Dense Medium Separation Powders Pty Ltd v Gondwana Chemicals Pty Ltd
[2011] NSWCA 84
•31 March 2011
Court of Appeal
New South Wales
Case Title: Dense Medium Separation Powders Pty Limited v Gondwana Chemicals Pty Limited Medium Neutral Citation: [2011] NSWCA 84 Hearing Date(s): 31 March 2011 Decision Date: 31 March 2011 Jurisdiction: Before: Campbell JA at [1] [42] [48]; Young JA at [2]; Whealy JA at [47]
Decision: Application for leave to appeal refused with costs.
[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]Catchwords: APPEAL from interlocutory order dealing with procedure- such appeals not encouraged- allegation that judge failed to deal with one aspect of submissions- recourse to that judge required rather than appeal.
PROCEDURE- amending pleadings- amendment of defence in response to amended statement of claim- defendant may amend to plead specifically- defendant cannot raise entirely new case.
PROCEDURE- joinder of additional parties- UCPR r 6.24- whether just and convenient- balancing of all factors required- additional costs, delay, relationship between matters affecting different defendants.
PROCEDURE- security for costs for appeal- foreign appellant- whether special circumstances exist- ordinarily security limited to probable expense in obtaining satisfaction of costs order in foreign court- here case exceptional in view of South African legislation.
Legislation Cited: Civil Procedure Act 2005, ss 56, 57, 58, 59, 60, 61, 62, 63, 64
Protection of Businesses Act 99 of 1978 (South Africa), s 1
Uniform Civil Procedure Rules, r6.24, Pt 19Cases Cited: Barton v Minister for Foreign Affairs (1984) 2 FCR 463
Energy Drilling Inc v Petrol NL [1989] ATPR 50,418 (40-954)
Maxim's Caterers Ltd v Magnona Pty Ltd (No 1) [2010] FCA 450
Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6; 185 CLR 259
Salomon v A Salomon & Co Ltd [1987] AC 22
Squire v Squire [1972] Ch 391
Vandervell Trustees Ltd v White [1971] AC 912Texts Cited: Category: Principal judgment Parties: Dense Medium Separation Powders Pty Ltd (t/as DMS Powders) (Applicant)
Gondwana Chemicals Pty Ltd (in liq) (First Respondent)
David Willetts (Second Respndent)Representation - Counsel: Counsel:
J B Simpkins SC and V McWilliam (Applicant)
No appearance for First Respondent
A Cheshire (Second Respondent)- Solicitors: Solicitors:
Resolve Legal (Applicant)
Colin Biggers & Paisley (Second Respondent)File number(s): CA 2010/59719 Decision Under Appeal - Court / Tribunal: - Before: Einstein J - Date of Decision: 17 February 2011 - Citation: Dense Medium Separation Powders Pty Limited (trading as DMS Powders) v Gondwana Chemicals Pty Limited & Anor [2011] NSWSC 76 - Court File Number(s) 2010/59719 Publication Restriction:
Judgment
CAMPBELL JA: I will ask Young JA to deliver the first judgment.
YOUNG JA: This is a concurrent application for leave to appeal and, if leave to appeal is granted, the hearing of the appeal. The appeal is from a decision of Einstein J sitting in the Commercial List of the Equity Division in a suit which was brought by a South African company against an Australian company now in liquidation, as well as what is termed the "alter ego" of that Australian company in the plaintiff's pleadings.
The claim is a little hard to discern from the allegations in the pleadings but appears to be a rather confused concatenation of breach of contract, breach of fiduciary duties and breach of an equity to observe confidential information.
The proceedings were commenced in 2010 and they moved very slowly through the Commercial List with at least three or four pieces of satellite litigation along the way. The present problems came to a head when the second defendant (the second respondent here) explicitly raised in a defence that, if there had otherwise been a breach of contract or breach of fiduciary duty, it had been waived, in the case of a common law matter, or consented to, in the case of an equitable matter, by the plaintiff and that the person who was responsible for binding the plaintiff to that position was a Mr Blair.
Although this only surfaced in pleadings towards the end of 2010, it had been mooted much earlier in that year. The plaintiff then sought to amend its claim by adding three further parties, Mr Blair and two companies that were alleged to be controlled by him. That application was opposed.
Einstein J then had to deal with three matters:
A. The application to amend the claim to add three additional parties;
B. An application by the second respondent to increase security for costs;
C. An oral application that was made during the course of the hearing to strike out parts of the amended defence.
I should note that the first respondent in liquidation has taken no part in the proceedings. We were told that orders had been made allowing the action to proceed against the company in liquidation, but the liquidator has deliberately taken no part in the proceedings so that today the only defence has been put forward by the second respondent, and that person who is, as I have said, being sued as the "alter ego" of the first defendant/respondent.
I would digress for a minute to say that the words "alter ego of a company" smack more of American jurisprudence than Australian and may run contrary to the doctrine in Salomon's case ( Salomon v A Salomon & Co Ltd [1897] AC 22), but that is for another day.
Einstein J heard the matter on 16 February 2011 and gave judgment the following day. The judgment is a fairly short judgment. Mr J B Simpkins SC, who appeared with Ms McWilliam for the applicant, stringently criticised the judgment as being completely inadequate.
The principal complaints were that it did not refer to a number of submissions that were made, it did not refer to the relevant rules of Court, it stated propositions from one side without balancing those with propositions on the other side and, in particular with respect to the security for costs application, the reasons were simply inadequate. There was discussion before us as to just how adequate reasons must be when one is hearing an interlocutory application.
The brief authorities that were read to us were decided before the Civil Procedure Act 2005 and one must bear in mind that there was quite a sea change with ss 56-60 of that Act. In particular s 57 deals with case management and makes the focus the efficient disposal of the business of the Court and s 58 tells courts that, when dealing with amendments, they have got to keep with the dictates of justice, and more technical matters as to crossing every "t" and dotting every "i" in interlocutory judgments are now of far less significance than they may have been in an earlier era. Even putting that thought aside, the authorities show that it is not a requirement in an interlocutory judgment, a fortiori an interlocutory judgment in a busy Commercial list or Equity duty list, that the Judge give full reasons for each and every step along the way such as can be criticised in the Court of Appeal.
Perhaps it gets close to the situation that one gets in the Wu case in Administrative Law ( Minister for Immigration and Ethnic Affairs v Wu Shan Liang [1996] HCA 6; 185 CLR 259). That is, so long as the parties have a fair idea of what were the reasons for the Judge's decision, that would suffice. However, I am a little disturbed I must confess about the paucity of reasons for the matter of increasing the security for costs, a matter to which I will come later.
So far as the oral application to strike part of the statement of defence is concerned, his Honour just did not deal with that at all. We have said before that when that sort of scenario presents itself, the obligation of the parties is to go back to the primary judge and respectfully suggest that he or she ought to give reasons on that point. It is not to come up to the Court of Appeal and ventilate the matter here.
Mr Simpkins says that he recognises that as a general principle, but as there were other matters being dealt with in the Court of Appeal it was expedient or convenient or both to have the Court of Appeal deal with the matter. With great respect, I do not think that is a sufficient reason for doing it.
It is quite obvious from looking at the pleadings in their present form that before this case does go to trial there will have to be considerable giving of particulars or amending of pleadings to make sure that the trial judge actually sees what the causes of action are.
As to point C, there is authority for the proposition that if a plaintiff amends its statement of claim, but does not amend para x, the defendant has general liberty to amend with respect to those paragraphs of the claim which are amended, but not para x or others which remain the same.
I concede that there is some support for that proposition but I do not consider that it is some general rule of practice and indeed when one looks at cases such as the Squire v Squire [1972] Ch 391, 397, one can see that the rationale put forward is that when some slight amendment is made in a statement of claim it should not permit a defendant to raise an entirely new case.
That is not the situation here. The amended statement of defence to the paragraphs which are not altered, now merely pleads specifically in lieu of a non-admission. However, despite what I have just said, we should not deal with the matter and let it be dealt with, together with other pleading points that will arise, in the Commercial List in due course.
I will pass to what I have called section A, the application to amend to add parties. I have already given the background facts and the criticism of his Honour's reasons.
The points in favour of granting the amendment can be briefly summarised as follows, there is a connection between Mr Blair and his company and the matters which will have to be resolved in the litigation, that is, whether Mr Blair did give consent for what he did believe operated as a waiver. However, what is now sought to be put is that Mr Blair, as a director of the plaintiff at the relevant time, has generally breached his contractual duty as an employee, or his fiduciary duty as a director, in allowing to happen what the second defendant says happened if that be established at the trial.
There is some correspondence on these issues and there is a possibility that there could be conflicting decisions if the issue between the plaintiff and second defendant was tried in Court A and the issue between the plaintiff and its solicitors was tried in Court B.
Furthermore, there could be, as Mr Simpkins explained, forensic problems involved and these include who, if anyone, might have to call Mr Blair and such matters.
However, on the other side, one has to realise that the trial, if it involves all these matters, that is, the present issues between plaintiff and defendant and the additional issues that are said to be raised against the Blair interests, would be very much extended. Mr Simpkins says part of that can be dealt with by having separate hearings, but that is just a possibility and it may or may not decrease the costs so far as the second defendant is concerned.
However, it is more likely than not that if these additional matters are put into the arena, the second defendant will have to be represented in Court while other issues that do not concern him are ventilated.
Whatever the result of the proceedings between the plaintiff and Blair it would not directly affect the second defendant or any actions by the plaintiff against the second defendant.
UCPR Rule 6.24 deals with the joinder of parties. It deals with two situations:
1. Where the addition of the alleged party is necessary.
2. Where it is just and convenient.
This is the second situation and it is not sufficient so far as I read the authorities such as Vandervell Trustees Ltd v White [1971] AC 912, 931, that one can see that it may be just and convenient to effect the joinder. It must be, indeed, as Mr Simpkins himself submits, that one must balance the matters one way or the other. It seems to me that the additional costs that will be incurred by the second defendant as a result of the joinder and the matters that are indirectly related to the case that is involved at the moment would put further delay in getting the case on and concluded. I say this although it is not moving at express speed, part of the reason for having a Commercial List is to deal with cases expeditiously.
Furthermore the proposed amendment involves further complications in foreign law and, possibly, it might be futile.
It seems to me that, when one adds all these things up, the decision that the primary judge came to is one with which this Court should not interfere. Indeed ss 57 and 58 of the Civil Procedure Act reinforce the view that has been taken by this Court before that we must show great restraint in interlocutory appeals especially with the appeals from the Commercial List or the Equity Duty list to make sure that litigation does run smoothly in the interests of justice generally.
B. I then pass to the increase in the security for costs which his Honour ordered. The parties initially consented to there being an order for security for costs in the amount of $50,000. Mr Simpkins said that was on the basis that that sum would more than cover the cost to the second respondent and indeed the first respondent, if they were successful and got an order for costs, of going to the courts in South Africa and having the judgment enforced there.
There was some evidentiary material before the trial Judge to suggest that those costs would be under about $10,000.
There are a series of cases which suggest that ordinarily, and that is probably a word that must not be forgotten, where one has an application for security for costs based on the fact that the applicant is outside New South Wales, the security for costs that ought to be ordered is the additional costs of realising the costs order in a foreign country as opposed to Australia. See for instance Barton v Minister for Foreign Affairs (1984) 2 FCR 463; Energy Drilling Inc v Petroz NL [1989] ATPR 50,418 (40-954) and Maxim's Caterers Ltd v Magnona Pty Ltd (No 1) [2010] FCA 450, a decision of Justice Jagot in the Federal Court on 10 May 2010.
Accepting that this is a case where that ordinary rule applies it is appropriate to apply it to this particular case. The evidence before the trial judge, and before us, is that there are usually three methods of enforcing a judgment for costs in Australian actions overseas in the ordinary cases.
The first is that one can realise a judgment under some reciprocal treaty. That is not available in South Africa as there is no reciprocal treaty. The second is to sue at common law for a debt. That is recognised everywhere as being an inconvenient and convoluted process, and the third, as in the present situation, is by means of South African statutes. That third way is the way in which parties have been directing their comments. It prima facie appears to be a fairly straightforward and inexpensive way of dealing with the matter.
However, there are two problems. The first is that there is no evidence to show that if a judgment is given by a South African Court the money, which can be obtained from the defendant, can be brought from South Africa to Australia.
The second and more significant matter is that, in the South African Protection of Businesses Act 99 of 1978 s 1, there is a restriction in obtaining the fruits of judgment when one has to recover it from a South African where the judgment "is connected with the mining, production, importation, exportation, refinement, possession, use or sale of or ownership of any matter or material of whatever nature whether within, outside, into or from the Republic."
The learned barristers who wrote the legal text put to us have indicated that this can cover virtually every commercial transaction. There was debate before us that that was an overstatement and that, when one looked at everything in a balanced way, the agreed probabilities were that the cost of getting relief in South Africa and getting the money to Australia in respect of a costs order would be something like $10,000, certainly less than what had already been given by way of security for costs.
It was also completely clear that the plaintiff was a substantial South African corporation and there is no doubt at all about its solvency. However, it seems to me, that even if we put aside the judgment of Einstein J as being short in reasons, certainly I would come to much the same decision. The reason for giving the Court power to make orders for security for costs is to make sure, as much as can be done, that an Australian citizen is not prejudiced because he or she is being sued by an overseas individual and there might be barriers put in the way of collecting the successful order for costs.
If one gets to the situation where one has to debate whether or not there are barriers and how significant the barriers are, it seems to me the Court does not decide that, but just says that the plaintiff is entitled, having been sued by a foreign person, to have some certainty that he or she will collect their costs. Accordingly an order for costs of the type made by Einstein J is justified.
I should note that on this point we have not been quoted any case at all as to how the South African Protection of Businesses Act operates so, to my mind, there is uncertainty as to whether the second respondent, and indeed the first respondent, is fully protected for any additional order if security is given.
I have probably given too many reasons in a matter of this nature because my view is that the proper order is simply to refuse leave to appeal with costs.
CAMPBELL JA: I agree with the reasons of Young JA subject to two matters. The first of those matters is that it should not be thought that the Civil Procedure Act 2005 has altered the fundamental obligation of a judge to communicate to litigants the essential reasons for deciding a case or application in the way the judge actually decides it.
However, as well as in the formal reasons for judgment, that can sometimes be done in the course of oral submissions or by reference to submissions made by one party that the judge says that he or she accepts. Here in my view that fundamental obligation has not been breached by the trial judge.
The second matter is that because this was a case in the Commercial List, the issues were formulated using the special form of Commercial List Statement and Commercial List Response. For that reason the formal rules relating to amendment of pleadings that are set out in UCPR Pt 19 did not apply.
The close supervision the judges of the Commercial List give to cases in that List has the effect that the way in which cases develop there is more influenced by the judge's discretion concerning what is appropriate for the individual case than happens in cases where the issues are formulated solely by reference to pleadings. Practice Note SC Equity 3 sets out some ground rules on which the Commercial List operates but otherwise it is a matter of the Judge giving directions from time to time, bearing in mind the provisions of ss 56 to 64 of the Civil Procedure Act 2005 . That is the principal means by which the issues are defined in the Commercial List.
I agree with the orders that Young JA proposed.
WHEALY JA: I agree with Young JA.
CAMPBELL JA: The orders of the Court are those proposed by Young JA.
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