Davidovic v Vesuvius Australia Pty Ltd (No 3) [2017] NSWSC 76

Supreme Court New South Wales

Medium Neutral Citation: Davidovic v Vesuvius Australia Pty Ltd (No 3) [2017] NSWSC 76 Hearing dates: 10 February 2017 Decision date: 15 February 2017 Jurisdiction: Equity Before: Stevenson J Decision: Applicant to be granted leave to be substituted as plaintiff if past costs orders paid and security provided for future costs Catchwords: PRACTICE AND PROCEDURE – application to be substituted as plaintiff – applicant claims to be assignee of the assignee of the cause of action – applicant evidently without means to meet past costs orders and future costs of the proceedings Legislation Cited: Civil Procedure Act 2005 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Davidovic v Vesuvius Australia Pty Ltd [2014] NSWSC 1066 Davidovic v Vesuvius Australia Pty Ltd (No 2) [2016] NSWSC 1679 Trendtex Trading Corporation v Credit Suisse [1982] AC 679 Category: Procedural and other rulings Parties: Velibor (Boris) Davidovic (Plaintiff) Damjan Zugic (Interested Party/Applicant) Vesuvius Australia Pty Ltd (First Defendant/Respondent) Verekers Lawyers (Second Defendant) Representation: Counsel: J R Young (Interested Party/Applicant) P Russell (First Defendant/Respondent)

Solicitors: James Legal (Interested Party/Applicant) Pikes & Verekers Lawyers (First Defendant/Respondent) File Number(s): SC 2013/385037

Judgment 1. Mr Damjan Zugic seeks to be substituted as plaintiff in these proceedings. 2. There is a lengthy background to the application. 3. Between 2007 and 2010, V&M Davidovic Pty Ltd and the defendant, Vesuvius Australia Pty Ltd, had dealings concerning land then owned by V&M in Unanderra. 4. On 8 April 2010, Vesuvius commenced proceedings against V&M to recover a deposit it had paid to V&M in the course of those dealings. Ultimately, Vesuvius obtained summary judgment in respect of that claim. 5. In those proceedings, V&M brought a cross-claim seeking damages against Vesuvius arising out of the 2007 to 2010 dealings. The claim now sought to be prosecuted in these proceedings, in substance, replicates that cross-claim. 6. On 15 February 2012, a receiver was appointed to V&M. The receiver was not prepared to prosecute the cross-claim. It was dismissed without any hearing on the merits. 7. By deed dated 3 August 2012, the receiver of V&M assigned to Mr Velibor and Mr Miroslav Davidovic, all of V&M's interest in that cross-claim. Without disrespect, I will refer to those gentlemen by the names by which they are commonly known, Boris and Mick. Boris and Mick are father and son. Both were directors of V&M. 8. Mick became bankrupt on 3 December 2013. 9. Several weeks later, on 24 December 2013, and in purported exercise of his rights under the 3 August 2012 deed, Boris commenced these proceedings. The statement of claim was filed on 24 December 2013. 10. On 28 March 2014 Kunc J struck out that statement of claim but granted leave to re-plead. 11. Boris sought leave to file an amended statement of claim. He named Vesuvius and Mick as defendants. 12. On 7 August 2014, Darke J granted Boris leave to file an amended statement of claim on various terms (including that Mick's trustee in bankruptcy be substituted for Mick as second defendant). Darke J ordered that the proceedings be stayed until $95,728.75 (being costs ordered against V&M in favour of Vesuvius in the 2010 proceedings, and duly assessed) was paid to Vesuvius: Davidovic v Vesuvius Australia Pty Ltd [2014] NSWSC 1066. 13. The next month, September 2014, Boris, having been diagnosed with prostate cancer, returned to his native Serbia. He will not return to Australia. He has since been made bankrupt. 14. By deed dated 8 May 2015, Mick's trustee in bankruptcy purported to assign Mick's interest in the 3 August 2012 deed to Mr Zugic. 15. By a further deed made around the same time, Boris purported to assign his rights under the 3 August 2012 deed to Mr Zugic. 16. Mr Zugic is Boris's grandson and Mick's nephew. 17. In an affidavit that Mr Zugic swore in support of his application to be substituted as plaintiff, Mr Zugic explained the reasons he took this step as follows: "Seeing the financial devastation suffered by my extended family that I understood were a consequence from the actions of the defendant, I agreed in May 2015 to take the place of the plaintiff in these proceedings so that there remained an opportunity to pursue the damages as specified in the Amended Statement of Claim annexed to the Notice of Motion". 1. The "financial devastation" to which Mr Zugic referred included the bankruptcy of his grandfather, Boris, and his uncle, Mick, and also the loss by members of his "extended family" of various properties (including the Unanderra properties owned by V&M). 2. Despite executing the May 2015 deeds, (which imposed on Mr Zugic an obligation to notify Vesuvius of the assignments contained in them) Mr Zugic took no steps in the proceedings until September 2016. 3. Indeed, nothing happened in the proceedings between Darke J's orders of 7 August 2014 and 26 August 2016, when Vesuvius filed a notice of motion seeking to have the proceedings dismissed. 4. Only then did Mr Zugic give Vesuvius notice of the purported assignments of May 2015, and then only by filing a notice of motion on 27 September 2016 seeking to be substituted as plaintiff. 5. The only explanation Mr Zugic gave in his affidavit for the delay was that it was necessary to "reassemble" documents relevant to the proceedings which had become "disorganised due to being moved on four occasions" and because Mick and other witnesses had only recently indicated their preparedness to assist to Mr Zugic. 6. Mr Zugic said that: "I admit that the receipt of [Vesuvius's] Notice of Motion [of 26 August 2016] to strike out these proceedings has had a galvanising effect on my determination to prosecute these proceedings". 1. Mr Zugic's notice of motion of 27 September 2016 was heard by Darke J (as Duty Judge) on 11 October 2016. Darke J struck out the motion on the basis that it was incompetent by reason of the stay that his Honour granted on 7 August 2014 (see [12] above). 2. On 25 November 2016, I dismissed a subsequent notice of motion filed by Mr Zugic on 25 October 2016 for similar reasons: Davidovic v Vesuvius Australia Pty Ltd (No 2) [2016] NSWSC 1679. 3. On or about 2 December 2016, Mr Zugic caused the $95,728.75 referred to in Darke J's order (and interest) to be paid to Vesuvius. 4. Thus, the stay ordered by Darke J on 7 August 2014 is lifted. 5. Now, by notice of motion filed on 5 December 2016, Mr Zugic presses his application to be substituted as plaintiff. 6. In response, Vesuvius pressed its application that the proceedings be dismissed. 7. An issue arose as to the Court's power to order that Mr Zugic be substituted as plaintiff. 8. In my opinion, the Court has such power. 9. First, the Court has inherent jurisdiction to control its process. 10. Second, s 64 of the Civil Procedure Act 2005 (NSW) provides that, at any stage of the proceedings, the Court may order that any document in the proceedings may be amended. 11. Third, r 6.24 of the Uniform Civil Procedure Rules 2005 (NSW) provides the Court may order that a person be joined as a party if it is necessary for the determination of all matters in dispute in the proceedings. 12. Fourth, UCPR r 6.27 provides that a person who is not a party may apply to the Court to be joined as a party, either as a plaintiff or a defendant. 13. I see the latter rule as providing an independent basis upon which I could make the order sought by Mr Zugic. 14. Mr Russell, who appeared for Vesuvius, submitted that the validity of the various assignments to which I have referred was problematic. Mr Russell submitted that neither Boris, Mick or Mr Zugic had a "genuine commercial interest" in the taking of the assignments and their pursuing of the assigned rights for their own benefit in the sense described by authorities such as Trendtex Trading Corporation v Credit Suisse [1982] AC 679 at [702F-703G]. 15. I do not consider it appropriate for me to determine any such issue on an application such as this. 16. I take the same view as was expressed by Darke J at [43] of his 7 August 2014 judgment that this is not a matter which Mr Zugic is required to demonstrate at this stage of the proceedings. 17. Mr Young, who appeared for Mr Zugic, accepted that there had been a "measure of delay" in the bringing of Mr Zugic's application. I have set out the explanation Mr Zugic gave for the delay above. It is not entirely satisfactory. However, I see force in Mr Young's submission that the fact that Mr Zugic has (from whatever source) been able to organise payment to Vesuvius of the amounts necessary to lift the 7 August 2014 stay (in total, some $113,000) is testament to the commitment that Mr Zugic (and, in all probability, members of his extended family) now has to embrace and prosecute the proceedings if leave is granted. 18. On the other hand, there is force in Mr Russell's submission that Vesuvius has been "vexed" with this dispute over many years. In addition to the 2010 proceedings and these proceedings, both Boris and a company called Obnova Concrete Pty Ltd, have brought proceedings against Vesuvius (both of which have been summarily dismissed) arising from the same background. 19. Mr Russell submitted that the orders sought by Mr Zugic "in reality represent the commencement of a fresh, fifth set of proceedings against [Vesuvius] and that: "It would appear that Mr Zugic has deliberately not informed [Vesuvius] of the alleged assignments. It would be unfair to [Vesuvius] to be denied a valid or proper limitation defence by an order substituting Mr Zugic as Plaintiff in these circumstances". 1. The question of whether Mr Zugic "deliberately" refrained from informing Vesuvius of the May 2015 assignments was not a matter tested in cross-examination and I am not prepared to make any findings to that effect. 2. It is true that were these proceedings to be dismissed, any fresh proceedings instituted by Mr Zugic to prosecute the same cause of action would likely be out of time. 3. However, I do not see this as denying Vesuvius a "valid or proper limitation defence", let alone (to adopt the language used in Mr Russell's oral submissions) to "trample over [Vesuvius's] right to plead limitation". 4. Although Mr Russell drew attention to a statement attributed to V&M's receiver in the recitals to the 3 August 2012 deed that it was not in the interests of V&M to continue the 2010 proceedings "in light of prospective substantial liabilities that might follow", he did not submit that there was no substance in the claim Mr Zugic wishes to prosecute. On the other hand, Mr Young submitted that the claim, if successful, will be of great value. 5. Taking all these matters into consideration, my conclusion is that the justice of the case requires that Mr Zugic be given the leave he seeks. 6. However, the position of Vesuvius so far as concerns costs must be protected. 7. In substance, all of the costs incurred by Vesuvius so far in these proceedings have been wasted. Although the proceedings were commenced in December 2013, it is only now that the final form of the pleadings will be settled. Indeed, in the course of these proceedings, costs orders have been made in favour of Vesuvius by Kunc J, Darke J and by me. None of those costs orders has been satisfied. 8. In those circumstances the grant of leave will be conditional upon Mr Zugic paying, or procuring the payment of Vesuvius's costs of the proceedings to date, which costs I propose to specify under s 98(4)(c) of the Civil Procedure Act. 9. Further, on the evidence before me, Mr Zugic, who is only 20, has no means of his own to meet costs orders. 10. In his affidavit he said that: "I joined MDL Logistics Pty Ltd with my brother a year ago. The business has cash flow to provide me with a minimum of $5500 per month that I can use to pay for legal costs." 1. However, financial statements produced by MDL Logistics Pty Ltd for the financial year ended 30 June 2016 show that it has a substantial deficiency of liabilities over assets, that its profit and loss account shows that the only income of the company is sales revenue of $71,649.64 and that after taking into account expenses (which do not include any salary to Mr Zugic or his brother) MDL's profit for the year was only $2,250. 2. Mr Zugic has adduced no evidence that he has any assets. 3. Thus, it appears that Mr Zugic has little or no capacity to meet any costs order. 4. It is also evident from Mr Zugic's statement set out at [17] that he wishes to pursue these proceedings for the benefit of his family generally, and not merely in his own interests. 5. For that reason, leave will also be conditional upon Mr Zugic providing security for the future costs of Vesuvius in these proceedings and for such security to be paid within a specified time after its assessment. 6. I will now direct the parties to confer and agree on a regime whereby I may specify a figure for Vesuvius's costs to date and fix an amount to be provided for security for Vesuvius's costs of the proceedings from now on. 7. Once those matters are attended to, and provided they are attended to speedily, I will grant Mr Zugic the leave he seeks.