Freehill Hollingdale & Page v Bandwill Pty Ltd
[2000] WASCA 150
•2 JUNE 2000
FREEHILL HOLLINGDALE & PAGE -v- BANDWILL PTY LTD & ANOR [2000] WASCA 150
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2000] WASCA 150 | |
| THE FULL COURT (WA) | |||
| Case No: | FUL:60/2000 | 18 MAY 2000 | |
| Coram: | OWEN J STEYTLER J MILLER J | 2/06/00 | |
| 16 | Judgment Part: | 1 of 1 | |
| Result: | Appeal allowed Stay application remitted to trial Judge | ||
| PDF Version |
| Parties: | FREEHILL HOLLINGDALE & PAGE BANDWILL PTY LTD GAD RAVEH |
Catchwords: | Practice and procedure Stay of proceedings Case management Whether trial Judge had discretion or duty to stay proceedings which appear to be unlawfully maintained and champertous Whether trial Judge's decision to adjourn stay application a proper exercise of discretion |
Legislation: | Nil |
Case References: | Abraham v Thompson [1997] 4 All ER 362 Carob Industries Pty Ltd (In Liq) v Simto Pty Ltd, unreported; SCt of WA (Anderson J); Library No 970692; 11 December 1997 Christmas Island Resort Pty Ltd v Geraldton Building Company Pty Ltd (No 5) (1997) 18 WAR 334 Condliffe v Hislop [1996] 1 WLR 753 Faryab v Smyth, unreported; Court of Appeal (UK); 28 August 1998 Hodges v New South Wales (1988) 62 ALJR 190 In the Matter of Whitemark Pty Ltd (1992) 7 WAR 54 Magic Menu Systems Pty Ltd v AFA Facilitation Pty Ltd (1997) 72 FCR 261 Newton v Gapes (1910) 12 WALR 86 Pioneer Machinery (Rentals) Ltd v El - Jay Inc (1978) 93 DLR (3rd) 726 Scanlon v American Cigarette Co (Overseas) Pty Ltd (No 1) [1987] VR 261 State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146 Stocznia SA v Latreefers Inc, unreported; Court of Appeal (UK); 9 February 2000 Sullivan v Henderson [1973] 1 WLR 333 Walton v Gardiner (1993) 177 CLR 378 Williams & Ors v Spautz (1992) 174 CLR 509 Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc & Anor (1981) 148 CLR 170 Bank of New Zealand & Ors v Spedley Securities Ltd (In Liq) & Ors (1992) 27 NSWLR 91 Elfic Ltd v Macks [2000] QSC 018 Esso Australian Resources Ltd v Commissioner of Taxation (1999) 168 ALR 123 Giles v Thompson [1993] 3 All ER 321 (CA and HL) Grovewood Holdings plc v James Capel & Co Ltd [1995] Ch 80 Hill v Archbold [1968] 1 QB 686 Jago v District Court of New South Wales (1989) 168 CLR 23 King-Brooks v Roberts (1991) 5 WAR 500 Martell v Consett Iron Co Ltd [1955] Ch 363 McMullin v ICI Australia Operations Pty Ltd, unreported; FCA (Wilcox J); 18 November 1996 Neville v London Express Newspapers Ltd [1919] AC 368 O'Keeffe v Scales [1998] 1 ILRM 393 Palamara v City of Perth (1996) 16 WAR 235 Re Daniel Efrat Consulting Services Pty Ltd (1999) 162 ALR 429 Re Oasis Merchandising Services Ltd (In Liq) [1977] 1 All ER 1009 (CA) Rogers v R (1994) 181 CLR 251 Roux v Australian Broadcasting Commission [1992] 2 VR 577 Sali v SPC (1993) 116 ALR 625 Seneviratne v Prefect Pty Ltd [2000] NSWCA 97 Southern Cross Assurance Co Ltd v Shareholders Mutual Protection Assoc Ltd [1935] SASR 480 Stevens v Keogh (1946) 72 CLR 1 Stocznia Gdanska SA v Latvian Shipping Co (No 2) [1999] 3 All ER 822 Theiss Contractors v Placer (Granny Smith) Pty Ltd [2000] WASCA 102 Trendtex Trading Corporation v Credit Suisse [1982] AC 679 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : FREEHILL HOLLINGDALE & PAGE -v- BANDWILL PTY LTD & ANOR [2000] WASCA 150 CORAM : OWEN J
- STEYTLER J
MILLER J
- Applicant
AND
BANDWILL PTY LTD
First Respondent
GAD RAVEH
Second Respondent
Catchwords:
Practice and procedure - Stay of proceedings - Case management - Whether trial Judge had discretion or duty to stay proceedings which appear to be unlawfully maintained and champertous - Whether trial Judge's decision to adjourn stay application a proper exercise of discretion
Legislation:
Nil
(Page 2)
Result:
Appeal allowed
Stay application remitted to trial Judge
Representation:
Counsel:
Applicant : Mr F M Douglas QC & Mr G R Donaldson
First Respondent : Mr D M Stone
Second Respondent : Mr D M Stone
Solicitors:
Applicant : Jackson McDonald
First Respondent : Williams & Hughes
Second Respondent : Williams & Hughes
Case(s) referred to in judgment(s):
Abraham v Thompson [1997] 4 All ER 362
Carob Industries Pty Ltd (In Liq) v Simto Pty Ltd, unreported; SCt of WA (Anderson J); Library No 970692; 11 December 1997
Christmas Island Resort Pty Ltd v Geraldton Building Company Pty Ltd (No 5) (1997) 18 WAR 334
Condliffe v Hislop [1996] 1 WLR 753
Faryab v Smyth, unreported; Court of Appeal (UK); 28 August 1998
Hodges v New South Wales (1988) 62 ALJR 190
In the Matter of Whitemark Pty Ltd (1992) 7 WAR 54
Magic Menu Systems Pty Ltd v AFA Facilitation Pty Ltd (1997) 72 FCR 261
Newton v Gapes (1910) 12 WALR 86
Pioneer Machinery (Rentals) Ltd v El - Jay Inc (1978) 93 DLR (3rd) 726
Scanlon v American Cigarette Co (Overseas) Pty Ltd (No 1) [1987] VR 261
State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146
Stocznia SA v Latreefers Inc, unreported; Court of Appeal (UK); 9 February 2000
Sullivan v Henderson [1973] 1 WLR 333
Walton v Gardiner (1993) 177 CLR 378
Williams & Ors v Spautz (1992) 174 CLR 509
(Page 3)
Case(s) also cited:
Adam P Brown Male Fashions Pty Ltd v Philip Morris Inc & Anor (1981) 148 CLR 170
Bank of New Zealand & Ors v Spedley Securities Ltd (In Liq) & Ors (1992) 27 NSWLR 91
Elfic Ltd v Macks [2000] QSC 018
Esso Australian Resources Ltd v Commissioner of Taxation (1999) 168 ALR 123
Giles v Thompson [1993] 3 All ER 321 (CA and HL)
Grovewood Holdings plc v James Capel & Co Ltd [1995] Ch 80
Hill v Archbold [1968] 1 QB 686
Jago v District Court of New South Wales (1989) 168 CLR 23
King-Brooks v Roberts (1991) 5 WAR 500
Martell v Consett Iron Co Ltd [1955] Ch 363
McMullin v ICI Australia Operations Pty Ltd, unreported; FCA (Wilcox J); 18 November 1996
Neville v London Express Newspapers Ltd [1919] AC 368
O'Keeffe v Scales [1998] 1 ILRM 393
Palamara v City of Perth (1996) 16 WAR 235
Re Daniel Efrat Consulting Services Pty Ltd (1999) 162 ALR 429
Re Oasis Merchandising Services Ltd (In Liq) [1977] 1 All ER 1009 (CA)
Rogers v R (1994) 181 CLR 251
Roux v Australian Broadcasting Commission [1992] 2 VR 577
Sali v SPC (1993) 116 ALR 625
Seneviratne v Prefect Pty Ltd [2000] NSWCA 97
Southern Cross Assurance Co Ltd v Shareholders Mutual Protection Assoc Ltd [1935] SASR 480
Stevens v Keogh (1946) 72 CLR 1
Stocznia Gdanska SA v Latvian Shipping Co (No 2) [1999] 3 All ER 822
Theiss Contractors v Placer (Granny Smith) Pty Ltd [2000] WASCA 102
Trendtex Trading Corporation v Credit Suisse [1982] AC 679
(Page 4)
1 JUDGMENT OF THE COURT: This is an application for leave to appeal and the hearing of the substantive appeal against the decision of a Judge of this Court to adjourn an application for a stay of proceedings on the grounds that they involved maintenance and champerty.
Background
2 Interests associated with Gad Raveh acquired certain businesses in Australia. They were acquired and held through trust structures, including a trust called the Interlaken Trust. This trust structure has two sets of beneficiaries, called the A Fund and the B Fund. Graeme Spencer-Laitt ("Laitt") was a partner in the law firm Freehill Hollingdale & Page ("FHP"). Raveh says that FHP, by Laitt, acted as his solicitors in connection with the businesses. In circumstances which are at the heart of this dispute, Raveh caused interests in some of the businesses to be transferred to interests associated with Laitt. The relationship between Laitt and Raveh soured. Raveh says that Laitt has, effectively, locked in his (Raveh's) interests in the business so as to prevent Raveh from having the beneficial enjoyment of them.
3 Raveh, and Bandwill Pty Ltd ("Bandwill") (a company associated with Hugh McLernon) commenced an action in this Court, CIV 2114 of 1999, against Laitt, Laitt's wife, a company associated with Laitt and FHP claiming wide-ranging relief the effect of which would be to "unlock" the assets and allow Raveh to assert his beneficial enjoyment of them. There is also a claim against FHP for damages for breach of fiduciary obligations. There is a counterclaim by the Laitt interests against Raveh and another for relief. Part of the defence and counterclaim is an assertion by the Laitt interests that the action is being unlawfully maintained against them.
4 In a separate action, CIV 1186 of 2000, FHP have alleged that two companies, McLernon Group Ltd ("MGL") and Biara Pty Ltd (which are associated with McLernon) have, by virtue of a Litigation Funding Agreement, unlawfully maintained the action by Raveh and Bandwill against them. The cause of action sounds in the tort of maintenance and champerty. There is another action, CIV 1185 of 2000, in which the other Laitt defendants in the main action make similar claims.
5 The three actions have been entered in the Long Causes List and assigned to a Judge for management. It will be convenient to refer to the Judge to whom the action has been assigned as "the trial Judge".
(Page 5)
6 We need to say something, very briefly, about the relationship between Raveh and his interests, on the one hand, and McLernon and his interests, on the other hand. In March 1999 McLernon interests (through Biara) made a loan of $7.8 million to Raveh interests and took security to support the loan. Bandwill became the trustee of the Interlaken Trust or of the A Fund within the trust. Biara became a beneficiary of the trust or of the A Fund within the trust. Raveh and Bandwill have retained MGL to investigate the circumstances which are at the heart of the dispute between Raveh and Laitt. To that end they have entered into a Litigation Funding Agreement. By cl 2 of the Agreement, MGL is obliged to supply the services of investigators "to investigate the conduct of … [Laitt and FHP], obtain documents and statements in relation to that conduct and provide that evidence and statements to the [solicitors acting for Raveh and Bandwill]".
7 Under cl 4 of the Agreement, MGL is to make funds available sufficient to pay the legal costs, expenses and disbursements incurred by the solicitors in the proceedings. Clause 13 of the Agreement sets out a formula which governs the amount which MGL could recover if the proceedings against the Laitt interests and FHP are successful. According to a calculation prepared by the solicitors for the applicant for the purpose of this appeal, the recovery could be as high as $27,400,000.
8 The Litigation Funding Agreement is the present point of contention. It is at the heart of the allegation that the action against FHP by Raveh and Bandwill is being unlawfully maintained.
The Application to the Trial Judge
9 As we have already said, the proceedings are in the Long Causes List and have been under the management control of the trial Judge. The Laitt interests and FHP are separately represented.
10 Both the Laitt defendants and FHP took out summonses for a stay of the proceedings on the grounds that they were being maintained. The summons by FHP is, relevantly, in these terms:
"The grounds … [for the stay] are that the action as against … [FHP] is an abuse of the process of … [the Court] and the continuation of the action as against … [FHP] is otherwise contrary to public policy in that: … (a) the action is unlawfully maintained and champertous."
(Page 6)
11 There are other grounds, relating to the unavailability of relevant documents, in support of the claim that the action should be stayed but they are not relevant for present purposes. The summons filed by the Laitt interests alleges collateral abuse as well as the maintenance argument. The plaintiffs took out summonses to dismiss actions CIV 1185 and 1186 of 2000.
12 The applications were first aired at a directions hearing on 24 February 2000. It was a lengthy hearing at which a number of matters, including a programme for the stay application, were dealt with. Counsel for FHP made it clear that, in his view, cross-examination of deponents of affidavits would be necessary in order to resolve the stay application.
13 There was an exchange between counsel for FHP and the trial Judge (see appeal papers 57) which we read as meaning that, at the next directions hearing, further programming orders would be made in connection with the stay applications.
14 Later, at 64 of the appeal papers, counsel for the present respondents said: " … your Honour would be helped by written submissions and reference to authority on the appropriate way in which to deal with the application for a stay." Counsel went on to develop that submission by reference to the law relating to maintenance and champerty. It evoked this response from the trial Judge:
" … your contention is, then, that in order to decide how the stay application should proceed and in particular whether it should be dealt with as a trial or mini-trial, I should have submissions in advance of the next return date so that that issue can then be decided and the matter proceed in accordance with that decision ... "
15 Programming directions were then given, including for the filing of further affidavits and the exchange of written submissions. The return date was set for 31 March 2000. Before that date the Laitt defendants filed an outline of submissions in support of an application for a stay of proceedings. The plaintiffs filed submissions in reply. At the hearing, counsel for FHP made it clear to the trial Judge that he joined in the submissions of the Laitt defendants. They were succinct and made the following basic contentions:
"1. Courts have an undoubted and broad jurisdiction and power to stay actions that are an abuse of process.
(Page 7)
- 2. The jurisdiction extends to cases where the proceedings are said to be unlawfully maintained or champertous.
3. There is an issue as to whether an order granting a stay on the grounds of abuse of process is a final or interlocutory order.
4. If the order sought is final, then the parties are entitled to a hearing at which there is cross examination of deponents to affidavits.
5. Even if the proceedings be interlocutory, in this case:
(a) many of the relevant events and conversations took place between the applicant and his advisers and, as a result, the defendants can only properly test the evidence as to what occurred by cross examination;
(b) the defendants' applications invite the court to make conclusions as to the purpose for which these proceedings are brought of a kind that should not be made on affidavit evidence without cross examination.
6. In those circumstances, there are bona fide grounds for cross examination of the deponent on his affidavit and cross examination should be allowed.
7. The plaintiffs have filed substantial affidavit material in opposition to the application for a stay. The first and second defendants seek 21 days in which to consider and adequately respond to that material (to the extent necessary) by affidavits in reply.
8. Thereafter, the application should be listed for hearing together with the related application by the fourth defendant. Adequate time should be provided for cross examination of deponents. There should be orders for notice to be given of deponents required to attend for cross examination."
- Numerous authorities were cited in support of the contentions urged for the Laitt defendants.
(Page 8)
16 At the hearing his Honour was informed that the "real issue for discussion" that day was the application for a stay. We should mention that prior to the hearing the plaintiffs had filed a minute of proposed orders (appeal papers 238). They clearly contemplate further programming orders for the filing of affidavits and the exchange of submissions before the hearing of the stay applications. They also suggest that the plaintiffs' application to have CIV 1185 and 1186 of 2000 dismissed should be heard at the same time as the defendants' applications for a stay of the main proceedings.
17 When the matter came on for hearing on 31 March 2000, counsel for the plaintiff was about to explain to the trial Judge the background to the stay application when his Honour indicated that he had a preliminary view that he was unpersuaded that he should hear the stay application at all because it was apparent that it would involve cross-examination and that he would not entertain. Further, his Honour was of the preliminary view that the stay application would involve going into issues which were substantially the issues which arose in the main action (CIV 2114 of 1999). His Honour said:
"That being so, it seems to me that it would be undesirable to entertain the stay application at all. I don't think I have to entertain it. I mean, I'm managing this list, this case in the list, and if I think in the exercise of my discretion that it's an inefficient way of progressing the matter to trial, then I don't think I'm obliged to entertain it."
- It is unnecessary to refer in any detail to the discussion which then ensued with counsel. His Honour expressed concern about the delay which would occur if the stay application was heard and expressed concern that the stay application itself did not, on its face, raise a terribly strong case and said, "I am concerned to manage the action efficiently in respect of which matter I think I have a very large discretion". His Honour added:
"See, there's another aspect to it as well. If Mr Raveh's case is that he has been kept out of his money by improper conduct on the part of Mr Laitt and that it's for that reason he has had to turn to Mr McLernon to get him out of difficulty, and it may be right or it may be wrong, I express no view at all, I simply don't know, but if at the end of the day that proves to be the case, then clearly it would have been wholly inappropriate to grant a stay. I mean, it would be apparent then with hindsight that no stay should ever have been granted. While there's that risk, as it were, or that objective possibility of that being the result, then it
(Page 9)
- seems to me in this particular case that it would be inappropriate to grant a stay in any event."
18 Counsel for the Laitt defendants then indicated that this was an issue on which he would seek to make submissions on the hearing of a stay application. His Honour responded by asking counsel to make those submissions there and then. To this, counsel answered that he understood the application before his Honour that day to be no more than an application by counsel for the plaintiffs challenging the right of the parties to cross-examine on affidavit, not a challenge to the listing of the application and whether it should be heard at all. His Honour, nevertheless, invited counsel for the Laitt defendants to make submissions, in response to which counsel advised that he was uncertain whether he could properly put the position of the Laitt defendants that day and sought the opportunity to put before the trial Judge short written submissions. His Honour then called upon counsel for FHP who stated that he was opposed to the summary dismissal of the application for a stay. The trial Judge indicated that he was of a mind that the matter should be adjourned sine die rather than be dismissed. There was then further discussion between the trial Judge and counsel for FHP, the essence of which was that counsel maintained an entitlement in the applicant to have the application for a stay brought before his Honour and determined. Counsel urged his Honour to hear the application for the stay whether it be with or without cross-examination, and suggested that without cross-examination a day would be necessary for the proper disposition of it. Reference was made to the need to deal with a "significant volume of cases", particularly those dealing with the assignment of choses of action by liquidators and receivers.
19 His Honour then heard submissions from counsel for the plaintiffs. Having done so, he delivered judgment in which he directed that the stay application should be adjourned sine die. His Honour concluded that having heard submissions he was confirmed in his view that he should not entertain the stay applications. He was not prepared to dismiss them (which he considered would be plainly wrong) but was of the view that he should adjourn them so that they should come on for hearing with the trial of the actions. His view was that the actions were so closely interlinked that an order would need to be made in due course for them either to be consolidated or tried together. The reasons for that decision were, in essence, that his Honour had three discretions. They were expressed in this way:
(Page 10)
- "5 … First, I have a discretion in the way that I manage this case because these three actions are in the long causes list for the reasons which are set out in the relevant practice direction. In particular, I have a discretion under O 29 r 2(1)(e) Rules of the Supreme Court to dispense with any interlocutory proceeding.
6 Secondly, the stay applications are made by way of chamber summons supported by affidavit evidence. The counsel for the defendants say that the stay applications cannot be disposed of properly unless the deponents to the various affidavits are cross-examined.
7 I agree with that. However, the defendants have no right to cross-examination on the affidavits. That again is a matter of discretion. It is a discretion which on the authorities will only be exercised in exceptional circumstances.
8 Thirdly, I have a discretion whether or not to stay the action even if it was being maintained."
- The learned trial Judge re-affirmed what had been said during the course of argument before him. That is, that there would be difficulty in separating out the matters which would be necessary to determine the stay application from the issues which arise in the main action. In those circumstances his Honour could not see how he could resolve the question of the stay without going into the merits of the head action to a very great extent. This, he considered, would clearly be an inefficient way of proceeding because it would require litigation to be repeated to a considerable extent, possibly even before different Judges. Further, there was no guarantee that the Judge who tried the stay application would necessarily be the trial Judge in the head action, which would add enormously to the inefficient disposition of the matter. Reference was made to the decision of Carob Industries Pty Ltd (In Liq) v Simto Pty Ltd, unreported; SCt of WA (Anderson J); Library No 970692; 11 December 1997 with his Honour concluding that even if the applicant was ultimately successful in the stay application, any costs incurred by the applicant prior thereto would constitute special damage and would be recoverable. Reference was also made to the affidavit of McLernon in response to assertions that he (McLernon) had fomented the dispute between the second plaintiff and the first defendant. His Honour concluded that he could not determine that question without exploring the
(Page 11)
- dispute itself and the origins of the dispute which in turn would require consideration of a long history of their relationship over some 20 years. All of these considerations were said by his Honour to militate against the determination of a stay application at that stage. His Honour then considered the question of discretion, that is, whether even if an action was being maintained it should be stayed at all. His conclusion was that the current judicial trend was against staying an action, even if it is being maintained, unless the maintenance involves what has been described as "trafficking" in litigation. His Honour then concluded:
"35 In deciding not at this stage to entertain the stay application I am not, I think, denying any of the defendants any substantive right. They have a right to claim that the action is being unlawfully maintained. They have a right to have that allegation explored and they have a right to raise the question whether the action should be stayed. However, to paraphrase the Chief Justice in the Carob Industries case: if at the end of the day it appears that a stay should have been granted, then any prejudice caused to the defendants as a result of my present directions can be rectified by way of appropriate orders for costs, including costs on an indemnity basis.
36 For all those reasons I have come to the conclusion that I should not now deal with the question of the stay: that I should simply adjourn the stay applications sine die with a view ultimately to giving a direction that they be dealt with at the hearing of the substantive matters."
20 No appeal has been lodged by the Laitt defendants. It will be convenient, in the balance of these reasons to refer to FHP as the applicant and to Raveh and Bandwill as the respondents. The applicant's grounds of appeal attack each of his Honour's conclusions. However, in essence, what is put by the applicant is that his Honour had no discretion to decline to hear the stay application. In the alternative, even if such discretion existed, his Honour was disentitled to exercise it by an adjournment sine die of the application (with a view to the application being joined in the main action) without giving counsel for the applicant the opportunity properly to argue and develop the grounds upon which the stay was sought.
(Page 12)
Is There a Discretion?
21 Essential to the submissions for the applicant is the proposition that once the court concludes that an action is an abuse of its process it must be stayed. Newton v Gapes (1910) 12 WALR 86 at 90 was relied upon, together with the decision of Anderson J in Carob Industries Pty Ltd (In Liq). It was argued that this latter case should have been followed by the learned trial Judge who was in any event bound by the decision in Newton v Gapes. Particular reliance was placed by counsel for the applicant upon the following passage of Anderson J in Carob:
"As to the appropriate orders that should be made, I think I am bound by Newton v Gapes [1910] 12 WAR 96 [sic] to hold that 'it is the duty of the Court to refuse to give effect to a transaction of this [champertous] kind when the nature of it once becomes apparent' (per MacMillan J at 90). The order that should be made is that the arbitration proceedings be stayed on the ground that they are being illegally maintained and are therefore vexatious and oppressive and an abuse of process. The stay should continue until the Court is satisfied that the proceedings are 'purged of the taint of illegality': Wild v Simpson(supra) per Atkin LJ at 564."
22 Counsel for the respondents argued that there is an undoubted discretion to stay an action on the grounds of an abuse of process, pointing out that an action will not be stayed for abuse on the grounds of collateral abuse, save in the most exceptional case. Reference was made to Walton v Gardiner (1993) 177 CLR 378 at 392 - 393; Williams & Ors v Spautz (1992) 174 CLR 509 at 519 and Christmas Island Resort Pty Ltd v Geraldton Building Company Pty Ltd (No 5) (1997) 18 WAR 334 at 345.
23 It was urged that there is ample authority to support the proposition that a court has a discretion to grant a stay of a maintained action as distinct from the duty to do so. Reliance was placed upon numerous authorities both in Australia (for example, Hodges v New South Wales (1988) 62 ALJR 190 at 193), the United Kingdom (for example, Condliffe v Hislop [1996] 1 WLR 753, Court of Appeal) and Canada (for example, Pioneer Machinery (Rentals) Ltd v El - Jay Inc (1978) 93 DLR (3rd) 726 at 729). Reference could also be made to Chitty on Contracts, 28th ed, Vol 1, p 17 - 053.
24 We agree with the proposition that, even if it could be made to appear that the action may be tainted by maintenance or champerty, the
(Page 13)
- trial Judge had a clear discretion whether or not to stay the action and was under no duty to do so. We do not, with respect, consider that there is anything in Newton v Gapes which suggests otherwise. The court there said no more than that it is the duty of the court to refuse to give effect to a transaction of a champertous kind when the nature of it once becomes apparent (see at 90, per McMillan J, with whom Parker CJ and Rooth J agreed).
25 It must, we think, be borne in mind that there is a distinction between a finding that a champertous agreement, or one providing for maintenance of an action, is against public policy and therefore unenforceable as between the parties to it, and a finding that an action which has been funded pursuant to the terms of an agreement of that kind is an abuse of process. A finding of the first kind should by no means automatically result in a finding of the second kind. The question whether a particular action has been brought, or is being continued, in abuse of the court's process is one which depends upon all of the material circumstances, of which the fact of maintenance or champerty may be only one. There is a considerable body of recent authority to support this proposition although it is enough, we think, to refer to Abraham v Thompson [1997] 4 All ER 362 at 375 - 76; Magic Menu Systems Pty Ltd v AFA FacilitationPty Ltd (1997) 72 FCR 261 at 268-69; Faryab v Smyth, unreported; Court of Appeal (UK); 28 August 1998 at 8; Stocznia SA v Latreefers Inc, unreported; Court of Appeal (UK); 9 February 2000 at 17. In Magic Menu the court said that where there may be "the real potential for an abuse of the courts' processes ... a stay might, in some cases, be justified". Indeed, there is Australian authority for the proposition that a stay of proceedings is an inappropriate remedy where the fact of maintenance is relied upon in a context in which an action which had been brought in tort had yet to be determined: see Hodges v New South Wales at 193.
26 To the extent that the appeal rests on the foundation that the trial Judge was obliged, in advance of the trial, to entertain the stay application because there was a duty to stay the proceedings once it had been made to appear that the proceedings were being maintained, the ground has not been made out.
The Exercise of the Discretion
27 It still remains, however, to consider whether the discretion to adjourn the stay application until the hearing of the substantive matters was properly exercised in all of the circumstances. It must be borne clearly in mind that the trial Judge did not dismiss the application for a
(Page 14)
- stay on procedural grounds and nor did he rule on the merits or substance of the allegations of maintenance and champerty. All that his Honour did was to rule that the issues could more appropriately be dealt with at trial rather than in interlocutory proceedings. It goes without saying that this Court is likewise not concerned with the substance of the allegations of maintenance or champerty. We are concerned with the issue whether the decision to defer consideration of the issue to trial was arrived at in a procedurally apt way. There is no doubt that the tort of maintenance and champerty remains part of the law of Western Australia. There is no doubt also that a maintenance arrangement could, depending on its circumstances, so taint or infect proceedings as to render them an abuse of the process of the court. But the determination of those issues, as questions of substance, is for another day.
28 It seems clear that the parties came to the Court on 31 March 2000 expecting the stay question (among others) to be dealt with only at a procedural level. This much appears from the exchanges between the trial Judge and counsel for the applicant and for the Laitt defendants. It also appears to have been the expectation of counsel for the respondents: see the minute of proposed orders to which we have previously referred.
29 That the question whether the application should proceed purely on the affidavit material or whether there should be cross-examination of deponents loomed large in the consideration of the parties and the trial Judge is hardly surprising. It was a procedural issue that required determination and there is no doubt that the parties were ready to argue, and did argue, their respective positions on that question. There is ample authority for the proposition that the discretion to permit cross-examination in interlocutory applications will be sparingly exercised: Sullivan v Henderson [1973] 1 WLR 333 and In the Matter of Whitemark Pty Ltd (1992) 7 WAR 54 at 56. This is even more so where there is a likelihood that the cross-examination will cover broad issues raised in the action: Scanlon v American Cigarette Co (Overseas) Pty Ltd(No 1) [1987] VR 261 at 274.
30 There was material before the trial Judge as to the extent to which there would be duplication of issues between the main action and the stay application. His Honour was concerned about the extent to which he would have to investigate, in the stay application, issues that were central to the main action and as to whether it would be possible effectively to deal with those questions without cross-examination. All of this was, we think, relevant to the issue whether or not to permit cross-examination. This question was decided against the applicant and the Laitt defendants.
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- There is not, in this appeal, a challenge to that decision and it must stand. Once his Honour had made clear his attitude on that question, counsel for the Laitt defendants said that he might have to reconsider his position and asked for time to do so, perhaps by lodging further submissions. However, counsel for the applicant indicated to his Honour that even if there were to be no cross-examination the applicant still wanted to the opportunity to argue in favour of a stay. Counsel went on to demonstrate the case for a stay by reference to Carob Industries (see appeal papers at 88 - 94). It may be that, following what we have said about the decision, Carob cannot now be relied on in support of the proposition for which counsel for the applicant contended at the hearing. However, it is not clear that counsel was contending that, absent cross-examination, the applicant would stand or fall on what was said in Carob. There were, he said, other issues, particularly the need to distinguish assignment of causes of action by external controllers of corporations. He said that it could take two days to deal with the application.
31 His Honour was clearly conscious of the need for efficient case management, and rightly so. He considered that there would be much unnecessary duplication of complex factual issues by the argument of a stay application in advance of the main action. He drew attention to the repetition of evidence, possibly before different Judges, which his Honour considered would "add enormously to the inefficient disposition of the matter". It cannot be said that his Honour was not conscious of the need in case management to avoid the doing of injustice. Indeed, his Honour made reference to State of Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146, explaining that he was fully aware of that decision and the implications of it and that it had been taken into account in the exercise of his discretion or discretions.
32 His Honour's primary aim was to bring on the main action and with it any application for a stay. This, his Honour thought, could cause no injustice to the applicant, who would be fully protected by reason of the availability to it of special damage, should it succeed in its contentions, whether upon the stay or in the main action itself or both. It is not necessary for us to consider those matters. However, it does seem to us that in the end the applicant has been disadvantaged by his Honour's refusal to allow the stay application to be argued without cross-examination. It is not for us to speculate what arguments might have been advanced. The applicant must confront the case on the basis of the affidavit material without cross-examination. If the applicant wishes to argue that the case for a stay can still be made out on the factual
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- material that is before the Court, then it ought to be given the opportunity to do so.
Conclusion
33 We are extremely conscious of the need to respect the integrity of the case management process and, in particular, the broad discretion that a case manager must have effectively to control the conduct of litigation. Nonetheless, procedural aspects will arise from time to time that require determination. But instances in which appeals should be allowed to be brought from procedural directions must inevitably be rare.
34 To resort to the language which governs the discretion of an appellate tribunal in granting or refusing leave to appeal, the fact that the applicant has not had the chance to advance the argument in favour of a stay means that we are unable to say "whether a substantial injustice would be done if the decision remains unreversed". In these circumstances there seems no alternative other than to remit the matter to the trial Judge for the purpose of allowing the stay application, if the applicant still wishes to pursue it, to be argued on such terms and conditions as his Honour considers appropriate.
35 Accordingly, we would grant leave to appeal and allow the appeal.
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