Dealquip Australia Pty Ltd v 33 Electra Pty Ltd [2013] NSWSC 1378

Supreme Court New South Wales

Medium Neutral Citation: Dealquip Australia Pty Ltd v 33 Electra Pty Ltd [2013] NSWSC 1378 Hearing dates: 16 August 2013 Decision date: 16 August 2013 Jurisdiction: Equity Division Before: White J Decision: Refer to para [29] of judgment. Catchwords: PROCEDURE - application to summarily dismiss application for non-party costs orders - summary dismissal sought on the basis that applicant for non-party costs orders failed to comply with court orders as to pleading and failed to duly prosecute claim - whether failure to duly prosecute when administration of applicant intervened Legislation Cited: Real Property Act 1900 (NSW) Cases Cited: Knight v FP Special Assets Limited (1992) 174 CLR 178 Category: Interlocutory applications Parties: Dealquip Australia Pty Ltd (Plaintiff/1st cross-defendant) 33 Electra Pty Ltd (1st Defendant/1st cross-claimant) Geoffrey Shannon (2nd Defendant/2nd cross-claimant) Alexander Guy Sanderson (2nd cross-defendant) Daryl Kaye (3rd cross-defendant) Representation: Counsel: A T McQuillan (Cross-Claimants) M Maconachie (Cross-Defendants) Solicitors: Platinum Lawyers (Cross-Claimants) UTR Law (Cross-Defendants) File Number(s): 2009/287885

Judgment 1HIS HONOUR: By a second amended notice of motion filed on 30 August 2012 and by a notice of motion filed on 3 September 2012, the first and second defendants, 33 Electra Pty Limited and Mr Shannon, sought orders against, amongst others, the directors of the plaintiff, Dealquip Australia Pty Limited (Messrs Sanderson and Kaye) that they pay on the indemnity basis the costs of 33 Electra and Mr Shannon of the proceedings brought by Dealquip. Messrs Sanderson and Kaye were not plaintiffs to the statement of claim. They have been joined as cross-defendants to a cross-claim brought by 33 Electra and by Mr Shannon. Dealquip is in liquidation. 2The applications for costs orders against non-parties came before Young AJ on 15 May 2013. The proceedings were adjourned essentially on grounds that did not concern the application brought by 33 Electra and Mr Shannon against Messrs Sanderson and Kaye. Rather the proceedings were adjourned because it was submitted for another party, against whom such orders were sought, that the case as opened was outside the case previously articulated against that other party. 3Young AJ gave the parties liberty to withdraw submissions that had been filed following a direction of Hallen AsJ (as his Honour then was). His Honour directed that parties might file fresh submissions by 7 June 2013. A registrar had made an order in 2012 requiring the applicants to the notices of motion to serve on the respondents a document in the form of a statement of claim, identifying the bases of their claims for costs. A document purporting to comply with that order was filed on 30 August 2012. The document is described as, "The first and second applicants' submissions in compliance with Hallen AsJ's orders of 23 July 2012". 4 The document as filed included a statement of what was called, "The Applicant's Case against the First and Second Respondents." It was not in the form of a statement of claim. 5There has been some confusion as to precise orders made by Young AJ on 15 May 2013, in particular as to whether or not his Honour directed the filing of amended points of claim. I think the confusion arises from the fact that the submissions to which his Honour was referring did include points of claim. 6The matter came before me on referral from the Duty Judge on 8 August 2013 on the application by Messrs Sanderson and Kaye to summarily dismiss the claims for relief brought by 33 Electra and Mr Shannon in their notices of motion of 30 August and 3 September 2012 for non-party costs orders. 7Not long after the matter was before Young AJ, administrators were appointed to 33 Electra. On 2 July 2013 the solicitors for Messrs Sanderson and Kaye, UTR Law, wrote to the administrators referring to the orders that had been made by Young AJ on 15 May 2013. Those orders included that the matter would be listed before the Registrar on 30 June 2013. That date was amended to 1 July. UTR Law advised the administrators that the matter could not be progressed on 1 July 2013 because there had been no appearance by 33 Electra and there were no lawyers apparently currently instructed by 33 Electra in relation to the proceedings. UTR Law asked for urgent advice from the administrators as to whether or not they proposed to carry on with the proceedings on behalf of 33 Electra. UTR Law stated that if they were not informed of the administrator's intention by 8 July 2013 they would file a motion to be returnable on 15 July 2013 seeking dismissal of the proceedings and an order for costs. 8There was no appearance for 33 Electra when the matter came before me on 8 August 2013. I stood the notices of motion brought by Messrs Sanderson and Kaye over to today and directed service on the administrator. I directed that the administrators be advised that the application might be dealt with today in the absence of 33 Electra if there was no appearance. Alternatively an application for security for costs might be dealt with today. 9On 8 August 2013 I also directed Mr Shannon to file and serve amended points of claim in relation to the non-party costs application, written submissions in support of those amended points of claim and any further affidavit to be relied upon. That order was substantially complied with, although as I deal with later in these reasons, there is contest as to whether any material amendments were made to points of claim and there is an issue as to what consequence should flow if the answer to that is no. 10A second application was brought by Messrs Sanderson and Kaye on 8 August 2013. It sought orders for dismissal of a cross-claim brought by 33 Electra and by Mr Shannon against Dealquip and Messrs Sanderson and Kaye. The cross-claim against Dealquip is stayed by reason of that company having gone into liquidation. The cross-claim was filed on 31 January 2012, but there has been virtually no progress with it since the filing of defences in July 2012. 11The administrators of 33 Electra were notified on Monday of this week of the orders that I had made on 8 August. I had ordered that they be notified of those orders last Friday on 9 August, but apparently due to an administrative oversight that was not done until Monday of this week. The administrator's first response was to raise an issue concerning a claim that had been made by the solicitors for Mr Shannon, Platinum Lawyers, that Platinum Lawyers had taken an assignment of 33 Electra's "litigation rights" with respect to the proceedings. Platinum Lawyers had advised UTR Law of that contention in correspondence of 14 June 2013. However, Platinum Lawyers continue to act for Mr Shannon. They have not sought themselves to be joined as a defendant to the proceedings as an assignee of any chose in action or other assignable interest that either Mr Shannon or 33 Electra might have. 12The solicitors for the administrators advised UTR Law that the purported assignment of the right, title and interest in the proceedings to Platinum Lawyers was a matter requiring the administrator's consideration, and that their client had written to Platinum Lawyers on several occasions seeking additional information but had not received a response. 13On 14 August 2013 UTR Law advised the administrator's solicitors that they had also asked for such information from Platinum Lawyers and had not received a formal response. UTR Law observed, however, that counsel for Mr Shannon had expressly stated in Court that he was not instructed by Platinum Lawyers in their own capacity but by that firm on behalf of Mr Shannon and had indicated that there were problems with the assignment. UTR Law said that they took it that Platinum Lawyers did not purport to have obtained any "right, title or interest in the proposed proceedings" and there was no justification for any further delay. 14The position stated by UTR Law concerning the position of Platinum Lawyers accords with my understanding of that firm's position. The administrators, in correspondence, requested a period of a further 14 days adequately to assess the merits of the proceedings as a whole. The claim brought by 33 Electra is not only a claim for costs orders against Messrs Sanderson and Kaye, but also a claim for damages or compensation under section 74P of the Real Property Act 1900 (NSW) in respect of losses allegedly sustained by 33 Electra by reason of the lodgment of caveats by Dealquip to the title of property which 33 Electra was developing. 15The latter claim is the subject of the cross-claim. The amount claimed is in excess of $10 million. That claim is not only made against Dealquip, but against Messrs Sanderson and Kaye. 16I do not think that there is any real prejudice that would be suffered by the present applicants, Messrs Sanderson and Kaye, if the claims for summary dismissal of 33 Electra's notice of motions and cross-claim are adjourned for at least the 14 days sought by the administrators, and if the application for security for costs is also stood over. I will order that those applications, so far as they concern 33 Electra, be stood over to 3 September, which is the first available day I have for the hearing of the applications, and I will direct that notice be given to the administrator's solicitors accordingly. 17So far as the claims brought by Mr Shannon are concerned, the position is different. Counsel for Messrs Sanderson and Kaye observed that the amended points of claim that were served pursuant to the orders that I made on 8 August 2012 are in the same terms as an earlier document that had been served in August 2012, except for some immaterial changes. 18Counsel also made valid criticisms of the points of claim as not complying with the rules of pleading. The Registrar had ordered that the matters to be relied upon in support of the non-party costs order should be articulated in the form of a statement of claim. That is to say, the matter should be pleaded. That has not been adequately done. The purported amended points of claim is a mixture of submissions, assertions of fact, some of which are material facts, some of which are conclusions, and references to evidence. 19The document refers to the applicant's intention to rely upon three bundles of documents, which I am told consist of hundreds of pages. On the form of the amended points of claim it might be open to the applicants to seek to rely upon any matter that arises from any of the three volumes of documents as justifying the costs order as sought against Messrs Sanderson and Kaye. That is not the intention of the orders. 20It appears that the application for a non-party costs orders is based partly upon the assertion that at all relevant times Dealquip was insolvent, that Messrs Sanderson and Kaye caused Dealquip to commence the proceedings and were the active parties in bringing and maintaining the litigation, and that they stand to receive personal financial benefits from the litigation. Reference was made to Knight v FP Special Assets Limited (1992) 174 CLR 178 at 193. 21The amended points of claim do not plead the material facts by reason of which it is said that Dealquip was insolvent at all material times. Instead, it alleges in a rolled-up way that at all relevant times, to the knowledge of Messrs Sanderson and Kaye, Dealquip was hopelessly insolvent. 22It also appears from the amended points of claim and from the submissions of counsel for Mr Shannon that a further ground upon which the non-party costs order will be sought is that Messrs Sanderson and Kaye knew, or should have known, that Dealquip's case was hopeless. So far as I understand that contention from the amended points of claim, it is based on an allegation that the dealings between Dealquip and 33 Electra that were the subject of Dealquip's allegations in its statement of claim were the subject of a settlement reached between those parties on 28 December 2008. It will be contended that Messrs Sanderson and Kaye swore false affidavits denying the settlement. 23However, it is not clear to me that this is the only ground on which it is said that they ought to have known that Dealquip's claim was hopeless. In submissions counsel referred to the fact that two earlier versions of the statement of claim had been struck out, albeit with liberty to replead. I do not know, and it is not made apparent at all in the amended points of claim, what relevance that has to the contention that Dealquip's claim was hopeless and that Messrs Sanderson and Kaye knew or should have known of that. 24The allegation of the settlement was not supported by a proper pleading. That is to say, there was no pleading in the amended points of claim as to how the settlement was reached, whether or not, for example, it was recorded in writing, nor of its terms. Rather, the amended points of claim simply states that details of the settlement and the circumstances leading to it can be found in certain statements and affidavits and other documents. 25Then the amended points of claim makes allegations that Dealquip's proceedings were an abuse of process, that Messrs Sanderson and Kaye were not frank, either in their evidence or in the allegations made by Dealquip. It is also alleged that Messrs Sanderson and Kaye denuded Dealquip of all its principal assets by means of the setting up of the Dealquip Investment Trust and the transfer of shares in a property holding company to Adetech Pty Limited. There is mixed up in the making of this allegation an assertion that Messrs Sanderson and Kaye sought to defeat an application for security for costs by showing that Dealquip was a solvent company through false evidence. 26These matters are not properly pleaded. The material facts relied upon to support the contentions, which are serious, should be properly pleaded to afford procedural fairness. These are not the only deficiencies in the amended points of claim. 27It is true that no issue was taken with the adequacy of an earlier document that was in substantially the same form that sought to articulate the case against Messrs Sanderson and Kaye before the claim came before Young AJ on 15 May 2013. At that time similar costs orders were sought against solicitors and counsel who had acted for Dealquip. Those applications have been settled. As the matter has had to be adjourned, and because other complications, some of which I have already referred to, will inevitably further delay the hearing of the claim for a costs order against non-parties, it is appropriate that the allegations be properly pleaded. 28However, I do not consider that the claim brought by Mr Shannon for a non-party costs order should be summarily dismissed. Summary dismissal was not sought on the grounds that it was clear there could be no arguable basis for the substance of allegations made in the amended points of claim. The claim for summary dismissal was put on a different basis, namely non-compliance with Court orders and lack of due prosecution of the claim. 29I do not consider there has been such a lack of due prosecution of the claim or non-compliance with Court orders that would justify summary dismissal of the claim. As I have said, I think there has been substantial compliance with the orders that I made on 8 August 2013 and there was considerable doubt before that time as to what exactly was required by the orders made by Young AJ on 15 May 2013. The case has also been disrupted by 33 Electra's having gone into administration. Accordingly, I will dismiss the application for summary dismissal of Mr Shannon's application for a non-party costs order but require him to file and serve a statement of claim pleading the relief claimed and the material facts on which it is based. 30Mr Shannon is also a cross-claimant in the cross-claim brought against Messrs Sanderson and Kaye. He claims to have suffered pecuniary loss by reason of the allegedly wrongful lodgement of the caveats over the title to the subject land. Ultimately, the claim for summary dismissal of his cross-claim was reduced to the non-prosecution of that cross-claim since July 2012. It does not appear that any orders were made for the further progress of that cross-claim with which Mr Shannon failed to comply. It was open to the cross-defendants, as well as to the cross-claimants, to seek to progress the cross-claim. 31Summary dismissal of the cross-claim without a hearing on the merits would not preclude Mr Shannon from instituting a fresh cross-claim which would result in additional costs and additional delay. Moreover, there has been activity, albeit not productive activity, as far as the claims between these parties are concerned, on other aspects of the litigation. I will not summarily dismiss Mr Shannon's cross-claim. 32In the course of submissions today some potential deficiencies were identified in the cross-claim. Counsel for Mr Shannon, who did not draft that pleading, says he wants the opportunity to consider the adequacies of the pleading and I will make orders to provide if any amendments are to be made to the cross-claim an amended cross-claim be filed and served with reasonable promptitude and I will make orders to seek to have Mr Shannon's cross-claim against Messrs Sanderson and Kaye brought forward so it is in a position to be finally dealt with. 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: 19 September 2013