Commonwealth Bank of Australia Ltd v Saraceni

[2013] WASC 115

COMMONWEALTH BANK OF AUSTRALIA LTD -v- SARACENI [2013] WASC 115

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2013] WASC 115
Case No:	CIV:1596/2011	Heard:	ON THE PAPERS
Coram:	CORBOY J	Delivered:	4/04/13
No of pages:	13	Judgment Part:	1 of 1
Result:	Application to discharge and vary orders refused
Category:	B
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Parties:	COMMONWEALTH BANK OF AUSTRALIA LTD LUKE SARACENI
Catchwords:	Practice and procedure Application to discharge and vary previous orders made by consent or at directions hearings No new principles
Legislation:	Nil
Case References:	Ansons Pty Ltd v Merlex Corporation Pty Ltd [2001] WASC 204 Commonwealth of Australia v Albany Port Authority [2006] WASCA 185 RD Werner & Co Inc v Bailey Aluminium Products (1988) 18 FCR 389 Ryan Nominees Pty Ltd v Western Australian Planning Commission [2003] WASCA 134

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA CITATION : COMMONWEALTH BANK OF AUSTRALIA LTD -v- SARACENI [2013] WASC 115 CORAM : CORBOY J HEARD : ON THE PAPERS DELIVERED : 4 APRIL 2013 FILE NO/S : CIV 1596 of 2011 BETWEEN : COMMONWEALTH BANK OF AUSTRALIA LTD

Appellant

AND

LUKE SARACENI
Respondent

Catchwords:

Practice and procedure - Application to discharge and vary previous orders made by consent or at directions hearings - No new principles

Legislation:

Nil

Result:

Application to discharge and vary orders refused

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Category: B

Representation:

Counsel:

Appellant : No appearance
Respondent : No appearance

Solicitors:

Appellant : King & Wood Mallesons
Respondent : Jackson McDonald

Case(s) referred to in judgment(s):

Ansons Pty Ltd v Merlex Corporation Pty Ltd [2001] WASC 204
Commonwealth of Australia v Albany Port Authority [2006] WASCA 185
RD Werner & Co Inc v Bailey Aluminium Products (1988) 18 FCR 389
Ryan Nominees Pty Ltd v Western Australian Planning Commission [2003] WASCA 134


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CORBOY J:

The application and the result

1 Successive interlocutory orders for the management of this matter were made during 2011 and 2012, either by consent or at directions hearings. The orders dealt with the question of costs. In some instances, no order was made for costs, while costs were either reserved or ordered to be in the cause in other instances.

2 Commonwealth Bank of Australia Ltd has applied to vacate those costs orders and to substitute an order that Mr Saraceni pay the costs of the directions hearings and of the costs incurred in conferring over the orders made by consent. I have concluded that the orders previously made should not be discharged or varied. (The proceedings were commenced in the name of Bank of Western Australia Ltd; it is convenient to refer to the plaintiff in these reasons as Bankwest.)

3 Bankwest made similar applications in related proceedings commenced against Tokyo City Pty Ltd (CIV 1651 of 2011) and LMS Holdings Pty Ltd (CIV 1652 of 2011). I have also concluded that the costs orders previously made in those proceedings should not be vacated for the reasons that follow.

4 The orders that Bankwest sought to vary were specified in a schedule to its application. That schedule is annexed to these reasons.

The Guarantor Proceedings

5 Bankwest alleges that:

(a) it entered into a facility agreement with Seaport Pty Ltd in September 2006 by which it agreed to provide financial accommodation to Seaport through various facilities;

(b) Mr Saraceni, Tokyo City and LMS (the Guarantors) entered into agreements by which they guaranteed the payment by Seaport of all moneys owing to Bankwest under the facility agreement;

(c) Seaport defaulted under its facility agreement.

6 Bankwest commenced this action and CIV 1651 of 2011 and CIV 1652 of 2011 in April 2011 (the Guarantor Proceedings). Each of the Guarantors filed a defence in October 2011 in which they alleged that the guarantee that they had purportedly given to Bankwest was void and
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unenforceable. They further alleged that Bankwest was not entitled to rely on any event of default by Seaport as:

(a) Bankwest had entered into another facility agreement (MOFA 1) with Westgem Pty Ltd (as borrower), secured by, among other things, guarantees given by Seaport, Mr Saraceni and others;

(b) Bankwest had alleged that various events of default had occurred under MOFA 1 and had made demands for additional payments by Westgem;

(c) Westgem had made the payments demanded to remedy the alleged defaults;

(d) the demands that had been made were in breach of the terms of MOFA 1;

(e) further or alternatively, Bankwest had engaged in conduct that was misleading or deceptive or unconscionable by alleging that the events of default had occurred and making the demands on Westgem for additional payments;

(f) Mr Saraceni had suffered or would suffer loss and damage as a guarantor of Westgem's obligations under MOFA 1 by reason of Bankwest's breaches of MOFA 1 or its conduct;

(g) Tokyo City and LMS have suffered or would suffer loss and damage as a result of Bankwest's breaches of MOFA 1 or its misleading or unconscionable conduct by reason of their liability for any default by Westgem imposed by the cross-default provisions in the guarantees that they had given.

7 Since about May 2011, Westgem, Mr Saraceni, Seaport and others had foreshadowed commencing proceedings against Bankwest and others claiming substantial damages (referred to in the parties' submissions as the 'foreshadowed claim'). The foreshadowed claim was said to be based on allegations that were similar to those made by the Guarantors in the Guarantor Proceedings.

8 Bankwest contended in this application that:

(a) various directions hearings were adjourned and orders were made in the Guarantor Proceedings extending the time for the Guarantors to file their defences and counterclaims on the basis that the foreshadowed claim was being prepared;

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(b) Westgem and its related parties had not commenced the foreshadowed claim at the time that this application was first made (September 2012);

(c) Bankwest had consented to programming orders and agreed to adjourn directions hearings on the basis of estimates made by the solicitors for the Guarantors (who also act for Westgem) about when proceedings for the foreshadowed claim would be commenced;

(d) the estimates had been consistently inaccurate and Bankwest had incurred costs that were wasted as a result;

(e) the actions of the Guarantors and Westgem in relation to the commencement of the foreshadowed proceedings constituted a material change in circumstances permitting the court to exercise its inherent jurisdiction to vacate the costs orders that had been previously made and to substitute fresh orders.

The relevant principles

9 The following propositions are relevant to an application to discharge or vary an order previously made by the court:

(a) A court may discharge or vary an interlocutory order in its inherent jurisdiction: Commonwealth of Australia v Albany Port Authority [2006] WASCA 185 [23] - [24] (Steytler P) and [70] (Pullin JA).

(b) That will be so even if the order was made by consent: Commonwealth v Albany Port Authority [24], Steytler P citing with evident approval RD Werner & Co Inc v Bailey Aluminium Products (1988) 18 FCR 389 and Ansons Pty Ltd v Merlex Corporation Pty Ltd [2001] WASC 204.

(c) An order that has been entered may be discharged or varied: Ryan Nominees Pty Ltd v Western Australian Planning Commission [2003] WASCA 134 [2], adopting what was said by Sanderson M in Ansons v Merlex [49].

(d) The court may vary or discharge an order that deals with 'substantive' rather than 'procedural' rights and obligations: see generally the instances cited by Steytler P in Commonwealth v Albany Port Authority [23] - [29].

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10 Master Sanderson stated in Ansons v Merlex that the power to discharge or vary an order should be exercised with care and only in the most unusual circumstances. McKechnie J (with whom Barker J agreed) repeated that statement in Ryan Nominees. However, his Honour added that the overriding consideration was the interests of justice in the particular case: [3].

11 It may well be that a discretion to discharge or vary an interlocutory order according to the interests of justice in the particular case should not be further circumscribed by imposing a requirement that the power only be exercised in the most unusual circumstances. However, I accept that the interests of justice must encompass the interests of the parties and the public in the efficient management of the interlocutory processes involved in civil litigation. Efficient and economical case management will generally require interlocutory disputes and associated issues to be finally determined as they arise. It is, in my view, in that sense that it may be said that the circumstances in which a court will revisit an interlocutory order that it has previously made will be rare.

12 The Guarantors submitted that the 'ordinary rule of practice' was that an application to set aside, vary or discharge an order 'must be founded on a material change of circumstances since the original application was heard, or the discovery of new material which could not reasonably have been put before the court on the hearing of the original application'. The interests of justice may encompass matters beyond those circumstances. However, nothing follows from that possibility in this instance as Bankwest based its application on an alleged change of circumstances from the time when the orders were made. It submitted that:

The actions of the Saraceni parties constitute a material change in circumstances, allowing the court to exercise its inherent jurisdiction. The Cost Orders were made on the basis of representations by the Saraceni parties that more time was required to prepare the defence and counterclaim and the Foreshadowed Claim. Given that the Foreshadowed Claim has still not materialised (and the defence and counterclaim was delayed twice by the Saraceni parties), the original basis on which the Cost Orders (and related adjournments) were consented to by Bankwest and made by the court have shown to be erroneous.

The evidence

13 Bankwest relied on two affidavits made by Michelle Leanne Dean (23 August and 12 September 2012; the affidavits were filed in CIV 1596 of 2011). Ms Dean is a solicitor employed by the solicitors who appear for Bankwest.

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14 The Guarantors relied on two affidavits made by Michael Richard Crommelin (6 and 24 September 2012; the affidavits were filed in CIV 1652 of 2011). Mr Crommelin is a solicitor employed by the solicitors who appear for each of the Guarantors.

15 Ms Dean and Mr Crommelin annexed a number of documents to their affidavits. The documents substantially comprised letters and emails exchanged between the solicitors during the course of the proceedings. It is not possible to meaningfully summarise the effect of the correspondence and the other documents annexed to their affidavits - there were a total of 64 documents annexed.

The costs orders made up to the Guarantors' defences

16 The Guarantors first sought an extension of time within which to file and serve their defences and counterclaims by letter dated 11 May 2011 (annexure 'MLD 1' to Ms Dean's affidavit made on 23 August 2012, p 14). The letter briefly indicated that the Guarantors proposed to make allegations concerning default notices issued under MOFA 1 and 'wrongful' demands for additional security and 'monetary contributions' - matters that did not arise directly out of the allegations pleaded by Bankwest in the Guarantor Proceedings. The letter stated that the Guarantors intended to apply for further time to prepare and file their defences. On the following day, the Guarantors' solicitors wrote to the solicitors for Bankwest indicating that the current estimate of time required to file and serve defences and counterclaims was three months ('MLD 1', p 15).

17 The solicitors for the parties conferred; no agreement regarding an extension of time was reached and the Guarantors made an application to extend time. An order was made by consent under O 43 r 16 of the Rules of the Supreme Court on 18 May 2011 excusing the Guarantors from filing and serving their defences until further order. No order was made for costs.

18 The order made on 18 May 2011 was not intended to address the Guarantors' application for an extension of time within which to file their defences and counterclaims. The application was subject to further conferral between the parties' solicitors but no agreement was reached. Consequently, a directions hearing was held on 27 May 2011 in which it was ordered that Bankwest file and serve an amended statement of claim by 31 May 2011 and the Guarantors file and serve their defences and counterclaims by 27 July 2011. The costs of that directions hearing were ordered to be in the cause.

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19 The next directions hearing was to have been held on 1 August 2011. The Guarantors' solicitors corresponded with Bankwest's solicitors immediately prior to the schedule hearing outlining first, the difficulties that they had encountered in preparing the foreshadowed claim and second, the gist of the claim that was proposed to be made (attachments 'MLD 7' and 'MLD 8' to Ms Dean's affidavit of 23 August 2012) . The parties agreed to vacate the directions hearing and an order was made by consent on 29 July 2011 that the time for the Guarantors to file and serve a defence should be extended to 7 September 2011. No order as to costs was sought or made.

20 The Guarantors did not file and serve their defence in the Guarantor Proceedings by 7 September, and a further directions hearing was held on 13 September 2011. The Guarantors were ordered to file their defence by 18 October 2011 at that hearing. They were also ordered to pay the costs of the hearing. The costs order reflected the failure by the Guarantors to adhere to the orders previously made.

21 The Guarantors filed and served their defences and counterclaims on 18 October 2011 in compliance with the order made on 13 September. At that point in the Guarantor Proceedings, the Guarantors had completed the next interlocutory step (the filing of their pleadings); orders had been made, either by consent or at directions hearings, for programming that step; those orders had dealt with the question of costs in light of the position at that time; and the costs orders included an order that the Guarantors pay the costs of the directions hearing on 11 September 2011 as a consequence of their failure to comply with the orders that had been earlier made.

22 I do not consider that events that occurred after the filing and the serving of the Guarantors' defences and counterclaims provide a proper basis for revisiting the costs orders made prior to that step being completed. The orders that had been made up to that point were either agreed between the parties following conferral or were made by the court having regard to the circumstances that were considered relevant at the time. The events that occurred after the Guarantors had pleaded their defence and counterclaim did not disclose any error in the costs orders made prior to that time. Contrary to Bankwest's submission reproduced above, there was nothing in the evidence that indicated that costs orders made up to the time that the Guarantors filed and served their defences and counterclaims were consented to or made by the court on an erroneous basis regarding the position in respect of the preparation of the foreshadowed claim.

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Costs orders made following the Guarantors' defences and counterclaims

23 An order was made by consent under O 43 r 16 RSC on 26 October 2011 excusing Bankwest from filing and serving its replies and defences to counterclaim until further order. No order was made as to costs. The orders were agreed in circumstances where Bankwest's solicitors had advised that they required further time to investigate the Guarantors' defences and counterclaims (attachment 'MLD 10' to Ms Dean's affidavit of 23 August 2012).

24 Bankwest's solicitors requested further particulars of the Guarantors' defences and counterclaims by letter dated 24 November 2011 (attachment 'MLD 11' to Ms Dean's affidavit of 23 August 2012). The parties subsequently agreed to vacate a directions hearing scheduled for 1 December 2011 and an order to that effect was made by consent on 30 November 2011. No costs order was made. It was agreed between the parties that the Guarantors would provide a response to Bankwest's request for particulars on or before 16 January 2012 - the day before the next scheduled directions hearing.

25 The Guarantors did not provide their response to Bankwest's request for particulars of the defences and counterclaims by 16 January 2012. However, the parties agreed that the directions hearing scheduled for 17 January 2012 should be adjourned. They further agreed that the costs should be in the cause. Self-evidently, Bankwest agreed to that order, knowing that the Guarantors had not responded to the request for particulars. The orders were made on 16 January 2012.

26 Bankwest's solicitors wrote to the Guarantors' solicitors by letter dated 20 February 2012 (attachment 'MLD 14' to Ms Dean's affidavit of 23 August 2012). The letter referred to the conferral between the parties over the Guarantors' response to Bankwest's request for particulars. According to the letter, the Guarantors had linked their response to the foreshadowed claim. The letter complained that the Guarantor Proceedings had been left in an unsatisfactory state and that Bankwest intended at the next directions hearing to seek an order requiring the Guarantors to file answers to their request for further and better particulars.

27 An order to that effect was made at the next directions hearing held on 21 February 2012. It was ordered that the costs of that hearing be in the cause. Senior counsel for Bankwest was given an opportunity to comment on whether that was the appropriate order but declined to do so (ts 37).

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28 The Guarantors' responses to the request for further particulars of their defences and counterclaims were filed and served on 15 March 2012.

29 Again, in my view, the costs orders that have been made between the filing and serving of the Guarantors' defences and counterclaims and their answers to the requests for further and better particulars reflected the state of the proceedings at the time, including the position in relation to the foreshadowed claim. Bankwest had expressed its frustration with the uncertainty surrounding the foreshadowed claim prior to the directions hearing held on 21 February 2012 but still accepted that the appropriate costs order at that hearing was costs in the cause. I consider that there is no basis for revisiting the costs orders made up to the time when the Guarantors filed and served their response to Bankwest's request for further particulars of their defences and counterclaims.

Costs orders after the Guarantors' answers to Bankwest's requests

30 A further directions hearing was held on 29 March 2012. That hearing was adjourned to a further hearing on 3 May 2012. The defendants were directed to file and serve an explanatory affidavit if they sought to further adjourn that directions hearing. The costs of the directions hearing were ordered to be in the cause. I do not consider that this order should be discharged. The directions hearing was scheduled as part of the case management procedures that ordinarily apply in the Commercial and Managed Causes List.

31 An affidavit was sworn by a solicitor employed by the solicitors for the Guarantors on 24 April 2012. That affidavit outlined steps that had been taken in relation to the preparation of the foreshadowed claim. Correspondence between the parties' solicitors regarding that affidavit, the foreshadowed claim and other matters was exchanged prior to the directions hearing held on 3 May 2012. That directions hearing was further adjourned to 17 May 2012, with the costs of the hearing reserved. A proposal that the Guarantors provide a draft of their statement of claim in the foreshadowed proceedings was canvassed at the directions hearing. However, the solicitors for the Guarantors declined to provide a draft of the statement of claim following the hearing.

32 Administrative orders were made on 16 May 2012. Those orders were programming Bankwest's application for security for costs and for the costs of the previous interlocutory orders and directions hearings (the application now under consideration). The costs of making those orders were reserved. An application for security for costs was filed by Bankwest on 4 July 2012 but the application did not proceed to an

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immediate hearing as Westgem, the Guarantors and others commenced proceedings in respect of their foreshadowed claim in October 2012.

33 The Guarantors in their submissions in opposition to Bankwest's application provided a schedule that contained a detailed chronology of the proceedings from the date on which they were commenced by Bankwest to 14 September 2012. The chronology summarised steps taken in the proceedings and much of the correspondence exchanged between the parties' solicitors. Bankwest filed a responsive submission. I have reviewed the parties' submissions, including the chronology of proceedings prepared the Guarantors, and have concluded from that review and from the attachments to the affidavits of Ms Dean and Mr Crommelin that the Guarantors should pay the costs of the directions hearing reserved on 3 May 2012 and the costs of the administrative orders made on 16 May 2012.

34 I accept that the primary reason for the hearing and the administrative orders was the uncertainty surrounding the foreshadowed claim and when proceedings would be commenced by Westgem, the Guarantors and others in respect of that claim. The Guarantors had consistently linked the foreshadowed claim with the Guarantor Proceedings. Counsel for the Guarantors advised the court at the directions hearing held on 29 March 2012 that Westgem, the Guarantors and others were 'working towards' commencing proceedings in respect of the foreshadowed claim in April 2012. That did not eventuate and I accept that the delay created uncertainty in the Guarantor Proceedings at this time. That was reflected in the need for a further directions hearing on 3 May 2012 and for another directions hearing to be scheduled for 17 May 2012. The hearing scheduled for 17 May did not proceed but the delays in the foreshadowed proceedings prompted Bankwest to bring the applications that were programmed by the administrative orders made on 16 May. Although I have found that one of the applications programmed by those orders should be refused, I consider that the Guarantors should pay the costs of the programming orders in all the circumstances. The security for costs application had been foreshadowed prior to May 2012 but deferred on the basis that it would be pursued, if at all, in the proceedings to be commenced by the Guarantors and others. It was reasonable for Bankwest to press that application given the statements made by counsel at the directions hearing on 29 March 2012 considered in the context of all of the earlier statements about when the foreshadowed proceedings would be commenced. Paragraph 6 of the administrative orders reflected the uncertain state that the Guarantor Proceedings had reached by May 2012.

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SCHEDULE

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