Solicitors:
The People's Solicitors (Plaintiff)
Morgan Ardino & Co (Defendant)
File Number(s): 2015/80375
[2]
Judgment
HIS HONOUR: The primary relief sought on this application is an order that the proceedings be summarily dismissed. Paragraph one of the defendant's notice of motion seeks an order that "the Statement of Claim filed on 2 April 2015 be dismissed based on Anshun estoppel as set out in Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589 and later related authorities."
In the course of submissions, counsel for the defendant also contended that the plaintiff's claim should be summarily dismissed on the basis of res judicata or cause of action estoppel.
There is an alternative claim for a stay of the proceedings pending payment of costs that were the subject of an order of Young AJ on 27 February 2015.
On the principal claim for summary dismissal, the defendant must show in substance that a defence based on principles of Anshun estoppel or res judicata would be bound to succeed. If there is a seriously arguable question about that, then the claim for summary dismissal must fail. This is a high hurdle for the defendant to overcome. (See generally Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91; Fancourt v Mercantile Credits Limited (1983) 154 CLR 87 at 99; Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 at [57]; and Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 at [24]).
No defence has yet been filed to the plaintiff's statement of claim, but it can be assumed that defences based upon the principles in Port of Melbourne Authority v Anshun Pty Limited, or of res judicata (cause of action estoppel), would be pleaded.
The current proceeding is at least the third proceeding in this court between these parties. The plaintiff, whom I will call Ms Dean, and the defendant, Mr Zeene, were formerly husband and wife. They were divorced, I am told, in 2001.
On 16 January 2003, orders were made by consent in the Family Court. Those orders included an order for Ms Dean to pay $100,000 to Mr Zeene. The orders also recorded an agreement between the parties that they would purchase in their joint names a property on Blackwall Road, Woy Woy, and that they had agreed jointly to develop and sell that property.
The agreement recorded that any profits derived from that development, together with moneys contributed by Ms Dean towards the deposit for the purchase, would be used initially to pay Mr Zeene the amount of $100,000.
In 2009, Mr Zeene commenced proceedings in this Court seeking an order for the dissolution of a partnership between Ms Dean and him, and, amongst other relief, damages. He alleged that Ms Dean had been in continuous breach of a joint venture agreement that the parties had made. He sought orders that he be entitled solely to three of the units in the project. Equitable compensation or equitable damages for the alleged breach of the agreement between him and Ms Dean to the value of $350,000 was sought.
The 2009 proceedings were ultimately settled by orders made by consent on 11 April 2012. On that day, Stevenson J made orders as follows:
"1. Note the agreement between the parties contained in the Terms of Settlement signed by the parties and their legal representatives, and initialled by me and placed with the papers.
2. Order that the proceedings be dismissed.
3. Order that the defendant pays one half of the plaintiff's costs of the hearing before Macready AsJ and that otherwise there be no order as to costs of the proceedings."
The terms of settlement contained an agreement between the parties. One of the terms was that the defendant, Ms Dean, should transfer her interest in three units of the Blackwall Road, Woy Woy property to Mr Zeene, and that he transfer his interest in the third unit to her.
The terms of settlement provided that both parties should arrange the refinancing of the Woy Woy properties, and that Mr Zeene was obliged to raise $500,000 "on his said 3 Units", and that Ms Dean was to "assume the balance of $750,000.00 of financial liability currently secured by the said Woy Woy properties and [a property of Ms Dean's at Denison Road, Dulwich Hill]."
The terms provided that the parties would have six months to put those orders into effect, and during that period they should maintain all mortgage repayments that they were currently liable for in "their required proportions".
The agreement also contained terms in relation to costs and various other matters.
On 25 July 2012, Mr Zeene commenced a second proceeding in this Court, in which he sought a declaration that he was entitled to possession of unit one in the property on Blackwall Road, Woy Woy. He sought an order that the registrar do all things necessary to effect a transfer of unit one into his sole name. He also sought damages and an account for any financial loss or damage sustained by him arising from what was alleged to be Ms Dean's breach of the terms of settlement dated 11 April 2012.
In October, November and December 2012, the parties signed numerous documents called consent orders, deeds of agreement and charge, and statutory declarations, that were said to contain their agreements in relation to the same matters that had been the subject of the orders of 11 April 2012.
Amongst these was a document styled short minutes of order dated 19 October 2012. The Registrar made orders in accordance with what was called an amended consent order on that day.
The orders provided, amongst other things, that:
"1. Terms of Settlement dated 11th April, 2012 in the Supreme Court between Peter Elias Zeene and Cherylyn Tonia Dean are now superseded.
2. I, Cherylyn Tonia Dean, will transfer to Peter Elias Zeene my interest in units 1, 2 and 4 ... Blackwall Road, Woy Woy into his sole name and he can sell unit 1, 2 and 4 to reduce part of $1,250,000.00 debt currently mortgaged to the National Bank ...
3. I, Peter Elias Zeene agree to transfer my interest in unit 3 ... to Cherylyn Tonia Dean's sole name and she can sell unit 3 to reduce part of the $1,250,000.00 debt currently mortgaged to the National Bank …
The Court notes
4. Peter Elias Zeene will no longer pursue any monies owed by Eileen Joan Dean … . I, Cherylyn Tonia Dean will in return provide Peter Elias Zeene security against ... Denison Road, Dulwich Hill for $250,000.00 … Consequently, Peter already has a caveat against ... Denison Road, Dulwich Hill.
...
6. We are both equally liable for the existing mortgage for $1,250,000.00 with the National Bank ...
…"
Further consent orders were signed on 7 and 9 November 2012.
On 18 February 2013, the Registrar made orders by consent in accordance with consent orders that had been signed by the parties and filed on 9 November 2012. Those orders provided:
"THE COURT MAKES ORDERS IN CONSENT ORDER:
Cherylyn tonia Dean {nee Zeene) [sic] and Peter Elias Zeene seek leave that the honourable court amend the orders dated 19 October 2012
BY CONSENT IT IS ORDERED THAT:
a) Terms of settlement dated 19[th] October, 2012 before registrar A M[u]sgrave and any other orders filed in the Supreme Court between [the parties] are now superseded.
b) Cherylyn Tonia Dean … will transfer her interest in units 1, 2 and 4 ... Blackwal[l] Road Woy Woy NSW into Peter Elias Zeene's sole name. Peter Elias Zeene will transfer his interest in unit 3 … [Blackwall] Road Woy Woy NSW to Cherylyn Tonia Dean['s] sole name.
c) Cherylyn Tonia Dean … will pay Peter Elias Zeene $250,000.00 … Cherylyn Tonia [Dean] will give Peter Elias Zeene security against ... Denison Road, Dulwich Hill and Peter Elias Zeene will lift his caveat in order to refinance. Upon Peter E[li]as Zeene receiving the $250,000.00 … he will remove the caveat on … Denison Road, Dulwich Hill NSW permanently.
d) Peter Elias Zeene acknowledges that upon receiving the said amount of $250,000.00 … he shall use the sum amount of $100,000.00 … to discharge the loan owing to his mother ... forthwith.
e) It is agreed by Cherylyn Tonia Dean … that Peter Elias Zeene's share of the joint loan owing to the National Bank … is $375,000.00 ...
…"
On 4 June 2014, Ms Dean filed a notice of motion in the 2012 proceedings in which she sought following relief:
"1. That the orders of the 18 [sic] February 2013 to be set aside [sic];
2. Finding that they were the product of undue influence by the Plaintiff in [the 2012 proceedings]"
On 19 August 2014, Ms Dean filed an amended notice of motion. It also sought an order that the orders of 18 February 2013 be set aside. Paragraph 2 of the amended notice of motion sought:
"Finding that they were the product of undue influence, irregular, contrary to good faith or obtained by fraud by the Plaintiff in [the 2012 proceeding]"
The amended notice of motion filed by Ms Dean was heard and determined by Young AJ on 27 February 2015. It is the hearing of that application by his Honour and its determination that has given rise to Mr Zeene's contention that the claim now made by Ms Dean should be summarily dismissed. Young AJ dismissed the notice of motion, with costs.
After the dismissal of that application, Ms Dean filed a summons in the present proceeding and subsequently filed a statement of claim. In her statement of claim, Ms Dean seeks, amongst other relief, an order that the consent orders filed on 18 February 2013 in "Supreme Court proceedings case number 2009/00288734 [sic] be set aside." I take that to be a typographical error and that the reference should be to the orders made in the 2012 proceedings.
By her statement of claim in these proceedings, Ms Dean also seeks orders setting aside the orders and terms of settlement dated 11 April 2012 in the 2009 proceedings. She seeks declarations that she has validly rescinded the contracts underlying the consent orders. She also seeks, amongst other relief, an order that the transfer of her interest in units 1 and 4 to Mr Zeene be set aside and an order that he deliver up to her the instrument for the transfer of her interest in unit 1.
Although the relief sought in the statement of claim in these proceedings is wider than the relief that had been sought in the amended notice of motion filed on 19 August 2014, there is a substantial overlap between the claims. In any event it appears that unless Ms Dean succeeds in her application to set aside the consent orders made on 18 February 2013 in the 2012 proceedings, the balance of her claims would have to fall away.
Because Ms Dean's application to set aside the orders of 18 February 2013 was dismissed by Young AJ, Mr Zeene submits that that matter is now res judicata or alternatively that her current claim is precluded on the basis of the principles in Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589.
At the hearing before Young AJ on 27 February 2015, Ms Dean relied upon reports of a psychiatrist, a Dr Lisa Juckes, apparently in support of her contention that she was under a significant disability, namely, a dependent personality disorder, of which Mr Zeene allegedly took unconscientious advantage in procuring her consent to the orders made on 18 February 2013, as well as to earlier orders. His Honour rejected the reports of Dr Juckes as there was no evidence of the facts on which she had based her opinions.
Counsel for Ms Dean then sought an adjournment. His Honour refused that application and dismissed the notice of motion. His Honour said (Zeene v Zeene; unreported, Supreme Court of New South Wales, Young AJ, 22 February 2015):
"The evidence before me today consists of an affidavit by the plaintiff and an affidavit by the plaintiff's solicitor together with a bundle of annexures. The applicant's affidavit is not a particularly wonderful document. For instance, para 6 merely says:
'I was infatuated with the plaintiff and was unable to disagree with his demands for participation in his business schemes.'
The primary facts were not fleshed out and I rejected that paragraph.
The annexures contain a report from a Dr Lisa Juckes whose qualifications include MBBS FRANZCP, consultant psychiatrist. She gave a number of reports, the most telling of which is 11 August 2014, which is addressed to the applicant's solicitor. That report includes the words:
'I have acquainted myself with the Expert Witness Code of Conduct prior and agree to abide by it in preparation of this letter.'
She then deals with some advice that she has given to the applicant and continues with a whole series of statements under the headings 'Background History' or 'History and Nature of the Relationship with Mr Zeene' and follows that with 'Comments on Diagnosis of Personality Disorder'.
Unfortunately, there is no evidence by the plaintiff of the so-called facts on which Dr Juckes gives her opinion. The necessity of such evidence is clear from the leading case of Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 and the requirements for getting this sort of evidence received into evidence are fairly well clear and are succinctly stated by the learned editors of the 8th Australian Edition of Cross on Evidence (LexisNexis Butterworths 2010) para [29065].
Mr Adams, who appears for the applicant, now recognises the problem and has asked for an adjournment. Mr Vernier, who appears for the respondent, points to para 56 of his client's affidavit of November last year which contains these words:
'I ask this Honourable Court to note that the applicant herself in her supporting affidavit and also in the report of Dr Juckes, has not set out any chronology or history of incidents or facts relating to my conduct which could form the basis for the conclusions arrived at by Dr Juckes that the applicant was dependent and subservient upon me.'
In other words, the point was very clearly drawn to the applicant's solicitors last year and only three months later is there now an application to consider the position."
After referring to the fact that no leave had been given for the calling of expert evidence, a matter which Young AJ did not consider would cause an insuperable problem, his Honour continued:
"There is also an underlying problem for the applicant and that is that the consent orders were made after there had been a contract by the parties to put an end to their then dispute and the consent order was part of it. The authorities are that one does not set aside a consent order where it has been made after a real contract. There are numerous authorities for that proposition including Livesey v Gilmore [1886] LR 1 CP 570; Siebe Gorman Ltd v Pneupac Ltd [1982] 1 WLR 185 at 189; and R D Werner and Company v Bailey Aluminium Products (1987) 16 FCR 488.
The present motion is in accordance with the rules brought within the existing suit. That only deals with the order. Setting aside the order is pretty useless if the underlying contract remains. The underlying contract can only be set aside by a suit in equity on the primary basis is [sic] unconscionable conduct or undue influence. The contract might be set aside in equity subject to the usual equitable defences, but that raises a whole lot of other matters which are not here today and it seems to me that the Court would in any event not set aside the consent order without delving into those issues, probably in a new suit.
For these reasons, it does not seem to me that there is any purpose in the light of s 56 and following of the Civil Procedure Act 2005 in adjourning the matter as its chances of success are relatively slim and, in any event, what is presently a fatal point of evidence was fairly and squarely forecast to the applicant's solicitors three months ago. Accordingly, I refuse the adjournment and, as the evidence presented is insufficient to make the order, I dismiss the current motion with costs."
Mr Vernier, who appears for Mr Zeene, has submitted that by this judgment Ms Dean's application to set aside the orders of 18 February 2013 was determined on their merits. Evidence was adduced on the application: namely the affidavits Ms Dean read. The evidence was largely rejected. Although Young AJ identified another problem with the application, he refused an adjournment and dismissed the motion because the evidence that had been presented was insufficient for the making of the order.
In my view that is not the preferable characterisation of his Honour's reasons. In any event, I think it seriously arguable that that is not the correct characterisation of his Honour's reasons.
There was a real difficulty in the way Ms Dean had brought her application that was before Young AJ, namely, by way of notice of motion in the existing 2012 proceeding. The consent orders she sought to have set aside appear to have embodied, or at least gave effect to, a contract between her and Mr Zeene. Because the orders made were final orders (compare in the case of interlocutory orders RD Werner & Co Inc v Bailey Aluminium Products Pty Ltd (1988) 18 FCR 389), the orders could only be set aside on the same ground as the contract which they embodied or to which they gave effect could be set aside (Harvey v Phillips (1956) 95 CLR 235 at 243-244). In my view, this was the matter to which Young AJ referred in the penultimate paragraph quoted above (at [30]).
There is clear authority that at least the preferable course (and, it has been said, the only proper course) is to bring such an application by way of fresh proceeding and not by way of notice of motion in the original proceeding. (See, for example, Ainsworth v Wilding [1896] 1 Ch 673 at 677, Phillips v Walsh (1990) 20 NSWLR 206 at 209-210; Spies v Commonwealth Bank of Australia (1991) 24 NSWLR 691 at 697 and cases there referred to, and 700-701; and DJL v The Central Authority [2000] HCA 17; (2000) 201 CLR 226 at [38].)
Mr Vernier submitted that this was not a determinative or particularly relevant consideration, because Mr Zeene had not objected, as he might have done, to the application to set aside the consent orders being brought by way of notice of motion rather than by statement of claim in a fresh action. The matter was allowed to proceed to a hearing on the notice of motion and that notice of motion was determined. Hence, as no objection had been taken to the form of the proceedings, the same principles should apply as if the proceeding had been commenced by a proper process. The question was as to the substance of the matter, not the form which the proceedings took.
However, it seems to me that the form which the proceedings took informed the way in which Young AJ disposed of them. It is not, with respect, entirely clear why his Honour was of the view that the motion before him was brought within the existing suit in accordance with the rules. The relevant rule, Uniform Civil Procedure Rules 2005 (NSW) r 36.15, provides that a judgment or order may, on sufficient cause being shown, be set aside if given or entered or made irregularly, illegally or against good faith. But the rule does not dictate the mode of procedure which should be adopted in such a case. The clear burden of authority is that in circumstances such as the present case, the proceeding ought to have been brought by statement of claim in a new action.
Nor would I characterise the problem in quite the same way as did his Honour, namely that setting aside the consent orders would be "pretty useless" if the "underlying contract" remained. I would rather say that the consent orders, being final orders, could only be set aside on the same grounds as the contract which the orders embodied, or to which they gave effect, could be set aside. But these are differences in expression only. I think that it was a clear part of his Honour's reasoning that a fresh action would need to be brought to set aside the contract which was embodied in, or given effect to by, the consent orders, and that for that reason no adjournment should be permitted to enable Ms Dean to cure the defects in her evidence sought to be adduced in support of her notice of motion.
It is true that Young AJ went on to say that the evidence presented was insufficient to make the order sought in the notice of motion. But I think it significant that his Honour went on to say that he would dismiss the "current motion with costs". I think this is consistent with my interpretation of his Honour's reasons that his Honour did not consider that dismissal of the notice of motion would finally determine Ms Dean's application to set aside the consent orders.
In The Sennar (No 2) [1985] 1 WLR 490, Lord Brandon described what constitutes a decision "on the merits" as follows:
"… a decision on the merits is a decision which establishes certain facts as proved or not in dispute; states what are the relevant principles of law applicable to such facts; and expresses a conclusion with regard to the effect of applying those principles to the factual situation concerned." (at 499)
That was said in the context of issue estoppel.
Neither the transcript of the hearing before Young AJ nor his Honour's reasons suggest that his Honour intended to embark upon such a decision on the merits. It follows that the dismissal of the plaintiff's amended notice of motion in the 2012 proceedings does not effect any res judicata or cause of action estoppel (Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543 at 556-557 per Clarke JA citing Thoday v Thoday [1964] P 181 at 197-198; see also s 91 of the Civil Procedure Act 2005 (NSW).)
It is at least unclear that a defence based on the principles of Port of Melbourne Authority v Anshun Pty Limited could succeed. For such an Anshun defence to succeed, it would have to be shown that the matters now raised by Ms Dean in the present proceeding were so relevant to her claim in the 2012 proceedings, that it was unreasonable for her not to have raised those matters in her application in the 2012 proceedings. That is a question which can require meticulous analysis of the facts relating to the institution of the application in the 2012 proceedings. (See O'Brien v Tanning Research Laboratories Inc (1988) 14 NSWLR 601 at 612 per Kirby P.)
The present application raises wider claims. It includes a claim to set aside the orders on the ground of fraudulent misrepresentation. (Such a claim had been initially foreshadowed in the amended notice of motion filed in the 2012 proceedings, but at a hearing before the Registrar, counsel for Ms Dean had said that on that application the claim for fraudulent misrepresentation would not be pressed.)
Be that as it may, the substantial difficulty with a claim of Anshun estoppel is that, at least prima facie, the claims now made should not have been raised at all by way of notice of motion in the 2012 proceedings, but should only have been raised by fresh action as has now been done.
I am far from being persuaded that a defence based on Anshun estoppel is so clear that it must succeed. Indeed, I am doubtful that it would succeed. For these reasons, the claim for summary dismissal should be dismissed.
I turn then to the defendant's alternative claim for a stay until payment of his costs of the notice of motion that was dealt with by Young AJ on 27 February 2015. His Honour dismissed the amended notice of motion with costs.
It was suggested by counsel for Ms Dean that without a further order those costs did not become payable. Rule 42.7 provides:
"42.7 Interlocutory applications and reserved costs
(cf SCR Part 52A, rule 16; DCR Part 39A, rule 22; LCR Part 31A, rule 17)
(1) Unless the court orders otherwise, the costs of any application or other step in any proceedings, including:
(a) costs that are reserved, and
(b) costs in respect of any such application or step in respect of which no order as to costs is made,
are to be paid and otherwise dealt with in the same way as the general costs of the proceedings.
(2) Unless the court orders otherwise, costs referred to in subrule (1) do not become payable until the conclusion of the proceedings."
The 2012 proceedings have been concluded. I see no reason that the costs could not be assessed forthwith, nor any reason why the costs would not be payable forthwith after agreement or assessment. But there was no evidence that costs have been agreed or that any steps have been taken to have the costs assessed. I was told that that had not been done.
I accept that there would be jurisdiction to stay these proceedings pending the payment of the costs which were ordered on 27 February 2015. I think there is jurisdiction under UCPR r 12.10 or, if not, under the court's inherent jurisdiction. I think the better view is that the application before Young AJ could be characterised as a proceeding for the purpose of r 12.10(a). (See Australian Securities and Investments Commission v Sigalla (No 4) [2011] NSWSC 62; (2011) 80 NSWLR 113 at [24].) In any event, the Court would have inherent jurisdiction to protect a party in the position of Mr Zeene where the previous application, which was an application for substantive relief, was dismissed with costs.
The question is whether that jurisdiction should be exercised. I was told that there are proceedings pending in the Federal Circuit Court. Although there was no evidence to describe those proceedings, I understand it to be common ground that they are proceedings on a creditor's petition brought by Mr Zeene against Ms Dean, presumably following from the service of a bankruptcy notice based upon the debt of $250,000 the subject of the orders of 18 February 2013. I was told that the proceedings in the Federal Circuit Court have either been stayed or been stood over from time to time pending determination of these proceedings.
The judgment whether the present proceeding should be stayed pending payment of costs involves the exercise of a discretion. If Mr Zeene had moved promptly to have the costs assessed in the absence of an agreement, then I think there would be much to be said for staying these proceedings pending payment of the costs. In all likelihood the costs assessment could by now have been completed. But that has not happened. I do not think these proceedings should be stayed for what would be an indeterminate time and remain in limbo, with associated uncertainty as to whether the proceeding might ever be revived.
There is nothing to prevent Mr Zeene from proceeding to an assessment of his costs and to his enforcing, if need be, the judgment that he could obtain on a costs certificate.
I was told that the plaintiff's evidence in this proceeding has been served in accordance with directions that have been given. In all of those circumstances I decline to grant a stay.
For these reasons I order that the defendant's notice of motion be dismissed.
[Counsel addressed.]
In my view, costs should follow the event and the plaintiff should have her costs of the notice of motion. However, such costs are not to include the costs which were incurred in the preparation of evidence for the principal proceeding and which would have been incurred whether or not this notice of motion was brought.
Accordingly, I order that the defendant pay the plaintiff's costs of the defendant's notice of motion, such costs not to include costs that would have been incurred in the proceeding in any event.
I order that the plaintiff file and serve any amended statement of claim by 18 August 2015, and that by 1 September 2015 the defendant file and serve his defence. I give leave to the defendant to adduce expert evidence from one medical expert. I order that by 22 September 2015 the defendant serve his affidavits. Any affidavits in response are to be served by the plaintiff by 6 October 2015.
The matter is stood over to the Registrar's list on 20 October 2015.
[3]
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Decision last updated: 18 August 2015