New South Wales Supreme Court CITATION : Five D v Impact Building [2007] NSWSC 993 HEARING DATE(S) : 15 August 2007 JUDGMENT DATE : 6 September 2007 JURISDICTION : Common Law Division JUDGMENT OF : Associate Justice Harrison DECISION : (1) The appeal is dismissed; (2) The decision of His Honour Magistrate Dillon made on 1 March 2007 is affirmed; (3) The summons filed 28 March 2007 is dismissed; (4) The plaintiff is to pay the defendant's costs as agreed or assessed. CATCHWORDS : Appeal decision of Local Court Magistrate - abuse of process LEGISLATION CITED : Local Courts Act 1982 - s 73 Uniform Civil Procedure Rules 2005 (NSW) - Rule 14.28(1)(c) Allen v Kerr & Anor [1995] Aust Torts Reports 81-354 Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Carr v Neill [1999] NSWSC 1263 Cleary v Jeans 65 NSWLR 355; [2006] NSWCA 9 Devries v Australian National Railways Commission (1993) 177 CLR 472 CASES CITED : Five D Pty Ltd v Impact Building Pty [2007] NSWLC 4 Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404 R L & D Investments Pty Ltd v Bisby (2002) 37 MVR 479; [2002] NSWSC 1082 Sea Culture International Pty Limited v Scoles (1991) 32 FCR 275 Secretary of State of Trade and Industry v Bairstow [2004] Ch1; [2004] 4 All ER 325 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588 PARTIES : Five D Pty Limited - Plaintiff Impact Building Pty Limited - Defendant FILE NUMBER(S) : SC 11617/2007 COUNSEL : Mr D Ash - Plaintiff Mr R Potter - Defendant SOLICITORS : Guild Lawyers - Plaintiff Turnbull Hill Lawyers - Defendant LOWER COURT JURISDICTION : Local Court LOWER COURT FILE NUMBER(S) : 10428/2006 LOWER COURT JUDICIAL OFFICER : Dillon LCM LOWER COURT DATE OF DECISION : 1 March 2007 LOWER COURT MEDIUM NEUTRAL CITATION : Five D Pty Ltd v Impact Building Pty Ltd [2007] NSWLC 4 IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ASSOCIATE JUSTICE HARRISON THURSDAY, 6 SEPTEMBER 2007 11617/2007 - FIVE D PTY LIMITED v IMPACT BUILDING PTY LIMITED JUDGMENT (Appeal decision of Local Court Magistrate - abuse of process) 1 HER HONOUR: The issue to be decided is whether there can be an abuse of process where a party in the current proceedings was not a party in the earlier proceedings. By summons filed 28 March 2007, the plaintiff seeks to appeal the whole of the decision of His Honour Magistrate Dillon made on 1 March 2007 in the Downing Centre in proceedings 10428/2006, and seeks an order that the defendant's notice of motion be dismissed with costs. 2 The plaintiff is Five D Pty Limited (Five D). The defendant is Impact Building Pty Limited (Impact). The plaintiff relied on the affidavit of John Arthur Bush sworn 10 May 2007. The defendant relied on the affidavits of Danny Vujic sworn 16 April 2007 and Christie Jane Howson sworn 16 April 2007. 3 At the outset, it may be helpful to make some brief comments concerning the remedy pursued by the plaintiff. Section 73 of the Local Courts Act 1982 (NSW) (the Act) permits a party who is dissatisfied with a judgment as being erroneous on a point of law to appeal to this Court. The onus lies on the plaintiff to demonstrate that there has been an error of law. What is a question of law (as opposed to a question of fact) was considered, inter alia, in Allen v Kerr & Anor [1995] Aust Torts Reports 81-354; Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 155-156; Carr v Neill [1999] NSWSC 1263 and R L & D Investments Pty Ltd v Bisby (2002) 37 MVR 479; [2002] NSWSC 1082. The judicial officer cannot act on evidence inconsistent with facts incontrovertibly established by the evidence - see Devries v Australian National Railways Commission (1993) 177 CLR 472 per Brennan, Gaudron and McHugh JJ at 479 and State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in Liq) (1999) 160 ALR 588. 4 In Swain v Waverley Municipal Council (2005) 220 CLR 517, the Chief Justice at [2] reiterated that in the common law system of civil justice, the issues between the parties are determined by the trial process. The system does not regard the trial as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal. 5 Section 75 of the Act provides that the Court may determine an appeal either (a) by varying the terms of the judgment or order, or (b) by setting aside the judgment or order, or (c) by setting aside the judgment or order and remitting the matter to the Court for determination in accordance with the Supreme Court's directions, or (d) by dismissing the appeal. Grounds of Appeal 6 Five D appeals the whole of the decision of Dillon LCM on the grounds, firstly, that the Magistrate erred in law in holding to the effect that a party which was not a party to a first set of proceedings could nonetheless be regarded in a second set of proceedings, as relitigating an issue determined in the first set of proceedings, so as to constitute an abuse of process; secondly, that the Magistrate erred in law in that in exercising his discretion to strike out the proceedings, he gave insufficient weight to a relevant matter, namely that the plaintiff was not a party to the original proceedings; and thirdly, that the Magistrate's exercise of discretion is a result so unreasonable or unjust as to suggest that a material error has occurred justifying the intervention of this Court. 7 By notice of contention filed 18 April 2007, the defendant contends that the decision of the Magistrate should be affirmed on the grounds firstly, that the proceedings are an abuse of process, being a collateral attack on a judicial decision; and secondly, that the proceedings are an abuse of process in that the case of fact made by the plaintiff is inherently improbable. Proceedings in the Local Court 8 There have been two proceedings in the Local Court, the first Impact Building Pty Limited v Kirk May which was heard at Newcastle on 28 August 2006 by Her Honour Magistrate Carmel Forbes (the Newcastle Local Court proceedings). The second proceedings between Five D Pty Limited v Impact Building Pty Limited, (which are the subject of this appeal) was heard in Sydney by His Honour Magistrate Dillon on 1 March 2007. Magistrate Dillon summarily struck out Five D's statement of claim (the Sydney Local Court proceedings). (i) The Newcastle Local Court proceedings 9 On 14 October 2005, Impact filed a statement of claim against Mr Kirk May alleging that the parties had entered into an oral agreement in November 2003 that Impact carry out certain building works at Mayfield Plaza in Newcastle. Impact alleged that it had not been paid a sum of nearly $15,000 to which it claimed entitlement. 10 Mr May filed a defence. In his defence, Mr May denied firstly, that there had been a verbal agreement; secondly, that the plaintiff had carried out works pursuant to it; thirdly, the implied terms concerning invoices, and fourthly, that in breach of the agreement, he had refused to pay the final invoice. He did not admit being served with the relevant invoice. The works that were the subject of the contract were identified as the demolition of the interiors of two shops; the stripping out of the shops; the construction of a dividing wall between the shops; the construction of a switchboard cupboard, a grease trap and a new loading dock; and the repairs of some water leaks [answer to request for particulars]. 11 The substantive issue between the parties was whether Mr May was a contracting party. He was defendant in the proceedings. Mr May's defence pleaded that he was acting as a representative or agent of another party when the agreement was formed, the companies being May Company and later Five D Pty Limited, he is a director of both companies. 12 On 28 August 2006, Magistrate Forbes entered a verdict and judgment for Impact in the sum of $14,968.29, together with orders as to interest and costs. (ii) The Sydney Local Court proceedings 13 The statement of claim filed by Five D against Impact alleged that "in or about 2003" Five D and Impact had entered into a contract pursuant to which Impact agreed to provide construction management services at Mayfield Plaza. Five D alleged that, in breach of the agreement, Impact carried out works in a negligent fashion and refused to rectify the defects. It claimed damages in the sum of $10,165.83. 14 By notice of motion, Impact sought an order striking out Five D's statement of claim pursuant to Rule 14.28(1)(c) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) on the grounds that Five D's claim sought to relitigate an issue determined on 28 August 2006 by Magistrate Forbes. Magistrate Dillon LCM found that Five D's claim was an abuse of process and struck out the statement of claim. 15 Both parties referred to Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404 at 414 where Hunt CJ at CL considered striking out pleadings on the basis of an abuse of process. 16 In Haines the facts are that Mr Haines took earlier proceedings for defamation. A separate trial was held on the issue of whether the pleaded imputation for which the plaintiff contended was incapable of being conveyed by the matter complained of. He was unsuccessful. Mr Haines then sought to amend his statement of claim so that his action continued against an unserved defendant and a new party. He was to discontinue the proceedings against the defendant involved in the separate trial, namely Australian Broadcasting Commission. 17 Mr Haines no longer pleaded a claim in defamation. In lieu, he pleaded claims for injurious falsehood and for misleading or deceptive conduct. The representation for which Mr Haines contended as being false or misleading or deceptive was no different in substance from the imputation, which had been rejected, in the separate trial. Hunt CJ at CL held that if the pleading had remained in its original form he would have struck it out as an abuse of process. Mr Haines' Counsel, at the conclusion of the argument, indicated that he would no longer rely on the representation as pleaded and proposed an amended and substantially different representation. It was by reason of the amendment that His Honour did not consider there had been an abuse of process. 18 Hunt CJ at CL reviewed English and Australian authorities on the topic of abuse of process. In particular His Honour referred to Sea Culture International Pty Limited v Scoles (1991) 32 FCR 275 where French J said at 413: "The possible varieties of abuse of process are only limited by human ingenuity and the categories are not closed. … An attempt to litigate in the court a dispute or issue which has been resolved in earlier litigation in this or another court or tribunal may also, according to the circumstances, constitute an abuse of process even if not attracting the doctrines of res judicata or issue estoppel. Underlying the power that courts have assumed to stay or dismiss proceedings for abuse of process is a policy of preventing waste of judicial resources and their use for purposes unrelated to the determination of genuine disputes. There is, in my opinion, another element to be considered and that is the necessity to maintain confidence in and respect for the authority of the courts." 19 Hunt CJ at CL in Haines at 414 continued: "There are obviously limitations to striking out pleadings or causes of action as an abuse of process upon the basis stated in Reichel v Magrath and elaborated in the cases to which I have referred. The issue determined in the earlier case which is sought to be litigated in the later case must be one which the party propounding it in the latter lost in the former. The principle does not work in reverse to enable the party who won the issue in the earlier case to prevent it being litigated in the later proceedings by someone who was not a party in the former. It must be an issue which was necessarily determined in the earlier case, and one of importance to the final result. It must have been properly argued — by which I mean that it is readily apparent from whatever records there are of the earlier case that the tribunal which decided it was an appropriate one to do so, that the parties were appropriate contradictors and that the issue was regarded by them as one of importance in that case. In normal circumstances, the decision disposing of the issue must have been a final one — by which I mean that it is not subject to appeal. (The filing of a notice of appeal may clearly be seen in some circumstances as merely seeking to delay the inevitable.) There may also be circumstances in which, notwithstanding the absence of an appeal, it is clear that the earlier decision has overlooked some binding authority, or that it has caused the unsuccessful party a manifest injustice. As most of the cases have emphasised, all the circumstances of the determination in the earlier case may be considered, and there can be no definitive statement of the circumstances which will inevitably lead to a finding of abuse of process." 20 Counsel for Five D submitted that this passage confines abuse of process to prior and subsequent litigation involving the same parties. I do not agree. The issue before Hunt CJ at CL was whether the same imputation, which had previously been determined by, separate trial when subsequently raised against a new party constituted an abuse of process. His Honour found that it would have been an abuse of process but for the late amendment, which raised a substantially different case. 21 Counsel for Impact referred to Cleary v Jeans 65 NSWLR 355; [2006] NSWCA 9, a decision which was not before the Magistrate. The facts in Cleary are that Mr Jeans sued a Bank in the Federal Court for damages and an order setting aside a guarantee he had given. The Bank cross claimed against Mr Jeans under the guarantee. At that stage Mr Cleary's execution of the guarantee was common ground. On the third day of the trial, Mr Jeans was asked in the witness box to confirm his signature on the guarantee and he refused to do so. He then applied for leave to withdraw his admissions in the pleadings that he had executed the guarantee. The Federal Court Judge held that Mr Jean's claim raised a triable issue but refused the application for leave to amend because of the prejudice to the Bank. The Federal Court dismissed Mr Jean's claims and entered judgment for the Bank on its cross-claim. Mr Jeans sued Mr Cleary, an officer of the Bank, for damages in the Supreme Court alleging that Mr Cleary had fraudulently attested a forged signature on the guarantee and that Mr Jeans had not checked his signature until asked to do so in the witness box having assumed it was genuine. Mr Cleary applied for summary dismissal on the basis of an Anshun estoppel or abuse of process. Her Honour Mathews AJ held that the allegation of fraud excluded an Anshun estoppel and prevented the proceedings being an abuse of process. 22 In Cleary, both Handley JA and Young AJA referred to a passage in Secretary of State of Trade and Industry v Bairstow [2004] Ch 1; [2004] 4 All ER 325 where Morritt VC set out three propositions where collateral attack to an earlier decision is considered an abuse of process. Their Honours extracted at [38] the propositions so far as they are relevant in New South Wales. They are: "(a) a collateral attack on an earlier decision of a court of competent jurisdiction may be but is not necessarily an abuse of process of the court; … (c) If the earlier decision is that of a court exercising a civil jurisdiction then it is binding on the parties to that action and their privies in any later civil proceedings; (d) If the parties to the later civil proceedings were not parties to or privies of those who were parties to the earlier proceedings then it will only be an abuse of the process of the court to challenge the factual findings and conclusions of the judge or jury in the earlier action if (i) it would be manifestly unfair to the later proceedings that the same issues should be relitigated or (ii) to permit such relitigation would bring the administration of justice into disrepute." 23 At [51] Bryson JA stated: "The fact that the challenging party himself led the Federal Court to the earlier decision does not conclusively show that the later collateral challenge is an abuse of process. The facts and circumstances may reveal some good reason why the challenging party took his earlier course, or they may serve to support fully a decision that there is an abuse of process in the second proceedings. The reasons for the change of ground and for the collateral challenge must be considered in whole." 24 Handley JA and Young AJA stated firstly, that the underlying basis of the Federal Court decision to enforce the guarantee was an estoppel by representation, and that decision would not be inconsistent with a decision of the Supreme Court based on the truth; the fact that a litigant has been held liable on the basis of an estoppel in one proceedings does not prevent him relying on the truth against a different party in another proceeding; and since the respondent did not have a full opportunity to litigate the signature issue in the Federal Court because he was estopped from doing so allegedly as a result of relying on the appellant's fraudulent misrepresentation in the attestation clause, there was no Anshun estoppel and it was not an abuse of process to litigate the signature issue in the Supreme Court. 25 Bryson JA, in his minority judgment at [56], decided that the proceedings in the Supreme Court should be "summarily dismissed on the basis that reasonable observers representing the Australian community and its values…would regard it as a scandal." According to Bryson JA, "such an event would tend to bring the administration of justice into disrepute, and the Court should prevent it from happening." 26 In Jeans, the New South Wales Court of Appeal adopted the reasoning in Bairstow in finding that abuse of process can apply where parties to later civil proceedings were not parties to the earlier proceedings. However, "it would only be an abuse of the process of the court to challenge the factual findings and conclusions of the judge or jury in the earlier action if it would be manifestly unfair to a party to the later proceedings that the same issues should be relitigated, or if to permit such relitigation would bring the administration of justice into disrepute." The Sydney Local Court decision 27 On the summary judgment application, the Magistrate Dillon, in his reasons dated 1 March 2007, stated at [32]-[36]: "32. It is also important to consider the principles analysed or distilled by Hunt CJ at CL in Haines (see [20] above) . First, is the issue determined in the earlier case now to be re-litigated by the party who lost the point in that case? Here the point is not raised by Mr May but by another party, Five D. Hunt CJ at CL commented that "The principle does not work in reverse to enable the party who won the issue in the earlier case to prevent it being litigated in the later proceedings by someone who was not a party in the former." On the face of it, the point, so far as it goes, favours Five D. 33. Second, the issue was one which "was necessarily determined in the earlier case, and one of importance to the final result." This point favours Impact. 34. Third, the point must have been "properly argued". There is nothing to suggest that it was not in the Newcastle Local Court: quite the contrary. This point also favours Impact. 35. Fourth, the decision was a final determination. It is not now subject to an appeal. Mr May did not appeal and the time for an appeal has elapsed. This is a key pillar of Impact's argument in favour of the motion. 36. Finally, Hunt CJ at CL stated, "As most of the cases have emphasised, all the circumstances of the determination in the earlier case may be considered, and there can be no definitive statement of the circumstances which will inevitably lead to a finding of abuse of process." When all the circumstances are considered, they favour Impact's application for the reasons I have outlined above but principally because to allow the claim to be maintained would be to create the potential for inconsistent judgments and thus to undermine the integrity of the original proceedings and the court's process generally, an intolerable prospect." 28 What has to be determined is whether it would either be manifestly unfair to the later proceedings that the same issues should be relitigated, or that to permit such relitigation would bring the administration into disrepute. 29 Mr May lost in the earlier Newcastle proceedings. Mr May was not the propounding party in the Sydney Local Court proceedings, Five D was the propounding party. Mr May is the sole director and 50% shareholder of Five D. He is what is known as the "alter ego" of Five D. The central issue in the earlier proceedings was the identity of the party to the November 2003 contract to carry out certain building works at the Mayfield Plaza in Newcastle. Impact was the other contracting party and it was the party who carried out the work. 30 In the earlier Newcastle proceedings Mr May asserted that the correct defendant was either May Company or Five D Ltd. The plaintiff did not seek to add May Company and Five D as defendants to those earlier proceedings. Mr May provided a statement and gave evidence at Newcastle. Mr May's statement dated 11 August 2006 at [15] stated that all representations were made on behalf of May Company up to the date of deregistration, and that Five D Pty Limited became the property owner after that date. He gave evidence in the Newcastle proceedings (t 30) that he applied for deregistration of May Company after July 2005 and that before that date he had always used May Company, or himself as an employee of May Company, as the entity making representations. 31 The issue of who was the other party to the contract was ventilated before the Local Court at Newcastle. A finding has been made that the November 2003 contract was one between Impact and Mr May. That was the view of the Magistrate Dillon in the summary judgment application. It was also the Magistrate's view that the identity of the contracting party was properly argued in the earlier proceedings, and further the Magistrate determined that when all the circumstances were considered, they favour Impact's application for the reasons I have outlined above but principally because to allow the claim to be maintained would be to create the potential for inconsistent judgments and thus to undermine the integrity of the original proceedings and the court's process generally, an intolerable prospect. This latter statement is another way of saying that relitigation would bring the administration of justice into disrepute. 32 It is my view that the decision of the Magistrate Dillon to summarily dismiss Five D's statement of claim as an abuse of process is correct. Firstly, it is manifestly unfair that the same issues should be relitigated; and secondly, to permit relitigation of the earlier Newcastle proceedings would bring the administration into disrepute. There is no error of law. The appeal is dismissed. The decision of His Honour Magistrate Dillon made on 1 March 2007 is affirmed. The summons filed 28 March 2007 is dismissed. 33 If I am wrong, in the exercise of my discretion, I would not remit this matter for hearing in the Local Court as on Mr May's own evidence he had always used May Company to make all representations up to the day that he applied for deregistration of May Company, namely after July 2005. On Mr May's own evidence the company that entered into the contract with Impact "in or about 2003" was May Company not Five D. 34 Costs are discretionary. Costs normally follow the event. The plaintiff is to pay the defendant's costs as agreed or assessed. The Court orders: (1) The appeal is dismissed. (2) The decision of His Honour Magistrate Dillon made on 1 March 2007 is affirmed. (3) The summons filed 28 March 2007 is dismissed. (4) The plaintiff is to pay the defendant's costs as agreed or assessed. ********** 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.