EWC Payments Pty Ltd v Commonwealth Bank of Australia
[2014] VSC 207
•14 MAY 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 00683 of 2010
| EWC PAYMENTS PTY LTD & OTHERS | Appellants |
| v | |
| COMMONWEALTH BANK OF AUSTRALIA | Respondent |
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JUDGE: | ELLIOTT J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 19 MARCH 2014 | |
FURTHER SUBMISSIONS: | 7 APRIL 2014 | |
DATE OF JUDGMENT: | 14 MAY 2014 | |
CASE MAY BE CITED AS: | EWC PAYMENTS PTY LTD v COMMONWEALTH BANK OF AUSTRALIA | |
MEDIUM NEUTRAL CITATION: | [2014] VSC 207 | |
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APPEAL – PRACTICE AND PROCEDURE – Pleadings – Application to amend statement of claim – Court’s discretion – Amendment to plead assignment of causes of action – Whether amendments bad in law or not fairly arguable – Whether granting of leave would be futile – Relevant principles – Whether genuine commercial interest – Whether necessary to plead – Material facts giving rise to genuine commercial interest – Whether leave ought to have been granted – Appeal allowed – Supreme Court (General Civil Procedure) Rules 2005 (Vic), rr 13.02(1)(a), 13.07(1)(a), (b) and (c), 36.01(1)(a), (b) and (c), and 76.06.09(2)(b) and (c); Civil Procedure Act 2010 (Vic), ss 7(1) and 63; Evidence Act 2008 (Vic), ss 55, 56 and 135.
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APPEARANCES: | Counsel | Solicitors |
| For the Appellants | Mr T North SC with Mr P Nugent | Madgwicks |
| For the Respondent | Mr AG Bell SC with Mr CM Archibald | Gilbert & Tobin |
TABLE OF CONTENTS
A.. Introduction................................................................................................................................... 1
B.. Background................................................................................................................................... 1
C.. Relevant principles...................................................................................................................... 6
D.. Issues identified for determination.......................................................................................... 8
E... Key findings.................................................................................................................................. 9
F... Grounds of appeal..................................................................................................................... 11
G.. The present state of the law in Australia as to the assignability of a cause of action.... 12
H.. A genuine commercial interest................................................................................................ 26
I.... What a plaintiff, as an assignee of a cause of action, must plead in a statement of claim 31
I.1.... Publications........................................................................................................................ 31
I.2.... Relevant case law.............................................................................................................. 33
I.3.... General principles and rules of pleading...................................................................... 36
I.4.... The Civil Procedure Act...................................................................................................... 39
J.... Outcome of the appeal.............................................................................................................. 40
K.. Other matters............................................................................................................................... 43
K.1... Further evidence................................................................................................................ 43
K.2... Reliance on the Civil Procedure Act by the Commonwealth Bank.............................. 44
K.3... The form of the proposed pleading................................................................................ 44
L... Conclusion................................................................................................................................... 46
HIS HONOUR:
A. Introduction
The appellants, being the 1st and 3rd plaintiffs, namely EWC Payments Pty Ltd (“EWC Payments”) and Matthew Thomas Starr (“Starr”) (together “the Appellants”), appeal from the judgment of an associate judge delivered on 28 January 2014 (“the Primary Judgment”).[1] On that occasion, the associate judge refused leave to the Appellants to amend the statement of claim.
[1][2014] VSC 4.
The appeal largely concerns whether leave ought to have been granted to the Appellants to plead assignments of certain causes of action of the 2nd (and remaining) plaintiff, Eworld Account Management SA (“Eworld”). Leave was refused as the court, in substance, accepted the submission of the defendant, the Commonwealth Bank of Australia (“the Commonwealth Bank”), that any granting of leave would be futile as the proposed pleading was bad in law and would be bound to fail at trial. The outcome of this appeal centres on the rather straightforward general rule that the law does not permit an assignment of a bare cause of action (also referred to as a bare right to litigate[2]). As is apparent from what is set out below, the extent to which the courts might permit an assignment of a cause of action is far from settled under Australian law.
[2]See, for example, Brownton Ltd v Edward Moore Inbucon Ltd [1985] 3 All ER 499, 509d (Lloyd LJ, with whom Donaldson MR agreed). The definition of “a bare right to litigate” given by Lloyd LJ is somewhat circular. If the exception of a “genuine commercial interest” (see section H below) applies, then it does not fit within his Lordship’s description.
For the reasons that follow, the appeal must be allowed. The Appellants will be granted leave to amend the statement of claim substantially in the form filed with the court.
B. Background
On 11 February 2010, a statement of claim was filed on behalf of the Appellants. At that time, EWC Payments was the 1st plaintiff and Starr was the 2nd plaintiff. Starr was a director and secretary of EWC Payments at the time of the facts pleaded. Starr is now the sole shareholder in EWC Payments.
The allegations then made included: an agreement made on or about 17 November 2006 between EWC Payments and the Commonwealth Bank (“the Agreement”); breaches of the Agreement; a duty owed by the Commonwealth Bank to Starr; a breach of that duty.
Pursuant to leave granted by the court, on 26 November 2010, Eworld was joined as the 2nd plaintiff, and Starr became the 3rd plaintiff. Eworld, at all relevant times, was the holding company of EWC Payments. Amongst other things, the amended statement of claim introduced claims by Eworld against the Commonwealth Bank. Those claims were based on an alleged duty of care owed by the Commonwealth Bank to Eworld. The amended statement of claim also introduced Eworld to the particulars of the Agreement, however it was not pleaded that Eworld was a party to the Agreement.
A further amended statement of claim was filed on 25 November 2011, pursuant to leave granted by the court. The amendments made were substantial with significant portions of the allegations previously made being deleted and a large number of new allegations being made. It is unnecessary to itemise all of these changes. It is sufficient for present purposes to note that the further amended statement of claim maintained allegations against the Commonwealth Bank for breach of a duty of care alleged to be owed to Eworld. Further, the pleading continued to refrain from alleging Eworld was a party to the Agreement.
By adopting the useful summary of the facts as set out in the Primary Judgment,[3] the claims may be summarised as follows:
[3][2014] VSC 4, [8].
(1)EWC Payments carried on business as an intermediary between merchants and customers involved in internet transactions from October 2006 until February 2009.
(2)In November 2006, EWC Payments entered into the Agreement with the Commonwealth Bank by which EWC Payments agreed to channel internet card payment transactions to the Commonwealth Bank for processing. These transactions were between cardholders and various merchants with whom EWC Payments and Eworld had contractual arrangements. (Such merchants were defined as “EWC Merchants”.)
(3)Under the Agreement, EWC Payments would be granted a merchant classification code which would not be changed without EWC Payments’ consent, and complex provisions were made for the processing of transactions between EWC Merchants and cardholders, including provisions for charging back to EWC Payments disputed, invalid, unacceptable and certain other transactions.
(4)The Commonwealth Bank breached the Agreement by failing to provide the necessary internet facilities, failing to implement as quickly as practicable a system whereby EWC Payments could be recognised as a merchant selling organisation or a service provider and, without the knowledge or consent of EWC Payments, in mid-July 2008, changed the merchant code assigned to EWC Payments.
(5)The number of “charge back” requests increased exponentially, the number of transactions cancelled also increased in the same way and, on 14 January 2009, the Commonwealth Bank wrongfully gave notice of termination of its relationship with EWC Payments.
(6)EWC Payments and Eworld allege a claim in tort against the Commonwealth Bank for negligence causing economic loss.
The associate judge set out the substance of the tortious claims made by EWC Payments and Eworld, as follows:[4]
[4][2014] VSC 4, [9].
In paragraph 39 of the [further amended statement of claim] it is pleaded that at all relevant times [the Commonwealth Bank] knew or ought to have known that each of [EWC Payments and Eworld] would or could suffer foreseeable economic loss if [the Commonwealth Bank] failed to take reasonable care in the performance of the services required to be performed by [the Commonwealth Bank] under the [A]greement and in the exercise of any powers or discretions reposed in it by the [A]greement. The particulars to that allegation include the following alleged facts:
(a)The Business Plan given to [the Commonwealth Bank] disclosed that Eworld had credit and payment processing businesses worldwide and that EWC [Payments] was its subsidiary;
(b)[The Commonwealth Bank] knew or ought to have known that the consequence of any failure by [the Commonwealth Bank] to take reasonable care with respect to the changing of EWC [Payments’] merchant code could have adverse economic consequences for EWC [Payments] because of the likely occurrence of the matters pleaded in paragraphs 9, 12(a), 13 and 14 and the particulars thereto;
(c)[The Commonwealth Bank] knew or ought to have known that the consequence of any failure by it to have processing facilities which facilitated the identification of all applicable EWC [M]erchants by their applicable descriptor could have adverse economic consequences for EWC [Payments] because of the likely occurrence of the matters pleaded in paragraphs 10, 12(b), 13 and 14 and the particulars thereto;
(d)[The Commonwealth Bank] knew or ought to have known that Eworld was directly concerned in the operation of EWC [Payments’] business and derived fees and commissions in respect of the EWC [Payments] business. [The Commonwealth Bank]’s knowledge derived from the content of the Business Plan which relevantly referred to the Edelweiss Payments Platform and the many communications between [the Commonwealth Bank] and representatives of Eworld and by reason of its knowledge of payments made by EWC [Payments] to Eworld through EWC [Payments’] accounts as managed by [the Commonwealth Bank];
(e)By reason of these matters, [the Commonwealth Bank] knew or ought to have known that any adverse economic consequences to EWC [Payments] would or could have adverse economic consequences to Eworld; and
(f)[The Commonwealth Bank] knew of the conduct of the Scheme Rules and the fact that a Merchant Fraud Notification would have the effect of permanently barring EWC [Payments] and Eworld from the industry, being an industry from which each derived income.
As was noted by the associate judge, the matters as set out above are relied upon by the Appellants to seek to demonstrate that Eworld is not merely an officious bystander in this piece of litigation.
By the proposed further amended statement of claim, the Appellants seek to make the following amendments:
(1)Introducing allegations that Eworld was also a party to the Agreement: paragraphs 5, 36(a), 38(a) and the particulars thereto. (This would have the consequence of redefining the term “EWC Merchants” throughout the statement of claim to merchants who had contractual relationships with either EWC Payments or Eworld.)[5]
(2)Amending the particulars to the existing allegations concerning the knowledge of the Commonwealth Bank in seeking to establish a duty of care: paragraph 39, particulars F.
(3)Amending the particulars of loss and damage alleged to have been suffered by Eworld as a result of the alleged breach of duty of care said to be owed to it by the Commonwealth Bank: paragraph 43, particulars A and B and the additional paragraphs thereto.
(4)Recording the status of Eworld as a company that has been declared bankrupt: paragraphs 2, 49 to 51.
(5)Alleging an assignment on 7 May 2013, alternatively on 16 May 2013, by the official controller of Eworld[6] to Internet Marketing Solutions Corp[7] (“Internet Marketing”) “of all of Eworld’s right title and interest in all claims and causes of action which it had or may have had against [the Commonwealth Bank] including its right title and interest in this proceeding” (“the First Assignment”) and that the transaction is governed by, and valid under, the law of Switzerland: paragraphs 53 to 55.
(6)Alleging a further assignment on or about 29 May 2013,[8] pursuant to which Internet Marketing assigned to EWC Payments all of Internet Marketing’s “right title and interest in all claims and causes of action which [Internet Marketing] had or may have against [the Commonwealth Bank] including its right title and interest in this proceeding” (“the Second Assignment”): paragraphs 56 and 57.
[5]I was informed by senior counsel for the Appellants that there was no opposition to the amendment to par 5 of the proposed pleading. See also pars 127-132 below.
[6]On or about 15 March 2012 Christopher Guenther was appointed by the Bankruptcy Office of Geneva, being the office with the competent authority for the management and the liquidation of Eworld, to act on behalf of Eworld in the bankruptcy of Eworld. On 7 May 2013, and also on 16 May 2013, he executed documents assigning the relevant causes of action. The latter document was executed “[f]or the avoidance of any doubt, … to clarify” the position. It is unnecessary to consider which of these 2 documents constituted the First Assignment.
[7]It is common ground that Internet Marketing is a company incorporated in Panama. It is not apparent presently as to what relationship, if any, it has with the Appellants or Eworld. See pars 118-121 below.
[8]The pleading refers to 29 May 2013. The Second Assignment bears the date of 31 May 2013.
C. Relevant principles
In an appeal from an associate judge, the Supreme Court (General Civil Procedure) Rules 2005 (Vic) provide that a judge of the court has power to, amongst other things, give any judgment and make any order which ought to have been given or made and make any further or other order as the case may require.[9] The appeal is not a rehearing de novo. Ordinarily, an appellant is required to demonstrate error before the court may exercise appellate power.[10] Further, in cases like this, involving practice and procedure and the exercise of a discretion, there must be “particular caution” in any exercise of appellate power.[11]
[9]Rule 77.06.9(2)(b) and (c).
[10]Oswal v Carson [2013] VSC 355 [11] (Ferguson J), referring to Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194, 203-204 [14] (Gleeson CJ, Gaudron and Hayne JJ).
[11]Ibid, referring to Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc (1981) 148 CLR 170, 177.3 (Gibbs CJ, Aickin, Wilson and Brennan JJ).
Applications to amend pleadings are governed by r 36.01(1) of the Supreme Court Rules. Pursuant to this provision, a court may order that a document be amended or order that any party have leave to amend any document in the proceeding. This may be done for the purpose of: (a) determining the real question in controversy between the parties; (b) correcting any defect or error in any proceeding; or (c) avoiding multiplicity of proceedings.
The associate judge referred to a number of authorities relevant to the exercise of the court’s discretion under r 36.01(1). In so doing, he noted that the Commonwealth Bank did not suggest that the amendments sought should not be allowed for any of the reasons considered in Aon Risk Services Australia Ltd v Australian National University.[12] Thus, the basis upon which the Commonwealth Bank contended that the leave sought should not be granted was that the amendments sought were bad in law and any granting of leave would be futile.
[12](2009) 239 CLR 175.
In this context, the associate judge correctly stated the applicable law. I cannot improve on, and so I repeat, what his Honour stated as follows:[13]
It needs to be remembered, however, that on an application to amend a statement of claim the court will not engage in an examination of the merits of the case foreshadowed by the proposed amendment, save where that amendment introduces a patently hopeless issue for determination or if the amendment has no reasonable prospect of success at trial.[14] This means that when deciding whether a party should be allowed to amend it is not the function of the court to decide arguable and difficult questions of law or mixed law and fact, even though it may appear that the proposed added claim or defence has little chance of success.[15] The determination of the arguable and difficult claims and defences is for the judge at trial, where, as the oft cited dictum of Kirby P (as he then was) in Wickstead v Browne[16] recognises, it is more efficient and just to consider the viability of causes of action when the suggested action can be judged with a full understanding of the facts and the evidence.
(Emphasis added.)
[13][2014] VSC 4, [37].
[14]Civil Procedure Act 2010 (Vic), s 63. Matthews v SPI Electricity Pty Ltd (Ruling No 6) [2012] VSC 70, [34] (J Forrest J); Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158, [35] (Warren CJ, Nettle and Neave JJA).
[15]Hall v National & General Insurance Co Ltd [1967] VR 355, 367.8 (Gowans J).
[16](1992) 30 NSWLR 1, 5G.
His Honour also referred to ACN 074 971 109 v The National Mutual Life Association of Australasia Ltd,[17] in which Croft J observed that pleadings are not an end in themselves but rather a means to ensure that the real issues of controversy are raised for determination in a procedurally fair manner. In essence, where there is no issue of procedural fairness, the authorities establish that, absent extraordinary circumstances, leave to amend would be granted.
[17][2010] VSC 186, [28].
Finally, having referred to these authorities, his Honour also noted that a party opposing an amendment is entitled to establish to a necessarily high degree of certainty, including by “extensive” argument,[18] that the amendments sought are bad in law or not fairly arguable and accordingly leave ought not be granted.[19]
[18]General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, 130.4 (Barwick CJ).
[19][2014] VSC 4, [40].
D. Issues identified for determination
His Honour identified the following as the 3 principal issues relevant to whether or not leave ought to be granted:[20]
(1)Whether it is arguable that the validity of the First Assignment is to be determined by Swiss law, it being accepted by the plaintiffs that the validity of the Second Assignment is governed by Australian law.
(2)If the validity of the First Assignment is governed by Swiss law and is thereby arguably valid, whether it is arguable that EWC Payments has a genuine commercial interest or a substantial interest in the cause of action assigned to it under the Second Assignment so as to make it arguably valid under Australian law.
(3)If both assignments are arguably valid, whether the proposed pleading is sufficient.
[20]At [41].
Having identified these issues, his Honour then stated that the first and second questions were pure questions of law to be determined on the assumption that the facts as pleaded, and proposed to be pleaded, are true.[21]
[21]At [42].
For completeness, I note that a question was identified earlier in the Primary Judgment, namely whether the facts as pleaded concerning the relationship between EWC Payments and Eworld revealed a commercial interest of EWC Payments in Eworld’s claim.[22] One of the issues for determination on appeal is whether the Appellants were confined to the facts as pleaded at this stage of the pleadings.
[22]At [10].
E. Key findings
There are a number of findings made below which go to substantial issues between the parties. I do not propose to refer to them all. It is sufficient for the purposes of determining this appeal that the following matters are referred to:
(1)The validity of the First Assignment is to be determined by Australian law, not Swiss law.[23]
(2)There is no evidence or pleading which is capable of supporting any genuine commercial interest of Internet Marketing in the cause of action purportedly assigned to Internet Marketing by Eworld pursuant to the First Assignment.[24]
(3)If the Commonwealth Bank is correct in its submission that is necessary to establish the existence of a genuine commercial interest of Internet Marketing, as assignee, under the First Assignment and of EWC Payments, as assignee, under the Second Assignment, then it is necessary for EWC Payments to plead the facts from which it can arguably be concluded that EWC Payments has a pre-existing genuine commercial interest in the subject matter ancillary to the First Assignment and the Second Assignment.[25]
(4)The proper law of the Second Assignment is also the law of Australia and the assignability of the cause of action the subject of the Second Assignment is to be determined under Australian law.[26]
(5)The allegations made in relation to the Agreement, and the proposal to add Eworld as a party to the Agreement, so as to allege that EWC Payments entered into the Agreement for its own benefit and also for the benefit of Eworld, are not enough to establish a genuine commercial interest of EWC Payments in the cause of action of Eworld, let alone in the assignor to EWC Payments, Internet Marketing. “They are not sufficient to support the existence of some close commercial relationship between the parties such as would give EWC [Payments] an interest in Eworld’s claim, as opposed to an interest in its own claim.”[27]
(6)“Assuming for present purposes that the relevant question is whether EWC [Payments] has an interest in Eworld’s claim, as opposed to [Internet Marketing]’s claim, the pleaded facts only show that EWC [Payments] had an interest in its own proceeding – its own cause of action – and that the interests of Eworld and EWC [Payments] were parallel interests. Had it been the case that Eworld survived and EWC [Payments] went into liquidation and its liquidator assigned its cause of action to Eworld, the position might have been different. A holding company may have a genuine commercial interest in the enforcement of a [subsidiary’s] claim, either because of the ability to flow profits up to the holding company, or for some other reason. The obverse does not disclose any genuine commercial interest. Absent some special facts not presently revealed, a subsidiary has no interest in the successful prosecution of its holding company’s cause of action” (emphasis added).[28]
(7)The relationship between the Commonwealth Bank and EWC Payments began in 2006 and extended to at least January 2009. The allegation that Eworld was the holding company of EWC Payments “at all material times” must relate to that period. The evidence tendered by the Commonwealth Bank, without objection, shows that Starr was the sole shareholder in EWC Payments from 31 July 2009. Accordingly, at the time of the relevant dealings with the Commonwealth Bank, the relationship of holding company and subsidiary existed. However, as at the time of the First Assignment and the Second Assignment, there was no apparent relationship between Eworld and EWC Payments.[29]
(8)The “interlinking” of Eworld and EWC Payments does not disclose a relevant genuine commercial interest of EWC Payments in Eworld’s claim. “Perhaps there are facts that might be adduced that [Starr], as the present owner of the shares in EWC [Payments], had some interest in the fruits of any successful claim as a person interested in Eworld. But there are no facts as to that disclosed. If they were, it may be doubted whether they would be sufficient …” (emphasis added).[30]
(9)Having decided there is no genuine commercial interest of EWC Payments in Eworld’s cause of action against the Commonwealth Bank, it is not necessary to decide whether it was necessary for EWC Payments to have a genuine commercial interest in Internet Marketing’s assigned cause of action pursuant to the First Assignment.[31]
[23][2014] VSC 4, [56].
[24]At [57].
[25]At [73]-[75]. It was suggested by the Appellants that his Honour mistakenly referred to Internet Marketing rather than Eworld in par 74 of the Primary Judgment. It is unnecessary to express an opinion one way or the other for the purposes of determining the outcome of this appeal.
[26]At [63].
[27][2014] VSC 41, [76].
[28]At [77].
[29][2014] VSC 4, [78].
[30]At [80].
[31]At [81].
F. Grounds of appeal
The grounds of appeal included the following:[32]
(1)The court erred in finding that, in order for a party to plead a cause of action, based on an assignment of a cause of action in tort, it was necessary for that party to lead evidence of a “genuine commercial interest” in the assigned cause of action (original emphasis).
(2)The court erred in law in finding that it was necessary for a party, seeking to rely upon an assignment of a cause of action in tort, to plead in its statement of claim the material facts giving rise to the pre-existing commercial interest in the subject matter of that cause of action, rather than in its reply, if the matter should be raised in the other party’s defence.
(3)In circumstances where the court accepted as true, for the purpose of considering the proposed amendments, [certain] allegations[33] [made by the Appellants] … the court erred in law in finding that EWC Payments did not plead the material facts which demonstrated it had a genuine commercial interest in Eworld’s cause of action against the Commonwealth Bank.
(4)The court erred in law in finding that a subsidiary cannot have a genuine commercial interest in the enforcement of a holding company’s tortious claim.
[32]Grounds 2 to 5 of the notice of appeal respectively.
[33]The allegation in par 4(a) of the notice of appeal, namely that EWC Payments, was “in a practical sense, the alter ego of” Starr is not something that was pleaded or the subject of acceptance by the court below.
For the reasons set out below, it is not necessary to discuss the grounds of appeal beyond those identified in the previous paragraph.
G. The present state of the law in Australia as to the assignability of a cause of action
Paraphrasing what is stated above, if the Commonwealth Bank were able to show that granting leave would be futile in any event, leave to amend should be refused. In addition to the pleading, some evidence, though not exhaustive, was led by the parties as to the nature of any interest EWC Payments might hold in Eworld’s causes of action. Accordingly, it is necessary to discuss the law concerning assignability of causes of action before any consideration of:
(1) What needs to be pleaded by a plaintiff relying upon the assignment of a cause of action.
(2)What the Appellants may properly plead based on the circumstances of this case.
As the discussion below demonstrates, the authorities provide some guidance in relation to whether or not a cause of action is assignable, and, having been assigned, may be prosecuted and enforced by an assignee against a defendant. Examples may be given where it is plain that a bare cause of action would not be assignable, or where a cause of action may lawfully be assigned. However, on the present state of the authorities, many examples may be postulated where considerable uncertainty might arise as to whether or not a cause of action could be assignable at law or in equity.
The starting point when considering the Australian authorities is Poulton v The Commonwealth.[34] In that case, in obiter dicta, consideration was given to the assignability of certain causes of action. In the context of considering the ability of a plaintiff to waive a cause of action in conversion, it was stated that the ability to waive the cause of action could only be exercised by the persons in whom the cause of action lay. Two reasons were given for this, namely, as a matter of fact there was no assignment by those persons to the plaintiff and, in any event, “because, according to well-established principle, the right [of action for the tort] was incapable of assignment either at law or in equity”.[35]
[34](1953) 89 CLR 540.
[35]At 602.9 (Williams, Webb and Kitto JJ). See also Poulton v The Commonwealth (1953) 89 CLR 540, 571.3 (Fullagar J at first instance).
Not only was the question of assignability apparently not argued before the High Court in Poulton v The Commonwealth but, as was pointed out by Heydon J in Equuscorp Pty Ltd v Haxton,[36] no argument was presented to the High Court that there was any “genuine commercial interest” of the plaintiff ancillary to the purported assignment.
[36](2012) 246 CLR 498, 558 [156].
In Trendtex Trading Corporation v Credit Suisse,[37] the House of Lords considered the validity of an assignment of a cause of action of a customer of Credit Suisse. Credit Suisse had funded a transaction previously entered into by the customer and it also guaranteed the customer’s costs in a case it was prosecuting against the Central Bank of Nigeria. Moneys remained outstanding with respect to both of these transactions, which transactions had occurred prior to any assignment.
[37][1982] AC 679.
The case involved 3 assignments, the 1st being from the customer to Credit Suisse of the customer’s claims arising out of certain contracts “until the claims of the assignee [Credit Suisse] are covered”. The 2nd assignment from the customer to Credit Suisse, entered into a few months later, had as its subject matter all of the customer’s claims arising from the contracts and from a specified letter of credit issued by the Central Bank of Nigeria “to the full extent of indebtedness to the transferee [Credit Suisse]”. In relation to these 2 assignments, Lord Wilberforce stated:[38]
I do not think that, whatever is the governing law of these documents, there can be much doubt that they were normal assignments by way of security from a debtor to its creditor bank.
(Emphasis added.)
In the other principal judgment of the court,[39] Lord Roskill doubted whether the transactions were “out-and-out” assignments, but rather contained language of security. In any event, there was no issue as to the validity of these 2 transactions.
[38][1982] AC 679, 693B.
[39]Lords Edmund-Davies, Fraser of Tullybelton and Keith of Kinkel agreed with the judgments of both Lord Wilberforce and Lord Roskill.
The 3rd assignment, which was the latest in time, was described as a fairly elaborate agreement.[40] Suffice to say for present purposes, it involved Credit Suisse assigning its rights in the customer’s cause of action to a third party. The third party was never identified. This assignment was held to be void as it involved, effectively, trafficking in litigation.[41]
[40]At 693C.
[41]At 694C-D, F-H, 695D, 696A-697A, 703D-E, G, 704B, 705D-E.
In relation to the assignability of the cause of action the subject of the 3rd assignment, Lord Wilberforce observed that if no party had been involved in that assignment other than the customer and Credit Suisse, it would have been difficult to contend that that agreement, even if it involved an assignment of the customer’s residual interest in the cause of action, offended against the law of maintenance or champerty. This was said to be because Credit Suisse had “a genuine and substantial interest in the success” of the litigation in question.[42]
[42][1982] AC 679, 694E.
Having made this observation, Lord Wilberforce noted that Credit Suisse had guaranteed the previous costs of the customer.[43] Lord Wilberforce also stated that the “vice, if any, of the agreement lies in the introduction of the third party”.[44]
[43]At 694E. This was the only matter there noted by his Lordship, which may suggest that this factor alone was sufficient in the circumstances of that case to establish the required interest.
[44]At 694F.
Lord Roskill came to the same conclusion as to the invalidity of the 3rd assignment. In rejecting what Lord Denning had said in the Court of Appeal, namely that “The old saying that you cannot assign a ‘bare right to litigate’ is gone”,[45] Lord Roskill stated that the “saying” remained a fundamental principle of English law.[46] His Lordship continued:[47]
[I]t is today true to say that in English law an assignee who can show that he has a genuine commercial interest in the enforcement of the claim of another and to that extent takes an assignment of that claim to himself is entitled to enforce that assignment unless by the terms of that assignment he falls foul of our law of champerty, which, as has often been said, is a branch of our law of maintenance. …
If the assignment is of a property right or interest and the cause of action is ancillary to that right or interest, or if the assignee had a genuine commercial interest in taking the assignment and in enforcing it for his own benefit, I see no reason why the assignment should be struck down as an assignment of a bare cause of action or as savouring of maintenance.
(Emphasis added.)
[45]Trendtex Trading Corporation v Credit Suisse [1980] QB 629, 657G-H.
[46][1982] AC 679, 703C.
[47]At 703D, F-G. For some elaboration as to what was meant by the first paragraph quoted, see Brownton Ltd v Edward Moore Inbucon Ltd [1985] 3 All ER 499, 505b-c (Sir John Megaw).
The proceeding was stayed by the House of Lords. This was ordered based on an exclusive jurisdiction clause, rather than any finding regarding maintenance or champerty.[48]
[48]At 693E-F, 695E-696A (Lord Wilberforce), 696 D-H (Lord Fraser), 697D, 705A-B (Lord Roskill). See also Campbells Cash & Carry Ltd v Fostif Pty Ltd (2006) 229 CLR 386, 431-432 [81] (Gummow, Hayne and Crennan JJ).
As was noted in 1994, in Monk v Australia and New Zealand Banking Group Ltd,[49] the exception to the general rule, as stated in Trendtex Trading Corporation v Credit Suisse, was subsequently applied in Australia.[50] However, the applicability in Australia of this decision in the House of Lords was far from clear. As late as 2007, Heerey J in Salfinger v Niugini Mining (Australia) Pty Ltd (No 3),[51] having reviewed a number of relevant authorities, concluded that the statement of principle in Poulton v The Commonwealth retained its authority without the suggested exception to the general rule.[52] In so doing, his Honour referred with approval[53] to an observation by Meagher, Gummow and Lehane in Equity Doctrines and Remedies.[54] By reference to the first instance decisions purporting to favour the adoption of the principle stated in Trendtex Trading Corporation v Credit Suisse, the following was stated by the learned authors:
The difficulty is that the proposition urged is inconsistent with Poulton v The Commonwealth … and it is not easy for courts below the High Court legitimately to depart from the considered dicta of three High Court Justices.
[49](1994) 34 NSWLR 148, 151G-152A (Cohen J).
[50]The cases referred to by Cohen J include Re Daley; ex parte National Australia Bank Ltd (1992) 37 FCR 390 (Heerey J); Re Timothy’s Pty Ltd and the Companies Act [1981] 2 NSWLR 706 (Needham J). As to the position in 2004, see Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2004) 220 ALR 267, 281 [46] for cases applying the Trendtex exception and 281-282 [48] for cases declining to apply it.
[51][2007] FCA 1532.
[52]At [119]. For completeness, I note that in Re Daley; ex parte National Australia Bank Ltd (1992) 37 FCR 390, 394.4, Heerey J referred with apparent approval to Trendtex Trading Corporation v Credit Suisse [1982] AC 679 and the relevance of a genuine commercial interest to the question of assignability. However, as that case was concerned with the assignment of a debt, the finding of a genuine commercial interest (394.7) did not form the basis of his Honour’s decision that there was a valid assignment; rather the decision was based on the assignability of the debt as property: 394.8.
[53]Ibid.
[54]4th ed, 2002, 281.
Before the decision of Salfinger v Niugini Mining (Australia) Pty Ltd (No 3),[55] issues relating to champerty and maintenance were considered by the Court of Appeal of New South Wales in Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd.[56] The case concerned funding arrangements between a litigation funder and plaintiffs in a representative proceeding. In substance, it was held that public policy did not provide an independent basis to stay the proceeding, notwithstanding the funding arrangements in place were champertous in nature. By reference to a series of cases, the detail of which is not necessary to go into, Mason P stated that “public policy”[57] had “changed and become more narrowly focused in this area. The law now looks favourably on funding arrangements that offer access to justice so long as any tendency to abuse of process is controlled”(citations omitted, emphasis added).[58]
[55][2007] FCA 1532.
[56](2005) 63 NSWLR 203 (Mason P, with whom Sheller and Hodgson JJA agreed).
[57]In the sense of a policy of law: see Cattanach v Melchior (2003) 215 CLR 1, 33-35 [73]-[75] (McHugh and Gummow JJ).
[58](2005) 63 NSWLR 203, 227 [105].
In discussing the issue of litigation funding, Mason P made the general observation that “the perceived evil of maintenance at common law lay in the very act of officious intermeddling with litigation, rather than in supporting an unfounded claim or defence”.[59] The President also observed that “trafficking in litigation”, although condemned in the case law at times, is elusive as to the proscribed activity.[60]
[59]At 224 [90], referring to J G Fleming, The Law of Torts (9th ed, 1998), 689.
[60]At 227 [107]. This observation was referred to with approval in Campbells Cash & Carry Ltd v Fostif Pty Ltd: (2006) 229 CLR 386, 483 [257] (Callinan and Heydon JJ, dissenting): see par 43 below.
On appeal,[61] both joint judgments of the High Court referred to the decision of Trendtex Trading Corporation v Credit Suisse.[62]Amongst a number of observations concerning that case, Gummow, Hayne and Crennan JJ[63] noted there was no examination by the House of Lords of the content of the rule of public policy said to be engaged in determining the 3rd assignment was void “beyond the reference made by Lord Wilberforce to trafficking in litigation”.[64] Their Honours continued:
In the courts below, in Trendtex[65], the accepted premise for argument appears to have been that there remained a public policy against at least some forms of maintenance and champerty. The limits of the application of that public policy were identified in the Court of Appeal as to be found in the existence and sufficiency of notions of common interest between the maintainer and the maintained.[66]
Later, in the joint judgment, their Honours observed that a general rule against maintenance “has long … been abandoned and the qualification of that rule (by reference to criteria of common interest) proved unsuccessful”.[67]
[61](2006) 229 CLR 386.
[62][1982] AC 679.
[63](2006) 229 CLR 386, 412, with whom Gleeson CJ (412 [21]) and Kirby J (443-444 [125]) relevantly agreed.
[64]At 431 [80], referring to [1982] AC 679, 694G.
[65][1980] 3 All ER 721 (Robert Goff J); [1980] QB 629 (CA).
[66][1980] QB 629, 653 (Lord Denning MR), 669 (Oliver LJ, with whose reasons Bridge LJ agreed).
[67](2006) 229 CLR 386, 434 [89]. Cf Magic Menu Systems Pty Ltd v AFA Facilitation Pty Ltd (1997) 72 FCR 261, 267E-G (Lockhart, Cooper and Kiefel JJ), although not a case concerned with the assignability of causes of action, spoke in terms of the courts today being “likely to take an even wider view of what might be acceptable” in relation to agreements previously viewed as being champertous or otherwise unlawful for maintenance.
Further, without descending to the detail of what was said by the Court of Appeal in Trendtex Trading Corporation v Credit Suisse,[68] it is noteworthy that, in the passage referred to by their Honours, Oliver LJ stated that the law “must again take account of the changes in public policy which have occurred during the past half-century”.[69]
[68][1980] QB 629.
[69]At 669F. See also Brownton Ltd v Edward Moore Inbucon Ltd [1985] 3 All ER 499, 507c, where Lloyd LJ referred to authorities commencing in 1881 “push[ing] back” the boundaries of unlawful maintenance.
Their Honours also made some observations concerning the public policy the subject of consideration in the context of litigation funding and issues of maintenance. By reference to the historical setting of the law of maintenance, their Honours stated:[70]
No certain rule would emerge because neither the content nor the basis of the asserted public policy is identified more closely than by the application of condemnatory expressions like “trafficking” or “intermeddling”, with or without the addition of epithets like “wanton and officious”.
[70](2006) 229 CLR 386, 433 [86].
Their Honours also made a number of other observations concerning the general rule against maintenance and the public policy underlying such a rule. These observations were made in the context of funding arrangements for litigation. However, it is clear that their Honours were guarded against the formulation of “an overarching rule of public policy”[71] in determining whether or not arrangements between persons should be interfered with.[72]
[71]At 434 [91].
[72]At 433-436 [87]-[97].
In agreeing with what was said by Gummow, Hayne and Crennan JJ, together with what was said by Mason P in the Court of Appeal,[73] Kirby J referred to:[74]
… the gradual realisation that some of the earlier judicial strictures against maintenance and champerty were in need of reconsideration in the light of modern conditions, analogous legal developments, practices in particular jurisdictions and the real impediments that commonly exist to affordable access to justice.
[73]Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd (2005) 63 NSWLR 203, 224-229 [88]-[112].
[74](2006) 229 CLR 386, 444 [125].
Callinan and Heydon JJ delivered a joint dissenting judgment. In so doing, their Honours referred to “trafficking in litigation”.[75] Their Honours referred to the observation of Mason P (see paragraph 37 above), and noted that the content of the proscription can be elusive.[76] After referring to a decision of the English Court of Appeal on the elusiveness of the expression,[77] their Honours noted that the authorities did point to some clear criteria. That said, in the context of assignment of causes of action, their Honours also observed the phrase “’genuine commercial interest’ calls for further definition”.[78]
[75](2006) 229 CLR 386, 483-484 [257]-[259].
[76]At 483 [257].
[77]Stocznia Gdanska SA v Latreefers Inc (No 2) [2001] 2 BCLC 116, 152 [61].
[78](2006) 229 CLR 386, 484 [258].
In the year following this High Court decision, in Deloitte Touche Tohmatsu v JP Morgan Portfolio Services Ltd,[79] the Full Court of the Federal Court considered whether it was an abuse of process where litigation was being conducted by 1 party for the benefit of another entity (namely, a holding company) who was not a party to the proceeding.
[79](2007) 158 FCR 417 (Tamberlin and Jacobson JJ, Rares J dissenting).
The case was not directly concerned with whether or not there was a valid assignment,[80] but rather with an agreement pursuant to which the holding company was able to control the conduct of the litigation and was also entitled to the benefits that flowed from any success. In these circumstances, the case must be viewed with some caution in this present appeal when considering specifically the validity of an assignment of a cause of action. That said, in discussing whether or not the case before the Full Court was an abuse of process, the majority made some instructive observations concerning the public policy involved.[81]
[80]At 427 [72].
[81]On 31 August 2007, the High Court of Australia refused special leave to appeal from the decision of the Full Court of the Federal Court on the basis that there were “insufficient prospects of success on the issues of principle regarding abuse of process”: [2007] HCA Trans 481.
Tamberlin and Jacobson JJ said it fell from the judgment of the majority in the High Court in Campbells Cash & Carry Pty Ltd v Fostif Pty Ltd[82] that the “question of whether there is an abuse of process is not solved by identifying a general rule of public policy that may be invoked by a defendant; each case must be determined on its own facts”.[83] Having observed that equity would not permit the assignment of a bare cause of action on the ground of public policy because it savoured of maintenance,[84] their Honours stated that the entire thrust of the majority judgment of the High Court was to “reject the notion that a plaintiff can invoke maintenance and champerty as a general ground for the identification of an abuse of process”.[85]
[82](2006) 229 CLR 386 (Gummow, Hayne and Crennan JJ, with whom Gleeson CJ agreed).
[83](2007) 158 FCR 417, 424 [39].
[84]At 424 [41], referring to Glegg v Bromley [1912] 3 KB 474, 489-490; Trendtex Trading Corporation v Credit Suisse [1982] AC 679, 702.
[85]At 424 [42].
Their Honours also referred to the dissenting judgment of Callinan and Heydon JJ, including the passage referred to in part in paragraph 43 above.[86] Having referred to this passage, their Honours continued:[87]
However, it would be wrong to confine attention to the paragraph we have cited above. This is because[88] their Honours went on to accept that whilst “trafficking” in litigation exists as a residual category of abuse of process, the question remains as to the circumstances in which trafficking will justify the grant of a stay.
It is implicit in this that their Honours do not limit the enquiry to that of asking whether the agreement involves maintenance or champerty. This is also apparent from other passages of their Honours’ judgment.
On their Honours’ approach, the factors relevant to maintenance and champerty will also be relevant to whether there is an abuse of process.[89]
[86]At 424 [46].
[87]At 425 [47]-[49].
[88](2006) 229 CLR 386, 484 [259].
[89]See at 486 [263]. In that paragraph, Callinan and Heydon JJ had suggested there had been excessive concentration in the arguments before the court on “how far the public policy relating to maintenance and champerty survives”. Their Honours continued by stating that it was “preferable to consider the matter from the point of view of abuse of process generally. It does not follow that factors relevant to maintenance and champerty are not also relevant to abuse of process”.
The matters which informed Tamberlin and Jacobson JJ as to the absence of an abuse of process included that there was nothing to suggest that the agreement in question might give rise to a fear of corruption of the court processes;[90] and that it was also not a case which had been manufactured by a party for a profit motive.[91]
[90](2007) 158 FCR 417, 426 [63].
[91]At 426 [64].
There are also 2 relatively recent decisions of Australian intermediate appellate courts that are relevant to the present discussion.
WorkCover Queensland v Amaca Pty Ltd[92] concerned an assignment of a cause of action by the executor of an estate of a worker. The worker, prior to his death, had instituted a proceeding claiming damages based on claims in negligence for personal injuries against a manufacturer of asbestos products. The assignee was WorkCover Queensland, to whom it was assigned all of the estate’s and the worker’s causes of action capable of being assigned against any person other than the worker’s employer “whose negligence, other breach of duty, conduct, act or omission actionable at law, in equity or by statute whatsoever, caused or contributed to the worker suffering his or her injury”.[93]
[92][2013] 2 Qd R 276 (McMurdo P, Gotterson JA and Martin J). See also pars 74 and 88 below.
[93]At 291 [23].
Before the assignment, WorkCover Queensland had paid compensation to the worker in the sum of $550,351.50. Accordingly, by taking the assignment, WorkCover Queensland created the prospect of recovering moneys that had been paid to the worker prior to his death. As a result of this, McMurdo P considered there was a close relationship between the assignor and the assignee. Her Honour observed that:[94]
WorkCover, as an insurer which fully indemnified its insured, … clearly had a close relationship with him and, after his death, his estate. True it is that the assigned cause of action was for damages for personal injury. But it is not offensive to the interests of justice or intermeddling for some collateral reason for WorkCover to seek to recover the amount it has expended, together with costs and outlays, through pursuing the assigned cause of action against Amaca Pty Ltd. Indeed, this is entirely consistent with the interests of justice.
[94]At 290 [16].
Having observed that the interest of WorkCover Queensland was a “legitimate or genuine commercial interest”, her Honour expressly acknowledged the existence of the common law rule that “ordinarily causes of action in tort based on a personal wrong … are not assignable”.[95] Her Honour stated there were “sound policy considerations” for the general rule. Having made this observation, her Honour continued:[96]
But as this case demonstrates, even causes of action for personal injury may be assigned in unusual cases like the present where the assignee has a pre-existing legitimate commercial interest in the enforcement of the claim so that the assignee is not acting against the interests of justice as an officious intermeddler guilty of maintenance or champerty.
(Emphasis added.)
[95][2013] 2 Qd R 276, 290 [17].
[96]Ibid.
The other judgment of the court was delivered by Gotterson JA.[97] His Honour considered a number of authorities, including the then recently decided High Court decision of Equuscorp v Haxton.[98] Having engaged in this exercise, his Honour concluded:[99]
Drawing upon the authorities to which I have referred, I understand the law now to be that a right to claim damages in negligence may be validly assigned where the assignee has a genuine commercial interest in the assignment.
(Emphasis added.)
He then went on to consider the meaning of “genuine commercial interest”, to which I will return below.[100]
[97]With whom Martin J agreed.
[98](2012) 246 CLR 498.
[99][2013] 2 Qd R 276, 299 [64].
[100]At par 74 below.
The other intermediate appellate decision is Dover v Lewkovitz.[101] In that case it was held at first instance that the assignee had a genuine commercial interest in the claim for damages and that the assignment was valid, notwithstanding its subject matter included a bare right to damages. The appeal was confined to questions of law.
[101][2013] NSWCA 452 (McColl, Macfarlan and Barrett JJA).
Having considered a number of authorities, including the High Court in Equuscorp Pty Ltd v Haxton,[102] Macfarlan JA, who wrote the judgment of the court, stated as follows:[103]
Neither authority nor principle suggests that a pre-existing genuine commercial interest can only exist for the purpose of the Trendtex principle if the assignee had a relevant pre-existing enforceable right against the assignor. The prima facie prohibition against the assignment of bare rights of action is founded upon a public policy of precluding trafficking in litigation. Trendtex recognised that that policy would not be infringed if the assignee had a pre-existing genuine commercial interest in the right of action sought to be assigned. In my view this is so whether or not that interest is constituted, or accompanied, by a pre-existing enforceable right of the assignee against the assignor. In neither type of case is the assignee acting as "an officious intermeddler" (see WorkCover Queensland v AMACA at [17]).
(Emphasis added.)
[102](2012) 246 CLR 498.
[103][2013] NSWCA 452, [23].
Macfarlan JA also indicated[104] that what was said by the Court of Appeal in Project 28 Pty Ltd v Tim Barr Pty Ltd[105] did not indicate an assignee needed a pre-existing enforceable right to have a genuine commercial interest.
[104]At [25].
[105][2005] NSWCA 240, [42]. See par 72 below.
I now turn to the High Court decision in Equuscorp Pty Ltd v Haxton.[106] Although that case concerned the assignability of restitutionary rights, there were some observations made which are relevant to the issues at hand. Briefly stated, the case concerned investors in a rural project. The investors had borrowed moneys from a lender to invest in the project. That lender had, in turn, borrowed funds from an arms length financier. The financier took a charge over the assets of the lender to secure the moneys advanced. The project failed. Subsequently, the lender assigned the loan agreements with the investors, together with the debts owing by the investors, to the financier. The financier sought to recover under loan agreements, which were held to be illegal and unenforceable. In the alternative, the financier sought to recover by making restitutionary claims for moneys had and received. An issue in the case was whether such restitutionary claims were assignable.
[106](2012) 246 CLR 498.
In the judgment of French CJ, Crennan and Kiefel JJ, reference was made[107] to the judgment of Dodds-Streeton JA in the Victorian Court of Appeal.[108] Their Honours noted that her Honour had conducted a careful review of the authorities and had correctly concluded[109] that “they offered no clear guidance on the question” of whether rights to claim for restitutionary relief were assignable.
[107](2012) 246 CLR 498, 523 [46].
[108]Haxton v Equuscorp Pty Ltd (2010) 28 VR 499 (Ashley and Neave JJA agreed with Dodds-Streeton JA).
[109]At 556 [310].
Without referring to the decision of Poulton v The Commonwealth,[110] their Honours stated that the criteria for assignability of causes of action had been widened by the decision in Trendtex Trading Corporation v Credit Suisse.[111] Their Honours quoted with approval a passage from Lord Roskill’s judgment (set out in paragraph 33 above). Their Honours then[112] referred to a passage from Smith, The Law of Assignment as follows:[113]
As with tortious causes of action, restitutionary claims can arise independently of any prior relationship between the parties. That said, a restitutionary claim can be so intertwined with a contract that a legitimate interest may be easy to establish.
A like observation to that made in the second sentence of this passage might also be made in relation to tortious causes of action, particularly in a commercial context.
[110](1953) 89 CLR 540.
[111][1982] AC 679.
[112](2012) 246 CLR 498, 525 [51].
[113]Smith, The Law of Assignment – The Creation and Transfer of Choses in Action (2007), 335 [12.106].
In a separate judgment, Gummow and Bell JJ also referred to Trendtex Trading Corporation v Credit Suisse[114] with approval. In so doing, their Honours stated as follows:[115]
[T]he Assignment was not open to the objection that it dealt with no more than “bare” rights of action and so attracted the statements of principle in Poulton v The Commonwealth. It has long been held that an exception exists where the assignee has an interest in the suit, and a genuine and substantial commercial interest is now regarded as sufficient.
(Citations omitted.)
[114][1982] AC 679.
[115](2012) 246 CLR 498, 532-533 [79].
In his dissenting judgment, Heydon J also considered the case of Trendtex Trading Corporation v Credit Suisse.[116] It is not necessary to say anything beyond the fact that Heydon J observed (as noted in paragraph 27 above) that the presence or otherwise of a “genuine commercial interest” was not argued in Poulton v The Commonwealth[117] and that his Honour noted that Trendtex Trading Corporation v Credit Suisse was decided after Poulton v The Commonwealth.[118] His Honour then went on to find that there was a “genuine commercial interest” on the facts of the case.[119]
[116][1982] AC 679.
[117](1953) 89 CLR 540.
[118](2012) 246 CLR 498, 558 [156].
[119]Ibid.
Based on the above authorities, there can be no doubt that the exception identified in Trendtex Trading Corporation v Credit Suisse now must be treated as good law in Australia. Although this is evident from the last decision referred to above,[120] I have gone into some detail of the history of the authorities to demonstrate that this area of the law is developing, and the application of the underlying policy or “asserted public policy”[121], upon which the general rule is said to be justified, may have changed or shifted over time. It might be said (and I put it no higher) that the courts, in more recent decisions concerned with whether or not “wanton and officious”[122] intermeddlers are engaged in “litigation trafficking”, are taking a more liberal view, including in cases concerning the “legitimate or genuine commercial interest” which must be established before a cause of action relating to that interest is treated as being lawfully assignable.
[120]Cf the comment by Dodds-Streeton JA in Haxton v Equuscorp Pty Ltd (2010) 28 VR 499, 556 [307] that the High Court in Campbells Cash & Carry Ltd v Fostif Pty Ltd (2006) 229 CLR 386 “seems to have approved Trendtex”.
[121]See Campbells Cash & Carry Ltd v Fostif Pty Ltd (2006) 229 CLR 386, 433 [86] and par 40 above.
[122]See also British Cash and Parcel Conveyors Ltd v Lamson Store Service Co Ltd [1908] 1 KB 1006, 1014.5 (Fletcher Moulton LJ).
Broadly speaking, and understood in the context of what is set out above, the rule against assigning bare causes of action reflects a public policy of the common law against maintenance. As was stated by McDougall J in Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd:[123]
The content of that policy, and its application, change from time to time. It is likely that a re-examination of the rule, in the light of changing social, commercial and economic conditions, will indicate exceptions that had not existed, or had not been perceived, in earlier times.
In the circumstances of this case, it might be that further exceptions are identified when facts not previously before the courts are the subject of consideration.
[123](2004) 220 ALR 267, 283 [53(4)]. See also Giles v Thompson [1994] 1 AC 142, 164A-C.
Finally, for the purpose of an application of this nature,[124] there is no need to express any concluded view about whether tortious causes of action in a commercial context ought to be treated differently to contractual or other causes of action, such as restitutionary causes of action. It is sufficient to refer to a number of Australian authorities, commencing with Monk v Australia and New Zealand Banking Group Ltd,[125] that suggest there is no logical reason to make a distinction regarding tortious causes of action in a commercial context.[126]
[124]See pars 15-16 above.
[125](1994) 34 NSWLR 148, 152E (Cohen J).
[126]See, for example, Hazard Systems Pty Ltd v Car-Tech Services Pty Ltd [2013] NSWCA 314, [15] (Basten, Meagher and Barrett JJA); Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2004) 220 ALR 267, 282 [50(2)], [52] (McDougall J) and the cases there cited; National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd (1995) 132 ALR 514, 538.9-539.6 (Lindgren J). See also Giles v Thompson [1994] 1 AC 142.
H. A genuine commercial interest
There is no clear authoritative statement as to what a “legitimate or genuine commercial interest” or a “genuine commercial interest”[127] exhaustively encompasses.[128] It would be surprising if it were otherwise. Whilst examples may be given of what “genuine commercial interest” does not include (for example, an interest in profiting in litigation based solely on the existence of an assignment of a bare cause of action) and what it does include (for example, the assignment of a cause of action relating to a property right which is also lawfully assigned or the assignment of a cause of action to a person who has a pre-existing enforceable right against the assignor), there are many circumstances in which the position may be far from clear.[129]
[127]For convenience, I will simply refer to “genuine commercial interest”.
[128]In stating this I am not ignoring the decision in National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd (1995) 132 ALR 514, 540.2 (Lindgren J). The passage concerning “genuine commercial interest”, although general in some respects, is narrowly confined as to what it says is not encompassed.
[129]Cf British Cash & Parcel Conveyors Ltd v Lamson Store Service Co Ltd [1908] 1 KB 1006, 1014.6 (Fletcher Moulton LJ), where it was said: “it is far easier to say what is not maintenance than to say what maintenance is”.
The whole of the transaction must be looked at in determining whether an assignee has a genuine commercial interest.[130] As to the approach to be taken, the following passage from Giles v Thompson is instructive:[131]
[T]he law on maintenance and champerty can best be kept in forward motion by looking to its origins as a principle of public policy designed to protect the purity of justice and the interests of vulnerable litigants. For this purpose the issue should not be broken down into steps. Rather, all the aspects of the transaction should be taken together for the purpose of considering the single question whether … there is wanton and officious intermeddling with the disputes of others in where the meddler has no interest whatever, and where the assistance he renders to one or the other party is without justification or excuse.
(Citation omitted, emphasis added.)
[130]Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd (2005) 63 NSWLR 203, 228 [109]; Brownton Ltd v Edward Moore Inbucon Ltd [1985] 3 All ER 499, 509d-e; Trendtex Trading Corporation v Credit Suisse [1982] AC 679, 703F.
[131][1994] 1 AC 142, 164C (Lord Mustill, with whom the other Lords of the House agreed). Referred to with apparent approval in Campbells Cash & Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386, 434 [90] (Gummow, Hayne and Crennan JJ), 480 [251], 490 [271] (Callinan and Heydon JJ (dissenting)).
In Monk v Australia and New Zealand Banking Group Ltd,[132] Cohen J considered whether the plaintiff had a genuine commercial interest. The assignment was from an owner of cheques who purported to assign its right of action for the tort of conversion. There was no other subject matter of the assignment. The plaintiff in that case sought to establish he had a genuine commercial interest by reason of the possibility of becoming a creditor of the defendant bank. It was hoped this would then allow the plaintiff to claim a set-off in relation to a claim made by the bank against the plaintiff. This was held not to be a genuine commercial interest. In so finding, the following was stated:[133]
In my opinion that is not a genuine commercial interest in the way that the phrase has been used in the judgments. Examples may be given from the facts in the various cases concerned. [By reference to other cases, Cohen J then gave examples of genuine commercial interests, namely: an existing substantial creditor of the assignor; a sole shareholder who was guarantor of an overdraft of the assignor; and an assignee who was a debenture holder with an interest in protecting the value of its security.] … In the authorities where the Trendtex test has been applied, the commercial interest has gone beyond a mere personal interest in profiting from the outcome of the proceedings and has required an interest by the assignee in the assignor or its business affairs or activities which the assignment may in some way protect.
(Citations omitted, emphasis added.)
[132](1994) 34 NSWLR 148.
[133]At 153A.
In National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd,[134] Lindgren J identified some strictures of what is meant by the phrase. His Honour said as follows:[135]
[T]he genuine commercial interest referred to in Trendtex is not a nebulous notion of the general commercial advantage of the assignee but something more specific and limited. In particular, it does not embrace an interest arising from an arrangement voluntarily entered into by the assignee of which the impugned assignment is an essential part, like the arrangement in the present case. Rather, the expression refers to a commercial interest which exists already or by reason of other matters, and which receives ancillary support from the assignment.
(Emphasis added.)
[134](1995) 132 ALR 514.
[135]At 540.2.
Lindgren J concluded that the causes of action in question were not ancillary to a proprietary right or interest, and accordingly did not come within the established exception.[136]
[136]At 539.10, 541.3.
In Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd,[137] Palmer J considered whether a real estate developer had a genuine commercial interest in an assignment of a cause of action. The assignment was taken by the developer from a lessee who had an option to purchase a parcel of land. The proprietor of the land had purported to terminate the lease alleging the lessee had breached it. The lessee wanted a declaration from the court that the termination of the lease was invalid so that it could exercise the option to purchase, and then sell, the land to the property developer. The property developer entered into the assignment and thereby agreed to do what was necessary to enforce the lessee’s option to purchase, in return for which the property developer had an option to purchase the land from the lessee.
[137](2004) 51 ACSR 129.
After considering the decision of Trendtex Trading Corporation v Credit Suisse[138] and other related cases, Palmer J found that the option deed, which included the assignment, when viewed as a whole, did not savour of maintenance. His Honour held that the property developer had a genuine commercial interest in acquiring the land and therefore had a genuine commercial interest in funding the proceeding.[139]
[138][1982] AC 679.
[139](2004) 51 ACSR 129, 137-138 [51]-[53].
Palmer J was overturned on appeal.[140] The Court of Appeal held that the fact that the assignee wanted to acquire the land for redevelopment was a “mere wish” of the property developer and was “far too insubstantial and tenuous to qualify” as a genuine commercial interest.[141] It was stated that the interest “must, at least, be rights-based and not a mere hope”.
[140]Project 28 Pty Ltd v Tim Barr Pty Ltd [2005] NSWCA 240 (Hodgson and Ipp JJA and Campbell AJA).
[141]At [42] (Ipp JA, with whom Hodgson JA and Campbell AJA agreed).
In a short concurring judgment, Campbell AJA, whilst agreeing with Ipp JA on the point that had been decided below, also stated as follows:[142]
In this matter there is, arguably, a genuine commercial interest in the transactions the subject of the litigation of the kind contemplated in Trendtex. It is, accordingly, unnecessary to develop the question whether other interests are relevant and the criteria for that relevance.
[142]At [127].
As stated above,[143] in WorkCover Queensland v Amaca Pty Ltd,[144] Gotterson JA specifically discussed the meaning of genuine commercial interest. By reference to earlier cases, his Honour recorded that a genuine commercial interest must be in existence prior to the assignment, but need not be an interest which, of itself, was enforceable at law or in equity.[145]
[143]At par 53 above.
[144][2013] 2 Qd R 276.
[145]At 299.5-300.3.
In Insight SRC IP Holdings Pty Ltd v Australian Council for Educational Research Ltd[146] the Full Court of the Federal Court held that a holding company had a legitimate commercial interest in the enforcement of its subsidiary’s cause of action. This position was not affected by the fact that subsequently the ownership of the subsidiary had changed.[147] By reference to an earlier decision of the Federal Court,[148] it was observed that the commercial setting for an assignment was relevant in considering whether or not there was a genuine commercial interest. It was held that the primary judge was correct in finding that the party was “closely connected” with the assignor and therefore should be able to be in a position to benefit.[149]
[146](2013) 101 IPR 484 (North, Rares and Robertson JJ).
[147](2013) 101 IPR 484, 492 [28].
[148]Deloitte Touche Tohmatsu v JP Morgan Portfolio Services Ltd (2007) 158 FCR 417, 426 [56]-[66] (Tamberlin and Jacobson JJ). See pars 44-48 above.
[149](2013) 101 IPR 484, 493 [29].
In summary, for an assignee to be able to rely lawfully upon an assignment of a cause of action, the assignee must have an interest that is pre-existing at the time of the assignment, which interest represents something more than an interest that would be held by a person who is an “intermeddler” with the disputes of others. Save for looking at decided cases which provide illustrations of genuine commercial interests or otherwise, it is not possible to positively and definitively state the interest necessary to establish a genuine commercial interest. Each case must be considered on its particular facts to ascertain whether the interest alleged is a genuine commercial interest.
One matter relevant to the facts of this case is clear, namely, the fact that Eworld ceased to be the holding company of EWC Payments, and that the relationships between the 2 companies changed fundamentally after the period in which the events pleaded in the statement of claim occurred, is not, of itself, a bar to a genuine commercial interest being established.[150]
[150]See par 75 above.
Further, since the obiter dicta, in 1953, of the 3 members of the High Court in Poulton v The Commonwealth,[151] no case has required the High Court to clearly state the nature and extent of any public policy underlying the issue of what comprises a genuine commercial interest, let alone identifying any categories of interests that may be properly considered as a genuine commercial interest. In these circumstances, considerable uncertainty remains.
[151](1953) 89 CLR 540.
What a plaintiff, as an assignee of a cause of action, must plead in a statement of claim
The issue of what a plaintiff must plead in its claim if it relies, as assignee, on an assignment to prosecute a cause of action is fundamental to the outcome of this appeal.
The Commonwealth Bank contended that the Appellants were required to plead facts which, if established, would demonstrate positively, in respect of each of the First Assignment and the Second Assignment, a pre-existing genuine commercial interest in the claims made. It was submitted that it was contrary to principle for the Appellants to avoid the need for any such interest to be identified in the statement of claim. No authority was cited for the proposition that the positive pleading of a genuine commercial interest in the claims made must be pleaded in the statement of claim. Indeed, no party referred the court to any authority on the issue.
My research has not revealed any authoritative decision or learning directly on point.
I.1 Publications
Atkin’s Encyclopaedia of Court Forms in Civil Proceedings provides examples of pleadings of assignments of causes of action in both contract[152] and tort.[153] For present purposes, there is only limited assistance in the forms of draft pleadings provided, given that the circumstances postulated in the draft pleadings are entirely different to the present circumstances. In the tort example, direct reference is made to the fact that the assignee is a creditor of the assignor. In the contract example, the subject matter of the assignment is a debt (which does not raise the relevant issue[154]). The short point to note is that there is nothing in the commentary to suggest that, where the issue might arise because of reliance upon an assignment, a plaintiff must plead in a statement of claim a genuine commercial interest.
[152]2nd ed, 2013 issue, vol 12(2).
[153]2nd ed, 2011 issue, vol 38(1).
[154]A debt is considered to be property which is capable of assignment, and therefore is not the subject of the rule concerning the non-assignability of a bare cause of action: see, for example, Fitzroy v Cave [1905] 2 KB 364, 373.9 (Cozens-Hardy LJ); Comfort v Betts [1891] 1 QB 737, 739.9-740.3 (Esher MR), 740.9 (Fry LJ), 741.8 (Lopes LJ). See also fn 52 above and also par 83 below.
In Bullen & Leake & Jacob’s Precedents and Pleadings, the issue of assignment of contractual rights is addressed.[155] There is nothing in the commentary which expressly states the matters that must be pleaded by an assignee in making its claim pursuant to an assignment. The commentary is concerned with various issues that arise at law and in equity concerning the ability to assign choses in action. That commentary precedes a discussion under the heading “Defences to a claim brought by an assignee”. The defences capable of being raised are said to include those “arising because the assignment is ineffective due to the fact that the chose in question is incapable of assignment”.[156] In the discussion concerning ineffective assignments because of the unassignability of the subject matter, the following is stated:[157]
Assignments of bare rights to litigate are contrary to public policy and prohibited by the rules against champerty and maintenance. What amounts to a “bare” right to litigate is a difficult question. It is clear that equity considers a debt to be a form of property, and regards any action at law necessary to reduce the property into possession as merely an instant which follows on from the assignment of the debt. Such claims in assignments are unaffected by the rules against champerty and maintenance. Other rights under a contract can be affected by the rules against champerty and maintenance. The assignment of a right under a contract will be regarded as a “bare” right to litigate – and, hence, unenforceable – where the assignee has no “genuine commercial interest” in the transfer of the chose.
(Citations omitted, original emphasis.)
[155]17th ed, 2012, vol 1, section 3. There is no equivalent discussion in relation to tortious causes of action.
[156]At 93 [3-13].
[157]At 94 [3-17].
This passage appears under a chapeau which suggests a debtor may contend that the assignment is ineffective because the chose is incapable of assignment. Thus, the commentary suggests that it is a matter for a defendant to raise issues concerning the assignability or otherwise of an alleged assignment.
Two draft pleadings are given by way of example, but both concern assignments of debts and do not provide any assistance to the present issues. However, the draft defences in relation to unassignability or ineffectiveness of an assignment both contain paragraphs which provide for the defendant to allege the facts or aspects of the chose in action or the assignment that are said to give rise to the unassignability or ineffectiveness of the chose in action or assignment respectively.
I.2 Relevant case law
I have reviewed a considerable number of authorities in order to ascertain whether there is either a previous ruling or an established practice in relation to what needs to be pleaded by an assignee as part of its claim. As far as I can ascertain, there is no clear position that arises from the authorities.
There are cases which show that simply pleading the existence of the assignment has been permitted without specifically pleading that the assignee has a genuine commercial interest. I will refer only to some to demonstrate this.
In WorkCover Queensland v Amaca Pty Ltd[158] the assignability of a cause of action was in issue. The claim made by the plaintiff simply pleaded that the assignor assigned to the plaintiff the whole and all of the assignor’s causes of action against the defendant. In its defence the defendant raised the issue of whether the cause of action was capable of assignment. No issue was taken with the form of the plaintiff’s pleading.
[158][2013] 2 Qd R 276 (McMurdo P, Gotterson JA and Martin J). See also pars 50-53 and 74 above.
In Corporate Systems Publishing Pty Ltd v Lingard (No 4)[159] claims were made by counterclaim against the 2nd plaintiff. At trial those claims were successful. It was noted in the principal judgment of the court that no issue was raised by the defendant to the counterclaim, by pleading or submissions, suggesting the assignment alleged in the counterclaim was unenforceable (other than in relation to an irrelevant matter, namely a previous undertaking given on behalf of a defendant to the Full Court).[160]
[159][2008] WASC 21; [2008] WASC 21 (S) (Beech J).
[160]At [395].
After the principal judgment was delivered, the defendant to the counterclaim sought to amend his defence to allege the assignment pleaded in the counterclaim was unenforceable as it was “a bare right to litigation”.[161] In response, the plaintiff by counterclaim said it would plead, by way of reply, a genuine commercial interest in the claim that had been made by counterclaim. The fact that such an allegation in reply might give rise to the need for the trial to be reopened was part of the reasoning of the court in refusing to grant leave to amend the defence.[162] There was no suggestion in any submission, or by the court, that it would be inappropriate for the counterclaimants to plead a “genuine commercial interest” by way of reply once the issue of assignability of the cause of action was sought to be enlivened in the proposed amended defence.
[161]At (S) [52].
[162][2008] WASC 21 (S), [60], [62].
In National Mutual Property Services (Australia) Pty Ltd v Citibank Savings Ltd,[163] Lindgren J heard an application to strike out parts of the statement of claim and for summary dismissal. Various assignments were pleaded in the statement of claim. In substance, the allegations were confined to the fact that the assignor had, by written assignments, assigned for valuable consideration to the plaintiff their rights to recover damages or compensation against the defendants.[164] One of the issues on the strike out application was whether or not the plaintiff had a genuine commercial interest in the claims the subject of the assignment.[165] There was no point made in submissions on behalf of the respondents, or by the court, based on the fact that a genuine commercial interest had not been pleaded as part of the statement of claim.
[163](1995) 132 ALR 514.
[164]At 521.7, 523.5, 527.9.
[165]At 539.9.
In Monk v Australia and New Zealand Banking Group Ltd,[166] the statement of claim alleged that, by an assignment in writing, the assignor “assigned to the plaintiff all choses in action it may have against the defendant and any other person with respect to the cheques”. Notice of that assignment given to the defendant was also alleged.[167] The assignability or otherwise of the choses in action was raised in the defence.[168] A separate question was raised for the court as to whether or not the purported assignment was effective. No point was taken on any failure of the plaintiff to plead a genuine commercial interest notwithstanding this was the basis upon which the defendant sought to challenge the assignment.
[166](1994) 34 NSWLR 148.
[167]At 149E.
[168]At 149F.
A much earlier decision, heard in 1880, addresses the need to plead the existence of an assignment if it is relied upon to establish the basis of a plaintiff pursuing a claim. In Seear v Lawson,[169] a trustee in bankruptcy commenced an action seeking declaratory relief concerning the bankrupt’s previous conveyance of property. The trustee then assigned the cause of action, and the assignee obtained an order entitling the assignee to continue with the action. The assignee delivered a statement of claim without making any amendment to the title of the proceeding, and which made no allegations in relation to the assignment. The defendant, by summons, sought to have the title of the action and the statement of claim amended.
[169](1880) 16 Ch D 121.
On appeal, it was held[170] the statement of claim should name the new plaintiff “and it ought to have contained a statement shewing how the [p]laintiff got his title”. Both Jessel MR[171] and Cotton LJ[172] stated that the assignee was required to plead how the title was derived, without their Lordships stating precisely what was necessary to plead in this regard.
[170]At 124.2 (Jessel MR, with whom Cotton and Lush LJJ agreed).
[171]At 124.3.
[172]At 124.7.
There are also cases where the interest of an assignee has been pleaded as part of the statement of claim. For example, in Brownton Ltd v Edward Moore Inbucon Ltd[173] leave was sought to re-amend the statement of claim at the commencement of the trial to plead an assignment. In that case, a defendant, having settled with the plaintiff, sought to plead a “genuine and legitimate interest” in the plaintiff’s claims as against the other defendant. It had been held by the trial judge that if the defendant sought to rely on an assignment it had to plead it. However, there was nothing in the judgment to indicate that the court required a genuine and legitimate interest be pleaded as part of the claim of the defendant. On appeal, there was no discussion as to what was required to be pleaded.
[173][1985] 3 All ER 499.
Further, there are many cases where it is not apparent on the face of the judgment what was pleaded in the statement of claim. The short point to note is that there appears to be no established practice which would support the contention made on behalf of the Commonwealth Bank as to what needs to be pleaded.
I.3 General principles and rules of pleading
Absent any definite guidance from the authorities or respected publications on precedents, it is necessary to consider the issue of what needs to be pleaded from basic principles.
The object of pleadings is to bring the parties to the issue or issues in a case.[174] For this to be achieved, pleadings must state with sufficient clarity the case to be met.[175] It is an established rule of pleading that the question of generality, and the level of specificity required to state a case with sufficient clarity, must depend on the general subject matter.[176]
[174]Thorp v Holdsworth (1876) 3 Ch D 637, 639.8 (Jessel MR).
[175]Banque Commerciale SA, en liquidation v Akhil Holdings Ltd (1990) 169 CLR 279, 286.8 (Mason CJ and Gaudron J).
[176]Ratcliffe v Evans [1892] 2 QB 524, 532.6 (Bowen LJ), referred to with approval in Charlie Carter Pty Ltd v The Shop, Distributive and Allied Employees’ Association of Western Australia (1987) 13 FCR 413, 417.3 (French J).
The Supreme Court Rules require every pleading to contain in summary form a statement of all the material facts on which the party relies.[177] Further, a party is required in any pleading subsequent to a statement of claim to plead specifically any fact or matter which:[178]
(1)The party alleges makes any claim of the opposite party not maintainable.
(2) If not pleaded specifically, might take the opposite party by surprise.
(3) Raises questions of fact not arising out of the preceding pleading.
[177]Rule 13.02(1)(a).
[178]Rule 13.07(1)(a), (b) and (c) respectively.
Given the object of pleadings, together with the specific rules referred to above, in my opinion it is sufficient for a plaintiff to simply plead the occurrence of an assignment if a plaintiff, as assignee, seeks to rely upon an assignment in prosecuting a cause of action.
As may be seen from the discussion above, there may be many reasons why it might be contended that the subject matter of an alleged assignment is unassignable or that for some other reason an alleged assignment is invalid. By pleading the assignment of the cause of action, the plaintiff potentially enlivens all these issues. The most efficient and practical manner to identify the real issues between the parties is to require the defendant to allege what issues, if any, might be taken in relation to a pleaded assignment. Once any such issue is taken by a defendant, the plaintiff is capable of addressing that issue in its reply. As the reply will be directed specifically to any issue raised by the defendant, no extraneous matters will be raised on the pleadings.
An analogy might be made with the pleading of an agreement as part of a claim. The usual practice is for the plaintiff to plead the conclusion, namely that an agreement has been entered into. It is not necessary for a plaintiff to plead the various elements which are said to comprise the agreement, or to positively plead why an agreement is lawful and enforceable. Such matters are for a defendant to raise in its defence in an appropriate case.
The Commonwealth Bank submits[179] there is a prima facie prohibition against enforcing an assigned cause of action and therefore the genuine commercial interest must be alleged in the statement of claim. Accepting the premise of this submission for present purposes, the contention is not made good. For example, there is a prima facie prohibition against enforcing claims that are commenced after the time prescribed under a statute of limitations.[180] This fact does not require a plaintiff to plead in its statement of claim relevant facts which might be in issue under the statute of limitations if the limitations period has expired. It is for the defendant to make allegations in its defence on this issue and only then, if it is raised by the defendant, is it incumbent upon a plaintiff to plead to such matters.[181]
[179]Adopting the language of the associate judge: Primary Judgment, [71].
[180]In contrast to a claim where the limitation period is annexed to the right created by a statute: see, for example, Australian Iron & Steel Ltd v Hoogland (1962) 108 CLR 471, 488.7 (Windeyer J).
[181]See, for example, The Commonwealth v Verwayen (1990) 170 CLR 394, 425.6 (Brennan J), 473.8 (Toohey J), 497.9 (McHugh J).
The conclusion I have reached is consistent with the approach of McDougall J, in CH2M Hill Australia Pty Ltd v State of New South Wales,[182] when certain issues arose in the conduct of the trial. As the proceeding was heard in the New South Wales Supreme Court Technology and Construction List, there were no formal pleadings. Pursuant to a practice note of the court, a plaintiff in that list is required to file a list statement and a defendant is required to file a list response. Also in that case, the parties prepared a statement of issues for determination at trial.
[182](2012) 30 BCL 35.
In the list statement filed by the plaintiff it was simply stated that an assignor had assigned to the plaintiff all of the assignor’s “right, title and interest in all claims that [the assignor] has against [the defendant] in connection with the Contract”.[183] The particulars to this allegation only referred to a written agreement and its date. In the response, the defendant did not admit this contention and made no relevant averment.
[183]At 40 [16].
As to the list of issues at trial, the question for the court was directed to what was the legal effect of the deed of assignment, with reference made back to the relevant allegation in the list statement.
In closing submissions, the defendant sought to attack the validity or effect of the assignment on a number of bases which had not previously been raised. This included a submission that the plaintiff did not have a genuine commercial interest in the subject matter of the assignment.[184]
[184]At 41 [20].
In refusing to allow the detailed submissions to be put in closing, McDougall J stated that the non-admission in the response could be dealt with by the plaintiff simply proving in a formal way the agreement to assign and tendering a copy of the agreement. His Honour stated that once that was done, the plaintiff “would have satisfied its onus of showing that there had been an agreement by which, in terms, the assignment alleged was made”.[185] His Honour suggested the only remaining issue would then be the question of construction as to what had been assigned by the agreement. Accordingly, as noted above, he refused to allow the defendant to raise the issue of whether or not the assignee had a genuine commercial interest in the subject matter of the assignment.[186]
[185](2012) 30 BCL 35, 41 [22].
[186]At 42 [31]-[32].
It is plain that, although the issue arose at trial, McDougall J was of the opinion that it was for the defendant to clearly raise in the “pleadings” any issue it had with the validity or effect of the assignment. In the absence of such matters being raised by the defendant, the plaintiff was required to prove no more than the existence of the assignment, and that, pursuant to the terms of that assignment, the cause of action had been duly assigned.
I.4 The Civil Procedure Act
There is a further reason why I have formed the view expressed above. By reason of the Civil Procedure Act 2010 (Vic), the overarching purpose of the Act and the rules of court in relation to civil proceedings is to facilitate the just, efficient, timely and cost effective resolution of the real issues in dispute between the parties.[187] To this end, in a case such as this, it is far more consistent with the overarching purpose to have allowed the pleadings to have closed[188] before the cost and time of the parties, and the court, was taken dealing with the issues such as those that have arisen in this appeal.
[187]Section 7(1). Cf CH2M Hill Australia Pty Ltd v State of New South Wales (2012) 30 BCL 35, 41 [24] (McDougall J).
[188]Supreme Court Rules, r 14.08.
The countervailing argument might be that it is better to entertain the application, as any refusal of leave would avoid the costs of further pleadings. In my view, generally speaking, this is not the preferred approach. Ordinarily, it would be expected that the more refined the issues on the pleadings, the more efficient it would be to deal with any remaining issues. In particular, in a proceeding such as this, raising a series of complex issues, and requiring the court to consider a large number of authorities and references (the Primary Judgment runs for 38 pages, with 109 footnotes and refers to 54 authorities;[189] I was provided with 4 volumes of authorities and an appeal book consisting of 428 pages, plus written submissions), a narrowing of the issues is highly desirable. Further, any additional costs for the further pleadings is relatively minor to the costs that have been incurred, and the significant time that has been spent, in relation to the Appellants’ application for leave to amend.
[189]See annexure “A” attached.
Indeed, with the benefit of hindsight, this may well have been an appropriate case for the court to have declined to determine any issue arising on the Appellants’ application for leave to amend. A better course may have been to simply direct that pleadings be filed and for the proceeding to progress until pleadings were closed.[190]
[190]Cf Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 303 ALR 199, 211-212 [56]-[57] (French CJ, Kiefel, Bell, Gageler and Keane JJ).
To elaborate, if the Commonwealth Bank had simply acceded to the amendment, pleaded the absence of a genuine commercial interest in its defence and waited to see what the Appellants pleaded by way of reply, this would have allowed all issues between the parties to be apparent and refined on the pleadings. It would have been preferable for this to occur before the court was required to determine whether or not the relevant parts of the Appellants’ pleadings concerning the First Assignment and the Second Assignment disclosed any valid causes of action.
J. Outcome of the appeal
In light of the matters set out above, it is not necessary for me to specifically address each of the principal questions identified by the learned associate judge,[191] nor his comprehensive reasons for answering them the way he did.
[191]See par 18 above.
By reference to the ground of appeal set out in paragraph 22(2) above, the Appellants have established error. With respect, it was wrong to hold that the Appellants were required to plead a pre-existing commercial interest in the proposed further amended statement of claim in order for leave to be granted to introduce allegations concerning the First Assignment and the Second Assignment.[192]
[192]See par 21(3) and (5) above.
Further, insofar as the associate judge made determinations on evidence before the court to the effect that no genuine commercial interest could be properly pleaded, he was also in error. As I have already noted,[193] the evidence before the court was not exhaustive. Without being conclusive or in any way seeking to pre-empt how a genuine commercial interest might be pleaded, the following demonstrates that the Appellants are, at the very least, likely to have an arguable basis for pleading a genuine commercial interest:[194]
[193]See par 24 above.
[194]In making this observation, I express no view about whether or not the Appellants would succeed in the event that the Commonwealth Bank made a summary judgment application after pleadings are closed.
(1)The Appellants and Eworld were already co-plaintiffs in this proceeding independent of, and long before, any assignment was entered into.
(2)EWC Payments and Eworld had a pre-existing contractual relationship with the Commonwealth Bank to which it is alleged they were both parties, which contractual relationship is the subject matter of this proceeding.
(3)Eworld, at the relevant times, was the holding company of EWC Payments.
(4)EWC Payments and Eworld had a joint business plan which was provided to the Commonwealth Bank before the Agreement was entered into, which business plan included the following:
(a)Eworld and EWC Payments putting forward a joint proposal for a contract to be entered into with the Commonwealth Bank;
(b)Starr being put forward as the CEO and president of the “founding team”.
(5)In relation to both the contractual claims and the tortious claims, the same substratum of facts concerning Eworld’s cause of action applies to the causes of action of EWC Payments (and, in relation to 1 cause of action, Starr).
In relation to the last of the matters raised in the previous paragraph, the associate judge stated that whilst a holding company may have a genuine commercial interest in the enforcement of a claim of its subsidiary, the existence of a relationship of holding company and subsidiary did not disclose any genuine commercial interest of a subsidiary in enforcing a claim of a holding company.[195] At this stage of the pleadings, given the joint involvement of the 2 companies in their dealings with the Commonwealth Bank, I doubt whether the position is so clear. As his Honour himself acknowledged, there may be some facts “not presently revealed” which could establish a genuine commercial interest.[196] Once the pleadings are closed, and all material facts, with the necessary particulars, have been provided, the position will be able to be properly assessed.
[195]See par 21(6) above.
[196]Ibid. See also par 21(8) above.
The focus of this judgment has been upon whether EWC Payments might be able to establish a genuine commercial interest in the causes of action of Eworld. That still leaves the issue of the First Assignment and what must be established by way of a genuine commercial interest for a valid and effective assignment to have occurred.
This raises further issues not only in relation to EWC Payments, but also in relation to the nature of the interest of the assignee of the First Assignment, Internet Marketing.
Presently, there is no pleading, or any evidence, of any interest that Internet Marketing might have in the causes of action in question. Senior counsel for the Appellants stated that, notwithstanding the absence of any pleaded allegation or any evidence, no assumption should be made by the court about the lack of a relationship between Internet Marketing and the plaintiffs in the proceeding. It was submitted that after the Commonwealth Bank has filed a defence, and depending on the nature of that defence, any relevant facts as to this relationship would be pleaded by way of reply. In contrast, the Commonwealth Bank submitted the court should determine now, on the materials presently before the court, that Internet Marketing could have no genuine commercial interest in the subject matter of the First Assignment.
For the reasons already stated, it is my view that such matters, to the extent necessary,[197] ought to be the subject of pleadings before any issue is determined by the court. This conclusion is not affected by whether Swiss law or Australian law applies to the First Assignment.
K. Other matters
K.1 Further evidence
[197]Extensive submissions were made by the Appellants that it is only necessary for EWC Payments to have a genuine commercial interest in relation to the Second Assignment for EWC Payments to be able to prosecute the causes of action in this proceeding. It is not appropriate to consider these submissions until the basis upon which it is said, or even if it is said, that Internet Marketing has a genuine commercial interest has been ventilated.
The Appellants sought to rely on appeal upon an affidavit of Starr sworn 12 March 2014. It was submitted that the purpose of the affidavit was to address, at least in part, findings of the associate judge concerning the absence of evidence to establish the relevant interest. By this affidavit, Starr sought to lead evidence that he was not a director or shareholder of Eworld “in a formal sense” but that he, and through him EWC Payments, had “effective control” of Eworld in relation to its dealings with the Commonwealth Bank.
In essence, the relevant part of the affidavit relied upon is a statement of a conclusion, rather than evidence from which such a conclusion might be drawn. The basis for the conclusion is simply not stated. Accordingly, I doubt whether the contents of the affidavit satisfy ss 55 and 56 of the Evidence Act 2008 (Vic) on that ground alone. If I am incorrect in this view, I would, in any event, exclude the evidence under s 135 of the Evidence Act on the grounds that evidence in such a form is unfairly prejudicial to the Commonwealth Bank and is also confusing.
K.2 Reliance on the Civil Procedure Act by the Commonwealth Bank
The Commonwealth Bank contended that even if the issues relating to a genuine commercial interest could be dealt with by way of reply, any granting of leave to amend the statement of claim would be futile because of the Appellants’ inability to identify the relevant evidence during the course of this application. Further, it was suggested that it would be inconsistent with the overarching obligations under the Civil Procedure Act to allow the claim to be amended.
I have already addressed the Civil Procedure Act above.[198] For the reasons already stated, it is far more consistent with the overarching obligations to encourage parties to resolve pleading issues, and to refine any possible outstanding issues, without the involvement of the court. Further, as previously stated, the court would be in a much better position to assess any issue concerning whether there is a genuine commercial interest once all the relevant allegations have been properly pleaded and particularised, and the precise issues between the parties have been identified.
[198]At pars 110-113 above.
As would already be apparent, nothing said in this judgment would prevent the Commonwealth Bank from applying to have the issue of the validity and effectiveness of the First Assignment and the Second Assignment dealt with summarily, if such an application were appropriate after the close of pleadings.
K.3 The form of the proposed pleading
The Commonwealth Bank submitted that the necessary pre-existing relationship to establish a genuine commercial interest could not be established because the proposed amendment in paragraph 5 introduced the words “or Eworld” after the reference to EWC Payments. This was coupled with a careful analysis of the proposed pleading as a foundation for submitting that Eworld’s involvement as a contractor with the Commonwealth Bank was in the alternative, rather than conjunctive, so that only 1 of either Eworld or EWC Payments were capable of having a contractual relationship with the Commonwealth Bank based on the pleading as it stood.
It was further submitted that the proposed pleading showed that the flow of any funds was from EWC Payments to Eworld and not the other way around. It was submitted that the Appellants purported to claim, by the alleged assignments, an income stream that EWC Payments was paying to someone else, namely Eworld, and that there was no genuine commercial interest of EWC Payments in that income stream.
In short, it was submitted by reason of the form of the proposed pleading, EWC Payments could have no real interest in Eworld’s causes of action.
In response, the Appellants contended that the proposed pleading, including the particulars, and the limited evidence tendered to date demonstrated that EWC Payments and Eworld had a trading relationship between them and that, in turn, they both had a contractual relationship with the Commonwealth Bank. The Appellants further submitted that the correct position to be derived from the pleading was that EWC Payments obtained merchants from both EWC Payments itself and also from Eworld, which were passed through to the Commonwealth Bank, together with the respective cardholders of the merchants.
In addition, the Appellants submitted that, as was apparent from the content of the existing pleading, the particulars to the proposed statement of claim are not exhaustive. The Appellants submitted that the way in which profits were treated between the companies, the manner in which funds were passed, and how management fees and other fees were dealt with were appropriately to be the subject of evidence. They submitted that the associate judge was wrong to impose his experience of the relationship between holding companies and subsidiaries in determining that a subsidiary could not have a genuine commercial interest in the cause of action of a holding company.
Whilst I do not necessarily accept that these matters raised by the Appellants are only matters of evidence, it is plain that the Appellants will contend that there was an interrelationship between the 2 companies which was not simply that of holding company and subsidiary. This is a matter for which the Appellants are entitled to contend. Whether that is to be raised only after the Commonwealth Bank has delivered its defence, or whether there are some necessary changes that need to be made to the proposed statement of claim is a matter for the Appellants. The form of order granting leave to amend will allow the Appellants to make any minor changes necessary to properly reflect the relationship between EWC Payments and Eworld.
L. Conclusion
The authorities are clear; if a case is clearly hopeless or has no reasonable prospects of success, it ought to be dismissed in the interests of justice. However, in an area involving public policy which is still the subject of ongoing development, particular caution needs to be exercised before striking out a claim or refusing leave to amend in relation to claims concerned with the public policy. In considering the application for leave to appeal, the court is not considering specific elements to a cause of action, or defined rules of law, but rather is considering the application of public policy in the particular facts and circumstances of this case, not all of which are presently before the court. For the reasons stated, the appeal must be allowed.
The court will make the following orders:
(1)Appeal allowed.
(2)The order made by the associate judge on 28 January 2014 is set aside and in lieu thereof it is ordered that the Appellants are granted leave to amend the statement of claim substantially in the form of the statement of claim appearing at appeal book pages 245-276.
(3)The respondent pay the Appellants’ costs of this appeal, together with the costs of and incidental to the application before the associate judge.[199]
[199]This order does not affect the application of r 63.17 of the Supreme Court Rules to costs occasioned by the amendment beyond those costs referred to above.
ANNEXURE A
| NO. | AUTHORITY |
| CASES | |
| 1. | ABL Custodian Services Pty Ltd v Smith [2010] VSC 548 |
| 2. | ACN 074 971 109 v The National Mutual Life Association of Australasia Ltd [2010] VSC 186 |
| 3. | Aksionairnoye Obschestvo Dlia Mechanicheskoyi Obrabotky Diereva AM Luther v James Sagor & Co [1921] 3 KB 532 |
| 4. | Alcock v Smith [1892] 1 Ch 238 |
| 5. | Amin Rasheed Shipping Corp v Kuwait Insurance Co [1984] AC 50 |
| 6. | Aon Risk Services v Australian National University (2009) 239 CLR 175 |
| 7. | Beatty v Brashs Pty Ltd [1998] 2 VR 201 |
| 8. | Cammell v Sewell (1860) 5 H & N 728 |
| 9. | Commonwealth v Verwayen (1990) 170 CLR 394 |
| 10. | Deloitte Touche Tohmatsu v JP Morgan Portfolio Services Ltd (2007) 158 FCR 417 |
| 11. | Dover v Lewkovitz [2013] NSWCA 452 |
| 12. | Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498 |
| 13. | General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 |
| 14. | Granite Springs Pty Ltd v Intercooler Water Dispensers Pty Ltd [2000] VSC 224 |
| 15. | Guy v Churchill (1888) 40 Ch D 481 |
| 16. | Hall v National & General Insurance Co Ltd [1967] VR 355 |
| 17. | Hazard Systems Pty Ltd v Car-Tech Services Pty Ltd (in liq) [2013] NSWCA 314 |
| 18. | Herbert v Christopherson [1929] 1 Ch 407 |
| 19. | Hockey v The Mother O’Gold Consolidated Mines Ltd (1903) 29 VLR 196 |
| 20. | Horton v Jones (No 2) (1939) 39 SR NSW 305 |
| 21. | ICM Agriculture Pty Ltd v Young [2009] FCA 109 |
| 22. | Inglis v Robertson & Baxter [1898] AC 616 |
| 23. | Insight SRC IP Holdings Pty Ltd v Australian Council for Educational Research Ltd [2013] FCAFC 62 |
| 24. | John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503 |
| 25. | Kelly v Selwyn [1905] 2 Ch 117 |
| 26. | Kovarfi v BMT & Associates Pty Ltd [2012] NSWSC 1101 |
| 27. | Lee v Abdy (1886) 17 QBD 309 |
| 28. | Lucasfilm Ltd v Ainsworth (2012) 1 AC 208 |
| 29. | Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158 |
| 30. | Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1996] 1 All ER 585 |
| 31. | Matthews v SPI Electricity Pty Ltd v Utility Services Corporation Ltd (Ruling No 6) [2012] VSC 70 |
| 32. | Monk v Australia and New Zealand Banking Group Ltd (1994) 34 NSWLR 148 |
| 33. | Namberry Craft Pty Ltd v Watson [2011] VSC 136 |
| 34. | National Mutual Property Services v Citibank Savings Ltd (1995) 132 ALR 514 |
| 35. | Neilson v Overseas Projects Corp of Victoria (2005) 223 CLR 331 |
| 36. | Oppenheimer v Cattermole (Inspector of Taxes) [1976] AC 249 |
| 37. | Poulton v The Commonwealth (1953) 89 CLR 540 |
| 38. | Princess Paley Olga v Weisz [1929] 1 KB 718 |
| 39. | Project 28 Pty Ltd v Barr [2005] NSWCA 240 |
| 40. | Re Chow Cho Poon (Private) Limited [2011] NSWSC 300 |
| 41. | Re Daley (1992) 37 FCR 390 |
| 42. | Re Independent Insurance Company Ltd (2005) 193 FLR 43 |
| 43. | Re Sutherland (1922) 39 WN (NSW) 108. |
| 44. | Regie Nationale de Usines Renault SA v Zhang (2002) 210 CLR 491 |
| 45. | Republica de Guatemala v Nunez [1927] 1 KB 669 |
| 46. | Salfinger v Niugini Mining (Australia) Pty Ltd (No 3) [2007] FCA 1532 |
| 47. | Seear v Lawson (1880) 15 Ch D 426 |
| 48. | Temilovski v Australian Iron and Steel Pty Ltd [1966] 1 NSWR 279 |
| 49. | Trendtex Trading Corporation v Credit Suisse [1980] QB 629 |
| 50. | Trendtex Trading Corporation v Credit Suisse [1982] AC 679 |
| 51. | Trevor Roller Shutter Service Pty Ltd v Crowe (2011) 31 VR 249 |
| 52. | UTSA Pty Ltd (In liq) v Ultra Tune Australia Pty Ltd (1996) 21 ACSR 457 |
| 53. | Wickstead v Browne (1992) 30 NSWLR 1 |
| 54. | WorkCover Queensland v AMACA Pty Limited [2013] 2 Qd R 276 |
| COMMENTARY | |
| 55. | Lawrence Collins (ed), Dicey and Morris on the Conflict of Laws, (12th ed, 1993) vol 2 |
| 56. | Lawrence Collins (ed), Dicey and Morris on the Conflict of Laws, (15th ed, 2012) vol 2 |
| 57. | LexisNexis, Halsbury’s Laws of Australia, Conflict of Laws, [85.1], [85-10] |
| 58. | Mark Moshinsky, ‘The Assignment of Debts in the Conflict of Laws’ (1992) 109 Law Quarterly Review 591 |
| LEGISLATION | |
| 59. | Civil Procedure Act 2010 (Vic), ss 1, 7, 9, 48, 63 |
| 60. | Corporations Act 2001 (Cth), ss 127(1), 477(2)(c), 580, 581(2)(a) |
| 61. | Corporations Regulations 2001 (Cth), 5.6.74 |
| 62. | Federal Act on Debt Enforcement and Bankruptcy 1889 (Switzerland), s 256 |
| 63. | Property Law Act 1958 (Vic), s 134 |
| 64. | Supreme Court (General Civil Procedure) Rules 2005 (Vic), r 36.01 |
| 65. | Trade Practices Act 1974 (Cth) |
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