MARGARITIS v AGC (ADVANCES) PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL PRIESTLEY, HANDLEY and SHELLER JJA 12 December 1991, 19 December 1991 [1991] NSWCA 191 APPLICATION FOR LEAVE TO APPEAL — CONSENT CONSENT ORDERS — DEED OF SETTLEMENT DISCOVERY — FURTHER DOCUMENTS ALLEGED NON-DISCLOSURE — PROCEDURE TO SET ASIDE CONSENT ORDERS — FRESH PROCEEDINGS — COSTS APPLICATION FOR LEAVE TO APPEAL — Consent Orders — Deed of Settlement — Discovery — Further Documents — Alleged Non-Disclosure — Procedure to set aside consent orders — Fresh Proceedings — Inconvenience of appeal procedure — Leave refused COSTS — Preliminary point should be raised at early stage — No order as to costs ORDER Application refused. No order as to costs. Bailey v Malinoff (1971) 125 CLR 529 Spies v Commonwealth Bank of Australia (unreported) Court of Appeal 3 October 1991 Harvey v Phillips (1956) 95 CLR 235 Ainsworth v Wilding (1896) 1 Ch 673 Kinch v Walcott (1929) AC 482 Huddersfield Banking Co Ltd v Henry Lister and Son Ltd (1895) 2 Ch 273 Priestley JA I agree with Sheller JA's reasons and forth the orders he proposes. Handley JA I agree with Sheller JA. Sheller JA BACKGROUND The claimants, Mr and Mrs Margaritis and two companies Attika Investments Pty Ltd and Attika Property Management Pty Ltd, seek leave to appeal from orders made by consent by Rogers CJ Comm D on 15 August 1988. ORIGINAL PROCEEDINGS On 13 January 1987 the claimants commenced proceedings number 10204/87 in the Commercial Division against the opponents AGC (Advances) Ltd and Westpac Banking Corporation. In those proceedings Mr and Mrs Margaritis sought declarations that deeds of loan and guarantee entered into respectively on 2 September 1983 and 10 July 1985 with AGC (Advances) Ltd were void. They sought, by way of interlocutory relief, that AGC (Advances) Ltd be restrained from enforcing certain mortgages and an order that Westpac Banking Corporation take all steps necessary to discharge each of the mortgages. The claimants claimed unspecified damages against the opponents. On 19 June 1987 the proceedings were removed from the Commercial Division to the Common Law Division. On 20 November 1987 AGC (Advances) Ltd commenced proceedings number 19037/87 in the Common Law Division seeking possession of certain properties owned by Mr and Mrs Margaritis. On 15 February 1988 an order was made that 2 UNREPORTED JUDGMENTS the two proceedings be heard together. On 15 April 1988 both proceedings were transferred to the Commercial Division and given a number 28253/88. On 20 April 1988 Rogers CJ Comm D gave directions, inter alia, that all parties were to complete further discovery on or before 13 May 1988 and that the proceedings be set down for hearing on 15 August 1988 for a week. On 26 April 1988 the claimants amended their proceedings to rely upon an alleged contravention of s52 of the Trade Practices Act 1974. DISCOVERY Some discovery was given by both parties. On 8 July 1988 the claimants' solicitors, Gadens, wrote to the solicitors for Westpac, Allen Allen and Hemsley, saying inter alia: "Further conferences with Counsel have indicated that the following documents should have been discovered:" There followed a numbered list of groups of documents running from | to 51. The letter concludes: "Please provide us with copies of these documents at your earliest convenience. We undertake to pay your reasonable costs of photocopying." On 18 July 1988 Allen Allen and Hemsley wrote back to Gadens in the following terms: "We refer to your letter dated 8 July 1988. We fail to see how it is said that any of the documents described in para | to para 51 of your letter are relevant to any issue raised in the Amended Summons and hence discoverable. If you are able to relate any of the categories of documents set out in your letter to any particular issue raised in the Amended Summons, we will give further consideration to your request for the documents." DEED OF SETTLEMENT No further correspondence about discovery followed before 15 August 1988 when the parties entered into a deed of settlement. The deed provided for a discharge of all securities by AGC (Advances) Ltd, mutual releases, a verdict and judgment by consent for the opponents in the proceedings by the claimants against the opponents described as 28253 of 1987 and the dismissal by consent with no order as to costs of the proceedings by AGC (Advances) Ltd against Mr and Mrs Margaritis described as 19037 of 1987. On the same day consent orders were made by Rogers CJ Comm D in the terms agreed. FURTHER DOCUMENTS The claimants allege that in 1991 they first became aware of certain documents which they say should have been discovered by the Westpac Banking Corporation in the original proceedings but which were not discovered. They allege that had these documents been discovered they may not have settled the proceedings or settled them on the terms that they did. These applications were then made for leave to extend the time to file a summons applying for leave to appeal and for leave to appeal from the consent orders made by Rogers CJ Comm D on 15 August 1988. APPLICATION FOR EXTENSION OF TIME AND LEAVE TO APPEAL The application to extend time came before Mahoney JA on 23 September 1991 and was referred to the Court sitting with three judges before whom it proceeded on the same day. During the course of that hearing the question was raised by the presiding judge, Mahoney JA, as to the appropriateness of the appeal procedure as distinct from other possible procedures for having the consent orders set aside. Mr Libling, who has throughout appeared for the claimants, said that he had in fact tied himself to the appeal procedure. During the URJ MARGARITIS v AGC (ADVANCES) PTY LTD (Sheller JA) 3 course of argument on that day counsel for AGC (Advances) Ltd referred to what he described as "a couple of threshold problems in this case" but the nature of these problems was not further explained. Counsel for Westpac Banking Corporation did not foreshadow any such problem. Because of the perceived length of hearing of the application it was stood out of the motion list for the Registrar to fix a date for hearing. In the course of a judgment delivered on that day Mahoney JA stated the claimants' position: "Tt is proposed to contest this matter by means of a procedure by way of appeal." It was indicated that the claimants should have leave to amend a motion and should be at liberty to file an application for leave to appeal "or other appropriate application pertinent to these proceedings, so as to put the procedural matters in the proper form." Contest as to the production of documents by the opponents was foreshadowed and a procedure for determining how they would be produced and whether they should be inspected discussed. The claimants were also required to provide a statement, in the form of points of claim, of the case to be made out on appeal, if leave to appeal was granted. The costs were reserved. CLAIMANTS' POINTS OF CLAIM On 8 November 1991 the claimants filed an amended notice of motion for an extension of time and a summons for leave to appeal and an amended notice of appeal. They also filed points of claim whereunder they claimed (inter alia): "1. An order that each of O.1 and O.2 made on 15 August 1988 by His Honour, Mr Justice Rogers in these proceedings be vacated. 2. An order that the Claimants' proceedings against the First Opponent be dismissed. 3. An order that the First Opponent pay its own costs of and incidental to this Appeal and in the Court below. 4. An order that judgment be entered for each of the Claimants against the Second Opponent. 5. An order that the proceedings between the Claimants and the Second Opponent be set down for trial for assessment of damages. 6. In the alternative to 4 and 5 above, an order that the proceedings between the Claimant and the Second Opponent be set down for trial. 7. A declaration that as between each of the Claimants and the Second Opponent, the deed made on 15 August 1988 by the parties (the "Deed") is null and void. 8. In the alternative to 7 above, an order that the Second Opponent be prohibited from relying upon the Deed or any part thereof in any proceedings between the Claimants or any of them and the Second Opponent. 9. In the alternative to 7 and 8 above, a declaration that the Second Opponent is estopped from relying on the Deed or any part thereof in any proceedings between the Claimants or any of them and the Second Opponent." In the points of claim the nature of dispute was described in part as follows: "2. A claim by the Claimants that unbeknown to His Honour Mr Justice Rogers and the Claimants, the Second Opponent had failed to comply with the Orders concerning Discovery made by His Honour on 6 February 1987 and 20 April 1988. 3. In consequence of 2, above, a claim by the Claimants to vacate as against the Second Opponent O.1 and O.2 made by consent by Mr Justice Rogers on 15 August 1988." In the summary of claimants' contentions it was alleged: 4 UNREPORTED JUDGMENTS "17. On or about each of the following dates, namely: (a) 19 March 1987; (b) 13 May 1988; (c) 8 July 1988; and (d) 15 August 1988 the Second Opponent had in its possession, custody or power discoverable documents, which, contrary to the Orders for Discovery made by His Honour Mr Justice Rogers on 20 April 1988 and/or 6 February 1987, it had failed to discover. 25. On 7 August 1991 the Claimants became aware that the Second Opponent had not given proper discovery." WESTPAC'S APPLICATION FOR PRODUCTION OF DOCUMENTS On 2 December 1991 the matter again came before the Court on an application by Westpac Banking Corporation for the production by the claimants of certain documents identified in a notice to produce. In the course of argument it was accepted by Mr Sweeney QC who appeared for Westpac Banking Corporation on that occasion that the notice was in part, at least, too wide. During the course of the hearing he handed up an amended notice to produce. Reasons were given by the Court for standing the application over to the hearing of the application for leave to appeal and for the costs of the application to be in the discretion of the Court when it dealt with the application for leave to appeal. The presiding judge, Mahoney JA, said that he was inclined, without expressing a concluded view, to think that the terms of the amended notice were too wide and that accordingly the application might not succeed. During the hearing of that application an outline was handed up by Westpac Banking Corporation in which it stated that it proposed to contend that the application for leave to appeal was either procedurally inappropriate or incompetent and should be dismissed without a hearing on the merits by reason of the fact that the proper means for avoiding the effects of the judgment entered by consent was to commence proceedings to set the judgment aside. Mahoney JA pointed out to counsel for the claimants that there was a question as to the proper procedure which had been raised by him in September, that is to say as to whether the claimants should proceed by separate proceeding or by way of an application for leave to appeal. HEARING OF APPLICATION FOR LEAVE TO APPEAL When the applications for an extension of time and leave to appeal came before us for hearing on 12 December 1991 the appropriateness of the appeal procedure as against the claimants' commencing fresh proceedings to have the deed of settlement set aside was raised with Mr Libling at the commencement of his submissions. This was in the forefront of the matters argued on the question of whether leave should be granted. A considerable bulk of affidavit material was filed in connection with the leave application. Had it all been read and the foreshadowed cross-examination on a good deal of it taken place the application would have become a mixture of first instance trial and full appeal. Sometimes such a procedure may be unavoidable in the interests of a proper result, but such occasions are rare. In the circumstances of the present case it soon became apparent that it would be possible for the Court to understand the substance of the opposing cases on the question of leave by a much more economical method. It became unnecessary for evidence to be formally tendered. Counsel for the claimants put his arguments by reference to various documents such as the Pt51 r3(7) statement of the nature of URJ MARGARITIS v AGC (ADVANCES) PTY LTD (Sheller JA) 5 the case, the proposed notice of appeal, earlier pleadings, facts and documents from the proposed evidence which were either common ground or permitted to be referred to as showing what would be open for argument by the claimants if an appeal were permitted to go forward. Counsel for the opponents followed the same course. For the purpose of argument we assumed, as Mr Libling submitted, and Mr Callinan QC, for Westpac Banking Corporation, denied, that: (a) Westpac had failed to discover a large number of documents which it should have discovered; (b) The documents were, in the words of Mr Libling, highly cogent and relevant; and (c) Impropriety was involved in the failure to discover. PROCEDURE TO SET ASIDE CONSENT ORDERS The claimants recognised that in order to pursue the claims foreshadowed in the points of claim it was necessary for the deed of settlement, containing as it did mutual releases, to be avoided and the consent orders set aside. It was accepted that that could not be done by application in the original proceedings to the court of first instance for reasons explained in Bailey v Marinoff (1971) 125 CLR 529. That Court having disposed of the matter could not reinstate it, at least without the consent of all parties. The course chosen by the opponents was based upon s101(2)(c) of the Supreme Court Act 1970. Faintly the argument was advanced that the Court of Appeal's jurisdiction pursuant to this section meant that the other choice namely the commencement of fresh proceedings was not available. However this argument wag not pursued and, in my opinion, is untenable. On the other hand the opponents argued that the Court of Appeal had no jurisdiction on appeal in these circumstances to set the deed aside or indeed to hear the appeal in view of the terms of the deed of settlement. For the reasons that appear hereunder I do not think it necessary to examine these arguments in detail. They do not seem to me to have any substance. In my opinion there can be no doubt that it was open to the claimants to seek to have the deed of settlement set aside in fresh proceedings. The cases are brought together and explained in the judgment of Handley JA in Spies vy Commonwealth Bank of Australia (unreported) Court of Appeal 3 October 1991 at 8-10. Both the other members of the Court agreed with his judgment.In particular the passages quoted from the judgment of five members of the High Court in Harvey v Phillips (1956) 95 CLR 235 at 243 make it plain that the question whether a compromise is to be set aside depends upon the existence of a ground which would suffice to render a simple contract void or voidable or to entitle the party to equitable relief against it, grounds such as illegality, misrepresentation, non-disclosure of a material fact where disclosure is required, duress, mistake, undue influence, abuse of confidence or the like. It was argued for the claimants that Harvey v Phillips was no authority for the proposition that fresh proceedings could be maintained to set aside a consent order and that indeed only in cases of fraud were such proceedings appropriate. In Harvey v Phillips, which was not a fraud case, the application to set aside the judgment and compromise was made to the Full Court "in the action". Although the trial judge had authorised the entry of judgment in accordance with the terms of settlement drawn up, judgment had not in fact been signed or entered. Their Honours observed at 242: "Had judgment been signed it may be doubted whether it was open to the plaintiff to attack it by making an application to the Full Court in the action to set aside the judgment and compromise." 6 UNREPORTED JUDGMENTS I think it may fairly be inferred from this that their Honours had in mind that if judgment had been entered the appropriate procedure to set the compromise aside was by way of fresh proceedings. However this may be, Spies' case and Ainsworth v Wilding (1896) 1 Ch 673 and Kinch v Walcott (1929) AC 482 at 494, cases referred to by Handley JA are clear authority for the proposition that such course is appropriate where fraud is alleged. There seems no reason in principle why fresh proceedings are not appropriate where the grounds relied upon for setting aside the compromise are other than fraud. In Huddersfield Banking Co Ltd v Henry Lister and Son Ltd (1895) 2 Ch 273 Vaughan Williams J held, in an action separately brought (see 276) that he had power to set aside a consent order made pursuant to an arrangement entered into under a mistake as to material facts. A dictum from the judgment of Lindley LJ in the Court of Appeal at 280 is quoted in Harvey v Phillips at 244: O eseeeeee nor have I the slightest doubt that a consent order can be impeached, not only on the ground of fraud, but upon any grounds which invalidate the agreement it expresses in a more formal way than usual.......... To my mind, the only question is whether the agreement upon which the consent order was based can be invalidated or not. Of course, if that agreement cannot be invalidated the consent order is good. If it can be, the consent order is bad." As was pointed out by Mr Callinan Ainsworth v Wilding was an application to discharge a judgment said to have been consented to under a mistake on the part of the applicant. It was in that context that Romer J said at 676 that a fresh action must be brought. In my opinion if the claimants had grounds for setting aside the deed of settlement it was open to them to do so by bringing fresh proceedings. The avoidance of the deed would ordinarily result in the vacation of the consent orders. INCONVENIENCE OF APPEAL PROCEDURE In answer to this it was said by Mr Libling that fresh proceedings would have involved the claimants in excessive expense and delay. It became clear during the course of argument that whether the proceedings to have the deed set aside are fresh proceedings or heard in this Court on appeal they will be lengthy and complicated. There are live issues as to questions of materiality and reliance, to name but two. As indicated by the correspondence I have quoted there is an issue between the parties as to whether the documents not discovered were discoverable. There may well be a question of restitution and Mr Callinan has flagged the possibility that his client may wish to seek to cross-claim for indemnity or contribution. For all these reasons in my opinion the proceedings are unsuited for hearing in a Court of Appeal consisting of three judges and indeed involve a substantial waste of judicial resources where the case can be heard by a single judge sitting at first instance. I am far from convinced that there would be any greater time involved in pursuing the claim by fresh proceedings rather than by way of appeal. Either way from what has been said during argument by the parties it seems likely that there will be interlocutory applications. One such has been heard in part in this Court. Either way it seems that the hearing will be a lengthy one. In my opinion the application for leave to appeal should be refused. COSTS This leaves the question of costs. It was suggested to the claimants that if the application for leave to appeal was refused, the costs before this Court should be costs in any fresh proceedings with liberty to apply in case such proceedings URJ MARGARITIS v AGC (ADVANCES) PTY LTD (Sheller JA) 7 never eventuated or were not finalised. The claimants submitted that such an order for costs would be appropriate. The opponents argued that they should have their costs of this application in any event or at least those costs not attributable to the production of documents produced as a result of the opponents' notice to produce issued in the applications in this Court. In my opinion in determining what costs order should be made the following matters have to be taken into account: 1. The claimants' application for leave to appeal has failed. 2. It failed on a point of a preliminary nature which could and should have been raised by the opponents at an early stage. Had it then been dealt with as a preliminary point the costs involved in preparing and filing a large number of affidavits and copying documents would have been avoided. At best the opponents were ambivalent in whether or not they proposed to take the point. Counsel for the opponents before us did not raise it immediately the matter was called on but rather at the invitation of the Court. 3. There are the reserved costs of the matter when it came on in the motion list and of the application by the opponents to obtain access to documents of the claimants. 4. As appears from the judgment of Mahoney JA on 2 December 1991 the notice to produce even in its amended form was prima facie too wide and had the matter proceeded it would probably have been dismissed at that stage. On the whole I consider that the costs of these applications and the reserved costs should be dealt with on the basis that the parties should pay their own costs. Accordingly there should be no order as to costs. Application refused. No order as to costs. Counsel for Claimant: D LIBLING Solicitors for claimant: Gadens Ridgeway Counsel for opponents: 1. AM JACOBSON PP Solicitors for opponents 1: CLAYTON UTZ Counsel for opponents: 2. 1 D CALLINAN QC / MISS A H BOWNE Solicitors for opponents 2: ALLEN ALLEN and HEMSLEY