Brott v MLC Limited
[2023] VCC 328
•15 March 2023
5z
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
General List
Case No. CI-21-04966
| ISSAC ALEXANDER BROTT | Plaintiff |
| v | |
| MLC LIMITED (ACN 000 000 402) | Defendant |
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JUDGE: | HER HONOUR JUDGE A RYAN | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 3 November 2022 | |
DATE OF RULING: | 15 March 2023 | |
CASE MAY BE CITED AS: | Brott v MLC Limited | |
MEDIUM NEUTRAL CITATION: | [2023] VCC 328 | |
RULING
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Subject:PRACTICE AND PROCEDURE
Catchwords: Defendant’s application seeking strike out or stay of plaintiff’s claim as abuse of process – plaintiff’s application for joinder of additional defendant
Legislation Cited: Bankruptcy Act 1966 (Cth); Civil Procedure Act 2010, County Court Civil Procedure Rules 2018; Insurance Contracts Act 1984 (Cth); Life Insurance Act 1995 (Cth)
Cases Cited:Alexander v Perpetual Trustees (2003) 216 CLR 109; Annesley v Westpac Banking Corp [2016] VSC 323; BFJ Capital Pty Ltd v Financial Ombudsman Service Ltd (in liq) [2019] VSC 71; Boral Resources (Vic) Pty Ltd v Robak Engineering & Construction Pty Ltd [1999] 2 VR 507; Carborundum Realty Pty Ltd v RAIA Archicentre Pty Ltd (unreported); Carroll v United Super Pty Ltd [2018] NSWSC 403; C E Heath Casualty and General Insurance Ltd v Grey (1993) 32 NSWLR 25; Chammas v Harwood Nominees Pty Ltd (1993) 7 ANZ Ins Cas 61-175; Cigna Insurance Asia Pacific Ltd v Packer [2000] WASCA 415; Gao v Zhang (2005) 14 VR 380; Ivan Mabbett v Watson Wyatt Superannuation Pty Limited and Anor [2008] NSWSC 365; Lindon v Commonwealth (No. 2) (1996) 136 ALR 251; Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158; Peters v General Accident Fire & Life Assurance Co Ltd [1937] All ER 628; Sandstrom v FSS Trustee Corporation [2020] NSWSC 200; Silver Chef Rentals Pty Ltd v Makong Australia Pty Ltd [2019] VSC 703; Rozenblit v Vainer (2018) 262 CLR 478; TAL Life Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68; Trident General Insurance Co Ltd v McNiece Bros Pty Ltd 165 CLR 107
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Bingham | Vasilaras & Co Pty Ltd |
| For the Defendant | Mr B Jellis | Clyde & Co |
HER HONOUR:
1This ruling deals with two interlocutory applications heard on 3 November 2023.
2The first application was by summons dated 31 May 2022 (“the defendant’s summons”). The defendant seeks orders that the plaintiff’s statement of claim be struck out or that the proceeding be stayed as an abuse of process under rules 23.02 or 23.01 respectively of the County Court Civil Procedure Rules 2018 (“the Rules”). The defendant did not press paragraph 3 of its summons relating to discovery.
3The second application was by summons dated 8 August 2022 (“the plaintiff’s summons”). The plaintiff seeks to join Ms Natalie Maree McAra (“McAra”) as a second defendant under Rule 9.06(b) of the Rules.
4The plaintiff relied upon:
(a) written submissions dated 10 August 2022, 28 October 2022, and 2 November 2022;
(b) affidavit of Andrew Dunner sworn 28 October 2022;
(c) affidavits of Issac Brott sworn 11 October 2022 and 2 November 2022;
(d) affidavits of Nelson Pinto sworn 8 August 2022,[1] 9 August 2022, and 12 September 2022; and
(e) a statement of affairs of McAra dated 15 December 2020 (produced under subpoena).
[1]Mr Pinto’s affidavit dated 8 August 2022 has not been separately filed in this proceeding but appears as exhibit NP-3 on page 5 of his affidavit dated 9 August 2022
5The defendant relied upon:
(a) written submissions dated 19 August 2022, 13 September 2022, and 28 October 2022;
(b) four affidavits of Anna Louise Morris, the defendant’s solicitor, dated 31 May 2022, 22 August 2022, 9 September 2022, and 19 October 2022;
(c) a statement of affairs signed by the plaintiff dated 15 December 2010;
(d) a letter from the defendant to McAra dated 3 November 2011 annexing a “Review Schedule” relating to an insurance policy (produced under subpoena).
Background
6By his statement of claim dated 9 June 2021, the plaintiff seeks payment of benefits from March 2014 to 15 January 2017 under a policy of insurance issued by the defendant, MLC Ltd, on 7 December 1999 (“the policy”). Under the terms of the policy, any benefit is payable to the “Policy Owner” specified in the schedule to the policy (“the schedule”).
7The plaintiff was originally listed as the policy owner in the schedule. On 1 January 2010, the policy was transferred by written memorandum of transfer to McAra, the plaintiff’s former de facto partner (“the transfer”). The transfer was registered by the defendant on 6 December 2010. The plaintiff became a bankrupt on 17 December 2010. The plaintiff and McAra have been involved in family law litigation since December 2013. McAra was declared a bankrupt on 19 December 2019.
8The plaintiff asserts that while ownership of the policy was transferred in equity to McAra by the transfer,[2] she held and still holds ownership of the policy on a bare trust for the plaintiff.[3] The plaintiff relies on a declaration of trust (“the declaration of trust”) dated “15th 2022” [sic],[4] which states (formalities excluded):[5]
“I, Natalie Maree McAra, ACKNOWLEDGE and HEREBY CONFIRM that:
1.On 7 December 1999, Issac Alexander Brott entered into by contract a policy of insurance with MLC Limited, policy number 1668-189W (‘the Policy’).
2.On 6 December 2010, the Policy was transferred to me.
3.At all times I have held the Policy on Trust for, and the benefit of, Issac Alexander Brott.”
[2]See paragraph [3] of the proposed amended statement of claim exhibited to the affidavit of Issac Brott dated 11 October 2022
[3]See paragraph [4] of the proposed amended statement of claim exhibited to the affidavit of Issac Brott dated 11 October 2022
[4]The plaintiff says that this should read “15 June 2022”: Further and Better Particulars of Statement of Claim dated 19 June 2022
[5]The plaintiff produced the declaration of trust by way of Further and Better Particulars of Statement of Claim dated 19 June 2022 in response to the defendant’s Request for Further and Better Particulars dated 15 March 2022
9The plaintiff says that he and McAra entered into this arrangement on the advice of their “crisis accountant”, a Mr Andrew Dunner. In his affidavit dated 28 October 2022, Mr Dunner exhibits a statement in which he says he was engaged by the plaintiff and McAra in 2006. This was during a period where the plaintiff’s medical condition was deteriorating. The statement reads in part:
“In the course of discussions, I told Natalie that Issac could transfer the ownership of the policies to Natalie.
Natalie told me she had spoken to Issac, and he was agreeable, and should speak to Issac and arrange it.
I told Natalie to get the forms and get Issac to sign them.
Being aware of my professional obligations in discussion with Natalie, I told her that the monies that came from Issacs Income protection was to still be for the benefit of Issac and that is to look after Issac as he may need looking after for some time still to come.
…
The change of ownership in the policy occurred only because Issac was debilitated.
At the time, I considered that the Policy Ownership was transferred to Natalie to hold on trust on Issacs’ behalf.
I took the concerns of both parties in good faith.
I was positive at the time both Issac & Natalie had a commonality of interests.
It was the case that it was agreed and understood that ‘when Issac recovered the Policy Ownership would be transferred back to Issac, as would the Directorships of the Corporate Entities and Issac would reassume his role as the family earner.
Certainly, both Issac & Natalie understood and expected this to be the case.
A constructive trust existed between the parties, which was known and understood at the time of the transfer by myself, Natalie and Issac Brott, and that at all relevant times Issac was the beneficial owner of the policy.
The entire exercise was motivated to reassure Issac and Natalie should the worse scenario occur to assure continuity of support for the family.”
10The defendant, by its defence dated 11 August 2021, denies that any benefit is payable under the policy because of, inter alia, fraudulent non-disclosure and misrepresentation by the plaintiff. It also alleges that paying the plaintiff an income protection benefit would be contrary to public policy, in circumstances where he was unable to work as a solicitor because his right to practise was removed for professional misconduct (and that this was the cause of any inability to work, not any injury as alleged).[6] The defendant further says that the plaintiff is not the policy owner and so he is not entitled to the remedies that he seeks in his statement of claim either as filed or in the amended form proposed.[7]
[6] Defendant’s submissions dated 28 October 2022, [6]
[7] Defendant’s submissions dated 28 October 2022, [7]
11On 18 December 2014, the defendant avoided the policy ab initio because of the plaintiff’s fraudulent non-disclosure and misrepresentation. It says it was entitled to, but has not sought, repayment of benefits of approximately $1,265,707.52 already paid under the policy to the policy owner between 18 June 2009 and 20 May 2014. In circumstances where the policy was avoided, the defendant says no benefits are payable under the policy for the period claimed by the plaintiff between March 2014 and 15 January 2017.
Procedural History
12The parties’ applications have a protracted procedural history. The defendant’s summons was initially listed for hearing on 21 June 2022. The matter was adjourned and relisted before her Honour Judge Burchell on 25 July 2022.
13At that hearing, her Honour made an order that the plaintiff file and serve any affidavit in opposition to the defendant’s summons exhibiting any proposed amended statement of claim, including any application to join McAra as a party to the proceeding. Her Honour indicated to the plaintiff during the hearing that this amendment and affidavit would need to answer the issues raised by the defendant in its submissions in relation to the summons. The defendant’s summons was adjourned to 23 August 2022.
14The plaintiff’s summons and the defendant’s summons were both listed for hearing on 23 August 2022. Shortly before the hearing, the plaintiff requested an adjournment because he was in hospital and unable to participate. During the hearing, counsel for the plaintiff informed the Court that he had been unable to obtain instructions from the plaintiff on short notice. The defendant did not consent to an adjournment of the application. Her Honour Judge Burchell nevertheless granted the plaintiff an indulgence, despite his ongoing history of non-compliance and delay. Her Honour made orders granting a further adjournment and requiring the plaintiff pay costs thrown away. Her Honour made further orders, inter alia, that:
“4. By 2 September 2022 at 4.00pm, the plaintiff must file and serve:
a. an affidavit in support of the plaintiff’s costs application;
b.a revised proposed amended statement of claim dealing with the matters raised in the hearing this day;
c.a supplementary affidavit in support of his amendment and joinder application deposing to the ‘special circumstances’ giving rise to his standing to bring the proceeding in the beneficiary’s own name; and
d. an affidavit in opposition to the defendant’s costs application.”
15The parties’ costs applications and the part-heard summonses were listed for hearing on 14 September 2022. The day before, the plaintiff’s solicitors emailed the Court seeking leave to file and serve an amended statement of claim, attaching the affidavit of Nelson Pinto sworn 13 September 2022 and minutes of proposed orders. At the hearing of 14 September 2022, His Honour Judge Woodward granted the plaintiff leave to rely on this affidavit. His Honour made orders dated 15 September 2022, including that:
“3.By 12 October 2022 at 4.00pm, the plaintiff must file and serve an affidavit:
a. in support of the plaintiff’s costs application;
b. in opposition to the defendant’s costs application; and
c. in support of the plaintiff’s amendment and joinder application.
4.In so far as the affidavit filed and served under 3 above is in support of the plaintiff’s amendment and joinder application, it must include evidence (to the extent that such evidence is known to, or reasonably ascertainable by, the plaintiff or his representatives) of:
a. The circumstances relevant to the plaintiff’s standing to bring the proceeding as an alleged beneficiary including:
i.what the plaintiff or anyone acting on his behalf has told or sent to Ms McAra or Ms McAra’s representatives about this proceeding (including particulars of contact details used to communicate with Ms McAra, noting that the email of 24 August 2022 is to ‘natalie Sisy’);
ii. what the plaintiff has been told and otherwise knows as to whether Ms McAra agrees or disagrees with the allegation that Ms McAra holds the benefits of the policy on trust for the plaintiff;
iii. what the plaintiff has been told and otherwise knows as to Ms McAra’s position about bringing proceedings in her own name; and
iv. whether any order or other determination has been made in the family law proceeding with respect to the ownership of the benefits of the policy.
b. The circumstances in which the “Declaration of Trust…Dated this 15th day of 2022” was entered into and including:
i.the full name, address, and occupation of the witness;
ii. where the document was signed and who was present at the time of signing; and
iii. what information was given to Ms McAra about the document at or before the time of signing, including whether Ms McAra obtained legal advice before the document was signed.
…
7.The defendant’s summons, the plaintiff’s summons and the parties’ costs applications are listed for hearing before the Commercial Division Duty Judge on 3 November 2022 at 10:00am or so soon after as the business of the Court allows.
16On 13 October 2022, the plaintiff filed an affidavit of Issac Brott, sworn 11 October 2022, addressing the requirements of Order 4 of the orders of Judge Woodward. The defendant filed a further affidavit of Anna Louise Morris in support of its summons and in opposition to the plaintiff’s summons on 19 October 2022.
17On 28 October 2022, both parties filed submissions pursuant to the orders of Judge Woodward. The plaintiff filed further reply submissions on 31 October 2022, along with the affidavit of Andrew Dunner sworn 28 October 2022.
18On 25 October 2022, the defendant filed a subpoena addressed to Stephen John Michell in his capacity as the Trustee for the Bankrupt Estate of Natalie Maree McAra. The Trustee produced documents in answer to the subpoena on 2 November 2022, which the parties inspected shortly before the hearing on 3 November 2022.
19The plaintiff filed a further affidavit of Issac Brott on 2 November 2022.
(a) Defendant’s strike out and stay application
20The defendant seeks an order pursuant to Rule 23.02 that the plaintiff’s statement of claim be struck out or, alternatively, an order that the proceeding be stayed as an abuse of process pursuant to Rule 23.01. Counsel for the defendant confirmed it pressed these applications even on the plaintiff’s proposed amended statement of claim, relying principally on the matters raised in its submissions dated 28 October 2022.
21Rule 23.01 permits the Court to stay a proceeding or give judgment generally in relation to a proceeding or claim in a proceeding that is an abuse of process of the Court. A party invoking Rule 23.01 can adduce evidence in support of its application.
22Derham AsJ in Annesley v Westpac Banking Corp [2016] VSC 323 at [68]-[69] outlined the approach to be adopted regarding Rule 23.01 as follows:
“The ground of application is that the claim is bad in law or is scandalous, frivolous or vexatious or is an abuse of process. In an application by a defendant, the contention will be that by no proper amendment of the pleading can the plaintiff raise a good cause of action because the claim so completely lacks foundation in fact or law that no legitimate pleading amendment could save it. On an application under r 23.01 of the Rules, any party may rely upon evidence given on affidavit or, by leave, orally.
The court will not make an order under this rule unless it is clear on the pleadings or from extrinsic evidence that the claim is unsustainable in fact or in law. The burden on this question lies on the party impeaching.”
23Rule 23.02 of the Rules permits the Court to strike out a pleading where it does not disclose any cause of action, may prejudice embarrass or delay the fair trial of the proceeding, or is otherwise an abuse of process. A party relying upon Rule 23.02 is limited to the terms of the pleading and documents referred to therein, and cannot adduce evidence in support of its application.
24The matters to be considered in a strike out application under Rule 23.02 were outlined by Elliot J in BFJ Capital Pty Ltd v Financial Ombudsman Service Ltd (in liq) [2019] VSC 71 as follows:[8]
“The elements of an adequate pleading are straightforward. A pleading must comprise a coherent narrative of material facts which set out and frame the elements of a cause of action. It must be pleaded with sufficient clarity, must not be unintelligible, ambiguous or vague and must not raise allegations that are offensive. Where particulars are relied upon, they ought not be used to “fill material gaps” or “cure a bad statement of claim.” Ultimately, the purpose of a proper pleading is to allow, in the interests of fairness, the opposite party to know what is alleged. Where a pleading is deficient in any of these respects, an application striking out the pleading may be warranted.
A strike out application, therefore, is distinct from an application for summary judgment in that it is an objection to the manner of expression of the pleading, as opposed to the prospects of the cause of action or defence itself. Again, care must be exercised when ordering that a pleading be struck out.”
[8]At [34]-[35]
25It is well accepted that the power to terminate proceedings summarily should be exercised with caution and should not be exercised unless it is clear that there is no real question to be tried. This is regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or whether the application is supported by evidence.[9] The jurisdiction to order that proceedings be dismissed or permanently stayed will be exercised sparingly and only in exceptional circumstances.[10] In the course of his submissions, Counsel for the defendant acknowledged that the appropriate test to be applied for summary judgment was that set out in s63 of the Civil Procedure Act 2010 as interpreted in Lysaght.[11]
[9]Silver Chef Rentals Pty Ltd v Makong Australia Pty Ltd [2019] VSC 703 at [53] (Sloss J), referring to the well-known principles in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158 (“Lysaght”)
[10] Williams, LexisNexis Butterworths, Civil Procedure; Victoria at [5617.19]
[11] Transcript page 17, lines 10-14
(b) Plaintiff’s joinder application
26The plaintiff’s summons seeks the joinder of McAra as a second defendant by its proposed amended writ and statement of claim, exhibited at pages 9 to 18 to exhibit “IB-1” of the affidavit sworn by the plaintiff on 11 October 2022. The plaintiff contends his proposed amended statement of claim will remedy any deficiencies raised by the defendant relating to standing.
27The plaintiff’s summons seeks addition of McAra under Rule 9.06(b) which reads:
“At any stage of a proceeding the Court may order that –
…
(b) any of the following persons 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 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; …”
28The question to be determined between the plaintiff (the party seeking the addition of McAra as a party) and McAra herself should exist already, though it is sufficient if the new question sought to be raised arises out of or relates to or is connected with the existing question.[12] Leave to add a party may be refused where the application was not made promptly and where the addition would prejudice an existing party in a way that could not be fairly met by an adjournment, an award of costs, or otherwise.[13]
[12]Williams, LexisNexis Butterworths, Civil Procedure; Victoria at [I 9.06.3], citing Boral Resources (Vic) Pty Ltd v Robak Engineering & Construction Pty Ltd at 513-514
[13]Williams, LexisNexis Butterworths, Civil Procedure; Victoria at [I 9.06.3], citing Carborundum Realty Pty Ltd v RAIA Archicentre Pty Ltd (VSC, Harper J, No F8708/91, 2 June 1992, unreported)
29The plaintiff seeks to amend paragraphs 3, 4 and 5 of his statement of claim to read (additions highlighted in bold):[14]
[14] Exhibit IB-1 to the affidavit of Issac Brott dated 11 October 2022, pages 10-13
“3.On 1 January 2010, ownership of the policy was transferred in equity to the Second Defendant, with the Plaintiff remaining the legal owner
Natalie Maree McAra.PARTICULARS
The transfer was effected by a document headed “Transfer of Ownership”, a copy whereof may be inspected at the office of the Solicitors for the Plaintiff by appointment. The transfer was registered by the First Defendant on 6 December
2010.
4. The Second Defendant took and held and still holds ownership of the policy on a bare trust for the Plaintiff.
PARTICULARS
(a)In November 2010, the Plaintiff had been in a defacto [sic] relationship with the Second Defendant for about 20 years and they had 4 dependent children.
(b) In November 2010, the Plaintiff was afflicted with physical and mental disability, undergoing psychiatric treatment and affected by medication.
(c)Both the Second Defendant and a crisis accountant, Andrew Leonard Dunner (“Mr. Dunner”), were concerned that the Plaintiff might take some action that would endanger the family’s financial situation .
(d) In or about November 2010, the Second Defendant sought the advice of Mr. Dunner as to how best to protect the policy, such conversations occurring at the Plaintiffs and Second Defendants residence located at 17 Lansell Road, Toorak and by telephone.
(e) Mr. Dunner advised the Second Defendant that she could seek nomination as the Plaintiff’s guardian from the Victorian Civil and Administrative Tribunal, which suggestion the Second Defendant never responded to.
(f) Mr. Dunner then advised the Second Defendant that she could seek to have the Plaintiff transfer the policy to her.
(g) Some short time later, the Second Defendant then informed Mr. Dunner that the Plaintiff had agreed to transfer the policy to her.
(h)Mr. Dunner then informed the Second Defendant that monies payable under the policy would still be for the benefit of the Plaintiff and that the purpose of the transfer would be to look after the Plaintiff, to which the Second Defendant agreed.
(i) Mr. Dunner then asked the Second Defendant whether she would return the policy to the Plaintiff when he recovered, to which the Second Defendant agreed.
(j) Some short time later, the Second Defendant attended Mr. Dunner in his office at 23 Erin Street, Richmond in the State of Victoria.
(k)Mr. Dunner then asked the Second Defendant whether she understood that the policy transfer was only because of the then current circumstances and the money from the policy was for the benefit of the Plaintiff, and she declared that she did, and further that ownership would be returned to the Plaintiff if the Plaintiff recovered his health.
(l)The contents of a Declaration of Trust dated 15 July (sic) 2022, which may be inspected at the office of the Solicitors for the Plaintiff, are referred to and repeated as if set out in whole herein.
Natalie Maree McAra is a bankrupt person.5. The Plaintiff was specified or referred to in the policy as a person to whom the insurance cover provided by the relevant contract extended, and Natalie Maree McAra held the relevant benefit in trust for the Plaintiff and by reason of section 48A of the Insurance Contracts Act 1984 (Cth.) (unaffected by the Insurance Contracts Amendment Act 2013) (Cth.)), alternatively at common law or pursuant to the equitable duty of good faith and fair dealing, the Plaintiff has a right to recover under the said policy.
PARTICULARS
The Plaintiff is referred to in the schedule to the policy as the Life Insured. The schedule to the policy states that benefits under the policy would be paid to the Plaintiff. A copy of the schedule may be inspected at the office of the Solicitors for the Plaintiff by appointment.
5A. Further, or in the alternative to paragraph 5, the Plaintiff has standing to enforce the policy as the beneficiary of the trust entitled to payment of the benefits payable under the policy in the due administration of the trust.
PARTICULARS
The Plaintiff requested the Second Defendant, by letter dated 3 April 2020, to cooperate and allow a generally endorsed writ be issued in the Supreme Court to preserve the rights of the parties under the policy and requested her to assign the cause of action to him to enable him to issue a generally endorsed writ to preserve the cause of action. The Second Defendant acknowledged the request by letter dated 6 April 2020 but failed comply with either request and has failed to issue proceedings to enforce the policy, as she ought to have done. The said letters may be inspected, so far as is relevant, at the office of the Solicitors for the Plaintiff by appointment.”
30The plaintiff proposes further amendments to the statement of claim to:
(a) refer to the “First Defendant” where relevant;[15]
(b) further particularise the plaintiff’s disability;[16]
(c) include a new paragraph 11A reading:
The Second Defendant is joined as a party to this proceeding for conformity only and no relief as against the Second Defendant in respect of the Plaintiff’s claim other than to pay to the Plaintiff the benefit if and when received by her from the First Defendant.
[15]See Exhibit IB-1 to the affidavit of Issac Brott dated 11 October 2022; paragraphs 1, 2, 6, 8 and 10 of the proposed amended statement of claim
[16]See Exhibit IB-1 to the affidavit of Issac Brott dated 11 October 2022; particulars(4) to paragraph 9 of the proposed amended statement of claim
31The plaintiff’s proposed amended statement of claim also seeks to amend the prayer for relief by seeking specific performance of payments due under the policy to the plaintiff or, alternatively to McAra. If specific performance is ordered against the defendant in favour of McAra, the plaintiff seeks an order that she should be ordered to pay any monies received to him.
32The issues arising from the parties’ application are intertwined and are dealt with below.
(1) Plaintiff’s standing to sue in his own name
33The defendant’s main argument is that the plaintiff does not have standing to sue. The plaintiff is not entitled to the remedies he claims as he is not the legal owner of the policy.[17] Any benefits payable under the policy would be payable to the policy owner, which is not the plaintiff.[18] If there is no standing or entitlement to a remedy on either the current or proposed amended statement of claim, then the case management principles of the Civil Procedure Act 2010 weigh heavily in favour of the grant of its application.
[17]Defendant’s submissions dated 28 October 22, [22]‑[23]. See, also, the defence dated 11 August 2021.
[18] Paragraphs 4A & 4B of the defence
34The defendant emphasises that the issues with the plaintiff’s claim addressed in its strike out and stay applications remain in the proposed amended statement of claim. It says that the plaintiff still pleads that the defendant “failed or refused to pay the Plaintiff the monthly benefit or refund premium from March 2014 to 14 January 2017.”[19] The defendant maintains that this allegation remains unviable because it was under no obligation to pay the plaintiff under the terms of the policy.
[19] Paragraph 10 of the proposed amended defence
35In paragraph 20 of the affidavit of Anna Morris dated 31 May 2022, the defendant says the plaintiff’s decision to launch this proceeding in his own name is an abuse of process because:[20]
(a) if successful in obtaining the relief sought, it would result in the payment of benefits to the plaintiff rather than to the owner of the policy;
(b) it avoids the limitation period that would apply were the owner of the policy to bring the proceeding; and
(c) it prevents the defendant from counterclaiming against the policy owner for amounts already paid under the policy.
[20] Affidavit of Anna Louise Morris dated 31 May 2022, [20]
36Counsel for the plaintiff objected to the admissibility of the statements contained in paragraph 20 of Ms Morris’ affidavit on the basis that the statements were not proof of the matters alleged and were in the nature of a submission. I accept that the statements are more in the nature of a submission rather than evidence. Counsel for the defendant did address these matters by way of submissions at the hearing.[21]
[21] Transcript pages 25-26
37Counsel for the defendant submitted that the documents discovered in this proceeding paint a clear picture of the contractual rights under the policy belonging to McAra and McAra only. The defendant relies on:
(a) the policy itself, which provides for payment of benefits to the “Policy Owner or Owners,” and which identifies the plaintiff as “The Policy Owner” to whom “Benefits under this Policy will be paid”;
(b) the “Transfer of Ownership” document signed by the plaintiff and McAra on 6 December 2010, transferring ownership of the policy from the plaintiff to McAra with effect from 1 January 2010;
(c) a letter from the plaintiff’s solicitor to the solicitor for McAra’s trustee in bankruptcy dated 3 April 2020, in which the plaintiff’s solicitor notes that the defendant ceased payments after McAra “contacted the insurer and appraised in considerable detail to MLC as to the family law litigation” between the pair, and requesting that McAra’s “Trustee … co-operate and allow a generally endorsed writ be issued in the Supreme Court to preserve the rights of the parties”;
(d) the Trustee’s response letter dated 9 April 2020, in which he offers that his “client is prepared to consider to assignment [sic] the cause of action, but it must be of [sic] valuable consideration”, suggesting that it would be appropriate for the plaintiff to offer $100,000 as surety for costs in the circumstances;
(e) the plaintiff’s solicitor’s response to the Trustee’s letter rejecting that offer;
(f) a letter from the defendant to McAra dated 3 November 2011 annexing a “Review Schedule” referring to the policy which names McAra as “The Policy Owner” to whom “Benefits under the Policy with be paid”. The defendant submits that this schedule is consistent with the transfer document, in that it also identifies McAra as the policy owner;
(g) a letter from McAra’s solicitor to the defendant dated 13 April 2016 exhibiting a proposed statement of claim in which McAra pleads that the policy was transferred to her and that she is the policy owner and entitled to damages. Counsel for the defendant noted that this proposed statement of claim was signed by current counsel for the plaintiff;
(h) the plaintiff’s statement of affairs under the Bankruptcy Act 1966 (Cth) entered into on 15 December 2010, shortly after the policy was transferred to McAra on 6 December 2010. The defendant notes that in this document, sworn to be correct by the plaintiff, the plaintiff has ticked “no” in answer to the questions “have you been a unit holder in or beneficiary of a trust in the last 5 years?” and “does the trust owe you any wages, loans or other money?”.
(i) the plaintiff’s affidavit sworn 11 October 2022, in which he deposes that “no order or other determination has been made in the family law proceeding with respect to the ownership of the benefits of the policy.”
38Counsel for the defendant submitted that these documents, taken together, show that the contractual rights under the policy belong to McAra only. Reiterating the defendant’s arguments relating to the forensic unfairness inherent in the plaintiff bringing this claim instead of McAra, counsel for the defendant suggested that the plaintiff’s amended paragraph [10] “shatters apart” when considered in relation to the terms of the policy itself. The declaration of trust dated 2022 had only been produced at a late stage by the plaintiff, despite purportedly creating a trust arrangement in December 2010. Counsel for the defendant emphasised that this document had not previously been raised or disclosed in either Mr Brott or McAra’s bankruptcy proceedings or in the family law proceeding between them.
39The plaintiff claims he remains the legal and equitable owner of the policy and that McAra’s ownership of the policy is held on trust for the plaintiff on the basis of a bare or express trust.[22] The plaintiff submits the assignment made to McAra was an equitable assignment of the right to receive the benefit under the policy. He claims that he retained other rights under the policy, including the right to apply for a life cover buy back.
[22]Counsel for the plaintiff refers to the trust both as an express and a bare trust (see, e.g., Transcript page 31 line 28; transcript page 32, lines 4-20; transcript page 38, lines 23-28). In the proposed amended statement of claim, it is referred to as a “bare trust” at paragraph 4
40During the hearing of the summonses, counsel for the plaintiff referred the Court to page 15 of the policy which provides:
“You may assign the benefits of this policy to someone else. The assignment has to be approved by us and registered with us before it will be effective.”
41The plaintiff submits that he has standing to sue because the transfer was not an equitable assignment of the policy itself, but rather he remained the legal and equitable owner of the policy after the transfer. He says that by the transfer “McAra became the equitable assignee of the right to receive the benefits under the policy”. The plaintiff says further that if the assignment had been a legal assignment, it would have constituted a novation, which the terms of the assignment make clear did not take place. As there has been no novation, the plaintiff claims that he remains able to sue under the policy as its owner at law.[23]
[23]Plaintiff’s submissions dated 10 August 2022, [16], citing Peters v General Accident Fire & Life Assurance Co Ltd [1937] All ER 628 and Life Insurance Act 1995, s10
42Counsel for the plaintiff relied upon Merkin and Enright’s Sutton on Insurance Law.[24] He referred to the discussion at paragraph [11.890] of the text which referred to the effect of novation of a contract of insurance as compared with an assignment. The commentary which he referred to draws a distinction between contracts of insurance where there is a novation in which the assignor did drop out of a contract of insurance as opposed to an assignment in which the assignor did not drop out. If there is a novation, the insurer cannot rely on the acts of the original insured to claim that the policy is vitiated and therefore deny liability to the assignee. The defence of non-disclosure of a material fact by the assignor at the time of entry into the contract can be raised against an assignee.
[24](Thomson Reuters, 4th ed, 2014)
43In this case, the defendant says it avoided the policy as a result of material non-disclosure on the part of the plaintiff and due to the fact that he was prohibited from engaging in legal practice. McAra is an assignee pursuant to the transfer which was effected in accordance with clause 15 of the policy. There is no suggestion that there was a novation of the insurance contract. The issue which the plaintiff raises in these circumstances is that the assignor, namely the plaintiff, remained a party to the insurance contract.
44The plaintiff says that there was no requirement for him to refer to the policy in his statement of affairs, as s116 of the Bankruptcy Act 1966 (Cth) has the effect that the policy is not property which vests in a bankruptcy trustee. Nor, for that matter, did McAra’s statement of affairs refer to ownership of the policy.
45Finally, the plaintiff submits that the defendant, while raising the issue of standing in its defence filed on 11 August 2021, sat on its hands in relation to that issue until June 2022. He submits that the Court should have regard to the principles set out in the Civil Procedure Act 2010 relating to legal practitioners conduct in litigation, in particular to the possibility of interlocutory proceedings having the effect of stifling a claim without a hearing.[25]
[25]Plaintiff’s submissions dated 28 October 2022, [6]-[7]. No section of the Civil Procedure Act cited
(2) Plaintiff’s standing to sue in his capacity as a beneficiary of a trust
46In the alternative, the plaintiff claims he is entitled to bring these proceedings in his own name either as a third party beneficiary under the policy;[26] “as an indirect beneficiary pursuant to the duty of good faith and fair dealing”;[27] or pursuant to s 48A of the Insurance Contracts Act 1984 (Cth).
[26]Plaintiff’s submissions dated 10 August 2022 [17] citing Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107; Cigna Insurance Asia Pacific Ltd v Packer [2000] WASCA 415 at [23]; Hannover Life Re of Australasia Limited v Sayseng [2005] NSWCA 214 at [69] –[72] per Santow JA, with whom Speigelman CJ and Tobias JA agreed
[27]Plaintiff’s submissions dated 10 August 2022 [18], citing Chammas v Harwood Nominees Pty Ltd (1993) 7 ANZ Ins Cas 61-175; C E Heath Casualty and General Insurance Ltd v Grey (1993) 32 NSWLR 25; 7 ANZ Ins Cas 61-199; Hannover Life Re of Australasia Limited v Sayseng [2005] NSWCA 214 at [50] – [72] per Santow JA, with whom Speigelman CJ and Tobias JA agreed; Ivan Mabbett v Watson Wyatt Superannuation Pty Limited and Anor [2008] NSWSC 365 at [3]; TAL Life Ltd v Shuetrim (2016) 91 NSWLR 439; [2016] NSWCA 68 at [53]–[56]; Carroll v United Super Pty Ltd [2018] NSWSC 403 at [87]; Sandstrom v FSS Trustee Corporation [2020] NSWSC 200 at [29]
47The plaintiff submits that if the Court should find that he is merely a third-party beneficiary under the policy, he is nevertheless entitled to seek specific performance from the defendant in circumstances where McAra as trustee refused to do so. He relies on a letter from his former solicitors sent to the solicitors for the trustee of McAra, dated 3 April 2020, seeking that the trustee assign a cause of action to issue a generally endorsed writ in the Supreme Court to preserve the rights of the parties.[28] In this regard, the plaintiff relies on the following extract from the High Court’s decision of Trident General Insurance Co Ltd v McNiece Bros Pty Ltd:[29]
“In the nature of things the likelihood of some degree of reliance on the part of the third party in the case of a benefit to be provided for him under an insurance policy is so tangible that the common law rule should be shaped with that likelihood in mind.”
[28]Affidavit of Issac Brott dated 11 October 2022, pages 30-32
[29](1988) 165 CLR 107, [32] (Mason CJ and Wilson J) (“Trident”)
48The defendant says there are two issues with respect to the allegation that McAra held the relevant interest on trust for the plaintiff. First, this alleged beneficial interest (even if established) would not entitle him to the benefit that he seeks. Any benefit is payable to the legal owner of the policy, not the plaintiff. Second, a limited exception to the principle in Trident is described by the High Court in Alexander v Perpetual Trustees (2003) 216 CLR 109 at [55]:
“…where relief is sought in the equitable jurisdiction of the Supreme Court against a third party, a beneficiary may sue in his own name, joining as defendants the trustee and any other beneficiaries, but only where there are ‘special circumstances’.”
49The defendant says that this exception does not apply because, inter alia, the policy owner is not a party to the proceeding and has not been joined as a defendant, and that there are no “special circumstances” which apply. Moreover, there is no authority suggesting that this principle applies where what is asserted is a constructive trust. It claims that the evidence provided with respect to “special circumstances” is incomplete, as:
(a) it does not disclose what responses were ultimately provided by the trustee for McAra; and
(b) no evidence has been called from the plaintiff’s previous solicitor, Mr Efron.
50The defendant made extensive submissions, both written and oral, addressing the trust pleaded by the plaintiff under the impression that it had been pleaded as a constructive trust.[30] However, at the hearing before me, the plaintiff’s counsel confirmed that the plaintiff relied upon a bare or an express trust.[31] Counsel suggested that confusion may have arisen from the section of Mr Dunner’s statement where he claims that “… a constructive trust existed between the parties”,[32] noting that “Mr Dunner is not a lawyer and the plaintiff does not and never has asserted that there was a constructive trust in this case.”[33]
[30] See defendant’s submissions [34]-[46]; transcript page 26, line 7 to page 29, line 26
[31] See transcript page 31, line 18 to page 32, line 20
[32] See above at paragraph [9]
[33] Transcript page 31, lines 22-24
51In reply, counsel for the defendant submitted that there is no unequivocal declaration of trust in any pleading or evidence given by the person purported to be the trustee of the bare trust alleged by the plaintiff. While noting the evidence given by Mr Dunner in his affidavit, the defendant claims that at its highest the plaintiff’s proposed amended pleading asks the Court to find that “words from someone else could give rise to an express trust in circumstances where the evidence is that money was paid to [McAra], not to [the plaintiff]”. While acknowledging the exception to privity held to exist by the High Court in Trident,[34] the defendant emphasises the limited nature of this exception and submits the terms of the policy should prevail.
[34] Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107
52Noting that none of the contemporaneous correspondence between solicitors mentions an express trust, the defendant raises the fact that the declaration of trust (created a decade after the transfer) fails to describe any facts at all and has been signed without a named witness.[35] The defendant submits that the declaration of trust, provided to McAra by the plaintiff himself, speaks to legal conclusions that a lay person would not have necessarily understood without legal advice. Finally, counsel for the defendant referred to text messages annexed to the affidavit of Mr Brott in which McAra appears to suggest that she was “forced” to sign the declaration by the plaintiff. The defendant says the declaration of trust is a document that is of no assistance to the Court at all because “it is in terms of a legal conclusion” rather than describing a fact.
[35]The declaration of trust attached to the further and better particulars of the statement of claim is signed by a witness named “Vinod Gojjeti”
53The plaintiff submits the existence of the express trust is supported by the independent evidence of Mr Dunner and the declaration made by McAra, as well as the plaintiff’s own evidence. As there are disputed questions of fact or law on this point, the existence or validity of the trust is an issue which should be determined at trial, not at an interlocutory stage.
Analysis
54The defendant’s main argument that the plaintiff has no standing because the right to receive any benefits under the policy were transferred to McAra as policy owner is compelling. The benefits under the policy were assigned under clause 15 of the policy with the result that McAra then became the policy owner. The transfer recording this arrangement was signed by the plaintiff and McAra and registered by the defendant. Benefits were then paid to McAra by the defendant up until it avoided the policy ab initio in December 2010, due to the plaintiff’s alleged fraudulent misrepresentations and material non-disclosure.
55As can be seen from the foregoing discussion, the plaintiff argues he retained contractual rights vis à vis the insurer as assignor of the policy. The analysis in Sutton on Insurance Law refers to the distinction between an assignment of a contract of insurance as opposed to a novation where the original owner effectively drops out. In paragraph 3 of the proposed amended statement of claim, the plaintiff asserts that he remains the legal owner of the policy, despite the transfer to McAra.
56The plaintiff argues that the requirements of s200 of the Life Insurance Act 1995 (Cth) regarding transfer were not met with the result that the legal interest was not transferred. The details of the alleged non-compliance with the section were briefly addressed before me,[36] but were identified in detail during the hearing before Her Honour Judge Burchell on 23 August 2022. It was said that all six of the requirements in that section were not met, including the fact that a prescribed form was not used in accordance with regulation 10. As a result, the transfer to McAra was in equity only and therefore, the plaintiff remained the legal owner of the policy. By contrast, the defendant contends that the transfer was effective under s200 with the result that the rights of the owner of the policy were assigned at law to McAra.[37] The arguments put forward raise disputed questions of both fact and law about the effect of the transfer to McAra and whether she became owner of the policy as contended for by the defendant.
[36] See transcript page 50 line 23 to page 51 line 11; page 52 line 23 to page 53 line 9
[37] Defendant’s submissions dated 19 August 2022, [5]
57Whilst somewhat tenuous, the legal points raised by the plaintiff that he retained some contractual rights as assignor and/or that the transfer to McAra was ineffective to transfer the legal ownership of the policy cannot be said to be so obviously unsustainable that a strike out or stay is now warranted on the basis the plaintiff clearly has no standing to sue on the policy. The mere fact that a claim may be weak is not of itself a basis for ordering summary termination.[38]
[38] Lindon v Commonwealth (No. 2) (1996) 136 ALR 251, 256 (Kirby J)
58The next aspect to consider is the capacity of the plaintiff to bring the proceeding as an alleged beneficiary. This involves a consideration of the principles in Trident and whether the plaintiff is an indirect beneficiary, pursuant to the duty of good faith and fair dealing as alleged, and/or has any entitlement to bring a claim under s48A of the Insurance Contracts Act 1984 (Cth).
59The review schedule naming McAra as policy owner refers to the plaintiff as the life insured, as did the original schedule to the policy. The plaintiff says he was named as the life insured and therefore a person for whom the benefit of the policy is covered invoking the limited jurisdiction under Trident as an exception to the privity rule. This raises a question about construction of the policy and whether the plaintiff was a person who was intended to be provided with a benefit under the policy. The plaintiff also says there were other benefits which were not assigned, such as what is described as a “Buy-back” on page 36 of the policy. The question of whether the plaintiff is a person who stood to benefit under the contract of insurance is a matter which will need to be resolved at trial after full argument, given the matter is not free from doubt.
60As to the bare trust claimed, the plaintiff claims that McAra was holding the benefits on trust for him and that in breach of trust, she failed to sue the insurer in which case he is entitled to take the action which McAra, as trustee refused to bring. Consequently, he has standing to bring the claim in his own name.
61The defendant points to several matters which would tend to support the proposition that any declaration of trust should be rejected, particularly given the declaration relied upon is alleged to be defective in form and is not a contemporaneous document, having been produced some time after these proceedings were commenced. That and the other factual matters which the defendant has referred to regarding the evidence, which is referred to in paragraphs 51 and 52 above, no doubt would be very fertile grounds for cross-examination at trial and be the subject of detailed submissions. But in all the circumstances, I am not persuaded that the allegations themselves are so unsustainable as to justify summary dismissal of the proceeding now.
62Further or alternatively, the plaintiff says he is entitled to bring the proceedings as an indirect beneficiary pursuant to the duty of good faith and fair dealing.[39]
[39]Plaintiff’s submissions dated 10 August 2022, [18], citing inter alia Chammas v Harwood Nominees Pty Ltd (1993) 7 ANZ Ins Cas 61-175
63The third ground relied upon by the plaintiff in respect of an express trust is s48A of the Insurance Contracts Act 1984, relying upon a version of that section before it was amended in late 2013. The plaintiff contends that this section requires payment to be made to him as he is a person who was expressed to benefit under the contract. The defendant submits the section is not applicable as it applies to a contract of life insurance effected on the life of a person but expressed to be for the benefit of another person identified in the contract. The defendant says the plaintiff is not specified or referred to in the contract as a person to whom the benefit of the insurance cover provided by the contract extends as required under s11 of the Insurance Contracts Act 1984. The parties were at cross-purposes to some extent on this issue, as they were arguing about different versions of s48A. Despite this, it still remains to be resolved whether the plaintiff can avail himself of this section to establish his claim as a beneficiary.
64As can be seen from the arguments raised above, there are various contested issues involving legal principles and factual matters. Even though some of the matters advanced by the plaintiff may appear weak, this is not enough to deprive the plaintiff of the opportunity to litigate his claim. Given the well-recognised principle that summary judgment should be exercised sparingly and only in the clearest of cases, I am not persuaded ultimately that this is such a case. I am not satisfied that the plaintiff’s claim has no real prospects of success. The question of the plaintiff’s standing to sue still remains a live issue, whether it be retaining legal ownership of the policy in his own right, or alternatively, whether he can bring the claim as a beneficiary of a bare or express trust. In my view, these areas of dispute can only be resolved at trial.
65The pleading itself, in my view, does not fall foul of the pleading principles in respect of applications under Rule 23.02 regarding its expression. The focus of the defendant’s application proceeded more under the considerations applicable to Rule 23.01. I am not persuaded that the claim put forward is an abuse of process given there remain issues in dispute as to the legal capacity of the plaintiff to make a claim under the policy, whether it be in his own name as assignor or in his capacity as a beneficiary of a trust.
66Given the matters raised about the declaration of trust and the alleged failure of the trustee McAra to commence proceedings against the defendant, it is appropriate that McAra, the alleged trustee, should be joined as a defendant so that these issues can be resolved in the same proceeding. It is likely that McAra would be called as a witness should the matter proceed to trial. It is undesirable that there should be separate trials given the commonality of issues and parties. The relief sought against her is declaratory only and that in the event she receives any benefits from the insurer, these should be paid onto the plaintiff.
67Counsel for the plaintiff informed Judge Burchell on 23 August 2022 that McAra remained a bankrupt. He said that her bankruptcy did not impact on the proposed claim as the proceeds of life insurance were exempt under s116 of the Bankruptcy Act 1966 (Cth) and therefore was not property that fell to be taken into account by her trustee. I note that McAra’s trustee is represented by McKean Park Lawyers who responded on the trustee’s behalf in response to the defendant’s subpoena. I will order that the plaintiff’s lawyers provide a copy of the amended statement of claim and writ to the trustee’s lawyers, together with a copy of this ruling and consequent orders once authenticated.
Costs applications under Rule 63A.03
68Her Honour Judge Burchell made orders on 25 July 2022, inter alia, requiring the plaintiff to pay the defendant’s costs thrown away by reason of two adjournments, fixed in the amount of $5,987.50 (the “July costs order”).[40] Judge Burchell made further orders on 23 August 2023 setting a deadline of 4.00pm on 13 September 2022 for the defendant to pay the July costs order to the plaintiff.[41] The plaintiff failed to comply.
[40] Order 7(a)+(b)
[41] Order 9
69On 15 September 2023, His Honour Judge Woodward made an order that the plaintiff pay the defendant’s costs of and incidental to the hearing held on 14 September 2022 fixed in the amount of $8,306.86 (“the September costs order”). His Honour noted in the “other matters” section of his orders that the plaintiff had applied for a stay of the July costs order (“the plaintiff’s costs application”),[42] and that:[43]
“…while the payment of costs pursuant to order 9 below (“September costs order”) is not contingent upon the plaintiff’s costs application, the payment of the July and September costs orders will be subject to consideration when the matter next returns for hearing, so that the court can decide whether those amounts should be payable forthwith or should be deferred until the conclusion of the proceeding.”
[42] Other mattes C(iii)
[43] Other mattes E
70The defendant had previously requested dismissal or stay of the proceeding on the basis that the July costs order had not been paid. His Honour Judge Woodward identified this application as being one of the extant applications in his orders of 15 September 2022.
71The plaintiff submits that the Court should vary the previous orders made so that payment of the July and September costs orders are payable at the conclusion of the proceeding. Per rule 63A.03(2.1), the July costs order was payable on 14 September 2022 and the September costs order “forthwith”. The defendant opposes the variation sought. He relies on paragraphs [17] to [32] of his affidavit sworn 11 October 2022 to submit that the previous cost orders should be payable at the conclusion of the proceeding, [44] taking into account the principles in Gao v Zhang (2005) 14 VR 380 (“Gao”) and Rozenblit v Vainer (2018) 262 CLR 478 (“Rozenbilt”).
[44] Filed in response to order 3(a) of the Orders made by Judge Woodward on 15 September 2022
72Rule 63A.03 reads (emphasis in original):
63A.03 Time for costs order and payment
(1)The Court may in any proceeding exercise its power and discretion as to costs at any stage of the proceeding or after the conclusion of the proceeding.
(2)Costs which a party is required to pay under any of these Rules or an order of the Court shall, unless the Court otherwise orders, be paid forthwith.
(2.1) Costs which a party is required to pay under an order of the Costs Court shall, unless the Costs Court otherwise orders, be paid forthwith.
(3) Where the Court makes an interlocutory order for costs, the Court may then or thereafter order that if the party liable to pay the costs fails to do so—
(a) if that party is the plaintiff, the proceeding shall be stayed or dismissed;
(b) if that party is a defendant, the party's defence shall be struck out.
(4) In paragraph (3)—
defendant includes any person against whom a claim is made in a proceeding;
plaintiff includes any person who makes a claim in a proceeding.
73In Rozenblit, Kiefel CJ and Bell J cited Ormiston JA’s decision in Gao as authority for the proposition that (citations omitted):[45]
“… where a stay order may deny justice to the party affected by it, it ought not to be employed unless it is the only fair way of protecting the interests of the party seeking the order. This was said by his Honour to reflect the "basal principle" stated by Dixon J in Cox v Journeaux [No 2](1935) 52 CLR 713.
The fundamental principle to which Dixon J referred in Cox v Journeaux is that, generally speaking, a person is entitled to submit a bona fide claim for determination by the courts. A litigant is entitled to a determination unless to allow the claim to proceed would amount to an abuse of process or would clearly inflict unnecessary injustice on the party seeking the stay, in which case the proceeding should be halted.
…
Importantly, it follows from what his Honour said in Cox v Journeaux that where the consequence of a stay order is the effective termination of the proceedings, there must be strong grounds for its exercise.
…when an order for a stay is made in the context of costs rules, regard would be necessary to the conduct of the proceedings. It might be expected that there would be a series of orders for costs in interlocutory applications which did not involve the genuine resolution of disputes necessary to be resolved before the matter goes to trial. The pursuit of appeals from essentially peripheral issues may evidence an effective harassing of the other party of a kind which may justify bringing the litigation to an end. Conduct of this kind could warrant condemnation by an order for a stay of proceedings.
The conduct in Gao v Zhang satisfied that description. There had been a series of orders made in related interlocutory applications which appeared of less and less merit and more and more ill-conceived as they proceeded up through the appellate levels to this Court. Ormiston JA held that the judge hearing the applications for stay could fairly have concluded that the defaulting party's persistent harassment of the other party should not be permitted unless and until the costs were paid.”
[45] [9]-[10], [13]
74Also in Rozenbilt, Gordon and Edelman JJ held that:[46]
“The powers to stay a proceeding, or to dismiss a proceeding without trial, are both powers which, if exercised, in one way or another ‘deny justice to the party affected and ought not to be employed unless it is the only fair way of protecting the interests of the party seeking such an order’”
[46] At [66]. Citing Gao at [12] and Cox v Journeaux [No 2](1935) 52 CLR 713 at 720
75The plaintiff deposes at paragraph [27] of his affidavit dated 11 October 2022 to having no assets to his name, pending the resolution of a section 90SN application pursuant to the Family Law Act 1975 (Cth) which was listed for hearing on 28 February 2023. The plaintiff says he currently receives a pension of $444 per fortnight and has no other income or savings.[47] If the Court does not allow a stay of the payment of the July and September costs orders, he will likely be unable to prosecute his claim against the defendant.[48] In a supplementary affidavit sworn by the plaintiff on 2 November 2022, he refers to two companies (which had been identified earlier by the defendant) of which he is a director. He confirms that neither have any assets. There was no evidence led by the defendant to contradict the accuracy of these statements nor was the plaintiff cross-examined about them.
[47] [30] of affidavit 11 October 2022
[48] [32] of affidavit 11 October 2022
76The defendant says if the Court declines to strike out the proceeding under Rule 23.02 it should not make the order sought by the plaintiff staying the payment of interlocutory costs orders already made against him. It notes that the plaintiff has been in serial default of previous Court orders and that he has failed to pay any costs orders. The amount of the July and September costs orders is relatively modest (being $5,987.50 and $8,306.86 respectively). The plaintiff has deposed to having an interest in a marital pool of about $12 million dollars. His claim that payment of those costs would stifle the litigation are submitted to be implausible. His affidavit makes only bare assertions unsupported by relevant evidence, including any independent statement of his financial affairs or any complete list of bank accounts, balances and assets.
77I accept the plaintiff’s submission that unless the July and September costs orders are stayed he will effectively be unable to prosecute his claim having regard to the state of the evidence lead as to his impecuniosity. Although non-payment of the costs orders undoubtedly results in a prejudice to the defendant, in the circumstances a delay in receipt of the “relatively modest” amounts (by its own definition) due to it is preferable to a course which will prevent the plaintiff from pursuing his claim entirely. While the plaintiff’s conduct has resulted in delay, prompting the July and September costs orders, it has not been so egregious or vexatious that these orders should be enforced immediately if they will in effect operate as a stay on proceedings.
78It follows then the defendant’s application for a dismissal or stay of the proceeding for the plaintiff’s failure to pay the costs also fails. I will therefore grant a stay of the July and September costs orders until the conclusion of the proceeding or further order of the Court. If the plaintiff’s financial circumstances later change for the better following the settlement of his family law litigation, for example, then the defendant should have the opportunity to revisit the timing of payment of the July and September costs orders, should it wish to do so.
Conclusion
79In the circumstances, I am satisfied that the plaintiff should be given leave to join McAra as second defendant to this proceeding and to file and serve his proposed amended statement of claim in the form of Exhibit IB-1 at pages 9 to 18 of the plaintiff’s affidavit sworn 11 October 2022 and to file an amended writ.
80Subject to hearing from the parties, I propose ordering that the parties’ costs of the defendant’s summons dated 31 May 2022 be costs in the cause. I do so on the basis that this is the usual order where a summary judgment application has failed. The defendant was seeking summary relief under Rule 23.01 of the Rules. It may well be that the defendant’s arguments will succeed after a contested trial, in which case it should have its costs of the application. Conversely, if the plaintiff succeeds, he should recover his costs of the application.
81As for the plaintiff’s summons, I am also inclined to order that the costs of that application be costs in the cause, unless either of the parties seek to convince me otherwise.
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Certificate
I certify that these 30 pages are a true copy of the Reasons for Ruling of Her Honour Judge A Ryan delivered on 15 March 2023.
Dated: 15 March 2023
Associate to Her Honour Judge A Ryan
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