Queensland v JL Holdings Pty Ltd

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

JUDGMENT 1 HIS HONOUR: Sanderson Motors Pty Ltd by Summons issued on 15 September 2000 claimed an order under subs 145(1) of the District Court Act 1973 transferring to this Court proceedings 14391/90 commenced in the District Court at Sydney. The matter came on for hearing on 25 September 2000, when I dismissed the proceedings. I now state my reasons for doing so. In the District Court proceedings Sanderson Motors is the defendant and cross-claimant and Mr JS Kirby is the plaintiff and cross-defendant as representative party for the partners of Nelson Parkhill BDO. 2 Subsection 145(1) is in these terms: (1) Proceedings may, upon the application of a party, be removed into the Supreme Court by order of the Supreme Court upon such terms as to payment of costs, giving security for the amount claimed or costs, or otherwise, as the Supreme Court thinks fit. 3 The power is a discretionary power. The terms of the legislation do not indicate expressly any relevant considerations for exercise of the discretion, but provide for the imposition of terms, including requiring payment of costs and security for the amount claimed. 4 These are reported decisions which refer to this power: I was referred to Ex parte Delporte; Re Thiess Bros Pty Ltd [1965] NSWR 1468 (Asprey J) and Ex parte Dusmanovic; Re Dusmanovic [1967] 2 NSWR 125 (Moffitt J). No limits or restrictions on the discretion are established by authority. When asked to exercise this power the Court should, in my opinion, appraise the facts and circumstances of the case before it and consider whether the applicant has shown something which, within the framework of the purposes for which the power exists, is a sound ground or a good reason why an order ought now to be made. The subject does not admit of more particular exposition. 5 The principal proceedings were commenced in the District Court on 13 September 1990 and claim $81,100 accountancy fees. The basis of the present application is that Sanderson Motors wishes to bring a cross-claim for damages which exceeds $750,000, which, for present purposes, is the limit of the jurisdiction of the District Court. The form of the proposed cross-claim is the Second Further Amended Cross-claim produced with the affidavit of Mr PR McCann. It is an elaborate claim relating to allegations of breach of fiduciary duty and negligence by Mr Kirby's firm in relation to a series of events and dealings which extended over the years from 1984 to 1989, although some later events and dealings are also relevant. The matter which is new is substantially that in paragraphs 3 to 29 of the proposed cross-claim; other paragraphs restate cross-claims which have already been filed. The allegations of breach of fiduciary duty and negligence must be set in the context of dealings of Mr Paul Wenham, at that time a partner of Nelson Parkhill BDO, and of interests which Mr Wenham controlled, with the principals of Sanderson Motors and interests related to them; these dealings concerned Mr Wenham's private interests as well as those of Nelson Parkhill BDO, in ways which it will be difficult to disentangle. 6 There is of course no application before me for leave to file the Second Further Amended Cross-claim or to file an Amended Defence which would include the proposed new matter in paragraphs 3 to 29. The Supreme Court could not deal with such applications unless and until the proceedings were transferred to this Court, and they would require extensive consideration, including not only the prospects of success and the procedural history of the District Court litigation, including earlier amendments and applications for amendments, but also the effects of allowing or of refusing amendments on questions of time and delay, both under the Limitation Act 1969 and on general principles. 7 An element in the facts which favours the grant of this application is the desirability, not only in the interest of Sanderson Motors and of Mr Kirby's firm, but also in the public interest, of having all matters in controversy arising out of related facts determined at the one time. While I am not able to see any distance into the merits, there is no basis for thinking that the proposed further grounds of cross-claim are obviously lacking in merit, or that Sanderson Motors' wish to raise them should not receive judicial consideration. 8 As an aspect of this, Sanderson Motors faces the possibility that if these claims are brought forward in separate proceedings in this Court which, if the ordinary procedural courses are followed, will be determined long after a decision is available in the District Court proceedings, it will be contended on Anshun principles that Sanderson Motors is estopped from making those claims. This would require consideration of whether Sanderson Motors should and, acting reasonably, could have brought forward the cross-claim in the District Court proceedings. In any debate on an Anshun defence, facts including that the amount claimed in the cross-claim was beyond the limits of the jurisdiction of the District Court, that Sanderson Motors made an unsuccessful application to remove the proceedings into the Supreme Court and that the application was resisted by Mr Kirby's firm would be relevant considerations on the question of reasonableness. 9 The proposed new grounds of cross-claim cover an even wider range of relevant facts than the matters already raised by the claim for accountancy fees and the extensive matters of defence already relied on. As is usually the case, the outcome of reliance on Anshun principles is rather difficult to foresee. 10 In my view the application should, in the light of observations in Queensland v. JL Holdings Pty Ltd (1997) 189 CLR 146 at 154, be approached with a disposition towards exercising discretionary powers in procedural matters in favour of keeping open the opportunity to rely on some claim or defence which appears to be fairly arguable, or (to make a closer approach to this case) the opportunity to apply to make which appears to be fairly arguable. The observations of Dawson, Gaudron and McHugh JJ at 154 show that in extreme circumstances it may be appropriate to rely on proper principles of case management to shut a party out from litigating an issue which is fairly arguable. 11 Refusal of the present application will not shut out Sanderson Motors' opportunity to raise, in other proceedings which it may yet commence in the Supreme Court or elsewhere, the matters proposed to be raised in paras 3 to 29. In fresh proceedings some matters of defence which Sanderson Motors may be confronted with would present themselves in a different frame of reference; the possibility of reliance on Anshun will present itself, and the operation of questions of delay and statutory limitations on proceedings will be different and could well be more adverse. 12 Another matter which requires consideration is the procedural history of the District Court litigation and the opportunities which have been before Sanderson Motors for many years to bring some such claim as is now proposed. The terms of the proposed new paragraphs 3 to 29 refer to facts which occurred between 1984 and 1989. As narrated to me by counsel, significant relevant events occurred in the following years, and these were events which it was necessary or important for Sanderson Motors to know if it was to come to an appreciation of what its losses had been and of whether it should seek any judicial remedy. It appears to me that Sanderson Motors was in a position to recognise fully and to quantify its losses when the dealings with Macquarie Bank were resolved in 1993, as recorded in document 10 in Exhibit E. There was a further significant revelation on 4 November 1997 when in other litigation Mr Wenham under cross-examination dealt with a written record maintained, it would seem, by or on behalf of Mr Kirby's firm which would seem to confirm an aspect of the facts favourable to Sanderson Motors, although Mr Wenham could not be induced to acknowledge that this was so or to deal in a clear way with the matter recorded. 13 The opportunity to bring the proposed additional grounds of cross-claim forward has been before Sanderson Motors for some years, and subject to questions of time, and Anshun will continue to be before Sanderson Motors if this application is refused. 14 The procedural history of the litigation also raises public interest considerations. The principal proceedings were commenced on 13 September 1990 and were not listed for hearing for a remarkably long time. The evidence on behalf of Mr Kirby's firm does not give any useful explanation of the lapse of time until 1996. The procedural history is set out in the affidavit of Mr PM Wayne. The proceedings, with the Defence and Cross-claim then relied on, were listed for hearing on 3 June 1996 and not reached; later they were given another appointment for hearing on 17 September 1996, when the hearing commenced; the hearing was abandoned on the following day because insufficient time to conclude the hearing was available during the commission of the Acting Judge. Then Mr Kirby's firm obtained leave to amend the Statement of Liquidated Claim, so as to add reliance on Quantum Meruit to its previous reliance on express contract; the Amended Statement of Claim was filed on 11 November 1996, and after several directions hearings a Defence to the Amended Statement of Liquidated Claim and an Amended Cross-claim were filed, and an appointment was made for the matter to be heard on 28 September 1998. On the application of Sanderson Motors that appointment was vacated on 25 September 1998 on terms as to costs very adverse to Sanderson Motors. The application followed the retainer by Sanderson Motors of a new firm of solicitors to represent it. 15 Then there was a further application to amend the Defence and Cross-claim, and the grant of leave to amend on 8 December 1998. Among the orders made on 8 December 1998 was the following: "2. Noted that the quantum of the cross-claim is limited in the manner set out in the particulars to paragraph 13 of the Further Amended Cross-claim." This shows that the District Court then acted on the understanding that amendment of the cross-claim was limited as there stated. The further grounds in paragraphs 3 to 29 were not brought before the District Court for consideration. The District Court again made procedural directions, and again made a costs order adverse to Sanderson Motors. On 21 May 1999 a hearing of five days was appointed to commence on 22 November 1999. On 22 November 1999 the matter was not reached. After some further directions an appointment was made on 19 April 2000 for the matter to be listed for hearing on 3 October 2000. 16 The circumstances revealed by this procedural history are altogether exceptionally ample in the opportunities which have been available to Sanderson Motors to ascertain the relevant facts, to consider its position fully, to be advised, and to bring forward any appropriate cross-claim or matter of defence. Some of these opportunities have arisen from Mr Kirby's firm having taken until 1996 to obtain an appointment for hearing, some of the opportunities have resulted from accidents and exigencies of listing which have prevented the matter coming on for hearing when it appeared to be ready, and some have been conferred by considered judicial directions. Sanderson Motors did not explain by evidence why the amendments now proposed, and the question of transfer from the District Court if appropriate, were not brought forward on the occasions when questions of amendment and of directions have been before the District Court. Ten years have passed since the litigation was commenced. I regard the procedural history of the matter as falling within the exceptional class the possibility of the existence of which was contemplated in Queensland v. JL Holdings. When the matter is examined in terms of procedural justice, the claim of Mr Kirby's firm to have its litigation heard and determined has come to outweigh, by very considerable excess, the claim of Sanderson Motors to consider fully and bring forward all appropriate matter in answer. 17 After reviewing all the considerations I have set out I was of the view that the principal proceedings should not be transferred into this Court. 18 On 25 September I made the following order: The proceedings are dismissed with costs.

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