The basis advanced by FAI that it should have leave to cross-claim in these proceedings is a concern on its part that Mr Byrne or the trustee will claim indemnity under the policies of insurance in respect of separate proceedings instituted by the Hagans and the Mitchells, the Richards, Dufume and Bullivants.
The Hagans, the Mitchells and the Richards have commenced proceedings in the Supreme Court of Queensland against the bank and Mr Byrne. The proceedings relate to loans and investments made in connection with the investment scheme promoted by Mr Byrne involving National Mutual's insurance policies. National Mutual has been joined as a third party by the bank. FAI is not a party to these proceedings. Nor has Mr Byrne or the trustee claimed an indemnity under either policy of insurance in respect of the claims in these proceedings.
The proceedings of Dufume were commenced in the Supreme Court of Victoria against National Mutual wherein it is sought to make National Mutual liable for the conduct of Mr Byrne in the promotion of the investment scheme relating to National Mutual insurance policies. Mr Byrne has been joined as a third party. Neither the bank nor FAI have been joined as a party. Mr Byrne has not claimed indemnity from FAI under the policy in respect of this claim. Nor has the trustee.
The proceedings brought in the Supreme Court of Queensland by Bullivants are against Mr Byrne and companies associated with him. The action concerns an investment scheme relating to insurance policies issued by Tower Life Australia Limited ("Tower Life"). None of FAI, the bank and National Mutual is a party to the proceedings. Neither Mr Byrne
nor the trustee has made a claim for indemnity against FAI in respect of the claims in these proceedings. There is no suggestion that the bank or National Mutual ever had any factual connection with the events the subject of these proceedings or are in any way legally interested in them.
The claim by Bullivants relates to the policy year 31 March 1991 to 31 March 1992. The Hagan and Mitchell, Richards and Dufume proceedings relate to claims made during the policy year 31 March 1992 to 31 March 1993.
In the proceedings in this court the settlement is such that Mr Byrne is not obliged to pay any sum of money under the settlement. The proceedings as between the parties other than FAI and National Mutual have been struck out. There is not basis upon which there will arise in the future in these proceedings a claim by the bank or National Mutual against Mr Byrne for contribution and indemnity in respect of the claim by the Dorroughs the subject of the settlement. Therefore, the allegation by FAI in paragraph 9 of the draft cross-claim will not be made out if FAI seeks to assert as a material fact the existence of a present claim for indemnity or contribution. As a plea of a past fact it is irrelevant to establishing any proper basis to bring proceedings against the bank and National Mutual for the declaratory relief now sought. In the absence of some material facts being pleaded against the bank, National Mutual or the trustee, there is no basis shown on the draft cross-claim that those parties have an interest in the proposed proceedings, that there is any lis between them and FAI or that all or any of them is a proper contradictor in those proceedings. FAI seek to overcome this deficiency on two bases. The first is that the respondents to its notice of motion will not give an undertaking not to join FAI, seeking relief
against it on the basis of the policies of insurance which it has purported to avoid, in the proceedings in the Supreme Courts of Queensland and Victoria issued by others. The second is that FAI contends that it has gained a legitimate advantage in the litigation in this court which it ought not be deprived of. The advantage claimed is the detailed preparation done in these proceedings which "will be wasted and potentially lost if these issues are litigated in other proceedings". This "legitimate advantage", it is submitted, makes this court and the present proceedings the appropriate venue and vehicle to litigate the issues raised on the draft cross-claim. It is therefore a reason, FAI submits, to grant leave to it to cross-claim and to deny to National Mutual leave to discontinue its cross-claim against FAI.
The jurisdictional fact which enables FAI to make its application is the existence of the claim against it by National Mutual. Absent that claim there would be no power under O 5 r 1, r 8 or r 9 of the Federal Court Rules to grant leave to FAI to cross-claim against National Mutual and to add to that cross-claim the bank, Mr Byrne and the trustee as additional parties. In these circumstances, the first question to be determined as between the two applications is whether National Mutual should have leave to discontinue against FAI.
The principles to be applied on an application for leave to discontinue are those stated by Woodward J in Trade Practices Commission v APM Investments Pty Ltd (No 2) 74 FLR 276 (at 279 - 280) :-
"On the question of the principles to be applied in cases of discontinuance, counsel for APM relied in particular on the decision of Graham J in Covell Matthews v French Wools Ltd [1977] 1 WLR 876 at 879. After citing several earlier authorities, his Honour said:
'The principles to be culled from these cases are, in my judgment, that
the court will, normally, at any rate, allow a plaintiff to discontinue if he wants to, provided no injustice will be caused to the defendant. It is not desirable that a plaintiff should be compelled to litigate against his will. The court should therefore grant leave, if it can, without injustice to the defendant, but in doing so should be careful to see that the defendant is not deprived of some advantage which he has already gained in the litigation and should be ready to grant him adequate protection to ensure that any advantage he has gained is preserved.'
Applying these principles to the case before him, his Honour made an order for discontinuance, conditional upon the party seeking it agreeing:
(a) not to renew its application (which his Honour said was probably academic);
(b) that the order would be without prejudice to a relevant contention of the other party which it might wish to raise in other proceedings; and
(c) to 'an appropriate order for costs' against it.
I would respectfully adopt Graham J's formulation of principles so far as it goes, but it leaves open the question as to what should be done in a case where leave cannot be granted without some injustice to the respondent, or in which it may not be possible or appropriate to ensure that every advantage which the respondent may have gained in the course of litigation is preserved.
In my view the matter must remain one for the exercise of the court's discretion in each case, even if the interests of the respondent cannot be fully protected. I do not believe that Graham J was suggesting that, unless the respondent's rights can be completely protected, an application for discontinuance must be refused. If he was implying that, then I must respectfully decline to follow his Honour to that extent."
(Affirmed on appeal; SCI Operations Pty Ltd v Trade Practices Commission (1984) 2 FCR 113 (FC) at 143 per Sweeney J, 162 per Lockhart J, 185 per Shepphard J). The court's discretion to grant leave is unfettered (SCI Operations at 143 per Sweeney J, 162 per Lockhart J, 182 per Shepphard J; Trade Practices Commission v Manfal Pty Ltd (No 3) (1991) 33 FCR 382 at 383) save, of course, that it must be exercised judicially.
From the standpoint of National Mutual, the bank, Mr Byrne and the trustee,
there is no utility in maintaining the present cross-claim. It cannot lead to any relief on the cross-claim because the declaratory relief relates to claims for indemnity and contribution arising out of the dealings involving the Dorroughs. Nor do any of these parties presently wish to litigate the issue of FAI's liability, if any, under the policies of insurance to indemnify Mr Byrne generally or in relation to the Supreme Court actions. The trustee is not a party to the Supreme Court proceedings and is an unwilling contradictor. It has been open to the bank, National Mutual or Mr Byrne in the Supreme Court actions, to which they are parties, to seek to join FAI if they were so minded. The time for doing so in a timely way under the rules of the Supreme Court of Queensland and Supreme Court of Victoria has long passed. Joinder in those actions would now require leave and an explanation of the delay in seeking joinder. The position of each of the parties to those actions is that, on the basis of information presently available, the joinder of FAI is neither necessary nor desired. Should circumstances materially change, that decision may require reconsideration. In those circumstances, they are not prepared to give an undertaking in all cases to refrain from seeking any relief against FAI in respect of claims arising against Mr Byrne in the 1991 to 1992 and 1992 to 1993 insurance years.
The position of the bank and National Mutual is no different from that of the plaintiff in each of the Supreme Court actions against Mr Byrne. If the bank or National Mutual has a right to join FAI as a party in the Supreme Court proceedings, so do the plaintiffs in those actions where Mr Byrne is a defendant. For the respondents to FAI's motion to be required to undertake not to seek to join FAI as a party seems both unjust and futile if FAI remains exposed to joinder by any other party, including Tower Life, in the action commenced by Bullivants. It is also clear that the absence of the plaintiffs and Tower
Life from the proceedings in this court means that those entities will not be bound by any declaration made on the cross-claim. This potentially leaves the issues to be re-litigated again between those parties and FAI if FAI is successfully joined in the Supreme Court proceedings. If the question of Mr Byrne's entitlement to indemnity generally, and in the specific cases where claims have been made against him, is to be determined between FAI and all parties who have an interest in that issue and are proper contradictors in proceedings instituted by FAI, then the present proceeding is not an appropriate vehicle for the determination of those issues. If the question of indemnity of Mr Byrne under the insurance policies in respect of any particular claim presently before a Supreme Court arises as an issue, then the appropriate place for its determination is in those proceedings. If no person having a real interest wishes to raise the issue in respect of that claim then the question is a hypothetical one and not properly the subject of judicial adjudication or the granting of declaratory relief (Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 582, 596; Oil Basins Limited v The Commonwealth of Australia (1993) 178 CLR 643 at 648 - 649).
As to FAI's second ground for resisting leave, I do not accept that preparation of a case constitutes "an advantage gained by litigation" in the sense the term was used by Graham J in Covell Matthews v French Wools Ltd [1977] 1 WLR 876 at 879. That term means, in this context, something akin to the fruits of the litigation such as the benefit of issue estoppel or interlocutory judgments or orders made in favour of the party against whom it is sought to discontinue (see for example Stahlschmidt v Walford (1879) 4 QBD 217 at 219). However, it is unnecessary to finally determine the matter because I am satisfied that the work undertaken will not be lost.