COCKBURN v GIO FINANCE LIMITED SUPREME COURT OF NEW SOUTH WALES — COURT OF APPEAL PRIESTLEY JA, BEAZLEY JA and GILES AJA 18 March, 19 June 1997 [1997] NSWCA 66 AMENDMENT — APPEAL PREVIOUSLY ALLOWED IN PART, DISMISSED IN PART — EFFECT OF RESULTING ORDERS — WHETHER AMENDMENT TO PURSUE NEW CROSS-CLAIM OR LEFT TO FRESH PROCEEDINGS — PROCEDURALLY SIMPLER IF THE LATTER. Priestley JA, Beazley JA and Giles AJA. Judgment in this appeal was delivered on 2 February 1996. Orders that were then made left it open to GIO to try to persuade the court, if after reading the reasons for judgment GIO wished to make the attempt, to consider whether GIO had some basis for relief against Colemans, other than the basis which had been litigated, which should be allowed to be litigated in the present proceedings. GIO subsequently applied to the court for directions as to how such claim (against Colemans for indemnity or contribution) should be litigated. GIO's request was dealt with in a number of directions hearings before Priestley JA, the result of which is summarised in directions made, for which reasons were given, on 20 December 1996. Pursuant to those directions the court sat as presently constituted by agreement of the parties. The first question before the court was whether the court would permit GIO to litigate its indemnity/contribution claim in the present proceedings. If the court were in GIO's favour on that point, other questions would arise. In the course of the directions hearings before Priestley JA the position had been reached where it seemed that GIO could only proceed with its claim if the court permitted GIO to file a further pleading additional to what had been contained in the pleadings as they were before Cohen J and the Court of Appeal during the hearing of the appeal, in which the claim which GIO was contending was previously unlitigated, was clearly stated. When the oral argument began a somewhat different course was taken by GIO from that assumed in the directions pursuant to which the court was hearing the argument. GIO presented two principal arguments, the second of which was of the kind which the directions contemplated, but the first of which took as its starting point that a procedural course should be taken which would not involve any amendment of the pleadings in the case at all. The first argument was founded on the orders made by this court and what GIO contended was their effect. Order A made by this court was that orders 1, 2 and 3 made by Cohen J should stand undisturbed. Cohen J's order 1 was that GIO deliver to the plaintiff a duly executed discharge of the mortgage over the property at Baulkham Hills. This court's order B was that the plaintiff should havejudgment against Colemans for breach of retainer, damages to be assessed. Order F was that payment of any amount found due pursuant to order B was stayed until a judge of the Equity 2 UNREPORTED JUDGMENTS Division had considered what set off or allowance, if any should be made as between GIO and Colemans to avoid double payment or benefit to the plaintiff. For GIO it was argued that Cohen J's undisturbed order 1 for the delivery of a duly executed discharge of the mortgage over the property at Baulkham Hills (an order which the court was told GIO had complied with) did not have the effect of entitling the plaintiff to a discharge of his personal obligation to repay moneys owing to GIO. There was thus still an outstanding obligation of the plaintiff to GIO. Counsel for the GIO made it very clear that this point was not being raised with a view to the GIO's seeking at any time to enforce the remaining personal liability which it said existed as a legal matter. Counsel said that the question whether the personal liability would be extinguished by the court's order had not been directly mentioned in the reasons either of Cohen J or this court. Counsel also said: It's incontrovertible that had the matter been addressed the Court would have made some suitable order in that regard, and ... GIO ... in no way will take any step against the plaintiff which would be contrary to the spirit of the orders that this Court has made. And ... GIO ... only raises this issue purely to take what is admittedly a tactical step, if it is entitled by the powers and the procedures of this Court to avoid (a) the loss unfairly falling wholly on itself, and (b) ... GIO ... being driven to institute wholly new proceedings ... The procedure GIO was submitting this court should follow was based on the submission that the personal obligation was still technically on foot. GIO wanted to take advantage of that position as against Colemans but not as against the plaintiff. GIO submitted that if the position, which became clear after this court made its orders, had been the position reached by the judge at first instance the Court could have effectively done justice by applying King Solomon's approach and saying the Court will avoid part of the debt, but it will do so on condition that the plaintiff obtain the damages [to] which he is entitled from Colemans. Counsel went on to explain how this procedure could work as a practical matter if the court were simply now to remit this aspect of the case to Cohen J. He supported the viability of such a procedure by reference to the width of power the trial court would have had pursuant to the Contracts Review Act. Although procedural complications can be seen as real possibilities in the procedure suggested by counsel, it might nevertheless have some attraction if its foundation premise were sustainable, namely, that Cohen J's order 1 did not extinguish the plaintiff's personal liability to the GIO The whole of the relevant parts of Cohen J's reasons show that his orders that GIO deliver a discharge of the mortgage over the property at Baulkham Hills and that the plaintiff's claim against Colemans be dismissed on the basis of the liability of the GIO were made on the basis that his Honour was ordering that the whole remaining liability of the plaintiff to GIO be set aside. This appears particularly clearly from two passages in his reasons, which, using the appeal book references, are at 4/909W-910I and4/919W-920C. GIO, through its counsel, was recognising, in the part of counsel's submissions quoted above, the reality of the situation. We think it proper in the circumstances of the present case to say that Cohen J's order 1 meant, when read in the light of his reasons for judgment, and should be construed as meaning that, to effect the setting aside of the remaining liability of the plaintiff to GIO, GIO was to deliver the duly executed discharge of mortgage as the order required. We are also of the view, after URJCOCKBURN v GIO FINANCE LIMITED (Priestley JA, Beazley JA and Giles AJA) 3 seeking to read the reasons of this court published in this case on 2 February 1996 in a detached way, that this court approached the questions in issue in the appeal on the footing that the effect of Cohen J's order 1 was as we have indicated in the preceding sentence. This view furnishes another reason why we should now clearly state what we understand the meaning and effect of Cohen J's order 1, and this court's order A, to be. The first of the two branches of GIO's argument therefore fails. In the course of argument the court asked counsel for GIO whether if GIO were to fail in its contention concerning the effect of the courts" orders, it had any basis for maintaining its submission that the case should simply be returned to Cohen J to be further dealt with on the present pleadings; that is, could GIO only pursue its indemnity/contribution claim in the present proceedings by obtaining an order from the court allowing it now to plead that claim. Counsel replied that if the court came to the conclusion which we have indicated we think is the correct approach to the question of themeaning of the court's orders, then the GIO would have to seek the court's leave to file an appropriate pleading. The second branch of GIO's argument was the one envisaged by the directions which brought the matter back before the court. The question raised by this second branch is whether GIO should be allowed to raise a fresh claim in these proceedings or be left to take such steps as may be open to it to commence proceedings at first instance to make its hitherto unlitigated indemnity/contribution claim. It seems to the court that there are procedural inconveniences and difficulties whichever course GIO is left with. The court is of the view that it will certainly be a simpler procedure both for the parties and the court if GIO's application to litigate its claim in the present proceedings is refused. This course may cause complications of an evidentiary kind. We note however that in the course of the directions hearings before Priestley JA the parties had reached agreement that if this court did allow GIO to file a fresh pleading and then made further directions for the hearing of the issues raised by new pleadings when complete, such hearing to be before a single judge, they would not be calling any further evidence than appeared in the appeal papers, with the exception of some formal evidence which was specified and which fell within a very narrow compass. The court sees no reason why the parties should not pursue the same course if GIO commences fresh proceedings. It is the obviously sensible and efficient course and would resultin keeping procedural problems to the minimum possible in the circumstances. A matter which has inclined the court, consistently with what has been just said, to refuse leave to GIO to bring its new case in the present proceedings is recognition that there was some force in one submission made by counsel for Colemans in opposing GIO's application. He reminded the court that in considering such an application it was relevant for the court to bear in mind the potential strength or weakness of the case proposed to be brought. He then submitted that the chances of GIO's success against Colemans were small. The submission was put succinctly: It is a very common and everyday occurrence in litigation of this type that [a] professional adviser may escape liability to his client as a consequence of the fact that his breaches are inconsequential because the client is relieved of his obligations to the financier concerned. 4 UNREPORTED JUDGMENTS In a written submission which the court gave leave to GIO to file following the conclusion of the oral argument, reasons were advanced why the foregoing submission for Colemans would not answer the facts and the equities in the present case. We do not think it appropriate to indicate any kind of definite opinion on this matter. The submissions before us show that the issue is complicated and involves possibly far reaching questions of principle. However, we do think there is sufficient force in what was said by counsel for Colemans to take it into consideration as a factor pointing towards the desirability of refusing GIO's application. Colemans" submissions, and the discussion that took place in the course of the argument, point to the likelihood that as a practical matter the plaintiff is unlikely to pursue the possibility of further remedy under this court's order B of 2 February 1996 and that its order F was guarding against a possibility more theoretical than real. However this may be, the court is of the view that the applications should be dismissed and that the GIO should pay Colemans" costs of the various directions hearings since 2 February 1996, including the costs of the argument with which these reasons have dealt. The court was told in the course of argument that the orders made on 2 February 1996 had been passed and entered and that by oversight the last nine words in order F had been left out. The court and the parties proceeded on the basis that this mistake would be corrected. That should be attended to. The orders of 2 February 1996 included an order that the operation of orders C, D and F be suspended for fourteen days from the delivery of the court's reasons. That suspension was continued from time to time, but with the publication of these reasons and the dismissal of GIO's applications that suspension comes to an end. Orders accordingly. Counsel for the appellant: SDONALDSON Solicitors for the appellant: COLIN BIGGERS and PAISLEY Counsel for the respondent: S D ROBB QC: J E ROBSON Solicitors for the respondent. WEBECK FARLAND PENDER