Davidson v Suncorp-Metway Limited (No 3)

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FEDERAL COURT OF AUSTRALIA

Davidson v Suncorp-Metway Limited (No 3) [2020] FCA 1593

File number: QUD 18 of 2020
Judgment of: JACKSON J
Date of judgment: 4 November 2020
Catchwords:

PRACTICE AND PROCEDURE - application for preliminary discovery - reasonableness of belief that prospective applicant may have the right to obtain relief - prospective applicant had previously commenced proceedings against prospective respondent - prospective applicant had already settled many of the claims said to give rise to reasonable belief - prior decision of Queensland Supreme Court found that prospective applicant had no real prospects of establishing that settlement deed was voidable - issue estoppel - reasonable belief held in relation to one claim - no jurisdiction in Federal Court of Australia in respect of that claim - application dismissed

HIGH COURT AND FEDERAL COURT - federal jurisdiction - jurisdiction of Federal Court of Australia in preliminary discovery matters - consideration of jurisdiction of Federal Court generally - meaning of 'matter' - Federal Court lacks jurisdiction over claim forming basis of preliminary discovery application
Legislation:

Federal Court Rules 2011 (Cth) r 7.23

Judiciary Act 1903 (Cth) ss 39B, 39B(1A)(c)
Cases cited:

Apache Northwest Pty Ltd v Newcrest Mining Ltd [2009] FCAFC 39; (2009) 182 FCR 124

Australian Securities and Investments Commission v Edensor Nominees Pty Ltd [2001] HCA 1; (2001) 204 CLR 559

Blair v Curran (1939) 62 CLR 464

Chappell & Co Ltd v Nestlé Co Ltd [1960] AC 87

Davidson v Suncorp-Metway Limited [2020] FCA 795

Davidson v Suncorp-Metway Limited (No 2) [2020] FCA 879

Essential Energy v Rose [2020] FCA 722; (2020) 145 ACSR 106

Fencott v Muller (1983) 152 CLR 570

Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112

Karam v Australia & New Zealand Banking Group Ltd [2001] NSWSC 709

Kerridge v Simmonds (1906) 4 CLR 253

Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd [2017] FCAFC 193; (2017) 257 FCR 62

Rana v Google Inc [2017] FCAFC 156

Re Wakim; Ex parte McNally [1999] HCA 27; (1999) 198 CLR 511

St George Bank Ltd v Rabo Australia Ltd [2004] FCA 1360; (2004) 211 ALR 147

Suncorp-Metway Ltd v Nagatsuma [2019] QSC 16

Timbercorp Finance Pty Ltd (in liq) v Collins [2016] HCA 44; (2016) 259 CLR 212
Texts cited: Tyler, Young and Croft, Fisher and Lightwood's Law of Mortgage (LexisNexis Butterworths, 3rd Australian ed, 2014)
Division: General Division
Registry: Queensland
National Practice Area: Commercial and Corporations
Sub-area: Commercial Contracts, Banking, Finance and Insurance
Number of paragraphs: 117
Date of last submissions: 9 July 2020 (first prospective applicant)
1 July 2020 (prospective respondent)
Date of hearing: 2 July 2020
Counsel for the First Prospective Applicant: The first prospective applicant appeared in person
Counsel for the Second Prospective Applicant: The second prospective applicant did not appear
Counsel for the Prospective Respondent: Mr DJ Ananian-Cooper
Solicitor for the Prospective Respondent: Gadens Lawyers
Table of Corrections
17 November 2020 At [49], seventh line amended to correctly…
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Details
Case
[2020] FCA 1593
Decision Date

CaseChat Overview and Summary

In the case of Davidson v Suncorp-Metway Limited (No 3), Mr Davidson sought an application for preliminary discovery against Suncorp-Metway Limited, seeking documents to determine whether to proceed with litigation. Mr Davidson, the director of Far North Queensland Cattle Company Pty Ltd, alleged that bank officers engaged in fraudulent activities, including unauthorised overdrafts and diversion of funds. The primary issue before the court was whether Mr Davidson's belief that he may have a right to obtain relief was reasonable, particularly given his prior comprehensive settlement deed with the bank and the Supreme Court of Queensland's ruling that he had no real prospects of establishing that the settlement deed was voidable. The court found that Mr Davidson's prior settlement deed and the Supreme Court's ruling presented insurmountable obstacles to the majority of his claims. Additionally, some claims were deemed largely without substance, and it was not established that preliminary discovery was necessary for deciding whether to commence a claim for these. The court also considered the jurisdictional limits of the Federal Court of Australia in preliminary discovery matters, ultimately determining that it lacked jurisdiction over the claim forming the basis of the preliminary discovery application. Consequently, the application was dismissed.

The legal issues involved the reasonableness of Mr Davidson's belief that he might have a right to obtain relief, the impact of prior legal proceedings and settlements on his current claims, and the jurisdiction of the Federal Court in preliminary discovery matters. The court had to weigh Mr Davidson's allegations against the backdrop of prior litigation outcomes and jurisdictional constraints. The central legal question was whether the Federal Court had jurisdiction to grant the preliminary discovery application, given the prior comprehensive settlement and the Supreme Court's findings. The court concluded that Mr Davidson's prior comprehensive settlement deed and the Supreme Court's ruling on the voidability of that deed severely undermined the reasonableness of his belief that he had a right to obtain relief. The court also found that the Federal Court lacked jurisdiction over the claim underlying the preliminary discovery application, thereby dismissing the application. This conclusion was based on a detailed examination of the procedural history and the substantive merits of Mr Davidson's claims.

In reaching its decision, the court highlighted several key factors. Firstly, Mr Davidson had already settled many of the claims through a comprehensive deed of settlement, which significantly diminished the reasonableness of his belief that he had a right to obtain relief. Secondly, the Supreme Court of Queensland had previously ruled that Mr Davidson had no real prospects of establishing that the settlement deed was voidable, further undermining his current claims. Additionally, some of Mr Davidson's claims were deemed to be largely without substance. The court also noted that discretionary factors, such as the lack of procedural fairness and the admissibility of expert evidence, weighed against granting the preliminary discovery application. Given these considerations, the court dismissed the application. The court further considered the jurisdictional limits of the Federal Court in preliminary discovery matters and found that it lacked jurisdiction over the specific claim forming the basis of the application. The court reserved the issue of costs pending further clarification from the solicitors who commenced the application.

The court's final orders included dismissing Mr Davidson's originating application for preliminary discovery, reserving judgment on a related interlocutory application, and directing that a case management hearing be held to address outstanding costs issues. The court also ordered that a representative of the solicitors who commenced the application must attend the case management hearing. The orders reflect the court's comprehensive analysis of the reasonableness of Mr Davidson's beliefs, the impact of prior litigation, and the jurisdictional constraints affecting the Federal Court's authority in this matter. The decision underscores the importance of prior legal proceedings and jurisdictional considerations in determining the admissibility and merits of preliminary discovery applications.

Orders

Orders of the court

1. The prospective applicants' originating application dated 21 January 2020 is dismissed.

2. Judgment in relation to paragraph 4 of the first prospective applicant's interlocutory application dated 11 June 2020 remains reserved.

3. The prospective respondent must serve a copy of these orders and the reasons for decision on Kelly Legal of Level 2, 65 Sydney Street, Mackay, Queensland by registered post addressed to that address and marked to the attention of Sean Kelly forthwith.

4. The matter is listed for a case management hearing on Friday 13 November 2020, which a partner, director or principal of Kelly Legal, or counsel representing the firm, is directed to attend.

5. Costs of the preliminary discovery application are reserved.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Whether Mr Davidson's beliefs are reasonable here must be tested against two important matters. One is that in 2014 he signed a comprehensive deed of settlement with the bank. The other is that he commenced proceedings in the Supreme Court of Queensland in which the court found that he had no real prospects of establishing that the deed was voidable by reason of economic duress. For the reasons that follow, those matters present formidable obstacles - in my view insurmountable ones - which stand in the way of success on many of Mr Davidson's claims. There are also some claims he has sought to raise which are not barred by either of those matters. But they are largely without substance and in relation to some of them, Mr Davidson has not established that he needs preliminary discovery in order to decide whether to commence a claim. In some cases there are also discretionary factors weighting against making any order for discovery. The application must be dismissed.Background Mr Davidson is the director of Far North Queensland Cattle Company Pty Ltd (FNQ). It appears that through that company, as the name would suggest, he conducted a cattle farming business in far northern Queensland. Mr Davidson swore an affidavit which was filed at the same time as the originating application in this proceeding. It exhibited parts of another affidavit which he swore in proceedings which he commenced in the Supreme Court of Queensland in 2014, from which much of the following background is taken. In late 2012 or early 2013 Mr Davidson approached the bank for refinancing. The refinancing occurred in September 2013 with the establishment of overdraft facilities with limits totalling $1 million. There were also term loan facilities totalling $7.8 million. FNQ was the borrower and Mr Davidson guaranteed its liabilities and he provided security over a number of parcels of land which he owned. It appears FNQ also granted a mortgage over one parcel of land. In the course of the refinancing, Mr Davidson met the former officer of the bank whom I have mentioned, Ben Houlihan. Mr Davidson alleges that Mr Houlihan engaged in various fraudulent dealings which had the result that the overdraft facilities were drawn to their limits without Mr Davidson's knowledge or authorisation. Mr Davidson alleges that Mr Houlihan used Mr Davidson's money for transactions that were to Mr Houlihan's benefit, including that money was taken from the overdraft facilities and diverted to Mr Houlihan. One of the overdraft limits was increased by $75,000, again, Mr Davidson says, without his knowledge. He alleges that a total of almost $732,000 was taken from his accounts without his approval. One of the ways Mr Davidson says the fraud occurred was by authorisations for payment of invoices rendered by Mr Houlihan's company, Houlihan Rural, and bank transfer slips. Mr Davidson has produced copies of the authorisations and transfer slips which the bank has given to him. He claims that he never signed these documents; that they are forgeries. He also claims that Mr Houlihan stole cattle. Mr Davidson also seeks to implicate another officer of the bank, Robert Drewitt, in alleged fraud.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

In circumstances where Mr Davidson has brought the application, had almost six months to put on evidence regarding matters that have been the subject of litigation since 2014, was legally represented for much of that period, and was granted multiple extensions to put on that evidence, I do not accept that the court has denied him procedural fairness. In respect of the evidence of the putative handwriting expert, it is clear for the reasons I gave in Davidson v Suncorp-Metway (No 2) that he was heard on the issue of its admissibility.Conclusion and costs The application for preliminary discovery must be dismissed. The bank pressed for indemnity costs in relation to the preliminary discovery application, against both Mr Davidson and Ms Nagatsuma. The basis of the application will be clear enough from the reasons above. In light of the multiple difficulties which I have described, the bank submits that the application for preliminary discovery was hopeless. The bank relies on letters dated 28 January 2020 and 8 June 2020 from its solicitors to the prospective applicants' solicitors at the relevant times in which, it says, this was pointed out. However, there is a threshold issue which, in my view, needs to be determined before or at the same time as any determination of Mr Davidson's and Ms Nagatsuma's liability for costs. The preliminary discovery application was commenced by Kelly Legal, who then acted for Mr Davidson and Ms Nagatsuma, on 21 January 2020. But as I have said above, it is not apparent why Ms Nagatsuma was a party to the application. She took no part in it. She did not even give the minimal evidence one would expect any prospective applicant to give at the time of filing the application, that she had a belief that she may have a claim against the bank and she wanted discovery to decide whether to make the claim. Before determining Ms Nagatsuma's liability for costs, if any, I consider it is appropriate to hear from Kelly Legal, the solicitors who commenced the application, as to how, while they were advising and representing her, she came to be a party and to be exposed to substantial liability for costs. Since they have not to date received any notice of the court's concern about that, it is not appropriate to say more. The matter will be listed for a case management hearing, which a representative of Kelly Legal will be ordered to attend, so as to programme the determination of outstanding costs issues.

Ratio Decidendi

Legal Principle Established

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