Cetinkaya and Anor – v – Unal and Anor
[2016] VCC 992
•13 July 2016
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL CASES LIST
Case No. CI-08-05385
| CETINKAYA & ANOR | Plaintiffs |
| v | |
| UNAL & ANOR | Defendants |
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JUDGE: | Judicial Registrar Tran | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 20 June 2016 | |
DATE OF DECISION: | 13 July 2016 | |
CASE MAY BE CITED AS: | Cetinkaya & Anor – v – Unal & Anor | |
MEDIUM NEUTRAL CITATION: | [2016] VCC 992 | |
REASONS FOR DECISION
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Subject: Application to set aside order striking out proceedings
Catchwords: PROCEDURE – Jurisdiction of County Court to set aside order striking out proceeding – Order not perfected by authentication - Order made using case management powers in Civil Procedure Act 2010.
PROCEDURE – Discretion to set aside order – Plaintiffs arguably lacked standing when proceeding commenced due to bankruptcy – Whether proceeding a nullity – Possible expiry of limitations period - Whether any defect capable of rectification by appropriate amendment – Delay – Whether any prejudice by reason of delay.
Legislation Cited: Bankruptcy Act 1966 (Cth), Civil Procedure Act 2010 (Vic), Judicature Act, Limitation of Actions Act 1958 (Vic), County Court Civil Procedure Rules 2008, Uniform Civil Procedure Rules 1999
Cases Cited:Chen v Monash University [2016] FCAFC 66, Northern Health v Kuipers [2015] VSCA 172, Lubura v Nezirevic (2013) 42 VR 43, Kostakanellis v Allen [1974] VR 596, Francis v National Mutual Life Association of Australasia Ltd [1999] 2 Qd R 355, Stone v ACE-I.R.M Insurance Broking Pty Ltd [2004] 1 Qd R 173, Jakimowicz v Jacks (2014) 288 FLR 365
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr T Sowden | Conlan Cummings Lawyers |
| For the Defendants | Mr C Connor | Tony Hargreaves & Partners |
JUDICIAL REGISTRAR:
In December 2008 Mr and Mrs Cetinkaya commenced these proceedings against Mr Unal alleging, in essence, that he fraudulently procured the transfer of the Cetinkaya’s Brunswick property (“the property”) into his name. Some seven and a half years later, and after a litigious battle that has spanned the County Court, Court of Appeal, Federal Circuit Court and Federal Court, it is fair to say that very little progress has been made on determining the real issues in dispute between the parties.
Background
Mr and Mrs Cetinkaya are Turkish immigrants. Mr Cetinkaya speaks limited English, Mrs Cetinkaya speaks only Turkish. Neither read nor write in English. In 1996, Mr Cetinkaya was operating a panel beating business on the property through a corporate entity. The business appears to have been in some financial difficulty, as on 14 May 1996 the ANZ Bank obtained judgment against the Cetinkayas for approximately $145,000 and for possession of the property. The Cetinkayas say they sought advice from Mr Unal, a financial adviser. They say that Mr Unal advised them that he would transfer the property into a family trust so that it would not form part of the estate of Mr and Mrs Cetinkaya in any bankruptcy. On 13 December 1996, Mr Unal became the registered proprietor of the property. On around 14 October 1997, Mr and Mrs Cetinkaya became bankrupt. They were discharged from bankruptcy on about 15 October 2000. In around November 2007, the Cetinkayas say they became aware for the first time that Mr Unal claimed that he had purchased the property from Mr and Mrs Cetinkaya absolutely in 1996. These proceedings were commenced in late 2008.
In addition to denying the substance of the claims made by Mr and Mrs Cetinkaya, Mr Unal claimed that:
a. they had no standing to bring their claim as any cause of action in relation to the transfer of the property vested in the Trustee in Bankruptcy on 14 October 1997; and
b. that any claim against him was in any event statute barred.
Mr Unal sought Summary Judgment. On 23 November 2009, Judge Anderson dismissed the application. This was appealed to the Court of Appeal, who on 12 March 2010 remitted the question of standing and jurisdiction to the County Court. These questions were listed for trial on 16 June 2010. The attention of the parties then turned to whether the Official Trustee would (or could be compelled to) assign any cause of action against Mr Unal to one of the parties. I will not set out in detail the litigation which ensued in relation to this issue, suffice to say that on 11 February 2016 (after multiple applications by Mr and Mrs Cetinkaya, Mr Unal and the Official Trustee to the Federal Circuit Court, an investigation by the Official Trustee under s.77C of the Bankruptcy Act 1966 (Cth) and an appeal to the Federal Court) the Official Trustee ultimately executed a deed of assignment, assigning the cause of action, the subject of these proceedings, to Mr and Mrs Cetinkaya. Throughout this period, it appears Mr Unal consistently opposed any assignment of the cause of action to Mr and Mrs Cetinkaya and instead argued, in essence, that if there were to be any such assignment it ought to be to him.
While the parties’ attention was focussed on the question of whether there would be an assignment of any cause of action held by the Official Trustee, the trial of the standing and jurisdictional questions was vacated and the proceeding was adjourned to administrative mention on 30 November 2010. The administrative mention was adjourned by consent to 8 March 2011 and again by consent to 14 June 2011 and again by consent to 20 September 2011 and one final time by consent to 17 January 2012. Then on 16 August 2012, after the parties did not respond to the administrative mention notice in January 2012 or a warning administrative mention notice in June 2012, Judge Kennedy made orders striking out the proceeding. There was no further action in relation to these proceedings until April 2016, when this application was made to reinstate the proceeding.
Before me, Counsel for Mr and Mrs Cetinkaya contended that the question of standing and jurisdiction had been put to bed by the Official Trustee’s assignment of any cause of action pleaded in the proceedings to Mr and Mrs Cetinkaya and that the proceeding, which has effectively stood in abeyance while that question was determined, should now be reinstated so that, finally, the merits of the dispute between the parties can be determined.
Mr Unal, on the other hand, contends that the Court has no power to set aside the order striking out the proceeding and even if it does have such power, ought not exercise its discretion to set aside the order given:
- the claims made in the proceeding are statute barred;
- the assignment of the cause of action does not remedy the fact that the proceeding was a nullity from the start; and
- the prejudice which will be suffered by Mr Unal in having to defend himself against claims which date back to 1996.
Jurisdiction
Counsel for Mr Unal noted that the order made by Judge Kennedy on 16 August 2012 struck out the proceeding rather than dismissed it. Accordingly, he submitted, the order could not be set aside under Rule 24.06 or 34A.16. He also referred to Chen v Monash University [2016] FCAFC 66 and the cases referred to therein which were said to establish that there is no implied power to set aside a perfected order bringing a proceeding to an end.
There are two answers to these submissions.[1] First the order of Judge Kennedy made 16 August 2012 has never been perfected by authentication. Whilst I do not accept the submission put for the Cetinkayas that as a result the order is of no effect and no order for reinstatement is required, it does mean that Chen and the cases referred to therein are not directly applicable. Second, and in any event, the order of Judge Kennedy was an exercise of the case management powers conferred upon her by Part 4.2 of the Civil Procedure Act 2010 (“CPA”), which applied to the proceedings on and from the commencement of that Part pursuant to s.74(2) of the CPA. Section 52 of the CPA gives the Court the express power to revoke or vary any direction or order made by it under this Part. Accordingly, there is an express power in the Court to revoke the order striking out the proceeding and there is no need to rely upon any implied powers of the sort considered in Chen.
[1] Neither of which was raised at the hearing of the application. However, the parties were subsequently given an opportunity to file further written submissions (on 22 June 2016 and 24 June 2016) on these issues which I have read and taken into account.
Discretion
The question, then, is whether I ought to exercise my discretion to set aside the order striking out the proceedings. In determining whether I ought to set aside the order striking out the proceeding, I must seek to give effect to the overarching purpose in s.7 of the CPA, “to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute”. I must have regard to the objects in set out in s.9(1) of the CPA and may have regard to the matters set out in s.9(2). As noted by the Court of Appeal in Northern Health v Kuipers [2015] VSCA 172, the “main focus” of the considerations in s.9 of the CPA is “forward looking and, in particular, in ensuring a fair and just determination of the real issues in dispute”.
The application before me is analogous to an application to set aside a default judgment, and in my view similar considerations govern the exercise of my discretion. In Lubura v Nezirevic (2013) 42 VR 43 at [3], Warren CJ described the test for setting aside a default judgment as follows:
“The test for setting aside a default judgment is set out in Kostakanellis v Allen [1974] VR 596 where the Full Court held that a court should assess:
· Whether there is a defence on the merits;
· The reasons for the default;
· Whether the application to set aside the judgment was made promptly after the judgment came to the knowledge of the first defendant; and
· Whether, if the judgment is set aside, a suitable award of costs and the giving of security would be adequate to cover the prejudice to the plaintiff in having the judgment set aside.”
This test is not all that different from the test for summary judgment.”
Is the proceeding a nullity?
Counsel for Mr Unal contended that the proceeding is a “nullity” as the Cetinkayas had no standing to sue when they commenced the proceeding in 2008. It is said that the fact that the Official Trustee has subsequently assigned rights to them which give them standing does not save the proceeding. Counsel relied upon the decision of Francis v National Mutual Life Association of Australasia Ltd [1999] 2 Qd R 355 as support for the proposition that such a proceeding “was never properly constituted and the court had no power to make an order that would overcome that deficiency”.
Francis was considered by the Full Court of the Queensland Court of Appeal in Stone v ACE-I.R.M Insurance Broking Pty Ltd [2004] 1 Qd R 173. In that case, the Court of Appeal allowed an appeal from an order striking out a proceeding as a nullity which had been commenced by a discharged bankrupt prior to the assignment of the cause of action by the trustee in bankruptcy. McPherson JA noted at para [7]:
“Why, then, should the action be struck out? The answer of the defendant Ace is, first, that the cause of action was and is vested in the trustee and not in her; and, secondly, that the action commenced by Mrs Stone on 12 October 2001 therefore is and always was a “nullity”…The concept of some proceedings being a “nullity” has always been a difficult one, and is essentially inconsistent with the principle that the Court retains control of all proceedings commenced within its jurisdiction. Since the Judicature Act, it has exercised that control by deciding as a matter of discretion whether or not those proceedings should be struck out or stayed as an abuse of process. Statute apart, courts should not be readily disposed to condemn proceedings as a “nullity”, whatever in law that may mean, because it removes the discretion which they have and exercise over their own process.”
McMurdo J noted at [26]:
“To the extent that the expression [“a nullity”] is useful, it can only refer to a proceeding which is defective in a way which the court with its various powers, including those conferred by its particular rules of procedure, cannot cure. If there is an apparent remedial power under the procedural rules, the defect is curable and the proceeding should not be described as a nullity. It is the extent of the remedial power which defines what can be remedied, rather than the remedial powers being qualified by a characterisation of something as a nullity, according to what was said in other contexts and under different procedural rules.”
McMurdo J went on to hold that any defect in the proceeding was capable of being remedied under Rules 375 and 376 of the Uniform Civil Procedure Rules 1999.
Stone was applied by the Victorian Court of Appeal in Rolfe v Investec Bank (Aust) Ltd [2014] VSCA 38. Nettle and Beach JJA and McMillan AJA said at [86]:
The proceeding was not a nullity albeit that it was defective. Although it is true that Mr Rolfe had no title to sue when the Writ was filed, it was open to him to take an assignment of the right of action from the trustee, as he did, and to seek, as he also did, to amend the Writ to reflect that he claimed as assignee. The judge was not in error in granting him leave so to amend his claim. Although the limitation period had expired by then, the court may allow an amendment notwithstanding the expiration of a limitation period — if satisfied that the other party to the proceeding would not thereby be prejudiced in a way that cannot fairly be met by an adjournment or award of costs — and there was no prejudice of that kind here because the claim (albeit in imperfect form) had been advanced before the limitation period expired.
In the present case, the question of standing was remitted to the County Court by the Court of Appeal and then set down for trial by Judge Anderson. The trial was vacated in order to enable the Cetinkayas to pursue the possibility of obtaining an assignment of the cause of action against Mr Unal. In my view it is not appropriate to determine this question on a summary basis on this application with the benefit of extremely limited argument and affidavit evidence given on information and belief pursuant to Rule 43.03(2). As was the case in Jakimowicz v Jacks:[2] “the facts must be fully investigated and the question cannot be determined on a summary application”.
[2](2014) 288 FLR 365 at 373 [32]
In any event, as noted below, the Court has the power (assuming these proceedings are reinstated and upon provision of a proposed amended statement of claim) to remedy any defect in the proceeding by granting leave under Rule 36.01(1) to file and serve an amended statement of claim relying upon the assignment of the cause of action. If the Court grants such leave, it may be that the question of standing will never need to be determined. Presumably this was in the contemplation of the parties when they agreed to the vacation of the trial of this question and the multiple adjournments of the administrative mention.
Relevance of Limitations of Actions
Counsel for Mr Unal contended that there was no utility in reinstating the proceedings as any cause of action against Mr Unal was statute barred. He contended that the causes of action became statute barred at the latest 6 years after the discovery of the fraud or mistake, which was as against the Cetinkayas, by December 2013 and as against the Official Trustee, by October 2015.
Counsel for Mr and Mrs Cetinakaya, however, contended that either:
- the relevant period was 15 years after the discovery of the fraud or mistake, relying upon s. 8 of the Limitations of Actions Act 1958 (action for recovery of land); or
- there was no relevant period of limitation, relying upon s.21(1) of the Limitations of Actions Act 1958 (action for fraudulent breach of trust).
If Mr and Mrs Cetinkaya are right and the relevant period was 15 years, then this would favour the grant of the order setting aside the proceedings. If an order were not granted, Mr and Mrs Cetinkaya could commence fresh proceeding tomorrow against Mr Unal, leading to further multiplicity of proceedings. There have been filing fees, Writ, pleadings and discovery and the payment of a setting down for trial fee in these proceedings, all of which might be wasted if fresh proceedings were required.
If Mr Unal is right and the relevant period ended in either December 2013 or October 2015, this does not necessarily preclude the reinstatement of the proceedings. The six year period expired after the commencement of these proceedings. Rule 36.01(1) provides that the Court may “at any stage order that any document in the proceeding be amended or that any party have leave to amend any document in the proceeding”. Rule 36.01(6) provides that “Notwithstanding the expiry of any relevant limitation period after the day a proceeding is commenced, the Court may make an order under paragraph (1) where it is satisfied that any other party to the proceeding would not by reason of the order be prejudiced in the conduct of that party’s claim or defence in a way that could not be fairly met by an adjournment, an award of costs or otherwise.”
The Court thus has the express power to permit amendment of the statement of claim so as to include a claim which is statute barred. That this power might properly be exercised in circumstances such as the present was recognised by the Court of Appeal in Rolfe v Investec Bank (Aust) Ltd [2014] VSCA 38 in the passage cited above.
Prejudice and delay
I turn then to the question of whether any delay or default by the Cetinkayas has caused prejudice to Mr Unal which cannot be remedied by an order for costs.
Mr Unal relies upon two periods of delay:
- the period of 12 years between the accrual of the cause of action in 1996 and the commencement of the proceedings in 2008; and
- the delay between the date of the order striking out the proceeding and 21 April 2016 when the application for reinstatement was made.
In relation to the initial alleged period of delay, the affidavit sworn by the Cetinkayas’ solicitor states that the alleged fraud was only discovered in 2007. Proceedings were commenced in 2008. Although perhaps the solicitor’s affidavit could have been more precisely expressed so as to fall within the terms of Rule 43.03(2), I do not consider any such technical defect to be sufficient to strike out his evidence. In these circumstances, I do not accept there was any unacceptable delay in commencing proceedings.
As to the delay between the 16 August 2012 order striking out the proceeding and 21 April 2016, initially it appears that all parties were in agreement that these proceedings should stand in abeyance whilst the issue of assignment of any cause of action held by the Official Trustee was agitated. It is likely that neither party anticipated that the final resolution of this issue would take as long as it ultimately did. There was then default by all parties in responding to the Administrative Mention.
There is no evidence before me as to the intention (if any) of the parties at the time that they failed to respond to the Administrative Mention or Warning Administrative Mention. At the time the order was made striking out the proceedings, the Official Trustee had indicated that it would not be assigning any cause of action to any of the parties and intended to investigate under s.77C of the Bankruptcy Act 1966 (Cth) whether there was a proper basis to bring proceedings under s.121 of that Act. It may be that the possibility that the Official Trustee would bring proceedings in its own name is the reason why no effort was expended by the Cetinkayas to keep the proceedings alive. Another possibility is that it was simple inadvertence on the part of the Cetinkayas’ solicitors. In the absence of any specific evidence I am unable to determine the reasons for the default.
Nor am I able to determine the rationale behind the filing of a fresh Writ in the County Court on 21 November 2013 (which was not ever served). I do not accept Mr Unal’s submission that this effectively constituted an irrevocable abandonment of the current proceedings.
On 2 July 2014, Justice Whelan of the Federal Circuit Court held that the “County Court cause of action” should be assigned to the Cetinkayas. Mr Unal appealed her decision. On 27 March 2015, Justice Beach of the Federal Court dismissed the appeal. In my view, particularly given the parties initially appear to have consented to the present proceedings standing in abeyance while the question of assignment of any cause of action held by the Official Trustee was resolved, it was not unreasonable for the Cetinkayas to refrain from incurring the expense of an application setting aside Judge Kennedy’s order striking out the proceedings until 27 March 2015.
It is less clear that the delay between 27 March 2015 and 21 April 2016 was reasonable. Having finally won what transpired to be an epic battle to have the cause of action assigned to the Cetinkayas, the attempts by the Cetinkayas’ solicitors to have that assignment formalised in a deed of assignment do not reflect the urgency one would expect in the circumstances. Between April 2015 and August 2015 it appears that a number of letters were written by the Cetinkayas’ solicitors which may or may not have been received by the Official Trustee, and perhaps a couple of telephone calls. But there was no further follow up by the Cetinkayas’ solicitors in relation to the lack of response from the Official Trustee until November 2015 and the deed of assignment was not in fact signed until 11 February 2016.
However, throughout this entire process Mr Unal was clearly aware that the Cetinkayas had not given up on their claims against him and that the Cetinkayas proposed to agitate those claims, if an assignment of the cause of action could be obtained, through the mechanism of a reinstatement of these proceedings. Thus, the application made in the Federal Circuit Court was for assignment of “a County Court cause of action”. In her reasons for decision, Justice Whelan noted at para 82:
“…the allegations against Mr Unal are extremely serious. There is a very strong public interest in those allegations being tested and determined in an appropriate forum. The only realistic way for that to happen is if the County Court cause of action is assigned to Mr and Mrs Cetinkaya.”
In the context of this ongoing litigation between the parties in relation to the “County Court cause of action” it cannot be said that, by reason of any delay in seeking to set aside the order striking out these proceedings, Mr Unal was led to believe that the claim against him was abandoned or not being pursued. Obviously a substantial period of time has elapsed between the allegations said to give rise to the cause of action the subject of these proceedings and the application for reinstatement. However, the present proceedings were commenced promptly once the alleged fraud was discovered and the subsequent delay in progressing the proceedings has to a significant extent been due to Mr Unal’s ongoing resistance to the assignment of any cause of action to the Cetinkayas.
As to the period of time after 27 March 2015 where it might be said that the Cetinkayas have unreasonably delayed to some extent, there is no evidence of any prejudice arising from that delay, nor would I be prepared to assume the existence of such prejudice in all of the circumstances.
I note that Mr Unal’s solicitor relies upon matters identified in the report prepared for the Official Trustee dated 19 February 2013, such as the death of Mr John Cinotis in 1988 and Mr Madafferi’s inability to recollect the Cetinkayas as constituting prejudice. This report was written in early 2013, following an investigation which commenced as early as April 2012. This was before the expiry of the limitation periods relied upon by Mr Unal before me and certainly before 27 March 2015. It cannot be said that matters referred to in this report constitute prejudice suffered by Mr Unal as a result of any delay in seeking to set aside the order striking out the proceeding. In defending the claim against him, Mr Unal will also have the benefit of the extensive investigation conducted for the Official Trustee in 2012-13, before the expiry of the relevant limitations period.
The other matters relied upon by Mr Unal are general and conclusory and refer to the entirety of the 20 years between the facts the subject of the proceedings and today’s date, rather than any specific delays which may be attributable to the Cetinkayas.
In all the circumstances, and particularly having regard to the overarching objective in the CPA, the order striking out the proceeding made on 16 August 2012 ought to be set aside and the proceeding reinstated.
I certify that these 11 pages are a true copy of the reasons for decision of Judicial Registrar Tran delivered on 20 June 2016.
Dated: 13 July 2016
Simon Bobko
Associate to Judicial Registrar Tran
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