De Saram v Brown
[2015] VSCA 142
•10 June 2015
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2014 0083
| JOSEPH SHIHARA RUKSHAN DE SARAM and RHODIUM AUSTRALIA PTY LTD (ACN 123 291 510) | Appellants |
| V | |
| DAVID ANDREW BROWN and MARGARET TERESA CUNNIFFE | Respondents |
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| JUDGES: | ASHLEY and TATE JJA and DIGBY AJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 12 March 2015 |
| DATE OF JUDGMENT: | 10 June 2015 |
| MEDIUM NEUTRAL CITATION: | [2015] VSCA 142 |
| RULING APPEALED FROM: | Brown v de Saram (Unreported, County Court of Victoria, Judge Lacava, 1 July 2014) |
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PRACTICE AND PROCEDURE – Appeal against summary judgment – Whether the defence has a ‘real prospect of success’ – Appeal against strike out of the counterclaim – Failure to comply with court orders – Appeal allowed in part – Counterclaim reinstated – Orders for the expedition of the counterclaim made – Civil Procedure Act 2010 ss 61, 63 and 64 – County Court Civil Procedure Rules 2008 r 24.02.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellants | Dr N Orow | Marsh & Maher |
| For the Respondents | Mr M G McNamara | McDonald Slater & Lay |
ASHLEY JA:
I agree with Digby AJA that the appeal against judgment for the plaintiffs on the claim should be dismissed, that the appeal against judgment in favour of the defendants to counterclaim should be allowed, and that the Court should make orders designed to facilitate the early trial of the counterclaim.
TATE JA:
I agree with Digby AJA that Grounds 4 and 5 of the Grounds of Appeal should be upheld. The appeal should be allowed and consequential orders made to facilitate the trial of the counterclaim.
DIGBY AJA:
This is an appeal from a decision by the County Court on 1 July 2014 entering judgment for the respondents in the sum of $201,000, with damages by way of interest in the sum of $94,795, and striking out a counterclaim brought by the appellants.
The principal issue in this appeal is whether, on the materials before the judge below he erred in giving judgment on the claim on the basis that the defence thereto had no prospect of success and whether the judge below was justified in striking out the defendants’ counterclaim.
Background
David Andrew Brown (‘Brown’) the plaintiff in the subject proceeding in the County Court issued a Summons dated 21 May 2014 seeking summary judgment on his claim for damages against Joseph Shihara Rukshan de Saram (‘de Saram’), and also bringing an application to strike out the counterclaim brought by de Saram and the second named counterclaimant Rhodium Australia Pty Ltd (‘Rhodium’) against
Brown and Margaret Teresa Cunniffe (‘Cunniffe’).
The gist of Brown’s case was that on or about 1 March 2012, Brown and de Saram entered into an oral agreement whereby Brown lent de Saram the sum of $200,000 (‘the principal sum’) in consideration for which de Saram agreed to make full repayment of the principal sum, plus interest and the sum of $1,000 for associated fees, within 90 days of receiving the principal sum.
On 8 March 2013, de Saram signed a document described as a ‘90 day Promissory Note’ (‘the Promissory Note’) in relation to the principal sum and interest thereunder. The Promissory Note signed by de Saram was relied upon by Brown as further evidencing the loan agreement.
It was also alleged that de Saram had made some four loan repayments totalling $14,590.
Brown issued a Summons dated 21 May 2014 for summary judgment of the loan, interest and associated fees. Brown supported the Summons by affidavit sworn 21 May 2014. In that affidavit Brown deposes to his claim in relation to the loan to de Saram of $200,000 and responds to de Saram’s allegations in defence of Brown’s claim. However, Brown does not by his affidavit deny any of the many cross-claims made in de Saram and Rhodium’s counterclaim.
De Saram in his responding affidavit sworn 27 June 2014 admits receipt of $200,000 from Brown, however de Saram denies this sum was a loan. De Saram also admits making four payments to Brown, but denies that those payments were in accordance with any loan agreement.
De Saram claims that the principal sum was instead an advance of funds for then as yet to be determined business dealings between Brown and de Saram.
De Saram also denies that the Promissory Note signed by him on 8 March 2013 was written evidence of a loan agreement. De Saram asserts that the Promissory Note was never intended to be enforceable.
De Saram outlined the agreement between himself and Brown in his affidavit sworn 27 June 2014. He describes the agreement as an agreement ‘to move forward’ and not as a loan agreement. The outline of the alleged agreement set out in de Saram’s affidavit is as follows:
Initially the funds were given to me to use towards the acquisition of a property at 127-129B Brisbane Street, Berwick but that purchase did not proceed. In about June 2012 we discussed the funds and we agreed that it will be kept by me as a performance bond (being a pre-payment as surety for deliverables to be undertaken and provided) and to cover their liabilities (incurred prior to that date and later liabilities). The deliverables (to provide direct or in management services to myself and related entities in the conduct of business and investments) that the performance bond sustained were undertakings by the plaintiff and second defendant by counterclaim to carry out work obligations to me and the second plaintiff by counterclaim and we were to share in the profits generated from successfully carrying out those obligations.
That affidavit also deposed to losses being incurred by de Saram as a result of Brown and Cunniffe failing to carry out their work obligations. These losses are not particularised. De Saram’s affidavit states that the principal sum of $200,000 was lost as part of business activities in which Brown and Cunniffe were to perform unspecified obligations.
De Saram’s affidavit of 27 June 2014 observes at [2] that Brown’s affidavit of 21 May 2014 deposes only to the de Saram defence and does not deny the allegations that de Saram and Rhodium make against Brown and Cunniffe in the counterclaim. In [3] of de Saram’s affidavit of 27 June 2014, he states that his affidavit deals only with the allegations which Brown makes in his affidavit in support of the Summons for summary judgment.
By counterclaim dated 5 December 2013 de Saram and Rhodium claim against Cunniffe and Brown, that Cunniffe, and subsequently Brown, failed to pay rent in respect of premises at 13 Fritzlaff Court Berwick (‘the Berwick Property’), which, it is alleged by de Saram, Cunniffe, and subsequently Brown and his children, had occupied. De Saram also pleads that Brown and Cunniffe used de Saram’s credit cards to pay for utilities at the Berwick Property. These credit card transactions appear to relate to utilities in the nature of unauthorised payment of internet service costs and various other expenses.[1]
[1]Defence and Counterclaim dated 5 December 2014 [12] and [27(v)].
De Saram’s defence seeks to set off against Brown’s claims the rental payments said to be owing by Cunniffe and Brown in respect of the Berwick Property and also the unauthorised credit card transactions by Brown and Cunniffe.
De Saram and Rhodium do not seek to set off the many other sums claimed in their counterclaim.
The additional de Saram and Rhodium counterclaims against Brown and Cunniffe include for breaches, by Brown and Cunniffe, of alleged Service Agreements to act for and on behalf of, and as contractors for, Rhodium. As a result of those alleged breaches, de Saram and Rhodium have suffered loss and damage. De Saram’s counterclaim also claims loss and damage from both Brown and Cunniffe for unauthorised use of credit cards, in a sum alleged to be in excess of $110,000, and includes claims in relation to wrongful conversion of de Saram and Rhodium’s Property, damage to the rented Berwick Property and wrongful injurious falsehoods.
In their defences to counterclaim, Brown and Cunniffe deny the claims made in the counterclaim and allege that the Berwick Property was not, and had never been, owned by de Saram or Rhodium. Brown’s defence to counterclaim also contends that he cannot plead further to certain paragraphs of the counterclaim until proper particulars are provided.
In an affidavit in opposition to an application for security for costs, sworn 31 January 2014 and filed on behalf of de Saram and Rhodium, Joanne Margaret McCall, a Director of Rhodium, deposes that the Berwick Property is owned by Elixir Vitae Pty Ltd.
Brown relied on the above affidavit sworn by Ms McCall to argue that de Saram had no standing to bring that part of the counterclaim which is dependent upon de Saram being entitled to let the Berwick Property and therefore entitled to the rent.
Earlier interlocutory proceedings
The original proceeding in this matter was commenced by Writ and Statement of Claim filed on 11 April 2013. De Saram filed and served a defence on 6 September 2013.
On 24 October 2013 the County Court made orders by consent that, inter alia:
(a) The proceeding is set down for trial on 19 May 2014.
(b) By 4:00pm on 5 November 2013, the plaintiff has leave to file an amended statement of claim.
(c) By 4:00pm on 29 November 2013, the defendant has leave to file an amended defence and/or counterclaim.
(d) By 4:00pm on 20 December 2013, the parties must deliver any request for further and better particulars of a pleading. Any request must be answered within 30 days.
(e) The parties shall cooperate in completing the interlocutory processes so that the action is brought to trial as quickly as possible.
On 1 November 2013 Brown filed a proper basis certification. On 17 December 2013 de Saram filed a proper basis certification.
On 1 November 2013 Brown filed an Amended Statement of Claim dated 31 October 2013. On 6 December 2013 de Saram and Rhodium filed a defence to the Amended Statement of Claim and a counterclaim. On 20 January 2014 Brown and Cunniffe filed defences to the counterclaim.
On 10 December 2013 Brown served a request for further and better particulars of the defence and counterclaim and a Notice to Produce certain documents referred to in the counterclaim. On 24 January 2014 Brown served a further Notice to Produce certain documents referred to in the counterclaim.
On 19 May 2014, upon the application of de Saram and Rhodium, the Court made orders including that the trial date listed for 19 May 2014 be vacated and the matter be relisted for trial on 21 July 2014. The Court also ordered that the matter be listed for a directions hearing on 5 June 2014.
By Summons dated 21 May 2014, Brown sought orders including for judgment on his claims pursuant to ss 61 and 63 of the Civil Procedure Act 2010 (the ‘CP Act’), and an order that the counterclaim be struck out.
The Summons was supported by the earlier mentioned affidavit from Brown sworn on 21 May 2014.
On 5 June 2014, the County Court adjourned the Summons for further hearing on 1 July 2014 (upon oral application by de Saram and Rhodium for an adjournment) and made orders including an order that by 4:00pm on 27 June 2014 de Saram and Rhodium file and serve further and better particulars of the defence and counterclaim in response to Brown’s request dated 10 December 2013 and provide copies of the documents requested in the Notice to Produce dated 24 January 2014. The Court also ordered that by 4:00pm on 27 June 2014 de Saram and Rhodium file and serve any affidavit material upon which they sought to rely in opposition to the Summons dated 21 May 2014.
De Saram in his submissions on appeal contends that on 5 June 2014, the application being prosecuted by Brown appeared to be limited to de Saram’s defence to Brown’s claim in relation to the $200,000 loan and not with de Saram’s non-compliance with past interlocutory orders.
Neither de Saram nor Rhodium provided further and better particulars of defence and counterclaim nor did they provide copies of the documents requested in Brown’s Notice to Produce dated 24 January 2014.
De Saram filed and served the above mentioned affidavit dated 27 June 2014 in reply to the Brown affidavit in which amongst other matters he deposed that he had not been able to comply with the order to provide further particulars of the defence and counterclaim because of change of solicitor and because he had a significant problem retrieving data that had been destroyed by Brown and Cunniffe. De Saram also deposed that he had been unwell for some time, and that had limited his ability to comply with orders.
On 1 July 2014 the Brown application for summary judgment came on again before the County Court.
The Summons dated 21 May 2014 was heard and determined on 1 July 2014. The judge below ordered that there be judgment for Brown on the claim in the sum of $201,000, together with damages by way of interest in the sum of $94,795, and that the counterclaim be struck out.
At the hearing on 1 July 2014 the defendant submitted that all that was before the Court was an application for summary dismissal of the defence to the Brown claim in relation to the loan and submitted that the defendants had not anticipated having to deal with any application by the plaintiff to strike out the defendants’ counterclaim.
The orders of the judge below
At the conclusion of argument on 1 July 2014 the County Court made orders as follows:
1.Judgment be entered for Brown on the claim in the sum of $201,000, together with damages by way of interest in the sum of $94,795.
2. The counterclaim be struck out.
3.De Saram pay Brown’s costs of and incidental to the proceeding including reserve costs to be taxed in default of agreement in the Costs Court.
4.That the sum of $40,000 lodged in the Court by de Saram as security for costs pursuant to the order of Judge Anderson made 3 February 2014 be retained by the Registrar until further order.
5.Reserve liberty to the parties to apply to the Duty Judge relating to disbursement or payment out of Court of the said $40,000 security for costs upon 7 days’ written notice to the practitioner for the other party.
By Notice of Appeal filed 21 July 2014, de Saram appeals OO 1 to 3 made by the County Court on 1 July 2014.
At the hearing of the appeal the question was raised as to whether leave to appeal was necessary given that the appeal was from the summary dismissal of a proceeding rather than a determination on the merits. The appellant made an oral application for leave, and he was granted leave, insofar as such leave was necessary.
The issues on appeal
The appellant submits that the principal questions for determination in this appeal are these:
(a) whether, on the evidence before the Court, his Honour erred in finding that the defence and the counterclaim did not disclose ‘a reasonable prospect of success’;
(b) whether the jurisdictional condition for the exercise of discretion to give summary judgment has been enlivened;
(c) whether an application to strike out the counterclaim was properly before the court;
(d) whether his Honour erred in dismissing the defence and striking out the counterclaim for want of compliance with orders;
(e) whether the judgment and orders are the product of a process infected by serious procedural unfairness;
(f) whether the exercise of discretion to dismiss and strike out miscarried in the sense contemplated in the well-known passage from House v The King;[2] and
(g) whether his Honour erred in failing to consider the discretion in s 64 of the CP Act.
[2](1936) 55 CLR 499, 505.
The governing principles
The appellant also submitted that the principles applicable to the disposal of an application for summary dismissal are, in essence:
(a)A court should be slow to dismiss a proceeding depriving a party of opportunity to present its case at trial.[3]
[3]Manderson M & F Consulting (A Firm) v Incitec Pivot Ltd (2011) 35 VR 98, 105.
(b)In order to dismiss summarily an action at a preliminary stage, it must be very clear indeed that the action is absolutely hopeless or so clearly untenable that it cannot succeed.[4]
(c)Analogously, the inherent jurisdiction of the court to dismiss an action was a jurisdiction which ought to be very sparingly exercised and only in very exceptional cases.[5]
(d)In relation to the underlying rationale for s 63 of the CP Act, the authorities make it clear that an inquiry as to whether a case has ‘no real prospects of success’ involves considerations extending beyond an analysis of the sufficiency of the statement of claim to plead a cause of action.
(e)The power under s 63 is not one to be exercised by reference only to the sufficiency of the pleading. The Appellant submits that ‘even if the court had doubts as to the prospect of success of a defendant’s claims’ assessed by reference to s 63 of the CP Act, the proper course would be to exercise the discretion under s 64 and to require a full trial of the claims’.[6]
(f)Although as noted in (b) above the appellant at one point referred to the statement of an earlier and somewhat different test the appellant accepted that the present test for summary judgment under s 63 of the CP Act is as stated in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd,[7] which test was approved in Feldman v Frontlink Pty Ltd.[8]
(g)Section 64 affirms the Court’s broad discretion regarding whether or not to order summary dismissal of a claim.[9]
(h)A judge is required to conduct judicial proceedings in accordance with natural justice.[10] The content of the requirement of fairness will depend upon the circumstances and may be affected by what is said and done during the proceedings. The focus is upon the consequences of any departure from proper procedures because what is ultimately in issue is whether unfairness has resulted from the process, not whether an expectation has been disappointed.[11]
(i)Where the judgment and orders are the product of a process infected by serious procedural unfairness, the orders must be set aside.[12]
(j)When considering an appeal against a discretionary decision, appellate intervention with respect to the challenged decision may be warranted in accordance with the principles stated in House v The King.[13]
[4]State Electricity Commissioner of Victoria v Rabel [1998] 1 VR 102, 109 (Ormiston JA).
[5]Day v Victorian Railway Commissioners (1949) 78 CLR 62, 91–92 (Dixon J).
[6]Manderson M & F Consulting (A Firm) v Incitec Pivot Ltd (2011) 35 VR 98, 107.
[7][2013] VSCA 158, [35].
[8][2014] VSCA 27, [24].
[9]Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd [2011] VSC 222, [12].
[10]Adamson v Ede [2009] NSWCA 379, [53–63].
[11]Re Minister for Immigration and Multicultural Indigenous Affairs: Ex parte Lam (2003) 214 CLR 1, [34].
[12]Aldous v State of NSW [2014] NSWCA 280, [14].
[13](1936) 55 CLR 499, 504–505.
The respondent did not take issue with the principles set out above.
The test expressed by the Victorian Court of Appeal in relation to summary relief pursuant to s 63 of the CP Act in Lysaght is, in summary, as follows:
(a)whether the respondent to the application for summary judgment has a ‘real’ as opposed to a ‘fanciful’ chance of success;
(b)the ‘real chance of success’ test is to some degree a more liberal test than the ‘hopeless’ or ‘bound to fail’ test and permits of the possibility that there may be cases, yet to be identified, in which it appears that, although the respondent’s case is not ‘hopeless’ or ‘bound to fail’, it does not have a real prospect of succeeding;
(c)the test as to whether a claim, defence or counterclaim, or part thereof, has no real prospect of success, is to be applied by reference to its own language and without paraphrase or comparison with the ‘hopeless’ or ‘bound to fail test’ referred to in earlier cases; and
(d)the power to terminate a proceeding summarily should be exercised with caution and should not be exercised unless it is clear that there is no real question to be tried.
Notice of Appeal
The appellants’ Grounds of Appeal are set out in summary form below, together with the essence of Brown and Cunniffe’s submissions and de Saram and Rhodium’s submissions.
Ground 1
Ground 1 of the Notice of Appeal provides:
In respect of the first respondent’s claims, on the evidence before the court the judge below erred in giving summary judgment pursuant to ss 61 and 63 of the CP Act on the basis that the first appellant’s defence does not disclose a reasonable prospect of success.
De Saram’s Submissions on Ground 1
De Saram submits that the judge below should have held that there were real questions of fact and law to be investigated and tried and that there was an arguable response to Brown’s claim.
De Saram submitted that there are substantial disputes as to whether the funds advanced by Brown were by way of loan. De Saram submitted that there were issues between the parties as to what agreement had been reached between Brown and de Saram as to the $200,000 Brown advanced to de Saram, when was any such agreement entered into, what the terms of that agreement were and the true character of that agreement. De Saram also argued that additional issues existed as to the status of the promissory note provided in connection with the advance, including de Saram’s claim that he only signed the Promissory Note in reliance on false representations made to him by Brown.
As well as submitting that the overall complexity of the issues between the parties rendered the proceeding inappropriate for summary judgment, de Saram submits that the difficult factual and legal issues described above reveal that there was real uncertainty without full argument and further investigation of the facts. De Saram submits that notwithstanding the apparent inadequacies in the form of the appellant’s pleadings, it was not just to finally dismiss his defence on the basis that it did not disclose reasonable prospects for success. De Saram argues that at trial, with the assistance of further evidence, he may have persuaded a court of the allegations made in his defence.
De Saram also relies upon the four defences referred to and addressed below in relation to Brown’s responses.
Brown’s Submissions on Ground 1
Brown points out that de Saram admits the advance and admits further periodic payments he had made to Brown totalling $14,590, and that de Saram also alleges that he has paid substantial additional sums to Brown. Brown points out that neither the defence nor de Saram’s affidavit contained any details of such other payments. No defence concerning additional payments was pressed before the judge below.
De Saram relies upon the four other defences outlined in his submissions, as summarised below, each of which it is submitted by Brown and Cunniffe, had no real prospect of success. Those four defences were as follows:
(a)the advance was for ‘then-to-be determined business dealings between de Saram and Brown and was not a loan’;
Brown submits that the de Saram affidavit of 27 June 2014 contained no evidence in support of this defence. Brown also submitted that de Saram’s defence contradicted the Promissory Note and de Saram’s evidence that initially the funds were intended to be put towards the acquisition of a property the purchase of which did not proceed.
(b) there was no oral agreement as alleged by Brown (albeit that there was apparently some other oral agreement concerning the advance);
The conversation de Saram deposes to in support of this argument was alleged to have taken place in June 2012, three months after the money was advanced.[14] However, de Saram fails to deal in any detail with the conversation Brown deposes to in his affidavit. Further, de Saram admits there was a conversation regarding the advance in about early March 2012.[15]
[14]De Saram affidavit 27 June 2014, [6]–[7].
[15]Defence dated 5 December 2013, [3(b)].
(c) the Promissory Note did not accord with or represent ‘the agreement that was reached between [the parties] regarding the advance’ and Brown only signed it ‘after the agreement regarding the advance was concluded’ in reliance upon false representations by Brown that the Promissory Note was not binding and he would not rely, or seek to rely, upon it;
Brown notes that in the sworn material before the Court, de Saram does not detail what the ‘false representations’ made by Brown were or why he prepared and signed the Promissory Note if it did not reflect the true agreement between the parties. Further, Brown submits that de Saram relies solely on statements, after the event, attributed to Cunniffe, and not to relevant representations by Brown.
(d) a set-off on the basis that Brown ‘rented’ the Berwick Property ... subject to an implied lease, but failed to pay [de Saram] rents for the same ... and further used de Saram’s credit cards to pay for utilities for the premises ... ‘.
Brown submits that the set-off of rental owing to de Saram is flawed because as mentioned above, in an affidavit made on 31 January 2014, filed on behalf of de Saram, Joanne Margaret McCall deposes that Elixir Vitae Pty Ltd owned the Berwick Property, not the appellants.
Brown also highlights that de Saram’s affidavit of 27 June 2014 sought to raise a further defence that the ’real agreement’ was entered into in or about June 2012. Brown points out that this agreement has not been pleaded by de Saram and is at odds with de Saram’s filed pleading.[16]
[16]De Saram defence dated 5 December 2013 [3] Particulars (a) and (b).
Ground 2
Ground 2 of the Notice of Appeal provides:
Alternatively, upon the evidence filed and the issues raised it was not open for the judge below to prefer the first respondent’s affidavit evidence to that of the first appellant and in those circumstances the judge erred in exercising his discretion because the judge could not in the circumstances properly assess the first respondent’s prospects of success without further investigation of the evidence, including the testing of the evidence by cross-examination and full argument, and in those circumstances the jurisdictional condition for the exercise of discretion had not been enlivened.
De Saram’s Submissions on Ground 2
De Saram submits that in the circumstances which existed, the jurisdictional precondition for the exercise of discretion by the judge below has not been enlivened because his Honour was not in a position to properly assess the prospects of success at trial without full argument, further investigation of the facts, including testing the evidence of parties in cross-examination.
De Saram submits that given the evidence and the issues raised in the application below, and in particular because the affidavit evidence of de Saram and Brown was diametrically opposed on the key facts and that evidence was not tested, there was no basis for the judge dealing with the applications to prefer one affidavit over the other.
De Saram submits, therefore, that in deciding that judgment should be entered for Brown on his claims in relation to the $200,000 payment, the judge erred in the exercise of his discretion because in the circumstances which existed there were insufficient facts on the basis of which the judge could be satisfied that de Saram’s defence to Brown’s claim had no real prospect of success.
Put another way de Saram submits that the Court’s exercise of discretion was not enlivened in the court below because the sufficiency of the necessary facts was so wanting that the Court could not, at the time of Brown’s application, properly assess the relevant prospects of success at trial.
Brown’s Submissions on Ground 2
Brown contends that a decision as to summary judgment in such applications involves an evaluation of evidence and an assessment of the defence. The mere existence of an affidavit in opposition contradicting the applicant’s case does not prevent the Court evaluating the merits as they present and does not foreclose an order being made for summary judgment.
Ground 3
Ground 3 of the Notice of Appeal provides:
The judge below erred in exercising his discretion to strike out the counterclaim because:
(a)The matter was not properly before the Court in that the summons did not specify the basis relied upon to strike out the counterclaim, and the affidavit in support of the applicant’s summons was limited to addressing the de Saram defence and did not deal with the claims made in the counterclaim;
(b)At the hearing before the County Court on 5 June 2014, the strike out application was considered on the basis it was brought under ss 61 and 63 of the Civil Procedure Act 2010 and not as an application to strike out the counterclaim on the basis of a failure to comply with orders to provide particulars;
(c)The counterclaimants’ affidavit opposing the summons was limited to claims made in relation to the defence;
(d)The claims made in the counterclaim related to both Brown and Cunniffe. There were separate defences filed by Brown and Cunniffe. However, the affidavit in support of the summons to strike out the counterclaim was made by Brown alone.
De Saram’s and Rhodium’s Submissions on Ground 3
De Saram’s submissions on this ground amounted to it advancing the four above points set out above under this ground of its Notice of Appeal.
Brown and Cunniffe’s Submissions on Ground 3
Brown and Cunniffe’s submissions in response to Ground 3 of the Notice of Appeal were that:
(1)The Summons dated 21 May 2014 at [4] applied to have the counterclaim by de Saram struck out.
Brown and Cunniffe also note that before the judge below they provided a written outline to the court of the bases upon which they argued that the counterclaim should be struck out.
(2)At an interlocutory hearing in the same proceeding prior to 1 July 2014, namely on 5 June 2014 another judge of the County Court had been informed, at a hearing at which the counterclaimants were represented, that Brown and Cunniffe intended to seek orders, amongst other things, striking out the counterclaim.
(3)At the hearing below the respondent also submits that statements by Brown and Cunniffe’s counsel[17] referred to the plaintiffs’ application for judgment under ss 61 and 63 of the Act. Brown and Cunniffe submit in this appeal that their counsel’s submissions on 1 July 2014 were not there concerned with the application to strike out the counterclaim, however, that application was not abandoned.
(4)At the interlocutory hearing on 5 June 2012 the Court provided the defendants with the opportunity to file and serve further and better particulars and to produce documents, that is providing the defendants with an opportunity to regularise aspects of their case prior to further hearing of the Summons on 1 July 2014.
[17]See [6] of de Saram’s and Rhodium’s written submission on appeal.
Brown and Cunniffe also submit that the de Saram affidavit of 27 June 2014 is in part dealing with the strike out claim directed to the counterclaim because it refers to the counterclaim and seeks to explain the counterclaimants’ failure to comply with orders.
The respondents also argue that it was a matter for the counterclaimants to decide what material they wished to put before the court.
The respondents also point out that there was no necessity for an affidavit to be filed by the second respondent, Cunniffe, in support of the strike out application.
Ground 4
Ground 4 of the Notice of Appeal provides:
If, and to the extent that the counterclaim was struck out by the judge below because there was no real prospects of success under ss 61 and 63 of the Act, in exercising his discretion to strike out the counterclaim the judge below erred because there was no affidavit evidence before the Court denying the counterclaimant’s claims and the counterclaim’s prospects of success could not properly be assessed without full argument and further investigation of the facts, including by cross-examination of witnesses.
De Saram and Rhodium’s Submissions on Ground 4
De Saram and Rhodium argue that, if and to the extent that the judge below struck out the counterclaim because he considered that there was no real prospect of its success under ss 61 and 63 of the CP Act, the judge erred because he purported to exercise his discretion in circumstances where he had no affidavit material before him denying the counterclaims, and further because the judge below could not properly assess the relevant prospects of success without further investigation of the facts, including the testing of the evidence by cross-examination, and in light of full argument from the parties.
Brown and Cunniffe’s Submissions on Ground 4
Brown and Cunniffe argue that the judge below did not strike out the counterclaim under ss 61 and 63 of the Act.
Ground 5
Ground 5 of the Notice of Appeal provides:
If, and to the extent that his Honour struck out the defence and counterclaim for non-compliance with court orders the judge below erred in exercising his discretion because based upon the evidence contained in the affidavit material, the defendants should have been afforded an opportunity to present their case properly and adduce evidence in support of their case. The defendant’s affidavit was limited to the first respondent’s claim and did not address the issue of non-compliance with orders.
De Saram and Rhodium’s Submissions on Ground 5
De Saram and Rhodium submit that, if and to the extent that the judge below struck out the defence and counterclaim for non-compliance with earlier Court orders, the judge below erred in the exercise of his discretion because upon the material before the Court, the Court should have given the appellants the opportunity to properly present their case and to put on supportive evidence.
De Saram and Rhodium point out that their affidavit material in opposition to the respondents’ applications did not address interlocutory non-compliance and was expressly limited to the respondents’ claim.
De Saram and Rhodium argue that in these circumstances the discretion of the judge below miscarried because he did not ‘observe proper principles’ and did not give the appellant a fair opportunity, or any opportunity, to put on the evidence or make the submissions in relation to matters relevant to the appellants’ interlocutory defaults.
De Saram and Rhodium submit that the orders under appeal are ‘infected’ by serious procedural unfairness and must be set aside.
Brown and Cunniffe’s Submissions on Ground 5
Brown and Cunniffe argue that de Saram and Rhodium had ample opportunity to prosecute the counterclaim. By the time of the hearing on 1 July 2014 they highlight that de Saram and Rhodium had breached orders in relation to the provision of further and better particulars, the production of documents pursuant to a notice to produce and had failed to take necessary steps in the proceedings after they had been granted an adjournment of an earlier fixed trial date.
Ground 6
Ground 6 of the Notice of Appeal provides:
Alternatively, in respect of the defence and counterclaim, the judge below erred, in not exercising his general discretion and/or his discretion under s 64 of the CP Act to allow the matter to proceed to trial on the basis that the dispute is of a nature that only a full hearing on the merits was appropriate.
De Saram and Rhodium’s Submissions on Ground 6
De Saram and Rhodium submit that the judge below erred in not exercising his general discretion and/or alternatively his discretion under s 64 of the CP Act, to allow the matter to proceed to trial on the basis that the dispute is of such a nature that only a full hearing on the merits is appropriate.
De Saram and Rhodium also submit that s 63 is expressly subject to s 64, and on the proper construction of Part 4.4 of the CP Act they submit that it was necessary for the judge below and incumbent upon this Court to separately consider whether it should exercise the discretion provided in s 64 of the Act. The discretionary power to which de Saram and Rhodium refer is the power to order a civil proceeding to trial, if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because it is not in the interests of justice to do so, or the dispute is of such a nature that only a full hearing on the merits is appropriate.
De Saram and Rhodium concede that the submission outlined in the last preceding paragraph regarding the necessity of considering s 64 was not made to the judge below.
Brown and Cunniffe’s Submissions on Ground 6
Brown and Cunniffe rely upon their arguments put forward in relation to Ground 1 as the basis for it being inappropriate in this matter for the Court to exercise the discretion available under s 64 of the Act.
Ground 7
Ground 7 of the Notice of Appeal provides:
It was unreasonable and unjust to dismiss the defence and strike out the counterclaim, in all the circumstances and upon the facts, alternatively a substantial wrong has occurred.
De Saram and Rhodium’s Submissions on Ground 7
De Saram and Rhodium submit that, in all the circumstances, it was unreasonable and unjust for the judge below to dismiss the defence and strike out the counterclaim. Alternatively the appellants submit that the circumstances and outcome before the judge below disclose that a substantial wrong has occurred and therefore this Court should intervene to rectify that situation.
Brown and Cunniffe’s Submissions on Ground 7
Brown and Cunniffe contend that there is no error warranting appellate intervention which is disclosed in this ground of appeal.
Orders sought
The appellant’s seek the following orders on appeal:
(1) the appeal be allowed;
(2)the orders of the judge below, made on 1 July 2014 be set aside and in lieu thereof there be an order that the application for summary judgment/strikeout be dismissed and the proceeding in its entirety be reinstated;
(3)the appellants have leave to file an amended defence and counterclaim; and
(4)the costs of the application before the judge below and on this appeal be paid by the respondents.
The hearing before the County Court on 1 July 2014
In the application below on 1 July 2014:
(a) Brown and Cunniffe’s counsel described the applications before the Court as applications for summary judgment on the claim and an application to have the counterclaim struck out pursuant to r 24 of the County Court Civil Procedure Rules 2008 (the ‘County Court Rules’);
(b) further reference was made by Brown’s counsel to his application to strike out the counterclaim during the early part of argument on 1 July 2014;
(c) Brown and Cunniffe’s counsel was not called upon by the Court to address issues relating to the counterclaim;
(d) counsel for de Saram and Rhodium argued in a general way that in relation to Brown’s claim there were real questions of a factual and legal nature to be decided as to whether or not the defendants had a defence to the plaintiffs’ claim based upon the alleged $200,000 loan;
(e) on the counterclaim, counsel for de Saram and Rhodium submitted that there was no evidence filed in the application by de Saram and Rhodium in respect of their counterclaim because it was envisaged that evidence would be addressed at trial;
(f) counsel for de Saram and Rhodium submitted that in any event Brown and Cunniffe had not addressed the counterclaim in their materials and that the sole topic addressed by the Brown affidavit was Brown’s claim in relation to the alleged loan and the de Saram and Rhodium defence to that claim. As a result, de Saram and Rhodium’s filed materials did not address the separate question of non-compliance with past orders;
(g) counsel for de Saram and Rhodium protested that the issues before the Court on the Brown application did not extend to dealing with the counterclaim but were confined to the plaintiffs’ claim and the adequacy of the de Saram defence to the Brown claim for repayment of a loan;
(h) de Saram’s counsel submitted that in response to the claim by Brown for judgment on the loan agreement de Saram denied any loan agreement and asserted that the relevant advance was for business and commercial purposes;
(i) de Saram and Rhodium’s counsel reiterated his submission that the application before the court did not relate to the de Saram and Rhodium counterclaim and that he did not intend to address the counterclaim;
(j) the judge below stated his view that Brown’s application was to strike out the de Saram and Rhodium counterclaim on the basis that the counterclaimants had not complied with orders of the court to deliver further and better particulars and respond to a notice to produce;
(k) the Brown applications before the court included both applications for summary judgment on his claim and also in respect of the counterclaim;
(l) counsel for Brown did not make submissions in support of the striking out of the counterclaim, either on the basis of r 24.02 of the County CourtRules or ss 61 or 63(1) of the CP Act, although Brown’s counsel at the outset of his submissions mentioned that Brown and Cunniffe were seeking to strike out the counterclaim pursuant to r 24 of the County Court Rules;
(m) the judge below identified the relevant applications as:
(i) judgment by the plaintiff on its claim pursuant to ss 61 and 63 of the CP Act;
(ii) an application by the plaintiff, by Summons dated 21 May 2014, that the defendants’ counterclaim be struck out; and
(n) the basis of the application to strike out the counterclaim was identified by the judge below as a failure by one of the plaintiffs by counterclaim to comply with orders to provide further and better particulars of defence and counterclaim and to properly answer notices which had been served on the plaintiff to counterclaim.
The judge’s ruling on 1 July 2014
On 1 July 2014 the judge below ruled on the application by Summons dated 21 May 2014. In the reasons which form part of the ruling, his Honour:
(a) identified the plaintiffs’ pleaded claim as verified by the plaintiffs’ affidavit of David Andrew Brown sworn 21 May 2014 deposing to the loan agreement between the plaintiff and the first defendant entered into on or about 1 March 2012 and the Promissory Note dated 8 March 2013, signed by the first defendant;
(b) noted that de Saram’s defence to the plaintiffs’ amended statement of claim admits that the plaintiff advanced the sum of $200,000 to the defendant on 1 March 2012, but also denied that the advance was by way of loan, pleading that the monies from Brown were funds in respect of an as yet to be determined business dealing between Brown and de Saram. The judge also referred to de Saram’s pleading and his affidavit sworn 27 June 2014 admitting the advance by Brown into an account held by de Saram in Singapore, noting that de Saram denied that the advance was in relation to a loan, and swore that the monies were provided in respect of the intended purchase of a property which transaction did not proceed;
(c) noted that de Saram also asserts that the parties then agreed that the monies would be kept as a ‘performance bond’ to cover a number of asserted liabilities and deliverables in the nature of director and management services to be provided by Brown and Cunniffe to de Saram and Rhodium;
(d) noted that de Saram’s affidavit asserts that the Promissory Note which he signed in respect of the advance of a principal sum of $201,000 was signed by de Saram and provided to Brown in Singapore on the basis that it was just a piece of paper that was not intended to be enforceable;
(e) observed that de Saram’s pleading is to the effect that the Promissory Note did not accord with what had been agreed with Brown and alleges that de Saram only signed what purported to be a Promissory Note after the agreement regarding the advance was concluded, and did so in reliance upon false representations by Brown that Brown did not want to be bound by the terms of what purported to be a Promissory Note and would not rely upon or seek to rely upon the terms of that document;
(f) observed that Brown’s pleading asserts that part repayments of the subject loan had been made by the defendant by 29 June 2012, in the total sum of $14,590. Further, de Saram’s pleading admits these payments, but refutes the allegation that they were made in accordance with the loan agreement pleaded by Brown;
(g) observed that in de Saram’s defence dated 5 December 2013 de Saram pleaded a set off at [11] of that pleading;
(h) criticised de Saram’s pleading of a set-off and counterclaim, in particular in relation to de Saram’s claim for rent and recovery of unauthorised credit card transactions. The judge described the de Saram affidavit in that regard as most unsatisfactory because it was couched in terms of generalities without any specifics whatsoever as to those asserted claims;
(i) noted that Brown’s and Cunniffe’s defence to de Saram’s rent claim included that the Berwick Property which was let to Cunniffe was not owned by de Saram but in fact owned by a company called Elixir Vitae Pty Ltd, as deposed to in the affidavit of Joanne Margaret McCall sworn 29 January 2014. On this basis Brown and Cunniffe argued that de Saram had no standing to bring that part of the counterclaim which is dependent upon the defendant being the owner of the premises and therefore entitled to rent;
(j) disclosed his dissatisfaction with the material put forward by de Saram in response to the claim for judgment made by Brown. Referring to [7] of de Saram’s affidavit of 27 June 2014, the judge said:
In argument, I described this paragraph as ‘waffle’. I added that I could have used stronger language. I adhere to that description. The paragraph commences with the words ‘Initially the funds were given to me to use towards the acquisition of a property, but that purchase did not proceed’. That gives the impression that the plaintiff simply gave the money to the defendant for the purchase of the property without more. I do not consider it a proper answer to the plaintiff’s claim.
The paragraph went on to refer to discussions not particularised either as to when, where or what was said and then referred to what was to happen to the funds, and it says: ‘We agreed that it will be kept by me as a performance bond’, and then went on to refer to, ‘It be a surety for deliverables undertaken to be provided’. The deliverables undertaken to be provided are not described in any way whatsoever, nor are the terms of the undertaking asserted or referred to, and then it goes on to refer to liabilities presumably of the defendants by counterclaim.
The paragraph then goes on to refer to the deliverables being: ‘To provide the director and management services to myself’, the director and management services said to be provided pursuant to this security are not defined or described in any way shape or form, nor are the related entities referred to in the paragraph, or the kind of business or investments that were to be conducted. Nowhere is the court informed in any detail whatsoever as to what it was that the defendants are supposed to have provided. I reject the defence that the money was paid as a performance bond as a matter that is, on the evidence before me, highly unlikely.
Having described the deliverables to be something that was the subject of an agreement, the paragraph then goes on to describe the agreement in terms of an undertaking where it refers to undertakings by the plaintiff and second defendant to carry out work obligations to me. The terms of the undertakings, when they were given, where and, to whom are not particularised in any way shape or form.
The cliché ’work obligations’ is used. There is no particularity of what is meant by that, and then the paragraph concludes: ’We were to share in the profits generated from successfully carrying out those obligations’. Again, there is no evidence given of what any arrangements are said to be between the plaintiff and the defendants by counterclaim.
(l) referred to paragraph 8 of de Saram’s affidavit of 27 June 2014, deposing to breaches by Brown and Cunniffe of obligations under the engagement which he pleaded in the counterclaim against them, and pursuant to which de Saram and Rhodium engaged Cunniffe and Brown as contractors. In relation to this evidence his Honour expressed his dissatisfaction with the lack of detail and particularisation of de Saram’s evidence;
(m) addressed the assertion by Dr Orow, counsel for de Saram and Rhodium that there was no real issue before the court as to whether or not the counterclaim should be struck out. His Honour stated:
Dr Orow submits that there is no real issue on the summons before the court as to whether or not the counterclaim should be struck out. The issue is raised squarely on the summons and there is evidence before the court that the defendant, plaintiff by counterclaim, has been required to give further and better particulars of the defence and counterclaim and to make documents available pursuant to a notice to produce. Those orders have not been complied with.
In the affidavit, the defendant does turn to this issue in paragraph 13. He says: ’I've been unwell for some time which has limited my ability to comply with orders and to properly prosecute my defence and counterclaim. I've been diagnosed with non-obstructive coronary artery disease and ectasia (enlargement of the vessels) as a result of which I have suffered mini strokes and blackouts. I humbly ask this Honourable Court to vacate the trial date to allow more time to prepare my defence and counterclaim before this claim is taken to trial’. There is no medical evidence whatsoever produced to support that which is asserted in paragraph 13.
The defendant went on in paragraph 14 to again address the issue. He said: ’I've not been able to comply with the order that I provide further particulars of the defence and counterclaim because of change of solicitor and because I have had a significant problem retrieving data that has been destroyed by the plaintiff and the second defendant by counterclaim’. Again, like most other aspects of the affidavit, there is no indication whatsoever of the data which the defendant has been unable to retrieve and what, if any, is the relevance of that to the matters raised by the pleadings.
(n)ultimately stated that he took the view that he should uphold the plaintiffs’ applications.
His Honour concludes his Ruling in the following way:
The defendant has gone out of his way, it would seem to me, to frustrate the plaintiff in the furtherance of this proceeding. I find the affidavit material lodged by the defendant to be most unsatisfactory. It does not disclose in my view a reasonable prospect of success either in defending the claim or on the counterclaim.
The plaintiff will have leave to enter judgment on the claim with interest. The defence and set-off and counterclaim will be struck out because the defendant has not complied with earlier orders of the court and I will hear the parties on cost.
Decision on Brown’s claim as to final judgment on the loan of $200,000
The judge below upheld Brown’s application for summary judgment on the claim for $200,000, and rejected de Saram’s asserted defences to that claim.
His Honour’s reasons were that Brown had by his affidavit verified a credible claim in relation to the loan he advanced to de Saram in the sum of $200,000, which was supported by the Promissory Note signed by de Saram.
In relation to the asserted defences to the loan claim, his Honour’s view was that de Saram’s affidavit evidence relating to the loan was unparticularised ‘waffle’ providing no meaningful description of the version of the agreement pursuant to which de Saram alleges Brown provided $200,000. In this regard de Saram claimed that the $200,000 provided by Brown was agreed to be retained by de Saram ultimately as a form of security sum for the future performance of Brown and Cunniffe in respect of their obligations under service agreements to de Saram and Rhodium.
His Honour concluded that the affidavit material relied on by de Saram was most unsatisfactory and was not sufficient to disclose a reasonable prospect of success either in defending Brown’s claim against him or on the counterclaim.
I share his Honour’s view that the sworn material relied on by de Saram in defence of Brown’s claim is lacking in detail and particularisation and is vague and unpersuasive.
I add that it is also inherently implausible that Brown would advance $200,000 to de Saram, and have de Saram acknowledge that debt by the Promissory Note which, inter alia, provided for interest penalties for late payment, if the true arrangement was one under which de Saram was to retain the $200,000 to secure the performance of services by Brown and Cunniffe.
Furthermore, I share the views of the judge below as to the quite unsatisfactory and unpersuasive assertion by de Saram that the Promissory Note was provided by him to Brown ‘on the basis that it was just a piece of paper that was not intended to be enforceable’.
I reject the argument by de Saram that on the competing affidavit material it was not open for the judge below to prefer the affidavit evidence relied on by Brown, without further investigation of the facts including by cross-examination.
The affidavit material relied on by de Saram did not establish that there was a contest of sworn material of the type which may persuade a court to either recognise that there was a real prospect of success on the defendants’ case or that it would be just and appropriate to allow the matter to proceed to trial.
Here de Saram’s affidavit, seeking to establish a defence to Brown’s claim, did not condescend to particulars and in substance asserted only a mere denial because the alternative agreement alluded to by de Saram was, as I have explained above, devoid of necessary particulars. De Saram’s defence was not supported by sworn material which clearly and concisely stated that defence and set out the facts relied on to make it out.
Conclusion in relation to judgment on Brown’s claims for $200,000, and associated sums
I can see no error in the decision of the judge below that de Saram failed to establish that he had a real prospect of success in defending Brown’s claim in relation to the loan of $200,000, and associated sums.
Accordingly I dismiss Grounds of Appeal 1 and 2.
Set-off Rental Claim for Berwick Property
I also consider that the set-off for unpaid rent, raised in de Saram’s defence, as pleaded, enjoys no real prospect of success as part of de Saram’s defence.
De Saram’s set-off for rental in relation to the Berwick Property, and sums wrongfully paid for by Brown and Cunniffe by credit card in relation to utilities at those premises, appears to be very weak, if not forlorn.
This is because in relation to the first component, de Saram’s own pleading at [20] of his defence and counterclaim alleges a lease between Cunniffe and de Saram, not a lease between de Saram and Brown. Similarly, the second component of de Saram’s asserted set-off in relation to payment for utilities is not supported by any detail as to what sums were wrongfully paid from credit cards or in respect of what utilities such wrongful transactions were made.
Further, although perhaps explained by inference, because de Saram has deposed that in his affidavit of 27 June 2014 he was not seeking to deal with his counterclaim, there is nevertheless no attempt in de Saram’s affidavit to establish the assertions underpinning his pleaded set-off by way of defence to the Brown claim for $200,000, and associated discounts.
For present purposes, however, I do not give any weight to Cunniffe and Brown’s argument that the Berwick Property was apparently owned by Elixir Vitae Pty Ltd and not de Saram or Rhodium. This apparent state of affairs does not necessarily preclude circumstances which may establish de Saram’s entitlement to claim and receive rental in relation to the Berwick Property.
For the reasons stated above I consider that the judge below was right in concluding that the matters raised by de Saram as set-offs, by way of defence, did not give rise to de Saram having a reasonable prospect of defending Brown’s claims in relation to judgment on the loan.
The decision by the judge below to strike out the counterclaim
His Honour’s orders of 1 July 2014, included an order that the de Saram counterclaim be struck out.
The interlocutory background to Brown’s application for summary judgment on 1 July 2014 and de Saram’s express position in relation to the hearing before his Honour on 1 July 2014, give rise to some doubt as to whether, at the outset of that hearing on 1 July 2014, the parties, in particular, de Saram, were entitled to harbour a reasonable expectation that the application to be addressed that day did not include the application to strike out de Saram’s counterclaim. In this regard I observe that a reading of the transcript of 1 July 2014 reveals that his Honour received little assistance from Counsel in relation to the precise bases for applications made by the Summons of 21 May 2014 nor in relation to which parts of the affidavit material and submissions were relevant to the court’s consideration of the merits of the claim and defence and which parts supported an application pursuant to r 24.02 of the County Court Rules.
However the clear terms of the Summons of 21 May 2014, rendered it clear enough that Brown sought to have the de Saram counterclaim struck out. Furthermore, counsel for Brown identified the bases of that strike out application at the hearing on 1 July 2014. Brown’s counsel opened his clients’ applications as for summary judgment on the claim and also to have the de Saram counterclaim struck out, pursuant to r 24 of the County Court Rules.
Rule 24.02 of the County Court Rules provides for the Court to dismiss or strike out a proceeding and pleadings where a party fails to comply with certain specified interlocutory orders, including to provide particulars and in respect of discovery or inspection.
In response to counsel for Brown and Cunniffe’s opening statement on 1 July 2014, counsel for de Saram argued that the counterclaim was not the subject of a strike out application.
During submissions on the summary judgment applications on 1 July 2014, counsel for Brown highlighted that Brown’s requests for particulars of de Saram’s defence and counterclaim and Brown’s two Notices to Produce (served on de Saram) had not been the subject of any response.
Ultimately, on 1 July 2014, counsel for Brown addressed only Brown’s application for summary judgment on his claim, and did not make submissions in relation to why de Saram’s counterclaim should be struck out.
At the hearing on 1 July 2014, counsel for de Saram submitted, in substance, that questions as to the adequacy of the counterclaim or whether it had a reasonable prospect of success were not expected to be the subject of argument.
Further to the above, the extent to which counsel for de Saram addressed the counterclaim was confined to very short observations as to the form and adequacy of the pleading of the counterclaim.
In support of the reasonableness of this expectation counsel for de Saram submitted that the affidavit relied on by Brown did not seek to address or deny the de Saram counterclaim.
The de Saram affidavit of 27 June 2014 itself highlights that Brown’s affidavit material does not address the counterclaim. De Saram also states that his affidavit is confined to supporting his case on the application for summary judgment and only deals with the Brown case in support of his claim for summary judgment.[18]
[18]De Saram affidavit 27 June 2014, [1]–[3].
In support of his client’s position, de Saram’s counsel submitted that there was no issue raised on the Brown application with respect to the counterclaim.
The judge below, however, considered that there had been adequate notice to de Saram that Brown was seeking to strike out the counterclaim, and seeking to do so on the basis that de Saram had failed to comply with orders for particulars and to respond to a Notice to Produce. His Honour pointed out to counsel for de Saram that the Summons of 21 May 2014 clearly sought to have the counterclaim struck out.
Conclusion as to whether Brown’s application to strike out the counterclaim was properly before the Court on 1 July 2014, and whether de Saram had reasonable notice of that application
The Summons of 21 May 2014 clearly made application to strike out the de Saram and Rhodium counterclaim, although the precise basis for that relief was not specified in the Summons.
Further, it is clear that on 1 July 2014 counsel for Brown and Cunniffe stated that his clients were seeking to strike out the counterclaim on the basis that the counterclaimants were in breach of orders to provide particulars and produce documents, and that Brown and Cunniffe were seeking to do so under r 24 of the County Court Rules.
In my view, neither the failure of the Brown affidavit to address the counterclaim nor the statements in the de Saram affidavit to the effect that his sworn evidence only sought to address Brown’s claims, overcome the fact that the Summons of 21 May 2014 returnable on 1 July 2014, made application to strike out the counterclaim.
Further, although de Saram’s argument as to why he considered the counterclaim would not be dealt with on 1 July 2014 are of some weight and somewhat understandable from de Saram’s point of view, ultimately at the hearing on 1 July 2014 de Saram did not feel sufficiently aggrieved or prejudiced as to seek an adjournment of the Summons.
For the above reason I am satisfied that Brown and Cunniffe’s application to strike out the de Saram and Rhodium counterclaim was properly before the judge below on 1 July 2014 and it was appropriate for his Honour to proceed to deal with that application.
For the above reasons I dismiss ground 3 of the Grounds of Appeal.
Confusion as to the basis upon which it was sought to strike out the counterclaim
Insofar as the judge below addressed and clarified the basis of Brown’s application to strike out de Saram’s counterclaim, his Honour:
(i) identified the basis for the application to strike out the counterclaim as being de Saram’s failure to comply with court orders to provide further and better particulars of its defence and counterclaim, and to properly answer Notice to Produce documents;
(ii) noted that the de Saram affidavit refers to the defendant having health issues and for that reason having had limited ability to comply with orders and to properly prosecute his defence and counterclaim; and
(iii) noted that the de Saram affidavit deposed to the defendant not being able to comply with court orders because he recently changed solicitors and had experienced a significant problem retrieving data needed to prosecute his case.
As earlier addressed, his Honour concluded that de Saram’s affidavit material was most unsatisfactory and did not disclose a reasonable prospect of success either in defending the plaintiffs’ claim or in verifying the counterclaim.
His Honour then pronounced judgment in the following terms:
The defence and set-off and counterclaim will be struck out because the defendant has not complied with earlier orders of the Court … .
The counterclaim
De Saram and Rhodium’s counterclaim is relatively extensive and in a number of respects detailed. It alleges, in essence, that from January 2007 de Saram and Rhodium, the company associated with him, engaged Cunniffe and subsequently Brown to act as contractors for Rhodium in Australia. In this regard the counterclaim pleads specific written services agreements between Rhodium and Brown and a company called Synergize Consulting Pty Ltd, of which both Brown and Cunniffe were directors.
The alleged service agreements were ones pursuant to which Brown and Cunniffe were to provide administrative, marketing, accounting, and business development services, in respect of the certain specialised information security technology and software created by de Saram and licensed to the Rhodium Group.
The counterclaim also alleges the rental agreement mentioned above between de Saram and Cunniffe in relation to the Berwick Property.
The counterclaim alleges breaches of the Berwick Agreement in relation to occupation and rental of that property and also alleges the basis for, and breaches of, arrangements pursuant to which de Saram provided office equipment to Brown and Cunniffe, the use of a number of credit cards provided by de Saram to Brown and/or Cunniffe and breaches of the service agreements pursuant to which it is alleged that Brown and Cunniffe failed to act for and as contractors of, Rhodium.
The breaches by Brown and Cunniffe, which are partly particularised in the counterclaim, include allegations of their unauthorised use of credit cards in respect of a cruise holiday in the approximate sum of $10,000, and to the extent of in excess of $100,000 in relation to alleged unauthorised withdrawals and unauthorised payment of speeding fines and internet service costs as well as other unauthorised transactions.
The de Saram and Rhodium claims against Brown and Cunniffe also include wrongful conversion of property owned by de Saram and Rhodium, damage to the Berwick Property and injurious falsehoods in the nature of representations made by Brown and Cunniffe as to de Saram and Rhodium’s commercial payment practices and the financial resources and insolvency of de Saram and the Rhodium Group, including Rhodium.
Before the judge below, counsel for the counterclaimants correctly observed and submitted that neither the affidavit material filed by the plaintiff nor the affidavit materials filed by the defendants and counterclaimants sought to address the above counterclaims.
I accept the appellants’ submissions before this Court to the effect that there was no argument by any party to the judge below as to the merits of the counterclaims. This was consistent with no party seeking to rely on any affidavit material in relation to the merits of the counterclaims.
Furthermore, as I have already highlighted, the de Saram affidavit of 27 June 2014 pointed out that Brown’s affidavit of 21 May 2014, in support of his summary judgment claim did not deny the allegations in the counterclaim.
De Saram’s affidavit also expressly stated that in it de Saram had confined his evidence to a response to the Brown claims for final judgment on, and related to, the $200,000 alleged loan.
Insofar as the argument before the Court below addressed the briefly opened basis upon which Brown sought to strike out the de Saram counterclaim, namely for non-compliance with earlier court orders pursuant to r 24 of the County Court Rules, I note that Brown’s affidavit material did not in any way address de Saram’s past interlocutory defaults and breaches of earlier interlocutory orders, nor did that material address any prejudice which Brown or Cunniffe would, or may, suffer as a result of de Saram’s past, and continuing interlocutory breaches.
De Saram’s affidavit of 27 June 2014, however, did seek to explain why he had been unable to comply with earlier interlocutory orders, and as to why he required more time to prepare for trial.
At the time of the subject applications the trial of the matter was fixed for 20 day hence.
Accordingly, although there was no material, or submission before the judge below as to Brown’s prejudice as a result of de Saram’s past and subsisting interlocutory defaults, it was self-evident and not necessarily requiring affidavit support that prejudice to de Saram and Rhodium would ensue in the event the counterclaim was struck out. Furthermore, de Saram had in his affidavit of 27 June 2014, to an extent, explained why he had failed to comply with past orders.
In my view, it is also ultimately not clear from his Honour’s reasons whether his Honour concluded that the counterclaim should be struck out because the affidavit material before the Court did not disclose that the counterclaim had a reasonable prospect of success and/or because the parties pursuing the counterclaim had not complied with earlier orders of the Court.
This lack of clarity arises because in neither the affidavit material nor the submissions before his Honour did any party deal with the failures on the part of the counterclaimants to comply with any order of the Court. The closest counsel for Brown and Cunniffe came to mentioning these matters was to complain that the plaintiff had requested further particulars and issued two notices to produce, which had not been responded to by the counterclaimants.
Furthermore, in the closing part of his reasons the judge below concluded that the defendants’ affidavit material was unsatisfactory and did not disclose a reasonable prospect of success, either in defending the claim or on the counterclaim, but then proceeded in the last paragraph of his Ruling to strike out the defence and set-off and the counterclaim because the defendant failed to comply with earlier court orders.
There had been no application by Brown and Cunniffe to strike out the defence and set-off based on r 24.02 of the County Court Rules.
To the extent his Honour based his reasoning upon a lack of merits in relation to the counterclaim, his Honour erred because it was sufficiently clear that none of the parties to the summary judgment application on 1 July 2014 addressed the merits of the de Saram counterclaim, either by way of sworn material or submissions. Underscoring this were the protestation of de Saram’s counsel that his client was not aware that Brown was intending to prosecute an application to strike out the counterclaim on 1 July 2014.
To the extent that his Honour based his reasoning upon the counterclaimants’ breach of earlier orders, I consider that the exercise of his Honour’s discretion to strike out the counterclaim erred.
This is because in addition to the parties not addressing a failure to comply with earlier orders as a basis to strike out the counterclaim, his Honour did not appear to have had any regard to any discretionary considerations, including the balance of prejudice which the respective parties would, or may, suffer as a consequence of an order striking out the counterclaim, or allowing it to stand.
Further, in my view, his Honour gave insufficient reasons for ascribing no weight to de Saram’s uncontradicted and unchallenged sworn evidence that his medical condition had impacted his ability to comply with the Court’s earlier orders. His Honour gave no weight to de Saram’s sworn statements about the impact of his medical condition because de Saram did not produce any medical evidence in support of what he asserted in that regard.
His Honour also gave no weight to de Saram’s sworn statement that a change of legal representation had deprived him of the materials necessary to answer Brown’s request for particulars. His Honour gave no weight to this explanation made by de Saram because he had not specified what ‘data’ the defendant was unable to retrieve and the relevance of that data to de Saram’s pleadings.
In my view the trial judge should have given some weight to what were uncontradicted and unchallenged and prima facie potentially reasonable explanations for the counterclaimants’ non-compliance with interlocutory orders.
Appellate courts are most reluctant to overturn a discretionary decision concerning a matter of practice and procedure. Here, however, I consider that in addition to it being unclear on what basis his Honour disposed of the counterclaim, for the reasons I have explained earlier I do not consider that such an order was justified either on the basis of there being no reasonable prospect of the counterclaims success or because of non-compliance with Court orders.
I also consider that his Honour fell into error in not evaluating the discretionary matter relevant to his decision to strike out or not to do so, including the effect of the contravening conduct on the party complaining and the Court’s management of the case, the reasonableness of any explanation proffered for non-compliance, whether alternative orders of less impact may be more suitable and the likely resultant prejudice of the contravention and the prejudice to de Saram if his counterclaim was struck out.
For the above reasons I allow the appeal in relation to grounds 4 and 5 in relation to the Court below striking out the counterclaim.
Ground 6
Ground 6 of the Notice of Appeal provides:
Alternatively, in respect of the defence and counterclaim, the judge below erred, in not exercising his general discretion and/or his discretion under s 64 of the CP Act to allow the matter to proceed to trial on the basis that the dispute is of a nature that only a full hearing on the merits was appropriate.
In relation to the de Saram defence, I am of the view that the judge below did not err by failing to consider s 64 of the CP Act.
Section 64 of the CP Act provides for the exercise of a discretion to allow a matter to proceed to trial upon the basis that the dispute is of such a nature that only a full hearing on the merits was appropriate even though the Court is at the time of the summary judgment application satisfied that there is no real prospect of the party succeeding against whom the application is made.
Section 64 of the CP Act provides:
Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because—
(a)it is not in the interests of justice to do so; or
(b)the dispute is of such a nature that only a full hearing on the merits is appropriate.
Counsel for de Saram conceded upon appeal that no submissions were made to the judge below regarding the discretion contained in s 64 of the CP Act. Despite this admission, it is now submitted by counsel for de Saram that his Honour should, of his own motion, have considered the discretion contained in s 64 and exercised it in favour of de Saram and Rhodium, as the dispute was of such a nature that only a full hearing on the merits was appropriate.
Section 63 of the CP Act begins with ’subject to section 64, …’. De Saram argued that these opening words of s 63 required a court hearing an application thereunder to also consider whether the discretion in s 64 of the CP Act should be exercised.
In JBS Southern Aust v Westcity Group Holdings,[19] having overturned a decision to give summary judgment under s 63 of the CP Act, Croft J added:
Further, having regard to the amount of money, principal and interest, the subject of the judgment and orders and the length and complexity of the provisions of the SUSA, I am of the opinion that even if the court had doubts as to the prospect of success of a defendant’s claims in circumstances like the present in terms of the s 63 test, the proper course would be to exercise the discretion under s 64 and to require a full trial of the claims.[20]
[19][2011] VSC 476.
[20]Ibid [66].
The underlying claim in JBS Southern concerned a contract of sale for a meat packing business and the application of a taxation indemnity clause contained within that contract. The disputed liability for the amended taxation assessment issued by the ATO exceeded $18 million (including interest). The subject matter of the case was as the trial judge observed, complex and extensive.
In Manderson M & F Consulting (A Firm) v Incitec Pivot Ltd,[21] Redlich JA and Judd AJA stated with regard to the operation of s 64 of the CP Act:
For as Croft J said in JBS Southern Aust v Westcity Group Holdings, ’even if the court had doubts as to the prospect of success of a defendant’s claims … in terms of the s 63 test, the proper course would be to exercise the discretion under s 64 and to require a full trial of the claims’. The same may be said of a plaintiff’s claim in this case.
The complexity of the issue between the parties made this proceeding inappropriate for summary dismissal where the only basis for dismissal relied upon was an analysis of whether the applicant’s statement of claim properly defined the confidential information.[22]
[21](2011) 35 VR 98.
[22]Ibid 108–109.
The focus of the proceeding in Manderson was an equitable claim for breach of confidence with regard to a model for restructuring and financing long-term asset leases. The complexity of the legal disputes in JBS Southern and Manderson, with one involving a large commercial contract for the sale of a business, the other a complicated financial computer model, are by reason of those features distinguishable from the present case.
In this case I can identify no features of the dispute or other factors which would have required the judge below to invoke the discretion provided for in s 64 of the CP Act, nor do I consider that, in the circumstances of this case, if the judge below had considered exercising the discretion provided for in s 64, he would have concluded he should not deal summarily with Brown’s claim and de Saram’s defence to that claim.
Because I do not consider that the circumstances of this matter would in any event be likely to invoke the discretion provided for in s 64 of the CP Act, I need say nothing further in relation to the appellants’ submission that s 64 is engaged and must be considered by a Court whenever an application is made under s 63 of the CP Act.
I see no error arising as a result of his Honour’s failure to consider the discretion in s 64 of the CP Act when his Honour gave summary judgment on Brown’s claim.
Because the result of my decision on the appeal is to reinstate de Saram’s counterclaim, it is not necessary to consider s 64 of the CP Act with regard to the counterclaim.
For the reasons stated above I therefore dismiss Ground 6 of the Grounds of Appeal.
Ground 7
Ground 7 of the Notice of Appeal provides:
In all the circumstances, and upon the facts, it was unreasonable and unjust for his Honour to dismiss the defence and strike out the counterclaim, alternatively a substantial wrong has in fact occurred. His Honour should have exercised his discretion to allow the matter (defence and counterclaim) to proceed to a full hearing on the merits.
I do not consider that, given the above, it is necessary to deal with Ground of Appeal 7, which asserted that the orders made by the judge below were unreasonable and unjust, alternatively resulted in a substantial wrong.
Overall result
I dismiss Grounds of Appeal 1, 2, 3, 6 and 7.
I uphold Grounds of Appeal 4 and 5.
The Court shall hear the parties as to any application for a stay of execution in relation to order 1 of the orders of 1 July 2014, and as to the existing order for costs in order 2 of those orders.
In the result I consider it important to make further orders to expedite the progress of the reinstated counterclaim in the County Court.
Proposed interlocutory orders
The disposition of this appeal calls for interlocutory orders by this Court in an attempt to ensure the prompt progress of this matter to trial. In a large part this will require the counterclaimants to expeditiously address those aspects of their counterclaims which are at present inadequately pleaded and particularised.
Given the interlocutory history of this matter and the previous interlocutory defaults by the counterclaimants I consider it appropriate to impose orders including a self-executing order to attempt to ensure the prompt filing and service of amended counterclaim by de Saram and Rhodium.
I have not disturbed orders 4 and 5 of the orders below, because the position in relation to the security for costs presently lodged with the Registrar of the County Court, should abide that Court’s consideration of any future application by the parties.
The Court shall hear the parties in due course, if necessary as to appropriate orders as to costs, both of the appeal and in relation to order 1 of the orders made by the judge below on 1 July 2014.
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