JBS Southern Australia Pty Ltd v Westcity Group Holdings Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL & EQUITY DIVISION

COMMERCIAL COURT

LIST A

No. S CI 2011 2732

JBS SOUTHERN AUSTRALIA PTY LTD
(ACN 129 908 372)

INDUSTRY PARK PTY LTD (ACN 007 256 215)

First Plaintiff

Second Plaintiff

WESTCITY GROUP HOLDINGS PTY LTD (formerly called TASMAN GROUP HOLDINGS PTY LTD) (ACN 096 323 385) AS TRUSTEE FOR THE TASMAN GROUP HOLDINGS TRUST

BELANDRA PTY LTD (ACN 055 452 778)
AS TRUSTEE FOR THE BELANDRA MEAT WORKS UNIT TRUST

GIUSEPPE CATALFAMO

First Defendant

Second Defendant

Third Defendant

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JUDGE:	CROFT J
WHERE HELD:	Melbourne
DATE OF HEARING:	23 August 2011
DATE OF JUDGMENT:	23 September 2011
CASE MAY BE CITED AS:	JBS Southern Aust Pty Ltd & Anor v Westcity Group Holdings Pty Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2011] VSC 476

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PRACTICE AND PROCEDURE – Appeal from Associate Justice – Application for summary judgment – Applicable principles – Whether leave to appeal required – Rule 77.06 Supreme Court (General Civil Procedure) Rules 2005 – Sections 63 and 64 Civil Procedure Act 2010.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr P.D. Crutchfield SC with Mr S.H. Parmenter	Allens Arthur Robinson
For the Defendants	Mr M.F. Wheelahan SC with Mr C.P. Young	Arnold Bloch Liebler

TABLE OF CONTENTS

Introduction......................................................................................................................................... 2

Background......................................................................................................................................... 3

Leave requirement........................................................................................................................... 13

Summary judgment......................................................................................................................... 21

Appeal................................................................................................................................................ 32

Summary and conclusions............................................................................................................. 38

HIS HONOUR:

Introduction

This is an application by the defendants for leave to appeal the judgment and orders of the Honourable Associate Justice Daly made on 3 August 2011 (“the judgment and orders”). The application for leave to appeal is made under the Supreme Court (General Civil Procedure) Rules 2005 (“the Rules”).[1] On the basis of leave being granted, the defendants sought to appeal against the judgment and orders under Rule 77.06(1) and the related provisions of Order 77. Compliance with the notice requirements of Rule 77.06(4) was sought to be dispensed with.
[1]Reference to a “Rule” or “Rules” are references to provisions of these Rules.

It was agreed by the parties that the defendants’ application for leave to appeal and the appeal itself would be heard together. As all parties were on notice in this respect and before the Court for the hearing of these applications there was no reason advanced as to why the notice requirements of Rule 77.06(4) should not be dispensed with. Additionally, the defendants sought a stay of execution of the judgment and orders until the hearing and determination of the appeal.

The judgment and orders relied upon the summary judgment powers introduced by s 63 of the Civil Procedure Act 2010 (“the Act”). The judgment and orders relate to part only of the claims made by the plaintiffs in this proceeding, namely paragraphs 1 to 20 and 24 to 28 of the statement of claim. It is noted, specifically, in the “Other Matters” material in the judgment and orders, that the defendants have leave to defend the balance of the plaintiffs’ claims. Consequently, the judgment and orders do not constitute an order granting summary judgment on all claims.

In broad terms, a number of procedural and substantive issues arise in respect of the present applications. The first is whether or not the defendants require leave to appeal under Rule 77.06(2.1) and, secondly, whether the appeal should be allowed. Within these broad issues questions arise as to whether the judgment and orders appealed from are final or interlocutory because only an appeal from the latter type of judgment or order requires leave. If leave is required, the further issue is whether leave should be granted. Finally, issues arise as to the operation of ss 63 and 64 of the Act and, with respect to the former, whether the requirements for summary judgment are established. This, in turn, requires consideration of the meaning of the basis of the operation of these provisions in this context, namely whether the relevant parts of the defence have “no real prospect of success”.

There is also the question of whether a stay should be granted pending the hearing and determination of the applications. At the conclusion of the hearing of these applications, I granted the stay application as sought by the defendants for the reasons then indicated; for reasons which it is not necessary to repeat now.

Background

The first plaintiff conducts substantial meat processing businesses which were formerly owned by the defendants. On 5 March 2008, the defendants entered into a Share and Unit Sale Agreement (“the SUSA”) with the first plaintiff. Under the SUSA, amongst other things, the defendants sold their shares in the Industry Park Pty Ltd (the second plaintiff) and Tasman Group Services Pty Ltd to the first plaintiff.

As might be expected with the sale of a substantial business, the SUSA is a detailed and comprehensive document, the substantive provisions of which occupy approximately 62 pages, provisions which are followed by 14 schedules of approximately a further 58 pages. The SUSA was prepared by the defendants (the vendors) solicitors, Arnold Bloch Liebler, and the first plaintiff (the purchaser), was advised by Allens Arthur Robinson. Within the comprehensive and extensive provisions of the SUSA, a mechanism was provided for determining the purchase price ultimately payable for the sale shares and units. Sub-clause 3.2 of the SUSA made provision for the calculation of the purchase price, and sub-clause 1.1, the definition provisions, contains a definition of “Purchase Price”, which indicates or re-affirms that the sum calculated in accordance with sub-clause 3.2 is to be adjusted in accordance with the other terms of the SUSA, with particular reference (on an inclusive basis) to sub-clauses 8.8 (Payment of Adjustment Amount), 12.15 (Reduction of Purchase Price), 13.15 (Reduction of Purchase Price) and 16.3 (Result of Existing Tax Claim). Many, if not all, of these provisions need to be read with further definition provisions and other substantive provisions of the SUSA. Additionally, clause 12 of the SUSA contains various vendors warranties and indemnities, including in sub-clause 12.7, with respect to the company vendor’s tax liability. These provisions are, in turn, subject to the qualifications and limitations set out in clause 14 of the SUSA. Reference should also be made to sub-clause 16.5 with respect to tax refunds.

The warranty and indemnity provisions of clause 12 are significant in the present context, particularly the provisions of sub-clause 12.7, which is as follows:

“12.7 Company Vendor’s Tax Indemnity
Subject to clauses 12.8 to 12.15 (inclusive) and the qualifications and limitations set out in clause 14, the Company Vendors must pay to the Purchaser on demand the following amounts:
(a)the amount of any Tax which a Company may be called upon to pay in respect of any income year ending before the Completion Date and in respect of the period commencing on the first day of the income year commencing before but ending after completion (the “Straddle Year”) and ending on the Completion Date which has not been paid prior to the Completion Date;
(b)the amount of any Tax which a Company may be called upon to pay, deduct or withhold in respect of any payments made or not made by a Company prior to the Completion Date (including as a result of a variation in an instalment rate);
(c)the amount of any Duty payable in respect of any agreement, deed, other document or transaction entered into prior to Completion to which a Company is or has been a party or by which a Company derives, has derived or will derive a benefit;
(d)the amount of any liability to any current or former Related Body Corporate of a Company (including the Company Vendors) as a result of any Tax loss transferred by a Company to that current or former Related Body Corporate prior to the Completion Date being disallowed, in whole or in part; and
(e)the amount that a Company is required to pay or contribute to any group liability of any consolidated group of which a Company formed a part in respect of any period prior to Completion, which has not been paid prior to the Completion Date,

but in each case only to the extent that the amount exceeds the amount of any provision for that particular Tax in the Completion Balance Sheet.”

As the provisions of sub-clause 12.7 indicate, these provisions are expressly subject to a number of other provisions of the SUSA. In this respect, note, particularly, the provisions of sub-clauses 12.8 and 12.9, and also the provisions of sub-clause 14.1, which is contained in the clause 14 “Limitations of Liability” provisions.

These further provisions are as follows:

“12.8 Company Vendors require notice of Claim
The Company Vendors are not obliged to pay any amount under clause 12.7 unless the Purchaser, within 60 Business Days after receipt by a Company of any Taxation Authority giving rise or potentially giving rise to a claim by the Purchaser under clause 12.7, gives to the Company Vendors notice of the Claim and a copy of the relevant parts of the relevant assessment where applicable.

12.9 Dispute of assessment
Where:
(a)notice is given in accordance with clause 12.8;
(b)a Company Vendor proposes to dispute on behalf of a Company or the Purchaser (as the case may be) the assessment; and
(c)payment of the assessment is required in order to dispute the assessment,

the Company Vendor must pay the amount of the assessment.

…
14.1 Minimum and maximum amounts
(a)The Purchaser may not make a Claim for breach of the Vendors’ Warranties unless and until the aggregate amount of all Claims exceeds $250,000.
(b)The maximum aggregate amount which the Vendors are required to pay in respect of:
(i)all Claims under the Title Warranties whenever made is limited to the amount of the Purchase Price;
(ii)all Claims under the Company Vendors’ Warranties (other than Title Warranties) and any indemnity given by the Company Vendor under this Agreement whenever made is limited to $20,000,000;
(iii)all Claims under the Baybrick Vendors’ Warranties (other than Title Warranties) and any indemnity given by the Baybrick Vendors under this Agreement whenever made is limited to $5,000,000;
but despite the foregoing the aggregate amount of all Claims under the warranties and indemnities in this Agreement and all Claims in respect of any corresponding warranties and indemnities provided by King Island under the King Island Contracts of Sale of Land (other than clause 12.17) and the Title Warranties will be capped at an aggregate of $20,000,000.
(iv)“

Clause 16 of the SUSA contains a suite of provisions under the descriptive heading of “Post Completion Tax Requirements”. Sub-clauses 16.1 to 16.3 are directed particularly to an existing tax claim, which is specifically defined in the definition provisions of sub-clause 1.1 of the SUSA. Sub-clause 16.4 makes provision for tax audits and sub-clause 16.5 in relation to tax refunds. In the present context, reference should be made to some of the provisions of sub-clause 16.4 and sub-clause 16.5, as follows:

“16.4 Tax audits
(a)The Vendors will give to the Purchaser all reasonable assistance, at the Vendors’ cost, in connection with any Tax audit of a Group Entity after the Completion Date in respect of any period before the Completion Date.
(b)The Purchaser will (and will procure each Group Entity to) promptly notify the Vendors of any proposed Tax audit of a Group Entity which may include any period before the Completion Date.
…
(f)The Purchaser must take any proper and reasonable action that the Vendors request to avoid, resist, compromise or defend a demand or notice issued by a Taxation Authority which gives rise to the Tax Claim.
(g)The Vendors may request a Group Entity (at the entire cost of the Vendors) to appeal or object to a Tax Claim provided that all other avenues of review have been exhausted.
(h)Any action required under this clause 16.4 must be taken in a timely manner.

16.5 Tax refunds
(a)Subject to clause 16.3, the Vendors will be responsible for any amount of Tax payable by a Group Entity in respect of the period up to and including the Completion Date.
(b)Subject to clause 16.3, the Purchaser will be responsible for any amount of Tax payable by a Group Entity in respect of the period from the Completion Date, excluding any Tax payable by Tasman in respect of the Disputed Assessments.
(c)Subject to cause 16.3, the Purchaser must pay to the Vendors, or procure the Group Entity to pay to the Vendors, an amount equal to any Tax refund, offset, rebate, reimbursement or credit allowed or received from a Taxation Authority in respect of any Tax or duty (including interest) paid by the Group Entity in respect of the period up to and including the Accounts Date immediately upon receipt by the Purchaser of such amounts, including any amount allowed or received from a Taxation Authority in respect of the Disputed Assessments.
(d)Any amount paid by the Purchaser to the Vendors under this clause 16.5 will be in addition to and an increase in the Purchase Price.
(e)Subject to clause 16.3, the Vendors will be liable for and will pay to the Purchaser on demand any additional tax assessed and audit costs incurred by a Group Entity in respect of the period up to and including the Completion Date.”

Sub-clauses 16.1 to 16.3 were directed specifically to the process agreed between the parties for dealing with the existing tax claim, as defined.

The SUSA also made provision, in sub-clause 4.3 (read with the definition provisions of sub-clause 1.1) for a “Retention Sum” of $15 million, together with a further sum to be retained with respect to the existing tax dispute. The Retention Sum was repayable by instalments, as provided in sub-clause 4.3, subject to any claim being made in accordance with those provisions.

Actual or potential tax liability became an issue after the completion of the sale in 2008 when the Australian Taxation Office (“the ATO”) commenced an audit of the affairs of the defendant vendors. One of the issues that arose was whether the requirements of Division 165 of the Income Tax Assessment Act 1997 (Cth) had been complied with by the second plaintiff on its recouping prior year losses for the income years 1999 to 2002 and 2004 to 2007. These losses totalled over $30 million. These prior year losses were said to have been incurred in the 1992, 1993 and 1994 income years. In any event, following this audit, the second plaintiff was served by the ATO with amended assessments which totalled over $16 million. As a result of interest accruing on the sum of these assessments, the liability of the second plaintiff to the ATO exceeds $18 million.

Following these assessments, demands were made on the vendors, the defendants, under paragraph 12.7(a) of the SUSA. As a result, the ATO was notified by the defendants (the vendors) that they intended to dispute the assessments. As a result of this notification, discussions have been and are being held with the ATO in relation to interim arrangements pending determination of the objections to the assessments, including any appeals.

The solicitors for the defendants (the vendors) requested that the ATO defer recovery action but, by letter dated 3 March 2011, the ATO refused this request. This was further followed by a letter dated 4 March 2011 from the ATO to the first plaintiff, as follows:

“Dear Directors
Re: Industry Park Pty Ltd
We refer to the debt which was raised as a result of the completion of an audit on your income tax account. Currently the tax, penalties and interest totalling $16,379,841.68 for the income tax years 1999, 2000, 2001, 2002, 2004, 2005, 2006 and 2007 remain outstanding.
We confirm that you have lodged an objection on 13 January 2011.
Although an objection has been received, as a general principle, the Commissioner expects that all debts, including those subject to dispute, will be paid on time. The legislative framework, which underpins the Commissioner’s policy in the collection and recovery of disputed debt, is designed to ensure that taxation debts are due and payable notwithstanding that the underlying liability may be disputed by taxpayers.
In tandem with the duty to decide objections, the Tax Administration Act 1953 (TAA) also imposes upon the Commissioner the duty to collect and recover tax which are the subject of objections and to ensure that payment of such taxes are not put at risk.
To mitigate the risk you can undertake one following actions;
·Payment of the whole debt within 14 days of a demand being issued to the tax debtor.
·Payment of the whole debt by instalments.
·Payment of 50% of the disputed debt
·Provision of acceptable security for the whole debt.
·Provision of financial documents to substantiate that payment of the disputed debt would cause serious financial hardship (DC of T v. Gergis 91 ATC 4510; DC of T v. La Rosa 37 ATR 84).

If you intend to enter into the a 50/50 arrangement, the details of the arrangement are as follows:
50-50 arrangement conditions
To meet the conditions of a 50-50 arrangement you need to:
§Pay all undisputed debts.
§Pay a minimum of 50% of the disputed debt amount.
§Make all future payment obligations by the due dates, provided no other deferral of legal action has been granted.
§Take all reasonable steps to proceed with the objection promptly.

50-50 Arrangement payment amount
There are mandatory as well as optional amounts payable in a 50-50 arrangement. In the attachment to this letter we have calculated the mandatory amount you must pay if you wish to enter into a 50-50 arrangement. The optional amount payable under such an arrangement is also shown, as payment of this would further minimise your exposure to the imposition of the General Interest Charges (GIC).
General interest charge
Until the dispute is resolved, GIC will continue to accrue on the outstanding balance at the full statutory rate. The GIC is currently 12.02% a year.
Concessional GIC
GIC will be charged on the disputed amount at:
§The full statutory rate from the due date until, but not including, the date you paid 50% of the amount under dispute and all undisputed amounts.
§50% of the GIC calculated from the date you paid 50% of the amount under dispute and all undisputed amounts, until 14 days after the date your objection is decided.

We will adjust your account to show this.
Our risk assessment
We will undertake an initial and ongoing assessment of any risk associated with this arrangement. If we consider it to be unacceptable at any stage, we will either not approve or rescind the arrangement and commence recovery action.
What you need to do
If you wish to request a 50-50 arrangement, you need to tell us in writing and comply with all the conditions of the 50-50 arrangement. We will then advise you in writing of our decision.

……”

It appears that representatives of all parties and the ATO have or intend to hold discussions in relation to the possibility of a “50-50 arrangement” pending resolution of the objections of the assessments.

The plaintiffs sought summary judgment on the basis that the effect of the ATO issuing the assessments produced circumstances which attracted the operation of paragraph 12.7(a) of the SUSA. In other words, the effect of the ATO issuing the assessments against the second plaintiff was that the first plaintiff became entitled to demand that the defendants (as vendors) pay to the purchaser the sum equivalent to the assessments on the basis that it was an amount of any tax which it “may be called upon to pay”.

It is against this background that Daly AsJ made the following statements and findings with respect to the application for summary judgment:

“9.The companies move for summary judgment on the basis that by issuing the assessments the second plaintiff has been ‘called upon to pay the tax’ within the meaning of clause 12.7(a) of the SUSA. The vendors submit that there is a triable issue as to whether in fact the second plaintiff has in fact been called upon to pay the amount in the assessments.
10.The vendor’s warranties with respect to the company’s taxation obligations are contained in clause 16 of Schedule 1 of the SUSA. It is common ground that the vendors are required to indemnify the companies with respect to the subject matter of the assessments. The only dispute between the parties is, having regard to the construction of the agreement as a whole, whether the obligations of the vendors under clause 12.7(a) is triggered by the issuing of the assessments by the ATO in circumstances where there is evidence that it is not uncommon for tax payers seeking to dispute adverse assessments by the ATO to not pay the disputed amount either in full or in part, but rather take the risk of being subject to incurring additional interest and penalties rather than pay the disputed amounts. In an affidavit affirmed on 12 July 2011, the solicitor for the vendors deposes that, in his experience, payment of the full amount of the disputed assessment could jeopardise the vendors’ interests by reducing the incentive for the ATO to negotiate with the vendors and/or determine the objections promptly.
11.The companies assert that this is an appropriate case for summary judgment in that the matters raised by the defendants in their affidavits and submissions do not raise a real question to be tried (within the meaning of the authorities applicable to summary judgment prior to the introduction of the Civil Procedure Act 2010) (‘Act’) or, alternatively, that these matters have no real prospect of success within the meaning of s. 63 of the Act.
12.The recent authorities regarding the applicable test for summary judgment[2] make it apparent that the test for summary judgment is less stringent than in the past, particularly in the light of the overarching purpose of the Act set out section 7(1) of the Act, being the ‘just, efficient, timely and cost-effective resolution of the real issues in dispute’ between the parties. In cases where the sole issue is the proper construction of the contract (as in this case) summary judgment should only be refused if there is a fair dispute about the meaning of the document.
13.In my view, there is no significant dispute between the parties as to the applicable test. The issue is whether the construction of clauses 14.7 contended for by the vendors has a real, and not fanciful, prospect of success. I accept the submissions made by counsel for the vendors that the terms of clause 14.1(b) of the SUSA (which ‘caps’ the liability of the vendors for any breach of warranty to $20,000,000) is not relevant to the question of whether summary judgment ought to be granted. The fact that the amount the companies are liable to pay the ATO under the assessments will reach the cap of $20 million by the end of the year is a practical concern for the companies, but does not strengthen their claim for summary judgment.
14.In my view, the construction of the term ‘may be called upon to pay’ contended for by the vendors is arguable, but does not have a real prospect of success.”

[2]Matthews v SPI Electricity [2011] VSC 168, Spencer v Commonwealth (2010) 241 CLR 118, Wheelahan v City of Casey (No 3) [2011] VSC 15.

In support of the view that Daly AsJ had formed in relation to the position of the defendants (the vendors) her Honour placed particular reliance upon a decision of the Supreme Court of Western Australia:

“15.In particular, I accept the submissions of counsel for the companies that this case is on ‘all fours’ with the decision of Burt CJ of the Supreme Court of Western Australia in Pernay Pty Ltd v Cord Holdings Ltd,[3] who found that the liability to indemnify in respect of a tax obligation arose when the obligation to pay the tax arises, that is, when an assessment is issued, notwithstanding the fact that the assessment was disputed and a decision of the Commissioner to dismiss the objection was subject to appeal. The only material differences between this case and the current case is the fact that the purchaser in Pernay was alert to the fact a tax liability might arise, and perhaps the degree of sophistication of the transaction and documentation. Otherwise, the terms of the relevant clause and the chronology of events were remarkably similar to the current case.
16.Of course, this decision is not, strictly speaking, binding upon me or a single judge of this court. However, given the substantial factual similarities between the two proceedings and the identical phrasing of the relevant clause, this court would be unlikely to disagree with Burt CJ’s conclusions unless it was shown that he was clearly wrong. This is powerfully supportive of a contention that the vendors’ contentions have no real prospect of success. The age of the decision and the fact that the judgment was unreported does not materially detract from this view.”

[3]Unreported, Supreme Court of Western Australia, Burt CJ, 13 March 1984, BC 8491259.

Daly AsJ then considered what her Honour regarded as the apparent commercial purpose of the warranty and indemnity provisions of clause 12, finding that the provisions, read together, sub-clauses 12.4, 12.6, 12.7 and 12.9:

“make it clear that the purpose of clause 12 is to put the companies in the same position as if the warranties had been true (subject to the cap in clause 14). This is reinforced by sub-clause 12.10, which provides that the vendors must bear the costs of any dispute regarding an assessment, and [sub-]clause 16.5(4), which provides for the reimbursement to the vendors of any refunds or credits”.[4]

[4]Reasons for Decision (Daly AsJ), [17].

Continuing, Daly AsJ said that if the defendants were correct in their construction, they would not have to pay the assessment to the plaintiffs who would, consequently, not be in the same position as if the warranties were true. Continuing, her Honour said:

“19.The contention that clause 12.9 is the only clause which imposes an obligation upon the vendors to pay an amount in respect of an assessment is flawed. Clause 12.9 provides a mechanism by which the vendors pay the ATO (or other relevant authority) directly if the payment is a precondition to the ability to dispute the assessment. It is not inconsistent with clause 12.7: clause 12.7 leaves the companies with the decision as to whether to pay the assessment, subject to the obligation in clause 14.3 to mitigate any losses caused by any breach of warranty. Indeed, clause 14.7 contemplates the practice deposed to by the vendors’ solicitor: it can determine whether or not to pay the tax, but is put in funds to do so by the vendors if it decides to do so.
20.I also agree with the contention of counsel for the companies that if the phrase ‘called upon to pay’ must mean a call made at a point in time when the liability and quantum of the assessed tax is final and certain and all objection and appeal processes exhausted then the parties would have drafted clause 12.7 in precisely those terms.”

Leave requirement

The critical issue in relation to whether leave to appeal is required pursuant to Rule 76.06(2.1) is whether the judgment and orders are properly characterised as having been “… made in an interlocutory application in a proceeding in the Commercial Court …”. The latter is clear enough, the proceeding is a proceeding in the Commercial Court, but whether the judgment and orders are to be regarded as an “order” made in an interlocutory application is not so clear. In this respect, it should also be noted that the rule does not use the word “interlocutory” as a descriptor of the “order” but, rather, the rule is cast in terms of an “order” made “in an interlocutory application”.

It might be inferred merely from the terms of Rule 77.06 as a whole that the effect of this formulation is to require leave only where the “order” is interlocutory in nature. In any event, the “order” will follow an application made to an Associate Judge and as long as the “order” made reflects the nature of the order sought in the application, then the outcome is probably the same.

A further linguistic issue that arises in relation to Rule 77.06 is the use of the word “order”. A review of the Rules indicates that the words “order” and “judgment” are not used consistently, and this is demonstrated by the use of the words, in substance, interchangeably in various parts of the Rules, notwithstanding provisions such as Rule 78.01, which forms part of Order 78 (proceedings under judgment), which defines “judgment” to include “order”.[5]
[5]See also the interchangeable use of judgment and order in Supreme Court Act 1986, s3 and Supreme Court (General Civil Procedure) Rules 2005, rule 1.13.

Consequently, it is helpful to consider some of the authorities on the question whether summary judgment in favour of a party is an interlocutory or final judgment or order and the effect of the casting of these rules by reference to “an interlocutory application”. Implicit in this question is the nature of the distinction between a final or interlocutory judgment or order, more generally.

Before moving to the general question of characterising orders or judgments as interlocutory or final on the basis of their own attributes, reference should be made to the authorities bearing on the effect of the use of the descriptor “in an interlocutory application”. In Border Auto Wreckers (Wodonga) Pty Ltd v Strathdee,[6] the Court of Appeal considered whether the reference to a judgment or order “in an interlocutory application” in both s 17A(4) of the Supreme Court Act 1986 and s 74(2D) of the County Court Act 1958 was a reference to an interlocutory judgment or order. This question arose in the context of the broader question whether an order granting an extension of time under s 23A of the Limitation of Actions Act 1958 was or was not interlocutory and, consequently, whether leave was required to appeal from it. In reviewing the authorities on this question, Brooking JA (with whom Winneke P and Tadgell JA agreed) said:[7]
[6][1997] 2 VR 49.
[7][1997] 2 VR 49 at 52-3.

“It is often said, in reliance upon Attorney-General v Great Eastern Railway Co. (1879) 48 LJ Ch 428; 27 WR 759, that an interlocutory application may result in a final order. The latter report of the decision is more satisfactory for present purposes. In a relator action in which an injunction was sought the Attorney-General moved for judgment under the Rules of Court on the admissions in the pleadings. On this application the Master of the Rolls granted a perpetual injunction. The question of the nature of the order granting the perpetual injunction arose because by O. 58 r. 15 of the rules scheduled to the Supreme Court of Judicature Act 1875 the time limit for appeals was one year except in the case of appeals from an interlocutory order, where the time was 21 days unless special leave was given. The Court of Appeal held the order to be final. The decision has, as I have said, often been cited for the proposition that a final order may be made on an interlocutory application, but the question arises of the sense in which ‘interlocutory’ is used when the decision is cited in this way. As regards the old s. 14(4) and the present s 17a(4) of the Supreme Court Act, the order in the Great Eastern Railway case would undoubtedly have been held to be final for the purposes of the former provision. If the new s 17a(4) is concerned only with the nature of the application, then it is certainly arguable that the application in the Great Eastern Railway case is an interlocutory application for the purposes of that provision.”

Brooking JA cited a number of other examples of cases where the “interlocutory order” and “interlocutory application” tests may give different results. Continuing, Brooking JA said:[8]
“Another example of cases where the interlocutory order and interlocutory application tests may give different results is furnished by an application made in an action for the summary enforcement of a compromise, as to which see Roberts v. Gippsland Agricultural & Earth Moving Contracting Co. Pty. Ltd. [1956] VLR 555; Williams, Supreme Court Practice, para. 23.01.145. Such an application, if successful, can certainly result in a final judgment or order. If the application is refused on the ground that adoption of the summary procedure is inappropriate, the applicant being left to bring a separate action on the compromise, it would seem clear that the order is interlocutory. How is the application to be classified if one is required to consider only the nature of the application and not the nature of the resulting order?”

It was noted that an application to enforce an arbitral award under s 33 of the Commercial Arbitration Act 1984 could yield the same question. Concluding, Brooking JA said that “… high authority is not wanting for the view that the words ‘in an interlocutory application’ may do no more than direct attention to the required interlocutory character of the order made”.[9] His Honour then made reference to these authorities, noting that he had drawn attention to the relevant decisions in Cuthill v State Electricity Commission of Victoria.[10]

[8][1997] 2 VR 49 at 53.

[9][1997] 2 VR 49 at 53.

[10][1981] VR 908 at 920-1.

In relation to the more general question, McHugh ACJ, Gummow and Heydon JJ, in Re Luck said:[11]

“[4] … As McHugh, Kirby and Callinan JJ in Bienstein v Bienstein,[12] the usual test for determining whether an order is final or interlocutory is whether the order, as made, finally determines the rights of the parties in a principal cause pending between them. That question is answered by determining whether the legal effect of the judgment is final or not.[13] If the legal effect of the judgment is final, it is a final order; otherwise, it is an interlocutory order.
[5] The order of Gleeson CJ refusing to grant leave to issue process was an interlocutory order. It did not finally determine Ms Luck’s rights against the various defendants, if she has any such rights. …”

[11](2003) 203 ALR 1 at 2, [4]-[5].

[12](2003) 195 ALR 225 at 230, [25].

[13]Carr v Finance Corp of Australia Ltd (No 1) (1981) 147 CLR 246 at 248, 256; 34 ALR 449 at 450, 456-7.

In similar vein, reviewing the authorities, Callaway JA said, in Dodoro v Knighting[14]
[14](2004) 10 VR 277 at 281-3, [17]-[20] (with whose reasons Charles JA agreed).

“[17] All orders are either final or interlocutory.[15] In Australia the test to determine whether an order is final or interlocutory proposed by Lord Alverstone CJ in Bozson v Altrincham Urban District Council[16] has been adopted, rather than the test proposed by Lord Esher MR in Salaman v Warner.[17] The general rule is that an order is interlocutory unless, in the words of Windeyer J in Hall v Nominal Defendant,[18] it ‘finally determine[s] the rights of the parties in a principal cause pending between them’. Whether it does so is determined by the legal, not the practical, effect of the order.[19]
[15]Coles v Wood[1981] 1 NSWLR 723 at 726D; Re Luck(2003) 203 ALR 1 at 2 [4]. An interlocutory order may be made after a final order: see National Australia Bank Ltd v Maher (No 2)[1999] 3 VR 589 generally and, in particular, at 594 [18].
[16][1903] 1 KB 547.
[17][1891] 1 QB 734.
[18](1966) 117 CLR 423 at 443.
[19]Licul v Corney (1976) 180 CLR 213; Carr v Finance Corporation of Australia Ltd (No 1) (1981) 147 CLR 246; Little v State of Victoria[1998] 4 VR 596 at 597–8; Bienstein v Bienstein(2003) 195 ALR 225 at 230, [25]; 30 Fam LR 488 at 493; Re Luck at 2 [4]; ALJR 178.
[18] Three kinds of interlocutory order are relevant for present purposes. First, because an order is interlocutory unless it finally determines the rights of the parties, a refusal of relief is interlocutory if it is theoretically possible to make a fresh application for the same relief. Accordingly, for example, an order refusing to set aside a default judgment or refusing to grant an extension of time is not a final order, because the unsuccessful party could make a further application for the same relief, even though such an application might have very little prospect of success.[20] That was also, by way of further example, the main reason given by a court of five judges in Western Australia for holding that a refusal of leave to appeal pursuant to s 38 of the Commercial Arbitration Act 1985 (WA) is interlocutory.[21] As Mathews AJ said in the leading judgment:[22]
Just as leave to appeal, once granted, can always be revoked, so it will always remain open to parties to renew applications for leave, notwithstanding a previous refusal, in the event of changed circumstances. There is no reason in principle why leave to appeal under s 38(4) is in any different category.[23]

[19] Secondly, an order may be interlocutory because, whether or not a fresh application might be made, it does not determine the rights of the parties in a principal cause. In Brincat v R[24] an order was made in the Supreme Court of Victoria in aid of criminal proceedings in Western Australia. In X v Director of Public Prosecutions[25] an order was made in the Supreme Court under ss 9H and 9I of the Evidence Act 1958 for a witness to give evidence in a committal proceeding by video link from Canberra. In Hornsby v Kaschke[26] an order was made in the Supreme Court quashing an order in the Magistrates’ Court in relation to pre-trial disclosure. In Kassionis v Magistrates’ Court of Victoria[27] an order was made in the Supreme Court refusing relief in the nature of certiorari and prohibition in relation to orders and rulings made on a contested mention in the Magistrates’ Court. In all those cases the order made in the Supreme Court was interlocutory because the principal cause lay elsewhere.[28]
[20] Thirdly, an order striking out, or even “forever staying” or dismissing, a proceeding because it is frivolous, vexatious or an abuse of process or because it does not disclose a reasonable cause of action is interlocutory, unless the abuse of process lies in an attempt to litigate an issue which is res judicata.[29] It was decided by this court in Little v State of Victoria[30] that that is still the law. It was reaffirmed by the High Court in Re Luck,[31] where it was held that the same is true of an order refusing leave to commence or proceed with an action because it is frivolous, vexatious or an abuse of process or does not disclose a reasonable cause of action. It is unnecessary to consider whether this third class constitutes an exception to the general rule referred to in [17].[32]”

See also National Australia Bank Ltd v Maher (No 2),[33] Gerlach v Clifton Bricks Pty Ltd,[34] Schiffer v Pattison[35] and see also Tampion v Anderson.[36]

[20]Bienstein v Bienstein at 230 [25] per McHugh, Kirby and Callinan JJ citing Carr v Finance Corporation of Australia Ltd (No 1) at 248 and 256 and Hall v Nominal Defendant at 441.

[21]Lamac Developments Pty Ltd v Devaugh Pty Ltd (2002) 27 WAR 287 at 299 [32]; 304-5, [56]-[57], 307 [70]-[72] and 317-18, [121]-[128].

[22]At 317 [127].

[23]See also Simjanoski v La Trobe University[2004] VSCA 125 at [1] and the cases there cited.

[24]Unreported, Full Court, 17 March 1995.

[25][1995] 2 VR 622.

[26][1999] 3 VR 27.

[27][2002] VSCA 73.

[28]See also Bienstein v Bienstein at 231 [28]. The principal cause need not be pending in a court: see, for example, VBI Properties Pty Ltd v Victorian Civil and Administrative Tribunal[2003] VSCA 17, especially at [9]-[10], and Freeman v Medical Practitioners Board of Victoria[2004] VSCA 4 at [10].

[29]Port of Melbourne Authority v Anshun Pty Ltd [No 1] (1980) 147 CLR 35 at 38. If there are other exceptions, in addition to res judicata, they are likely to be narrowly confined.

[30][1998] 4 VR 596.

[31](2003) 203 ALR 1 at 4 [9].

[32]As I said in Little v State of Victoria at 601, whether or not it is an exception, it works well in practice. It is in the interests of justice that there should be no appeal against such an order except by leave.

[33][1999] 3 VR 589.

[34](2002) 209 CLR 478.

[35](2005) 143 FCR 328.

[36](1973) 48 ALJR 11 (PC).

Moving from the general question to the more particular question whether a judgment or order for summary judgment is final or interlocutory, a further issue arises as to whether summary judgment in favour of a plaintiff is interlocutory or final, in relation to which little authority exists, in contrast to the position with respect to summary judgment in favour of a defendant.

This further question was noted by Weinberg J (as he then was) in Schiffer v Pattison[37] where his Honour noted “a substantial body of authority for the proposition that summary judgment in favour of a defendant … is interlocutory”. This view was supported by the Full Federal Court of Australia in Jefferson Ford v Ford Motor Company of Australia Ltd.[38] In that case, the summary judgment was only a partial summary judgment on a cross-claim. The majority of the Court (Rares and Gordon JJ, Finkelstein J dissenting) held that a partial summary judgment order is an interlocutory order because it does not finally dispose of the substantive rights of the parties in the principal case between them. Thus, Rares J said:[39]

“71. Here, the primary judge’s order had the legal effect that part of the cross-claim remained undetermined. That remaining part was and is able to go to trial. The position is similar to that where a separate question has been heard and determined under O 29, r 2. The power which the primary judge exercised was to give judgment in relation to part of the cross-claim; he was not asked to and did not determine the whole of it. Such a determination is interlocutory. After any trial, Jefferson Ford will have a right of appeal on any matter on which it failed in the proceedings that affected the final result: Gerlach v Clifton Bricks Ltd (2002) 209 CLR 478 at [6]–[8] per Gaudron, McHugh and Hayne JJ. The order under s 31A would preclude Jefferson Ford litigating a cause of action under s 51AC. Thus the order would affect the final result if, in the final orders Jefferson Ford did not achieve all the relief it could have were it successful under s 51AC: cf David Syme & Co Ltd v Lloyd[1984] 3 NSWLR 346 at 349B-G per Glass JA, 358F-G per Samuels JA at 359A per Priestley JA (reversed on other grounds Lloyd v David Syme & Company Ltd(1985) 3 NSWLR 728 (PC)) as explained in Gerlach 209 CLR 478 at [8].”[40]

Gordon J reached the same position following a comprehensive review of the authorities.[41]

[37](2005) 143 FCR 328 at 339, [56].

[38](2008) 167 FCR 372.

[39](2008) 167 FCR 372 at 393-4.

[40]Note also the reference by Rares J (2008) 167 FCR 372 at 415-6 [164] to r 54(b) of the US Federal Rules of Civil Procedure establishing the default rule that:

“… Any order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities or fewer than all the parties does not end the action as to any of the claims or parties and may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties’ rights and liabilities”.

[41](2008) 167 FCR 372 at 418-422, [174]-[191].

Similar views were also expressed by Spender, Graham and Gilmore JJ sitting as the Full Federal Court in Kowalski v MMAL Staff Superannuation Fund Pty Ltd.[42] Referring to Jefferson Ford, their Honours, in a joint judgment, said:[43]

“[40] In our opinion, a case where summary judgment is given for a respondent in the absence of the full and complete factual matrix and full argument thereon, the Court being satisfied that the moving party has no reasonable prospect of successfully prosecuting the proceeding is no different from a case where an order is made dismissing an action because it is frivolous, vexatious, an abuse of the process of the Court or does not disclose a reasonable cause of action (see Re Luck) or one dismissing an appeal from an order of a Master refusing to set aside a default judgment (see Carr v FCA; Zoia v Commonwealth Ombudsmen Department(2007) 240 ALR 624 (“Zoia”) per Spender J, Gilmour J concurring, at [14] and [19] and per French J as his Honour then was at [26]).
We respectfully disagree with the views expressed by Finkelstein J in Jefferson Ford 167 FCR 372 at [12] that ’[i]n an application for summary judgment, the judge resolves the dispute on the merits’, and by Gordon J, by way of obiter dicta, at [164] that “an order granting summary judgment on all claims … is a final order because there are no further substantive rights in issue”.
What the judge does, when considering a summary judgment application, is make a determination, on the material then before the court, as to the prospects of the moving party successfully prosecuting the proceeding. The legal effect of such a judgment is not final.”

See also Spencer Bower, Turner and Handley on Res Judicata.[44]

[42](2009) 178 FCR 401.

[43](2009) 178 FCR 401 at 411, [40] see also, Spencer Bower, Turner and Handley on Res Judicata (3^rd ed by the Honourable Mr Justice K.R. Handley, Butterworths, London, 1996); and see also Cox Brothers (Australia) Ltd v Cox (1934) 50 CLR 314 where the High Court held that an order giving respondents leave to enter judgment was merely interlocutory.

[44](3^rd ed by the Honourable Mr Justice K.R. Handley, Butterworths, London, 1996); and see also Cox Brothers (Australia) Ltd v Cox (1934) 50 CLR 314 where the High Court held that an order giving respondents leave to enter judgment was merely interlocutory.

On the basis of the authorities to which reference has been made, I am of the opinion that the weight of authority indicates that the judgment and orders are properly characterised as interlocutory and, consequently, the application which was their foundation is to be regarded as “an interlocutory application” for the purposes of Rule 77.06(2.1). Consequently, leave to appeal from the judgment and orders is required.

The power of the Court to grant leave in the present circumstances should be exercised having regard to the principles considered in Niemann v Electronic Industries Ltd.[45] Those principles include whether, in all the circumstances, the decision from which the appeal is brought “… is attended with sufficient doubt to warrant its being reconsidered on appeal and secondly whether substantial injustice will be caused to the applicant if the order … is allowed to stand”.[46] It is clear that the Court’s discretion whether to exercise the power of summary dismissal is very wide, as both the authorities and the provisions of the Act indicate.[47] If leave to appeal is granted, the appeal proceeds by way of a re-hearing de novo of the application before Daly AsJ.[48]
[45][1978] VR 431 (FC).
[46][1978] VR 431 at 433 (McInerney J); and see 441-2 (Murphy J); see also Re Saeco Australia Pty Ltd [2010] VSC 161, [7] (Davies J).
[47]See, for example, Ottedin Investments Pty Ltd v Portbury Developments Co Pty Ltd [2011] VSC 222, at [18] (Dixon J); and see the provisions of Part 4.4 of the Act, which are discussed below (paragraph 36 and following).
[48]Rule 77.06(7).

Where leave to appeal is required for an appeal from an order made in the exercise of a judicial discretion, the Court has a duty to identify a proper basis for the grant of leave to appeal. The exercise of such a discretion will not normally be interfered with by an appellate court unless that court identifies an error in the exercise of that discretion. It follows that merely because the appellate court might have exercised the discretion differently had the matter come before it in the first instance does not provide a sufficient reason to grant leave to appeal.[49] The identification of some error in the exercise of discretion is not, on the basis of the Niemann principles as discussed, decisive and the question of injustice which would flow from the error not being corrected must also be placed in the balance. On this basis, “… [t]he courts will more readily grant leave where the error should be reviewed because substantial injustice would result if the error was not corrected”.[50]
[49]See Re Saeco Australia Pty Ltd [2010] VSC 161, at [9] (Davies J); Niemann v Electronic Industries Ltd [1978] VR 431; Mace v Murray (1955) 92 CLR 370; and Hause v R (1936) 55 CLR 499. The reason for this approach was clearly stated by McInerney J in Niemann v Electronic Industries Ltd [1978] VR 431 at 432:
“My brother Murphy has pointed out the inconvenience and possible prejudice or scandal which could arise if this Court were to refuse or grant leave simply according to whether it thought the judgment of the primary judge was right or wrong – and see also the remarks of Walsh, J. in Fredericks v May (1973) 47 ALJR 362 at pp. 364-5 cited by my brother Murphy”.
(and see Murphy J at [1978] VR 440).
[50]Re Saeco Australia Pty Ltd [2010] VSC 161, at [9] (Davies J).

Unlike the position in Niemann, where the Full Court had not been invited to treat the application as the hearing of the appeal itself, in the present proceedings the parties have agreed this course. Consequently, I have identified the error in the judgment and orders in the course of consideration of the substantive issues with respect to the grant of summary judgment. In terms of substantial injustice, it is, in my view, reasonably clear, in the context of my reasons with respect to the summary judgment issues, that allowing the judgment and orders to stand in the amount of $18,825,805.24 plus interest pursuant to statute against the defendants without their having been afforded the benefit of arguing the underlying claims and defences in full at trial does result in a substantial injustice. For these reasons, I will grant leave to appeal the judgment and orders and now proceed to more substantive matters going to the appeal itself.

Summary judgment

Among the main purposes of the Act, as stated in its provisions, is “to reform and modernise the laws, practice, procedure and processes relating to civil proceedings in the Supreme Court …”.[51] Without limiting the stated purpose provisions, it is stated that “[t]his Act provides for … the enhancement of case management powers of the courts …”.[52] Parliament sought to achieve these objectives by including within the Act specific provisions directed to particular aspects of civil proceedings and, very specifically, the case management powers of the courts. The guiding light, the beacon, provided in the Act is its “overarching purpose”, which is formulated in the following terms:[53]

“(1) The overarching purpose of this Act and the rules of court in relation to civil proceedings is to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.”

The Act also imposes obligations on parties, practitioners, law practices and any person that provides financial assistance or other assistance to a party in civil proceedings to act in pursuit of the overarching purpose of the Act, with various sanctions provided for failing to do so.

[51]Sub-section (1)(a).

[52]Sub-section (2)(c).

[53]Sub-section 7(1).

Part 4.2 of the Act contains a suite of provisions directed to the case management powers of the courts. These provisions open with sub-s 47(1), as follows:

“47. Judicial powers of case management-overarching purpose and active case management
(1) Without limiting any other power of a court, for the purposes of ensuring that a civil proceeding is managed and conducted in accordance with the overarching purpose, the court may give any direction or make any order it considers appropriate, including any directions given or orders made-
(a) in the interests of the administration of justice; or
(b) in the public interest.”

Section 47 continues:
“(3) Without limiting subsection (1) or (2), a court may actively case manage civil proceedings by-
…
(c) deciding the order in which the issues in dispute in the civil proceeding are to be resolved including-
(i)deciding promptly which issues need full investigation and a hearing; and
(ii) disposing summarily of other issues;

…”

The summary judgment powers conferred by the Act are contained in Part 4.4. The provisions of ss 60 to 65 of the Act, which constitute this Part, are provisions which, as specifically provided in s 65: “are in addition to, and do not derogate from, any powers a court has under rules of court in relation to summary disposal of any civil proceeding”. The provisions enable a plaintiff or a defendant, including a plaintiff or defendant by counterclaim, to apply to the court for summary judgment on the ground that the claim or defence or part of it “has no real prospect of success”. Section 63 is the enabling or empowering provision, but a provision which, specifically, must be read subject to the discretion of the court, under s 64, which allows a matter to proceed to trial. These provisions are as follows:

“63. Summary judgment if no real prospect of success
(1) Subject to section 64, a court may give summary judgment in any civil proceeding if satisfied that a claim, a defence or a counterclaim or part of the claim, defence or counterclaim, as the case requires, has no real prospect of success.
(2) A court may give summary judgment in any civil proceeding under subsection (1)-
(a) on the application of a plaintiff in a civil proceeding;
(b) on the application of a defendant in a civil proceeding;
(c) on the court's own motion, if satisfied that it is desirable to summarily dispose of the civil proceeding.

64. Court may allow a matter to proceed to trial
Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because-
(a) it is not in the interests of justice to do so; or
(b) the dispute is of such a nature that only a full hearing on the merits is appropriate.”

The provisions of the Act with respect to summary judgment are a departure from the position provided for under Rule 22.02, which provides for application for judgment in the following terms:

“22.02 Application for judgment
(1) Where the defendant has filed an appearance, the plaintiff may at any time apply to the Court for judgment against that defendant on the ground that the defendant has no defence to the whole or part of a claim included in the writ or statement of claim, or no defence except as to the amount of a claim.
…”

Various descriptions of the test to be applied under the test as provided for in the Rules appear in the authorities. The Full Court discussed this test in Australian Can Co Pty Ltd v Levin & Co Pty Ltd:[54]
[54][1947] VLR 332 at 334 to 335.

“From all this it appears that where there is a real case to be investigated in fact or in law, leave to defend should be given ... But in whatever language the discrimen is expressed to determine in what cases liberty to the plaintiff to sign judgment or liberty to the defendant to defend should be given, the length at which or the detail in which or the vigour with which counsel has argued the matter cannot be the determining factor. So to hold would be to allow the pertinacity or ingenuity of counsel or even the tolerance of the judge to obscure the real requirement of the rule. Whatever the language various Courts have used, it seems to us that the substance of the criterion to be applied is that after the matter involved has been explained to the Judge there must be a real uncertainty without full argument or further investigation of the facts as to the plaintiff’s right to judgment.”

In Fancourt v Mercantile Credits Ltd the High Court said:[55]
“The power to order summary judgment or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried.”

Even if the Court considered that there was no question for which there ought to be a trial, Rule 22.06(1)(b) provides a discretion whereby the Court may refuse summary judgment if “there ought for some other reason be a trial of that claim or part”. It was clear on the basis of the test formulated in these terms that summary judgment would rarely be given.

[55](1987) 154 CLR 87 at 99.

The new test for summary judgment, that it be shown that the claim, defence or counterclaim has “no real prospect of success”, is clearly intended to be a liberalisation of the requirements of the test as provided for in the Rules. The new test was recommended by the Victorian Law Reform Commission:[56]

“The threshold issues is whether there should be a liberalisation of the criteria for summary disposal of a claim or defence. On balance, the commission has concluded that the present requirements to show that there is no defence, or no cause of action, or no real question to be tried are unduly restrictive. Summary disposition should be available where a claim or defence has ‘no real prospect of success’. This is arguable a more liberal test, is consistent with the rules applicable in some other jurisdictions, and a change in the formulation may encourage a more robust approach to be adopted by parties and courts.”

[56]Victorian Law Reform Commission, Civil Justice Review Report, Report No. 14 (2008), page 355 at 10.7.

The language of the new test, “no real prospect of success”, is cast differently and in more liberal terms than the existing test. Nevertheless there was, of course, a danger that the interpretation of these provisions on a more literal basis may, nevertheless, result in their actual operation more or less reflecting the status quo. For example, Lord Hope in Three Rivers District Council v Bank of England said:[57]

“The difference between a test which asks the question ‘is the claim bound to fail?’ and one which asks ‘does the claim have real prospect of success?’ is not easy to determine … While the difference between the two tests is elusive, in many cases the practical effect will be the same.”

[57][2001] 2 All ER 513 at [541].

However, in my opinion, the adoption of a more literal approach would be to overlook the context of these provisions in the new regime established by the Act, its legislative history, and that of these particular provisions. These are matters to which the Interpretation of Legislation Act 1984 directs attention, in favour of implementation of the legislative purpose.[58]
[58]See Interpretation of Legislation Act 1984 s 35.

The test adopted in the Act is based, in part, upon and is similar to the tests adopted in the Federal Court and in the United Kingdom. Section 31A of the Federal Court of Australia Act 1976 provides:

“Summary judgment
(1) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is prosecuting the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding.

(2) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is defending the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.

(3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:
(a) hopeless; or
(b) bound to fail;

for it to have no reasonable prospect of success.
(4) This section does not limit any powers that the Court has apart from this section.
(5) This section does not apply to criminal proceedings.”
[emphasis added]

In Wang v Anying Group Pty Ltd, Foster J summarised the principles applicable to section 31A as follows:[59]

“The critical words of s 31A(1), when applied to the present case, require me to be satisfied that the respondents have ‘... no reasonable prospect of successfully defending the proceeding ...’. The following principles may be extracted from the authorities:
(a) The moving party does not have to demonstrate that the defence is hopeless or unarguable;
(b) The Court must consider the pleadings and the evidence with a ‘critical eye’ in order to see whether the respondent party has evidence of sufficient quality and weight to be able to succeed at trial (Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd [2008] FCAFC 60; (2008) 167 FCR 372 at [23] (p 382) (per Finkelstein J));
(c) The respondent party is not obliged to present its whole case in order to defeat the summary judgment applicant but must at least present a sufficient outline of the evidence in order to enable the Court to come to a preliminary view about the merits for the purpose of considering the statutory test in s 31A(1)(b) (Jefferson Ford Pty Ltd [2008] FCAFC 60; 167 FCR 372 at [22] (p 382) (per Finkelstein J)); and
(d) The test may require greater scrutiny of the pleadings and evidence in some cases than in others. In my judgment, the words of s 31A(1) compel a flexible approach. The real question in every case is not so much whether there is any issue that could arguably go to trial but rather whether there is any issue that should be permitted to go to trial. This seems to be the approach of Finkelstein J in Jefferson Ford Pty Ltd [2008] FCAFC 60; 167 FCR 372 and of Gordon J in the same case (as to which see [123]–[134] (pp 406–409)), although Rares J in that case at [73]–[74] (p 394) and in Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd [2006] FCA 1352; (2006) 236 ALR 720 esp at [45] (p 731) favoured a test which is much closer to the older test articulated in authorities decided under Rules of Court expressed in terms different from the language of s 31A(1)).”

[59][2009] FCA 1500 at [43].

In England and Wales, rule 24.2 of the Civil Procedure Rules 1998 provides:

“24.2 Grounds for summary judgment
The court may give summary judgment against a claimant or defendant on the whole of a claim or on a particular issue if –
(a) it considers that –
(i) that claimant has no real prospect of succeeding on the claim or issue; or
(ii) that defendant has no real prospect of successfully defending the claim or issue; and

(b) there is no other reason why the case or issue should be disposed of at a trial.
(Rule 3.4 makes provision for the court to strike out a statement of case or part of a statement of case if it appears that it discloses no reasonable grounds for bringing or defending a claim)”

It has been held that “real prospect” means that the case must be stronger than merely arguable.[60] However, a party does not need to show that they will probably succeed at trial. Such a requirement would be costly, time consuming and be almost equivalent to running the trial. Nothing would therefore be gained by the summary judgment procedure.

[60]International Finance Corp v Utexafrica Sprl [2001] C.L.C. 1361 and ED&F Man Liquid Products Ltd v Patel [2003] EWCA Civ 472.

The operation of the provisions of s 31A of the Federal Court of Australia Act were considered by the High Court in Spencer v Commonwealth of Australia.[61] French CJ and Gummow J reaffirmed the position which the High Court had emphasised in Fancourt v Mercantile Credits Ltd[62] that caution must guide the exercise of any power of summary termination of a proceeding:[63]
[61](2010) 241 CLR 118.
[62](1987) 154 CLR 87 at 99.
[63](2010) 241 CLR 118 at 131-132, [24].

“[24] The exercise of powers to summarily terminate proceedings must always be attended with caution. That is so whether such disposition is sought on the basis that the pleadings fail to disclose a reasonable cause of action[64] or on the basis that the action is frivolous or vexatious or an abuse of process.[65] The same applies where such a disposition is sought in a summary judgment application supported by evidence. As to the latter, this court in Fancourt v Mercantile Credits Ltd said:[66]
[64]General Steel Industries Inc v Cmr for Railways (NSW) (1964) 112 CLR 125 at 128–130 per Barwick CJ; [1964] HCA 69.
[65]Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91 per Dixon J; [1949] HCA 1.
[66](1983) 154 CLR 87 at 99 ; [1983] HCA 25. See also Webster v Lampard (1993) 177 CLR 598 at 602–603 per Mason CJ, Deane and Dawson JJ; [1993] HCA 57.
‘The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried.’

More recently, in Batistatos v Roads and Traffic Authority (NSW)[67] Gleeson CJ, Gummow, Hayne and Crennan JJ repeated a statement by Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde[68] which included the following:
‘Ordinarily, a party is not to be denied the opportunity to place his or her case before the court in the ordinary way, and after taking advantage of the usual interlocutory processes. The test to be applied has been expressed in various ways,[69] but all of the verbal formulae which have been used are intended to describe a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way.’

There would seem to be little distinction between those approaches and the requirement of a ‘real’ as distinct from ‘fanciful’ prospect of success contemplated by s 31A.[70] That proposition, however, is not inconsistent with the proposition that the criterion in s 31A may be satisfied upon grounds wider than those contained in pre-existing Rules of Court authorising summary dispositions.”

[67](2006) 226 CLR 256 at 275 [46]; [2006] HCA 27.

[68](2000) 201 CLR 552 at 575–576 [57]; [2000] HCA 41.

[69]Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91 per Dixon J; General Steel Industries Inc v Cmr for Railways (NSW) (1964) 112 CLR 125 at 130 per Barwick CJ.

[70]In A v Essex County Council [2010] 3 WLR 509, the criterion of “real prospect of success” was variously equated to whether the plaintiff “could succeed at a trial”, whether there was a “triable issue” and whether there was the “least doubt”: at 523, [44] per Lord Clarke of Stone-cum-Ebony JSC, 541 [119] per Baroness Hale of Richmond JSC, 544, [133] per Lord Brown of Eaton-under-Heywood JSC and 552 [163] per Lord Kerr of Tonaghmore JSC.

Continuing, their Honours said:[71]

“[25] Section 31A(2) requires a practical judgment by the Federal Court as to whether the applicant has more than a ‘fanciful’ prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success.
[26] Where an application under s 31A requires consideration of apparently complex questions of fact, then the caution uttered by Lord Hope is relevant.[72] The importance of those considerations is amplified if the case involves resolution of issues of law and fact, or mixed law and fact.”

[71](2010) 241 CLR 118 at 132, [25]-[26].

[72](2010) 241 CLR 118, [21].

The plurality in Spencer v The Commonwealth adopted a similar approach:[73]

“[51] First, the central idea about which the provisions pivot is ‘no reasonable prospect’ (emphasis added). The choice of the word ‘reasonable’ is important. If s 31A is to be seen as deriving from r 24.2 of the Civil Procedure Rules 1998 of England and Wales, its provisions underwent an important change in the course of their translation from that jurisdiction to this. The English rule speaks of ‘no real prospect’; s 31A speaks of ‘no reasonable prospect’. The two phrases convey very different meanings.
[52] Second, effect must be given to the negative admonition in subs (3) that a defence, a proceeding, or a part of a proceeding may be found to have no reasonable prospect of successful prosecution even if it cannot be said that it is ‘hopeless’ or ‘bound to fail’. It will be necessary to examine further the notion of ‘no reasonable prospect’. But before undertaking that task, it is important to begin by recognising that the combined effect of sub-ss (2) and (3) is that the enquiry required in this case is whether there is a ‘reasonable’ prospect of prosecuting the proceeding, not an enquiry directed to whether a certain and concluded determination could be made that the proceeding would necessarily fail.
[53] In this respect, s 31A departs radically from the basis upon which earlier forms of provision permitting the entry of summary judgment have been understood and administered. Those earlier provisions were understood as requiring formation of a certain and concluded determination that a proceeding would necessarily fail.
…
[56] Because s 31A(3) provides that certainty of failure (‘hopeless’ or ‘bound to fail’) need not be demonstrated in order to show that a plaintiff has no reasonable prospect of prosecuting an action, it is evident that s 31A is to be understood as requiring a different enquiry from that which had to be made under earlier procedural regimes. It follows, of course, that it is dangerous to seek to elucidate the meaning of the statutory expression ‘no reasonable prospect of successfully prosecuting the proceeding’ by reference to what is said in those earlier cases.”

[73](2010) 241 CLR 118 at 139-40, [51]-[53] and [56].

The summary judgment provisions of the Act were also considered by J. Forrest J in Matthews v SPI Electricity Pty Ltd.[74] As a result of consideration of the authorities, including Spencer v The Commonwealth, J. Forrest J noted that “… [i]n Spencer, although dealing with an equivalent (but not identical) provision of the Federal Court Act … [s 31A] which referred to ‘reasonable’, rather than ‘real’, prospects of success, the High Court did not doubt that a different standard was to be applied” from that which had previously applied under the Rules; referring particularly to the judgment of the plurality in Spencer at [56], as set out above.[75] I also agree, with respect, that the approach of J. Forrest J to the provisions of s 63 of the Act and the reasoning of the High Court in Spencer’s case is correct in that no sensible distinction can be drawn between the difference in language as between the Act and s 31A of the Federal Court Act as a result of the slightly different formulation of the test; the latter referring to “reasonable”, rather than “real”, the word used in the State Act. The genesis of the expression “no real prospect of success” is, as J. Forrest J noted in Matthews, Lord Woolf’s report of 1996.[76] Lord Woolf MR did, himself, consider the English test of “no real prospect of succeeding on the claim or issue” in Swain v Hillman,[77] as to which his Lordship said:[78]

“Under r 24.2, the court now has a very salutary power, both to be exercised in a claimant’s favour or, where appropriate, in a defendant’s favour. It enables the court to dispose summarily of both claims or defences which have no real prospect of being successful. The words ‘no real prospect of succeeding’ do not need any amplification, they speak for themselves. The word ‘real’ distinguishes fanciful prospects of success or, … they direct the court to the need to see whether there is a ‘realistic’ as opposed to a ‘fanciful’ prospect of success.”

[74][2011] VSC 168.

[75]See [2011] VSC 168, [19].

[76]Woolf, Access to Justice: Final Report to the Lord Chancellor on the civil justice system in England and Wales (1996) [32]-[34].

[77][2001] 1 All ER 91 (CA).

[78][2001] 1 All ER 91 at 92.

The test to be applied under the English Civil Procedure Rules was also considered by Lord Hope of Craighead in Three Rivers District Council v Bank of England [No 3].[79]

“94 For the reasons which I have just given, I think that the question is whether the claim has no real prospect of succeeding at trial and that it has to be answered having regard to the overriding objective of dealing with the case justly. But the point which is of crucial importance lies in the answer to the further question that then needs to be asked, which is – what is to be the scope of that inquiry?
95. I would approach that further question in this way. The method by which issues of fact are tried in our courts is well settled. After the normal processes of discovery and interrogatories have been completed, the parties are allowed to lead their evidence so that the trial judge can determine where the truth lies in the light of that evidence. To that rule there are some well-recognised exceptions. For example, it may be clear as a matter of law at the outset that even if a party were to succeed in proving all the facts that he offers to prove he will not be entitled to the remedy that he seeks. In that event a trial of the facts would be a waste of time and money, and it is proper that the action should be taken out of court as soon as possible. In other cases it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents or other material on which it is based. The simpler the case the easier it is likely to be to take that view and resort to what is properly called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents without discovery and without oral evidence. As Lord Woolf said in Swain v Hillman, at p 95, that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all.”

[79][2003] 2 AC 1 at 260-261, [94], [95] (HL (E)); and see Matthews v SPI Electricity Pty Ltd [2011] VSC 168 at [20] (J. Forrest J).

On the basis of the authorities considered by J. Forrest J in Matthews, his Honour identified a number of principles as applicable to the application there under consideration:[80]

“From the above, I think that the following principles can be identified as relevant to this application:
1.If a court determines that a particular cause of action is hopeless or bound to fail, then it should be dismissed;
2.A court may also dismiss a claim where it determines that it has no real prospect of success in the sense that such prospects are fanciful rather than realistic;
3.The less complex the issue in a case then the easier it is for a court to take the view that such a proceeding is capable of being determined on summary judgment; and
4.Whatever the test to be applied, the power to order summary dismissal of a claim must be exercised with care. This is particularly so where a case may involve issues of contested fact, or where its consequences may affect a large number of persons.”
[80][2011] VSC 168, [22].

His Honour noted that he adopted this statement of principles on the basis of the statement by Hamblin J in Credit Suisse International v Ramot Plana OOD,[81] adapted for Australian authorities. In my view, for the purpose of the application of these principles in the present proceedings, the different circumstances inherent in the proceeding in Matthews do not detract from their application more generally. Nevertheless, having regard to the present circumstances, one might add to the fourth point: “or the construction of complex documents”. This does, of course, also follow from the third point in any event.
[81][2010] EWHC 2759.
Appeal

In my opinion, two errors appear in the reasoning of Daly AsJ in the judgment and orders. First, her Honour was in error in the manner in which she construed the provisions of the SUSA and, particularly, in the meaning ascribed to the expression “may be called upon to pay” as used in paragraph 12.7(a) of that agreement. Secondly, her Honour was in error in determining that the claims to which the judgment and orders relate had “no real prospect of success” within the meaning of s 63 of the Act. Further, I am of the opinion that, even if it was open to Daly AsJ to determine that these claims had “no real prospect of success” for the purposes of s 63 of the Act, her Honour ought, in all the circumstances, to have found that it was appropriate that these claims be subject to full trial and determination, not summary determination, in the exercise of the discretion conferred by s 64 of the Act.

These bases of error are, in the particular circumstances of this case, interconnected in that it may have been the case that if the first error had not been made, then the second may not have arisen. Nevertheless, it may still, in all the circumstances, have been appropriate to exercise the discretion under s 64 to require a full trial in relation to the matters the subject of the summary judgment application. In any event, that is speculative and it is not necessary to take these matters further.

Also, at the outset, it is useful to mention an argument advanced on behalf of the defendant that the error in the application of the test provided for under s 63 of the Act was made manifest by the statement in her Honour’s judgment that, “[i]n my view, the construction of the term ‘may be called upon to pay’ contended for by the vendors is arguable, but does not have a real prospect of success”.[82] I am of the view, however, that read in context, this sentence does not indicate any error of itself, but in a more general manner states in broad general terms that any proposition is arguable, may be argued for, but, applying the relevant test, does not have a real prospect of success.[83] Any proposition is arguable, in the most general sense, though the weaker the prospects, the weaker and more problematic is any argument in support likely to be.
[82]Reasons for judgment [14].
[83]And see paragraph 34 and following, above.

At this point I should stress that I do not regard Daly AsJ being in error in seeking, where possible, to apply the summary judgment provisions of the Act. As indicated previously, clearly the Parliamentary intention is that these provisions be applied wherever possible to reduce the cost and burden of litigation in appropriate cases. The particular issue here is, of course, whether this was an appropriate case.

I turn now to the first aspect of error, namely the proper construction of the critical provisions of the SUSA. There are many aspects of the process of the interpretation of contracts which reaffirm that the process is one applied to a particular document construed as a whole. This principle is expressed by Sir Kim Lewison in The Interpretation of Contracts as, “[i]n order to arrive at the true construction of a document, a clause must not be considered in isolation, but must be considered in the context of the whole of the document”.[84] Thus, Lewison says:[85]
[84]Sir Kim Lewison, The Interpretation of Contracts (4^th ed, Sweet & Maxwell, London, 2007), paragraph 7.02.
[85]Ibid, 243.

“In Chamber Colliery Ltd v Twyerould,[86] Lord Watson said:
‘I find nothing in this case to oust the application of the well known rule that a deed ought to be read as a whole, in order to ascertain the true meaning of its several clauses; and that the words of each clause should be so interpreted as to bring them into harmony with the other provisions of the deed, if that interpretation does no violence to the meaning of which they are naturally susceptible.’

In the modern jargon this principle is sometimes labelled a ‘holistic’ interpretation.[87] The expression of this principle of construction is no more than an enlargement of the general proposition that an individual word takes its meaning from the context in which it is found, which is now the single most important principle in the modern approach to the interpretation of contracts. So too an individual clause takes its meaning from the context of the document in which it is found. Thus in Barton v Fitzgerald,[88] Lord Ellenborough CJ said:
‘It is a true rule of construction that the sense and meaning of the parties in any particular part of an instrument may be collected ex antecedentibus et consequentibus; every part of it may be brought into action in order to collect from the whole one uniform and consistent sense, if that may be done.’[89]”

[86][1915] 1 Ch 268 (Note).

[87]See Adam v Shrewsbury [2006] 1 P & CR 27 (per Neuberger LJ); Taylor v Rive Droite Mustic Ltd [2006] EMLR 4 (per Neuberger LJ); Shaw v Hutton-Shaw [2007] 1 FLR 1839 (per Arden LJ).

[88](1812) 15 East 530.

[89]See also The Apostolis (No 2) [2000] 2 Lloyd’s Rep 337 at 348, CA (“However, it is hornbook law that a contract must be construed as a whole. One cannot first construe cl 3 and then afterwards alter the meaning of cl 20 in order to accord with it” per Waller LJ).

The principle that the document is to be construed as a whole does not necessarily mean that reference may not be made to other documents forming part of the same transaction, antecedent agreements or draft agreements, but the guiding principle remains that the primary material available for the process of construction is the particular document which is to be interpreted.[90]
[90]See Lewison, op cit, chapter 3; particularly paragraph 3.01 (The document to be interpreted); paragraph 3.02 (Supplemental documents); paragraph 3.03 (Documents forming part of the same transaction); paragraph 3.04 (Deleted words); paragraph 3.05 (Antecedent agreements); and paragraph 3.06 (Draft agreements).

This guiding principle is supplemented when the document to be construed includes a technical term or legal term of art. Technical terms should be interpreted on the basis of evidence as to the meaning of the terms.[91] Legal terms of art should be given “their technical meaning in law, unless there is something in the context to displace the presumption that it was intended to carry its technical meaning.”[92] The defendant submitted that the phrase ‘called upon to pay’ is “not an expression which is commonly used in contracts”[93] and that “there’s no suggestion that called upon to pay is a term which is commonly used in contracts which has attracted great judicial authority on the question.”[94] The plaintiff did not advance a contrary position and there is nothing to suggest that the term is a technical term or a legal term of art in the relevant sense.
[91]Op cit, 164-166.
[92]Op cit, 166.
[93]See transcript, p 20.
[94]See transcript, p 21..

It follows from an application of the more general principles that courts discourage “… the citation of authority on the construction of a one-off contract, and will not usually be greatly assisted by it”.[95] Lewison elaborates this proposition, with reference to authority. Reference is made to the opinion of the Privy Council in Ata ul Haq v Nairobi City Council, where Lord Morris of Borth-y-Gest considered a decision on the construction of another one-off contract to be “of assistance”, but not decisive.[96]
[95]Lewison, op cit, paragraph 4.11; and noting that there is no evidence that the SUSA is anything but a “one-off” contract – and that, in any event, its terms and detail indicate that it is most unlikely that the position would be otherwise.
[96](1962) 28 Build LR 76 applied in National Coal Board v Neill (William) & Son (St Helens) Ltd [1985] QB 300.

However, in Schuler (L) AG v Wickman Machine Tool Sales Ltd,[97] Lord Morris of Borth-y-Gest responded differently, saying: [98]

“If it is correct to say, as I think it is, that where there are problems of the construction of an agreement the intention of the parties to it may be collected from the terms of their agreement and from the subject matter to which it relates, then I doubt whether, save in so far as guidance on principle is found, it is of much value (although of much interest) to consider how courts have interpreted various differing words in various contracts. Nor is it of value to express either agreement or disagreement with the conclusions reached in particular cases.”

[97][1974] AC 235.

[98][1974] AC 235 at 256.

Thus, other cases on construction of other documents are said to be only useful “as guidance on principle”. Similarly, as Lewison notes, Lord Wright expressed a similar view in Luxor (Eastborne) Ltd v Cooper:[99]

“I deprecate in general the attempt to enunciate decisions on the construction of agreements as if they embodied rules of law. To some extent decisions on one contract may help by way of analogy and illustration in the decision of another contract. But however similar the contracts may appear, the decision as to each must depend on the consideration of the language of the particular contract, read in the light of the material circumstances of the parties in view of which the contract is made.”

[99][1941] AC 108 at 130.

It is perhaps helpful to conclude this point by reference to a passage from the judgment of Jessel MR in Aspden v Seddon:[100]

“No judge objects more than I do to referring to authorities merely for the purpose of ascertaining the construction of a document; that is to say, I think it is the duty of a Judge to ascertain the construction of the instrument before him, and not to refer to the construction put by another judge upon an instrument, perhaps similar, but not the same. The only result of referring to authorities for that purpose is confusion and error, in this way, that if you look at a similar instrument, and say that a certain construction was put upon it, and that it differs only to such a slight degree from the document before you, that you do not think the difference sufficient to alter the construction, you miss the real point of the case, which is to ascertain the meaning of the instrument before you. It may be quite true that in your opinion the difference between the two instruments is not sufficient to alter the construction, but at the same time the Judge who decided on that other instrument may have thought that that very difference would be sufficient to alter the interpretation of that instrument. You have in fact no guide whatever; and the result especially in some cases of wills has been remarkable. There is, first document A, and a Judge formed an opinion as to its construction. Then came document B, and some other Judge has said that it differs very little from document A – not sufficiently to alter the construction – therefore he construes it in the same way. Then comes document C, and the Judge there compares it with document B, and says it differs very little, and therefore he shall construe it in the same way. And so the construction has gone on until we find a document which is in totally different terms from the first, and which on human being would think of construing in the same manner, but which has by this process come to be construed in the same manner.”

[100](1874) LR 10 Ch App 394 at 396n, which, as Lewison notes (paragraph 4.11, at 142), was approved by the Court of Appeal in Equity & Law Life Assurance Plc v Bodfield Ltd [1987] 1 EGLR 124. See also the opening observations of Dillon LJ in Pagnan SpA v Tradax Ocean Transportation SA [1987] 3 All ER 565 at 577.

In my opinion, the reliance which Daly AsJ placed on the judgment of Burt CJ in Pernay Pty Ltd v Cord Holdings Ltd[101] is at odds with the principles of construction to which reference has been made; both in the general approach to the provisions of the particular document, in this case the SUSA, and the need to read the document as a whole and construe particular provisions accordingly. It is also at odds with the authorities in relation to the use of cases on the construction of other documents in the process of construing the subject document or provisions. It also follows that the extent to which the “factual matrix” which might relevantly have been considered in the process of construction of the subject document has been excluded as a result of this approach to construction.[102]
[101]Unreported, Supreme Court of Western Australia, Burt CJ, 13 March 1984, BC 8491259.
[102]See, with respect to the “factual matrix”, see Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337.

I turn now to the second aspect of error, namely the application of the provisions of s 63 of the Act and the question whether the relevant claims which relied upon the construction of the SUSA had “no real prospect of success”.

It was submitted by the defendants that if the phrase ‘called upon to pay’ in clause 12.7 did mean ‘due and payable’ the parties would have used the phrase in clause 12.7 as they did in clause 14.4(f). It was also said, the phrase does not mean ‘an assessment as a result of which a person is liable to make a payment for tax’ as that term was used in the definition of ‘Tax Claim’ but was not used in clause 12.7. Rather, ‘called upon to pay’, may mean a call made at a point in time when the liability and quantum of the assessed tax is final and certain. As the defendants are presently in negotiation with the ATO about the assessed tax and because the proposed a ‘50/50 arrangement’ is still being discussed it might be said that in the circumstances the ATO has made a ‘call’ for the assessments to be paid. It might reasonably be argued on this basis that neither the condition nor the quantum of any adjustment is yet known. Thus it would follow that there is a reasonable basis for a dispute as to the meaning of the phrase ‘called upon to pay’, in all circumstances when considered in light of the SUSA provisions as a whole. Further, given the complexity of the SUSA provisions, it is not possible, in my view, having regard to the principles of construction to which reference has been made, to form a view at this stage on the proper interpretation of the expression “may be called upon to pay” as used in sub-clause 12.7(a) of the SUSA.

Accordingly, I am of the opinion that her Honour was in error in finding that the defendants’ arguments in respect to the relevant claims did not have “a real prospect of success”.

Further, having regard to the amount of money, principal and interest, the subject of the judgment and orders and the length and complexity of the provisions of the SUSA, I am of the opinion that even if the Court had doubts as to the prospect of success of a defendant’s claims in circumstances like the present in terms of the s 63 test, the proper course would be to exercise the discretion under s 64 and to require a full trial of the claims.

Summary and conclusions

For the preceding reasons, as I have indicated, I will grant leave to appeal the judgment and orders and, in relation to the appeal, I am of the opinion that the appeal should be allowed and the judgment and orders set aside.

I will hear the parties on the question of costs and the form of final orders.

[2011] VSC 476

23 September 2011