Ganesh v National Australia Bank Ltd
[2021] VSCA 45
•9 March 2021
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S EAPCI 2019 0111
| ANANDAVALLI GANESH | Applicant |
| GANESH RADHAKRISHNAN | Appellant |
| v | |
| NATIONAL AUSTRALIA BANK LIMITED (ACN 004 044 937) | Respondent |
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| JUDGES: | McLEISH, SIFRIS and KENNEDY JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 22 February 2021 |
| DATE OF JUDGMENT: | 9 March 2021 |
| MEDIUM NEUTRAL CITATION: | [2021] VSCA 45 |
| JUDGMENT APPEALED FROM: | [2019] VSC 642 (Riordan J) |
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PRACTICE AND PROCEDURE – Appeal – Order discontinuing proceeding – Effect of order to also discontinue counterclaim – Complex procedural history before referral to trial – Counterclaim substantially pleaded within defence but certain documents specifying relief by counterclaim struck out before referral – Whether judge erred by basing decision to grant leave to discontinue on mistaken fact that no counterclaim on foot – Error shown – Appeal upheld – Supreme Court (General Civil Procedure) Rules2015 rr 10.08, 25.02.
PRACTICE AND PROCEDURE – Costs – Self-represented litigants – Whether judge erred by making no order as to costs on basis that defendants self-represented – Self-represented litigants entitled to costs orders and to recover disbursements – Cachia v Hanes (1994) 179 CLR 403, Bell Lawyers v Pentelow (2019) 93 ALJR 1007, United Petroleum Australia Pty Ltd v Herbert Smith Freehills [2020] VSCA 15, considered – Supreme Court (General Civil Procedure) Rules2015 rr 25.05, 63.15.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellant | Ms G Crafti with Mr C Lum | Victorian Bar Pro Bono Scheme |
| For the Respondent | Mr A Segal | Dentons Australia |
McLEISH JA
SIFRIS JA
KENNEDY JA:
The appellant, Mr Ganesh, seeks to appeal a decision that the respondent, National Australia Bank, be given leave to discontinue a proceeding which it brought against Mr Ganesh, his wife, and their company, and that there be no order as to costs.[1]
[1]National Australia Bank Ltd v Ganesh [2019] VSC 642 (‘Reasons’). Mr Ganesh is the sole appellant because Mrs Ganesh became bankrupt after filing the application for leave to appeal, and her trustee in bankruptcy has not elected under s 60 of the Bankruptcy Act 1966 (Cth) to continue the proceeding in her name. Mr and Mrs Ganesh’s company was not a party to the application for leave to appeal.
Mr Ganesh contends that, while he had no objection to the bank discontinuing its claims, the effect of the judge’s order was to bring to an end a counterclaim advanced by Mr Ganesh. He further contends that the judge erred in making no orders as to costs on the basis that Mr Ganesh was a self-represented litigant and had not contested the bank’s position that there should be no order as to costs.
For the reasons that follow, the appeal will be allowed on both grounds.
Grounds of appeal
Leave to appeal was earlier given on the following grounds:[2]
(a) The trial judge erred by mistaking the fact that the defendants had made a counterclaim, and ordering on that basis that the proceeding, and not just the plaintiff’s claims in the proceeding, be discontinued.
(b) The trial judge erred in ordering, on the basis that the defendants were self-represented and had not contested the point, that there be no order as to costs.
[2]Ganesh v National Australia Bank Ltd [2020] VSCA 39 (‘Leave Reasons’).
Background
This matter has an extensive, and relatively complex procedural history, which it is necessary to set out in some detail. Much of the history was set out in the Leave Reasons, parts of which are repeated here.
In 2009, the bank lent Mr and Mrs Ganesh a total of $1,425,000 under six credit facilities, variously secured by three properties:[3]
[3]See Ganesh v National Australia Bank Ltd [2018] VSCA 224 [5] (Hargrave JA).
(c)
24 Plumpton Avenue, Oak Park, then the family home owned by Mr and
Mrs Ganesh;
(d) 29 Glen Drive, Rye, which was owned by Mrs Ganesh; and
(e) 20 Marcia Avenue, Rye, which is owned by GSquare Group Pty Ltd, a company of which Mr and Mrs Ganesh were both directors.
The first four credit facilities were secured by the Plumpton Avenue property. Mr and Mrs Ganesh sold that property following a default on those facilities and the net proceeds of that sale discharged all but one of the facilities, the ‘second facility’. Another credit facility, the ‘sixth facility’, was secured by the Glen Drive property.[4]
[4]See National Australia Bank Ltd v Ganesh [2016] VSC 738 [8] (Mukhtar AsJ).
The remaining facility, the ‘fifth facility’, has been the main subject of the dispute between the bank, Mr and Mrs Ganesh and GSquare. The contentious feature of that facility is that it extended the bank’s security relative to another facility which it replaced (the ‘previous facility’). The previous facility was secured only by the Marcia Avenue property and a guarantee from GSquare. The fifth facility was a cross-collateralised facility, secured not only by that property and guarantee, but also by the existing mortgages over the Plumpton Avenue and Glen Drive properties.
The proceeding
On 6 August 2015, the bank commenced the proceeding against Mr and
Mrs Ganesh, and GSquare (collectively, ‘the defendants’) following defaults under several of the facilities. The bank sought judgment for outstanding amounts due under the second facility, the fifth facility and the sixth facility, as well as possession of the Glen Drive and Marcia Avenue properties.
On 17 February 2016, the defendants filed a defence and counterclaim in the proceeding. In that document, they alleged that the bank had ‘foisted’ the fifth facility on them without adequate disclosure or consent. The defendants denied that the fifth facility had been validly executed and said that the bank’s conduct had caused them loss. They sought compensation for that loss, as well as rectification, the return of various settlement funds, interest and costs.
In late 2016, an application by the bank for summary judgment was granted in respect of the bank’s claims relating to the second facility and sixth facility, but summary judgment was refused in respect of the claims relating to the fifth facility.[5] As a result, the bank was granted summary judgment for possession of the Glen Drive property, but not the Marcia Avenue property. The claims in relation to the fifth facility were to be determined at trial.
[5]Ibid [57]–[59].
In March 2017, an appeal brought by the defendants against the summary judgment was dismissed by a judge in the trial division. In addition to ordering that the appeal be dismissed, the judge ordered the bank to file and serve an amended statement of claim limited to claims relating to the fifth facility, and referred the proceeding for further case management. Later, the defendants sought, and were refused, an extension of time to file an application for leave to appeal to this Court against those orders.[6]
[6]Ganesh v National Australia Bank Ltd [2018] VSCA 224.
The bank filed its amended statement of claim on 10 April 2017. By that document, the bank claimed amounts said to be owing under the fifth facility as well as the mortgage over the Marcia Avenue property and GSquare’s guarantee. It also claimed possession of the Marcia Avenue property, interest and costs.
On 25 October 2017, an associate judge ordered the defendants to file and serve their defence and any counterclaim by 4 December 2017, and ordered the bank to file and serve any reply and defence to any counterclaim by 22 January 2018.
On 19 January 2018, the defendants filed a document entitled ‘Defendants’ Response to Amended Statement of Claim’. On the bank’s application, the associate judge made orders striking out that document in its entirety on 22 March 2018. In large part, this was because the document sought to address matters already determined by the summary judgment.
The orders gave the defendants leave to file and serve a proposed amended defence by 12 April 2018. In those orders, the associate judge directed that:
(f) the proposed amended defence confine itself to issues of liability in respect of the fifth facility;
(g) any proposed counterclaim against the bank be made in a separate document to be filed and served with the proposed amended defence; and
(h) any proposed counterclaim confine itself to the fifth facility, identify the person against whom it is made, state the relief or remedy sought, and state the facts upon which the counterclaim relies.
On 16 April 2018, the defendants filed a document described as ‘Proposed Defence to Amended Statement of Claim dated 10 April 2017’. Following a directions hearing, the associate judge made orders striking out certain paragraphs of that document on 18 April 2018. The orders provided that, subject to the Court striking out the paragraphs, the ‘Proposed Defence to Amended Statement of Claim dated 10 April 2017’ would ‘stand as the defence’ in the proceeding. Relevantly, paragraph 3 of the orders provided that:
The defendant[s] shall by 27 April 2018 file and serve a document called ‘Relief or Remedy Sought by Way of Counterclaim’ in which they shall state, by reason of their allegations in their defence, what relief or remedy they seek on a counterclaim.[7]
[7]Emphasis added.
It is necessary to note certain aspects of the ‘defence’ document, as it stood after the strike-out order. In addition to disputing the validity and enforceability of the fifth facility and its various securities, the defendants also positively alleged wrongdoing on the part of the bank in relation to the fifth facility. The alleged wrongdoing included, for example, contraventions of various provisions of the National Credit Code and the National Consumer Credit Protection Act 2009 (Cth), and misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law.
The defendants alleged that, by reason of that wrongdoing, they suffered loss and damage. The loss and damage was not specified, but it was clear that it was alleged to have gone beyond their liability under the fifth facility. So, loss and damage was said to have resulted from their entry into additional credit facilities with other lenders and secured by other properties, unaware that the fifth facility was more extensively secured than the previous facility. Those additional credit facilities were defaulted upon, the properties which secured those facilities were ‘lost’, GSquare became insolvent, and there were ‘outstanding creditor claims’ against Mr and Mrs Ganesh in respect of those facilities. The defendants said that if the bank had properly disclosed to them (and to credit reporting agencies and other credit providers) the extent to which the fifth facility was secured, then those additional credit facilities would not have been sought or approved, and the losses arising from the defaults on those facilities would have been avoided.
On 1 May 2018, the defendants filed a lengthy document entitled ‘Relief and Remedy Sought by Way of Counterclaim’ dated 27 April 2018, which it is presently unnecessary to describe in any detail. It claimed an extensive list of heads of loss and damage, not confined to the fifth facility.
On 25 June 2018, the bank filed a document entitled ‘Reply and Defence to Counterclaim’. In it, the bank responded to both the ‘Defence to Amended Statement of Claim dated 10 April 2017’ and the ‘Relief and Remedy Sought by Way of Counterclaim’ dated 27 April 2018. The first part of the bank’s document was entitled ‘Reply’, and responded to the allegations in the ‘Defence to Amended Statement of Claim dated 10 April 2017’ which had not been struck out. The second part of the document was entitled ‘Defence to Counterclaim’, and responded to the ‘Relief and Remedy Sought by Way of Counterclaim’ dated 27 April 2018. This second part was brief. It referred to the matters set out in the preceding ‘Reply’ section and otherwise denied that the defendants were entitled to the relief sought by way of the counterclaim.
At a further directions hearing on 26 June 2018, the associate judge made orders striking out the defendants’ ‘Relief and Remedy Sought by Way of Counterclaim’ in its entirety. Among other things, this was because it pleaded extensive facts, including matters previously struck out, rather than just identifying the relief or remedies sought on the basis of the surviving allegations in the defence. The orders provided the defendants an opportunity to file a further version of the document, as follows:
8.By 20 August 2018, the [defendants] shall file and serve another document called ‘Relief and Remedy sought by way of Counterclaim — Version 2’ in which they shall state what relief or remedy they seek on a counterclaim by reason of the allegations in their defence.
9.For the purposes of paragraph 8 the document to be filed may not seek relief or remedy concerning the first, second, third, fourth and sixth facilities which have already been the subject of the Court’s determination and affirmed on appeal, and likewise by reason of the Court’s determinations the counterclaim may not seek relief concerning securities under those facilities.
In a statement of reasons accompanying the orders, the associate judge explained that:
[I]n order to understand and accommodate any desire for [the defendants] to file a counterclaim, I … ordered on 18 April 2018 that they were to file a standalone document to be called ‘Relief or Remedy sought by way of Counterclaim’. That is, I relieved them of the need to plead or repeat facts in the counterclaim but required them to simply state the relief or remedy sought. I stipulated that the relief or remedy should be based upon the allegations in their defence.
This brings me to the present problem. The document ‘Relief and Remedy sought by way of Counterclaim’ was filed on 1 May 2018. Rather than confining itself to relief or remedy, it purported to introduce an array of allegations and reintroduce facts and matters concerning the facilities which the Court has already found were valid and enforceable. Moreover, their document one way or another reintroduced allegations which the Court in the past has found were scandalous and outlandish, and which have been struck out. The dispute was going backwards. One possibility was to go laboriously through this prolix document and strike out piecemeal the offending parts. That creates confusion or difficulties of comprehension especially at trial. Instead, I made these orders [to] give them a chance to redo the document, and redo it with a reminder that it is to be confined to the surviving allegations in their defence; confined to the fifth facility and the security under it; and confined to stating the relief or remedy sought.[8]
[8]Emphasis added, save for the emphasis of ‘standalone document’ which appears in the original.
On 21 August 2018, the defendants filed a document entitled ‘Relief and Remedy Sought by Way of Counterclaim — Version 2’. Following a further directions hearing on 24 August 2018, the associate judge again made orders striking out that document in its entirety.[9] As the associate judge explained in those orders, this was because the document was ‘in substance no different to the [v]ersion previously struck out’.
[9]These orders were made on 24 August 2018 and corrected pursuant to the ‘slip rule’ on 27 August 2018.
The orders gave the defendants leave to file and serve a further version of the document, entitled ‘Relief and Remedy Sought by Way of Counterclaim — Version 3’ by 14 September 2018, and required that document to confine itself to ‘stating concisely the relief or remedy’ they would seek, if the Court were to determine that the fifth facility is unlawful or unenforceable. In ‘Other Matters’, the associate judge recorded that:
The plaintiff suggests striking out and proceeding to trial according to the allegations in the defence. But the defendants adamantly raise the sword as well as the shield. This Court is unwilling to simply leave a state of disorder and awful problems for the trial Court, which has to know what the defendants seek by way of a counterclaim.[10]
[10]Emphasis added.
On 2 October 2018, there was a further directions hearing. The defendants had not filed a ‘Relief and Remedy Sought by Way of Counterclaim — Version 3’. Mr and Mrs Ganesh did not appear at the directions hearing.
At that directions hearing, counsel for the bank submitted that the matter should proceed to trial notwithstanding that the defendants had not filed a ‘Relief and Remedy Sought by Way of Counterclaim — Version 3’. The trial judge, it was said, could deal with the case without that document as the substance of any counterclaim was contained in the extant defence. Counsel for the bank characterised the defence as ‘a defence and counterclaim in that it [is] shield and sword’. This was because, in addition to defending the bank’s claims, it made claims against the bank for misleading or deceptive conduct and for damages. Counsel said that the fact that the defendants had not filed a document specifying the relief sought in respect of their claims was not an obstacle because, were the trial judge to ‘take the view that [the defendants] are entitled to some form of relief’ on the basis of the allegations contained in the defence, the trial judge could fashion appropriate relief, and the bank would not be caught by surprise.
The associate judge appeared to accept this submission, stating:
Accordingly, they are proceeding to trial on the basis of their defence dated 12 April, filed 16 April, parts of which were struck out on 18 April. To observe that within that defence there’s a claim for loss and damage, and whilst it is unorthodox, possibly unsatisfactory, what must prevail is advancing the matter to trial and the court fashioning relief by way of counter claim depending on its findings on allegations made in the defence.
Counsel for the bank also explained that the bank had chosen, rather than to make the defendants ‘go back’ and redo the struck out ‘Relief and Remedy by Way of Counterclaim’ documents, to treat the defence as the defence and counterclaim of itself. Accordingly, the bank’s ‘Reply and Defence to Counterclaim’ stood as its reply. The associate judge then queried whether he should order that ‘as things stand there is no counterclaim’, before deciding that such a statement would not amount to an order and it was preferable to ‘leave it as some reasons’.
The associate judge made orders adjourning the directions hearing until 8 October 2018, at which time the Court would ‘make orders referring the proceeding to the Commercial Court for the making of trial directions’ unless Mr and Mrs Ganesh could ‘show good reason why the matter should not now proceed to trial’. The associate judge set out under ‘Other Matters’:
The Court has experienced great difficulty in getting the defendants to prepare a satisfactory defence and counterclaim to enable an orderly trial. Those difficulties necessitated the Court ordering the defendants to file a separate counterclaim, that is, separate to the defence. The Court struck out two versions of their counterclaim in April and August this year and gave them an opportunity to file a third version by 14 September. They have not done so.
There is sufficient in the defence to not cause embarrassment in the fair and orderly conduct of a trial. The problem has been the composition of the counterclaim, which is based on claiming loss and damage according to the same allegations as comprise the defence. More extensions of time to give the defendants more opportunity to improve their counterclaim will lead to more disputes and delay. As litigants in person, it is unlikely that more coercive Court orders will produce a more meaningful counterclaim. It is one of those cases where things will have to be fashioned at trial. The plaintiff is content with adapting to that state of affairs, as against the prospect of further delay.[11]
[11]Emphasis added.
The orders relevantly provided that:
The defendants’ defence to this claim shall proceed according to the ‘Defence to Amended Statement of claim dated 10 April 2017’ which was filed on 16 April 2018 and parts of which were struck out according to the Court’s orders dated 18 April 2018, and to which the plaintiff has filed a reply dated 22 June 2018.[12]
[12]Emphasis added.
Neither the orders nor what appeared under ‘Other Matters’ contained a statement that ‘as things stand, there is no counterclaim’. The Court did, however, describe ‘two versions of [the] counterclaim’ as having been ‘struck out’.
On 8 October 2018, Mr and Mrs Ganesh again did not appear, and the associate judge made orders referring the proceeding:
to the Principal Judge of the Commercial Court, or the responsible officer in the Commercial Court Registry, for allocation to a trial Judge of the Commercial Court for pre-trial directions and the hearing and determination of the proceeding.
The associate judge then suggested to counsel for the bank that the trial judge be provided with copies of the various orders in the case so that the judge could ‘better see the journey’ and understand why the pleadings were somewhat unorthodox. Counsel for the bank acknowledged the importance of providing the trial judge with an understanding of the relevant history.
On 28 October 2018, Mr and Mrs Ganesh filed a notice of appeal against the order referring the proceeding to trial. Their fundamental complaint was that the proceeding referred was confined to issues in relation to the fifth facility, whereas they wished to allege against the bank breaches of the terms of the other facilities: the first, second, third, fourth and sixth facilities, as well as the previous facility.
On 2 November 2018, there was a directions hearing before the trial judge. At the hearing Mr Ganesh explained that the defendants sought to allege contractual breaches by the bank which caused the defendants loss and damage. The trial judge made orders adjourning the hearing of the defendants’ notice of appeal to 1 February 2019. Those orders also required Mr and Mrs Ganesh, in the interim, to file and serve a statement:
(a)listing each alleged breach of contract by the plaintiff on which the defendants rely; and
(b)with respect to each breach, the financial consequences that flow from the alleged breach.
On 29 January 2019, the defendants filed a lengthy document entitled ‘Defendants Submission Pursuant to Order dated 2 November 2018’. This document set out the contractual breaches alleged, as well as related allegations of fraudulent misrepresentation, misleading and deceptive conduct, breach of privacy, and contravention of provisions of the Banking Code of Practice. On the same day, the defendants filed a companion document entitled ‘Financial Consequences Arising out of Plaintiff’s Conduct Pursuant to Order dated 2 November 2018’. This document referred to the document outlining the allegations of breach, and set out the relief sought by the defendants. The relief sought included a lengthy list of categories of loss in respect of which compensation was sought, including financial losses, wasted costs, lost opportunities, as well as psychological distress.
On 1 February 2019, there was a further directions hearing. At that hearing, the trial judge suggested that the defendants’ ‘counter-claim’ raised the issue of the extension of the fifth facility to other properties. Counsel for the bank responded that he would have to review the orders of the associate judge to determine:
what, if anything, their counterclaim says because their counterclaim was struck out on numerous occasions tracked through the orders, and the defendants effectively declined to take any further step promulgating a counter-claim.
The trial judge referred to the associate judge’s orders referring the matter to trial, then stated ‘as I understand it, there’s no counterclaim as such afoot, is there?’ Counsel for the bank replied, ‘yes, that’s right’. The judge then noted the associate judge’s reference to the counterclaim being ‘fashioned at trial’. Later, the judge stated:
[T]hat leaves the question … that the defendants would like to contend [by reason of the extension of the mortgage to cover other loans] they’ve suffered other damage…
And so the only thing we would need to question at trial is if they wish — if they can get afforded that despite the fact that there’s no counterclaim on foot at the moment — … [to] say that the bank’s conduct was wrongful either as misleading, deceptive or unconscionable or on some other ground in obtaining the extension of the mortgage [and to] contend that somehow that caused other losses to them.[13]
[13]Emphasis added.
Counsel for the bank accepted the judge’s summation, and explained that the bank proposed to lead evidence to contest that: (a) the fifth facility was invalid or unenforceable by reason of wrongful conduct on the part of the bank; and (b) even if so, Mr and Mrs Ganesh suffered any loss. Later, the judge proposed to Mrs Ganesh that the defendants lead evidence on those same topics.
The trial judge then made orders listing the matter for trial and requiring the filing and serving of witness outlines. The following direction was made as to the issues to be tried:
Pursuant to the Court’s obligation to give effect to the overarching purpose under s 8 of the Civil Procedure Act 2010, the Court has made the following trial directions and identified to the parties that the issues to be tried (‘the Trial Issues’) are as follows:
(a) Is the fifth agreement (as it is referred to in the Defence to the Amended Statement of Claim dated 10 April 2017) invalid or otherwise unenforceable by reason of the plaintiff’s wrongful conduct in the incorporation of a term extending the security under the fifth agreement to the mortgages over the Plumpton Avenue Property and the Glen Drive Property (as defined in the Amended Statement of Claim filed 10 April 2017)?
(b) If the plaintiff did engage in the wrongful conduct, referred to in subparagraph (a), did the defendants suffer any damage, and if so what damage, as a result of such wrongful conduct?
The bank duly filed and served its witness outlines, and discovery proceeded. Mr and Mrs Ganesh did not file outlines.
On 6 May 2019, the judge made orders by consent on the papers. These orders required the bank to respond to interrogatories of the defendants by 5 June 2019, and to file and serve a court book by 31 July 2019. The orders also required the defendants to file their witness outlines by 28 June 2019. The schedule of parties to these orders referred to the bank as plaintiff and defendant by counterclaim, and to the defendants as both defendants and plaintiffs by counterclaim. This was the first of the judge’s orders to so describe the parties.
On 17 June 2019, the bank wrote to Mr and Mrs Ganesh advising that it had closed and written off the balance of the remaining eight loan accounts they held with the bank, was preparing a discharge of the remaining mortgage (on the Marcia Avenue property), and wished to discontinue the proceeding. On 10 July 2019, lawyers for the bank wrote to Mr and Mrs Ganesh to advise that the mortgage over the Marcia Avenue property had been discharged. The bank sent the certificate of title to the property to GSquare on 5 August 2019.
Shortly afterwards, on 7 August 2019, the bank made an application for leave to discontinue the proceeding, which was heard by the trial judge on 19 August 2019. The written submissions provided by the bank in support of the application relevantly stated:[14]
(c) There is no pleaded counterclaim on foot by the Defendants. In that regard, NAB refers to the orders made by the Court on 18 April 2018, 26 June 2018, 27 August 2018, and 2 October 2018.
7. Further, there has been limited or no documents discovered by the Defendants in relation to any counterclaim and there has been no elaboration by them as to how its claim is brought.
8. As it currently stands, it is difficult to see how a trial of any counterclaim can proceed in circumstances where the moving party has not properly articulated the basis of its claim and the responding party does not understand the issues which it would be required to meet at trial.
[14]These submissions appear to have been provided to the judge’s chambers and the defendants in advance of the hearing of the application, but were not filed.
Mr and Mrs Ganesh did not object to the bank discontinuing its claims, but sought to maintain the claims they said they had made, as well as those which the associate judge had prevented them from making, as part of the ongoing proceeding.
During the hearing, Mr Ganesh handed up to the judge a set of written submissions running to 21 pages. Commencing at the foot of the eighteenth page, the following passage appeared:
The Supreme Court Rules provides that a Defendant who alleges that he has any claims against a Plaintiff may, instead of bringing a separate action, make a counterclaim in respect of that matter. The rules shall apply in relation to a counterclaim as if the counterclaim were a separate action and as if the person making the counterclaim were the plaintiff and the person against whom it is made a defendant. Moreover, the issues of fact raised by the claim and counterclaim should as a rule be tried together as that was the defendants’ object in pleading the counterclaim. It is apparent from the court rules and decided cases that the counterclaim must be regarded as a separate and independent action ...
In this case, the Defendants’ facts and rights have not been given due consideration so far. Even as far back as 2016, the [Defendants’] original filing dated 17 February 2016 was a Defence and Counterclaim document. The [Defendants] have a right to counterclaim.
The final paragraph of the written submissions addressed the question of costs, requesting that costs be reserved:
Defendants further pray that all costs of the proceedings be reserved until the Defendants’ matters as set out hereof, have been heard and determined.
In his oral submissions, Mr Ganesh addressed various matters, emphasising that the defendants wanted their ‘issues’ or ‘case’ to be heard, but otherwise relied on their written submissions.
In an oral exchange with the judge, Mr Ganesh made reference to those submissions, as well as the submissions filed on 27 January 2019. He further explained:
I don’t know full rights over here, but if they wish to discontinue their proceedings, we do not object to their discontinuing. But what we would like to say is our case is still there, and we would like the directions of this court to hear our case and our claims.
…
In the context of this case, that we have been here for a number of years, and in spite of us being in the many hearings that have happened, it is not that our issues have been heard.
What has been heard is the plaintiff’s claim of default. That is the only issue that has been determined and ordered upon by this court, and that is what — we have reached this position so far. Our case is not about debts and defaults, though they have a bearing. We do say that the issues — defendants’ issues arise from the plaintiff's conduct, or more precisely, the misconduct, and the consequential loss and damages suffered by us.
We come to ask the court the question: why [have] the defendants’ real issues not been heard?[15]
[15]Emphasis added.
The bank’s application was granted at the hearing. The judge delivered his reasons ex tempore at the conclusion of the hearing. Orders were made that the proceeding be discontinued and that there be no order as to costs. Again, the schedule of parties to the orders referred to the bank as plaintiff and defendant by counterclaim, and to the defendants as both defendants and plaintiffs by counterclaim.
Judge’s reasons
After setting out the background, and the nature of Mr and Mrs Ganesh’s claims, the trial judge turned to the procedural history.
The judge noted that the associate judge had made orders allowing the defendants to file a document entitled ‘Relief and Remedy Sought by Way of Counterclaim‘, wholly struck out two iterations of that document, and afforded the defendants a further opportunity to file a third iteration of that document. The defendants did not do so and therefore ‘did not file a counterclaim’ as provided for by the associate judge’s orders. The judge recorded the associate judge’s assessment that, given deficiencies in the composition of the counterclaim, it is ‘one of those cases where things will have to be fashioned at trial’.
The judge explained that, the matter having been referred to trial, he had directed that the parties address two issues: whether the fifth facility was invalid or unenforceable by reason of wrongful conduct on the part of the bank; and, if so, whether the defendants suffered any damage as a result. The judge recorded that the defendants had not complied with orders as to the filing and service of witness outlines.
The judge then turned to the substance of the bank’s application. The judge considered it appropriate that leave to discontinue the proceeding be granted, given that, by the time of the hearing of the bank’s application:[16]
[16]Reasons [17].
(i) the bank had written off the debt due under the fifth facility, the subject matter of its remaining claims;
(j) the bank had discharged the mortgage over the Marcia Avenue property, the remaining mortgage at issue in the proceeding, and had returned the certificate of title;
(k) Mr Ganesh, at the hearing, did not object to leave to discontinue being granted.
The judge noted that, notwithstanding that they did not object to leave being granted, Mr and Mrs Ganesh continued to contend that they were entitled to ‘broad-ranging’ and ‘unspecified’ relief against the bank ( beyond that which the bank now conceded) for alleged wrongful conduct on the part of the bank in relation to the fifth facility. However, the judge considered that those claims were ‘not part of any current proceeding’ before the Court, as both iterations of Mr and Mrs Ganesh’s ‘counterclaim’ had been struck out by the associate judge.[17]
[17]Reasons [19].
The judge concluded that, in these circumstances, it was ‘appropriate that this matter be brought to an end’.
Next, the judge considered the question of costs. He accepted the bank’s submission that because Mr and Mrs Ganesh were self-represented litigants there should be no order as to costs,[18] and recorded that they did not contest that there should be no order as to costs.
[18]Ibid [20], citing Cachia v Hanes (1994) 179 CLR 403, 410–11 (Mason CJ, Brennan, Deane, Dawson and McHugh JJ).
Ground 1
Appellant’s submissions
Mr Ganesh’s primary submission is that the trial judge’s discretion miscarried because he erred by finding that there was no counterclaim on foot at the time of the application to discontinue.
It was submitted that this finding was made in the judge’s statement that the defendants’ claims against the bank were for ‘broad-ranging … unspecified relief’ and ‘not part of any current proceeding before this Court, both counterclaims having been struck out’ by the associate judge.[19] This finding, it was said, was in error. The issue was not the precise boundaries of the defendants’ claim but whether a claim existed at the time of the bank’s application. Such a claim plainly existed, even though two iterations of the ‘Relief and Remedy Sought by Way of Counterclaim’ document had been struck out.
[19]Ibid [19].
First, Mr Ganesh submits that the defendants’ ‘Defence to Amended Statement of Claim’ was substantively a defence and counterclaim, albeit in unconventional form. The defence alleged extensive wrongdoing on the part of the bank. The associate judge had recognised that by that document, the defendants raised the ‘sword’ as well as the ‘shield’ and that they positively claimed loss and damage on the basis of allegations of wrongdoing raised in the defence. Counsel for the bank, before the associate judge, had similarly recognised the document as both defence and counterclaim, and had stated that the bank was content to proceed on that basis.[20] The matter was referred to trial on the basis that the amended defence made all the necessary allegations for the counterclaim; all that remained to be specified or ‘fashioned at trial’ was the specific remedy or relief.
[20]Mr Ganesh takes particular issue with the fact that counsel for the bank, at the hearing of the application to discontinue, submitted that any counterclaim could not proceed because it was not adequately articulated, when, before the associate judge, the same counsel had accepted that waiting to have a properly articulated counterclaim would unduly delay the trial, and submitted that the matter should be referred for trial without a third ‘Relief and Remedy Sought by Way of Counterclaim’ having been filed.
Mr Ganesh submits that the trial judge should have recognised this to be so. The basis on which the matter had been referred was sufficiently clear in the associate judge’s orders and reasons. Before the trial judge, the defendants maintained their allegations of wrongful conduct on the part of the bank, including contractual breaches, and other conduct causing loss. As a result, the trial judge identified wrongdoing on the part of the bank and loss to the defendants as the two trial issues, and ordered submissions from the defendants as to those issues. The defendants filed separate submissions on both question (to which the judge made no reference in his Reasons).
Secondly, Mr Ganesh submits that the defendants’ failure to file a third iteration of the ‘Relief and Remedy Sought by Way of Counterclaim’ did not indicate the absence of a counterclaim. It only indicated a failure to specify the relief sought by way of the counterclaim contained in the ‘Defence to Amended Statement of Claim’. The associate judge referred the matter to trial on the basis that it was the appropriate relief (not the counterclaim itself) which could be fashioned at trial, and made other remarks consistent with the existence of a counterclaim. For instance, the associate judge spoke of ‘improving’ and ‘producing a more meaningful’ counterclaim, and the ‘composition of the counterclaim’. Similarly, the associate judge had proposed that counsel for the bank provide the trial judge with a history of the procedural orders to ensure that formal deficiencies in the defendants’ pleadings not be mistaken for the substantial absence of a claim.
It was said not to matter that previous iterations of the ‘Relief and Remedy Sought by Way of Counterclaim’ were struck out. Those were special documents specifying relief; they were not the counterclaim itself. In any event, that they were struck out did not nullify or even stay the underlying claim. A strike out causes the struck out parts of the pleading to cease to exist; the underlying claim persists.
Mr Ganesh submits that the judge’s error was explicable given the very complex procedural history, the unusual state of the pleadings, and the defendants’ self-representation. In those circumstances, the judge was especially reliant on the bank for an explanation of the true position. In those circumstances, it was said to be significant that counsel for the bank appeared not to have taken the trial judge to the transcript of the final hearing before the associate judge, including the passages recording the bank’s concession that a counterclaim existed.
Mr Ganesh further submits that the question of the existence of a counterclaim must be understood against the backdrop of the defendants’ self-representation. It was said that the fact of self-representation required the Court to assume a more active role in ascertaining the parties’ rights, notwithstanding the limitations of a self-represented party’s advocacy.[21] Accordingly, in the circumstances, including
Mr Ganesh’s clear position at the hearing of the application that he wished the Court to hear and determine his claims, the Court ought to have perceived the existence of a counterclaim, or made necessary enquiries of the defendants to establish its existence. Having established its existence, the Court should have taken steps to protect the defendants’ right to pursue the claim, such as by providing the defendants an opportunity to re-plead, referring the defendants to pro bono representation, or striking out aspects of the existing pleadings.
[21]Neil v Nott (1994) 68 ALJR 509, 511 (Brennan, Deane, Toohey, Gaudron and McHugh JJ).
Mr Ganesh’s alternative submission is that, even if the judge appreciated that a counterclaim was on foot at the time of the application, his discretion nonetheless miscarried. It was said that the intended effect of his order discontinuing the proceeding (read in light of the reference in his reasons to the matter being ‘brought to end’) was to bring to an end the entire proceeding, including the defendants’ claims. In exercising his discretion in this way, the judge overlooked prejudice to the defendants. While the defendants could bring their counterclaim in a fresh proceedings, that would be prejudicial to them. For example, some of the defendants’ claims might now be statute-barred, and there would be additional and duplicated costs. Maintaining the counterclaim in the existing proceeding, it was said, may also have case-management advantages, and be more consistent with the objectives of the Civil Procedure Act.
Respondent’s submissions
Ultimately, there appears to be little dispute between Mr Ganesh and the bank as to whether there was a counterclaim of some sort on foot. The parties now agree that there was, albeit incompletely or unconventionally pleaded. Similarly, there appears to be little dispute as to whether the judge should have appreciated that there was some form of counterclaim on foot. The parties agree that the procedural history, filed documents, and the submissions before the judge should have alerted him to the existence of a counterclaim of some sort.
The critical dispute is whether the judge in fact appreciated that there was some form of counterclaim on foot. The bank submits that the judge perceived the existence of a counterclaim, and properly exercised the discretion to discontinue in the light of the true circumstances.
The bank identifies a number of facts (many of which are also relied on by Mr Ganesh as supporting the contrary position) which it says show that the judge perceived the existence of a counterclaim. The judge’s reasons set out relevant parts of the procedural history. They contained a lengthy extract from the associate judge’s orders referring the proceeding to trial in which the state of the pleadings was described and it was said that ‘things will have to be fashioned at trial’. The judge ordered the defendants to file submissions as to the bank’s alleged breaches and the relief sought by them. The judge identified closely related issues as the two ‘trial issues’ for determination. The judge had the benefit of oral submissions from the bank which, it was said, made it clear that the bank was prepared to deal with the defendants’ claims, but within the framework of their own claim. The bank’s written submissions in respect of the application to discontinue were said not to have flatly disputed the existence of any counterclaim, stating only that there was not a ‘properly articulated’ or ‘pleaded’ counterclaim. The judge’s orders discontinuing the proceeding contained a schedule of parties which identified the parties not only as ‘plaintiff’ and ‘defendants’ but also ‘defendant by counterclaim’ and ‘plaintiffs by counterclaim’.
The bank submits that, having appreciated that there was a counterclaim of some form on foot, and a desire on the part of the defendants to properly plead and pursue a counterclaim, the judge nonetheless properly exercised his discretion to discontinue. This was said to be appropriate in light of matters recorded by the judge, including: the long history of the proceeding; the defendants’ non-compliance with orders as to the filing of witness outlines; the bank having discharged the defendants’ remaining loan accounts and the mortgage over the Marcia Avenue property; and the ‘broad ranging’ and ‘unspecified’ nature of the relief the defendants continued to contend for. In the circumstances, the judge was entitled to consider it appropriate that matter be brought to an end.
Counsel for the bank submitted that the fact that the bank no longer sought to pursue its claims in respect of the fifth facility meant that circumstances had changed and that claims which depended on that facility were no longer intelligible without the ‘framework’ that had previously been in place. It was submitted that the judge had recognised, as had the associate judge, that a counterclaim could not seek to re-agitate matters which had been the subject of summary judgment, with the result that the issues for trial were confined to alleged wrongful conduct relating to the fifth facility. Since the bank no longer sought to uphold that facility, the counterclaim fell away and it could be inferred that the judge approached the mater this way.
Consideration
Rule 25.02(2) of the Supreme Court (General Civil Procedure) Rules 2015 provides that a plaintiff may discontinue a proceeding commenced by writ or withdraw any part of it, either before the close of pleadings or by leave of the Court or with consent of all other parties. Rules 25.02(3) provides in similar terms for a defendant wishing to discontinue a counterclaim or withdraw any part of it.
It is tolerably clear from these provisions that discontinuance of a proceeding and discontinuance of a counterclaim are separate steps, and that one does not necessarily follow the other. Any doubt on that score is dispelled by r 10.08, which relevantly provides that a counterclaim may be prosecuted notwithstanding that ‘the original proceeding is stayed, discontinued or dismissed’.[22]
[22]See also Toyota Motor Corporation Australia Ltd v Ken Morgan Motors Pty Ltd [1994] 2 VR 106, 210 (JD Phillips J).
None the less, the parties are agreed that the purpose and effect of the judge’s order giving leave to the bank to discontinue ‘the proceeding’ was to bring the counterclaim to an end as well. That interpretation of the order is supported by reading it together with the reasons, in which the judge stated that the counterclaim was not part of any proceeding before the Court, having twice been struck out, and that it was appropriate to bring the matter to an end.[23] Resort to reasons for this purpose may be appropriate even where the order is unambiguous on its face, since the reasons form part of the context for the making of the order.[24]
[23]Slea Pty Ltd v Connective Services Pty Ltd (2018) 341 FLR 208, 214 [27]–[30] (Ferguson CJ, Whelan and McLeish JJA); [2018] VSCA 180; Yates Property Corporation Pty Ltd v Boland (1998) 89 FCR 78, 78–9 (Drummond J, Sundberg J and Finkelstein J agreeing at 79) (‘Yates’); Athens v Randwick City Council (2005) 64 NSWLR 58, 70 [28]–[29] (Hodgson JA) 78 [129] (Santow JA), 80 [141] (Tobias JA) (‘Athens’).
[24]Australian Energy Ltd v Lennard Oil NL [No 2] [1988] 2 Qd R 230, 232 (Andrews CJ, Kelly SPJ agreeing at 240), 243–4 (Thomas J); Yates (1998) 89 FCR 78, 78–9; cf Athens (2005) 64 NSWLR 58, 70 [28]–[29] (Hodgson JA) 78–79 [133]–[138] (Santow JA).
In our view, the history of this matter makes it clear that, at least until the bank sought to discontinue the proceeding, the parties and the Court were moving toward trial on the understood basis that the defendants advanced a counterclaim, the grounds of which were stated in the ‘defence’ dated 12 April 2018 (subject to parts of that document having been struck out), but the relief in respect of which was to be identified (or ‘fashioned’) at trial. While no document formalised that relief, two ‘versions’ of such a document had been filed and struck out and a third document filed 29 January 2019 set out ‘financial consequences’ of the bank’s alleged conduct. With the possible exception of this last document, to which the judge did not refer, the judge appears to have been aware of all these matters.
The bank submitted that the position changed when it sought to discontinue its case, because the framework for the counterclaim was taken away. There is no suggestion in the judge’s reasons that he approached the matter in that way. But in any event the argument fails to recognise that the defendants sought relief beyond that which would follow from the bank discontinuing its case. They alleged loss and damage, not merely by way of defence, but counterclaim. Put differently, the defendants might no longer need their shield, but still wanted to wield their sword. Nothing about the discontinuance affected that position.
It seems to us that the judge recognised that the defendants still wished to pursue their counterclaim, and that the counterclaim extended beyond the boundaries of the bank’s claim. He said:
The submissions made by the defendants relate to the fact that they continue to contend that they are entitled to broad relief beyond that which the bank now concedes by reason of what they contend is the wrongful conduct of the bank.[25]
[25]Reasons [19].
However, in dealing with this state of affairs, the judge said:
The fact that the defendants continue to contend that they should be entitled to broad-ranging, if I might say, unspecified relief against the bank for the wrongdoing arising out of the fifth facility is not part of any current proceeding before this Court, both counterclaims having been struck out by the Associate Judge.[26]
[26]Ibid.
In reasoning this way, the judge treated the striking out of the two ‘versions’ of the relief document as having put an end to the counterclaim. That was incorrect, for two related reasons. First, the matter was proceeding on the basis that the defence document advanced the counterclaim, albeit without a proper statement of the relief sought. Secondly, as counsel for the appellant pointed out in argument in this Court, the striking out of parts of a pleading does not bring the underlying claim to an end. These matters caused the judge to mistake the status of the counterclaim, meaning that his discretion in the grant of leave miscarried.
We do not attribute significance to the fact that the judge’s order listed the parties as plaintiffs and defendant by counterclaim. The identification of parties in the titles to Court documents often operates as an historical artefact more than a contemporary record. In other words, unless there is a formal order to the contrary, a party usually remains named and identified in their original capacity notwithstanding that they may, for example, not have entered an appearance or have settled their part of the proceeding.
We do not accept the bank’s argument that the judge based his decision, not on the mistaken fact that there was no counterclaim on foot, but on the whole of the circumstances surrounding the defendants’ failure to advance that counterclaim. That explanation is simply not found in the judge’s reasons. Counsel fastened on the judge’s statement that it was ‘appropriate’ to bring the matter to an end. But that observation followed directly from the judge’s statement that the counterclaim had twice been struck out. And even if wider considerations were to be taken into account, that required proper notice and full argument on a summary judgment or other application brought by the bank.
For these reasons, the first ground of appeal must be upheld. The appropriate relief is to substitute orders that the proceeding[27] be discontinued and that the matter be remitted for directions before a judge of the Commercial Court as to the defendants’ counterclaim.
[27]In the context of r 25.02, ‘proceeding’ means only the plaintiff’s claims.
There may be an issue as to the identity of the parties to the counterclaim, as a result of Mrs Ganesh’s bankruptcy. While she made a written application on the day of the hearing to have this Court rule on her ability to take part in the counterclaim, in reliance on s 60(4) of the Bankruptcy Act, that is a matter best left for the trial judge. We also do not know the position of the company GSquare, which did not seek to appeal the judge’s order. Again, that matter may be raised before the judge on remitter.
Ground 2
Appellant’s submissions
Mr Ganesh submits that the trial judge erred in two respects by making no order as to costs.
First, it was said that the judge erred by accepting the bank’s submission that the decision in Cachia v Hanes[28] precludes a costs order in favour of a self-represented litigant. Mr Ganesh submits that Cachia does not preclude a costs order, but simply prevents a self-represented litigant being compensated for their own time in preparing and conducting the case. As a result, Cachia does not preclude the recovery of other costs, including disbursements and expenses. Mr Ganesh submits that this position has been confirmed in subsequent authorities, including in the High Court’s decision in Bell Lawyers v Pentelow[29] and this Court’s decision in United Petroleum Australia Pty Ltd v Herbert Smith Freehills.[30]These authorities, and others, were said to confirm that a costs order may be made in favour of a self-represented litigant, who may then recover disbursements. Mr Ganesh submitted that this was not merely a question of principle. The defendants, for example, incurred many thousands of dollars in filing fees which may well be recoverable as disbursements.
[28](1994) 179 CLR 403 (‘Cachia’).
[29](2019) 93 ALJR 1007.
[30][2020] VSCA 15.
Secondly, it was said that the judge erred in stating that the defendants did not contest the fact that there should be no order for costs. This overlooked the last paragraph of the written submissions handed up at the hearing of the application to discontinue, in which the defendants stated that they sought that costs be reserved.
Counsel for the appellant, who appeared pro bono, did not have specific instructions as to disbursements that might be claimable as costs. Counsel accepted that, if ground one were to succeed, so that further steps would be taken in respect of the counterclaim, it would be open to reserve the costs of the hearing before the judge for later determination.
Respondent’s submission
The bank now accepts that a costs order may be made in favour of a self-represented litigant, who may recover disbursements but not costs for their own time. But the bank now suggests that it was open for the judge not to make an order for costs in favour of the defendants in circumstances where there had been no suggestion of any recoverable disbursements. The bank suggests that by not making an order as to costs, where there was no evidence of recoverable costs incurred, the judge facilitated the just, efficient, timely and cost-effective resolution of the real issues in dispute, as required by the Civil Procedure Act.
Consideration
In our view, the judge’s costs discretion miscarried when he applied Cachia v Hanes, as the bank had invited him to do, for the broad proposition that a litigant in person is not entitled to costs. The cases relied on by the appellant, and referred to above, demonstrate that a self-represented litigant is in the same position as to disbursements as legally-represented parties.
The discretion also miscarried in so far as the judge considered that the defendants had no objection to the costs order he made. As noted, they had submitted, albeit only in a brief mention in their written submissions, that costs should be reserved.
The bank now submits that the judge’s order should be sustained on the basis that Mr Ganesh has not pointed to any actual disbursements that would be recoverable under a costs order. It is true that to leave that question to taxation is not the optimal course if this Court could more efficiently resolve the issue. On the other hand, the bank could have advanced this argument before the trial judge or again in seeking to resist leave to appeal. We therefore decline to uphold the judge’s order on that basis. In our view, the appropriate course is to set aside the judge’s order as to costs and in its place order that the costs of the proceeding be reserved. When those costs are ultimately determined, regard should of course be had to rr 25.05 and 63.15, which together provide that, unless the Court otherwise orders, a party who discontinues a proceeding shall pay the costs of the other party to the time of that discontinuance.
Conclusion
We will allow the appeal on both grounds and make the orders referred to above. We will receive short submissions as to the costs of the appeal and decide that matter on the papers.
The Court records its gratitude to counsel for the appellant, who appeared pro bono and assisted the Court, and their client, with submissions of the highest quality.
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