Supreme Court New South Wales Medium Neutral Citation: Perera v Genworth Financial Mortgage Insurance Pty Ltd [2018] NSWSC 448 Hearing dates: 10 April 2018 Date of orders: 10 April 2018 Decision date: 10 April 2018 Jurisdiction: Common Law Before: Garling J Decision: (1) Dismiss the proceedings constituted by the Amended Statement of Claim filed 26 October 2017. (2) Order the plaintiff to pay the defendant's costs. (3) Grant leave to the defendant to file and serve any further Notice of Motion seeking further orders for costs on or before 5pm Tuesday, 17 April 2018. Direct that a copy of any such material be provided to my Associate. (4) Order the plaintiff to file and serve any material upon which he proposes to rely, including submissions in opposition to such an order, by 5pm 1 May 2018. Direct that he deliver a copy of that material to my Associate. (5) Reserve judgment on any such application, and order that it be disposed of on the papers unless the Court restores the matter to the list. (6) Grant the parties liberty to apply on one day's notice with respect to those subsequent orders. Catchwords: TORTS – malicious prosecution – question of the existence of malicious prosecution in certain civil proceedings – whether the four elements of malicious prosecution could be established CIVIL PROCEDURE – application by defendant to dismiss or strike out Amended Statement of Claim pursuant to UCPR r 13.4 – no reasonable cause of action disclosed – elements of the tort not established – application granted – proceedings dismissed Legislation Cited: Uniform Civil Procedure Rules 2005 Cases Cited: A v State of New South Wales [2007] HCA 10; (2007) 230 CLR 500 Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552 Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 Eleizer v The Owners Strata Plan No. 51682 [2017] NSWSC 783 General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 Genworth Financial Mortgage Insurance Pty Limited v Hodder Rook & Associates Pty Ltd [2010] NSWSC 1043 Genworth Financial Mortgage Insurance Pty Limited v Hodder Rook & Associates Pty Ltd [2017] NSWSC 639 Genworth Financial Mortgage Insurance Pty Limited v Hodder Rook & Associates Pty Ltd [2017] NSWSC 640 Hodder Rook & Associates Pty Ltd v Genworth Financial Mortgage Insurance Pty Limited [2011] NSWCA 279 Perera v Genworth Financial Mortgage Insurance Pty Limited [2015] NSWSC 1357 Perera v Genworth Financial Mortgage Insurance Pty Ltd [2017] NSWCA 19 Sahade v Bischoff [2015] NSWCA 418 Spencer v The Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118 Watiwat v Dixon [2017] NSWSC 360 Texts Cited: Not Applicable Category: Principal judgment Parties: Madura Perera (P) Genworth Financial Mortgage Insurance Pty Ltd (D) Representation: Counsel: Self-represented (P) R Mansted (D) Solicitors: Self-represented (P) Hicksons Lawyers (D) File Number(s): 2017/295462 Publication restriction: Not Applicable EX TEMPORE Judgment 1. By an Amended Statement of Claim filed on 26 October 2017, Mr Madura Perera sued Genworth Financial Mortgage Insurance Pty Limited ("Genworth"), claiming damages for malicious prosecution. Mr Perera sought an order in the Amended Statement of Claim that Genworth pay him $1.675M. It will be convenient to call these proceedings "the 2017 proceedings". 2. The claim for malicious prosecution related to underlying proceedings brought by Genworth in 2008. It is necessary to sketch the background of those proceedings. Underlying Proceedings 1. Hodder Rook & Associates Pty Ltd ("HRA") was a valuation company which provided property valuations to its clients. Some of its clients included financial institutions. Genworth is a mortgage insurer providing insurance to financial institutions in the event of loan defaults. Valuations prepared by HRA are used from time to time by organisations such as Genworth for the purpose of their underwriting. 2. Mr Perera, by 1 July 2008, was the sole director and shareholder of HRA. On 2 July 2008, Genworth commenced proceedings in this Court against HRA, being proceedings numbered 2008/290472 ("the 2008 proceedings"). Genworth's claim, which was in respect of the valuations of eight separate properties, was that HRA had been negligent and that Genworth had suffered economic loss as a consequence of those negligent valuations. 3. As it transpired, HRA were indemnified by a professional indemnity insurer with respect to three of the eight valuations. A firm of solicitors, DLA Phillips Fox, who had been instructed for HRA by its professional indemnity insurer in respect of those three valuations, negotiated a settlement with Genworth. This settlement was satisfactory to Genworth and the professional indemnity insurers of HRA. Consequently DLA Phillips Fox ceased to act for HRA. 4. On 18 August 2009, an Amended Statement of Claim by Genworth was filed with respect to the remaining five valuations. HRA engaged a firm of solicitors, Carneys, to act for it. On 4 May 2010, Carneys' solicitors ceased to act for HRA and Mr Perera represented HRA thereafter in his capacity as sole director of the company. 5. The 2008 proceedings were heard by Einstein J in the period from 6 September 2010 until 8 September 2010. On 15 September 2010, Einstein J handed down judgment in favour of Genworth for the reasons which he published: see Genworth Financial Mortgage Insurance Pty Ltd v Hodder Rook & Associates Pty Ltd [2010] NSWSC 1043. 6. HRA appealed against that judgment and on 30 September 2011, the Court of Appeal delivered judgment in favour of HRA, allowing the appeal and remitting the proceedings back to the Supreme Court for hearing. 7. The reasons of the Court of Appeal are to be found in Hodder Rook & Associates Pty Ltd v Genworth Financial Mortgage Insurance Pty Limited [2011] NSWCA 279. By the time that the Court of Appeal judgment was delivered, HRA, having been the subject of insolvency proceedings commenced by the Australian Taxation Office, had been placed into liquidation. 8. In light of that liquidation, northing further transpired in Court in the 2008 proceedings. 9. In 2017 Mr Perera applied by Notice of Motion to be added as a second defendant to the 2008 proceedings. That application was dismissed by Black J. At the same time, Black J heard and determined a Notice of Motion filed by Genworth which sought leave to discontinue the 2008 proceedings, being its claim for damages against HRA, with no order as to costs. 10. His Honour granted leave to Genworth to discontinue, and made no order as to costs as and from the date when HRA went into liquidation. Black J's reasons for disposing of the motion brought by Mr Perera and that brought by Genworth are to be found in the decisions of Genworth Financial Mortgage Insurance Pty Limited v Hodder Rook & Associates Pty Ltd [2017] NSWSC 639 and Genworth Financial Mortgage Insurance Pty Limited v Hodder Rook & Associates Pty Ltd [2017] NSWSC 640. 11. On 12 August 2017, HRA was deregistered. Other Proceedings 1. In addition to the 2008 proceedings which I have just described and the 2017 proceedings, I should note that in 2014 Mr Perera also commenced proceedings against Genworth alleging that Genworth had acted negligently in commencing the HRA proceedings thereby, causing him loss. To this claim he added a claim in defamation ("the 2014 proceedings"). 2. The 2014 proceedings were commenced in October 2014. On 18 September 2015, Slattery J delivered judgment summarily dismissing those proceedings, for the reasons which he gave: Perera v Genworth Financial Mortgage Insurance Pty Limited [2015] NSWSC 1357. 3. Mr Perera appealed against the judgment of Slattery J in the 2014 proceedings. His appeal was heard by the Court of Appeal in December 2016. On 16 February 2017, the Court of Appeal delivered judgment and made orders which had the effect of dismissing Mr Perera's claim in negligence against Genworth, but permitting him to continue his proceedings in defamation. 4. The Court of Appeal's reasons are to be found in Perera v Genworth Financial Mortgage Insurance Pty Ltd [2017] NSWCA 19. Present Proceedings 1. The current Notice of Motion (which is an Amended Notice of Motion) was filed by Genworth on 8 November 2017 in the 2017 proceedings. It seeks the following orders with respect to the 2017 proceedings: 1. an order that the plaintiff's claim be dismissed pursuant to r 13.4(1)(b) of the Uniform Civil Procedure Rules ("UCPR"); 2. an order that the plaintiff's claim be dismissed pursuant to r 13.4(1)(a) of the UCPR; 3. in the alternative to each of (1) and (2) an order in the Court's inherent jurisdiction to dismiss the plaintiff's amended statement of claim. 1. Other alternative orders were sought including an order for costs. Applicant's Submissions 1. Genworth, the applicant on the Motion, submitted that whilst it may be controversial in this jurisdiction as to whether malicious prosecution is available in relation to foundational civil proceedings such as the 2008 proceedings, as distinct from criminal prosecutions, if such a cause of action exists, then at the least it must have four essential elements. That submission is made by analogy with the essential elements of the tort of malicious prosecution brought in respect of foundational criminal proceedings. 2. The four elements of the tort of malicious prosecution are clear: see A v State of New South Wales [2007] HCA 10; (2007) 230 CLR 500. In that decision at [1] the plurality of the High Court (Gleeson CJ, Gummow, Kirby, Hayne, Heydon and Crennan JJ) held that there are four components which must be established, namely: 1. that proceedings of the kind to which the tort of malicious prosecution applies were initiated against the plaintiff by the defendant; 2. that the proceedings terminated in favour of the plaintiff; 3. that the defendant, in initiating or maintaining the proceedings, acted maliciously; and 4. that the defendant acted without reasonable and probable cause. 1. By reference to these four criteria, Genworth first submitted on this Motion that proceedings were never initiated by it against the plaintiff, Mr Perera. It submitted that the foundational proceedings, being the 2008 proceedings, were commenced only against HRA, a corporation which it was entitled to lawfully sue, and that at no time was Mr Perera ever sued in his name by Genworth in the 2008 proceedings or any other proceedings. 2. To the extent that confirmation of this position is necessary, Genworth drew attention to the fact that Mr Perera, of his own Motion, sought to be joined as a second defendant to the proceedings. This Notice of Motion was, as previously stated, rejected by Black J in 2017. 3. Secondly, Genworth submitted that, since Mr Perera was not a party to the 2008 proceedings, these foundational proceedings could not be said to have terminated favourably to Mr Perera. Genworth added to that submission that the proceedings also could not be said to have terminated favourably to HRA as they were discontinued with the leave of the Court by reason of the fact that HRA was in liquidation. Leave to proceed against HRA had not been granted and it was unlikely that leave would be granted as HRA was shortly to be deregistered. In other words, there was no favourable termination of the proceedings by the Court granting leave to discontinue. 4. As to the third and fourth elements of the tort of malicious prosecution, Genworth submitted that, as a matter of fact, it had a reasonable basis to commence proceedings and that at no time did it act maliciously. Respondent's Submissions 1. Mr Perera submitted that, although he was not a party to the 2008 proceedings, as he was the only director and the only shareholder of HRA who was conducting the litigation, he should be regarded as having been a party to the proceedings. 2. Mr Perera drew the Court's attention to the provisions of r 7.2 of the UCPR which noted that where a director or authorised person seeks to commence or carry on proceedings in this Court on behalf of a company and is authorised by a resolution of the directors so to do, the director must file an affidavit setting out, amongst other things, the basis of that authority, and that the director is aware that he or she may be liable to pay some or all of the costs of the proceedings. 3. Mr Perera submitted that, having filed such an affidavit, he was at all times in the 2008 proceedings at risk of having an order for costs made against him. He accepted that, in fact, in the events which occurred no order for costs was ever sought against him, nor was one ever actually made, and that the proceedings concluded without any order for costs being made against HRA or himself. He accepted that the order for costs made by Black J in consequence of his own failed Motion to be joined to the proceedings is not relevant to this submission. But, he seeks to argue by analogy with cases such as Sahade v Bischoff [2015] NSWCA 418, that there is no reason to prevent his being regarded as a party to the 2008 proceedings, and that therefore he is entitled to bring this suit. 4. Mr Perera also argued that because he was the valuer responsible for the preparation of the valuations which were claimed to be negligent by Genworth, he was and is at risk of suffering economic loss and damage by such proceedings either because professional indemnity insurers may decline to insure him in the future, or else because the relevant regulatory authorities may decide, based upon claims of negligence in the 2008 proceedings, to revoke his licence to be a valuer. 5. Mr Perera submitted that, because the plaintiff, Genworth, discontinued the proceedings, the Court would be entitled to find that the outcome was favourable to HRA. 6. He submitted that by reference to expert evidence and the fact that, ultimately, a significant number of the claims made by Genworth were discontinued, there was a prima facie case that Genworth was acting maliciously and without reasonable or probable cause. 7. Finally, Mr Perera submitted that, by reference to the well-known principles restricting a grant of summary dismissal at an interlocutory stage, this Court would be loath to grant interlocutory relief of the kind which Genworth claimed on this Notice of Motion. Discernment 1. I have carefully considered all of the evidence and all of the submissions which have been put by both parties, and it is now necessary for me to turn my mind to a consideration of the legal principles which underlie the exercise of the Court's power to summarily dismiss proceedings pursuant to r 13.4 of the UCPR. That rule permits the Court to summarily dismiss proceedings if those proceedings are frivolous or vexatious or if no reasonable cause of action is disclosed, or if the proceedings are an abuse of the process of the Court. 2. It is to be recalled that the Amended Notice of Motion relies, in the alternative, on the grounds that no reasonable cause of action is disclosed in the Amended Statement of Claim or that the proceedings are frivolous or vexatious. 3. In Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 at 91 Dixon J said: "A case must be very clear indeed to justify the summary intervention of the Court to prevent a plaintiff submitting his case for determination in the appointed manner by the Court with or without a jury. The fact that a transaction is intricate may not disentitle the Court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the Court to dismiss the action as frivolous and vexatious and an abuse of process." 1. A number of other authorities have since then applied that principle in the context of the summary disposal of cases: see General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 128-9; Agar v Hyde [2000] HCA 41; (2000) 201 CLR 552. 2. In 2010, the High Court of Australia emphasised the importance of that authority in Spencer v The Commonwealth of Australia [2010] HCA 28; (2010) 241 CLR 118. In a joint judgment, French CJ and Gummow J said this at [24]: "The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings failed to disclose a reasonable cause of action or on the basis that the action is frivolous or vexatious or an abuse of process. The same applies where such disposition is sought in a summary judgment application supported by evidence" 1. I am conscious of the limited circumstances in which this Court ought exercise its power under r 13.4 of the UCPR: the circumstances must be very clear, and in exercising the power, the Court must proceed cautiously. 2. As I have previously said, I have listened carefully to the submissions put by Mr Perera. I accept that it is inappropriate for me on this interlocutory application to determine as a final matter whether there is or is not a cause of action available for malicious prosecution arising out of underlying civil proceedings as distinct from criminal proceedings. 3. I prefer to leave that question until it is necessary for it to be determined in the course of a fully argued case. In taking this approach I follow what I determined to be an appropriate course in Eliezer v The Owners Strata Plan No. 51682 [2017] NSWSC 783 and the course followed by Ward CJ in Eq in Watiwat v Dixon [2017] NSWSC 360 at [46]-[47]. 4. However, it is quite clear that if such a tort exists, then coherently with the tort as it exists with respect to underlying criminal proceedings, it is essential that it be demonstrated that the foundational proceedings (being the proceedings to which the tort applies) were initiated against the plaintiff in these proceedings by the defendant in these proceedings. That is to say that the underlying or foundational proceedings must necessarily have been commenced by Genworth against Mr Perera. It is beyond argument, in my view, that as a matter of fact that did not occur. 5. The 2008 proceedings were commenced by Genworth against HRA. It was a corporation. It was liable to be sued in that name, and it alone was liable to meet any verdict for damages if such a case brought by Genworth was successful. Mr Perera was not a party to those proceedings at any time and, on the only occasion when he sought to be made a party, that application was rejected by the Court. 6. It does not matter, as it seems to me, that Mr Perera, in choosing as the director to carry on the litigation by being authorised to represent the company, may have hypothetically been at risk of an order for costs. No such costs order was made. No such order was sought by Genworth against Mr Perera and it seems to me that that hypothetical prospect is a matter of no consequence at all in determining whether the elements of the tort of malicious prosecution have been made out. It is an accepted matter of practice and procedure that in some circumstances a person who is not a party to proceedings may be liable for costs without becoming a party. 7. I must also say that I prefer the view, expressed in the lucid and clear reasons of Black J in Genworth v Hodder Rook & Associates Pty Ltd [2017] NSWSC 640 in granting leave to discontinue, that in effect the proceedings had not terminated favourably to HRA. As his Honour makes plain, the basis upon which Genworth was granted leave to discontinue the proceedings was because of the futility of continuing proceedings against a company which by then was in litigation, had no insurance coverage and was soon to be deregistered. Further, as his Honour added, the liquidator had determined that he would not carry on the proceedings. 8. If I had to determine this question as to whether the proceedings had terminated favourably to HRA, I would have determined that they had not been determined favourably to HRA. However, it is unnecessary for me to determine that question because, on any view, if Mr Perera was not a party to those proceedings, which I have determined is a matter of fact beyond argument, then it is not open to him to argue that the proceedings had terminated in his favour. 9. It will be observed from these remarks that I have formed the clear view that the claim by Mr Perera for damages for malicious prosecution in these proceedings against Genworth is incapable of succeeding. He has failed to demonstrate the existence in his favour of such a cause of action and it is inevitable that the proceedings as presently constituted must fail. In those circumstances, I regard this as a very clear case for the Court to intervene by way of summary disposal. 10. After all, as would be obvious, the continuation of these proceedings will only engender significant costs and be a burden to Genworth thereby causing it prejudice. 11. In all of the circumstances I am well satisfied that the claim by Mr Perera for damages for malicious prosecution against Genworth is ill-conceived, and discloses no reasonable cause of action. Its continuation is frivolous and vexatious and accordingly it ought be dismissed. 12. In light of those circumstances I grant the orders sought in the Amended Notice of Motion. Orders 1. I make the following orders: 1. Dismiss the proceedings constituted by the Amended Statement of Claim filed 26 October 2017. 2. Order the plaintiff to pay the defendant's costs. 3. Grant leave to the defendant to file and serve any further Notice of Motion seeking further orders for costs on or before 5pm Tuesday, 17 April 2018. Direct that a copy of any such material be provided to my Associate. 4. Order the plaintiff to file and serve any material upon which he proposes to rely, including submissions in opposition to such an order, by 5pm 1 May 2018. Direct that he deliver a copy of that material to my Associate. 5. Reserve judgment on any such application, and order that it be disposed of on the papers unless the Court restores the matter to the list. 6. Grant the parties liberty to apply on one day's notice with respect to those subsequent orders. ********** 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: 12 April 2018