Findex Group Pty Ltd v McKay
[2023] ACTCA 36
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
COURT OF APPEAL
| Case Title: | Findex Group Pty Ltd v McKay |
| Citation: | [2023] ACTCA 36 |
| Hearing Date: | 25 August 2023 |
| Decision Date: | 22 September 2023 |
| Before: | Mossop, McWilliam and Taylor JJ |
| Decision: | See [230]. |
Catchwords: | PRACTICE AND PROCEDURE – APPLICATION FOR LEAVE TO APPEAL – Application for leave to appeal against |
| interlocutory decision of primary judge on an issue of practice and | |
| procedure involving discretion – where appeal seeks to raise denial of procedural fairness and factual errors – reluctance of courts to grant leave to appeal interlocutory orders – where denial | |
| of procedural fairness may have effect of occasioning substantial | |
| injustice – leave granted | |
| PRACTICE AND PROCEDURE – APPEAL – Appeal against | |
| orders refusing leave to reopen decision following refusal of an | |
| application to amend Statement of Claim – whether primary judge proceeded upon a misapprehension of the facts – whether there was a denial of procedural fairness – appeal allowed – matter | |
| remitted | |
| Legislation Cited: | Corporations Act 2001 (Cth) Court Procedures Act 2004 (ACT), s 5A Court Procedures Rules 2006 (ACT), rr 417, 501, 502, 504, 1613, 1720 |
| Cases Cited: | Autodesk Inc. v Dyason (No 2) (1993) 176 CLR 300 Commonwealth v Davis Samuel Pty Ltd (No 12) [2020] ACTSC 312 Findex Group Limited v McKay [2022] ACTSC 192 |
| Findex Group Ltd v iiNet Ltd (Application by ASIC) | |
| [2017] NSWSC 853 Findex Group Ltd v iiNet Ltd [2018] NSWSC 1567 | |
| Findex Group Ltd v iiNet Ltd (Application by ASIC) (No 2) | |
| [2017] NSWSC 1048 Findex Group Ltd v iiNet Ltd [2019] NSWSC 1198 Findex Group Ltd v McKay [2019] NSWCA 93 Findex Group Limited v McKay (No 2) [2023] ACTSC 43 | |
| General Steel Industries Inc v Commissioner for Railways | |
| (NSW) (1964) 112 CLR 125 Gray v Sirtex Medical Ltd [2011] FCAFC 40; 193 FCR 1 House v The King (1936) 55 CLR 499 In re the will of FB Gilbert (deceased) (1946) 46 SR (NSW) 318 In the Matter of Prime City Investments Pty Ltd [2012] NSWSC | |
| 1287 | |
| Liu v The Age Company Pty Ltd (No 2) [2015] NSWSC 276 Liu v The Age Company Ltd [2016] NSWCA 115; 92 NSWLR 679 | |
| McKay v Findex Group Limited; Findex Group Limited v McKay | |
| [2023] ACTSC 58 McKay v Findex Group Limited [2022] ACTSC 191 McKay v Paule [2022] ACTCA 72 Notaras v St George Bank Ltd [2005] ACTSC 5; 157 ACTR 1 Paule v McKay [2020] ACTSC 145 Paule v McKay (No 2) [2022] ACTSC 190 | |
| Parties: | Findex Group Ltd (First Applicant) |
| Findex Services Pty Ltd (Second Applicant) Financial Index Australia Pty Ltd (Third Applicant) | |
| Spiro Paule (Fourth Applicant) | |
| Danielle Bartholomeusz nee Ludbey (Fifth Applicant) | |
| Phillip Hart (Sixth Applicant) David McKay (Respondent) | |
| Representation: | Counsel |
| M A Friedgut (Applicants) M Karam with H Rodgers (Respondent) | |
| Solicitors | |
| Harmers Workplace Lawyers (Applicants) Just Dispute Resolution (Respondent) | |
| File Number: | ACTCA 19 of 2023 |
| Decision Under Appeal: | Court: Supreme Court of the ACT |
| Before: McCallum CJ Date of Decision: 12 May 2023 | |
| Case Title: Findex Group Limited v McKay (No 3) | |
| Citation: [2023] ACTSC 108 | |
| THE COURT: |
1. This is an application for leave to appeal from an interlocutory decision of a judge of the
court (the primary judge). By that decision, the court dismissed an application made by
the applicants to reopen an earlier interlocutory decision which was said to be based
upon certain identified factual misapprehensions. The earlier interlocutory decision
involved a refusal to permit a Further Amended Statement of Claim to be filed.
2. There are six applicants for leave to appeal, Findex Group Ltd, Findex Services Pty Ltd,
Financial Index Australia Pty Ltd, Spiro Paule, Danielle Bartholomeusz nee Lubdey and Philip Hart. Unless the context requires otherwise, the applicants will be referred to
collectively as “Findex”. The respondent is a former employee who is alleged to have
sent (anonymously) disparaging correspondence to clients of Findex after he had parted
ways with Findex.
3. The reasons for both decisions were given orally but ultimately published:
(a) McKay v Findex Group Limited; Findex Group Limited v McKay [2023] ACTSC 58 (the Amendment Decision); and
(b) Findex Group Limited v McKay (No 3) [2023] ACTSC 108 (the Reopening Decision).
4. The application for leave to appeal was argued concurrently with the appeal.
5. The essential point sought to be agitated by Findex was that it had been denied
procedural fairness in the manner in which the application to reopen the
Amendment Decision was argued and decided. Further and alternatively, Findex
contended that there were a variety of House v The King (1936) 55 CLR 499 errors in
the Reopening Decision.
6. For the reasons that follow, the application for leave to appeal will be granted and the
appeal allowed.
7. The proceedings will be remitted to the Supreme Court for further determination on
whether to permit Findex to reopen.
The litigation matrix underlying this appeal
8. There are presently four different proceedings pending in the Supreme Court:
(a) the present proceedings (SC 464 of 2019) (the disparagement proceedings) which involve claims of a breach of a non-disparagement clause in a contract
between Mr McKay and the second applicant (Findex Services Pty Ltd) and
related claims of a breach of the Australian Consumer Law;
(b) search order proceedings (SC 172 of 2020) which relate to preliminary discovery proceedings and the making of search orders permitting the search
of Mr McKay’s residence;
(c) defamation proceedings (SC 11 of 2020) in which the fourth applicant (Spiro Paule) seeks damages for defamation; and
(d) trespass proceedings (SC 109 of 2020) in which Mr McKay alleges that the search of his residence was unlawful.
9. The disparagement proceedings and the other related proceedings have a very long
and tortured history. The parties have been involved in litigating various disputes against
each other since 2016. The disparagement proceedings, search order proceedings and
defamation proceedings all came to the court as a result of cross-vesting orders made
by the NSW Supreme Court.
10. The grounds of complaint on this appeal require a detailed understanding of the history
and the matters in issue in the various proceedings. It has thus been necessary to set
out that history below to a greater extent than might otherwise have been required on
an appeal from interlocutory orders. Such matters provide critical context for what
occurred before the primary judge and for understanding why error has been established
in the findings her Honour made.
11. The history of proceedings is drawn largely from the chronologies, which were included
in the appeal papers, and derived from the affidavit filed in support of the application for
leave to appeal. Some of the history of the proceedings up until 2019 was summarised
in the decision of Ward CJ in Eq in Findex Group Ltd v iiNet Ltd [2019] NSWSC 1198 at
[3]-[31] and is otherwise apparent from decisions of courts referred to in the chronology.
To the extent to which any factual material goes beyond what was before the primary
judge, it is relevant to the application for leave to appeal insofar as the primary ground
of the proposed appeal alleges a denial of procedural fairness.
The genesis of the application to reopen before the primary judge
12. The issue originally before the primary judge (on the Amendment Decision) was whether
to grant leave to Findex to further amend the claim in the disparagement proceedings.
13. Previously in October 2020, the plaintiffs had filed an Amended Statement of Claim. It
was the subject of a contested strike out and summary dismissal dispute which was
determined in July 2022: Findex Group Limited v McKay [2022] ACTSC 192. The result
of that interlocutory dispute was that one paragraph in the Amended Statement of Claim
(paragraph 110) which pleaded the claim for damages was struck out, because it
contained a “rolled up broad summary” and did not comply with r 417 of the Court
Procedures Rules 2006 (ACT).
14. No direction was made setting a timetable for filing a further pleading to accommodate
the fact that paragraph 110 had been struck out. However, Findex indicated an intention
to replead paragraph 110 at a directions hearing before the primary judge on
15 December 2022. At that time, the primary judge directed that Findex file the proposed
Further Amended Statement of Claim in the disparagement proceedings by 10 February 2023 and that Mr McKay notify any objections to that pleading by
24 February 2023. The latter date was subsequently proposed by Findex to be amended
to 3 March 2023.
15. On 16 February 2023, Findex filed an application for leave to file a Further Amended
Statement of Claim. The grounds for that application included that the plaintiffs “seek to
amend the amended statement of claim filed 9 October 2020 to replead and further
particularise and further clarify their damages claim in the light of the orders and reasons
of McWilliam AsJ dated 27 July 2022, and to update and correct the current positions
held by some of the individual plaintiffs”.
In lieu of the previous single paragraph 110 that had been struck out, Findex’s proposed
Further Amended Statement of Claim pleaded the following damages components:
(a) a claim to recover as damages the costs incurred in the search order proceedings (new paragraphs 109.1-109.19) (“costs claim”); and
(b) a claim to recover damages for certain losses incurred in relation to the acquisition of Moore Stephens (Queensland) Limited, (new paragraphs 109.20
to 109.27) referred to as the “Moore Stephens” damages claim.
The decision under appeal
17. The primary judge refused leave to permit the proposed amendments. Findex sought
leave to reopen that decision and a question about the power to make the orders sought
was argued. The primary judge declined to make the orders sought. The detail of the
arguments and the primary judge’s reasons in respect of both the Amendment Decision
and Reopening Decision appears below. Leave is only sought to appeal the Reopening
Decision.
Ruling on additional evidence
18. At the hearing, counsel for Findex sought to put before the court for the purposes of the
appeal certain additional documents that were not before the primary judge. Some of
that material was relevant to the claim of a denial of procedural fairness. It is open to
admit such material notwithstanding that it was not before the primary judge as it was
relevant to establishing that denial. The balance of the material will not be admitted.
Some of the documents may become relevant to a question of costs but are not
admissible at this stage.
19. The documents that will be admitted are the documents behind tabs 2, 3, 7 and 9 of the
“Revised Folder of the Appellants’ additional materials”.
Should leave to appeal be granted?
20. The application before the court is an application for leave to appeal from an interlocutory
judgment on a discretionary matter involving a question of practice and procedure. Each
of the integers of this concept mean that the court should be reluctant to grant leave:
(a) the decision is interlocutory; (b) the decision is on a matter of practice and procedure; and (c) the decision involves the exercise of discretion. See In re the will of FB Gilbert (deceased) (1946) 46 SR (NSW) 318 at 323.
21. More generally, the principles applicable to a grant of leave to appeal are summarised
in McKay v Paule [2022] ACTCA 72 at [24]. Particularly in a case such as the present,
which has been contested in every possible way at every stage, the court must be
reluctant to allow decisions of single judges to be made the subject of review, because
to do so fragments proceedings and renders proper and timely case management even
more difficult than it already is.
22. In the circumstances of this case, for the reasons set out below, the primary judge made
errors of fact in circumstances where, through a combination of circumstances, Findex
was denied procedural fairness. The denial of procedural fairness was one which
warrants a grant of leave to appeal. It affected the manner in which the court addressed
an application to amend pleadings in a way which may ultimately be of significance to
the plaintiffs and have the effect of occasioning a substantial injustice. In those
circumstances, notwithstanding the general strong reluctance of a court of appeal to
grant leave to appeal in matters of practice and procedure involving the exercise of a
discretion, leave to appeal should be granted.
Proposed grounds of appeal
23. The draft Notice of Appeal is 37 pages long. It should be trite to observe that, as a matter
of generality, a Notice of Appeal of such length is unhelpful. That unhelpfulness is
manifest in this case by the manner in which the grounds of appeal are drafted. There
are 13 grounds of appeal, all except one of which is elaborated upon in multiple
subparagraphs. Many of the grounds are replete with chaff amongst which it is difficult
to find the wheat.
24. For the purposes of the present application, it is only necessary to deal with four of those
grounds, which may be summarised as two complaints:
(a) that the primary judge denied Findex procedural fairness in the manner in which she dealt with the reopening application; and
(b) that the Reopening Decision involves errors of fact which affected the exercise of discretion.
25. Both a denial of procedural fairness or a House v The King error ((1936) 55 CLR 499 at
504-505) (which includes a mistake as to the facts) provide a basis for appellate review
of a discretionary decision such as that in the present case.
Was there factual error or a denial of procedural fairness in the
Reopening Decision?
26. In reaching the conclusion that she did in the Reopening Decision, the primary judge
made a number of errors of fact. The making of those errors of fact arise from a
combination of circumstances which, in aggregate, indicate that by the time the
application for reopening was determined, Findex had been denied procedural fairness.
27. The reasons that follow will first explain the history of the litigation, then explain the
findings and identify the errors in the reasons given by the primary judge, and then
explain why the combination of circumstances leading up to the determination of that
application involved a denial of procedural fairness.
Commencement of the search order proceedings
28. On 9 September 2016, Findex commenced proceedings in the NSW Supreme Court for
preliminary discovery against iiNet, iiNet (Ozemail) Pty Ltd and LinkedIn for the purposes
of discovering the identity of the person responsible for certain damaging publications
about them. On 13 September 2016, the NSW Supreme Court (McDougall J) made
orders in the search order proceedings granting four of the present applicants
preliminary discovery from three internet service providers. On 16 September 2016, the
court (Rein J) made orders authorising the search of the respondent’s home. That
search order was executed on 20 September 2016. The documents obtained during the
search were held in the possession of an independent solicitor.
29. On 22 September 2016, Mr McKay was joined as a defendant in the search order
proceedings.
30. On 31 October 2016, Mr McKay filed a motion seeking an order that production
inspection of approximately 75 percent of the seized documents be refused to any party (McKay motion). Consent orders were made preventing access to the
Disputed Documents pending determination of that motion. The documents to which no
objection was taken (Undisputed Documents) were provided to Findex’s solicitors,
subject to a Harman undertaking.
31. At the instigation of Mr McKay, ASIC became involved in the proceedings in
November 2016 and filed a separate motion, claiming public interest immunity in relation
to certain documents (ASIC motion).
32. On 16 December 2016, a confidentiality regime was established to permit the legal
representatives of Findex to view certain documents so as to be able to address the
McKay motion.
33. On 28 April 2017, ASIC’s application in relation to public interest immunity over
38 documents was heard by Ward CJ in Eq. Judgment was delivered on 30 June 2017:
Findex Group Ltd v iiNet Ltd (Application by ASIC) [2017] NSWSC 853. A further
judgment was handed down in relation to the public interest immunity documents on
11 August 2017: Findex Group Ltd v iiNet Ltd (Application by ASIC) (No 2)
[2017] NSWSC 1048.
34. In November 2017, there was correspondence between the parties as to whether or not
causes of action arising out of the documents seized should be added to pre-existing
Federal Court proceedings brought by Findex against Mr McKay relating to breaches of
a shareholder agreement and the Corporations Act 2001 (Cth). No agreement was
reached.
35. In January 2018, Findex filed a motion seeking that the McKay motion be dismissed for
want of prosecution. Findex also sought consent that would allow the
Undisputed Documents to be used in the Federal Court proceedings. Mr McKay did not
consent. Instead, he filed a motion seeking that the search order be discharged and all
copies of the seized documents be returned. Mr McKay declined invitations to have the
consolidation of the various issues in one proceeding in the Federal Court.
36. On 24 April 2018, the hearing of the Findex January 2018 motion and the McKay
February 2018 motion commenced. The proceedings were adjourned until
September 2018.
37. In June 2018, the confidentiality regime was varied to permit junior counsel for Findex
to review the documents the subject of the McKay motion. Later, senior counsel was
also included.
38. In July 2018, Findex filed an amended notice of motion seeking release from the Harman
undertaking in relation to the documents seized pursuant to the search order.
39. In September 2018, the adjourned hearing recommenced before Ward CJ in Eq. The
position of Findex was that it wished to review the documents before instituting its
proceedings.
40. In October 2018, judgment was delivered by which Ward CJ in Eq refused Findex access
to the Disputed Documents: Findex Group Ltd v iiNet Ltd [2018] NSWSC 1567. The
judgment did not relate to the Harman undertaking in relation to the
Undisputed Documents as that issue had been deferred by consent. Findex sought
leave to appeal from that decision.
41. The application for leave to the Court of Appeal was heard on 2 April 2019 and that
application was dismissed on 3 May 2019: Findex Group Ltd v McKay [2019] NSWCA
93.
Commencement and cross-vesting of the disparagement proceedings
42. In March 2019, a Statement of Claim was filed in the NSW Supreme Court. This was the
commencement of the current proceedings, being the disparagement proceedings. It
was filed with the intention that it be stayed pending the determination of the application
for leave to review and deploy the seized documents in the search order proceedings.
43. On 20 June 2019, orders for the cross-vesting of the disparagement proceedings to the
ACT Supreme Court were made by consent. These were given the file number
SC 464 of 2019.
The release of the Harman undertaking in respect of the documents seized in the search
order proceedings
44. On 28 May 2019, Findex notified Ward CJ in Eq that it intended to proceed with the
application that had been deferred by consent for release of the Harman undertaking.
The evidence in support of that application included an affidavit filed on 7 June 2019
annexing a proposed Amended Statement of Claim, which included as a particular of
damages a claim in the following terms:
In addition, Findex, on its own behalf, and on behalf of each of the plaintiffs, incurred substantial expense in investigating the source of the anonymous and pseudonymous representations as foresaid and in taking action in relation to them.
45. Directions were made on 20 June 2019 (when the disparagement proceedings were
cross-vested to this jurisdiction) in relation to the application for a release of the Harman undertaking and the motion relating to the documents sought by Mr Paule. The
hearing of those applications occurred before Ward CJ in Eq on 24 June 2019. Her
Honour reserved judgment.
Commencement and cross-vesting of the defamation proceedings
46. Two weeks after judgment was reserved, Mr Paule made an urgent application for
interim orders to be made to permit the filing of a Statement of Claim (which later became
the defamation proceedings) because of the imminent expiry of a limitation period. There
was an urgent hearing on 15 July 2019, following which Ward CJ in Eq gave Mr Paule
leave to file a Statement of Claim for defamation on a provisional and conditional basis
pending delivery of her Honour’s judgment in the application for release of the Harman
undertaking.
47. Ward CJ in Eq ultimately delivered judgment on 11 September 2019, granting release
from the Harman undertaking in relation to specific documents and making orders for
the return or destruction of other seized documents subject to certain undertakings by
Mr McKay’s solicitors: Findex Group Ltd v iiNet Ltd [2019] NSWSC 1198. The costs of
the search order proceedings, and their future determination, was very much a matter
in contemplation as indicated by [164] of her Honour’s judgment:
The qualification I add to this is that I consider that Mr McKay’s legal representatives should
retain a complete record of the material served or filed in the Court proceedings at least for the duration of the respective sets of proceedings now on foot (such that, if necessary, access could be made to that in the future whether for costs assessment purposes or otherwise). An undertaking to that effect (in relation to the Annexure C document) was proffered by the solicitors and I consider that such an undertaking is acceptable (though I will require an extension of the undertaking to cover not just the Cross-Vested Proceedings but also the Defamation Proceedings now on foot).
(Emphasis added.)
48. The reference to the “Cross-Vested Proceedings” was a reference to the disparagement
proceedings. Part of the orders made by her Honour included a requirement that
Mr McKay’s solicitors provide a written undertaking to retain a complete copy of all
documents filed and served in the search order proceedings and of the “Subject
Documents” until the final disposition of the disparagement proceedings and the
defamation proceedings and any appeals therefrom.
49. In September 2019, there were further orders consequential upon the decision of
Ward CJ in Eq.
50. There was an issue about whether the defamation proceedings should also be
cross-vested. On 11 October 2019, Hoeben J determined that the question of cross-vesting should be determined prior to the question of the extension of the limitation
period. Further orders were made by Hoeben J on 21 October 2019. An application to
cross-vest the defamation proceedings was filed on 6 November 2019.
51. On 19 November 2019, Mr McKay indicated that he would consent to the cross-vesting
of the defamation proceedings and orders were made to that effect on
22 November 2019.
Cross-vesting of the search order proceedings
52. On 20 December 2019, Mr McKay indicated his intention to seek to enforce the
undertaking as to damages and hence orders were made by Ward CJ in Eq that the
exhibits be retained on the court file.
53. On 13 March 2020, Mr McKay filed a motion in the NSW Supreme Court seeking an
enquiry as to damages in the search order proceedings.
54. On 1 April 2020, Ward CJ in Eq transferred the search order proceedings to the
ACT Supreme Court. They became proceedings SC 172 of 2020.
Continuation of the disparagement proceedings in the ACT Supreme Court
55. On 12 November 2019 and following the transfer to this Court, Findex filed an application
to amend the Statement of Claim in the disparagement proceedings. The proposed
amendments were to include the documents over which a Harman release had been
granted by Ward CJ in Eq and other amendments consequential on the cross-vesting of
the proceedings. The proposed amended Statement of Claim included, as a particular
to paragraph 110, the following allegation:
In addition, Findex, on its own behalf, and on behalf of each of the plaintiffs, incurred substantial expense in investigating the source of the anonymous and pseudonymous representations as foresaid and in taking action in relation to them.
56. On 20 December 2019, pursuant to orders made by consent on 15 November 2019,
Mr McKay served a “schedule of concerns” or “concerns notice”relating to the proposed
Amended Statement of Claim in the disparagement proceeding. That included a
statement that:
The defendant does not consider that any AON v ANU like issues arise given that no defence has yet been filed. Therefore, there is the opportunity for the plaintiffs to amend the statement of claim as they see fit, but in a way that fulfils the functions of pleadings as set out in paragraph 4 above and consistent with the applicable rules of court.
57. On 6 April 2020, Mr McKay filed an application seeking that the disparagement
proceedings be summarily dismissed, struck out or permanently stayed. Mr McKay filed
an amended application, seeking the same relief but on additional grounds, on
22 June 2020.
58. On 2 October 2020, McWilliam AsJ gave Findex leave to file an Amended Statement of
Claim subject to Mr McKay’s then pending strike out application. The Amended
Statement of Claim was filed on 9 October 2020. It contained particulars to
paragraph 110 in the same terms as had been contained in the version of the pleadings
provided to Mr McKay in June 2019 (see [44] above) and November 2019 (see [55]
above).
59. The hearing of Mr McKay’s summary dismissal application commenced on
4 February 2021 and continued on 24 March 2021. The parties then engaged in a
regime for written submissions, which concluded on 9 November 2021. Judgment on
the application was then reserved.
Continuation of the defamation proceedings in the ACT Supreme Court
60. On 17 February 2020, Mr Paule filed an application for an extension of time in the
defamation proceedings. Following directions made by Crowe AJ on 1 May 2020, the
application was split into a hearing dealing with the proposed amendment of the
Statement of Claim, and a separate hearing dealing with the remaining issues relating
to the extension of the limitation period.
61. On 7 May 2020, Crowe AJ heard Mr Paule’s application for leave to file an Amended
Statement of Claim in the defamation proceedings. On 5 June 2020, Crowe AJ gave
judgment in favour of Mr Paule, permitting him to file an Amended Statement of Claim:
Paule v McKay [2020] ACTSC 145, subject to determination of the limitation question.
62. On 31 August 2020, McWilliam AsJ commenced hearing Mr Paule’s application for an
extension of time to commence his defamation proceedings.
On 28 October 2021, the application for an extension of time in Mr Paule’s defamation
proceedings was further heard by McWilliam AsJ. The application had been put on hold
since the earlier hearing because the parties were, evidently unsuccessfully, attempting
to settle the proceedings. Judgment was reserved.
Commencement of the trespass proceedings
64. On 24 March 2020, Mr McKay served further proceedings alleging trespass arising out
of the execution of the search order. They are the trespass proceedings
(SC 109 of 2020). On 9 June 2020, Findex filed an application seeking to summarily
dismiss, strike out or permanently stay the trespass proceedings.
65. On 17 February 2021, McWilliam AsJ commenced hearing Findex’s application to
summarily dismiss the trespass proceedings.
66. On 15 November 2021 (and following the unsuccessful settlement negotiations), there
was further argument before McWilliam AsJ on Findex’s application to dismiss the
trespass proceedings. Judgment was reserved.
The combined progress of the litigation from July 2022
67. On 27 July 2022, McWilliam AsJ delivered judgment in the trespass proceedings:
McKay v Findex Group Limited [2022] ACTSC 191, in the disparagement proceedings:
Findex Group Limited v McKay [2022] ACTSC 192 and in the defamation proceedings:
Paule v McKay (No 2) [2022] ACTSC 190. In the disparagement proceedings,
paragraph 110 of the Amended Statement of Claim was struck out but Mr McKay’s
application was otherwise dismissed. As we have said, paragraph 110 was struck out
because it was a “rolled up broad summary” and did not comply with r 417 of the
Court Procedures Rules 2006 (ACT). There were directions about exchanging
submissions on costs. No direction was made setting a timetable for filing a further
pleading to accommodate the fact that paragraph 110 had been struck out.
68. In the trespass proceedings:
(a) On 31 August 2022, Mr McKay filed an Amended Statement of Claim and Originating Application.
(b) On 29 November 2022, Findex served an application to strike out or summarily dismiss the Amended Statement of Claim filed.
(c) On 16 March 2023, the Findex strike out application in the trespass proceedings was heard before the primary judge. Reasons were delivered as part of the
Amendment Decision on 23 March 2023.
69. In the search order proceedings orders had been made as part of the judgment in the
trespass proceedings on 27 July 2022 that the search order proceedings would travel
together with the trespass proceedings.
70. In the defamation proceedings:
(a) On 12 October 2022, Mr McKay filed an application for leave to appeal from McWilliam AsJ’s 27 July 2022 judgment.
(b) On 7 December 2022, Mossop J heard Mr McKay’s application for leave to appeal.
(c) On 22 December 2022, Mossop J dismissed the application for leave to appeal in the defamation proceedings that had been filed on 12 October 2022: McKay
v Paule [2022] ACTCA 72.
71. In the disparagement proceedings:
(a) On 15 December 2022, there was a directions hearing before the primary judge in which Findex indicated an intention to replead paragraph 110. Findex was
directed to file the proposed Further Amended Statement of Claim in the
disparagement proceedings by 10 February 2023. Mr McKay was directed
notify any objections by 24 February 2023. The latter date was subsequently
proposed by Findex to be amended to 3 March 2023.
(b) The issue of costs in the disparagement proceedings continued to be agitated before McWilliam AsJ in February 2023, with judgment delivered on
10 March 2023 determining the question of costs of the summary dismissal
application in favour of Findex: Findex Group Limited v McKay (No 2)
[2023] ACTSC 43.
(c) On 16 February 2023, Findex filed an application for leave to file a Further Amended Statement of Claim. The grounds for that application included that
the plaintiffs “seek to amend the amended statement of claim filed
9 October 2020 to replead and further particularise and further clarify their
damages claim in the light of the orders and reasons of McWilliam AsJ dated
27 July 2022, and to update and correct the current positions held by some of
the individual plaintiffs”. The amendments included the search order damages
and Moore Stephens damages components referred to at the outset of these
reasons (see [16] above).
(d) On 10 March 2023, Mr McKay notified grounds of objection to the proposed Further Amended Statement of Claim. In relation to the search order damages
claim, it was said “the proposed further amended statement of claim seeks to
improperly introduce a claim for legal costs in a matter still on-foot – SC172/20.”
The amendment application in the disparagement proceedings was put over
until 22 March 2023.
(e) On 22 March 2023, the hearing of the amendment application in the disparagement proceedings occurred before the primary judge as described in
more detail below.
(f) On 23 March 2023, the primary judge gave oral reasons for dismissing the application and directed the parties to bring in short minutes in accordance with
those reasons.
(g) On 11 April 2023, there was a directions hearing before the primary judge. (h) On 28 April 2023, Findex filed an application seeking to reopen the Amendment Decision to the extent necessary to permit the filing of a Further
Amended Statement of Claim and the hearing of each of the matters before the
court by a single judge with evidence in one to be evidence in each other.
(i) On 3 May 2023, there was a directions hearing before the primary judge.
(j) In relation to the reopening application, written submissions were provided by the parties and the hearing of the 28 April 2023 application occurred on
11 May 2023. On 12 May 2023, the primary judge dismissed the application
and gave her reasons orally.
(k) The present application for leave to appeal was filed on 19 May 2023.
Events leading up to the decision on 12 May 2023
72. Having provided an overview of the procedural history of the various proceedings since
the initial publications in 2016, it is necessary to describe in more detail what occurred
in the disparagement proceedings in the lead up to the decision which Findex wishes to
appeal.
The hearing on 15 December 2022
73. There was a directions hearing on 15 December 2022 before the primary judge. During
the course of that directions hearing there was some discussion of the procedural
background to the proceedings. Reference was made to a decision of Ward CJ in Eq in
2018. Counsel for Findex offered to prepare a detailed chronology because “there is so
much evidence – it may well be that your Honour may be assisted by a detailed
chronology”. Her Honour declined the offer saying that she would “get across enough of
the background if I have those key judgments identified”.
74. On 15 December 2022, the primary judge made directions which included requiring the
plaintiffs in the disparagement proceedings to file an application for leave to file their
proposed Further Amended Statement of Claim and for the defendant to notify the
plaintiffs of any objections to that document. A date was provided for the matter to be
argued in the event that agreement could not be reached.
Application in proceeding dated 16 February 2023
75. This application sought leave pursuant to rr 501, 502 and 504 to file a Further Amended
Statement of Claim annexed to the application.
76. The document attached to the application was marked up in both red and green. The
red amendments were amendments already made pursuant to leave granted by
McWilliam AsJ on 2 October 2020. The green amendments were those for which leave
was sought in the 16 February 2023 application.
Correspondence prior to hearing
77. The orders made on 15 December 2022 required that Mr McKay notify Findex of any
objections to the proposed amended pleadings by 24 February 2023, later proposed by
Findex to be amended to 3 March 2023.
78. The defendant declined to notify the plaintiffs of his objections. Instead, he adopted an
ambiguous position which only crystallised into opposition on 10 March 2023. The
position initially adopted on 2 March 2023 contemplated that pleading issues could be
preserved until the final hearing and the making of the amendment not opposed.
However, on 10 March 2023, that position changed with various objections being
notified. The only ground for opposition to the costs claim component of the pleadings
was that the claim “seeks to improperly introduce a claim for legal costs in a matter still
on-foot - SC172/20”.
There was also a reference to the “Moore Stephens” damages which were said to have
been matters which ought to have been identified during the course of the strike out
application. The grounds did include generalised complaints about delay but no specific
complaint about prejudice.
80. On the evening before the hearing on 22 March 2023 the solicitor for Findex
communicated with the primary judge’s associate, asking if arrangements could be
made to have the affidavits referred to in paragraphs 5-6 of the affidavit of Lauren
Brouwer-French dated 21 March 2023 (an affidavit filed in response to an affidavit to be
relied upon by Mr McKay) available in court.
The hearing on 22 March 2023
81. At the commencement of the hearing the primary judge indicated that the estimate for
the proceedings was two hours and that she would keep the parties to that estimate.
82. Counsel for Findex read the affidavit of Lauren Brouwer-French dated 16 February 2023.
83. There was an objection to paragraphs 9 and 24 and her Honour indicated that she would
read those paragraphs as a submission.
84. Counsel for Mr McKay read the affidavit of Bede Webster dated 22 June 2020 other than
paragraphs 6-8 and did not tender annexures A and B to that affidavit.
85. Counsel for Findex read in reply the affidavit of Lauren Brouwer-French dated
21 March 2023 except for paragraphs 9-26. In relation to that affidavit, her Honour
indicated that she was “not quite sure what any of this goes to” as it described procedural
history. She asked counsel for Findex to go to the “main game, about paragraph 110
and the new pleading”. Counsel for Findex indicated that he was happy to leave the
contents of that affidavit in reply and see whether counsel for Mr McKay made any
submissions which required him to address it.
86. Counsel for Findex indicated that McWilliam AsJ had struck out paragraph 110 and that
the amended pleading was in order to make the damages claim as clear as possible.
The additional paragraphs 109.1-109.27 were intended to outline the basis upon which
contract damages or damages because of the misleading conduct were claimed. The
primary judge summarised the amendments as being that the plaintiffs in the preliminary
discovery proceedings (being the search order proceedings) were claiming from
Mr McKay the costs of bringing those proceedings. Her Honour queried as to how any
party other than the plaintiffs to the preliminary discovery proceedings could claim
damages. Her Honour queried where the losses suffered by each individual plaintiff were
explained in the paragraphs and whether that was sufficient to let the defendant know
the case it had to meet.
87. Counsel made brief reference to the “Moore Stephens” damages claimed at paragraphs
109.20-109.27. Her Honour asked how aggravated damages might be claimed for a
breach of contract that some of the parties were not party to. Counsel indicated that that
was claimed both as a matter of contract and under the Australian Consumer Law.
88. Her Honour invited counsel to address other issues in reply.
89. Counsel for Mr McKay articulated two broad bases upon which the application was
opposed. The first was that the amendments were deficient as a matter of form and the
second were discretionary reasons.
90. So far as the first was concerned, he submitted that the pleading did not do what
McWilliam AsJ had required to be done in relation to paragraph 110. He made the
following submissions:
(a) It was unclear how five of the six plaintiffs were bringing claims in circumstances where the sixth was suing as a trustee of such claims.
(b) The pleading was defective because it did not indicate who in fact spent the money that was claimed by way of costs.
(c) There was a question as to whether aggravated damages could be claimed by the contractual party where the damages held in trust are those of individuals.
(d) In respect of paragraphs 102 and 103, the pleading did not disclose how the claim of mental distress arose. It was inappropriate to have individuals seeking
a global sum for hurt feelings, humiliation and embarrassment which would
necessarily be the subject of an individual enquiry in relation to each of them.
(e) Almost seven years after the event and four years after the proceeding was commenced, Findex was pleading, for the first time, a claim for costs. The claim
for costs was “all brand-new” and had “never been raised at any time of the last
four years”. Issues of “efficiency” “would be a reason in itself to [refuse] it”.
Costs issues were at large in the [search order] proceedings still before the
court. It would be “a two-week trial about what went on in the New South Wales
Supreme Court”.
(f) The discretionary point was that there is no explanation in the affidavit in support as to why it was not flagged that any stage in the four years that the
proceedings have been on foot. The explanation in the affidavit in support was
that the additional pleading was to further particularise and clarify the damages
claim and to update and correct the current positions held.
(g) Two new entities were being added to the pleadings in paragraphs 3.1 and 3.2 without a proper explanation.
(h) The claim for time spent by a Rosario Patane was “novel as well”. (i) Paragraph 109 should be refused altogether.
(j) The attempt to particularise paragraph 110 was inadequate because there was still no individual particularisation of what loss had been sustained by which
plaintiffs.
91. Counsel for Mr McKay then made submissions in relation to some proposed orders
which would have given the plaintiff the opportunity to plead paragraph 110 “in a way
that does indicate the loss and damage that has been suffered by each of them”.
92. In submissions in reply, counsel for Findex addressed a number of the submissions that
had been made by Mr McKay. He submitted:
(a) In relation to the suggestion that it was a new claim, the struck through words in the proposed Amended Statement of Claim that indicated that a claim for
“substantial expenses investigating the source of the anonymous and
pseudonymous representations” was a pre-existing claim.
(b) The plaintiffs have in no way been responsible for any delay in this case. It was only in September 2021 that all of the documents which had been seized in the
search were obtained. In March 2019 proceedings had been commenced but
“were, in effect, put on hold pending the determination of Mr McKay’s
applications which were to prevent Findex … from having access to the
documents”. Those applications were only finally determined in
September 2021.
(c) In response to a question from the primary judge about the delay from 27 July 2022, counsel referred to the evidence in reply and submitted that there
were very substantial things happening, there was no delay and referred to
paragraphs 31-45 of Lauren Brouwer-French’s affidavit of 21 March 2023. He
submitted that the plaintiffs had never been criticised for any type of delay.
(d) The plaintiff was attempting to clarify the damages paragraph which was always there.
(e) In response to the contention that it was novel for damages like that to be claimed in a case like this, he submitted that this was a matter for trial and the
damages either flowed directly or were in the reasonable contemplation of the
parties.
(f) In answer to a question from the primary judge as to why the parties who were not privy to the contract were parties to the proceeding, he referred to the
pleading in paragraph 17 which explained the alternative bases upon which the
claim was put.
93. The primary judge asked whether the 9 October 2020 claim was the first time that the
claim for investigation costs had appeared on the pleadings. Counsel indicated that it
was the first time. The primary judge also enquired whether Findex accepted that each
of the matters in paragraph 109 would have to be proved, whereas otherwise they would
be left to an assessor. Counsel indicated that there would have to be a determination
whether Findex was entitled to the costs incurred in those preliminary discovery
proceedings and pointed out that whether or not such an order was made may be
affected by the orders made in the subsequent proceedings.
94. Counsel for Mr McKay was then asked about the 9 October 2020 pleading and what
submission he had in relation to the claim included in the 9 October 2020 version. He
was also asked about how the costs of preliminary discovery proceedings should be
dealt with. During the course of his submissions, he indicated that Mr McKay was not
even a part of the preliminary discovery proceedings as opposed to the proceedings that
followed relating to access to documents.
95. Her Honour indicated that she would give her reasons orally the next day. At the end of
the hearing, counsel for Findex gave her Honour some references to cases including
the line of authority that resulted in Gray v Sirtex Medical Ltd [2011] FCAFC 40; 193
FCR 1.
The Amendment Decision – 23 March 2023: [2023] ACTSC 58
96. At 3pm the next day her Honour delivered her reasons orally. Those reasons related to
an application that had been heard on 16 March 2023 in relation to the trespass
proceedings as well as the application that had been heard the previous day in relation
to the disparagement proceedings.
97. The reasons in relation to the trespass proceedings were given first. Her Honour then
turned to the disparagement proceedings. She recited the history leading to the
application to file an amended pleading. She referred to the two principal contentions in
opposition to the grant of leave namely, first, that the pleading was deficient and did not
address the deficiencies identified by McWilliam AsJ, and second, that as a matter of
discretion the court should refuse leave because the amended pleading travels “well
beyond” what was contemplated by McWilliam AsJ.
98. So far as the continued pleading deficiencies were concerned:
(a) Her Honour agreed that the introduction of the additional entities without any attempt to make them parties to the proceedings was confusing and
embarrassing.
(b) Her Honour found that the individual claims made by each plaintiff had been made “more confused” by the amended pleading and gave two examples of
how that was the case.
(c) So far as the second complaint was concerned, her Honour identified that this complaint related to paragraphs 109.1-109.19. She recorded the submission
as being that the claim was “entirely new”, that it was large in scope and the
court was already seized of the issue in separate proceedings.
99. Her Honour then referred to the submissions made by counsel for Findex. She recorded
counsel’s submission that the costs claim had been included in the Amended Statement
of Claim but found that that “it was a proposed amendment which was not allowed” and
that “There has never previously been on the pleading a claim for the costs of the
preliminary discovery proceedings as part of the damages in the disparagement
proceedings” (at [73]).
100. The primary judge then found that it was “an allegation of extremely large scope” and
that to permit the parties to make that claim at this stage “would, in effect, see this Court
perhaps not fully rehearing those proceedings but certainly hearing a very large scope
of evidence as to the course of those proceedings” (at [73]). On that point she said “the
sheer size of the claim and the extent to which it will expand the scope of these
proceedings, when a remedy is available to the Findex parties by the mechanism of
obtaining a costs order in the preliminary discovery proceedings, affords a reason for
exercising the discretion not to permit the amendment at this very late stage of the
proceedings” (at [74]). The reference to “late stage” was clarified as being “the time that
has elapsed since the proceedings were commenced without the pleadings progressing
in any way”. She described the submission made on behalf of Findex as “that the Findex
parties are not responsible for any delay; they commenced proceedings in March 2019
but only obtained the documents required to prosecute them in 2021 and that the
proceedings were “put on hold” by Mr McKay’s fight to get the documents back”.
However, she said “It is not possible, on an application of the present kind, to explore
the merits of that kind of assertion. The simple fact is that what is sought to be introduced
now is an extremely large additional claim as to which the plaintiffs require leave and as
to which the scope of the claim would be so large as to warrant rejection at this stage”
(at [76]).
101. Her Honour then referred to the authorities provided by counsel for Findex including
Gray v Sirtex and indicated that “None of those authorities supports the proposed claim
here, where the costs of earlier proceedings against Mr McKay are sought as damages
and later proceedings against him” (at [79]) (emphasis in original). Her Honour indicated
that the application of the General Steel test (General Steel Industries Inc v
Commissioner for Railways (NSW) (1964) 112 CLR 125) was not appropriate as what
was being sought was “an indulgence to expand the scope of their claim in the context
of the very complex litigation in cross-litigation between these parties which, in my view,
will unduly expand the scope of these proceedings” (at [80]). Her Honour indicated that
her consideration of paragraphs 109 and 110 failed to address the concerns of
McWilliam AsJ at [94]-[105] of the earlier judgment.
102. Her Honour indicated that she intended to refuse leave to file the Further Amended
Statement of Claim but would make orders as suggested by counsel for Mr McKay, in
particular, an order that would permit Findex to plead paragraph 110 in a way that does
indicate the loss and damage that has been suffered by each of the parties and makes
appropriate differentiation between them. Her Honour directed the parties to bring in
short minutes of order in accordance with those reasons and listed of the matter on
11 April 2023 for further directions.
103. Immediately upon the conclusion of the giving of those reasons, counsel for Findex drew
her Honour’s attention to two matters. He said that he was doing so under the slip rule.
One matter was in relation to the disparagement proceedings and one in relation to the
trespass proceedings. So far as the disparagement proceedings were concerned, he
drew attention to the fact that the reasons had indicated that the statement claiming
damages for expenses was not part of the Amended Statement of Claim but rather a
proposed Amended Statement of Claim. Her Honour indicated that she understood that
the strike out application was taken as a proxy for or coinciding with the issue of leave
to amend and paragraph 110 was the paragraph that her Honour did strike out. Counsel
for Findex indicated that her Honour was correct except that the basis of
McWilliam AsJ’s decision was not the particular in the pleading raising the costs as
damages claim. Counsel indicated that he wanted to check whether or not the particular
paragraph had in fact been crossed out earlier. Her Honour indicated that if that was the
case then it was not really a slip rule matter, but did note that Findex’s position was
protected in that “it is noted that I may have proceeded on a misapprehension”. Counsel
then referred to an issue arising in relation to the trespass proceedings. There was then
discussion of an appropriate date and 11 April 2023 was settled upon.
The hearing on 11 April 2023
104. On 11 April 2023, senior counsel who then appeared for Findex said that the written
reasons had been published the previous Wednesday and that the Findex interests
wished to consider “whether to draw to your Honour’s attention some matters that may
have been overlooked in your Honour’s reasons”. Her Honour queried what process was
proposed, whether it was an application of the slip rule or the court’s power to set aside
an order before it is entered. Senior counsel said, “I’ll need to hunt up the authorities
that express the discretion that we are seeking to invoke.” Her Honour made reference
to the decision of the High Court in Autodesk Inc. v Dyason (No 2) (1993) 176 CLR 300
and the power in r 1613 of the Court Procedures Rules. Her Honour indicated “I should
indicate for your benefit I would take some persuading that it wasn’t preferable for you
simply to bring forward the amended pleadings.” She indicated that the proceedings
“have been sitting in the court’s lists for years” and that the only order that she had made
was for the parties to bring in short minutes. Her Honour said “if there’s an issue about
the scope of the amendment I have foreshadowed will be permitted in my judgment,
bring forward an amended pleading and let’s argue about it. But these parties have to
get on with these proceedings.” Her Honour later indicated that if a direction was sought
that was dealt with in the judgment, then “you would need to argue the Autodesk kind of
argument”. The matter was then listed on 26 April 2023.
The application dated 28 April 2023
105. The matter does not appear to have been heard on 26 April 2023. On 28 April 2023, the
Findex parties filed an application in proceeding. The application in proceeding sought
the following orders:
1. Order that the interlocutory direction made on 23 March 2023 that the parties agree Short Minutes of Order giving effect to the reasons orally published on that day (the Reasons) be vacated in so far as may be necessary for the purpose of making Orders 2 and 3 below;
2. Order pursuant to Rules 501 and/or 502 and/or 503 of the Court Procedure Rules 2006 (ACT), and/or pursuant to the inherent jurisdiction of the Court, that leave be granted to the plaintiffs to file the Further Amended Statement of Claim (FASOC) annexed to this application;
3. Order pursuant to Rule 270(2)(b) of the Court Procedure Rules 2006 (ACT) that these proceedings be heard together with proceedings SC172 of 2020 (the Undertaking Proceedings), SC11 of 2020 (the Defamation Proceedings) and SC109 of 2020 (the Trespass Proceedings), and that evidence in one proceeding be the evidence in each of the other proceeding;
4. Costs;
5. Further or alternative relief.
106. The grounds were set out in that application at great length. The grounds identified six
assumptions underlying the reasons which were said to be incorrect. In summary, they
were that:
(a) The costs claim was raised for the first time in the proposed Further Amended Statement of Claim, it was “entirely new” and made “at a very late stage” of the
proceedings.
(b) That the costs claim did not form part of the Amended Statement of Claim filed on 9 October 2020.
(c) That it was not possible to explore the merits of the submission on behalf of Findex that Findex was not responsible for the claim being made at this stage
of the proceedings.
(d) That the costs claim gave rise to a claim of “extremely large scope”. (e) That the Further Amended Statement of Claim failed to specify whether the claims for damages were based upon the plaintiff’s contractual claim or
statutory cause of action.
(f) That the introduction of “further parties” was confusing and embarrassing without making any attempt to make them parties to the proceedings.
107. The basis for the contention that the assumptions were incorrect were set out at great
length in the application. However, the statutory or other basis for the court to reopen an
interlocutory decision was not articulated in the application.
The hearing on 3 May 2023
108. At the commencement of the hearing on 3 May 2023, the primary judge indicated that
she had been provided with “duelling short minutes of order”. She asked senior counsel
who then appeared for Findex to go first because “it is not clear to me what is the basis
on which the court would revisit the judgment” and “I think I’d want to be persuaded that
order one is appropriate, that that is having regard to the principle of finality and the
consideration of that principle in the decision of the High Court in Autodesk v Dyason”.
109. Counsel for Mr McKay had suggested that there be no written submissions “in order to
not have this balloon out too much” but agreed that “some short submissions certainly
identifying the basis for this proposed variation which doesn’t appear in the application
itself would be useful”.
110. Senior counsel for Findex indicated that Findex “had thought that by wrapping up the
proposed orders one, two, and three – the single application – and progressing them
together that would be the most efficient course”, however accepted that, if the court
wished to address proposed order one, namely, “should your Honour’s judgment be –
or orders be varied at all”, then he suggested written submissions.
111. Her Honour then expressed the view that there may be overlap between the issue of
whether the orders should be set aside and the issue of the proposed amendments.
Counsel for Findex indicated that there would be overlap and that whether or not the
order should be varied “would properly be considered in light of the variation for which
we contend” in the proposed Further Amended Statement of Claim.
112. Her Honour then asked counsel for Mr McKay whether there was a “false economy” in
addressing the issues separately. Counsel for Mr McKay indicated that Findex “has a
very high bar to get over”. He suggested that an application for leave to appeal was the
proper course. He submitted that the “actual basis of order one” was not articulated and
that he had not been told “whether it’s brought under some rule of the Court Procedures
Rules or some principle”. He submitted that to be forced back into a substantive
argument again about what “is a significant new version of the pleading but which
proceeds on the basis that your Honour’s judgment of 23 March doesn’t stand” would
be inefficient and antithetical to appropriate procedure. He submitted that the applicant
“would need to show some change in circumstances”.
113. Those submissions brought the primary judge back to her original view for which she
set a date. Counsel for Findex enquired that what her Honour had in mind was “an
argument confined to the question of whether there is both power and grounds upon
which to make order one in our application”. Her Honour confirmed that. There were
then some further discussions about written submissions before the proceedings being
adjourned until 11 May 2023.
The written submissions
114. The written submissions filed on behalf of Findex articulated the question as being
whether the court had power to make order 1 sought in the application, that is, “could
the court make order 1”. They contended that there was a discretionary power to set
aside a direction if it was in the interests of justice and that it would be if the previous
decision had been based upon some misapprehension of the facts or the relevant law
which could not be attributed solely to the neglect or default of the plaintiffs.
115. The submissions indicated that whether the court “should make order 1” would arise if
the court decided that it had power to make order 1 and that would be the occasion
make findings about the correctness of the plaintiff’s grounds and an eva luative
assessment about how any such findings engaged interests of justice”. Those
contentions were elaborated on in a manner which clearly exposed the conceptual basis
upon which an interlocutory order may be reopened.
116. The submission on behalf of Mr McKay contended that the issues for determination
were:
(a) what precise power the plaintiffs seek to invoke to set aside the order; and (b) the grounds for doing so.
The submissions contended that there was “no justifiable basis for the court entertaining
vacating the order” previously made. They submitted that there was a very high bar to
justify the invocation of the court’s power to vary an order made after a contested
interlocutory hearing.
118. A substantial part of the submissions then articulated “a fundamental and conclusive
anterior basis” upon which the application should be rejected, namely, the rule
articulated in Gray v Sirtex precluding recovery of costs as damages. The submissions
pointed to discretionary considerations against the present application. It made
submissions about the factual history of the amendment to the pleadings. The ultimate
submission was that order 1 should be refused and that upon rejection of that order “the
entire application should be dismissed, with costs.”
The hearing on 11 May 2023
119. The procedural fairness complaint discussed below requires a detailed understanding
of what occurred during the hearing on 11 May 2023.
120. Senior counsel who appeared for Findex moved on order 1 of the application and read
the affidavit of Amy Zhang dated 28 April 2023 and tendered tab 4 of the exhibit. Tab 4
of the exhibit was the Amended Statement of Claim filed on 9 October 2020. The affidavit
itself referred to the earlier filed evidence that may be relied upon for the purposes of
the application. It also dealt with the following matters arising out of the reasons given
by the primary judge on 23 March 2023:
(a) that although the current proceedings were commenced in NSW Supreme Court on 1 March 2019 there was an agreement between the parties that the
matter would be held in abeyance pending the determination of the applications
before Ward CJ in Eq;
(b) that although most aspects of the matter had been determined by September 2019, there were ancillary matters that continued until April 2020;
(c) a summary of the complex procedural history of the proceedings following the cross-vesting of the current proceedings to the ACT Supreme Court in
June 2019;
(d) a summary of events following the judgment of McWilliam AsJ in July 2022; (e) the procedural history of the application for leave to file the February proposed Further Amended Statement of Claim; and
(f) communications between the parties following the decision on 23 March 2023. 121. Counsel for Mr McKay did not formally object but submitted that there was a limit on the
matters that could be relied upon to establish an error in the circumstances of this
application. Her Honour admitted the material on the basis that she would hear counsel
for Mr McKay’s submissions on that issue.
122. Senior counsel for Findex indicated that the issue he was addressing was “does the
court have power to make order 1 on the grounds on which we ask it to do so”. Counsel
for Mr McKay interrupted and said that he understood that the court was determining
order 1 today as opposed to some anterior question of whether or not there was power.
He indicated that he was prepared to argue order 1. Her Honour then turned to senior
counsel for Findex and said:
Yes, Mr Neil, is that – is that clear? I think it’s a nuance, but I think it might assist in focusing
your submissions. It is not contended on behalf of Mr McKay that the court lacks authority
to vary an interlocutory order, but the question is what power is invoked here and – and what
principles should govern that determination?
123. Senior counsel for Findex said: “I’m happy to proceed upon that basis” and that it would
“shorten something of what we had proposed to say.”
124. Senior counsel then took her Honour to passages from an authority. There was a
discussion with her Honour in which she raised some authorities in NSW and said “there
is sometimes criticism where the matter is one that could readily have been raised with
the primary judge for correction”. She continued:
This is, obviously we are not dealing with the substance today, but this might sit, or be seen
to sit somewhere on the fuzzy border of that question, that it’s – it’s a large correction. You
know, it’s, in effect, you’re seeking to have leave to make an amendment that I have refused.
125. There was then further discussion as to what had occurred on 23 March 2023. Senior
counsel then addressed the contention that it was necessary to point to a change in
circumstances and made reference to some of the authorities collected in the written
submissions. He made specific reference to the decision in Notaras v St George Bank
Ltd [2005] ACTSC 5; 157 ACTR 1 which he submitted did not accept that demonstration
of change circumstances was a necessary condition for the jurisdiction to reopen an
interlocutory order. He submitted that it was not a case involving a change of
circumstances but that “it would be in the interests of justice, in the circumstances of this
case, to set aside the direction … and revisit your Honour’s underlying reasons, in order
that the matter not proceed on the basis of the misconceptions of facts or law that we
have … identified. That – that’s the way the case is put.”
Her Honour said “and I know we’re not dealing with – with the merits today …” but asked
whether there was anything that senior counsel wished to say about the contention that
costs could not be recovered as damages. Senior counsel said, “The first is to make the
obvious point – as your Honour has averted to a moment ago – that full consideration of
that proposition is really something that would arise on order 2 rather than order 1 in our
application.” Her Honour pointed out that it was an issue that she had dealt with in her
judgment. Senior counsel for Findex indicated that her Honour’s observation at [79] was
not a concluded view. He also submitted that the paragraph contained a factual
misapprehension that the search order proceedings were not against Mr McKay but
against other parties, iiNet and LinkedIn. He also submitted that the legal contention
“really was a General Steel question”. Her Honour challenged this saying that it was an
application to amend pleadings well after the time for the closure of pleadings on
ordinary case management principles. Her Honour described the General Steel test as
“a test for kicking out, not letting in”. Senior counsel for Findex indicated that the issue
would arise if one of the grounds of opposition was that the claim was not maintainable
in the matter of law.
127. Senior counsel then turned to a submission about the newness of the costs claim:
Now, here, could I point to the circumstances and – and in doing so I’m going to trespass a little upon the merits of – of order 1, which is not what we are here to, necessarily to deal with, but – or the merits of the amendment, order 2, which is not what we are here to deal with, but your Honour will recall that – well, indeed, as we read your Honour’s reasons, one important consideration in – in your Honour’s decision to, not to permit the amendment, to — to raise what – what the parties in their submissions are calling the costs claim, the claim,
as damages in these proceedings for costs associated with the search order proceedings
and the investigation that preceded it, but one reason that – that was important in your Honour’s reasoning towards that decision was the premise, the factual premise that the
claim, the costs claim was new---
…
- - - and that its introduction would, it would expand the scope of the proceedings beyond
that which had previously been notified …
128. He indicated that Findex’s contention was that those factual propositions were wrong.
He summarised some of the procedural history surrounding the introduction of the claim
in the particulars to paragraph 110 and submitted that the proposed claim was “a
disaggregation of a claim that was already there”.
129. Counsel for Mr McKay then made his submissions. He indicated that there was no great
difference between the parties as to the principles. He referred her Honour to her
decision in Liu v The Age Company Pty Ltd (No 2) [2015] NSWSC 276. He agreed with
senior counsel for Findex that whether it was in the interests of justice for an interlocutory
order to be varied was “always the ultimate touchstone”. He submitted that the present
case was one involving an interlocutory order of a substantive nature made after a
contested hearing. He submitted that an application to set aside vary or discharge an
order must be founded on a material change in circumstances or the discovery of new
material that could not reasonably have been put before the court on the hearing of the
original application. He submitted that Findex did not like the decision that had been
made but did not “point to any material change in circumstances at all”. He referred to
the NSW Court of Appeal’s decision in Liu v The Age Company Pty [2016] NSWCA 115;
92 NSWLR 679 and the decision in Notaras. He submitted “when one assesses the
overarching principles of justice here, in my submission, your Honour would readily
reject this – this application, order 1 of it, for a number of reasons”.
130. He submitted that Mr McKay was a party to the earlier proceedings because even though
not identified initially, once he had been identified the other defendants “dropped out”,
having provided the required information. The proceeding then went on for three years
between Findex and Mr McKay.
131. He then referred to her Honour’s earlier reasons identifying that her Honour had referred
to the timing of the application and also concluded that none of the authorities put
forward by Findex supported the proposed claim. He submitted that this involved a
determination by her Honour on a discrete basis that was not challenged in Findex’s
application.
132. He then turned to address the six asserted errors. He submitted that no error had been
made out. He addressed the alleged error that the claim was raised for the first time and
made substantial submissions about the procedural history. He then indicated he was
going to run through the balance of the grounds of the application. Her Honour
interrupted him and said:
HER HONOUR: Just before you do that, Mr Karam. I do want to hear whether Mr Neil has any objection given the truncated process we foreshadowed.
Mr Neil, are you content that for Mr Karam to briefly address the alleged incorrect
assumptions? I think it would assist me, but I don’t want you to feel taken by surprise.
MR NEIL: I have no difficulty, your Honour.
HER HONOUR: Thank you, and you, of course, can reply
MR NEIL: Yes, your Honour, although your Honour has already seen we put on an awful lot of writing about all of that in the application - - -
HER HONOUR: Well, that – that - - -
MR NEIL: - - - so I don’t want to weary your Honour by going there again.
HER HONOUR: I’m mindful of that in thinking that it will assist me to hear from Mr Karam,
so - - -
MR NEIL: If your Honour pleases.
133. Counsel for Mr McKay said he was not proposing to address the 17 pages of grounds
but addressed his position on the incorrectness of the assumptions.
134. He then addressed, over the following four pages of transcript, the six matters identified
in the summary of the errors identified in the application in proceeding. He submitted
that in relation to each of the matters no error was demonstrated. His submission was
that at a case management level the court would not entertain the application because
there had been substantive argument and no change of circumstances. He submitted
that the appropriate course if there was a material error would be to take the matter on
appeal. He then submitted that the notice of contention point was a substantive problem.
135. Senior counsel for Findex submitted that her Honour’s earlier reasons should not be
taken to be “the expression of a concluded holding” that a costs as damages claim was
not available.
136. Her Honour indicated “that may be so” but raised the availability of a specialised costs
assessment system and the prospect of having to relitigate the whole case to prove
costs as damages. Senior counsel indicated that he raised the point about the availability
of costs as damages because it was raised by counsel for Mr McKay but had not been
the subject of any point taken at the hearing on 22 March 2023 before her Honour. Her
Honour then returned to her point that to prove costs in proceedings “is a big proposition”
and queried what would be necessary to prove the claim.
137. Senior counsel for Findex submitted that it would take “almost no time at all” to prove.
There was then a discussion as to how reasonableness of the costs might be proved.
Senior counsel for Findex submitted that the principle was that “one can’t claim in a
second set of proceedings something that in another proceeding it has been
conclusively determined one can’t have”.
138. Her Honour queried how the reasonableness or causation in a contract claim could be
proved and said: “that’s what makes it such an – such an unusual and large claim,
because it’s – it’s, effectively, going against centuries of understanding that costs don’t
get dealt with as damages.” Senior counsel for Findex responded:
Our – our fundamental answer to this notice of contention point is that it’s not a point that arises now. It’s not a point. It is a large point. It’s a complex point. Now that it has been
raised it deserves a considered argument if it is something that your Honour considers
should be dealt with at an interlocutory stage. We accept the defendant has raised it and – and it must be dealt with, but at the heel of the hunt – the heel of the hunt with a two-hour
hearing devoted to the question of power is not the occasion to do this. This is an order 2
point, not an order 1 point, properly understood. That’s – that’s our principal response.
139. He then asked for a short adjournment. Before the adjournment her Honour raised again
the prospect that if costs were dealt with by the judge, then the judge would “hear
argument about the reasonableness of every step in that lengthy litigation in another
state” and said that “seem to me to be a relevant case management consideration” in
determining whether to allow the amendment.
140. Following the adjournment, senior counsel for Findex indicated that he had an adequate
opportunity to consult with his junior. He referred the court to the addition to the pleading
that was the subject of order 2 that the costs be “assessed” costs and that Findex was
not asking to have the court embark on that assessment.
141. He then made a submission in response to the submission that the claim for costs
associated with investigation and prosecution of the search order proceedings was new.
He submitted that the legal availability of a claim for damages was properly a matter that
arose under order 2, “it never having arisen before 9 May”. He indicated he was not able
to address it “in … the context of this limited hearing” and if Findex was successful on
the day, the issue should be reserved for another occasion.
142. He accepted that Mr McKay had subsequently become a party to the search order
proceedings but was not a party initially. Her Honour asked whether Findex would
submit that the claim for costs under contract may be more readily obtainable than a
discretionary award of costs against Mr McKay in proceedings before he was a party to
those proceedings. Senior counsel for Findex agreed.
143. He then addressed whether or not demonstration of a change of circumstances was an
essential element of the invocation of the jurisdiction and submitted that the capacity to
reopen was not limited to those circumstances and that a misapprehension of fact or
law is one of the other circumstances.
144. Finally, he made a reference to the decision of Refshauge J in Commonwealth v Davis
Samuel Pty Ltd (No 12) [2020] ACTSC 312 at [111].
145. Her Honour then sought additional submissions from counsel for Mr McKay addressing
her understanding that it was not intended that the judge hearing the case undertake the
process of assessment. Counsel for Mr McKay said there was no order sought referring
the issue of costs off to a registrar for assessment. He submitted that each of the facts
that were pleaded in the subparagraphs of paragraph 109 would still need to be proven.
He also emphasised the operation of r 1720 which he submitted precluded the recovery
of costs in different proceedings.
146. Her Honour indicated that she would give her reasons next day.
The Reopening Decision of 12 May 2023: [2023] ACTSC 108
147. Her Honour gave her reasons orally on 12 May 2023. She referred to her earlier decision
and the orders that had been proposed to advance the matter. She referred to the fact
that counsel for Findex had, at the conclusion of her reasons, raised a misapprehension
as to the history of the claim and set out the passages from the transcript. She then
referred to the application in proceeding dated 28 April 2023 and set out the orders which
were sought.
148. She then referred to what had occurred at the first return of the application and the
submission by counsel for Mr McKay that “it was not clear to him the basis on which the
Court was invited to vacate an order made after a contested hearing and the publication
of considered reasons”. Her Honour indicated that “I determined first to hear
submissions from the parties on the preliminary issue raised by order 1, namely whether
the Court should take the step of vacating the direction made on 23 March 2023”.
149. She indicated that the submissions made by the parties were “helpful in distilling the
relevant principles” and that counsel for Mr McKay had “to some extent resiled from his
initial position” and, so far as he acknowledged, that it was not necessary for Findex to
establish a change of circumstances. She then set out the principles applicable in the
form that they appeared in counsel for Mr McKay’s submissions and the authorities from
of an unwarranted sense of entitlement to make an amendment. Rather, it reflected the
objective circumstances of the procedural history of the case. The objective
circumstances were that, up until the point of cross-vesting of the proceedings to the
Territory (20 June 2019), the search order proceedings were continuing and the parties
had agreed that the current proceedings would not progress. Even though the
disparagement proceedings had been cross-vested, the search order proceedings
remained contested in New South Wales. Following the transfer of the disparagement
proceedings, the parties were engulfed in Mr McKay’s largely unsuccessful attempt to
terminate them. The result of these attempts was the striking out of paragraph 110 of
the pleading. Given the necessity to include a claim for damages and replead paragraph
110, an “unrolling” of the “rolled up” pleading was an obvious and necessary step in the
context of the history of the case.
181. This error is closely related to the error concerning the lateness of the application. As
pointed out above, that factual error fell into the category of errors which it was
appropriate to draw the primary judge’s attention to.
Extremely large scope (Reopening Decision [25], [36]) (ground of appeal 6)
182. Her Honour had determined the matter on the basis that the costs claim would be of
“extremely large scope”. Her Honour reconsidered that finding in the
Reopening Decision based on a review of the pleadings and found that she had made
no misapprehension. She therefore concluded that it provided no basis for reopening
her earlier decision. The primary judge found that the subsequent introduction of
reference to “assessment” did not indicate that her earlier decision, prior to that
clarification, involved any misapprehension.
183. It can be accepted that reasonable minds will differ as to the consequences for the length
and complexity of a trial of an additional claim. The claim for legal costs incurred as a
consequence of a breach of contract claim would be for the whole of those costs. There
may be some qualifications upon costs which are recoverable if they were obviously
excessive. That might involve questions of causation, remoteness or a failure to mitigate.
However, the likelihood is that the factual steps that were taken would be objectively
provable and uncontroversial. The amount paid for the legal services would be readily
documented and easily summarised. The spectre of the court being involved in an
item-by-item assessment exercise was a remote one. If, during the course of the
preparation of the case or at the hearing, it emerged that there was a real prospect of
such a requirement, then a referral of a discrete damages assessment exercise to a
registrar was (and remains) a procedural technique available to relieve the court of that
burden.
184. Even if the determination of the costs claim was more complicated than indicated above,
any such complexity needed to be assessed in the context of the claim as a whole and
the complexity of the other proceedings that were before the court. Those, of course,
included the search order proceedings in which the costs issue remained live. It could
not be said that the addition of a costs claim, when compared with the other aspects of
the dispute, involve any significant addition to the complexity of the cases overall.
Further, the court would, in any event, have to be familiar with the procedural aspects of
the search order proceedings in order to properly determine the appropriate
discretionary costs order, if that was to be the basis for recovery rather than through the
claim in contract.
185. In any event, the fact that a claim may be complex or add to the court time necessary to
determine it is not, of itself, a reason to refuse a grant of leave to amend a pleading so
as to include it. It may well be a reason to refuse a grant of leave if there were
considerations of the claim delaying the progress of the litigation or, as here, an alternative mechanism of recovery through a costs assessment process. However, it is
those factors rather than the bare magnitude of the exercise involved that would be the
relevant ones to consider.
186. If reliance was to be placed upon the existence of an alternate means of recovery of
those costs as a reason to refuse leave to amend, the court would need to be satisfied
that the alternative was an equivalent one or consider the extent of any difference. In
the present case, the differences arose from the discretionary nature of the awarding of
costs under the order and the uncertainty as to which of the entities had incurred, or
incurred liability for, those costs. That required the issue of equivalence to be examined
and considered. Such engagement with the issue is not apparent from the reasoning of
the primary judge.
187. The error in relation to the categorisation of the consequences of granting an
amendment and the failure by the primary judge to consider the proposed amendment
in the context of the issues that would arise in the proceedings and the other proceedings
likely to be heard by the court were not issues of the type that were suitable for a
reopening of the decision. They were not frank factual misconceptions. Instead, they
were errors which ought properly to have been the subject of an application for leave to
appeal. However, the relevance here is that they are matters which may have been
subject to reagitation had the primary judge reopened the Amendment Decision,
particularly in light of the clarification provided in the revised proposed pleading which
made it clear (if it was not already) that Findex did not intend the court itself to engage
in an exercise equivalent to a costs assessment.
Potential to include claim in paragraph 110: (Reopening Decision [38]) (ground of appeal 8)
188. Her Honour made it clear in the passage referred to at [162] above that she did not
understand why the claim for legal costs could not be maintained by fully particularising
it in the manner that had been proposed. Insofar as her Honour thought that there was
a capacity to take such a course, it would have been a significant factor in refusing leave
to reopen the Amendment Decision.
189. The difficulty with that course is that any attempt to include the claim for costs in the
particularisation of paragraph 110 based upon the earlier provided particulars would
inevitably be met with the submission that leave had been refused to include that aspect
of the claim as part of the Amendment Decision. In other words, it would be met with
precisely the argument that was put by Mr McKay on the reopening application, that the
issue had been determined after a contested hearing and should not be reopened.
190. The pleading at paragraphs 109.1-109.19 involved a substantial “unrolling” of the
particulars earlier provided to paragraph 110. The detail of the unrolling may have been
excessive but was plainly designed to avoid any criticism of a failure to set out the
material facts that would have been made if the claim for the costs of investigation and
action had been pleaded more succinctly.
191. Once the procedural history of the proceedings is appreciated, in particular, the notice
of the intention to claim the costs of investigation and action as early as June 2019 and
the grants of leave to include such a claim in October 2020, the intention to “unroll” the
claim was understandable. In the context of the level of procedural disputation in the
various proceedings it is also understandable that it would be “unrolled” by a detailed
pleading of its factual basis. If her Honour was to rely upon the potential to replead
paragraph 110 as a basis for refusing leave to reopen her decision, then that could only
be a factor favouring a refusal of leave if she was later willing to depart from her refusal
to entertain the costs claim on “case management grounds”. Yet, the
Reopening Decision indicated that she was not prepared to depart from that refusal.
Thus, the outcome appeared to contain two inconsistent lines of reasoning:
(a) the court refuses to allow Findex to further plead the costs claim because of “case management reasons”; and
(b) the court will not reopen its decision because, inter alia, Findex can still plead this claim.
192. If these two propositions were not entirely inconsistent, then the reasons given by the
court did not explain why, and to what extent, that was the case. In those circumstances
it was an error in refusing to reopen the Amendment Decision to rely upon the capacity
to plead the costs claim when the court had refused leave to plead the costs claim.
Denial of procedural fairness – order 1 (ground of appeal 1)
193. Denial of procedural fairness is raised by ground 1 in the draft Notice of Appeal.
194. The principal errors identified above are those relating to the lateness of the application
and the reasons for the application being made when it was. These errors arise from a
failure by the primary judge to take into account the details of the procedural history of
the matter that was in evidence before her. However, it was contributed to by a series
of matters leading up to the hearing on 22 March 2023 and then again the hearing on
11 May 2023 which deprived Findex of a fair opportunity to address the matters
ultimately relied upon by her Honour in the Reopening Decision. The series of events
can be summarised as follows.
Following the decision of McWilliam AsJ to dismiss Mr McKay’s summary judgment and
strikeout application except in relation to paragraph 110, no timetable was set requiring
the filing of an amended pleading. Instead, the parties were engaged in resolving the
issue of costs of that application and that was only finalised in March 2023.
196. At the hearing on 15 December 2023, her Honour declined the offer by counsel for
Findex to provide a chronology of the proceedings. Her Honour did make a direction
relating to identification of objections to an amended pleading. Initially on 2 March 2023,
Mr McKay indicated that the amendments were unlikely to be opposed but then on
10 March 2023 provided, after the relevant date, an uninformative statement of the
grounds of opposition to the inclusion of the costs claim.
197. At the commencement of the hearing on the amendment application on 22 March 2023,
two affidavits were read by Findex in support of the application. The first one
(Lauren Brouwer-French 16 February 2023), simply explained that the amendment was
consequential upon the striking out of paragraph 110. The second one
(Lauren Brouwer-French 21 March 2023) was targeted at responding to the affidavit
read by Mr McKay (the body of which was not included in the appeal books). It indicated
at paragraph 5 that a series of other affidavits were referred to and relied upon (“I refer
to and rely upon …”). The status of these affidavits was never clarified but they were not
formally read on the application. As a consequence, they were not in evidence before
the primary judge: In the matter of Prime City Investments Pty Ltd [2012] NSWSC 1287
at [6], even if they might have been read if an issue arose relating to the procedural
history that required going beyond what was formally in evidence.
198. Significantly, the 21 March 2023 affidavit contained some of the explanations of the
procedural history of the matter relevant to the timing of the application for leave to
amend.
199. However, when counsel for Findex read the affidavit, there was the exchange referred
to at [85] above in which her Honour indicated that she was not sure what it went to, as
it was “just a procedural …” and asked counsel to “come to the main game”. As a result,
counsel indicated that he would only deal with the matter in response to any submissions
made by counsel for Mr McKay. Her Honour said “just address me about your new
damages pleading?”. As a consequence the primary judge discouraged submissions
relating to the procedural history relevant to the making of the application.
200. It was in that context that counsel addressed the primary judge and dealt with any
question of delay in reply. He did so in the context of the affidavit evidence of Ms Lauren
Brouwer-French of 21 March 2023 which specifically included (at paragraph 29(b)) evidence that the parties had consented to no steps being taken in the disparagement
proceedings after their commencement, pending the determination of motions in the
search order proceedings. It also discussed events following the decision of
McWilliam AsJ on Mr McKay’s attempt to terminate the proceedings.
201. It was in that context that her Honour then made the finding that it was not possible to
resolve the issue and that the amendment was sought to be made at a “very late stage”
being “the time commenced without the pleadings progressing in any way”:
Amendment Decision at [74]-[75]. While it was a fact that the proceedings had been on
foot for four years and it was a fact that no defences had been filed, those two facts
could not be reasonably deployed in opposition to the making of an amendment without
at least considering the procedural history which explained why that was the case.
202. Having dealt with the matter in this way, following the making of the 28 April 2023
application, the direction was made on 3 May 2023 that the 28 April 2023 application not
be dealt with as a whole but instead the question of power be addressed first. It was
clear from the written submissions provided on behalf of Findex that counsel understood
that the question was a limited one as to the scope of power to reopen an interlocutory
decision such as that made on 23 March. The written submissions of Mr McKay framed
the issue differently and raised, for the first time, the point raised on this application in
its notice of contention.
203. It is clear that the scope of the issue the subject of submissions expanded during the
course of the hearing on 11 May. The difficulty is that the extent to which the issue had
expanded was never made clear. That is indicated by the following remarks by the
primary judge during the course of submissions:
(a) “the question is what power is invoked here and … what principles should govern that determination”: [122] above.
(b) “obviously we are not dealing with the substance today”: [124] above. (c) “I know we’re not dealing with the merits today …”: [126] above. (d) “Mr Neil, are you content for Mr Karam to briefly address the alleged incorrect assumptions? I think it would assist me, but I don’t want you to feel taken by
surprise”: [132] above.
204. The manner in which her Honour ultimately dealt with the issue involved, in substance,
dealing with the merits of both orders 1 and 2 in the context of deciding whether to make
order 1. That conclusion requires some explanation.
205. Whether or not to reopen an interlocutory order as a result of errors or misapprehensions
identified in the reasons for that order must be dependent upon both the existence of
errors and their significance for the interlocutory decision that was made. In the present
case, except for some relatively minor amendments, the proposed Further Amended
Statement of Claim was the same as that which had been rejected in the
Amendment Decision. In those circumstances what was involved in determining order 1
could involve either:
(a) determining whether there was power to reopen and deciding whether to reopen without determining the outcome of that reopening; or
(b) determining whether there was power to reopen and deciding whether to reopen based upon a determination of the merits of the application to amend
that would be the subject of the reopening.
206. The former approach might allow the decision to be reopened even if the ultimate result
was that there should be no variation to the earlier order. The latter course would only
involve reopening if a different result would be reached on the substantive application to
amend. On this latter approach, if the consideration of order 1 went beyond whether
such an order could be made to whether it should be made, it would necessarily involve
determination of order 2. That is, in fact, how the primary judge dealt with the issue. In
deciding whether to reopen her earlier decision she considered both the existence of
errors in her earlier reasons and the significance of those errors for the substantive
decision that she made.
207. Such a course was certainly available to her Honour. Where a litigant must show cause
to argue a claim, a court will routinely consider both whether cause is shown and the
merit of the claim simultaneously. An example is an application for leave to appeal such
as in this case.
208. However, her Honour, having decided to separate the application into two parts (at
[108]-[113] above), never clearly indicated that she was departing from the approach
that involved dealing only with a confined issue relating to order 1 or that the significance
of the factual errors would be addressed without a further opportunity to make
submissions.
209. It is true that senior counsel for Findex did indicate that he did not oppose the course
that her Honour explained to him. However, the primary judge never clearly indicated
that, having gone beyond the question of power, her Honour was going to adopt the
latter course discussed above and hence, deal with both order 1 and order 2 issues in deciding whether to reopen the Amendment Decision. Consistent with that, in
submissions in reply, senior counsel for Findex put only limited submissions in response
to the substantive matters relating to the earlier reasons.
210. The significance of her Honour not having been addressed on the substance of the
alleged errors in the original discretionary decision is illustrated by her comments in the
Reopening Decision about a lack of explanation for delay and why the amendment was
only made when it was and the conclusion that she reached about the significance of
the eight-month “delay” between March 2019 and November 2019. The substance of
the errors has been addressed above.
211. However, in the lead up to the Amendment Decision, her Honour had discouraged the
provision of a chronology. At the commencement of argument on 22 March 2023 she
had discouraged an explanation of the procedural history. In the Amendment Decision,
the primary judge disavowed an attempt to determine the correctness of the submission
made by counsel for Findex about the procedural history. When it came to the
Reopening Decision, although her Honour did not appear to accept that she had made
any error of significance, her reasons altered the emphasis in relation to the novelty of
the pleading and in what respect the amendment was “late”. Yet, that conclusion was
reached without reference to the evidence before the court in the Zhang affidavit and
without the benefit of submissions in relation to its significance.
212. These features of the various hearings before the primary judge may explain her
characterisation of Findex’s approach as one reflecting a sense of entitlement rather
than properly seeking permission to amend: Amendment Decision at [34]; [154] above.
Against a proper understanding of the procedural history, in particular, the early notice
of the costs as damages claim (June 2019, November 2019 and October 2020 being
the relevant dates) and the necessity to “unroll” the pleading in paragraph 110 of its
pleadings, the expectation of being able to do what the decision of McWilliam AsJ
required to be done was not unreasonable. It did not reflect an unprincipled sense of
entitlement.
213. What is required by way of procedural fairness moulds to the particular circumstances
of the case. This was an unusual case in which an understanding of the procedural
history of the matter was significant in determining whether or not leave to amend should
be granted. By a series of circumstances, the court narrowed the focus of the
proceedings before it in a way that avoided an adequate explanation of the procedural
history being the subject of submissions and then determined the application in a way
that placed emphasis on the passage of time since the commencement of proceedings and the absence of the proposed claim in the original pleading, without considering the
evidence that was before it or permitting submissions to be made on the point ultimately
determined against Findex.
214. We emphasise that the primary judge’s attempt to narrow the focus was entirely
understandable in the face of volumes of material and time estimates of counsel that
went beyond what would ordinarily be required to dispose of a procedural application
following paragraph being struck out in a pleading. However, in the particular
circumstances of this case, for the above reasons, this resulted in a denial of procedural
fairness.
Denial of procedural fairness – order 3 (ground of appeal 1.5, 3.1, 3.2, 3.3, 10(e))
215. A subsidiary question relates to the dismissal of order 3. That order in the application in
proceeding dated 28 April 2023 sought that each of the proceedings involving Findex
and Mr McKay be heard together and that evidence in one proceeding be evidence in
the other proceeding.
216. Her Honour dismissed this application without hearing any submissions from Findex.
Although order 1 contemplated the possibility that some aspect of the
Amendment Decision may need to be set aside in order to permit order 3 to be made,
the making of order 3 was not precluded as a matter of substance by the earlier
Amendment Decision. The making of the order might have been inconsistent with the
earlier order only to the extent to which the parties were to propose short minutes
consistent with her Honour’s reasons in the Amendment Decision rather than addressing
the separate topic of hearing the proceedings together.
217. It was certainly a possible outcome that, had her Honour given Findex the opportunity
to address her in relation to order 3, that the order would have been made despite the
fact there was no reopening of the substantive issues determined in the
Amendment Decision.
218. Plainly enough, given the capacity to seek the direction at a later point in time, the denial
of procedural fairness in relation to order 3 would not have warranted a grant of leave to
appeal. However, given that leave to appeal is granted it is appropriate to address the
substance of the ground with a view to removing future disputes between the parties
about the potential consolidation of these disputes.
The notice of contention
219. The notice of contention alleges that the decision of the primary judge should be
confirmed because in the absence of any pleading of a relevant agreement between the
parties or an applicable statutory provision, the costs claim is contrary to
well-established common law principles and r 1720 of the Court Procedures Rules and
hence is liable to be struck out upon the grounds set out in General Steel Industries Inc
v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129.
220. The primary judge did not determine either application on the basis that the claim was
manifestly groundless or any of the other formulations in General Steel. It was only on
the reopening application that the issue was raised by Mr McKay. On that application,
senior counsel for Findex indicated that the question was “a complex point” which would
need considered argument on a separate occasion: [138] above. In her reasons for the
Reopening Decision, the primary judge simply said that she accepted that the issue of
claiming the costs of the other proceedings of damages “is a difficult issue”: Reopening
Decision [29].
221. The conclusion reached above is that her Honour erred in the manner in which she
addressed the question of the lateness of the application and that there was a denial of
procedural fairness in reaching the conclusions that she did in the circumstances of the
case. There was, however, no denial of procedural fairness in relation to the
maintainability of the costs as damages claim because the primary judge accepted the
submission that the question was a difficult one which would need to be argued, if at all,
on a separate occasion.
222. Mr McKay contends that if leave to appeal is granted the appeal should be dismissed
because the costs as damages claim is manifestly groundless. However, consistent with
the approach taken by the primary judge, this is not a matter which should be finally
determined in the context of an application to reopen.
223. The general principles are summarised in Gray v Sirtex Medical at [15]-[30]. In the
present case the second plaintiff (Findex Services Pty Limited) was the contracting party
for the purposes of the contractual claim. The claim for damages is put on the basis
either of liability to the plaintiffs in the search order proceedings or alternatively to the
second plaintiff as trustee. The second plaintiff was not, however, a party to the search
order proceedings. It sues in contract on its own behalf and on behalf of the other
plaintiffs. Those other plaintiffs include the first, fourth, fifth and sixth the plaintiffs who
are also parties in the search order proceedings. Mr McKay was not initially a party
(because his identity as the publisher of the statements generating the dispute was unknown and the search order proceedings were initially commenced against internet
service and website providers) but he subsequently became a party to the proceedings.
It is not clear what position Mr McKay will adopt in relation to the costs of the proceedings
prior to his joinder. The claims under the Australian Consumer Law are made by each
plaintiff.
224. It is not possible to say with the degree of certainty required by the General Steel test
that each of these claims would be unarguable. The result of the contract claims is likely
to be influenced by which of the parties are entitled to directly claim based upon the
contract between Findex Services and Mr McKay and the consequences, if any, of the
benefit of the contract being held on behalf of persons who were parties to the earlier
proceedings. It may also be influenced by which plaintiff has paid the costs or is liable
to do so, something which has not yet been clearly particularised. The relationship
between the provisions of the statutes relied upon for the statutory claim, the common
law rule and the provision of the Court Procedures Rules may also arise. As it is not
possible to conclude to the requisite high degree that the line of authority summarised
in Gray v Sirtex is fatal to the claim, that basis does not provide a separate reason for
affirming the decision not to reopen the earlier Amendment Decision.
225. For these reasons the notice of contention will be dismissed.
| Relief |
226. The Notice of Appeal seeks orders that:
(a) the orders made on 12 May 2023 be set aside; and (b) leave be granted to the applicant to file the Further Amended Statement of Claim annexed to its application dated 28 April 2023.
227. Further, it seeks an order to the effect of order 3 in its application of 28 April 2023 or the
matter be remitted for that to be determined. In the alternative, the Notice of Appeal
seeks a declaration that the Supreme Court has power to vacate the interlocutory
decision made on 23 March 2023 and a remittal of the application for rehearing.
228. It is not appropriate for this Court to grant leave to file the Further Amended Statement
of Claim. The issues on appeal were confined to the Reopening Decision, even though
that necessarily involved consideration of the Amendment Decision. Given that the court
has found errors in the Reopening Decision and that the manner in which the application
of 28 April 2023 was dealt with involved a denial of procedural fairness, it is appropriate
to set aside the Reopening Decision. That is a matter which should be remitted to the
Supreme Court to be properly determined. The making of a declaration that the court has power to reopen the decision would lack utility as the existence of such a power
was, ultimately, uncontroversial. The question was whether or not that power should be
exercised in the circumstances.
229. It will be a matter for Findex as to whether, having been successful in having the
Reopening Decision set aside and with the benefit of these detailed reasons, it is
unnecessary to pursue the reopening application. It may be that there are other ways by
which the parties or the court are able to make some progress towards a trial of the
proceedings. Section 5A of the Court Procedures Act contemplates the application of
flexibility and common sense to achieve its main purpose and objectives. It is not
appropriate for the Court of Appeal to determine how that is to occur.
Orders
230. The orders are:
1. The documents behind tabs 2, 3, 7 and 9 of the Revised Folder of the
Applicants’ additional materials are admitted into evidence.
2. Leave to appeal is granted.
3. Within 7 days, the applicants are directed to file a notice of appeal in the form
of the draft Amended Notice of Appeal filed on 18 June 2023.
4. The appeal is allowed.
5. The notice of contention is dismissed.
6. The orders made on 12 May 2023 are set aside and the proceedings are
remitted to the Supreme Court to be determined according to law.
7. The respondent is to pay the appellants’ costs of the application, appeal and
the notice of contention.
8. Order 7 does not take effect until further order of the Court if, within 7 days any
party files and serves written submissions limited to not more than four pages
and any evidence in relation to costs.
I certify that the preceding two hundred and thirty [230] numbered paragraphs are a true copy of the Reasons for Judgment of the Court
Associate:
Date: 22 September 2023
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