Mr Alexander Smith and the other four plaintiffs in these proceedings allege that, between 2008 and 2016, they advanced in excess of $2 million to the defendants, Mr Steven Shilkin and Mr Ashley Shilkin, to acquire shares in, or to invest in business undertaken by, Inosite Ltd ("Inosite"), a company principally engaged in the provision of residential accommodation for mining workers in Western Australia.
The plaintiffs contend that those amounts were advanced as a result of the defendants' misleading and deceptive conduct. That alleged conduct included representations to the effect: that Inosite either had secured, or would acquire, certain mining tenements; that those tenements had substantial and valuable mineral ore deposits; and that Inosite would make substantial profits from its ownership and development of those tenements.
These, of course, are mere allegations. Their truth is a long way from being determined. The allegations will undoubtedly be contested if, and when, the time for trial comes.
These proceedings have become unusually procedurally complex in relation to the issue of service, and perhaps unnecessarily so. The current situation may be shortly summarised. The plaintiffs have joined the defendants in two sets of proceedings. They commenced one set in April 2017 (2017/119572) and the other, these proceedings (2018/71614), were commenced in March of this year. The proceedings will each respectively be referred to as "the 2017 proceedings" and "the 2018 proceedings".
This short interlocutory judgment determines a motion in the 2018 proceedings. This judgment does not summarise the procedural manoeuvrings that occurred last year and this year in relation to the issue of service on these defendants, other than to the limited extent necessary to resolve the matters now before the Court.
The platform for the Court's present determination is a motion the defendants filed in the 2018 proceedings on 10 July 2018 ("the July 2018 motion") under Uniform Civil Procedure Rules 2005 ("UCPR"), r 12.11. The named defendants in the 2018 proceedings and the applicants on the July 2018 motion are, as indicated, Mr Steven Shilkin and Mr Ashley Shilkin.
Smith v Shilkin [2018] NSWSC 1582 | Case summary | Zoe
It is not in contest that no service of the process on the 2018 proceedings has been effected on Mr Ashley Shilkin. But the plaintiffs took the position, until shortly before the present hearing, that service had been duly effected on the other defendant, Mr Steven Shilkin.
The July 2018 motion seeks a declaration under UCPR, r 12.11(1)(c) that legal process in the 2018 proceedings had not been validly served on Steven Shilkin, apparently because of non-compliance with the Service and Execution of Process Act 1992 (Cth). However, the plaintiffs have now conceded that service had not been validly effected on Mr Steven Shilkin under the relevant legislation and so that issue has gone away.
The July 2018 motion also claimed relief that the originating process in the 2018 proceedings be set aside as an abuse of process, or that the proceedings be permanently stayed. The basis for this application was that the substance of the allegations in the 2018 proceedings substantially replicated the substance of the allegations in the 2017 proceedings and for the plaintiffs to pursue both against the same defendants would be an abuse of process within established principles.
To the extent that the Court can work these things out from the history that is advanced, it appears that the 2018 proceedings were commenced, in part, because of the forest of procedural applications and litigation arising out of the plaintiffs' attempts to serve the 2017 proceedings on the defendants.
The July 2018 motion raised three issues for the Court's consideration: whether there should be a stay or dismissal of the 2018 proceedings; whether a declaration should be made to the effect that legal process in the 2018 proceedings had not been validly served on Mr Steven Shilkin; and whether the Court has jurisdiction to entertain any application under UCPR, r 12.11 by the defendants before they have been served with legal process. These issues had partly resolved by the time of the hearing. These reasons will deal with each of these three matters in turn followed by the Court's determination in relation to certain costs arguments.
[2]
Stay or Dismissal?
The defendants contend that the 2018 proceedings are an abuse of process because they duplicate the allegations made against them in the 2017 proceedings. It is not in contest that the allegations in both proceedings are substantially the same.
It is trite law that a party cannot bring proceedings making the same allegations or substantially the same allegations against another party in two jurisdictions: see Mason J's judgment in Moore & Ors v Inglis (1976) 50 ALJR 589 ("Inglis") and Henry v Henry (1996) 185 CLR 571; [1996] HCA 51, at 591. Neither the allegations nor the parties need to correspond exactly in both proceedings for the principle to apply, provided there is a substantial ovelap.
But in response to this, in their written submissions and again in Court, the plaintiffs said that they would consent to a permanent stay of the 2017 proceedings and only wished to maintain the 2018 proceedings in future.
That would solve any problem of vexation or oppression, which would otherwise arise from the bringing of two sets of proceedings. The defendants' initial response to the plaintiffs taking this position was that the plaintiffs had previously taken an inconsistent position, in which they had undertaken not to pursue the 2018 proceedings and only to pursue the 2017 proceedings. But it is certainly not clear from the correspondence that the plaintiffs had given any such undertaking. Moreover, even if it had been given, it could have been withdrawn with leave. But, subject to an issue to which I will shortly come, there is now no opposition by the defendants to the course the plaintiffs foreshadow of agreeing to a permanent stay of the 2017 proceedings.
So, the Court will issue a permanent stay in the 2017 proceedings.
But a subsidiary issue arises as to the timing of this stay. This issue has been the subject of short argument today. A number of procedural issues in the 2017 proceedings were listed for two days' hearing before Hallen J on 31 October and 1 November 2018. One of these was whether or not Mr Ashley Shilkin was indeed a party to the 2017 proceedings as a result of the amendment sought to the originating process in those proceedings.
Mr Douglas, on behalf of the defendants, the applicants on the motion, has pressed upon the Court today that this question should be allowed to be determined before a permanent stay is imposed in the 2017 proceedings. Mr Douglas submits that Mr Ashley Shilkin is a director with public responsibilities, who will have to disclose that he is arguably a party to the 2017 proceedings and that he is entitled to know whether or not he is such a party before this permanent stay is imposed. Mr Douglas submits that this question should therefore be determined before the stay is put in place.
I disagree. Any analysis of the past 18 months' conduct of these proceedings enables the view to be quickly drawn that there have been far too many interlocutory applications, all dealing with procedural questions relating to whether or not legal process has been served. The substantive issues in the proceedings are still a long way from determination.
Given this history, it cannot be realistically contemplated that the Court will invite yet another interlocutory hearing to be conducted in proceedings which are about to be permanently stayed in the orders I am to make today. Moreover, there is very little public interest in determining the question of Mr Ashley Shilkin's position as a party to the 2017 proceedings. Once the proceedings are permanently stayed, there is little difference from Mr Ashley Shilkin's point of view in him having to disclose that he is arguably a party to proceedings which have been permanently stayed compared with his not having to make any disclosure at all.
[3]
Should a Declaration Be Made?
The second issue is whether or not, it having been conceded that service has not taken place on Mr Steven Shilkin, that a declaration to that effect should now be made. At first, the applicants on the motion wanted a declaration made. But after a clear admission was placed on the record by the plaintiffs that service on Mr Steven Shilkin had not been effected, that issue has gone away. And the defendants no longer pressing for a declaration to be made.
The position of both parties is now consistent with established principle that courts should not make declarations unless the parties have a real interest in a matter being determined between them: Ainsworth v Criminal Justice Commission (1992) 174 CLR 564; [1992] HCA 10. It seems to me that the issue of service on Mr Steven Shilkin has resolved and the declaration is not needed.
[4]
The Defendants' Locus Standi at this Stage
The third issue is whether, on the July 2018 motion, the defendants had standing to seek orders that the originating process in the 2018 proceedings was an abuse of process or to seek any other relief under UCPR, r 12.11, prior to service on either defendant of the 2018 proceedings. Once the plaintiffs conceded that they had not as yet validly served the 2018 proceedings on Mr Steven Shilkin, they were therefore not contending that they had served either defendant with process in these proceedings. So the question of their locus standi arose.
The Court handed down to the parties a copy of Barrett J's decision in Onefone Australia Pty Ltd v One.Tel Limited; Weston v Publishing and Broadcasting Limited [2007] NSWSC 1320 ("Onefone"), which was considered with approval in Weston in Capacity as Special Purpose Liquidator of One. Tel Ltd (In Liquidation) v Publishing and Broadcasting Limited (2012) 88 ACSR 80; [2012] NSWCA 79. According to Onefone, applications for extension of time to serve process are normally undertaken in the absence of the defendant. It follows that some other applications that are akin to applications for extension of time can all be undertaken in the absence of the defendants. Based on the principles stated by Barrett J in Onefone, there is no obligation in such cases for the Court to give the defendants a hearing when, after service, they will have an entitlement to be heard to challenge the decision.
After considering Onefone, the defendants did not contend they had standing to appear to pursue the July 2018 motion. Although the issue of standing had become academic so far as the July 2018 motion was concerned (given the parties' agreement to a permanent stay of the 2017 proceedings and the plaintiffs' admission that the 2018 proceedings had not been served on Steven Andrew Shilkin), the issue will not be entirely academic in what is left of the service issues in the 2018 proceedings. The plaintiffs foreshadowed that they wished to bring another motion, for substituted service and related orders, which they contended either fell within the principles of Onefone, or upon or which the defendants had no right to appear.
Prior to the parties agreeing to a permanent stay of the 2017 proceedings they had been listed for two days before Hallen J on 31 October 2018 and 1 November 2018. Those hearing dates can now be vacated, as there is now no present need to argue any matter in the 2017 proceedings. But after consulting with Hallen J, I have given leave to the plaintiffs to make returnable any proposed motion in the 2018 proceedings before his Honour at 10.00am on 31 October 2018. For the reasons stated here, it is anticipated that any such motion will be unopposed and should take little time.
Argument then proceeded to deal with issues of costs. But before that, a subsidiary issue was raised. The Court adverted to the fate of another motion filed on 17 September 2018 in the 2018 proceedings to extend time for the service of the statement of claim on the first and second defendants up to 5 December this year.
That motion was heard before Rein J on 26 September 2018. Rein J made orders on 26 September extending the time for service of process in the 2018 proceedings until 5 December 2018. But past disputes had arisen about whether Rein J's 26 September 2018 orders were validly made in the absence of the defendants. The parties did not refer Rein J to Onefone, which entirely justified the orders which Rein J made in the absence of the defendants. I have now referred the parties to Onefone and it seems to me that Rein J's extension of time order is not liable to be set aside on the grounds that the defendants were not present when the orders were made.
After reading Onefone, the defendants did not seek to advance on this occasion any contentions challenging Rein J's 26 September 2018 orders. The Court will proceed on the basis that they are not challenged.
[5]
The Costs of the 2017 Proceedings and of the July 2018 Motion
The remaining issue in these proceedings is that of the costs of the July 2018 motion and the 2017 proceedings. The applicants on the motion, the defendants, say that they have been partly or substantially successful and that costs should follow the event. The Court raised the issue of whether all costs incurred so far in these proceedings should indeed be determined at the end after a hearing and reserved at this stage. That position was then taken up in submissions by the plaintiffs.
The defendants' arguments for an award of costs in their favour now is the following. First, the defendants put that the plaintiffs had always implicitly indicated that both the 2017 proceedings and the 2018 proceedings were potentially going to be pursued against them. Secondly, the plaintiffs had changed position, allegedly having first given an undertaking that the 2018 proceedings would be stayed and that the 2017 proceedings would be conducted. But this has now changed, it is said, and the 2017 proceedings will be stayed. Thirdly, the defendants emphasise that an abuse of process is a very serious challenge to the administration of justice and it is appropriate to deal with such conduct by way of a costs order now, rather than have that issue adjourned until the end of the proceedings.
In my view, this is an unusual case. And because of its special features I have decided, I will reserve costs rather than deal with them now. The actions of the parties in relation to service are so complex and protracted and have been productive of so much delay that it would not surprise the Court if that conduct became the subject of cross-examination when the 2018 proceedings are heard. That cross-examination may reveal a lot more information about what is going on behind the scenes and who has been the source of the delay to date, the problems with service, and the multiple procedural applications in this case. Determination of costs will be more fairly undertaken after any such cross-examination has occurred.
Moreover, no grave offence against the administration of justice will occur if costs were not determined now. As the Court reads the correspondence between the parties as a whole, the plaintiffs did change their mind about which proceedings would be stayed but they never sought to press in an express way the offensive idea that both proceedings would be run to trial against the defendants at the same time, no matter what.
The Court therefore orders the costs of today's applications be reserved for determination by the trial judge after the hearing of the 2018 proceedings.
[6]
Conclusion and Orders
In conclusion, as the Court said a number of times in the course of argument, it is most important that the parties in these proceedings focus upon the determination of the real substantive issues in dispute between them, rather than the procedural disputes which have preoccupied them so far. The parties should be mindful of the overriding purpose of the Civil Procedure Act 2005, s 56(1) to facilitate the just quick and cheap resolution of the real issues in proceedings. The Court has not seen focus on that purpose by these parties to date.
Accordingly, the Court makes the following orders and directions:
1. Order that proceedings 2017/119572 ("the 2017 proceedings") be permanently stayed.
2. Note the plaintiffs in the 2018 proceedings admit that service of process in those proceedings has not taken place on Steven Andrew Shilkin.
3. The plaintiffs are to file by 4pm on 23 October 2018 any notice of motion ("the proposed motion") seeking orders for substituted or informal service and related orders in proceedings 2018/71614 ("the 2018 proceedings") together with any evidence upon which they wish to rely in support of the proposed motion.
4. Order that any application for costs in the 2017 proceedings for matters and events occurring up to the date of this stay order, will be determined in accordance with order 10 below.
5. The Court notes that the counsel and solicitors who appeared for Steven Andrew Shilkin and Ashley Shilkin ("the Shilkins") on other applications before the Court today were asked whether it might be useful to serve the proposed motion upon their solicitor Katja Jane Levy, in order to provide advance notice of that motion to the Shilkins; and the Court was informed in response that the Shilkins, who are likely to be the respondents to the proposed motion, have given no present instructions to counsel or solicitors on the issue of accepting service but they said that they would attempt to communicate with the Shilkins and if they obtained instructions they said they would communicate those instructions to the plaintiffs.
6. Direct that by 4pm on 23 October 2018 that the plaintiffs serve the proposed motion on the offices of Katja Jane Levy, solicitor, care of her professional address in Perth but service in accordance with this order will not bind the defendants to any form of service of the said process and should be effected only for the better administration of justice,.
7. If the defendants wish to appear at the hearing before Hallen J on 31 October 2018, having received documents from the plaintiffs in accordance with the above orders by 23 October 2018, the Court expects that they will file and serve any evidence upon which they wish to rely to support their appearance by no later than 4pm on 26 October 2018.
8. Direct that by 4pm on Monday, 29 October 2018 that the plaintiffs file and serve any submissions upon which they wish to rely in support of their applications before Hallen J on 31 October 2018 upon Katja Jane Levy care of her professional address in Perth. Service in accordance with this order may be effected for the convenient administration of justice and without thereby binding the defendants to any form of service of the process.
9. The hearing of the eight questions listed for determination by Hallen J on 31 October and 1 November 2018 is vacated and instead any proposed motion filed in accordance with Order 3 may be made returnable for hearing before Hallen J on 31 October 2018.
10. Costs of the Shilkins' July 2018 motion and of today's application are reserved for determination by the trial judge after the hearing of the 2018 proceedings (together with the determination of all issues of the costs of the 2017 proceedings before they were stayed today).
[7]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 22 October 2018