Cirillo v Citicorp Australia Ltd

[2005] HCATrans 433

[2005] HCATrans 433

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Adelaide  No A59 of 2004

B e t w e e n -

VINCENZO GIOVANNI CIRILLO

Applicant

and

CITICORP AUSTRALIA LIMITED, CW CONSTRUCTION PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION), JOHN HAROLD HEARD AND STEPHEN ELLIOTT YOUNG

Respondents

Application for special leave to appeal

GUMMOW J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

FROM ADELAIDE BY VIDEO LINK TO CANBERRA

ON FRIDAY, 17 JUNE 2005, AT 12.30 PM

Copyright in the High Court of Australia

MR M.F. BLUE, QC:   May it please the Court, I appear with MR R.M. MARRONE for the applicant.  (instructed by Marrone & Co)

MR P.A. McNAMARA, QC:   May it please, I appear with my learned friend, MR M.G. EVANS, for the respondents.  (instructed by Finlaysons)

GUMMOW J:   Where is this machine now?  What is its condition?

MR BLUE:   I understand that it is still stored at Wingfield which is where it was at the time of the trial and that its condition is poor. 

CALLINAN J:   Why was it left to lie idle or not sold, what, for five years or seven years?

MR BLUE:   During the course of the injunction, your Honour?

CALLINAN J:   Yes.

MR BLUE:   The injunction prevented it being sold or used or in any way being dealt with.

GUMMOW J:   It was only interlocutory.

CALLINAN J:   It could have been dissolved. 

MR BLUE:   Yes, it could have been dissolved but it was not dissolved.

GUMMOW J:   Or some arrangement could have been reached.

MR BLUE:   In fact, it did remain on foot.

GUMMOW J:   Yes.

CALLINAN J:   What was the value of this machine when it was ceased to be used?

MR BLUE:   I think the evidence was that it had been purchased at a cost of $120,000 – I am sorry, I correct that, $23,000.  The claim pursuant to the undertaking was not for the value of the machine or its deterioration but rather the loss of revenue that it could have been used to generate.

GUMMOW J:   We understand that.  I am just a bit mystified and bemused at the whole course of this unhappy litigation.

MR BLUE:   Yes, if your Honour pleases.  The trial judge found – and this is at application book page 72, paragraph 13 – that having obtained the interlocutory injunction the respondents took no steps at all to prosecute the proceedings, including they did not file a statement of claim.  At paragraph 14, he found that the instructions were given by Citicorp to undertake minimal activity and, at paragraph 15, that the reason for that was that it was hoped by the respondents:

at about the time of the granting of the injunction, that Cirillo would be made bankrupt in the then near future.  It was felt by them that a trustee in bankruptcy would be far easier to deal with, in attempting to negotiate some form of settlement, than would be the case in dealing with Cirillo himself.

In that respect, their hope was realised in that Mr Cirillo was made bankrupt in 1992, but in the meantime they had maintained the injunction preventing him from using the machine.

CALLINAN J:   What was the date of the injunction again?

MR BLUE:   An interim injunction was granted on 10 May and the interlocutory injunction was granted on 24 May 1985.

CALLINAN J:   Mr Cirillo was not adjudicated bankrupt until, what, 1992?

MR BLUE:   Correct, your Honour, yes.

CALLINAN J:   Why did he not apply for a discharge of the injunction?

MR BLUE:   I think he was not represented during that period, or the bulk of that period, your Honour.

CALLINAN J:   There is no evidence as to why, in those seven years, he never sought to have the injunction dissolved?

MR BLUE:   I understand that there was one application made and it was unsuccessful.

CALLINAN J:   When was that, Mr Blue?

MR BLUE:   No, I am sorry, I withdraw that.  It is our contention that it is an abuse of process for a party to obtain an interlocutory injunction and then take no steps to prosecute it and, indeed, have the intention of taking no steps to prosecute it in the hope that it might apply commercial pressure and lead to some other resolution.

CALLINAN J:   But the answer to that is that you can apply for its dissolution.

MR BLUE:   One can but, nevertheless, we submit that it is still an abuse of process for a plaintiff to have ‑ ‑ ‑

CALLINAN J:   After the interlocutory injunction was granted, was there any step taken in the action at all?

MR BLUE:   No, your Honour. 

GUMMOW J:   Well, that would be a good ground for getting it dissolved.

CALLINAN J:   Exactly.

MR BLUE:   Yes, I accept ‑ ‑ ‑

CALLINAN J:   And, indeed, for getting the whole action dismissed for want of prosecution.

MR BLUE:   Yes, I accept that and, ultimately, in 1993, the plaintiffs did discontinue but, as I said, Mr Cirillo generally was not represented in that period and it is our submission that a plaintiff cannot simply sit on an injunction and then say that it is the defendant’s fault for not seeking to dissolve it.  It is the plaintiff who has obtained the injunction from the court and it is our submission that a plaintiff in those circumstances, if it makes a decision not to prosecute the action, has a duty to come to the court and ask to dissolve it. 

That question, in a sense, was one of the reserve questions for the subsequent trial.  That was a point that was taken by the respondents but it was not one of the specific points decided in a separate trial, so that point remains alive to the respondents to take.

GUMMOW J:   There has never been a full trial to this day, has there?

MR BLUE:   No, there has not been a full trial.  The trial was confined to five specific questions that were stated. 

CALLINAN J:   Was it a Mareva or asset protection injunction that was granted?

MR BLUE:   No, your Honour, it was an injunction in support of the claim to ownership and the claim to security interests in favour of Citicorp over the machine itself.

CALLINAN J:   Something like a bill of sale or a debenture, was it, crystallising of a debenture?

MR BLUE:   Yes, exactly, a debenture.  That is right.  Citicorp had a debenture over the assets of CWC, the corporate respondent, and it was claimed that CWC owned the machine and it was claimed that Citicorp had that security over it.  An injunction was sought to preserve their rights in the meantime until a trial. 

We have referred in our book of authorities to the decision in Town and Country Building Society v Daisystar Ltd, which is case No 5 in that book, a decision of the Court of Appeal in England, in which it was held that a litigant who obtains a Mareva injunction is under a duty to get on with the litigation.  It is our submission that the same applies to an ordinary interlocutory injunction.  In that case there were no steps taken in the action for a long time and it was held by the Court of Appeal that:

it is an abuse of the process of a Mareva injunction to obtain the injunction, then not get on with prosecuting the action, but then to desire to hold the injunction and start prosecuting the action afresh if it appears that there may be a prospect of getting security ahead of others through the use of the Mareva on assets which are not the subject of any charge ‑ ‑ ‑

GUMMOW J:   Yes, but that case arose out of an application to discharge the injunction, did it not?

MR BLUE:   Yes, it did, but we cite that case ‑ ‑ ‑

GUMMOW J:   For some reason that does not immediately appear, the primary judge would not and the Court of Appeal said, yes, it should have been.

MR BLUE:   That is so, your Honour, but the point we cite it for is to say it is an abuse of process for a plaintiff to act in that way and, indeed, that can give rise both to ‑ ‑ ‑

CALLINAN J:   A Mareva is quite different really because it is not a case in which the plaintiff has a proprietary interest or need have a proprietary interest, whereas your case was a case in which the other party contended it had a proprietary interest.  It is easy to draw a distinction between using somebody else’s assets or restraining the use of them on the one hand and pursuing a claim for assets which you say you own or have a proprietary interest in.

MR BLUE:   We accept that, but it is our submission that it is likewise an abuse of process for a plaintiff to assert ownership, obtain an injunction on the basis of that assertion, and then take no steps to prosecute it and, indeed, ultimately simply to discontinue it. 

Can I move to the first special leave point which is our contention that when a party does discontinue such litigation that that party is deemed in law to accept that the injunction was wrongly granted and is not entitled to then go into the merits which were the subject matter of the action itself.  We cite, firstly, a decision in Bird Construction Co Ltd v Paterson, if I could take the Court to the majority judgment in that case.  This was a decision of the Alberta Supreme Court Appellate Division, the majority decision being a decision of Justices of Appeal Macdonald and Johnson.  I take the Court to page 185, about point 9 of that report, the last paragraph:

The defendants have asked for an order that the action be dismissed.  As the action has been effectively terminated by the filing of a discontinuance, such an order is unnecessary.  It is, I think, clear that the plaintiff by discontinuing the action has admitted that it had no right to the relief claimed.

They then cite an earlier decision of Justice Murphy:

“There is no need for a hearing to determine that the injunction was wrongly asked for.  Plaintiffs by discontinuing the action admit this is so.”

And in 43 Corp Jur Sec, p 285, it is stated that ordinarily “where plaintiff obtained an injunction and where thereafter plaintiff discontinues the action without defendant’s consent, such discontinuance constitutes an adjudication that plaintiff was not entitled to the injunction”.  There will be cases where the wrong or threatened wrong which has been enjoined will disappear and make the continuation of the injunction unnecessary.  In such cases, the proper procedure is to apply to have the injunction dissolved and the Court will have the opportunity to determine if the plaintiff’s right to the injunction is either conceded or established, in which cases the plaintiff would be entitled to be relieved of his undertaking.  If that right has not been made out –

that is, if an application is not made to dissolve the injunction on that basis –

the defendant would then or thereafter be entitled to have his damages assessed.  I think it is a salutary rule to insist that a discontinuance is an admission that the injunction was wrongly asked for where an action is discontinued while an injunction is undischarged.  In this way the Court is assured that its processes are not abused.

I pause there to say that ‑ ‑ ‑

GUMMOW J:   That is all too broad, it is just too broad.  There may be some supervening event.

MR BLUE:   If your Honour pleases, the court has dealt with that in saying that if there is a supervening event then the remedy for the plaintiff is to approach the court – and, indeed, we would say the duty of the plaintiff is to approach the court – and seek dissolution of the injunction because if the injunction is no longer needed then the plaintiff ought not to be maintaining it.  On that hearing, the plaintiff can then also seek to be relieved from the undertaking as to damages.  So we submit that is the appropriate remedy for a plaintiff in those circumstances.

It is also the position in the United States to like effect.  I just want to take the Court to one authority of the many that we have cited in our outline, which is an early decision in Mitchell v Sullivan, which is case No 4 in our book, and as is recorded there by Chief Justice Horton:

This was an action upon an undertaking executed by the defendant to obtain a temporary injunction.  The district court sustained a demurrer to the petition, upon the ground that, as the case in which the temporary injunction was granted was dismissed before answer at the costs of the plaintiff therein, and without prejudice for a future action, it had not been finally decided that the injunction ought not to have been granted . . . 

The ruling of the court below was erroneous, as in our judgment the discontinuance of the action by the plaintiff was not only a confession that the temporary injunction ought not to have been granted, but was a final decision that he was not entitled to the injunction . . . If the district court, upon a hearing, had dissolved the injunction, we think it would be conceded that the court had finally decided that the injunction ought not to have been granted.  As the judgment of dismissal terminated the proceedings, and had the same effect upon the rights of the parties as if a motion to dissolve the injunction had been sustained, and as the judgment of the dismissal was the final action of the court, so far as the temporary injunction was concerned, this was equivalent to the court finally deciding that the plaintiff was not entitled to the injunction order.  While the dismissal of the case without prejudice does not preclude a plaintiff from bringing a new action, the dismissal ends, and disposes of the order of injunction allowed at the commencement thereof, or granted during the litigation, as the order cannot be revived or renewed at the mere will of the plaintiff. 

There are many cases in the United States which hold that that is ‑ ‑ ‑

GUMMOW J:   Any in England?

MR BLUE:   No, your Honour, we have not been able to locate a case in England which so holds and in Australia the only case that we have located is the one under appeal.  The approach that the Full Court took here is that the Full Court rejected those propositions as propositions of law or equity and merely said that a discontinuance might, in certain circumstances, lead to a factual inference that the plaintiff could not sustain its action but declined to follow Bird Construction in that being a principle of law or equity. 

It is our submission that the law in this country ought to be the same as the law in Canada and the law in the United States, that, as a matter of policy, the injunction is granted on the fundamental basis that the plaintiff will go on and prosecute its case and make out the relief to which it is entitled, which is the only basis on which it gets the interlocutory injunction in the first place.  If it simply does not do that and abandons that attempt, it is our submission that the law is that it then has wrongfully obtained the injunction and it cannot then be heard to seek to litigate the merits of the very action which it has abandoned. 

CALLINAN J:   Mr Blue, assume everything you say is right to this point, was there a finding against you at first instance that your client had no proprietary interest in the machine?

MR BLUE:   Yes, there was, your Honour.

CALLINAN J:   Did that finding stand?

MR BLUE:   Yes, that finding was upheld by the Full Court, but it is our submission, your Honour, that if we are right in this preliminary point, that that finding is irrelevant.  That is that if we are right that the respondents ought not to be permitted to assert their legal ownership of the machine because they have discontinued, in other words if the United States cases and the Canadian cases are correct, then they are simply not entitled to assert that and we submit ‑ ‑ ‑

CALLINAN J:   But wait a moment.  You are trying to rely upon ultimately an undertaking that was not given to you; it was given to somebody else.

MR BLUE:   It was given to the court.

CALLINAN J:   Yes, in respect of a different party.  Were you a party to the litigation in which the undertaking was given?

MR BLUE:   Yes.  Mr Cirillo was one of the two defendants in that litigation, your Honour, so the undertaking was given for his benefit. 

CALLINAN J:   But it has been held that he in fact had no proprietary interest in the machine.

MR BLUE:   It has, yes, your Honour, but we have two answers to that.  One is to say that it was the effect of the injunction in preventing his use of the machine which has caused his loss and the question of ownership is irrelevant to that and that was made ‑ ‑ ‑

CALLINAN J:   Was there some agreement between him and the corporate defendant?  Was that proved?

MR BLUE:   No, there was not any agreement proved, rather the corporate defendant relied upon evidence in its own records, such as depreciation schedules, to support its claim that somehow the machine had been transferred to it, but it never identified the precise process or agreement pursuant to which that occurred.  It is our submission that Justice Gray found – and this is application book 187 at paragraph 87 – that it was the effect on the use of the machine that has caused the loss not anything else. 

It is our submission, in those circumstances, the question of ownership is irrelevant because but for the injunction Mr Cirillo would have been able to use the machine.  Secondly, it is our submission, as I said before, that if the Canadian and American approach is followed in this country then the discontinuance should foreclose respondents such in this case from agitating the issue of ownership.  We accept, of course, that if a defendant consents to a resolution of the proceedings which involves them both being discontinued and agrees that the defendant will not pursue the undertaking, then that, of course, would be an answer and the American courts have accepted that, but that is not the case in this case. 

In relation to the question of supervening events that your Honour Justice Gummow raised, my learned friend raises that in his outline, but it is our submission that that does not arise for two reasons.  One is that the respondents here ought to have made application to dissolve the injunction and they could have then sought to be discharged from their undertaking on the basis of supervening events; but, secondly, in any event, the only supervening event to which the respondents point is the fact that the

machine had deteriorated in value over the seven years.  That, of course, was a direct consequence of the injunction because the injunction prevented the machine being used.  So a respondent cannot rely on an event which is a consequence of its own conduct, namely, the preservation of the injunction, to be a supervening event. 

GUMMOW J:   Thank you, Mr Blue.

MR McNAMARA:   May it please the Court, your Honours will ‑ ‑ ‑

GUMMOW J:   Just a minute.  We do not need to call on you actually, Mr McNamara.

MR McNAMARA:   I am obliged to your Honours. 

GUMMOW J:   Having regard to the history of this litigation, there are insufficient prospects of success of an appeal to this Court to establish the general propositions asserted by the applicant concerning the consequences of discontinuance of an action upon an undertaking as to damages given in respect of an interlocutory injunction in that action.

Accordingly, special leave is refused with costs.

AT 12.52 PM THE MATTER WAS CONCLUDED