuds occupied shops 415 to 417 inclusive at the shopping centre. The main issue was whether PT engaged in unconscionable conduct towards Spuds contrary to s 62B(1) of the Retail Leases Act 1994 (NSW) and if so, what relief was appropriate.
166 In September 2001, PT granted a five-year lease of an area outside the premises occupied by Spuds on which a new kiosk known as the B Zone kiosk was to be constructed. This replaced two other kiosks which were formerly located outside shops 415 and 416.
167 Between around July 2002 and November 2002, PT negotiated with Boost Juice for it to substitute its own kiosk for the B Zone kiosk. Boost Juice began trading on 15 November 2002, the same day that the Boost Juice lease commenced. Shortly after, two other kiosks were set up in the shopping centre near Spuds's premises. Some of the signage used by the kiosks did not comply with the shopping centre's guidelines and interrupted the sight lines to Spuds's premises in a way which should not have occurred.
168 PT succeeded before the Retail Leases Division ('the Division') of the Administrative Decisions Tribunal and Spuds succeeded to some degree in its appeal to the Appeal Panel ('the Panel') of the Tribunal. The effect of the decision by the Panel was to partly allow Spuds's appeal against orders by the Division in two separate proceedings which were heard together.
169 In the PT proceedings, the Division ordered Spuds to pay PT $327,553.25. This figure included arrears of rent, outgoings and other amounts due by Spuds together with interest.
170 In the Spuds proceedings, Spuds claimed relief against PT on various grounds including unconscionable conduct. The main complaint related to the construction and placement of kiosks at the shopping centre. Part of them obstructed customers' view of Spuds's premises. The kiosks' dimensions were said to be bigger than what PT's own guidelines permitted. Spuds said that PT's conduct was, in the circumstances, unconscionable and caused Spuds to sustain losses through reduced turnover and profits. Spuds claimed damages of $400,000.
171 The Division found that there was no unconscionable conduct and dismissed the claim. The Panel found there was unconscionable conduct but limited the damages to approximately $97,000. It also ordered that the damages be set off against the monies owed by Spuds to PT under the decision of the Division.
172 PT appealed against the Panel's decision. Spuds cross-appealed in relation to the award of damages.
173 PT largely failed in its appeal because the Court of Appeal upheld the Panel's finding of unconscionable conduct against it. PT did succeed in setting aside the damages award. It was common ground that the Panel denied the parties natural justice in assessing damages on a basis which Spuds did not advance and to which PT had no opportunity to respond. Thus, the damages award could not stand.
174 Spuds succeeded in it cross-appeal to set aside the damages award. However, it failed to obtain an order from the Court of Appeal that the damages award in its favour should have been $400,000.
175 In reaching its decision, the Panel compared the actual interference with sight lines caused by the kiosks' contravention of the 2002 height restrictions with the interference which would have existed had the B Zone kiosk remained in place. The parties in the Court of Appeal did not dispute that, to determine whether PT's unconscionable conduct caused any loss to Spuds, one had to compare the actual situation of the three new kiosks in place with the hypothetical situation which Spuds would have faced if PT had not acted unconscionably. The Court interpreted the Panel's reasons as finding that if PT had not engaged in unconscionable conduct, then the B Zone kiosk or a very similar structure would have remained in place. Hence, there was a comparison between the actual position and the likely position if there were no unconscionable conduct.
176 The other case the plaintiffs referred to was Anderson v Canaccord Genuity Financial Ltd.[60] Craig Anderson was the former director and shareholder in the Ashington group of companies. The group was involved in property development. Two companies in the group earned fees as the trustee and manager of two unlisted unit trusts which invested in properties which were suitable for redevelopment and sale. Around September 2009, the companies defaulted on loans which facilitated the purchase of one such property called Stonnington. The lenders threatened to enforce their rights. Other investors were dissatisfied with Ashington's investment performance.
177 Anderson employed the second and third defendants to arrange a refinance of the debt in relation to Stonnington. However, rather than doing as they were asked, the second and third defendants worked on a proposal for a new company to take over as trustee and manager of the unit trusts, with funds being supplied by other parties. The second and third defendants never raised the capital sought. By December 2009, the Ashington companies ceased to be trustee of the two unit trusts and later ceased to be the trustee and manager of those trusts and other related trusts.
178 Two of the Ashington companies went into liquidation and Mr Anderson's wife later took an assignment from the company's liquidator. The trial judge found that the second and third defendants acted dishonestly and fraudulently against their employer. But her Honour found that they did not breach their fiduciary duty. Even though the conduct of the second and third defendants had caused the capital raising to fail, the Court found there was no loss and so damages and compensation were assessed at nil.
179 On appeal, the Court of Appeal found that the second and third defendants did breach their fiduciary obligations and awarded the appellant judgment against various defendants in a sum exceeding $3 million.
180 The plaintiffs referred to the trial judgment in Anderson's case in the context of submitting that, where a party such as the defendant in the present case sets up an alternate counterfactual, it bears the onus of proving that counterfactual. That proposition is uncontroversial and reflects a well-accepted view of the law. However, it is not relevant to the dispute between the parties in the present case. The plaintiffs argued that it was correct to make the points in paragraph 163 above. But the defendants argued that more was required and that the plaintiffs had to plead and prove the counterfactual. On my reading of the PT case, more is required to establish the plaintiffs' loss of opportunity claim than relying upon the hypothetical situation of what CVS Lane would have done had it not acted unconscionably.
181 The proposed further amended statement of claim which the plaintiffs served late on 18 December 2023 does not respond to the multiple instances of criticism regarding the counterfactual. This pleading does not allege that there was a lender ready, willing and able to lend money for the purchase of the CFAL debt on the terms discussed by Shakes.
182 The defendants argued that the orders made by Stynes J on 15 June 2023 directed the plaintiffs to file a further amended statement of claim "containing cross-references to the evidence relied upon in support of each claim made". The order granted the plaintiffs no broader leave to amend. Nonetheless, the plaintiffs say that the proposed pleading filed made wholesale changes from the prior version and that the scope of the changes well exceeded the leave given.[61] The defendants commented that none of the alterations addressed key problems which had plagued the plaintiffs' claim - the lack of an appropriate counterfactual and the absence of evidence of loss.[62]
183 The defendants contend that the latest proposed further amended statement of claim annexed to the affidavit of Iskander still does not address these issues. Thus, they say that it is futile to reinstate the proceeding and allow the plaintiffs to file the proposed further amended statement of claim.
184 Apart from the defendants raising the issue of the counterfactual, Connock J and Stynes J also commented on the absence of the counterfactual. In November 2021, Connock J queried what the counterfactual would have been if the defendants had not engaged in the allegedly unconscionable conduct complained of. Stynes J said at the hearing in November 2022 that she had formed a preliminary view about the inadequacy of the plaintiffs' pleadings. Her Honour said that at the time, she did not understand the plaintiffs' claim. A particular area of concern was the alternative funding arrangements which the plaintiffs might have entered into if the defendants' alleged misconduct had not occurred.
185 The Court has previously ordered more than once that the plaintiffs file all lay and expert evidence upon which they intend to rely at trial. Accordingly, the Court should now have, by way of witness statements and expert reports, all the evidence necessary to substantiate the plaintiffs' case.
186 Shakes has filed two reports. The plaintiffs relied upon them to show the alternative finance which a lender, acting reasonably, would have made available to the plaintiffs if the CVS Lane entities had not provided finance on the terms they did.
188 The defendants raised these criticisms of the initial Shakes report in their submissions filed in May 2023.
189 In his second report dated December 2023, Shakes opined that no financier would have provided the facilities set out in the construction budget for the project because the plaintiffs would have committed a material breach of the lending terms. Shakes said that the project was capable of being funded by mainstream Australian banks if the construction plans (which Ferrier relied upon in his first report) were amended to delay:
190 Again, the defendants noted that Shakes did not identify an alternate lender or indeed explicitly say that any particular bank would have funded the project. His comment that, as modified, the project was capable of being funded was more equivocal.
191 In my view, the plaintiffs are not correct in contending that:
192 In circumstances where the plaintiffs seek millions of dollars in damages, it is relevant, both legally and practically, that there be such a lender in the real world. Without a lender who was prepared to advance funds on the terms Shakes referred to, the plaintiffs cannot show any loss of the sort they claim. The evidence does not disclose any other lender ready, willing and able to advance funds to the plaintiffs to facilitate the purchase of the CFAL debt. Without that funding, the transaction could not occur. The situation would have remained one in which Pentridge Village had defaulted in repaying by 30 June 2010 the $167 million CFAL debt facility granted in 2008.[63] By around late 2010 or early 2011, Pentridge Village was in breach of a credit facility agreement made in 2010 with CFAL. The plaintiffs' financial position was weak and most likely, the financiers would have enforced their security.
193 The legal principles about damages claims made under s 82 of the Trade Practices Act 1974 (Cth) (the equivalent to the current s 236 of Schedule 2 of the Competition and Consumer Act 2010 (Cth) ('The Australian Consumer Law')) were summarised by the Court of Appeal comprising Tate, Santamaria and Kyrou JJA in BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Services GmbH & Co KG.[64] In that case, BHP sued Steuler alleging that Steuler misrepresented the attributes of their high density polyethylene product which was to be used to line solvent extraction tanks at Olympic Dam. The Court found that if BHP had not chosen the Steuler product, it would have chosen a high density polyethylene product made by a rival manufacturer. Because the underlying assumption in BHP's case was that the high density polyethylene was unsuitable for the proposed use, BHP's damages claim failed. Although it established the misrepresentation, it could not show that it was worse off due to Steuler's misleading or deceptive conduct. Choosing the other manufacturer's product would not have conferred on BHP any greater benefit or less detriment than the course it adopted. The Court said that without proof of loss, it could not infer that BHP had suffered any prejudice or disadvantage.[65]
194 The decision in PT Ltd[66] shows that in assessing damages for unconscionable conduct, the Court is to compare the current situation with what would have been the case if there were no unconscionable conduct.[67] Hence, the Court of Appeal accepted a comparison between the current sight line interference and the situation which would have occurred if the B Zone kiosk were still in place. The comparison was grounded in reality.
195 In the present case the plaintiffs' main contention is that, if they had been able to obtain finance for the purchase of the CFAL debt and some additional capital for necessary works, they could have stabilised the project. They would then have sought funding from a large Australian bank to complete the project. They say that, due to the unconscionable conduct of the CVS Lane parties, they lost that opportunity.[68] The major problem is that there was no other source of funding available apart from CVS Lane and without funding, the transaction to buy the CFAL debt could not have occurred.
196 An aspect of the context is that Pentridge Village engaged Gresham Property Investments Limited ('Gresham') in May 2012 to provide financial advisory services. Pentridge Village agreed to retain Gresham for six months on an exclusive basis to assist Pentridge Village in introducing a potential debt provider to acquire the CFAL debt, undertake a strategic negotiation to obtain the debt at a discount to the proposed acquisition price of $25 million and, if required, to liaise with a short list of prospective bidders.
197 Pentridge Village agreed to pay Gresham substantial amounts: $15,000 a month for six months; an arrangement fee equal to 3% of any loan amount advanced, whether or not it was fully drawn; and a success fee if Pentridge Village acquired the CFAL debt for less than the proposed acquisition price - Gresham would receive 40% of the difference between the proposed price and the actual price paid.
198 There was no dispute between the parties that Gresham was well motivated financially to raise funds for the plaintiffs. But the only available and willing financier was the CVS Lane group. Thus, it cannot accurately be said that there were a number of prospective financiers ready, willing and able to provide funding to the plaintiffs for the acquisition of the CFAL debt.
199 Unconscionability and its consequences cannot be addressed in a factual vacuum which bears only a distorted relationship with reality. The CVS Lane parties offered finance on the terms they did. If there were no other lender prepared to fund the plaintiffs, the plaintiffs cannot sensibly say that they are entitled to millions of dollars in damages because CVS Lane acted unconscionably. Without a lender who was prepared to offer the plaintiffs the funds needed on terms which conformed to those specified by Shakes, the plaintiffs would not have had any basis for an unconscionability claim giving rise to substantial damages.
200 In dealing with loss, I will refer to several matters: the counterfactual; inconsistencies between the experts; differences in funding; and the problem caused by unsupported assumptions.
201 The plaintiffs' failure to plead and prove an arguable counterfactual is sufficient basis to find that the plaintiffs could establish no loss. The evidence filed does not show that there was another lender able and willing to advance funds to the plaintiffs on the necessary terms to enable the project to continue. Nor did the evidence show that any plaintiff would likely have made a profit had such a lender existed.
202 Furthermore, the defendants submitted in their written submissions of 17 October 2023, that despite the indulgence granted by Stynes J in June 2023 for the plaintiffs to file all their lay evidence, the plaintiffs have still not provided any evidence of "actual profits realised" from the opportunities which the plaintiffs allege they lost. In relation to the lack of evidence regarding "actual profits realised', the plaintiffs have not filed any additional evidence since the October 2023 which goes to this point. Accordingly, the plaintiffs have failed to remedy the problem identified by Stynes J in June 2023 that the plaintiffs' claim fails to establish the detail of the commercial opportunities alleged to have been lost and their alleged value.
203 Another problem regarding quantum arises due to a failure to properly connect the expert views of Shakes and Ferrier. In his second report, Shakes recognises that, without the construction timetabling changes he proposed, the project would not have been attractive to a mainstream financier. None of the evidence showed that:
204 The views which Ferrier expressed in his two reports did not take into account these timetabling changes which Shakes introduced only in December 2023. Ferrier was unaware of the changes to the construction program which Shakes said was necessary and was never asked to comment upon them or take them into account in reaching his conclusions. The other disconnect between the two experts concerns the loan thresholds important to each of them - $25 million for Shakes and $30 million for Ferrier. This is considered below.
205 The plaintiffs' proposed further amended statement of claim also raises the issue of the precise amount of funding they claim was required for the project. Shakes's opinion is that a reasonable lender would have advanced $25 million. Ferrier's evidence appeared to be that the lender had to advance at least $30 million to the plaintiffs in order for a lost opportunity to arise. There was no dispute that:
206 The plaintiffs' case looks to be that they required a minimum loan of $20 million to cover the acquisition cost of the CFAL debt of $15 million and $5 million in working capital to fund the Pentridge Village project works. Leigh Chiavaroli says that, at a meeting with CVS Lane on 25 May 2012, he explained that despite the minimum $20 million requested, Daimleigh anticipated it would need at least $30 million to $40 million to bring all works to completion. He said this outcome could be funded from a combination of cash flow from sale proceeds and further debt arrangements.[70] Paragraph 44 of the proposed further amended statement of claim sets out the particulars of this meeting and does not refer to Leigh's explanation that more than $20 million was required**.**
207 Ferrier's initial report relies upon the assumption that the existing equity holders of the Pentridge Village Joint Venture would have contributed $30 million at the commencement of the development, that Pentridge Village would have been able to obtain bank development finance to fund the development and that the contribution of $30 million would be repaid once the finance facilities had been fully repaid.[71]
208 The figure of $30 million, being the contribution from existing equity holders of the Pentridge Village Joint Venture, is repeated in Ferrier's second report.[72] This figure is important because Ferrier's opinion about the plaintiffs' loss of opportunity assumes a loan of $30 million.
209 The plaintiffs say that, when compiling his report, Ferrier was asked to assume that the developer came up with $30 million being an equity component of 20% of the loan. The letter of instruction to Ferrier dated 26 September 2023 and the amended statement of claim filed 10 February 2021 (provided to Ferrier with this letter of instruction) do not refer to a sum of $30 million.
210 Shakes opines that a reasonable lender would have advanced $25 million and bases his analysis on this figure. However, neither Shakes nor the other evidence establishes that CVS Lane was willing and able to lend this amount. The CVS Lane business model is to pool funds from investors for lending purposes. There was no specific evidence about the ability of the company to obtain more funds or the preparedness of investors to advance more funds to the plaintiffs.[73] I infer that investors would not have been interested in advancing more money in connection with the Pentridge Project without advice or endorsement from CVS Lane. There was no evidence about these matters. However, I consider it would be unusual for a borrower to successfully complain that a lender has acted unconscionably for lending the borrower an amount which the parties agreed upon and not a higher sum.
211 These discrepancies about funding do not assist the plaintiffs in running their case. At best, there is conflicting evidence which will need to be clarified by lay witnesses and then, quite likely, examined and opined upon by experts. At worst, there is conflict in the evidence which undermines the utility of the experts' current evidence. This in turn would, in all likelihood, compromise or invalidate the worth of the expert opinions. This is a serious concern when the plaintiffs are taken to have filed all the lay and expert evidence they rely upon at trial. If the situation is capable of remedy, the plaintiffs cannot do so without obtaining yet another indulgence to adduce more evidence.
212 There are several other assumptions upon which Shakes relies in his second report which cannot be reconciled with the evidence filed.[74]
213 In his first report, Shakes assumes that all site works, including the remediation of contaminated soil, would have been completed. Shakes relied upon the Knight Frank valuations which existed in December 2011, that provided for the cost of removal of contaminated soil of $4,989,690. In his second report, Shakes maintains the assumption that all site works, including the remediation of contaminated soil, would have been completed.[75] However, according to Leigh Chiavaroli's witness statement dated 2 October 2023, CVS would not allow Daimleigh to fund the costs of clearing the land from sale proceeds or otherwise reallocate funds. Instead, CVS required that the soil be stockpiled and then disposed of.[76] The soil was moved in mid-2013 but CVS never funded the soil contamination removal and remediation works and Daimleigh was unable to otherwise fund the soil contamination removal and remediation works.[77] Given Shakes relies upon the assumption that the remediation works, including the removal of contaminated soil, would have all been completed at the time of valuation, the plaintiffs will need to file more evidence to make good this assumption.
214 A further issue created by Shakes's second report is his assumption that the developer had 100% pre-sales before the commencement of construction for all residential properties.[78] This assumption appeared to be inconsistent with the case which the plaintiffs advanced. They complained that the defendants wrongfully refused to allow reductions in the list price of properties so that the plaintiffs could generate sales and a cash flow to use during construction of the project.
215 Shakes also assumes that the estimated operating costs are accurate.[79] Shakes quotes the operating costs as $54,781,700. The correlating figure in Ferrier's first report appears against the item "Total cash outflows - Other expenses." Ferrier used profit and loss statements of Pentridge Village to calculate "other expenses" but did not include consultants fees in his initial costs assessment. Gamage's report considers what allowance there should be for additional costs. Having received Gamage's report, Ferrier's second report suggests that "other expenses" should be increased by $505,027 to reflect the consultants fees. This adjustment means that the operating costs upon which Shakes relied in his second report were increased by Ferrier's second report filed on the same day. The changes made by Ferrier are not reflected in Shakes's second report.
216 In his first report, Ferrier referred in sections 3.6, 3.7, 3.11 and 3.12 to Appendix F of his report which is the construction schedule for The Heart part of the Pentridge Project. It includes the starting date for construction, the end date and the construction span. Ferrier says that he is not qualified to comment on these construction timing assumptions which he has used to allocate the construction costs.
217 One of the affidavits filed late on 18 December 2023 was sworn by Leslie Gamage, a quantity surveyor. He said that he had reviewed Ferrier's report inter alia to analyse sections 3.6, 3.7, 3.11 and 3.12. He attaches a letter of analysis in which he says:
Heart Precinct (Lots 10, 12, and 14) - Sections 3.6 and 3.7:
The construction schedule, including start and end dates, is provided in Appendix F, forming the basis for our assessment.
The rates used for feasibility study requirements in 2011 align closely with 2014 rates, falling within an acceptable range for a feasibility study.
Rates considered are exclusive of land acquisitions and related land development costs.
Specific geotechnical rates for the construction location are not factored into the analysis.
The assumption is made that the construction is based on a developer-designed detailed design open tender construction-only contract agreement.
The design responsibility lies with the developer, and the contractor does not bear any design responsibility.
Rates applied for the feasibility study do not encompass client-related costs such as;
Construction Project Management,
Quality Management during construction,
Materials and sample approval by specialist Engineer and Architect,
Monitoring Contractor's Health and safety Management Plans etc, and,
Construction Risks.
218 Gamage said similar considerations apply to the Additional Land section of the project which Ferrier referred to in sections 3.11 and 3.12.
219 The gist of Gamage's evidence was that the applied rates are reasonable given the conditions and assumptions referred to. In summary, Gamage says his review represents an appropriate assessment of the considerations and assumptions for the construction costs of the development stages.
220 I note that Appendix F of the first Ferrier report contains area measurements and a construction timespan. Gamage's report contains no information which suggests that he performed any measurements or verification procedures to ensure that these areas to be constructed were accurately stated. He appears to have simply assumed both their accuracy and that of the construction duration. David Way's affidavit sworn 18 December 2023 provided some evidence of particular lots or areas at pages 64, 90, 119, 153 and 223 of the PDF containing his affidavit.[80] However, Gamage makes no reference to this material.
221 There are also problems with the assumptions relied upon by Ferrier. When preparing his first report, Ferrier was not provided with a date for his assessment and he assumed that the plaintiffs required an assessment of the current value. He explains that where there has been an infringement against a business that is operating, it is normal practice to assess the current value of the loss with reference to the past economic loss and the future economic loss. In these circumstances, the amount of each loss is based on the date the assessment is completed. He therefore assessed the value of the lost opportunity as at 30 September 2023.
222 His calculation assumes that the plaintiffs would still be receiving cash flows from the project up until 2023. In their October 2023 submissions, the defendants submitted that there was no evidence to support this assumption. Despite no further evidence being adduced on this point, Ferrier continued to value, in his second report, the loss of opportunity from 30 September 2023. The plaintiffs were on notice of the potential problems with the assessment date relied upon by Ferrier. Despite this, Ferrier was not instructed to assess the loss of opportunity claim from any other date. The plaintiffs would likely need to file further evidence to show that they would still be receiving cash flows from the project up until the 2023 assessment date.
That being so, I am not satisfied that the plaintiffs have put forward an arguable case. Accordingly, if I am wrong in my determination that the plaintiffs' claim should not be reinstated, the claim should not proceed in any event. To do so would be futile and not in accordance with the overarching purpose of the CPA.
224 On the general question of delay and abuse of process, if the proceeding had been reinstated, I am not satisfied that the delay is so notable and the ensuing prejudice to the defendants so severe as to warrant the dismissal of the proceeding. While the plaintiffs delayed in issuing the writ, then in serving the defendants, and have been tardy in conducting the litigation, I do not think the defendants' case has been so adversely affected that an order for dismissal is appropriate.
225 In summary, I consider that the plaintiffs' application to reinstate the proceeding should be dismissed.
226 If I had reinstated the proceeding I would have then:
(a) struck out the proposed further amended statement of claim because:
(i) it does not plead, and the evidence does not prove, the requisite counterfactual;
(ii) as a result of the absent counterfactual it does not establish loss flowing from the alleged wrongful conduct of the defendants. That is, the plaintiffs cannot show that they would likely have made a profit without the hypothetical lender advancing sufficient money on the terms proposed by Shakes.
(i) the Ferrier evidence does not take into account the changes in the construction program which Shakes said were required for the project to be attractive to, and funded by, a mainstream Australian bank. Ferrier's reports were based on a different construction program.
(ii) in his second report, Shakes:
A. assumes that the development had 100% pre-sales before the commencement of construction for all residential properties. This position is inconsistent with the plaintiffs' claim and adversely affects the relevance and utility of the Shakes report;
B. could not show that CVS Lane was ready, willing and able to advance to the plaintiffs from its investors the sum of $25 million;
C. did not identify any bank, Australian or otherwise, which would have lent the necessary funds to the plaintiffs on the terms which he specified.
(iii) the experts are not consistent about the level of funding required for the project. Shakes says a reasonable lender would have lent $25 million. Ferrier could establish a loss of opportunity only if a lender advanced $30 million;
(iv) to deal with difficulties or inconsistencies in the evidence and to justify assumptions made by the experts the plaintiffs would need to rely upon additional evidence beyond that which was filed before 19 December 2023. This would require yet another indulgence which, in my view, is not justified.
227 For the reasons outlined above I will dismiss the plaintiffs' summons dated 18 December 2023. Subject to hearing from the parties, I propose to order that the plaintiffs pay the defendants' costs of and incidental to the three applications. In circumstances where the plaintiffs have not been successful in their application, the general rule dictates that they should bear the costs associated with it. I note that, had the plaintiffs succeeded in seeking to reinstate the proceeding, I would have likely ordered that they pay the associated costs due to the significant indulgence they would have received.
228 The parties should file and serve written submissions on the issue of costs by 4.00pm on 22 July 2024. The submissions are limited to five A4 pages, a minimum 12-point typeface, 1.5 spacing and 40 mm margins on either side of the page. Any reply submissions are to be filed by 4:00pm on 25 July 2024. The reply submissions are limited to three A4 pages, a minimum 12-point typeface, 1.5 spacing and 40 mm margins on either side of the page. Unless the parties request, or I otherwise consider an oral hearing necessary, I propose to determine the issue of costs on the papers.
DAIMLEIGH CAPITAL PTY LTD (ACN 114 793 126) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) IN ITS PERSONAL CAPACITY AND AS TRUSTEE OF THE DAIMLEIGH CAPITAL UNIT TRUST
PVS5 HOLDING CO PTY LTD (ACN 154 301 596) (RECEIVERS AND MANAGERS APPOINTED) IN ITS PERSONAL CAPACITY AND AS TRUSTEE OF THE PVS5 UNIT TRUST
PENTRIDGE VILLAGE PTY LTD (IN LIQUIDATION) (ACN 087 151 068)
WEST HOMES AUSTRALIA PTY LTD (ACN 004 964 185) (RECEIVERS AND MANAGERS APPOINTED) IN IT PERSONAL CAPACITY AND IN ITS CAPACITY AS TRUSTEE FOR THE WHA TRUST
DAIMLEIGH PTY LTD (TRADING AS ABBOTT & DEAN REAL ESTATE) (ACN 079 259 082)
CVS LANE CAPITAL PARTNERS PTY LTD (ACN 155 490 154)
[1] The plaintiffs' proposed further amended statement of claim is exhibited to the affidavit of Sameh Iskander dated 18 December 2024.
[2] I note that the nett amount received was reduced by reason of the substantial fee charged for the loan.
[3] The plaintiffs' proposed further amended statement of claim is exhibited to the affidavit of Sameh Iskander dated 18 December 2024.
[4] Defendants' Submissions dated 4 May 2022.
[5] [2008] VSCA 110 ('Jorgensen').
[8] Ray Jokai Tea Holdings Ltd [1993] 1 All ER 630 at 637.
[10] See Affidavit of Lino (Leigh) Chiavaroli dated 18 March 2024.
[11] Her Honour expressed her views in a context where Efthim AsJ had already ruled about the problems of the plaintiffs' pleading.
[12] The orders were formally made in November 2023.
[13] Connock J ordered this in November 2021.
[14] Connock J ordered this in May 2022.
[15] Affidavit of Troiani dated 21 March 2024 at [20].
[16] The Owners - Strata Plan No. 94784 v Mirvac Projects Pty Ltd [2024] NSWSC 741.
[19] Two experts were retained on this day.
[20] [2024] NSWSC 741 at [18].
[22] Plaintiffs' Reinstatement Submissions dated 18 March 2024 at [4.5].
[23] Affidavit of Troiani dated 21 March 2024 at [22].
[24] See analysis commencing at [152] below.
[25] Defendants' Reinstatement and Amendment Submissions dated 21 March 2024 at [17].
[26] Affidavit of Troiani dated 17 October 2023 at [24] - [29].
[27] Affidavit of Troiani dated 21 March 2024 at [27(a)].
[28] As presently advised, I believe that in the usual course, the earliest possible trial date available would be in the latter half of next year. However, I acknowledge that it may well be 2026 before the trial can begin.
[30] See [20] of the affidavit of Troiani dated 21 March 2024 where Troiani sets out steps he would have followed had he been in the plaintiffs' position. The substance is set out at [79] above.
[31] Affidavit of Troiani dated 17 October 2023 at [24].
[32] It is clear from cases such as Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 ('Aon') that, in exercising their powers and discretions, courts need to take into account not only the interests of the parties to a particular case but the interests of other litigants and the administration of justice more broadly.
[33] [2015] VSCA 172 ('Northern Health v Kuipers').
[34] [2011] VSC 370 at [9].
[35] Northern Health v Kuipers at [33].
[37] Ibid at [58] (citations omitted).
[38] Northern Health v Kuipers at [28].
[39] Commonwealth v Verwayen (1990) 170 CLR 394 at 456.
[40] Shannon v Lee Chun (1912) 15 CLR 257 at 265.
[41] Nowlan v Marson Transport Pty Ltd (2001) 53 NSWLR 116 at [34] - [36].
[42] Commonwealth v Verwayen (1990) 170 CLR 394 at 456.
[43] Annesley v Westpac Banking Corporation [2016] VSC 323 at [68].
[46] Business Service Brokers Pty Ltd v Optus Mobile Pty Ltd [2021] VSC 310 at [24].
[47] Kermani v Westpac Banking Corporation (2012) 36 VR 130 at [97].
[48] Pentridge Village Pty Ltd (In Liq) v Capital Finance Australia (No 3) [2023] VSC 605 at [28] - [38] (citations omitted).
[50] Spitfire Nominees Pty Ltd v Ducco [1998] 1 VR 242 at 248.
[51] Alginates (Aust) Pty Ltd v Thompson & Carroll Pty Ltd [1970] VR 570.
[52] See [137] of the Plaintiffs' Proposed Amended Statement of Claim. The plaintiffs made due allowance for the residual debt at the end of the term.
[53] See [147] of the Plaintiffs' Proposed Amended Statement of Claim. The plaintiffs made due allowance for the loan and interest payable to Daimleigh.
[54] See [149] of the Plaintiffs' Proposed Amended Statement of Claim.
[55] See [151] of the Plaintiffs' Proposed Amended Statement of Claim.
[58] [2013] NSWCA 446 at [155]- [156].
[59] [2022] NSWSC 58 at [2496]-[2506].
[61] Defendants' Submissions dated 17 October 2023 at [9] and [10].
[63] This replaced an earlier finance package provided by CFAL.
[64] Protec Pacific Pty Ltd v Steuler Services GmbH & Co KG; BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Services GmbH & Co KG [2014] VSCA 338 at [540].
[68] And they incurred fees and suffered other forms of financial loss.
[69] About a fortnight before entering into the Mezzanine Loan Facility, Daimleigh accepted an offer for funding made by Global Consulting Services Pty Ltd of $2 million for 18 months.
[70] See Witness Statement of Lino (Leigh) Chiavaroli dated 2 October 2023 at [52].
[71] See Expert Report of David Ferrier dated 3 October 2023 at [4.24(a)(c) & (g)].
[72] See Second Expert Report of David Ferrier dated 18 December 2023 at Appendix U.
[73] To the extent that extra funds could be made available by capital recycling or releasing funds held in the Restricted Cash Account, there was no evidence to suggest that CVS Lane was willing to countenance financial limits different from those they specified.
[74] Section 10.1 of the Second Expert Report of Jonathan Shakes dated 18 December 2023.
[75] Section 10.1(ii) of the Second Expert Report of Jonathan Shakes dated 18 December 2023.
[76] Witness Statement of Lino (Leigh) Chiavaroli dated 2 October 2023 at [208].
[78] Section 10.1(vii) of the Second Expert Report of Jonathan Shakes dated 18 December 2023.
[79] Section 10.1(xv) of the Second Expert Report of Jonathan Shakes dated 18 December 2023.
[80] See Valuation Report for Various Lots dated December 2011 at page 55; Valuation Report for Proposed Lots 1701-1704 dated December 2011 at page 19; Valuation Report for Lot S5, 1 Via Roma dated December 2011 at page 16; Valuation Report for Various Lots within Pentridge Village Estate dated 1 February 2012 at page 26 and Valuation Report for Various Lots within Pentridge Village Estate dated 12 May 2013 at page 20.
Daimleigh Capital Pty Ltd & Ors
CVS Lane Capital Partners Pty Ltd & Ors [2024] VSC 410
(2009) 239 CLR 175
(1999) 3 VR 863
(1990) 170 CLR 394
(2012) 36 VR 130
(2001) 53 NSWLR 116
(1912) 15 CLR 257