Commonwealth Bank of Australia v White (No 3)
[2000] VSC 259
•20 June 2000
| SUPREME COURT OF VICTORIA | |
| COMMERCIAL AND EQUITY DIVISION COMMERCIAL LIST | Not Restricted |
No. 5660 of 1997
| COMMONWEALTH BANK OF AUSTRALIA | Plaintiff |
| v | |
| PETER EVERETT WHITE | Defendant |
| and | |
| THE SOCIETY OF LLOYD'S | Third Party |
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JUDGE: | Warren, J. | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 18 and 19 April 2000 | |
DATE OF JUDGMENT: | 20 June 2000 | |
CASE MAY BE CITED AS: | Commonwealth Bank v White (No. 3) | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 259 | |
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Third Party proceeding – application for severance – exceptional circumstances –
delay – fact of related proceedings in foreign jurisdiction.
Stay application of whole proceeding – anti-suit injunction granted by foreign court – comity - fact of related proceedings in foreign jurisdiction.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr P. Bick QC with | I.F. Purbrick |
| For the Defendant | Mr M.K. Moshinsky | Foster Hart |
| For the Third Party | Mr P.J. Jopling QC with Dr I.J. Hardingham QC | Freehill Hollingdale & Page |
TABLE OF CONTENTS
THE JAFFRAY PROCEEDINGS............................................................................................................................................ 5
THE SEVERANCE APPLICATION...................................................................................................................................... 5
Separate issues.......................................................................................................................................................... 6
The Orders made by the English Court against White....................................................................... 7
Delay to the bank if severance is not allowed..................................................................................... 9
The strength of the Bank's case against White.................................................................................. 10
THE STAY APPLICATION BY LLOYD'S....................................................................................................................... 12
WHICH PROCEEDING WAS COMMENCED FIRST?.................................................................................... 14
WHETHER THE DETERMINATION OF ONE PROCEEDING IS LIKELY TO HAVE A
MANIFEST EFFECT ON THE OTHER.................................................................................................................. 14THE PUBLIC INTEREST............................................................................................................................................ 15
THE UNDESIRABILITY OF TWO COURTS COMPETING TO SEE WHICH OF THEM
DETERMINES COMMON FACTS FIRST............................................................................................................ 15CONSIDERATION OF CIRCUMSTANCES RELATING TO WITNESSES............................................ 16
WHETHER WORK DONE ON PLEADINGS, PARTICULARS, DISCOVERY,
INTERROGATORIES AND PREPARATION MIGHT BE WASTED..................................................... 16THE UNDESIRABILITY OF SUBSTANTIAL WASTE OF TIME AND EFFORT IF
IT BECOMES A COMMON PRACTICE TO BRING ACTIONS IN TWO COURTS
INVOLVING SUBSTANTIALLY THE SAME ISSUES................................................................................... 17HOW FAR ADVANCED THE PROCEEDINGS ARE IN EACH COURT.................................................. 17
THE LAW SHOULD STRIVE AGAINST PERMITTING MULTIPLICITY OF
PROCEEDINGS IN RELATION TO SIMILAR ISSUES.................................................................................. 17GENERALLY BALANCING THE ADVANTAGES AND DISADVANTAGES
TO EACH PARTY.......................................................................................................................................................... 18
OTHER MATTERS.................................................................................................................................................................. 18
HER HONOUR:
Towards the end of 1980, the defendant, Peter Everett White became an underwriting member or "name" of the insurance market managed and regulated by the third party, Lloyd's in London. In order to become an underwriting member White made agreements and security trust deeds with Lloyd's and provided various securities including letters of credit from the plaintiff, the Commonwealth Bank of Australia ("the bank").
The first letter of credit was provided by the bank in about December 1980 for the sum of 60,000 pounds. There were a number of terms of the letter of credit arrangement including a term to the effect that the bank was authorised to debit the account of White in favour of Lloyd's if and when a call was made by Lloyd's. There was also a term to the effect that the letter of credit would expire on 31 December 1985 subject to four years' notice of cancellation. The first letter of credit was varied on four occasions in November 1982, December 1983, September 1984 and October 1987 when the period and amount of credit under the letter of credit was extended. By the time of the fourth variation the amount of the letter of credit was 168,000 pounds and it was for a minimum period of four years from 1 January 1988.
On 2 August 1992 White instructed the bank to give notice of the termination of the letter of credit as varied to Lloyd's. On 13 November 1992 the bank, in accordance with the instructions, gave written notice of four years' duration to Lloyd's that the letter or letters of credit would terminate on 31 December 1996. On 21 December 1992 Lloyd's acknowledged receipt of the notice of termination.
During the period 1995-1996 Lloyd's drew down and the bank paid on the letter of credit for the total sum of 168,000 pounds sterling as follows:
Date
Amount
24/03/95
31,847.91 pounds sterling
31/03/95
31,152.09 pounds sterling
31/03/95
25,030.42 pounds sterling
18/03/96
5,080.78 pounds sterling
10/04/96
41,755.48 pounds sterling
10/04/96
14,888.80 pounds sterling
06/11/96
18,244.52 pounds sterling
Total:
168,000 pounds sterling
Following the payments made by the bank to Lloyd's, by 8 April 1997 White was indebted to the bank in the sum of A$421,119.16. White failed to pay. As a result, the bank commenced this proceeding in the Commercial List on 29 May 1997 claiming the moneys owed under the letters of credit together with interest.
White delivered an amended defence filed on 1 March 2000 wherein he admitted non‑payment of the moneys claimed by the bank but alleged that he was not bound to do so. In summary, White alleged in the defence that the original letter of credit operated on terms different from those relied upon by the bank, in particular, that the term of the letter of credit was valid at all times for minimum periods of four years unless and until the bank gave varying periods of written notice that it would not extend credit to White for a longer period. White alleges that the bank made payment to Lloyd's after the relevant letter of credit had expired. Further, the amended defence included an allegation that there was an implied term of the agreement between the bank and White such that the bank was not to pay Lloyd's if White so directed and that the bank knew of "clear evidence of fraud or unconscionable conduct by Lloyd's which would release the defendant from his underlying obligations to Lloyd's". White alleged that he directed the bank on 27 June 1994 and 6 March 1995 not to pay on any draw downs by Lloyd's on the basis of fraud and bad faith by Lloyd's. White alleged, also, that on each of the dates that the bank paid Lloyd's it knew of clear evidence of fraud or unconscionable conduct that would release White from his underlying obligations to Lloyd's.
The alleged knowledge of evidence of fraud and unconscionable conduct was said to arise from two matters. Firstly, fraudulent misrepresentation or non‑disclosure by Lloyd's to "names" including the defendant with respect to potential liability under asbestos claims. Secondly, the conduct of Lloyd's in failing to properly regulate the Lloyd's market in relation to those claims. The evidence was said to have come to the knowledge of the bank in separate litigation between the bank and other persons who were "names" and between Lloyd's and other "names" and from various documents said to have come to the attention of the bank derives from government and parliamentary reports. White alleges in the amended defence that by each of the dates when the bank paid Lloyd's it knew of the fraud and unconscionable conduct of Lloyd's. As a consequence, it was alleged that White is not obliged to pay the bank on its claim.
In a reply to the amended defence filed 24 March 2000 the bank alleged that the letter of credit and variations were effected in accordance with terms agreed between it and White and that the bank acted pursuant to such terms. The bank referred to a number of documents to support its allegation. The bank further alleged that White represented to it that the letter of credit was subject to particular terms as relied upon by the bank and that such representations give rise to an estoppel whereby White is estopped from alleging that the letters of credit were not in a form requested or authorised by him. The bank in its reply denied the implied term alleged by White. Significantly, the bank refuted that the matters relied upon by White constituted "clear evidence" of fraud and unconscionable conduct by Lloyd's but asserted that the matters merely consisted of allegations by other persons about Lloyd's. The bank also alleged that the documents relied upon by White as "clear evidence of fraud and unconscionable conduct" in fact established the contrary fact.
In addition to filing an amended defence, White joined Lloyd's as a third party. In an amended statement of claim against the third party dated 20 October 1998 White alleged that Lloyd's, through its agents, made negligent misstatements and false representations to him as to the financial efficacy of becoming a "name" in breach of ss.51A and 52 of the Trade Practices Act 1974 (Cth) and ss.10A and 11 of the Fair Trading Act 1985 (Vic). White alleged that as a result of the negligence and statutory breaches he is entitled to an order for damages against Lloyd's and an indemnity by it insofar as he may be found liable to the bank. There are additional claims based on invalidity arising from certain corporate law statutory provisions The bank brought its own claim against Lloyd's claiming against Lloyd's in the event that White succeeds against it and Lloyd's.
There have been a number of interlocutory applications determined to date including an application by Lloyd's for summary dismissal, alternatively, a stay of the third party claim: see Commonwealth Bank of Australia v White (No. 1) unreported judgment of the Hon. Justice Byrne in the Commercial List of this court dated 29 July 1999; [1999] VSC 262. The application was unsuccessful. An appeal to the Court of Appeal of the Supreme Court of Victoria against the judgment of Byrne J of 29 July 1999 was dismissed. An application for leave to appeal was refused by the High Court of Australia. Subsequently, there was an interlocutory application by the bank to strike out part of the White defence with respect to the allegations of knowledge of fraud and unconscionable conduct. The application was only successful in part and the substantive allegations of knowledge made by White against the bank remained: see Commonwealth Bank of Australia v White (No. 2) unreported judgment of the Hon. Justice Byrne dated 22 October 1999; [1999] VSC 400. The matters determined by Byrne J in Commonwealth Bank v White (No. 2) arose on a summons filed by the bank on 24 February 1999. A remaining component of the summons sought severance of the third party proceeding from the substantive proceeding between the bank and White. A further summons filed on 6 March 2000 by the third party, Lloyd's, sought the stay of the proceeding pending the handing down of judgment in pending English litigation relating to Lloyd's. These two matters came before me: the severance application by the bank and the stay application by Lloyd's. Before turning to consider the two applications it is necessary to consider developments in the English litigation already referred to and generally known as the "Jaffray proceedings".
The Jaffray proceedings
There are existing separate proceedings issued in the Commercial Court, Queens Bench Division of the High Court of Justice in England in The Society of Lloyd's v Sir William Otho Jaffray. In those proceedings a number of persons who were Lloyd's names, including Sir William Otho Jaffray, were sued by Lloyd's for unpaid premiums. The "name" defendants issued counterclaims against Lloyd's seeking various relief but, in particular, raising the issue of knowledge, fraud and unconscionability against Lloyd's that relate to the knowledge issue asserted by White against the bank and the allegations made by White against Lloyd's in the present proceeding. The trial in the Jaffray proceedings commenced before His Lordship Mr Justice Cresswell on 28 February 2000. I was informed by the parties in this proceeding that the trial in the English proceeding was expected to finish about August 2000. Of course, the date for delivery of judgment is unknown and ought not be the subject of speculation in the context of what will doubtlessly be an onerous judicial task.
On 3 March 2000, following an anti-suit application by Lloyd's, the trial judge in the Jaffray proceedings, Cresswell J made orders enjoining White from pursuing in the courts of any country other than England any claim against Lloyd's arising out of or relating to his membership of Lloyd's and/or underwriting of insurance business at Lloyd's. White was not represented before Cresswell J save for the filing of written submissions by his Australian solicitors. The submissions were considered by the learned judge but were ultimately unpersuasive.
The severance application
- The bank seeks severance of the third party claim from its principal proceeding against White. Rule 11.12(b) of Chapter I of the Rules of this court provide that unless a court otherwise orders a third party may attend and take part in a proceeding and the issues between the defendant and the third party are to be tried concurrently with the questions between the plaintiff and the defendant. In determining whether to sever a third party claim from substantive proceedings a fundamental principle is applied. The power to order severance is only exercised in exceptional circumstances: AMP Fire & General Insurance Co Limited v Dixon and Anor [1982] VR 833. The bank asserts three principal grounds that it relies upon to establish exceptional circumstances to warrant severance of the third party claim. I deal with reach ground separately.
1. Separate issues
The bank submitted that the substantive proceeding between it and White will turn on the legal efficacy of the implied term alleged by White and whether the documents relied upon by White constitute knowledge by the bank of clear evidence of fraud and unconscionability. The bank submitted that, as a result, there was no factual overlap of the issues between it and White and between White and Lloyd's. It was said that, by contrast, the claim of White against Lloyd's was very different. In that claim it was said it will be necessary for White to prove that Lloyd's made the misrepresentations and negligent misstatements alleged, alternatively, to establish that the agreements between White and Lloyd's are void. It was urged on behalf of the bank that the facts and issues in the two proceedings are entirely separate and discrete.
Both White and Lloyd's opposed the application for severance. They did so on the basis that there are no exceptional circumstances such as to warrant severance. In my view, consideration of the current pleadings in the proceedings in this court demonstrate that the issues between the parties are intertwined and incapable of severance. The very fact of the arrangements between White and Lloyd's led to the acquisition of the letters of credit from the bank that are the subject of the bank's claim against White. White's defence goes to the very essence of his dealings with Lloyd's. In my view it would be entirely inappropriate to attempt to perform a clinical dissection of the facts and issues of the substantive proceeding and the third party proceeding so as to effect severance as proposed by the bank. An examination of the pleadings together with the affidavits filed with respect to this application demonstrate the very likelihood of the same witnesses and documents arising in both proceedings. In my view there is a very high risk if the proceedings are severed of duplication of evidence and inconsistent findings of fact.
Furthermore, it is to be observed that the bank has made a direct third party claim of its own against Lloyd's. Consequently, the bank's claim against Lloyd's and White's claim against Lloyd's are inevitably intertwined. It is to be observed, further, that the bank's claim against Lloyd's is partly based on the success of White's claim against Lloyd's.
2. The Orders made by the English Court against White
The second basis that the bank relies upon in support of its severance application is the fact of the anti-suit injunction ordered by Cresswell J in the Jaffray proceedings. It is apparent from the reasons for judgment of the learned judge dated 3 March 2000 (at 73-4 and 91-7) that the anti-suit injunction was granted for three reasons. Firstly, because of an exclusive jurisdiction provision in the agreement between Lloyd's and White whereby the parties agreed that the applicable law was the law of England. Secondly, to avoid Lloyd's being put to the cost and inconvenience of defending two proceedings relating largely to the same issues at the same time. Thirdly, because it was seen more appropriate that the disputes between White and Lloyd's be conducted within the English forum. These very issues were considered to a large extent by Byrne J in Commonwealth Bank of Australia v White (No. 1), supra in the context of considering whether or not proceedings in Victoria were a convenient forum compared with proceedings in England. Byrne J observed (at 37-38):
"Forum non conveniens
Counsel for Lloyd's submitted that the litigation had a substantial connection with England where White is presently engaged in similar litigation against Lloyd's. The evidence, especially that for and against the falsity of the misrepresentations and negligence of Lloyd's, is situated in England. This evidence includes a substantial number of documents which have been marshalled in England. The witnesses, both lay and expert, who may be called as to the practices of Lloyd's and the knowledge available to it are likewise likely to be from England. It must be observed, however, that these factors bear on the question whether London is a more convenient forum rather than the question before me, which is whether Victoria is clearly an inappropriate forum: Rocklea Spinning Mills Pty Ltd v Consolidated Trading Corporation [1995] 2 VR 181.
A good deal of the argument on the forum non conveniens issue centred around the proceeding 1996 Folio 2032 in the Commercial Court in London, the Jaffray proceeding. The evidence shows that a number of Lloyd's names including Sir William Otho Jaffray were sued by Lloyd's for unpaid premiums. Their defences based on Lloyd's insufficient information were unsuccessful because no set off was permitted under the Reconstruction and Renewal plan. Their complaints therefore moved forward to trial as counterclaims only. The Jaffray proceeding is to be tried later this year on the basis that it raises the complaints common to a large number of former names including White. He will, therefore, be bound by the findings of fact and law in that trial. In this sense he is a counterclaimant in the English proceeding. What was then put on behalf of Lloyd's is that it would be vexatious and oppressive if White were permitted to litigate at the same time in London and in Melbourne the same issues and to seek much the same relief. This, it was said, is to be contrasted with the modest inconvenience to him of pursuing Lloyd's only in London.
This submission is flawed at a number of levels. First and foremost, the mere pendency of similar litigation in London does not of itself render litigation in this Court inappropriate: Rocklea Spinning Mills Pty Ltd v Consolidated Trading Corporation [1995] 2 VR 181. Second, notwithstanding the common factual substratum, the causes of action in the Jaffray proceeding are fundamentally different from those in the present case which I have summarised in paragraph [8] to [12] above. In the Jaffray proceeding it is not open for the claimant to seek damages for negligent misrepresentation having regard to s.14(3) of the Lloyd's Act 1982. What is alleged in that proceeding is that Lloyd's recklessly and or deliberately misrepresented or concealed the true position from its members or acted fraudulently. Alternative claims are based on the English Misrepresentation Act 1967 ss.2(1) and 2(2) and on breach of duty of care prior to the commencement of the Lloyd's Act 1982. The allegations of bad faith against Lloyd meant that the issues in the Jaffray proceeding differ from those based on the Initial Representations and the Subsequent Representation sin the proceeding in this Court. The claims of White based on misleading and deceptive conduct and breaches of the companies legislation have no counterparts in the London litigation. Given that there is probably little dispute between the parties about the making of the statements said to constitute the representations, this means that the evidence in the Jaffray proceeding will be very different from that in this proceeding."
I respectfully adopt the observations of Byrne J. There are separate issues that will be canvassed in the Jaffray proceeding as distinct from the claims made by White against the bank in the present proceeding. The obvious examples are the alleged breaches of the statutory provisions set out in the Trade Practices Act (Cth) and the Fair Trading Act (Vic) and the other claims.
The orders made by the English court in the Jaffray proceedings purport to bind White so far as the English jurisdiction is concerned. They do not bind this court. However, issues of comity arise that I address later in my reasons with respect to the stay application by Lloyd's. However, so far as the severance application is concerned, in my view, the fact of the existence of the Jaffray proceedings and the anti‑suit injunction against White is not a factor sufficient to constitute an exceptional circumstance such as to warrant severance of the third party proceeding from the substantive proceeding between the bank and White. My view is based upon the matters claimed in the present proceeding that are not before the English Court as considered by Byrne J in Commonwealth Bank of Australia v White (No. 1). On behalf of the bank it was submitted that the trial presently under way in England in the Jaffray proceedings will in effect determine the issues in the third party claim between White and Lloyd's. The plaintiff went so far as to assert that it was common ground that the trial in England would "in substance" dispose of the allegations by White of fraud and unconscionable conduct on the part of Lloyd's. It must be said at the outset that the position is not common ground so far as White and Lloyd's are concerned.
3. Delay to the bank if severance is not allowed
It was submitted that logically the proceedings between White and Lloyd's would be stayed pending judgment in the Jaffray proceedings. On this basis, therefore, it was urged on behalf of the bank that it would suffer delay and commensurate prejudice if it was forced to await the outcome of the Jaffray proceedings before enjoying the benefit of any judgments in its proceeding against White. In weighing these matters up I consider that any delay that arises is unavoidable and no fault can be laid at the door of White. It is a fact that arises from the existence of the Jaffray proceedings over which both the bank and White have no or little control. Nevertheless, insofar as there is any potential prejudice that may be suffered by the bank if the third party proceeding is not severed is overcome by Lloyd's proffering an undertaking to pay any interest lost by the bank during the period of delay. On that basis, therefore, I do not consider that delay constitutes an exceptional circumstance such as to warrant severance of the third party proceeding.
4. The strength of the Bank's case against White
The bank argued that it had a strong case such as to satisfy the exceptional circumstances test. It relied upon a Canadian authority in Royal Bank of Canada v Darlington & Ors, unreported judgment of Blair J of the Court of Ontario dated 19 April 1995. There the Royal Bank of Canada and other banks sued 18 respondents who were Lloyd's names for moneys said to have been provided by those banks pursuant to letters of credit, similar to the arrangements between White and Lloyd's. The respondent parties asserted that they provided to the Royal Bank of Canada and other banks evidence of "clear or obvious fraud" on the part of Lloyd's sufficient to relieve the banks of their obligation to honour the letters of credit. Ultimately, the learned judge held in the Canadian case that the fraud defence failed.
Mr Bick QC who appeared with Ms Loughnan for the bank in the present proceeding relied upon observations of Blair J in Royal Bank of Canada (especially at 74ff.) with respect to the analysis by the learned judge as to the duty cast upon a banker when presented with materials and information that the customer asserts establishes "clear or obvious fraud on the part of the beneficiary of the letter of credit". However, I consider that on close analysis the Canadian authority undercut the submissions made on behalf of the bank for severance. Whilst the Canadian case was a similar case to that of White it is apparent from a reading of the judgment that a large expanse of material was considered by the Canadian court before the ultimate position was determined. It is apparent from a reading of the Canadian judgment that extensive evidence was called from witnesses in relation to whether a fraud had or had not occurred together with expert evidence about reasonable banking practices and the steps that a prudent, reasonable banker would take when provided with the documents relied upon by the Lloyd's names in the Canadian case. In my view the Canadian authority does not support the plaintiffs' position before me. Rather, it augments the position of White and Lloyd's in that it demonstrates the extent of evidence that will need to be called on the fraud issue in the substantive proceeding between the bank and White and in the third party proceeding between Lloyd's and White. The authority demonstrates the extent to which the issues arising in the third party proceeding are intertwined with the issues in the substantive proceeding between the bank and White.
Taking into account each of the grounds relied upon by the bank in support of the claim that exceptional circumstances arise such as to warrant severance of the third party claim I am not so satisfied. The Full Court of the Supreme Court of New South Wales in Standen v G.H. Varley Pty Ltd (1956) 56 SR (NSW) 346 considered the power to order separate trials of proceedings between a plaintiff and a defendant and between a defendant and third party. The Full Court observed (at 347):
"It is only in exceptional circumstances that the power should be exercised since it is obvious that as a matter both of convenience and justice it is most desirable that the same tribunal should, at one and the same time, determine the rights and liabilities of the parties concerned. Indeed it was for that very reason that the third party procedure was introduced. … "
In AMP Insurance Co Limited v Dickson, supra, the Full Court of this court considered (at 835) a passage from the judgment of Scrutton LJ in Barclay's Bank v Tom [1923] 1 KB 221, 224, which read:
"The object of the third party procedure is then in the first place to get the third party bound by the decision between the plaintiff and the defendant. In the next place it is directed to getting the question between the defendant and the third party decided as soon as possible after the decision between the plaintiff and the defendant, so that the defendant may not be in the position of having to wait a considerable time before he establishes his right of indemnity against the third party while all the time the plaintiff is enforcing his judgment against the defendant. And thirdly, it is directed to saving the extra expense which would be involved by two independent actions."
In my view if the application of the bank for severance of the third party proceeding was acceded to it would defeat each and every object of the third party procedure recited by Scrutton LJ. Insofar as the courts have required exceptional circumstances to be made out before exercising the power of ordering separate proceedings, it is to be observed that the views of the Full Court of the Supreme Court of New South Wales in Standen were approved by the Full Court of this court in AMP Fire & General Insurance Co Limited (at 836).
Ultimately, in my view it is clearly the case that as a matter of convenience and justice it is highly desirable that the same court at one and the same time determine the rights and liabilities between the bank and White, between White and Lloyd's and between the bank and Lloyd's.
It follows that the application by the bank for severance of the third party proceeding fails.
The stay application by Lloyd's
I turn to consider the second application before me, that is, the application by Lloyd's for a stay of the third party proceeding pending the outcome of the judgment in the Jaffray proceedings.
The application is for a stay of the whole proceeding and is made pursuant to the inherent jurisdiction of the court. The relevant principles were considered by Lockhart J of the Federal Court of Australia in Sterling Pharmaceuticals Pty Ltd v The Boots Company (Aust) Pty Ltd (1992) 34 FCR 287 at 290-1. It is to be observed that the application by Lloyd's is not a "re-run" of the application concerning jurisdiction considered by Byrne J in Commonwealth Bank of Australia v White (No. 1). As was observed by Lockhart J in Sterling Pharmaceuticals (at 294): "There is obviously a substantial difference between a motion for a permanent stay or dismissal of a proceeding and a motion for a temporary stay or lengthy adjournment of a case … The Court remains in full control of the proceeding before it when it is stayed only temporarily … ". The factors to be taken into account by a court in considering whether to grant a stay pending the determination of proceedings instituted in another court as considered in Sterling Pharmaceuticals (at 291) are:
(1) Which proceeding was commenced first?
(2)Whether the determination of one proceeding is likely to have a material effect on the other.
(3)The public interest.
(4)The desirability of two courts competing to see which of them determines common facts first.
(5)Consideration of circumstances relating to witnesses.
(6)Whether work done on pleadings, particulars, discovery, interrogatories and preparation might be wasted if the stay is not granted.
(7)The undesirability of substantial wasting of time and effort if it becomes a common practice to bring actions in two courts involving substantially the same issues.
(8)How advanced the proceedings are in each court?
(9)The application of the principle that the law should strive against permitting multiplicity of proceedings in relation to similar issues.
(10)Generally balancing the advantages and disadvantages to each party, that is, weighing up issues of justice and convenience.
The criteria considered in Sterling Pharmaceuticals were referred to with approval by the High Court of Australia in Henry v Henry (1996) 185 CLR 571 at 590; and also in CSR Limited v Cigna Insurance Australia Limited (1997) 189 CLR 345 at 390 n98. I adopt the criteria applied in Sterling Pharmaceuticals. I shall consider each of the criteria as applied to the present proceeding.
(1) Which proceeding was commenced first?
The Jaffray proceeding against Lloyd's, to which White is a party, was commenced in November 1997. The third party proceeding was instituted against Lloyd's by White on 30 January 1998. The time difference is minimal, therefore, a matter of two months only.
(2) Whether the determination of one proceeding is likely to have a manifest effect on the other
In determining Lloyd's application concerning jurisdiction Byrne J concluded that White will "be bound by the findings of fact and law in that [ie. the Jaffray] trial": [1999] VSC 262 at para 93. The conclusion, conceded by White, is required by the doctrine of issue estoppel: see Blair v Curran (1939) 62 CLR 464 at pp.531-532; Brewer v Brewer (1953) 88 CLR 1 at pp.14ff. Given that both the Jaffray proceedings and the Victorian proceeding concern the largely same substratum of fact and that, in essence, the same relief is sought in both proceedings, the determination of the Jaffray proceeding may have a manifest effect on the Victorian proceeding. For example, if Lloyd's were to lose the Jaffray trial then (subject to proof of individual reliance, causation and loss) White might seek to recover damages in that proceeding that would cover the losses that he suffered as a result of his membership of Lloyd's (including, for example, underwriting losses paid either directly or through the drawdown of a letter of credit, membership fees and other expenses of his underwriting). If, on the other hand, Lloyd's were to win the Jaffray trial, then the allegations currently advanced by White against Lloyd's in the Victorian proceeding would need to be re-visited and re-pleaded in the light of the relevant findings of fact and law. Such findings may include findings as to whether the relevant brochure and the global accounts contained representations as alleged and, if so, whether those representations were false as alleged.
In the principal proceeding White contends by way of defence the implied term. In the bank third party claim the bank claims that if White succeeds against the bank and proves fraud or unconscionable conduct by Lloyd's or if White succeeds against Lloyd's in this proceeding or in the Jaffray proceedings then the bank is entitled to relief against Lloyd's. Whether Lloyd's acted fraudulently is apparently the central issue in the Jaffray proceedings. Although the bank is not a party to the Jaffray proceedings, the bank will seek relief from Lloyd's. It has therefore specifically fixed its claim against Lloyd's to the outcome of the Jaffray action and to the findings in that proceeding. Further, White's solicitor, Mr Foster, deposed on affidavit in this application that if the court in Jaffray holds that certain documents relied upon by White as evidencing fraud by Lloyd's do not in fact evidence such fraud, White may wish to re-consider his "notice of fraud" defence against the bank. If White does not press his "notice of fraud" defence, the bank's third party claim against Lloyd's will fall away. If, on the other hand, those documents are part of a successful fraud finding against Lloyd's, White might feel encouraged to pursue his defence in relation to the "notice of fraud" claims against the bank.
(3) The public interest
It was submitted on behalf of Lloyd's and, I accept, that the public interest would not be jeopardised by the granting of a temporary stay in the present case. On the contrary, the public interest would be served by the efficient disposition of the present case with a minimum wastage of court time and a maximum saving of costs. In my view, the public interest will not be served if court time is wasted and costs are incurred unnecessarily.
(4)The undesirability of two courts competing to see which of them
determines common facts first
It is apparent that this factor is unlikely to come into play as the Jaffray trial, commenced on 28 February 2000 with an estimated duration of between three and six months, will be concluded in all likelihood before any trial is commenced in Victoria, irrespective of whether a stay is granted or not.
(5) Consideration of circumstances relating to witnesses
It was urged on behalf of Lloyd's that many of the witnesses relied upon by Lloyd's in the Jaffray proceeding are elderly and in poor health. So much was not rebutted. It is feasible, therefore, that it would be oppressive to require those witnesses to assist with the preparation of witness statements for use in the Victorian proceeding before they have completed giving evidence in the Jaffray proceedings. It may be oppressive to Lloyd's also to require it to prepare witness statements for the Victorian proceeding before it is quite clear as to the issues that will remain for determination in that proceeding following judgment in Jaffray. Further, it could be burdensome to the parties and their witnesses if duplication in the preparation and settling of witness statements was permitted to occur. There would be, in addition, increased costs and burdens to the parties in endeavouring to obtain co-operation of witnesses many of whom are elderly and retired.
(6)Whether work done on pleadings, particulars, discovery, interrogatories
and preparation might be wasted
It necessarily follows that work done in this proceeding on pleadings, particulars, discovery, interrogatories and preparation would be wasted insofar as that work concerns issues which, following Jaffray, may no longer be justiciable or in dispute as between the parties. Furthermore, it is readily comprehensible that Lloyd's Australian legal advisers would need constant access to Lloyd's English legal advisers, to Lloyd's documents and to Lloyd's witnesses in order to complete interlocutory steps and prepare generally for the trial of the Victorian proceeding. Access would be severely limited as a consequence of the involvement of Lloyd's English legal advisers in the conduct of the Jaffray trial, the participation of Lloyd's witnesses in the Jaffray trial and the deployment of relevant documentation in the Jaffray trial.
In addition, there is a confidentiality regime in place as requested by third parties in the Jaffray proceedings. Hence, access by Lloyd's Australian legal advisers to documents discovered and witness statements filed in Jaffray is in all likelihood limited. It would be a very substantial task, necessarily requiring the involvement of Lloyd's English legal advisers, to sift out from general discovery in Jaffray documents not the subject of confidentiality orders and to commence an entirely independent discovery process in relation to documents said to constitute approximately 35,000 crates of Lloyd's documents. It also said that those documents are not centrally indexed.
Whilst Lloyd's will be obliged to make discovery at some point wastage would be minimised if discovery was delayed until the determination of Jaffray when the issues outstanding between the parties to the Victorian proceeding will be known and documents and witness statements in Jaffray are likely, of the confidentiality regime, subject for the most part to the terms to be available.
(7)The undesirability of substantial waste of time and effort if it becomes a
common practice to bring actions in two courts involving substantially the same issues
In my view, for the reasons already stated this factor is self-evidently applicable in the present case. Although relying on different causes of action, White is currently seeking some relief from Lloyd's in relation to much of the same sub-stratum of fact in two separate courts.
(8) How far advanced the proceedings are in each court
As already considered, the trial of Jaffray actually commenced on 28 February 2000. In the Victorian proceeding, Lloyd's has done nothing more than file an appearance and pursue the initial interlocutory application before Byrne J and this application.
(9)The law should strive against permitting multiplicity of proceedings in relation to similar issues
For the reasons already expressed, I consider this factor is made out in that a stay is appropriate so as to avoid multiplicity of proceedings.
(10) Generally balancing the advantages and disadvantages to each party
If White is successful in the Jaffray proceedings, he will have suffered no prejudice if in the meantime the progress of his claims in Victoria is delayed. He may no longer need to pursue such claims. Indeed, if the Jaffray proceeding is resolved in White's favour, time and the substantial expense incurred by the parties in connection with the Victorian proceeding will have been wasted. If, on the other hand, White is not successful in the Jaffray proceeding then, if a stay is granted in Victoria pending the determination of the Jaffray proceeding, that stay will fall away and it will be for the parties to make submissions as to the future conduct of the action having regard to issues that remain outstanding in light of the findings in Jaffray. It is important in this respect that Lloyd's undertakes to pay interest in respect of sums recovered by the bank from White during the period of any stay ordered insofar as the bank itself is unable to recover such interest from White thereby ensuring that the bank will suffer no prejudice if the proceeding is stayed. In addition, the bank prays in aid of its claim against Lloyd's the findings of the English Court in Jaffray. Depending on the outcome of Jaffray, White will revisit his "notice of fraud" defence to the bank's claim against him. The alternative is that Lloyd's will have to address allegations of fraud in two forums concurrently if the bank's claims against White and Lloyd's are permitted to proceed before Jaffray is determined.
Other matters
It was urged on behalf of Lloyd's that the fact that a foreign court has granted an anti‑suit injunction restraining White from further prosecuting his claim in this forum is a factor that should weigh in the exercise of the discretion in favour of granting a stay. On behalf of Lloyd's it was acknowledged that this court is not bound to give effect to the injunction granted by Cresswell J in the Jaffray proceedings. However, it was urged that the this court should do so for reasons based on notions of comity.
The High Court of Australia considered the principles applicable to stay orders and anti‑suit injunctions in CSR Limited v Cigna Insurance Aust Limited (1997) 189 CLR 345. The High Court observed that anti‑suit injunctions are a matter to be approached with caution. In Cigna (at 372 per Brennan CJ) cited with approval the observations of Lord Scarman in British Airways v Laker Airways (1985) AC 58 at 95:
"The approach has to be cautious because an injunction restraining a person within the jurisdiction of the English court from pursuing a remedy in a foreign court where, if he proves the necessary facts, he has a cause of action is, however disguised and indirect, an interference with the process of justice in that foreign court. Caution is needed even in a 'forum convenience' case, ie, a case in which a remedy is available in the English as well as in the foreign court. Caution is clearly very necessary where there is no remedy in the English court in respect of the cause of action which, if the facts be proved, is recognised and enforceable by the foreign court."
The High Court held that the court's inherent power to protect the integrity of its processes may authorise the grant of an anti-suit injunction. The court further held that if the commencement of legal proceedings involves unconscionable conduct or the unconscientious exercise of a legal right, an injunction may be granted in the exercise of equitable jurisdiction in restraint of those proceedings regardless of where they have been instituted. In the joint judgment of Dawson, Toohey, Gaudron, McHugh, Gummow and Kirby JJ the position was stated (at 392) thus:
"The inherent power to grant anti-suit injunctions is not confined to the examples just given. As with other aspects of that power, it is not to be restricted to defined and closed categories. Rather, it is to be exercised when the administration of justice so demands or, in the context of anti‑suit injunctions, when necessary for the protection of the court's own proceedings or processes.
Quite apart from the inherent power of a court to protect its own processes, a court may, in the exercise of the power deriving from the Chancery Court, make orders in restraint of unconscionable conduct or the unconscientious exercise of legal rights. If the bringing of legal proceedings involves unconscionable conduct or the unconscientious exercise of a legal right, an injunction may be granted by a court in the exercise of its equitable jurisdiction in restraint of those proceedings no matter where they are brought.
In some cases, the equitable jurisdiction to restrain unconscionable conduct may be exercised in aid of legal rights. Thus, as the respondents correctly contend, if there is a contract not to sue, an injunction may be granted to restrain proceedings brought in breach of that contract, whether brought here or abroad. Similarly, an injunction may be granted in aid of a promise not to sue in a foreign jurisdiction constituted, for example, by an agreement to submit to the exclusive jurisdiction of the courts of the forum."
Indeed, the application of anti-suit injunctions have been considered in recent times in the Federal Court of Australia in the context of competing jurisdictions between State Supreme Courts and the Federal Court: Cook Inc v World Medical Manufacturing Corp unreported judgment of Goldberg J dated 24 September 1999; [1999] FCA 1333; Australian Competition and Consumer Commission v Simply No-Knead (Franchising) Pty Ltd unreported judgment of Sundberg J dated 24 December 1999; [1999] FCA 1842; Construction, Forestry, Mining and Energy Union v Multiplex Constructions Pty Ltd unreported judgment of Marshall J dated 14 February 2000; [2000] FCA 101; Australian Workers' Union v Yallourn Energy Pty Ltd unreported judgment of Merkel J dated 8 February 2000; [2000] FCA 65.
The anti-suit injunction having been granted by the English court in the Jaffray proceedings raises the issue as to its application to this court. As observed by the High Court in Cigna (at 395-396) an anti-suit injunction acts in personam but nevertheless interferes with the processes of the foreign court. As a consequence, it may be perceived as a breach of comity by that court. In Cigna (at 395) the High Court considered the English and North American authorities in relation to the application of comity and observed that the notion was explained by the Supreme Court of the United States in Hilton v Guyot (1895) 159 US 113 at 163-164 as follows:
"'Comity', in the legal sense, is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and good will, upon the other. But it is the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws."
Applying those principles to the present matter it is appropriate on the basis of duty, convenience and in recognition of citizens' rights under the law that I recognise the judicial act of the court in the Jaffray proceedings of granting the anti-suit injunction.
It was also urged on behalf of Lloyd's that the fact that White contracted to litigate exclusively in the foreign jurisdiction together with the fact that the law of the foreign jurisdiction constituted the proper law of the contract between White and Lloyd's were factors to weigh in favour of granting the stay. For the reasons already stated, and particularly in reliance upon the findings of Byrne J in Commonwealth Bank of Australia v White (No. 1) there are separate issues that cannot be determined in the English court and under English law. If this was the only factor relied upon in support of the stay I would decline to do so. However, as there are other compelling factors already considered it is unnecessary for me to determine whether to exercise the discretion on this basis.
Ultimately I am satisfied that Lloyd's ought succeed on its application for a stay of the proceeding pending the outcoming of the judgment in the Jaffray proceedings. Accordingly, I will make appropriate orders staying the proceeding until further order subject to the undertaking proffered by Lloyd's.
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