Commonwealth Bank of Australia Ltd v Klapanis
[2014] VSC 532
•3 October 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2012 3972
| COMMONWEALTH BANK OF AUSTRALIA LTD (ABN 48 123 123 124) | Plaintiff | |
| - and - | ||
| RITA KLAPANIS | Defendant | |
| - and - | ||
| DUNEMANN SUTHERLAND PTY LTD (ACN 007 063 836) | Third Party | |
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JUDGE: | DERHAM AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 2 October 2014 |
DATE OF RULING: | 3 October 2014 |
CASE MAY BE CITED AS: | Commonwealth Bank of Australia Ltd v Klapanis |
MEDIUM NEUTRAL CITATION: | [2014] VSC 532 |
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PRACTICE AND PROCEDURE – Application to add third party to a third party proceeding - Third party claim involving a claim by the defendant for negligence – Addition of third party for the purposes only of invoking the proportionate liability regime under Part IVAA of the Wrongs Act 1958 (Vic) – Whether joinder too late – Joinder allowed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr B Carew | HWL Ebsworth Lawyers |
| For the Defendant | Mr J Searle | Frenkel Partners |
HIS HONOUR:
Introduction
The Third Party (‘Dunemann’) applies by Summons filed on 3 September 2014 for leave to join Zaia Arthur & Associates Pty Ltd (‘Zaia Arthur & Associates’) as a Second Third Party to the proceedings and for leave to file and serve an Amended Defence to the Third Party Notice and Statement of Claim. The Amended Defence to the Third Party Notice and Statement of Claim sought to be filed and served is Exhibit NLW-1 to the affidavit of Nigel Lawson Watson sworn 2 September 2014 in support of the Summons.
The sole purpose of the addition of Zaia Arthur & Associates is to enable Dunemann to pursue its rights under Part IVAA of the Wrongs Act 1958. Dunemann does not pursue any claims against Zaia Arthur & Associates for financial contribution or indemnity and seeks no relief from it of any sort. The application is made to ensure that Zaia Arthur & Associates is a party to the proceeding in order that the Court may take into account its conduct in determining what liability, if any, should be attributable to Dunemann for the Defendant’s alleged loss.
For the brief reasons that follow I have concluded that it is appropriate to allow the joinder of Zaia Arthur & Associates as a Second Third Party and have made consequential Orders as appropriate.
The Proceeding
The proceeding is brought by the Plaintiff (‘the Bank’) by Writ filed 12 July 2012. The Bank sues the Defendant on a guarantee and supporting mortgage securing payment of a loan made to a company called Golden Era Investments Pty Ltd (‘Golden Era’).
The Defendant was a director of Golden Era but seems to have little to do with it. Her defences to the claims include that she did not sign the guarantee or mortgage or, if she did, that she was at a special disadvantage vis-à-vis the Bank and it has taken unconscionable advantage of her disability, relying upon the principles reflected in the High Court decision in Commercial Bank of Australia v Amadio[1] and later cases.[2]
[1](1983) 151 CLR 447, 462.
[2]Kakavas v Crown Melbourne Limited (2013) 250 CLR 392; Bridgewater v Leahy (1998) 194 CLR 457.
By the third party notice,[3] the Defendant’s claims against Dunemann are for negligent breach of a duty to take care. Dunemann were the solicitors acting for Golden Era when it sold the business that had been acquired with the loan from the Bank. It is alleged that Dunemann was negligent in disbursing the proceeds of the sale of the business contrary to an irrevocable authority given by Golden Era. Dunemann provided the cheques to Zaia Arthur & Associates, trusting that firm of accountants (who were the accountants for Golden Era) to pay the monies to the Bank in reduction of the loan.
[3]Filed on 9 July 2013.
The monies were not paid in reduction of the loan but they were paid into an account of a company called BR Investment Group Pty Ltd. One of the principals of Zaia Arthur & Associates, Mr Zaia, is said to have been the sole director, secretary and shareholder of BR Investment Group Pty Ltd.
In the result, the loan from the Bank that should have been repaid, or reduced, from proceeds of the sale of the business was not. The Bank has not been repaid the loan. Golden Era has been wound up and thus the Bank sues under the guarantee and mortgage.
Proportionate liability claim - Part IVAA of the Wrongs Act 1958
Dunemann as Third Party wishes to allege in its Amended Third Party Notice and Statement of Claim that Zaia Arthur & Associates is a concurrent wrongdoer within the meaning of Part IVAA of the Wrongs Act 1958. Dunemann says that:
(a) The claim made by the Defendant falls within a claim to which Part IVAA applies by virtue of s 24AF;
(b) On the facts alleged Zaia Arthur & Associates is a concurrent wrongdoer with it within the meaning of s 24AH; and
(c) In order to be entitled to limit its liability under Part IVAA, pursuant to s 24AI, Zaia Arthur & Associates must be a party to the proceeding: see s 24AI(3).
Mr Searle of Counsel who appeared for the Defendant contended that the relevant claim for purposes of s 24AH is the claim made by the Bank and because the Bank’s claim is not a claim arising from a failure to take reasonable care (as required by s 24AF) there is no possibility of the proportionate liability provisions being applicable.
I disagree. It seems to me to be open to Dunemann to say that it and Zaia Arthur & Associates are concurrent wrongdoers within the meaning of s 24AH. The relevant claim is the claim made by the Defendant, which arises from a failure to take reasonable care, for the purposes of the application of that section.
Joinder Too Late
It was then contended by the Defendant that this application is made too late and that the potential for the Defendant to be prejudiced by the late application was self-evident. It arose from the fact that the addition of Zaia Arthur & Associates on the application of Dunemann exposes the Defendant to the risk of its claim for damages being limited unless it now seeks to join Zaia Arthur & Associates itself. The trial is fixed on an estimate of 5-8 days commencing in a little over a month’s time, on 10 November 2014. The third party notice had been originally filed on 19 July 2013. Dunemann’s defence was filed on 20 August 2013 and there had been an Amended Defence and Counterclaim (to the Bank’s claim) filed on 1 November 2013. There was no adequate explanation for the failure to apply to join Zaia Arthur & Associates earlier.
Mr Searle contended that if Zaia Arthur & Associates were added and the Defendant did not seek to make a claim against that company itself, then it would be at risk of being estopped from later claiming against it in separate proceedings on the basis of the estoppel principles in Anshun.[4]
[4]Port of Melbourne Authority v Anshun Property Ltd (1981) 147 CLR 589.
Ms Burton of Counsel, who appeared for Dunemann, contended that:
(a) The balance of the prejudice required to be assessed in accordance with the decision of the High Court in AON,[5] were not weighty enough in the circumstance of this case (as presently known) to close out the opportunity of Dunemann to take advantage of the statutory limitation of liability permitted by Part IVAA of the Wrongs Act;
(b) Zaia Arthur & Associates were always a proper and necessary party and it did not lie in the mouth of the Defendant to claim the potential prejudice that might result from the joinder where it might have joined that party long ago; and
(c) In any event, there may not be any risk to the trial date and it is necessary, as Ms Burton put it rather colourfully, to deal with one headache at a time.
[5]Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175.
Mr Carew of Counsel who appeared for the Bank was concerned to ensure that the trial date was maintained. He did not disagree with the submissions made on behalf of Dunemann that it was too early to say whether the trial date would be affected by the addition of Zaia Arthur & Associates as a party. That will not be known until it’s known whether the added third party wishes to participate. Then it may be possible to split the Bank’s claim from the third party claim.
I was taken to several decisions relevant to the application of Part IVAA, including Tulip Investments Pty Ltd v Edwards,[6] Main Road Property Group Pty Ltd v Pelligra & Sons Pty Ltd,[7] and Dartberg Pty Ltd v Wealthcare Financial Planning Pty Ltd.[8]
[6][2009] VSC 492.
[7][2010] VSC 5.
[8][2007] FCA 1216.
The significance of the decision in Tulip Investments is that, like the claim in this case, that was an instance of a joinder of a defendant without pursuing any claim against that defendant. The joinder was for the sole purpose of having the benefit of limiting liability under Part IVAA of the Wrongs Act as required by s 24AI(3).
As was the decision in that case, so it is in this case. The difference is the looming presence of the trial and the risk that to be fair to the Defendant or the added third party, or both, the trial might need to be vacated. That would seriously prejudice the Bank and possibly disrupt the business of the Court. But at this stage as Ms Burton submitted, it cannot be known whether either of those problems will arise. I was told that some of the people involved in Zaia Arthur & Associates are the subject of criminal charges and that there are other proceedings between the Bank and Defendant. It may well be that Zaia Arthur & Associates do not wish to participate in the trial and that the Defendant determines that there is no point in claiming against it.
Conclusion
The matter that persuades me that it is appropriate to allow the joinder now, is the prejudice to Dunemann in denying it the statutory limitation of its liability, that it is prima facie entitled to have, under proportionate liability of Part IVAA of the Wrongs Act. This is especially poignant when it is not known whether the joinder will upset the trial date and when it is realised that the prejudice to the Defendant may be illusory. Further, it was not suggested that the vacation of the trial date itself will prejudice the Defendant. The prejudice the Defendant pointed to is the risk that it will be denied the opportunity of amending its third party claim to make a claim against Zaia Arthur & Associates. That is as yet unknown.
In determining the appropriate orders and directions to permit Dunemann to add the third party and to protect the Bank and Defendant from prejudice as far as is presently possible, the Court should adopt a flexible approach.[9] To that end I have required a tight timetable for the filing and service of the Amended Third Party Notice and have brought the proceeding back at the earliest possible date so as to determine what further steps might be appropriate.
[9]Tulip Investments Pty Ltd v Edwards [2009] VSC 492, [25].
For these reasons, I have decided to allow the joinder of Zaia Arthur & Associates as the Second Third Party, and to make the orders made this day.
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