Ansa Enterprises Pty Ltd v Australian Finance Group Ltd - [2021] WASC 233

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   ANSA ENTERPRISES PTY LTD -v- AUSTRALIAN FINANCE GROUP LTD [2021] WASC 233
CORAM:   REGISTRAR GRIFFIN
HEARD:   21 JUNE 2021
DELIVERED          :   14 JULY 2021
PUBLISHED           :   14 JULY 2021
FILE NO/S:   CIV 2184 of 2020
BETWEEN:   ANSA ENTERPRISES PTY LTD
First Plaintiff
ANDONIO ESPOSITO
Second Plaintiff
AND
AUSTRALIAN FINANCE GROUP LTD
Defendant

Catchwords:

Application for permanent stay of proceedings - Application for temporary stay of proceedings - Application for security of costs - Whether subsequent action seeks to re-litigate earlier action

Legislation:

Corporation Act 2001 (Cth)
Rules of the Supreme Court 1971 (WA)

Result:

Defendant's application for permanent stay dismissed
Action temporarily stayed until plaintiffs make payment into court of an amount being an estimate of the defendant's costs from earlier action

Defendant's action for security of costs successful
Plaintiffs ordered to provide security for costs

Category: B

Representation:

Counsel:

First Plaintiff	:	Mr T Galic
Second Plaintiff	:	Mr T Galic
Defendant	:	Mr C G Hicks

Solicitors:

First Plaintiff	:	TGC Lawyers
Second Plaintiff	:	TGC Lawyers
Defendant	:	Herbert Smith Freehills

Case(s) referred to in decision(s):

Ansa Enterprises Pty Ltd v Australian Finance Group Ltd [2020] WASC 378
Brocx v Hughes (2010) 41 WAR 84
Patrick Jebb as trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [2019] WASC 121

REGISTRAR GRIFFIN:

This is the defendant's application by chamber summons dated 30 April 2021 and amended chamber summons dated 8 June 2021 seeking orders that:
1)Pursuant to the court's inherent jurisdiction, this action be permanently stayed as an abuse of process.
2)In the alternative to order 1, this action be stayed until the plaintiffs pay $54,813.36 into court, that amount being the estimated likely taxed costs of the defendant that the plaintiffs were ordered to pay in proceeding CIV 2675 of 2014.
3)Further, or in the alternative to 1 above:
a)pursuant to s 1335 of the Corporations Act 2001 (Cth) and O 25 of the Rules of the Supreme Court 1971 (WA), within 14 days from the date of this order, the plaintiffs give security for the defendant's costs of the action up to and including the giving of discovery in the sum of $30,000, by way of either payment of that amount into court or by way of an unconditional bank guarantee in favour of the defendant from an Australian trading bank;
b)the action be stayed until security is provided in accordance with order 3(a) above;
c)in the event that the plaintiffs do not give security by the date stipulated in order 3(a) above, the defendant has liberty to apply for further or other relief;
d)the defendant has liberty to apply for further security following the date on which it files its affidavit of discovery, or in the event it considers that the amount of the security provided in order 3(a) is inadequate.
4)The plaintiffs pay the defendant's costs of this application.

Outcome

For the reasons below, I find that:
1)The defendant's application for a permanent stay is dismissed.
2)This action be stayed until the plaintiffs pay $54,813.36 into court, that amount being the estimated likely taxed costs of the defendant that the plaintiffs were ordered to pay in proceeding CIV 2675 of 2014.
3)The plaintiffs to provide security for costs as sought in order 3 of the defendant's chamber summons and the action is to be stayed until that occurs.
I have outlined proposed orders to give effect to this outcome at the conclusion of these reasons.

Evidence and submissions

The defendant relies upon submissions filed on 8 June 2021 and an affidavit of David William John filed on 30 April 2021 (John Affidavit).
In response, the plaintiffs rely upon submissions filed on 10 June 2021 and an affidavit of Andonio (Anthony) Esposito also filed on 10 June 2021 (Esposito Affidavit).
Both plaintiffs and defendant refer to an earlier action involving the same parties – CIV 2675 of 2014. I will call that action the 'Old Action' and the action in which these applications are made, the 'Current Action'.
The defendant sets out applicable legal principles in its submissions. plaintiffs' counsel indicated that no issue was taken with respect to the correctness of the applicable legal principles.

The actions

It is helpful to set out some background about the Old and Current Actions.
Both actions involve the same parties in the same capacities. The plaintiffs are Ansa Enterprises ACN 128 202 399 (Ansa) and Anthony Esposito (Esposito). The defendant is Australian Finance Group Ltd ACN 066 385 822 (AFG).
The defendant's submissions set out the parties to the actions, and their relationships to one another:
11. AFG is an ASX-listed company that carries on the business of mortgage broker aggregation: John Affidavit [8]. It acts as an intermediary between lenders and a network of 'member brokers' who offer loans to their customers: John Affidavit [10].
12. The Second Plaintiff, Mr Esposito, is the sole director and beneficial owner of the First Plaintiff, Ansa Enterprises Pty Ltd: John Affidavit at [7]. At the relevant times, Mr Esposito was a mortgage broker, and Ansa Enterprises the company through which he conducted business: John Affidavit at [12]-[13].
13. Until about February 2013, Ansa Enterprises had a contract with St James Finance Corporation Pty Ltd (SJFC) to provide mortgage brokering services to SJFC: John Affidavit [12]-[13]. SJFC is a 'member broker' of AFG: John Affidavit [11]. There is (and was) no contractual relationship between AFG and either Ansa Enterprises or Mr Esposito.[1]
[1] Defendant's submissions in support of its application filed 8 June 2021 [10] - [13].
This background was not disputed at the hearing of this application.

Permanent stay - general principles

The jurisdiction to stay an action arises from the court's inherent power to control its own proceedings to prevent an abuse of process. The parties' submissions on this point are directed to whether the Current Action is an abuse of process by reason of it being with respect to the same or substantially the same subject matter.
The defendant refers to and relies upon the decision of this court in Brocx v Hughes (Brocx) with respect to the applicable principles.[2]
[2] Brocx v Hughes (2010) 41 WAR 84, 87 - 88 [13] - [16] (Brocx).

Permanent stay - conduct

The defendant contends that the plaintiffs' conduct of the Old Action was contumacious within the meaning of Brocx and points both to the dismissal of the Old Action and the reasons for that, together with delays in the Current Action, namely the late filing of submissions in opposition to the defendants' costs application in the Old Action and (as at the date of its written submissions) the fact that no evidence had been filed with respect to this application.[3]
[3] Defendant's submissions in support of its application filed 8 June 2021 [19]; In the context of an application made partly as a result of delays on the part of the plaintiff, I note that the plaintiffs' affidavit was due for filing on 21 May 2021 and was in fact filed on 10 June 2021, pursuant to an extension of time I granted.
The plaintiffs seek to distinguish Brocx from the situation we are now faced with on the basis that '[T]he principles … simply do not in any way bear upon the facts of this case. Brocx was a different case altogether'.[4] The relevant points of difference are not identified.
[4] Plaintiffs' submissions in opposition to the defendant's application filed 10 June 2021 [4].
The defendant supports its application by reference to the John Affidavit, which outlines the procedural history of the Old Action, its placement on the Inactive Cases List and its eventual dismissal for want of prosecution.[5]
[5] Defendant's submissions in support of its application filed 8 June 2021 [18] - [28].
The plaintiffs contend that the Old Action should not have been on the Inactive Cases List such that it could be dismissed for want of prosecution and submits that the learned Master 'completely ignored' the contents of the affidavit advanced in support of their application to be removed from the Inactive Cases List.[6] The Master delivered reasons in that regard on 20 October 2020.[7]
[6] Plaintiffs' submissions in opposition to the defendant's application filed 10 June 2021 [5].
[7] Ansa Enterprises Pty Ltd v Australian Finance Group Ltd [2020] WASC 378.
The plaintiffs in written submissions (but not pressed in oral argument) also refer to matters which were apparently relevant, but unknown to the plaintiffs at the time of their application in 2020.[8] The Master could not possibly have had regard to those matters at that time, and the plaintiffs adduced no evidence in that regard which would assist in determining whether or not the dilatory conduct of the Old Action could be expected to be seen again in the Current Action. I make this observation as the defendant contends that given the conduct of the Old Action, it is reasonably anticipated that the Current Action would also proceed slowly.[9]
[8] Plaintiffs' submissions in opposition to the defendant's application filed 10 June 2021 [5].
[9] Defendant's submissions in support of its application filed 8 June 2021 [19].
I indicated to counsel during the hearing of this application that the Master's decision stands, and there is no jurisdiction to now review it or draw inferences on the evidence presented to the Master. The parties accepted that is the position.
The plaintiffs have not complied with any of the orders made by the court with respect to case management of the Current Action. No evidence is provided to explain those delays or provide reassurance to the court or to the defendant that there will be compliance (even substantial compliance) in the future. Plaintiffs' counsel informed me at the hearing that the responsibility for this late compliance is due to his workload and should not be visited upon his clients.
I note the comments of Newnes JA in Brocx that dismissal for want of prosecution does not, by default, establish that the conduct of the defaulting party was contumacious – each case must turn on its own circumstances.[10]
[10] Brocx (n 2) 102 - 103 [97] - [99].
I am invited to infer that the plaintiffs' conduct in the Old Action was contumacious.
I do not consider that it is open to me to make a finding with respect to the plaintiffs' conduct in the Old Action beyond the observations made by Master Sanderson in his reasons for decision. I note that Master Sanderson did not expressly find that the plaintiffs' conduct was contumacious, although he referred to unexplained delays in the conduct of the Old Action.
I do not, therefore, find that the plaintiffs' conduct in the Old Action was contumacious.

Permanent stay – re-litigation

The defendant says further that the Current Action is an abuse of process and seeks to re‑litigate the Old Action.[11]
[11] Defendant's submissions in support of its application filed 8 June 2021 [19].
The Old Action did not proceed to hearing, so the defendant is not obliged to re-visit a full hearing of the matter, although, there may, as conceded by plaintiffs' counsel, be some overlap between the two actions in such matters as discovery.
The Old Action relates to events which occurred between December 2012 and November 2014.
As I understand it, in the Old Action, the plaintiffs allege, in short, that a complaint was made against Esposito by a Bankwest client in late 2012. That resulted in an internal investigation by Bankwest. Esposito was, it was submitted, exonerated of any wrongdoing by that investigation. AFG could have, it is said, informed Esposito's and Ansa's clients of this exoneration by reason of a 'release letter' or 'separation certificate' (essentially a letter saying that Esposito was of good standing) but did not do so, with the result that Ansa and Esposito lost business and substantial amounts of money.[12]
[12] Statement of claim filed in CIV 2675 of 2014 on 26 February 2015.
The relief sought in the Old Action is:
1.An order that AFG do;
1.1Provide to the Plaintiffs a release letter or separation certificate
1.2alternatively, conduct an independent review and/or investigation into the claims made by Bankwest regarding Esposito.
2.Alternatively, a declaratory order that the independent investigation carried out by RISQ is sufficient for the provision of the Certificate or Letter sought by injunction in paragraph 1.
3.Damages for intentional and/or negligent infliction of economic loss
4.Damages for misleading and deceptive conduct
5.Damages for inducing a breach of the agreement between St James and Ansa.[13]
[13] Ibid Prayer for Relief.
There is no Statement of Claim in the Current Action. The indorsement to the writ indicates that the claim relates to events occurring from January 2015 onwards. The writ was filed on 30 November 2020. It will immediately be seen that whilst claims from the Old Action are now time barred (ignoring for the moment the effect of the dismissal), the claims in the Current Action were made within the limitation period.
The Current Action relates to conduct of AFG in allegedly inducing a breach of contract between SJFC and Ansa in or about January 2015. That breach resulted in SJFC ceasing to pay to Ansa trail commission on and from January 2015, having previously made payments of trail commissions to Ansa up to December 2014.
Plaintiffs' counsel submitted at the hearing that prior to December 2014, the only trail commissions that had been stopped were the Bankwest commissions. However, after January 2015, all trail commissions ceased.
The relief sought in the Current Action is:
1.damages arising from the conduct of the Defendant in or about January 2015 in inducing a breach by St James Finance Corporation Pty Ltd ABN 44 066 240 953 (SJFC) of written agreements (Commission Agreements) made between SJFC as Master Agent in the business of finance and residential mortgage broking / facilitation) AND the First Plaintiff (as Loan Writer) and pursuant to which:
i.the First Plaintiff accessed and used SJFCs software facilities to complete, process or refer residential or non-residential mortgage finance applications to the Defendant;
ii.the First Plaintiff received or was entitled to receive by way of remuneration commissions (also known as Trail Commissions) for the introduction or referral of applicants for loan products available through the Defendant through whom SJFC aggregated its business to lenders whereupon SJFC thereafter ceased making Trail Commissions to the First Plaintiff as and from January 2015 having previously made payments right through until December 2014.
2.An account of all Trail Commissions paid by the Defendant to SJFC that had accrued and were paid by the Defendant to June 2016 on account of the introduction or referral (by the First Plaintiff or on its behalf) of applicants for loan products available through the Defendant,
3.An account or inquiry into the First Plaintiffs share of the Trail Commissions that have been remitted (or should have been remitted) to SJFC by the Defendant that have been accruing since June 2016.
4.A declaration that the First Plaintiff is entitled to receive and be paid all Trail Commissions relating to all loans written by the First Plaintiff through SJFC pursuant to the Commission Agreements that have been accruing January 2015 including payment of all Trail Commissions that have not been paid to the Plaintiff that have been accruing since January 2015 and Interest on all monies outstanding.
5.Damages for misleading or deceptive conduct by the Defendants its servants or agents in the period beginning as and from 2014 and 2015 and thereafter when informing or making it known to various banks, lenders and mortgage aggregators on divers occasions both orally and in writing that the Second Plaintiff who is First Plaintiffs director Mr Andonio Esposito (Esposito) had breached the aforesaid Commission Agreements through misconduct and had been terminated in withholding information from or failing to inform banks, lenders and mortgage aggregators of the results of an independent inquiry and investigation carried out by the Mortgage and Finance Association of Australia (MFAA) that had exonerated Esposito alternatively had found that there had been insufficient evidence of misconduct by Esposito within the meaning of MFAAs Code of Practice.
6.costs.[14]
[14] Writ of summons filed 30 November 2020.
Two things are immediately apparent when comparing and contrasting the Old Action and the Current Action. Firstly, whilst there is a similarity – even a very substantial similarity – between the two actions (plaintiffs' counsel conceded that there may be 'some overlap'), the conduct complained of, and the time at which it occurred, are in fact, not the same.
Second, different relief is sought. Defendant's counsel pointed to the principle that it is the substance of the claim, and not the relief sought which should be the focus of this inquiry. I accept that contention. However, even applying that principle, I find that although substantially similar, the claims are not the same such that the Current Action could be said to be an attempt to re-litigate the Old Action.
I note the comments of Buss JA in Brocx that 'the fact [dismissal for want of prosecution] will not of itself justify the dismissal of a subsequent action, based upon the same cause of action, as an abuse of process.'[15]
[15] Brocx (n 2) 89 [19].
Further, in Patrick Jebb as trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd (Jebb)[16] Vaughan J held that:
[T]he fact that the parties may not be identical, or the relief different, does not necessarily disentitle a party to relief under the doctrine of abuse of process. In applying the principles of abuse of process the focus is on matters of substance rather than form.
[16] Patrick Jebb as trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [2019] WASC 121 [108] – [109] (Jebb).
It was submitted by the defendant that the equitable claim for relief against AFG had no chance of success, because there was no contractual relationship between the plaintiffs' and AFG. Plaintiffs' counsel conceded that part of the claim was weak.
It is not to the point whether the claim is strong or weak; it need only be arguable to avoid the permanent stay.[17]
[17] Ibid [177(3)].
There is considerable overlap between the Old and Current Actions. The plaintiffs clearly consider that the defendant is responsible for them suffering significant financial losses.[18] The Current Action is about, say the plaintiffs, loss of ongoing trail commissions which have caused the plaintiffs to sell nearly all the properties that they owned.[19]
[18] Esposito Affidavit [9].
[19] Ibid.
Significantly, the Old Action is concerned with the failure to issue the release letter or separation certificate. The Current Action is concerned with the failure to pay trail commissions in respect of all customers, not just the Bankwest customer, since January 2015.
I find that although the causes of action are substantially similar, they are not identical. I am satisfied that there is sufficient differentiation between the two proceedings, namely the conduct complained of and the date at which it occurred, to allow the current proceedings to remain on foot.
The two actions necessarily are similar, involving as they do the same parties. I do not find that they are so substantially similar that the Current Action is an attempt to re-litigate the Old Action.

Permanent stay - outcome

For the above reasons, I do not grant the application for a permanent stay.

Temporary stay and payment into Court

Defendant's counsel submitted that it was open to me to order a temporary stay, even if I should find that a permanent stay should not be granted. The distinction is subtle.
The court may, in its inherent jurisdiction, stay proceedings pending the payment of costs in earlier proceedings.[20]
[20] Jebb (n 16) [138].
The plaintiffs were ordered to pay the defendant's costs of the Old Action on 20 April 2021.[21] Those costs were provisionally assessed on 27 May 2021 and the plaintiffs have lodged objection to those costs.
[21] Order of Registrar Griffin in CIV 2675 of 2014 dated 20 April 2021.
The plaintiffs contend that they are not liable to pay the costs of the Old Action pursuant to the order of 20 April 2021 as those costs have not been quantified by way of taxation.[22] In response, the defendant points out that there has been a provisional assessment (albeit one to which the plaintiffs have objected) so that the plaintiffs have at least some indication of the likely taxed amount of costs.[23] Additionally, reliance is placed upon the comment of Vaughan J in Jebb that in principle, it does not matter that the costs of earlier proceedings have not been quantified by taxation.[24]
[22] Esposito Affidavit [5].
[23] John Affidavit [64] – [66].
[24] Jebb (n 16) [161], cited in defendant's submissions in support of its application filed 8 June 2021 [25].
I accept the defendant's submission. The plaintiffs have been ordered to pay the defendant's costs of the Old Action.[25] That order was not appealed. The plaintiffs are liable to pay those costs.
[25] Order of Registrar Griffin in CIV 2675 of 2014 dated 20 April 2021.
The defendant submits, and I accept that it would be an abuse of process to expose AFG to the costs of defending the Current Action while its costs in the Old Action remain unpaid.[26]
[26] Defendant's submissions in support of its application filed 8 June 2021[28].
The defendant submits that the court can safely infer that requiring the plaintiffs to pay money into court would not stifle the Current Action.[27]
[27] Ibid [31].
The plaintiffs have budgeted for their costs of the Current Action. [28]
[28] Esposito Affidavit [16].
The matter should be temporarily stayed pending the payment into court of an amount representing an estimate of the defendant's costs in the Old Action.

Security for costs

The defendant seeks security for costs on the bases that the plaintiffs have no assets with which to satisfy a costs order, the claim has low prospects of success, security would not stifle the litigation and that the plaintiffs' impecuniosity was not caused by the defendant's conduct.[29]
[29] Defendant's submissions in support of its application filed 8 June 2021 [34].
The plaintiffs say that the defendant is using the trail commissions which SJFC should be paying to the plaintiffs, to fund its defence to this action.[30] I am being asked to find or infer that the defendant is already being funded by the plaintiffs and therefore should not require, nor be entitled to seek, security for costs.[31] Effectively, say the plaintiffs, the defendant already has its security.
[30] Esposito Affidavit [19].
[31] Ibid; plaintiffs' submissions in opposition to the defendant's application filed 10 June 2021 [7].
The plaintiffs provide hearsay evidence to support this assertion at par 16 of the Esposito Affidavit, at which it is stated 'I have been told by employees of SJFC that the Defendant has been using the trail commissions to pay its legal fees of the 2014 action'. I acknowledge that such evidence is admissible pursuant to O 37(6)(2)(c) RSC in an interlocutory proceeding. This statement, though, goes to the main relief sought in this action, which is an accounting with respect to trail commissions. I cannot infer from this statement (although I accept that Mr Esposito believes it to be true) that SJFC does in fact already have its security for costs.
The principles applicable are well known. For present purposes, I note the court has a broad discretion to order security for costs, and the likely inability of the plaintiff to pay is not, on its own, a reason to order security for costs.[32]
[32] Jebb (n 16) [214] - [215], cited in defendant's submissions in support of its application filed 8 June 2021 [33].
Vaughan J outlined relevantly principles in Jebb:
1)the strength and bona fides of the plaintiff's case;
2)the likelihood of the plaintiff being unable to pay the defendant's costs;
3)whether the plaintiff's impecuniosity was caused by the defendant's conduct which is the subject of the claim;
4)whether the award of security would deny an impecunious plaintiff a right to litigate (i.e. whether the order for security will stifle a just claim);
5)whether the application for security has been brought promptly;
6)whether the defendant has any rights which it can exercise against assets of the plaintiff to satisfy an order for costs in its favour.[33]
[33] Jebb (n 16) [217].
Applying those principles:
1)The plaintiffs' case is arguable;
2)The plaintiffs say they have budgeted for their costs of the proceedings but do not specify the amount which has been set aside;
3)The plaintiffs say that their financial difficulties have been caused by the defendant's conduct; but it was SJFC, not the defendant, which had a contractual obligation to pay trail commissions to the plaintiffs and ceased to do so. Whilst the defendant's argument is factually correct – it did not stop paying commissions to the plaintiffs, because it never had –the plaintiffs' argument is that the defendant is ultimately responsible for the cessation of those commissions because it caused SJFC to stop paying them. The plaintiffs have commenced a separate action against SJFC which is likely to involve consideration of this issue. I am unable to find that the defendant's conduct caused the plaintiffs' difficulties, based on the available evidence. All that can be said at this point, is that is what the plaintiffs truly believe, and have believed for some time.
4)It is not clear that ordering security would stifle a just claim. The plaintiffs have budgeted for their costs of these proceedings;
5)The application has been brought promptly;
6)The plaintiffs have very limited assets with which to satisfy any costs orders in the defendant's favour.[34]
[34] John Affidavit [50] - [56].
Applying the principles outlined by Vaughan J in Jebb above, I have come to the conclusion that security for costs should be ordered.

Esposito Affidavit

Paragraph 21 of the Esposito Affidavit is embarrassing and is struck out.

Proposed orders

Subject to counsels' views, I propose the orders below to give effect to these reasons. For the avoidance of doubt, the intent of the orders and these reasons is that the plaintiffs must both pay into court an amount representing the costs of the Old Action and provide security for costs before this action can resume:
1)The plaintiffs to pay $54,813.36 into Court, that amount being the estimated likely taxed costs of the defendant that the plaintiffs were ordered to pay in proceeding CIV 2675 of 2014.
2)Pursuant to s 1335 of the Corporations Act 2001 (Cth) and O 25 of the Rules of the Supreme Court 1971 (WA), within 14 days from the date of this order, the plaintiffs give security for the defendant's costs of the action up to and including the giving of discovery in the sum of $30,000, by way of either payment of that amount into Court or by way of an unconditional bank guarantee in favour of the defendant from an Australian trading bank.
3)The action be stayed until the later of compliance with orders 1 or order 2.
4)In the event that the plaintiffs do not give security by the date stipulated in order 2 above, the defendant has liberty to apply for further or other relief.
5)The defendant has liberty to apply for further security following the date on which it files its affidavit of discovery, or in the event it considers that the amount of the security provided in order 2 is inadequate.
6)The plaintiffs pay the defendant's costs of this application.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AW
Associate
14 JULY 2021