Supreme Court New South Wales Medium Neutral Citation: Thumbiran v Silver Chef Rentals Pty Ltd [2021] NSWSC 1300 Hearing dates: On the papers Decision date: 13 October 2021 Jurisdiction: Equity - Commercial List Before: Ball J Decision: (1) The proceeding be dismissed. (2) The plaintiffs pay the defendants' costs of the proceeding on an indemnity basis. Catchwords: CIVIL PROCEDURE — Pleadings — Fraud — Res judicata and issue estoppel — whether proceedings should be struck out under rule 14.28 of the Uniform Civil Procedure Rules 2005 (NSW) or dismissed as an abuse of process on the ground that they raise issues dealt with in prior proceedings Legislation Cited: Civil Procedure Act 2005 (NSW) Real Property Act 1900 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Colgate Palmolive Co v Cussons Pty Limited (1993) 46 FCR 225 HIH Casualty and General Insurance v Chase Manhattan Bank [2003] 2 Lloyd's Rep 61 Leichhardt Municipal Council v Green [2004] NSWCA 341 Silver Chef Rentals Pty Ltd v Thumbiran [2020] NSWSC 605 Takhar v Gracefield Developments Limited [2019] UKSC 13 Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 Category: Procedural rulings Parties: Trevelyn Thumbiran (First Plaintiff) Absolute Pump Services Pty Ltd (Second Plaintiff) Silver Chef Rentals Pty Ltd (First Defendant) Donny's Pizzeria Pty Ltd (Second Defendant) Antonio Andrea Telese (Third Defendant) Representation: Counsel: G Lucarelli (Plaintiffs) J Baird (First Defendant) Solicitors: City Legal (Plaintiffs) SLF Lawyers (First Defendant) Mathas Law (Second & Third Defendants) File Number(s): 2021/217789 Judgment 1. By a notice of motion filed on 23 August 2021, the first defendant, Silver Chef Rentals Pty Ltd (SCR), seeks an order that this proceeding be struck out under r 14.28 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) or be dismissed as an abuse of process. UCPR r 14.28 gives the Court power to strike out a pleading that (a) discloses no reasonable cause of action, (b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or (c) is otherwise an abuse of the process of the court. 2. In order to understand the application, it is necessary to say something about the history of the dispute between the parties and the nature of the claim in this proceeding. 3. On or about 11 May 2018, SCR entered into two equipment rental agreements with Donny's Pizzeria Pty Ltd, the second defendant. Donny's Pizzeria's obligations under the agreements were guaranteed by the third defendant, Mr Antonio Telese, and the second plaintiff, Absolute Pump Services Pty Ltd (APS). It appears that APS is controlled by the first plaintiff, Mr Trevelyn Thumbiran, and that through that company Mr Thumbiran held a 25 percent interest in Donny's Pizzeria at the time the rental agreements were signed. 4. SCR also claims that Mr Thumbiran personally guaranteed Donny's Pizzeria's obligations under the rental agreements pursuant to a letter agreement between them and that he gave security for that guarantee. Relevantly, the security consisted of charges over Mr Thumbiran's interest in a number of properties owned by him and his wife, including a property at The Ponds in New South Wales. 5. On 28 May 2018, SCR lodged caveats against the properties owned by Mr and Mrs Thumbiran relying on the security it claimed to have. 6. In January 2020, Mr and Mrs Thumbiran served a lapsing notice in respect of the caveat lodged against the property at The Ponds in anticipation of a sale of that property. In response, on 21 January 2020, SCR commenced proceedings (the Caveat Proceeding) originally in the duty list seeking an order extending the caveat. On 24 January 2020, Henry J made various orders by consent, including an order under s 74K of the Real Property Act 1900 (NSW) extending the operation of the caveat until further order. That order was expressly made without admission by Mr Thumbiran. The orders contained a notation in the following terms: The Court further notes that the Plaintiff undertakes to provide a withdrawal of the caveat in the event of a scheduled settlement of the proposed sale of the property, provided that the First Defendant complies with the following: (A) The Proceeds of sale of the property inclusive of the deposit are applied to pay: (a) The amount to discharge the mortgage to Westpac Banking Corporation; (b) The usual standard adjustments; (c) The real estate agent's commission and advertising expenses; (d) The reasonable costs of the conveyance; and (B) The remaining net proceeds of sale of the property (limited to $150,000) be paid into Court, pending finalisation of these proceedings. 1. On 21 February 2020, Mr Thumbiran swore an affidavit in opposition to SCR's application. It is apparent from that affidavit that it was Mr Thumbiran's contention that he had not given a personal guarantee, that any document he signed he signed as a director of APS and that there was, therefore, no basis for SCR to lodge the caveats it had. 2. In the meantime, there were without prejudice discussions and correspondence between the solicitors for the parties. SCR was represented by Mr Yam. At the time, Mr and Mrs Thumbiran were represented by Mr Bakoss. 3. On 11 March 2020, Mr Yam sent a settlement offer to Mr Bakoss. It was a term of the settlement offer that "our client and your client enter into a Deed of Settlement to be prepared by our office to record the terms referred to above". Mr Bakoss purported to accept that offer on behalf of Mr and Mrs Thumbiran later that day. Subsequently, and in accordance with that offer, SCR withdrew its caveat and received the sum of $32,919.69 on settlement of the sale of the property at The Ponds. 4. On 18 March 2020, Mr Yam sent a draft settlement deed to Mr Bakoss inviting him to mark up any amendments or revisions for consideration by SCR. Subsequently, on 2 April 2020, Mr Yam sent an email to Mr Bakoss that attached a proposed consent order that provided for the Caveat Proceeding to be dismissed with no order as to costs. 5. Mr Bakoss replied to that email by email later that day. In his reply, Mr Bakoss said that his clients would not sign the settlement deed and "will proceed with this matter and will not finalise it without further litigation". 6. In response to that email SCR, relying on s 73 of the Civil Procedure Act 2005 (NSW), served a notice of motion seeking orders enforcing the settlement agreement. That motion was dealt with on the papers by Darke J. In opposition to the motion, Mr and Mrs Thumbiran contended that Mr Thumbiran had not given a personal guarantee in respect of the rental agreements. It was also their case that they had entered into the settlement agreement as a consequence of SCR's duress or unconscionable conduct because they were forced to settle the whole claim in order to obtain removal of the caveat over the property at The Ponds, which was contrary to the undertaking noted in the orders made by the Court on 24 January 2020. 7. Darke J rejected Mr and Mrs Thumbiran's claims: see Silver Chef Rentals Pty Ltd v Thumbiran [2020] NSWSC 605. His Honour expressed the view (at [25]) that by Mr Yam's offer, "the plaintiff offered an alternative to the agreed interlocutory regime and a continuation of the proceedings, namely, an agreement that would bring the proceedings to an end on certain terms". His Honour rejected any suggestion that Mr and Mrs Thumbiran were placed in an impossible position by the offer or that any case of unconscionable conduct had been established. Accordingly, his Honour made an order under s 73 of the Civil Procedure Act that the proceedings "as between the plaintiff and the first defendant were settled on 11 March 2020 on the terms set out in Mr Yam's email to Mr Bakoss sent at 12:44pm on that day …" (at [34]). His Honour also ordered that Mr Thumbiran sign the deed of settlement within seven days of the date of the order failing which a Supreme Court Registrar was to sign it on his behalf. 8. Mr Thumbiran failed to sign the deed and on 17 July 2020 a copy of the settlement deed was executed by Registrar Hedge on his behalf. 9. Clause 2 of the deed provides: ACKNOWLEDGEMENTS 2.1 TT [Mr Thumbiran] and APS acknowledge that: (a) they have received independent legal advice in relation to entering into the Deed and the contents of the Deed; (b) they understand the terms and effect of the Deed; and (c) they enter into the Deed of their own free will and without any compulsion or duress. 2.2 TT acknowledge that: (a) he is liable to SCR as guarantor under the First Rental Agreement and the Second Rental Agreement; (b) he charged, in favour of SCR: (i) his interest in [the property at The Ponds]; (ii) the Doonside Property; (iii) his interest in the Hamilton Property; (iv) his interest in the First Point Cook Property; (v) his interest in the Second Point Cook Property; as security for the due punctual and complete performance of his obligation to SCR as guarantor under the First Rental Agreement and the Second Rental Agreement. (c) SCR has: (i) an equitable charge over his interest in [the property at The Ponds]; (ii) an equitable charge over the Doonside Property; (iii) an equitable charge over his interest in the Hamilton Property; (iv) an equitable charge over his interest in the First Point Cook Property; (v) an equitable charge over his interest in the Second Point Cook Property; hereinafter referred to as Equitable Charges as security for the due punctual and complete performance of his obligations to SCR as guarantor under the First Rental Agreement and the Second Rental Agreement. 1. Clause 3.1 of the deed provides: TT will pay to SCR the Settlement Sum in full and final settlement of the obligations of TT and APS to SCR as guarantors under the First Rental Agreement and the Second Rental Agreement. 1. Clause 3.2 contains an acknowledgement by SCR that Mr Thumbiran paid the sum of $32,919.69 on 11 March 2020. Clause 3.3 requires Mr Thumbiran to pay SCR the balance of the settlement sum of $150,000 by way of equal monthly instalments over a period of 9 months commencing on 1 April 2020. Clause 4.1 provides that if no default has occurred and Mr Thumbiran has paid the settlement sum in full, SCR will withdraw its remaining caveats. 2. In this proceeding, Mr Thumbiran and APS seek orders for the withdrawal of the remaining caveats, a declaration that the settlement deed is of no force and effect, and an injunction restraining SCR from seeking to enforce its terms. 3. It is alleged that the caveat was lodged fraudulently because the officer of SCR who caused the caveat to be lodged actually knew that SCR had no caveatable interest or was recklessly indifferent to that fact. Paragraph 77 of Mr Thumbiran and APS' Commercial List Statement summarises their claim in these terms: To be clear, TT will contend the Caveat Proceedings was an abuse of process for three reasons: a. first, because it was founded upon the fraudulent lodgement of caveats: ex turpi causa non oritur action; b. secondly, the action was devoid of merit because the contention that TT was a guarantor was (and remains) preposterous; and c. thirdly, because it was commenced for an improper collateral purpose, being to exert pressure on TT to pay Silver Chef monies which Silver Chef knew or ought to have known it had no entitlement; a hopeless case brought for an improper collateral purpose. 1. In my opinion, the plaintiffs' claim in this proceeding is entirely misconceived. 2. The caveats were originally lodged in support of a claim that Mr Thumbiran had guaranteed the obligations of Donny's Pizzeria under the rental agreements and had given security for that guarantee in the form of a charge over the properties in respect of which the caveats had been lodged. The question whether, and in what circumstances, the caveats could be maintained by SCR was resolved by the settlement agreement. The question whether the settlement agreement was valid and enforceable was resolved by the judgment of Darke J. 3. The plaintiffs submit that the settlement deed and the judgment of Darke J do not prevent them from advancing the case they do for two reasons. 4. First, their position appears to be that Darke J's judgment did not create a res judicata or any other form of estoppel on the question raised by the current proceeding. Second, relying on the principle stated by Lord Bingham in HIH Casualty and General Insurance v Chase Manhattan Bank [2003] 2 Lloyd's Rep 61 at [15] that "fraud unravels all", they say that a plea of res judicata or estoppel is not available where the claim is based on fraud. 5. It is not easy to understand the first point. In written submissions, Mr Lucarelli, who appeared for the plaintiffs, put the point in these terms (at para 10) by reference to para C93 of the Commercial List Statement (which alleges that "[t]he commercial pressure inflicted on TT on that day, 11 March 2020, led him to conclude he had no option but to accept the terms then being offered by Silver Chef, which (as His Honour Justice Darke subsequently found) resolved the whole of the Caveat Proceedings, shutting down any opportunity TT had to prove that Silver Chef had no caveatable interest at all"): The current proceedings do not entail any repeat of the claims for relief against duress or unconscionable conduct as were made in the Prior Proceedings. CLS para C93 has nothing to do with duress or unconscionable conduct. It is relevant to the tortious collateral abuse of process claim. The allegation is that because of the commercial pressure brought to bear on TT on 11 March 2020 he gave instructions to accept whatever terms SCR were then offering, in order to enable settlement of the sale of The Ponds property that day. As the plaintiffs aver the Prior Proceedings were a tortious collateral abuse of process brought with the improper purpose of extracting funds from TT, the allegations in C93 are plainly relevant to proof of an "overt act" revealing the existence of the asserted improper purpose. That TT accepted the terms then being offered by SCR as a result of commercial pressure is not foreclosed by the Judgment. 1. The submission seems to be that the case that the plaintiffs now seek to advance is a case that the whole proceeding before Darke J was an abuse of process because SCR to its knowledge never had a caveatable interest in The Ponds property and the claim that it did was advanced to put improper commercial pressure on Mr Thumbiran with a view to extracting money from him. That case was not dealt with by Darke J. 2. In my opinion, that submission is misconceived for two reasons. First, SCR's claim to be entitled to maintain the caveats now rests on the settlement agreement embodied in the Settlement Deed, which is binding on Mr Thumbiran. In order to attack the caveats, the plaintiffs must attack that agreement. Until the settlement agreement is set aside, anything that went before it is irrelevant. Second, Darke J dealt with the question whether the settlement agreement should be set aside on the grounds of duress and unconscionable conduct. He held that it should not. In reaching that conclusion, his Honour specifically addressed the question whether "TT accepted the terms then being offered by SCR as a result of commercial pressure" (to quote from the plaintiffs' written submissions) and concluded that he did not. In reaching that conclusion, his Honour pointed out that Mr Thumbiran was legally represented and had the option of either settling the whole proceeding on the terms that were embodied in the settlement deed or of resolving the immediate dispute that is said to have been the source of the commercial pressure by proceeding in accordance with the undertaking noted in the orders made by consent by Henry J on 24 January 2020. He chose the former course. 3. It is not in doubt that a judgment obtained by fraud may be set aside by the Court: see, for example, Wentworth v Rogers (No 5) (1986) 6 NSWLR 534 at 538-9 per Kirby P for a summary of the relevant principles. There is a question of the precise scope of those principles and their interaction with the principles of res judicata and cause of action and issue estoppel, particularly in light of the recent decision of the Supreme Court of the United Kingdom in Takhar v Gracefield Developments Limited [2019] UKSC 13. It is not necessary to investigate those principles in any detail in this case. One thing that is clear is that there must be a connection between the judgment and the fraud in question. The fraud must "taint" the judgment: per Kirby P, Wentworth v Rogers (No 5), at 538–9. 4. In the present case, the relevant judgment is that of Darke J to the effect that Mr and Mrs Thumbiran and SCR reached an agreement to settle the Caveat Proceeding and that that agreement should not be set aside for any of the reasons advanced by Mr and Mrs Thumbiran. The plaintiffs offer no credible explanation of how that judgment was tainted by fraud. The fraud in this case is said to be the lodgement by SCR of caveats that it knew it was not entitled to lodge. But even accepting that there is some basis for that allegation (and there is none in the evidence before the Court), how could it be said that that fraud in some way or another caused the Court to be misled in making the findings it did? It was Mr Thumbiran's position throughout the Caveat Proceeding that SCR had no basis for lodging the caveats; and the question whether he was right or wrong about that was irrelevant to the question whether he had reached an enforceable agreement on the terms that SCR alleged he had. 5. It follows that this proceeding against SCR is an abuse of process and must be dismissed. 6. The current proceeding is also brought against Donny's Pizzeria and Mr Telese. However, no order is sought against either of them and they were joined solely because they were parties to the rental agreements. Both have filed an appearance but have not otherwise participated in the proceeding. There is no reason why the proceeding should not be dismissed against them as well. 7. SCR seeks its costs of the proceeding on an indemnity basis. In my opinion, it is appropriate to make that order. For the reasons I have explained, the claim is plainly misconceived. It contains serious allegations that are not supported by evidence and which, in some cases, are inconsistent with the findings already made by Darke J. Those features make it appropriate to order costs on an indemnity basis: see Colgate Palmolive Co v Cussons Pty Limited (1993) 46 FCR 225 at 233 per Sheppard J. See also Leichhardt Municipal Council v Green [2004] NSWCA 341 at [48] per Santow JA. 8. Accordingly, the orders of the Court are: 1. The proceeding be dismissed; 2. The plaintiffs pay the defendants' costs of the proceeding on an indemnity basis. ********** 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: 13 October 2021