Beamer Pty Ltd v Star Lodge Supported Residential Services Pty Ltd (No 1)
[2004] VSC 390
•8 October 2004
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 8145 of 1998
| BEAMER PTY LTD | Plaintiff |
| v | |
| STAR LODGE SUPPORTED RESIDENTIAL SERVICES PTY LTD AND OTHERS | Defendants |
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JUDGE: | Hollingworth J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 23 September 2004 | |
DATE OF RULING: | 8 October 2004 | |
CASE MAY BE CITED AS: | Beamer Pty Ltd v Star Lodge Supported Residential Services Pty Ltd [No 1] | |
MEDIUM NEUTRAL CITATION: | [2004] VSC 390 | |
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Practice and procedure - application by eleventh defendant for removal as a party under r 9.06(a) Supreme Court Rules - application supported by plaintiff and opposed by certain other defendants seeking contribution - whether "just and convenient" that eleventh defendant remain as a defendant- whether defendant "proper" party.
Practice and procedure - application by eleventh defendant that notice of contribution be struck out or stayed under rr 23.01 or 23.02 Supreme Court Rules-whether notice of contribution "frivolous, vexatious or an abuse of process".
Practice and procedure -whether third-party proceeding should be heard and determined separately - whether "exceptional circumstances".
Supreme Court (General Civil Procedure) Rules 1996, rr 9.02, 9.03, 9.04, 9.06, 11.15, 23.01, 23.02.
Boral Resources (Vic) Pty Ltd v Robak Engineering & Construction Pty Ltd [1999] 2 VR 507, applied.
Dey v Victorian Railways Cmrs (1948) 78 CLR 62, applied.
Hamilton v Oades (1989) 166 CLR 486, applied.
NCSC v Monsoon Nominees Pty Ltd (No 3) (1990) 9 ACLC 66, applied.
Payne v Young (1980) 145 CLR 609, applied.
State Bank of New South Wales v Stenhouse Ltd (1997) Australian Torts Report 81-423, considered.
Williams v Spautz (1992) 174 (CLR) 509, considered.
Port of Melbourne Authority v Anshun Pty Ltd (No 2) (1981) 147 CLR 589, cited.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G Hevey | Anthony Peterson & Co |
| For the 4th, 6th and 10th Defendants | Mr M Ravech | Brygel Lawyers |
| For the 11th Defendant | Mr M Sifris SC Mr T Di Lallo Mr L Hawas | GSM Lawyers |
HER HONOUR:
Background
By a summons dated 21 September 2004, the eleventh defendant, Nicholas Mitsios, seeks orders removing him as a party to the proceeding and striking out or staying a notice of contribution served on him by the fourth, sixth and tenth defendants ("the relevant defendants"). Mr Mitsios was joined as a defendant and the contribution notice was filed and served during the course of the trial of this proceeding in the following circumstances.
The plaintiff ("Beamer") and the third defendant ("Najjar SAS") were and are the sole unit holders in the Star Lodge Trading Trust ("the trust"), which was established in June 1998. Beamer is a company owned and controlled by members of the Moutidis family. Najjar SAS is owned and controlled by the second defendant, Bassam Najjar. Until 9 October 1998, the trustee of the trust was the first defendant, Star Lodge Supported Residential Services Pty Ltd ("Star Lodge"). The directors of Star Lodge at all relevant times were George Moutidis and Bassam Najjar.
In early July 1998, Star Lodge bought from Kimis Pty Ltd ("Kimis") a supported residential services business conducted from premises in Gordon Street, Footscray ("the SRS business"). Star Lodge leased those premises from the fifth defendant ("Hidek"). By early September 1998 at the latest, Hidek had purportedly brought the Star Lodge lease to an end.[1] Thereafter, Mr Najjar or Najjar SAS took over the running of the SRS business on their own account. No attempt was made to seek relief from forfeiture in respect of the Star Lodge lease or to recover the SRS business. In summary, Beamer alleges that the above circumstances constituted breaches of various director's and trustee's duties by Mr Najjar and Star Lodge. It is further alleged that Najjar SAS wrongfully operated the SRS business until 1 December 1998 and is liable to account to the trust for profits made or to compensate for loss suffered during that period.
[1]Hidek and the relevant defendants allege that the Star Lodge lease came to an end either by notice of termination due to unremedied breaches of the lease by Star Lodge, or by repudiation by Star Lodge which was accepted by Hidek. Beamer raises various factual and legal challenges to the termination of the Star Lodge lease. The circumstances surrounding the termination of the Star Lodge lease and its validity are central issues in this proceeding and occupied considerable time during the trial. It is not necessary for me to describe those arguments in greater detail or resolve them for the purposes of this application.
By late September 1998, the unit holders had agreed to the appointment of two new trustees to the trust. The new trustees were to be Mr Mitsios, the accountant for the Moutidis interests, and Jack Feldman, an accountant nominated by the Najjar interests. On 9 October 1998, Coldrey J ordered that Star Lodge be removed as trustee and Messrs Mitsios and Feldman be appointed as the new trustees of the trust. Mr Feldman remained a trustee until 9 December 1998, at which time he resigned. Since that time, Mr Mitsios has been the sole trustee of the trust.
By letter dated 12 October 1998, Pryles & Defteros, Beamer's solicitors at that time, wrote to Messrs Mitsios and Feldman about the dispute between the Moutidis and Najjar interests. The letter urged the new trustees to commence proceedings as a matter of urgency against Mr Najjar, Najjar SAS and possibly Star Lodge "to recover the asset of the trust, namely the business of the Star Lodge Special Accommodation Home." The new trustees did not issue any such proceeding. During the trial I was not required to consider any pleading or hear any evidence as to why they did not do so.
By 1 December 1998, the fourth defendant ("Western Lodge") had acquired the SRS business from the Najjar interests and obtained a lease over the Footscray premises. Western Lodge is a company controlled by the sixth defendant, Manuel Jimenez. In summary, Beamer alleges that Western Lodge acquired the SRS business as a knowing recipient of trust property taken in breach of various fiduciary duties, and wrongfully profited from the operation of the SRS business thereafter.
On 15 December 1998, Beamer commenced this proceeding against Star Lodge, Mr Najjar and Najjar SAS. In January 1999, Western Lodge and Hidek were added as defendants. Mr Jimenez and various companies associated with Mr Najjar and Mr Jimenez were joined as defendants at various times since 1999. The tenth defendant (Zenn Nominees Pty Ltd) was only added as a defendant on 17 May 2004. It was added in its capacity as the new trustee of the Najjar Family Trust and was appointed by the second defendant, Bassam Najjar, in place of the third defendant. The statement of claim has been amended on numerous occasions, including during the trial.
At all times since the commencement of this proceeding, the statement of claim has contained an allegation that Messrs Mitsios and Feldman have failed or refused to commence proceedings against Star Lodge, Mr Najjar or Najjar SAS, or to take any other steps to recover the loss suffered by the trust. By reason of that failure or refusal, Beamer has always alleged that it is entitled to commence this proceeding.
In a notice to admit dated 8 June 1999, Western Lodge and Hidek requested Beamer to make a number of admissions relating, amongst other things, to Mr Mitsios's failure to seek relief from forfeiture or to take any other steps to recover possession of the Footscray premises.
I find that at all times since their respective joinder, each of the relevant defendants was well aware of the material facts which might entitle them to seek contribution or indemnity from Mr Mitsios.
This proceeding and a related proceeding between some of the Moutidis and Najjar interests[2] were set down for trial commencing in October 2003. That trial date was vacated when it became apparent that the then trial judge would be embarrassed by the calling of a particular witness. The two proceedings were re-listed for trial in May 2004. The trial date was vacated on that occasion due to the provision of late discovery by the Moutidis interests.
[2]Proceeding No 6604 of 1999.
I commenced hearing the trial of both proceedings on 21 July 2004. Beamer called Mr Mitsios as a witness. Mr Mitsios gave evidence in relation to his involvement in the setting up of the trust, the preparation of an agreement between the unit holders, the execution of the contract of sale between Kimis and Star Lodge, and the drafting of directors' resolutions for Star Lodge. He was cross-examined by counsel for the relevant defendants about those events. After the completion of his evidence on 6 August 2004,[3] Beamer's counsel first raised the possibility that Beamer would seek to join Mr Mitsios as a defendant on the following basis:
"… Mr Mitsios as the current trustee might need to be joined as a defendant to cover the situation where there might be an argument that we hadn't joined all appropriate defendants. Mr Mitsios' joinder would only be for the purpose of having him abide any order of the court in relation to any trust property that might flow there."[4]
[3]Mr Mitsios gave evidence in chief on 23 July 2004. With the consent of all parties, his cross-examination by counsel for the relevant defendants occurred on 3 August 2004. He was recalled for further, brief examination and cross-examination on 6 August 2004.
[4]Mr Hevey at T1300.
On 12 August 2004, being the 16th day of the trial, Beamer sought leave to add Mr Mitsios as the eleventh defendant and to amend its claim in the form of the ninth amended statement of claim. This was not opposed by any of the defendants and such leave was duly granted.[5] The ninth amended statement of claim made no claim against Mr Mitsios for damages or compensation by reason of any alleged misconduct by Mr Mitsios. The amended pleading did seek by way of relief certain orders vesting the trust property in Mr Mitsios as trustee.[6]
[5]T1743-5.
[6]Leave was subsequently granted to file and serve a 10th amended statement of claim. The paragraphs relating to Mr Mitsios are the same in the 9th and 10th amended statements of claim.
On 23 August 2004, being the 20th day of the trial, counsel for the relevant defendants foreshadowed that a notice of contribution against Mr Mitsios was in the course of being prepared.[7] The contribution notice was filed later that day and served on Mr Mitsios shortly thereafter.
[7]T2130.
The contribution notice seeks contribution and indemnity from Mr Mitsios by reason of the alleged breaches by Mr Mitsios of his obligations as trustee of the trust. It is pleaded that if the allegations against the relevant defendants are made out, then Beamer's loss and damage was caused or contributed to by Mr Mitsios' breach of trustee's duties after 9 October 1998, in that he failed to seek relief from forfeiture or otherwise seek to regain possession of the Footscray premises.[8]
[8]Contribution notice paragraph 4.
At no stage prior to 23 August 2004 had the relevant defendants ever sought to make a contribution claim against Mr Mitsios. At trial, counsel for the relevant defendants gave the following explanation for the course which had been adopted. Until the joinder of Mr Mitsios as a defendant, the relevant defendants were content to argue that they could not be liable as a matter of causation in respect of any loss and damage suffered or any profit made after 9 October 1998, being the date of the appointment of Messrs Mitsios and Feldman as trustees. If they lost on that causation argument, the relevant defendants could then have brought a separate proceeding claiming indemnity or contribution against Mr Mitsios in respect of any loss or accounting of profit arising after 9 October 1998. In the words of Mr Collinson, who led Mr Ravech at trial:
"While Mr Mitsios was not a party to this proceeding we could leave that to one side because certainly no Anshun estoppel could be raised on our view on the cases of Anshun estoppel by reason of claims not being advanced by us against Mr Mitsios in this proceeding because he was not a party. But having reflected upon the consequences of his joinder the concern we frankly have is that if we were to conclude this trial without bringing a contribution claim against Mr Mitsios for the period after 9 October 1998, we are at risk of being liable perhaps for some kind of relief after 9 October and yet not have our back covered against Mr Mitsios because in a later proceeding Mr Mitsios might be able to say 'You can't advance these claims. We were parties together in this proceeding and you are now estopped from advancing them.'[9]
…
Your Honour, we were less troubled about this before - when Mr Mitsios was not a party - because we were content then to just run a causation argument against Beamer, that we can't be held responsible for that which occurs after 9 October. We really are concerned now about Anshun."[10]
[9]T2129-30.
[10]T2131.
On 31 August 2004, being the 22nd day of the trial, Mr Hawas announced that he appeared on behalf of Mr Mitsios and had been retained the previous night.[11] Not surprisingly, he informed me that he would require some time to take instructions and then advise me as to his client's attitude to the contribution proceeding. Counsel for all of the parties who appeared at the trial agreed that I should complete the balance of the trial and deal with the question of the contribution proceeding separately.[12] I left open for further consideration the question of whether or not I would be able to write my reasons for decision prior to the completion of the contribution claim.
[11]T2365.
[12]T2376.
On 3 September 2004, Mr Di Lallo announced his appearance with Mr Hawas on behalf of Mr Mitsios. He foreshadowed possible challenges to the contribution notice. I subsequently gave directions for the hearing of any such challenges on 23 September 2004, after the completion of the trial.
The trial concluded on 10 September 2004, after 30 sitting days, and I reserved my decision in the proceeding, subject only to this application.
The application
The summons seeks the following relief:
1. Mr Mitsios be removed as a party to the proceeding pursuant to rule 9.06(a) of the Supreme Court (General Civil Procedure) Rules 1996 ("the Rules") or the court's inherent jurisdiction.
2. Alternatively, the contribution notice be stayed, dismissed or struck out pursuant to rule 23.01 or the court's inherent jurisdiction, on the grounds that:
(1) The notice is frivolous or vexatious; or
(2) The notice is an abuse of the process of the court.
3. Alternatively, the joinder of the claims against Mr Mitsios made pursuant to the contribution notice be excluded pursuant to rule 9.04(b) of the Rules on the grounds that they:
(1) May embarrass or delay the trial of the proceeding;
(2) May cause prejudice to Mr Mitsios and/or the other parties to the proceeding; or
(3) Are otherwise inconvenient.
4. Alternatively, paragraphs 1 to 5 of the contribution notice be struck out pursuant to rule 23.02 of the Rules or the court's inherent jurisdiction, on the grounds that they:
(1) Do not disclose a cause of action;
(2) Are frivolous or vexatious; or
(3) May prejudice, embarrass or delay the fair trial of the proceeding.
Removal as a party - Rule 9.06(a)
Rule 9.06(a) provides that at any stage of a proceeding the court may order that "any person who is not a proper or necessary party, whether or not he was one originally, cease to be a party." A person is a necessary party if the conditions for joinder under r 9.03 are satisfied. A person is a proper party if either:
(a) The conditions for joinder as a party under r.9.02 are satisfied;[13] or
(b) The conditions for joinder as a party under r. 9.06(b) are satisfied.[14]
[13]Payne v Young (1980) 145 CLR 609.
[14]NCSC v Monsoon Nominees Pty Ltd (No 3) (1990) 9 ACLC 66.
In the present case, it is not suggested that Mr Mitsios is a necessary party within the meaning of r. 9.03. The question therefore becomes whether Mr Mitsios is a proper party.
Rule 9.02(a) permits, but does not require, the joinder of two or more persons as defendants where, if separate proceedings were brought against each of them, some common question of law or fact would arise in all the proceedings and all rights to relief are in respect of, or arise out of, the same transaction or series of transactions. Rule 9.02(b) gives the court a wide discretion to permit the joinder of several defendants even if r 9.02(a) is not satisfied.
Rule 9.06(b) permits, but does not require, any of the following persons to be added as a party:
"(i) a person who ought to have been joined as a party or whose presence before the court is necessary to ensure that all questions in the proceeding are effectually and completely determined and adjudicated upon; or
(ii) a person between whom and any party to the proceeding there may exist a question arising out of or relating to or connected with any claim in the proceeding which it is just and convenient to determine as between that person and that party as well as between the parties to the proceeding."
Although r. 9.06 uses the general term "party", it is clear from the structure of the rules and the authorities that the rule is concerned with whether a party is an appropriate plaintiff or defendant, as the case may be. Rule 9.06 is not concerned with whether a person may be or has been properly joined as a third party; that question is governed by r. 11.01. Accordingly, in considering the current application under r. 9.06, I am only considering the question of whether Mr Mitsios is a proper defendant. If he is, then the relevant defendants' claim for contribution and indemnity is made as between defendants. If I decide that Mr Mitsios is not a proper defendant, then the effect of r. 11.15(3) seems to be that the contribution notice continues as if it were a third party notice and Mr Mitsios was a third party. In that case, I would then have to determine whether the third party proceeding should be heard separately from the claim between plaintiff and the other defendants.
At the hearing of the summons, counsel for Beamer informed me that Beamer consented to the removal of Mr Mitsios as a defendant, on the basis that he was not a necessary and proper party to the proceeding. This was a reversal of the position taken by Beamer when it sought the joinder of Mr Mitsios during the trial. Counsel for Beamer agreed with counsel for Mr Mitsios that, if Beamer succeeds at trial, the court could order delivery up of trust property or the payment of compensation or profits to Mr Mitsios as trustee, regardless of whether or not he was a defendant.
Counsel for the relevant defendants opposed the removal of Mr Mitsios as a defendant, on several bases.
First, the relevant defendants said that it was too late for Mr Mitsios to contend that his joinder was improper, because he had consented to it prior to its occurrence. In support of that proposition, reference was made to certain pages in the trial transcript.[15] I do not accept that Mr Mitsios gave any such consent. All that the relevant pages of the transcript disclose is that Mr Hevey informed me that Mr Mitsios had told him that he had anticipated that he might be joined at some stage, did not expect to play an active role in the proceeding and would abide by any order the court might make. That is not the same as consenting to his joinder. Mr Mitsios was not a party to the application for his joinder. Mr Hevey was acting for Beamer, not Mr Mitsios. At no stage did Mr Mitsios inform me, either personally or through his own lawyers, that he consented to being joined. Even if, contrary to the above finding, Mr Mitsios had consented, that would not preclude me from considering whether it is appropriate that he remain as a defendant.
[15]T1301 lines 10-26 and T1345 lines 2-9.
Alternatively, the relevant defendants argued that Mr Mitsios was a necessary and proper party as the conditions for his joinder under r. 9.02 had been satisfied. In the further alternative, they argued that Mr Mitsios ought not be removed as a party because, in the terms of r.9.06(b)(ii), his presence before the court was necessary "to ensure that all questions in the proceeding are effectually and completely determined and adjudicated upon".
In the present case, the relevant defendants are seeking to impose upon Beamer a defendant whom Beamer no longer wishes to sue and against whom Beamer claims no relief. Beamer obtained leave to add Mr Mitsios as a nominal defendant well into the trial and out of an abundance of caution. It did so with the consent of all other parties and without any argument as to the necessity or appropriateness of such joinder. Beamer now says that it agrees with Mr Mitsios that Mr Mitsios ought not be a defendant. Beamer has never made a claim or sought any relief against Mr Mitsios.
I am not hearing an application by the relevant defendants to add Mr Mitsios as a defendant. However, in considering whether Mr Mitsios ought to be removed, I am obliged to consider whether the conditions for joining him as a defendant are satisfied. It has often been said that, as a general rule, a plaintiff will not be compelled to join a person as defendant against the plaintiff's will; that is especially the case if the plaintiff claims no relief against the proposed defendant.[16] However, that rule is not absolute, and a person may be added as a defendant against the wishes of the plaintiff if it would be just and convenient to do so.
[16]See for example the commentary in Williams, Civil Procedure Victoria at 9.06[10] and the cases discussed there.
The relevant principles were discussed by the Court of Appeal in Boral Resources (Vic) Pty Ltd v Robak Engineering and Construction Pty Ltd[17]. In that case a defendant builder applied under r. 9.06(b)(ii) to have the third party builder joined as an additional defendant. The purpose of the joinder was to take advantage of ss. 131 and 132 of the Building Act 1993, which abolished joint and several liability among defendants in building cases and replaced it with proportional liability. The plaintiff opposed the joinder of the additional defendant. The Court of Appeal held that the evident policy behind ss. 131 and 132 was to ensure that the damages to be borne by a defendant in a building action were no more than proportionate to that defendant's responsibility for the plaintiff's loss and damage. Although ss. 131 and 132 would not have prevented the defendant from issuing separate contribution proceedings against the proposed additional defendant, the court held that the policy behind those sections was sufficient to justify the joinder of the additional defendant against the plaintiff's wishes. The policy and object of the relevant division of the Building Act being to abolish the effect of joint and several liability in building cases, that object was contrary to the interests of persons who wish to sue and in the interests of persons who may be sued.[18] There is no such policy consideration applicable in the case before me.
[17]Boral Resources (Vic) Pty Ltd v Robak Engineering & Construction Pty Ltd [1999] 2 VR 507.
[18]At 512.
In discussing the general principles governing the joinder of defendants under r.9.06(b)(ii), Chernov JA made the following observations:
"Under the rules, the plaintiff is generally entitled, in the first instance, to sue such person or persons as it may choose. Consequently, the plaintiff's right to choose the defendant and not have one forced upon it, must be a relevant factor to be taken into account in determining the issue of whether the "just" requirement of subpara. (ii) has been made out. In my view, however, it is but a factor to be considered in the context of such an application and what weight is to be given to it, must depend on all relevant circumstances.
As I have mentioned previously, in giving the plaintiff's opposition to the application the weight that he did, [the trial judge] had regard to what was said in the cases which dealt with applications under subpara. (i). In my view, however, it is at least doubtful that the cases lay down the general rule that prima facie, the plaintiff's opposition to the application on the sole ground that it does not wish to proceed against the proposed defendant, is determinative or almost determinative of such an application."
After discussing the relevant authorities dealing with the issue under rr.9.06(b)(i) and (ii), his Honour concluded that there is nothing in the wording of subpara. (ii) (being the one relied upon here by the relevant defendants):
"… to warrant the conclusion that it would be 'unjust' to make an order for joinder of a person as defendant merely because the plaintiff does not wish to sue that person or that the plaintiff's attitude is to be given any particular weight. It may be that in certain cases, it would not be 'just' to have the relevant question determined between the two sets of parties if to do so, would force the plaintiff to proceed against the person it does not wish to sue. But whether that is so, would depend on the circumstances of the particular case."
In the present case, it would not be just or convenient to require Mr Mitsios to remain as a defendant, for the following reasons. There are several reasons why it would not be "just" to require Mr Mitsios to remain as a defendant. Whilst I accept that the plaintiff's wishes are not decisive, there is no policy consideration of the type considered in Boral which might militate against giving some weight to Beamer's wishes. I also have regard to the unusual circumstances in which Mr Mitsios came to be joined as a party to the proceeding, and the relevant defendants' attitude to his participation in the proceeding over the last five or more years.
The relevant defendants were at all material times aware of the underlying facts which might give rise to a claim for contribution against Mr Mitsios. They never sought to have Mr Mitsios joined a defendant. They also could have brought a claim for contribution at any time after their respective joinder as defendants, either by way of third party notice or separate proceedings for contribution. According to their counsel, they chose not to join Mr Mitsios as a third party because there was no need for them to do so, at least until the time at which Mr Mitsios was joined as a defendant by Beamer. They were content to reserve the right to issue a separate contribution proceeding in the event that they were unsuccessful in their causation arguments against Beamer. I accept the explanation given by counsel for the relevant defendants that, once Mr Mitsios was joined, they decided that they had no option but to serve the contribution notice in order to avoid any estoppel of the type considered in Port of Melbourne Authority v Anshun Pty Ltd (No 2).[19]. But if Mr Mitsios is removed a defendant at this stage of the proceeding, the relevant defendants' estoppel problem will be removed and they will be back in the position they were in prior to 12 August 2004. They would then be free to pursue their claim for contribution at a later time, if they lose on their causation argument against Beamer.
[19](1981) 147 CLR 589.
It was argued on behalf of Mr Mitsios that the relevant defendants had made tactical choices and elected not to join Mr Mitsios as a third party, and conducted their case at trial consistently with that election. Whilst the decision by the relevant defendants not to join Mr Mitsios as a third party (or a defendant) undoubtedly involved some tactical choice by them, I do not accept that it involved any "election" in any strict sense of that term. However, that tactical choice may be relevant to my consideration of what fairness and justice might require in the present case.
If Mr Mitsios is to remain as a defendant subject to a contribution claim by the relevant defendants, justice would require that he have a fair opportunity to participate fully in the trial of the proceeding between Beamer and the relevant defendants. Justice would also require that all the existing parties have a fair trial of that proceeding.
The evidence in the proceeding has concluded and the cases of Beamer and all defendants except for Mr Mitsios have closed. No evidence was led from any party as to what Messrs Mitsios and Feldman did after their appointment on 9 October 1998, or why they did not take steps to regain possession of the Footscray premises. Final submissions have been made. All of that occurred without Mr Mitsios' participation in the trial, and with the full consent of all parties, including the relevant defendants. The relevant defendants now say that I should effectively adjourn the trial on a part-heard basis, and not finalise my reasons for decision until their contribution claim has been heard. I do not believe that such a course would be either just or convenient.
For Mr Mitsios to defend the contribution claim, in my opinion his lawyers would need some months to become familiar with the large amount of evidence which occupied 30 sitting days at trial, as well as the extensive discovery already given in this proceeding. His counsel have foreshadowed that Mr Mitsios may seek to join additional parties to the proceeding, including his co-trustee, Mr Feldman, and possibly also insurers and professional advisers. The lawyers for any additional parties would also require time to become suitably familiar with the case. Pleadings, discovery and other interlocutory steps would occur between the relevant defendants, Mr Mitsios and any additional parties, and would obviously take some time. The matter would then have to be refixed for hearing and prepared for trial. It is difficult to predict at this early stage just how long might be required before that part of the trial could be heard and determined, but it would have to be many months from now and quite possible more than one year away.
It would be neither just nor convenient for the trial to be split in this way. It is likely that at least five of the key witnesses who gave evidence in the recent trial would have to be re-called to give evidence relevant to the contribution claim.[20] Each of those witnesses was in the witness box for a number of days and was the subject of a sustained attack on their credit. It is obviously undesirable that witnesses have their evidence split, particularly over such a long period of time, and particularly where they are the subject of a credit attack.
[20]Being three members of the Moutidis family, Mr Najjar and Mr Jimenez.
After sitting through 30 days of the trial, it is apparent to me that in order to give judgment in the disputes between Beamer and all defendants other than Mr Mitsios, I will need to make some difficult decisions as to witness credibility. The transcript does not fully capture the flavour of several of the witnesses' evidence. There are few independent or objective documents or witnesses on the key issues. It is obviously in the interests of the parties and of justice for me to come to a decision in the main proceeding sooner, rather than later, whilst my impressions of witnesses are still fresh.
Whilst the above discussion has focussed on the concepts of "just and convenient" in terms of r.9.06(b)(ii), the matters I have considered above also lead me to decline to hold that Mr Mitsios is a "proper" party in terms of r.9.02.
Counsel for the relevant defendants did not point to any specific circumstance in this case which would make it unjust to put them back in the position they had chosen to be in prior to August 2004. Rather, the relevant defendants relied upon the general public policy considerations that favour finality in litigation and the avoidance of a multiplicity of proceedings. Those considerations frequently come into play when a court is considering various rules in Order 9 and Order 11. But those policy considerations are not immutable rules and have to be considered against the particular circumstances of each case.
If this were a contested application for leave to join Mr Mitsios as a defendant or third party at this late stage of the proceeding, in my opinion such an application would have to fail, for all the reasons given above. The relevant defendants would be left to pursue any contribution claim against Mr Mitsios by way of separate proceeding. That is what they always intended to do, up until the 16th day of the trial when Beamer joined Mr Mitsios as a nominal defendant only. Beamer now wishes to reverse that joinder. Apart from the filing and service of the contribution notice, no party has led any evidence or taken any step in the proceeding in reliance on the joinder of Mr Mitsios as a defendant. Nothing has been done that cannot be undone.
In the unusual circumstances of this case, I propose to order that Mr Mitsios be removed as a defendant. I will discuss later in these reasons why I propose to also order that the contribution notice proceed as a third party claim which will be heard and determined separately from the proceeding between the plaintiff and the defendants.
Joinder inconvenient - rule 9.04(b)
In the alternative, Mr Mitsios seeks an order under r. 9.04(b) that the claims in the contribution notice be excluded because they cannot be conveniently disposed of together with Beamer's proceeding.
Rule 9.04 provides as follows:
"Notwithstanding Rules 9.01 and 9.02, where any joinder of claims or of parties may embarrass or delay the trial of the proceeding or cause prejudice to any party or is otherwise inconvenient, the Court may order that -
(a) there be separate trials;
(b) any claim be excluded;
(c) any party be compensated by an award of costs or otherwise for being required to attend, or be relieved from attending, any part of a trial in which he has no interest;
(d) any person made a party cease to be a party on condition that he be bound by the determination of the questions in the proceeding or without any such condition."
Like r. 9.06, r .9.04 deals with joinder of claims and parties as between plaintiffs and defendants. It does not deal with claims against third parties who are not also defendants. For the reasons expressed earlier, in my opinion Mr Mitsios should be removed as a defendant pursuant to r. 9.06. Accordingly, it is not necessary for me to consider whether any order should be made under r. 9.04. Were it necessary for me to decide the issue, for the reasons already given I would conclude that permitting the contribution and indemnity claims to proceed as between defendants would "embarrass or delay the trial of the proceeding or cause prejudice to any party or is otherwise inconvenient".
Summary stay or judgment - rule 23.01
Mr Mitsios seeks to have the contribution notice stayed or disposed of summarily on the basis that it is frivolous or vexatious or an abuse of process. The application is made under either r.23.01 or the court's inherent jurisdiction to control and supervise its own process to prevent injustice. It is not alleged that the contribution notice should be summarily disposed of because it does not disclose a cause of action.
The general principles governing such an application are well-settled and do not require detailed examination here. The application requires me to consider whether the contribution proceeding is seriously and unfairly burdensome, prejudicial or damaging and productive of serious and unjustified trouble and harassment.[21] A court must ensure that its processes are used fairly as between the parties to the litigation and must avoid the erosion of public confidence through concern that its processes may lend themselves to oppression and injustice.[22]
[21]Hamilton v Oades (1989) 166 CLR 486.
[22]See State Bank of New South Wales v Stenhouse Ltd (1997) Australian Torts Report 81-423 at 64,086 per Giles CJ and the cases referred to therein.
The general principle is that only in exceptional circumstances ought a party to be denied the opportunity to have the validity of its case tested through the ordinary processes of litigation.
"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 or vexatious or an abuse of process."[23]
[23]Dey v Victorian Railways Cmrs (1948) 78 CLR 62 at 92 per Dixon J.
Counsel for Mr Mitsios submitted that there would be substantial inconvenience in dealing with the contribution notice in circumstances where final submissions had been made after a lengthy trial. It was argued that the administration of justice might also be brought into disrepute if that occurred. Accordingly, it was submitted that the contribution notice should be disposed of summarily. For the reasons given earlier, I accept that it would not be convenient or just to deal with the contribution claim as part of the current proceeding, the trial of which has concluded. However, the contribution claim can be heard and determined separately, once all additional parties have been joined and all interlocutory steps completed.
Further, Mr Mitsios' counsel submitted that the contribution notice had been served in order to circumvent the rules relating to the bringing of third party notices. Such notices must be initiated within 30 days of the filing of a defence and otherwise only with the leave of the court.[24] It was said that it was doubtful whether leave to make the claims by third party notice would have been granted by the court during the trial of the proceeding. Accordingly it was argued that "the Notice has been used for a collateral purpose or to secure a collateral advantage beyond what the law offers: Williams v Spautz (1992) 174 CLR 509."
[24]Rule 11.05(2).
In the present case, if the relevant defendants have any liability to Beamer arising out of any breach of trust by Star Lodge or breach of duty by Mr Najjar, it is at least arguable that they may be entitled to indemnity or contribution from Mr Mitsios, as the successor trustee, in respect of the period since 9 October 1998.
In this case, there is no evidence that the relevant defendants have issued the contribution notice for an improper collateral purpose or advantage. It was always open to the relevant defendants to take the course that they did until August 2004, namely to defer bringing any contribution claim until after judgment in the main proceeding. They were not obliged to add Mr Mitsios as a third party in the current proceeding.[25] Once Mr Mitsios was added as a defendant, it was proper for them to serve a notice of contribution on him, in order to avoid what they perceived to be possible estoppel problems if they did not do so. It was fortuitous for the relevant defendants that they were able to serve the contribution notice without leave once Mr Mitsios was added as a defendant; but of course they could have issued a separate contribution proceeding without leave as well. Their contribution claim cannot be said to be frivolous or vexatious or an abuse of process simply because Beamer has now changed its position and no longer wants Mr Mitsios to remain as a nominal defendant.
[25]Although the later they left any such joinder, the less likely it might be that leave would be granted to add Mr Mitsios as a third party.
Accordingly, in my opinion the relevant defendants should not be denied the opportunity to have the validity of their contribution claim tested through the ordinary processes of litigation. How and when the contribution claim should be determined is dealt with later in these reasons.
Striking out pleading - r.23.02
As a further alternative, Mr Mitsios seeks to have all five paragraphs of the contribution notice struck out under r.23.02, on the basis that they do not disclose a cause of action, are scandalous, frivolous or vexatious, or may prejudice, embarrass or delay the fair trial of the hearing. This application was only briefly touched upon in the written submissions and not addressed in oral submissions by counsel for Mr Mitsios. The relevant defendants submit that the contribution notice is cast in proper form and discloses a cause of action.
On an application under r.23.02 it is assumed that the relevant party does have an arguable claim or defence. The objection is to the manner of expression in the pleading, and the purpose of the rule is to secure compliance with the rules of pleading. The consequence of an order under r.23.02 would not be to bring the contribution proceeding to an end, rather, the relevant defendants would have to amend the present pleading to cure any defects. The power to strike out a pleading or order its amendment is discretionary. The pleading must be sufficient to enable Mr Mitsios to know the case he has to meet and the trial judge to conduct a trial fair to all parties. A pleading is embarrassing when it places the opposite party in the position that he or she does not know what is alleged against him or her; in other words, that it is unintelligible, ambiguous or too general.
Counsel for Mr Mitsios sought to attack the contribution notice on a number of bases. First, it was submitted that paragraphs 1 and 2 of the contribution notice referred to a number of paragraphs of the Beamer statement of claim which either do not concern Mr Mitsios, or are irrelevant to the relevant defendants. On this basis, it was suggested that those allegations were not material to the claims made in the notice. As a general rule, a pleading will not be struck out merely on the ground that it is unnecessary or irrelevant unless it is also scandalous or embarrassing. Although paragraphs 1 and 2 of the contribution notice could perhaps be drafted more clearly, one is able to determine that paragraph 2 (with the exception of its reference to paragraph 34 of the statement of claim) summarises the disputed issues between the plaintiff and the relevant defendants in the proceeding. Furthermore, any of the paragraphs of the statement of claim referred to in paragraph 1 of the notice, but not referred to in paragraph 2, are issues not in dispute between the plaintiff and relevant defendant or remedies consequent upon the allegations described in paragraph 2 being made out.
When drafting a contribution notice it is common practice to provide a summary of the relevant facts and issues pleaded in the original claim. This gives the other party an opportunity to understand the critical aspects of the original dispute and provides a context for the substantive part of the contribution claim. Paragraphs 1 and 2 of the notice are not unnecessary or irrelevant and should not be struck out. However, given that a tenth amended statement of claim was filed and served after the notice of contribution, it will be necessary for the relevant defendants to amend those paragraphs of the contribution notice to refer to the latest statement of claim.
Next, it was contended that although paragraph 3 of the contribution notice alleges that Mr Mitsios owed Beamer a duty, the notice did not articulate precisely how the duty was breached. In my view, this is not correct. The particulars joined to paragraph 4 of the contribution notice clearly identify the alleged breaches of duty by Mr Mitsios.
It was also contended that paragraph 5 of the contribution notice did not allege the jurisprudential basis for the claimed entitlement to contribution or the basis on which it would be "just and equitable" for such contribution to be awarded. There is some force in that criticism. I agree that Mr Mitsios is entitled to a pleading which unambiguously articulates the bases on which the relevant defendants are entitled to contribution and indemnity.
Third party directions
As previously mentioned, if I remove Mr Mitsios as a defendant, the contribution notice is treated as if it were a third party notice.[26] I then have to consider what directions are appropriate in terms of r.11.12, particularly in relation to when and how the third party proceeding should be heard and determined. I accept that it is only in exceptional circumstances that the power to order separate trials of the plaintiff's claim against the defendants and the defendants' claim against the third party should be exercised.[27] In my opinion this is an exceptional case. I do not propose to repeat here the reasons which I have already given as to why it would not be just and convenient to split the trial which has otherwise been completed and have the contribution claim heard and determined in the proceeding between the plaintiff and defendants.
[26]The relevant defendants conceded that this was the effect of r. 11.15(3).
[27]AMP Fire and General Insurance Company Ltd v Dixon [1982] VR 833.
There was and is no opportunity for Mr Mitsios to take part in that part of the trial which has already concluded.[28] Although witnesses may be re-called and further submissions made, that is not the same thing as having had an opportunity to participate whilst the evidence was being called.
[28]Which is one of the factors for consideration under r.11.12(b).
Given the stage and circumstances in which this issue has arisen, in my opinion, the third party proceeding must not only be determined separately, but fairness and justice requires that the third party not be bound by the result of the trial which has already concluded.
Proposed orders
I propose to make orders in the following terms:
1. Nicholas Mitsios be removed as a defendant to this proceeding.
2. The questions the subject of the notice of contribution filed and served by the fourth, sixth and tenth defendants be heard and determined as a third party proceeding, separately from the trial of the questions between the plaintiff and the defendants.
3. Nicholas Mitsios not be bound by the result of the trial between the plaintiff and the defendants.
I will hear from the parties as to the precise form of orders and in relation to further directions in the third party proceeding (including any application for leave to amend the notice of contribution) and the costs of this application.
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