FEDERAL COURT OF AUSTRALIA Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited (No. 3) [2011] FCA 100 Citation: Australian Equity Investors, An Arizona Limited Partnership v Colliers International (NSW) Pty Limited (No. 3) [2011] FCA 100 Parties: AUSTRALIAN EQUITY INVESTORS, AN ARIZONA LIMITED PARTNERSHIP and THE 258 NEST, AN ARIZONA LIMITED PARTNERSHIP v COLLIERS INTERNATIONAL (NSW) PTY LIMITED (ACN 001 401 681) and BILL JEAN-PAUL MARKOPOULOS File number: NSD 1344 of 2009 Judge: COWDROY J Date of judgment: 15 February 2011 Catchwords: PRACTICE AND PROCEDURE – Notice of Motion – O 29 r 2 – Determination of separate questions – Misleading and deceptive conduct claim – Efficient resolution of dispute – Whether second application constitutes an abuse of process – Whether litigation will be stifled. Legislation: Civil Procedure Act 2005 (NSW) ss 57-59 Federal Court of Australia Act 1976 (Cth) s 37M Federal Court Rules O 29 r 2, O 35 r 7(2)(c) Trade Practices Act 1974 (Cth) ss 52, 53A Cases cited: Adam P Brown Male Fashion Pty Ltd v Phillip Morris Incorporated & Anor (1981) 148 CLR 170 AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 Ariss & Anor v Express Interiors Pty Ltd (in Liq) [1996] 2 VR 507 Barton v Minister for Foreign Affairs (1984) 2 FCR 463 Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44 Cowell v Taylor (1885) 31 Ch. D. 34 DA Christie Pty Ltd v Baker [1996] 2 VR 582 Fletcher v Besser [2010] NSWCA 30 National Parks and Wildli fe Service v Pearson (2002) 55 NSWLR 315 Nominal Defendant v Manning (2000) 50 NSWLR 139 P Dawson Nominees Pty Ltd v Australian Securities and Investments Commission (No 2) (2009) 255 ALR 466 Pearson v. Naydler [1977] 1 W.L.R. 899 The Airtourer Co-operative Ltd v Millicer Aircraft Industries Pty Ltd [2004] FCA 1400 Date of hearing: 1 February 2011 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 45 Counsel for the Applicants: Mr M. B. J. Lee Solicitor for the Applicants: Harris Freidman Hyde Page Solicitors Counsel for the First Respondent: Mr A. Mcinerney Solicitor for the First Respondent: Tresscox Lawyers IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1344 of 2009 BETWEEN: AUSTRALIAN EQUITY INVESTORS, AN ARIZONA LIMITED PARTNERSHIP First Applicant THE 258 NEST, AN ARIZONA LIMITED PARTNERSHIP Second Applicant AND: COLLIERS INTERNATIONAL (NSW) PTY LIMITED (ACN 001 401 681) First Respondent BILL JEAN-PAUL MARKOPOULOS Second Respondent JUDGE: COWDROY J DATE OF ORDER: 15 FEBRUARY 2011 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The questions set out in the Schedule to the Notice of Motion filed by the Applicants on 15 December 2010 be heard and determined in priority to all other questions. 2. The hearing of those questions be set down to commence on 16 March 2011 subject to the below orders and the parties' availability. 3. Both orders of the Court made on 5 November 2010 be revoked. 4. The Applicants provide security in the amount of $100,000 within 21 days of this order. 5. The costs of the First Respondent's Notice of Motion filed on 21 September 2010 for security for costs be paid by the Applicants within 21 days of the date of this order. 6. The costs of the Applicant's Notice of Motion filed on 15 December 2010 be paid by the Applicants on an indemnity basis. Such costs be paid within 21 days of the date of this order. 7. The Notice of Motion filed by the First Respondent on 17 December 2010 be dismissed. 8. Liberty to either party to apply. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1344 of 2009 BETWEEN: AUSTRALIAN EQUITY INVESTORS, AN ARIZONA LIMITED PARTNERSHIP First Applicant THE 258 NEST, AN ARIZONA LIMITED PARTNERSHIP Second Applicant AND: COLLIERS INTERNATIONAL (NSW) PTY LIMITED (ACN 001 401 681) First Respondent BILL JEAN-PAUL MARKOPOULOS Second Respondent JUDGE: COWDROY J DATE: 15 FEBRUARY 2011 PLACE: SYDNEY REASONS FOR JUDGMENT FACTS 1 Before the Court is a motion seeking to vary the orders made by this Court on 22 March 2010 requiring that all issues in these proceedings be determined at a single hearing, and an order made on 5 November 2010 requiring security for costs. 2 These proceedings are brought by the first and second applicants ('Arizona') against the first respondent ('Colliers') and the second respondent in respect of claims pursuant to s 52 and/or s 53A of the Trade Practices Act 1974 (Cth) ('the TPA') arising from a valuation issued by Colliers and prepared by Markopoulos. A cross-claim was filed by Colliers against Markopoulos but on 19 October 2010 Colliers filed a Notice of Discontinuance of its cross-claim against Markopoulos. It appears that an arrangement has been made between these parties pursuant to which Markopoulos will not take an active part in the proceedings, at least at this stage. 3 Essentially Arizona claims that the valuation of the subject property at 258 Pacific Highway, Crows Nest, New South Wales ('the property'), was misleading and deceptive and in consequence of reliance upon such valuation Arizona has suffered loss and damage in the amount of approximately $5,845,239. 4 By Notice of Motion dated 10 February 2010 Arizona sought to have various issues sought and determined separately and before other issues in the proceedings under O 29 r 2 of the Federal Court Rules ('the Rules'). By judgment delivered on 22 March 2010 the Court rejected such application, upon the ground that it would not ultimately prove expedient for the proceedings to be heard in the manner sought by Arizona. However, in lieu of the orders sought, the Court offered the parties a prompt hearing date. Dates for hearing in April 2010 and June 2010 were made available, and the parties initially agreed to proceed with the hearing on all issues on 28 June 2010. 5 By a motion filed on 1 June 2010, the hearing was vacated by consent. Thereafter the parties engaged in extensive discovery. 6 By Colliers' motion filed on 21 September 2010, an application was made for security for costs. An amount of $100,000 had been paid by Arizona as security for costs by agreement between the parties in January 2010 but Colliers sought additional security in respect of the hearing which was fixed to commence on 16 March 2011 and to continue for 13 hearing days. 7 On 5 November 2010 the Court ordered that additional security for costs be paid within 28 days of the order in the amount of $250,000, which the Court assessed to be the sum which might be recoverable by way of costs on a party/party basis if the proceedings continued on all issues. Such payment has not been made. 8 When the matter came before the Court on 8 December 2010 counsel for Arizona acknowledged that payment had not been made, and indicated that his client would not be in a position to pay such security. Accordingly, the proceedings were adjourned until 17 December for further directions. ARIZONA'S MOTION 9 On 15 December 2010 Arizona filed a Notice of Motion ('Arizona's motion') seeking, inter alia, the following relevant orders: 1. That this notice of motion be heard instanter. 2. The questions referred to in the Schedule to this notice of motion be determined separately and before any other issue in the proceedings pursuant to Order 29 rule 2 of the Federal Court Rules. 3. That the order that the applicants provide the further sum of $250,000 by way of security made on 5 November 2010 be vacated. 4. An order that the applicant provide a further sum of $100,000 by way of security with respect to the separate trial ordered in accordance with order 2. 10 The Schedule referred to poses the following questions for determination: 1. Whether as alleged in paragraph 16 of the statement of claim a facsimile letter headed "Proposed Residential Development 258 Pacific Highway, Crows Nest" was sent by the first respondent to the first applicant by facsimile on 8 July 2004? 2. Whether as alleged in paragraphs 18 and 19 of the statement of claim any or all of: a) the Express Representation; and/or b) the First Implied Representation; and/or c) the Second Implied Representation; and/or d) the Third Implied Representation, was conveyed by either of: (i) the second respondent; and/or (ii) the first respondent? 3. Whether by making any of the Express Representation or the First, Second or Third Implied Representations, the second respondent and/or first respondent engaged in conduct that was: a) in the case of the first respondent, contrary to section 52 and/or section 53A of the Trade Practices Act 1974; b) in the case of the second respondent, contrary to section 42 and/or section 45 of the Fair Trading Act 1987 (NSW)? 11 Arizona's motion is supported by an affidavit of Mr Eric Gregory Moore of Arizona, the United States of America, sworn on 15 December 2010. Mr Moore deposed that he is the president of The Gregory Moore Real Estate Company Inc ('GMREC') which is described as the 'General Partner' of each of the first named applicants ('AEI') and the second applicant ('the 258 Nest'). The affidavit establishes that GMREC is a corporation based in Arizona, controlled by Mr Moore and has a 1% interest in each of the first and second applicants. 12 Mr Moore also states that a company known as The Laundry Man of Arizona, Inc ('Laundry Man') is also an Arizona based company controlled by him which holds a 99% interest in the first applicant. Another company known as GMREC L.L.C. is an Arizona limited liability company controlled by Mr Moore's wife and himself. GMREC L.L.C has a 99% interest in the second applicant. 13 Mr Moore states that the first applicant was formed by him in March 2003 for the purpose of conducting investments in Australia and that on 17 October 2003 the first applicant lent Zepher Pty Limited ('Zepher') an amount of $2,750,000 to purchase the property. Such funds comprised $1,000,000 from Laundry Man and the balance was borrowed from US retirement funds and individual lenders on an unsecured basis. 14 Mr Moore states that by November 2003 Zepher Pty Limited had defaulted and in December 2003 the first applicant had taken defacto control of the property. It was transferred to the second applicant on 23 December 2005. 15 In early 2006 the second applicant applied to Eclipse Prudent Mortgage Corporation Limited ('Eclipse') for construction finance to complete the development of the property and such funds, in excess of $3,750,000 was borrowed from Eclipse. A further $190,000 was borrowed from the National Australia Bank. 16 Mr Moore states that as at 31 December 2008, $5,959,151 was due to promissory note holders and $2,462,922 was payable to investors but that the first and second applicants have no assets to meet such liabilities. Mr Moore deposes that both applicants have less than $1,000 cash in the bank and no other assets. No other funds are available and litigation funders have been approached to fund the litigation, but without success. He also deposes that the Laundry Man and GMREC L.L.C. have minimal cash in the bank and no other assets. 17 Mr Moore claims that if the Court is prepared to agree to the motion that the issues be separately determined, the applicants will raise an additional $100,000 as security for the respondents' costs up to and including the hearing of the separate questions. COLLIERS' MOTION AND SUBMISSIONS 18 Colliers opposes the relief sought and maintains that the Court has already delivered judgments in respect of the very questions which Arizona is seeking to be revisited. Colliers submit that Arizona's motion is simply an attempt to revisit the Court's findings and to circumvent the order for security for costs. 19 On 17 December 2010 Colliers filed a motion seeking orders, inter alia, that the proceedings be stayed pending payment of the sum of $250,000 security ordered by the Court on 5 November 2010. 20 Colliers has provided extensive written submissions in opposition to Arizona's motion. Colliers principally allege that there has been no new material or new evidence furnished by the applicants since their first application for separate hearings nor are there exceptional circumstances to justify the exercise of judicial discretion in Arizona's favour by revoking the order of security for costs. 21 Colliers also claims that Arizona's motion is tantamount to an abuse of process in that it effectively seeks a second hearing of its unsuccessful motion for determination of separate questions of law and that the overarching purpose of s 37M of the Federal Court of Australia Act 1976 (Cth) ('the Court Act') would be defeated if the Court entertained Arizona's motion. Colliers rely upon the majority judgment in DA Christie Pty Ltd v Baker [1996] 2 VR 582; Nominal Defendant v Manning (2000) 50 NSWLR 139 at [71]-[72]; Fletcher v Besser [2010] NSWCA 30 at [17] per Sackville AJA, and AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 in support of the submission that, consistent with s 37M of the Court Act, the Court should dismiss Arizona's application. Reliance is also placed on P Dawson Nominees Pty Ltd v Australian Securities and Investments Commission (No 2) (2009) 255 ALR 466 at [49] per Goldberg J. CONSIDERATION 22 Arizona's motion requires the Court to consider, firstly, whether the circumstances of its financial inability to pay the security of $250,000 constitutes sufficient reason for the Court to reconsider the Court's decision made on 22 March 2010. 23 The overarching purpose of civil practice and procedure as provided by the Court Act pursuant to s 37M(1) requires the Court to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible, and the decision of the High Court of Australia in AON provides a salutary reminder of the necessity for the Court to deal with matters efficiently and conclusively. 24 In DA Christie the Supreme Court of Victoria by majority (see Brooking and Hayne JJA) held that the absence of an explanation by a party for failing to provide evidence which was available at the time of the original hearing will disqualify that party from relying upon such evidence at any later attempt to review the Court's decision. However, Charles JA, in his dissenting judgment, said at 611: … I conclude that it is not possible for this court to adopt a rule which would preclude an unsuccessful applicant for interlocutory orders from repeating the application, on the ground of abuse of process, simply because the applicant sought to rely on additional relevant facts which did not amount to fresh evidence. Some other factor must, in my view, be present before an abuse of process is established, although, since the respondent is being faced a second time with an application for extension of time to bring proceedings, the potential for the second application to amount to an abuse is readily apparent. 25 In Manning Heydon JA at [46] cautioned against the application of authorities which dealt with different circumstances as follows: These "general rules" and "ordinary rules of practice" are to be administered bearing in mind the "overriding principle governing the approach of the court to the interlocutory applications", namely "that the court should do whatever the interests of justice require in the particular circumstances of the case": Brimaud v Honeysett Instant Print Pty Ltd (at 4). 26 Heydon JA declined to follow the majority in DA Christie and adopted the reasoning of Charles JA. Foster AJA also agreed with the reasoning of Charles JA. Heydon JA, in declining to follow the majority, said at [72]: The real evils to which Hayne JA referred in D A Christie Pty Ltd v Baker (at 602-603) – the risk of conflicting decisions, the unnecessary vexing of respondents, judge-shopping and the diminution of certainty in the conduct by respondents of their affairs – and others – damaging public confidence in the integrity of judicial decisions, expending time and money on litigation unnecessarily – are evils which each court in its individual discretion will rightly strain to avoid. 27 The decision in Manning was subsequently approved by the New South Wales Court of Appeal: see National Parks and Wildlife Service v Pearson (2002) 55 NSWLR 315 at [19] where Palmer AJA said: …the overriding principle governing the approach of the court to interlocutory applications is that the court should do whatever the interests of justice require in the particular circumstance of the case: per Foster A-JA in Nominal Defendant v Manning (at 161). 28 Subsequent to the above decision of the New South Wales Court of Appeal, the Civil Procedure Act 2005 (NSW) ('the CPA') was enacted. Section 57 thereof relates to the objects of case management and of the need to efficiently use 'judicial and administrative resources' (s 57(1)(c)) and to the object of having 'the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties': see s 57(1)(d). 29 Section 58 of the CPA makes provision, inter alia, for the Court in the management of proceedings to have regard to issues which will ensure the efficient disposal of matters before it and section 59 of such Act refers to the need to eliminate delay. 30 In Fletcher v Besser [2010] NSWCA 30 Sackville AJA at [17] referred to the decisions in Manning and DA Christie, and while endorsing Manning, indicated that caution might be required to determine whether, in light of the aforementioned provisions of the CPA, such provisions should be considered when determining whether a separate application for an extension of a limitation period should be permitted where there was evidence at the time of the first application which was not relied upon. 31 The provisions contained in ss 57-59 of the CPA largely correspond with the objectives contained in s 37M of the Court Act. The most recent decision which has guided this Court in determining the current motion is that of Justice Goldberg in P Dawson where his Honour identified at [49] the four circumstances, one or more of which must have occurred in order to enable the Court to determine a second application for interlocutory relief. Those circumstances were described by his Honour as follows: (a) there is new material or new evidence which was not available to [the moving party] at the time the orders were made …; (b) there has been a material change in the circumstances since those orders were made; (c) there are exceptional circumstances which warrant the re-consideration of the matter, the subject of their notice of motion; and (d) as a matter of discretion, the justice of the matter requires that the applicants be allowed to revisit the matter, the subject of the notice of motion. 32 As is recognised by Goldberg J at [38], whether an interlocutory order should be revisited is a matter for the discretion of the Court which ultimately retains control of its interlocutory orders: see Adam P Brown Male Fashion Pty Ltd v Phillip Morris Incorporated & Anor (1981) 148 CLR 170 at 178, as quoted by Goldberg J at [39], in which the High Court said: A court must remain in control of its interlocutory orders. A further order will be appropriate whenever, inter alia, new facts come into existence or are discovered which render its enforcement unjust … 33 The fact that interlocutory orders of the Court are not final orders supports the submission of Arizona that an interlocutory decision can be reviewed. Order 35 rule 7(2)(c) specifically envisages the Court varying an order in circumstances where it is interlocutory. In Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44, McLelland J said at 46: Interlocutory orders, of their very nature, create no res judicata or estoppel, and the Court retains jurisdiction to set aside, vary or discharge an interlocutory order up to the time of the final disposition of the proceedings. However the general rationale of the principles last referred to applies even in the case of interlocutory orders. It would be conducive to great injustice and enormous waste of judicial time and resources if there was no limit on the power of a party to have any interlocutory application or order relitigated at will. FINDINGS 34 When the Court made its decision on 5 November 2010 ordering Arizona pay an additional security in the sum of $250,000, no evidence was put before the Court to suggest that the making of such an order would render it impossible for the applicants to proceed with the hearing. Such question would have been highly significant since the Court would usually decline to make an order for security for costs where the making of such order would 'stifle the litigation' and especially where the adverse financial position of a party seeking to bring the litigation is said to arise out of the very subject matter to which the litigation relates. Such principle rests upon the consideration of the fundamental right of a citizen to have access to the Courts: see The Airtourer Co-operative Ltd v Millicer Aircraft Industries Pty Ltd [2004] FCA 1400 at [18]. See also the observations of Morling J in Barton v Minister for Foreign Affairs (1984) 2 FCR 463 at 469 where his Honour said: It has never been the case that impecuniosity on the part of a plaintiff is a ground for ordering him to give security for costs. In Pearson v. Naydler [1977] 1 W.L.R. 899, Megarry V-C said: "The basic rule that a natural person who sues will not be ordered to give security for costs, however poor he is, is ancient and well-established. As Bowen L.J. said in Cowell v Taylor (1885) 31 Ch. D. 34 at 38, both at law and in equity 'the general rule is that poverty is no bar to a litigant'. The power to require security for costs ought not to be used so as to bar even the poorest man from the courts." 35 The evidence of Mr Moore contained in his affidavit and provided by his answers in cross-examination, satisfies the Court that Arizona does not have the financial capacity to comply with the order for security made by the Court on 5 November 2010. Whilst the interlocking financial arrangements of the stakeholders in Arizona is not entirely clear, the Court accepts that at the time that such order for security was made, Arizona did not anticipate that such an order would be made, nor that it did not possess the requisite resources to meet such an order. 36 Arizona bears the onus of proving that the litigation will be stifled: see Phillips JA in Ariss & Anor v Express Interiors Pty Ltd (in Liq) [1996] 2 VR 507 at 515. The position is now plain that Arizona is unable to make a payment of the amount of $250,000. Had the Court been aware of the dire financial position of Arizona on 5 November 2010, it may have made a distinct difference to its consideration of the application for security for costs. 37 In making its decision on 22 March 2010 that separate trials should not be ordered, the Court did so upon the premise that it would not be expeditious nor efficient for the trial to be conducted in that way, and the observations of the Court upon the preferred conduct of the hearing of these proceedings remains. However, it is now apparent that unless the trial can be conducted in such a way that will accommodate the present financial resources of Arizona there will be no trial at all. 38 The Court accepts Colliers' submissions that the conduct of the proceedings by Arizona is contrary to the objectives contained in s 37M of the Court Act. Further, the conduct of Arizona in filing this motion narrowly escapes being found to be an abuse of process. 39 Despite these considerations the Court is satisfied that it would not be in the interest of justice for these proceedings to be stayed. The interests of justice must be the overarching consideration of the Court. 40 The questions nominated by Arizona in the Schedule to its motion will be considered in a separate hearing. Such hearing will occupy a substantially shorter period of time than that was envisaged for the hearing fixed for determination of all issues. COSTS 41 The conduct of the Applicants has fallen well short of an acceptable standard. Such conduct based upon the pronouncements in Aon could have warranted the Court dismissing Arizona's motion. The Applicants had the opportunity at the hearing on 11 October 2010 to adduce any evidence to suggest it could not meet the security then sought by Colliers. No evidence of a financial nature was brought forward. 42 In its present application Arizona has produced no evidence to explain its failure to inform the Court of its true financial position during the application for security for costs. Further, the cross-examination of Mr Moore reveals that he made no inquiries to source funding for the litigation from 21 September 2010 to 11 October 2010. 43 The Court infers that Arizona failed to appreciate the gravity of its position should security be ordered. By Arizona's conduct, it has caused Colliers to incur avoidable expenditure. The Court considers that Arizona's conduct is such as to merit an award of indemnity costs against it in relation to the motion currently before the Court. 44 Further, by reason of Arizona's conduct the hearings relating to the separate trials and Colliers' application for security of costs have been wasted in view of the orders which the Court now has to make in Arizona's favour. The costs of those applications are to be borne by Arizona on a party/party basis. 45 The Court will order Arizona to meet and pay all outstanding costs orders against it within 21 days and to pay a further $100,000 as security within 21 days. If, during the continuation of the hearing the expenses are such that Colliers are exposed to the risk of further costs that are not secured, Colliers may apply to the Court for further security. I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cowdroy. Associate: Dated: 15 February 2011