KC Park Safe (SA) Pty Ltd v Adelaide Terrace Investments Pty Ltd
[1998] FCA 1157
•17 SEPTEMBER 1998
FEDERAL COURT OF AUSTRALIA
PRACTICE AND PROCEDURE - application for summary dismissal or permanent stay - whether proceeding brought for improper or collateral purpose - whether proceeding could and should have been brought by way of defence and counterclaim to earlier proceedings - whether failure to bring in proceedings in which judgements given in default of defence or appearance could give rise to Anshun estoppel.
Federal Court Rules, O 20 r 2
Trade Practices Act 1974 (Cth), s 52
White Industries (Qld) Pty Ltd v Flower & Hart (A Firm) (Goldberg J, 14 July 1998,
unreported), applied
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589, applied
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, cited
Walton v Gardiner (1993) 177 CLR 378, cited
Webster v Lampard (1993) 177 CLR 598, cited
Second Life Decor Pty Ltd v Comptroller-General of Customs (1994) 53 FCR 78, cited
Bryant v Commonwealth Bank of Australia (1994) 51 FCR 529, cited
Williams v Spautz (1992) 174 CLR 509, applied
Rogers v Legal Services Commission (1995) 64 SASR 572, cited
The Bellcairn (1885) 10 P. 161, cited
Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502, cited
Tanning Research Laboratories Inc v O’Brien (1989-90) 169 CLR 332, cited
KC PARK SAFE (SA) PTY LTD, BENJAMIN KAMER and DAVID RICHARD PELMAN LESTER v ADELAIDE TERRACE INVESTMENTS PTY LTD
VG 144 of 1998
MANSFIELD J
ADELAIDE
17 SEPTEMBER 1998
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VG 144 of 1998
BETWEEN:
KC PARK SAFE (SA) PTY LTD,
BENJAMIN KAMER and
DAVID RICHARD PELMAN LESTERAPPLICANTS
AND:
ADELAIDE TERRACE INVESTMENTS PTY LTD
RESPONDENT
JUDGE:
MANSFIELD J
DATE OF ORDER:
17 SEPTEMBER 1998
WHERE MADE:
ADELAIDE
THE COURT ORDERS THAT:
Application for summary judgment refused.
Notice of motion filed 15 June 1998 otherwise adjourned to a date to be fixed, with liberty to apply.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VG 144 of 1998
BETWEEN:
KC PARK SAFE (SA) PTY LTD,
BENJAMIN KAMER and
DAVID RICHARD PELMAN LESTERAPPLICANTS
AND:
ADELAIDE TERRACE INVESTMENTS PTY LTD
RESPONDENT
JUDGE:
MANSFIELD J
DATE:
17 SEPTEMBER 1998
PLACE:
ADELAIDE
REASONS FOR JUDGMENT
The respondent Adelaide Terrace Investments Pty Ltd (“ATI”) has applied by motion dated 15 June 1998 to dismiss or strike out the applicants’ claim in this matter, or for it to be stayed until all amounts owing by the applicant KC Park Safe (SA) Pty Ltd (“KCPS”) and guaranteed by the applicants Benjamin Kamer (“Kamer”) and David Richard Pelman Lester (“Lester”), under a certain lease are paid and maintained. Kamer and Lester are the directors and shareholders of KCPS. Additional claims for security for costs, and for other orders, are not presently pursued.
The claim arises in respect of the lease by ATI to KCPS of the land in Certificate of Title Register Book Volume 5184 Folio 116 situated at 128 Hindley Street Adelaide and known as the Cosmopolitan Car Park (“the car park”). The car park was leased to KCPS for a term of ten years, commencing on 1 July 1996, by written memorandum of lease dated 13 June 1996 (“the lease”). Under the lease, KCPS was to pay to ATI the rental by calendar monthly payments in advance on the first day of each month. The initial base rental was $875,000 per annum, and following review on 1 December 1997 according to the terms of the lease, the current annual base rental is $1,010,625 per annum. Under the lease, KCPS also agreed to pay to ATI upon demand all rates taxes charges assessments and fees charged imposed or assessed in respect of the car park, all (defined) strata contributions as the car park is part of a strata plan administered by a strata corporation, all electricity supply costs associated with the car park, and all costs due relating to the provision of services for maintenance of equipment such as fire equipment. Further, KCPS agreed to pay interest on any amount outstanding for seven days or more at a defined rate and costs incurred by ATI in proceedings brought to enforce the lease. In addition to the usual covenants in such a lease, KCPS was required to provide an unconditional bank guarantee to ATI in the sum of $100,000 as security for its due performance of its obligations under the lease (“the required guarantee”). It is not necessary to refer to the terms of the lease in detail, nor to the exact amounts outstanding under the various covenants referred to. There is no dispute about the terms of the lease, or that KCPS is in substantial default under its terms.
By Deed of Guarantee also dated 13 June 1996 (“the personal guarantee”) Kamer and Lester guaranteed to ATI the due performance of the obligations of KCPS under the lease, and indemnified it for any loss or damage caused by any breach by KCPS of those obligations.
KCPS duly took possession of the car park under the terms of the lease. For a time it performed its obligations thereunder. Since March 1997 it has failed to do so in a timely manner, and more recently it has failed to do so at all. These proceedings were instituted on 9 April 1998 in the course of a long running series of proceedings brought by ATI to recover monies due by KCPS under the lease, the details of which are set out below. On 12 June 1998, KCPS by its solicitors gave to ATI by its solicitors notice entitled ‘Notice of Intention to Quit Possession’, indicating its intention to vacate the car park on 31 July 1998. ATI did not accept that it was entitled to do so. It treated the notice, and other conduct, as entitling it to regard KCPS as no longer being prepared in any way to perform its obligations under the lease, and so itself retook possession of the car park on 28 July 1998.
The current proceedings allege that ATI made a series of representations to KCPS and to Kamer and Lester in the period August 1995 to June 1996, and failed to disclose to them a material matter, to induce them to enter into the lease and the personal guarantee respectively. Those representations are claimed to relate to the revenue that could be derived from the operation of the car park, to a guaranteed revenue from the operation of the car park, to the ability to reduce security contract costs by a specified sum without diminishing security quality, to the ability to reduce salaries and wages to a specified sum in operating the car park again without reducing its quality of operations, and as to the existing and budgeted revenue and expenses of operating the car park. They are said to be contained, inter alia, in a report of Murray F Young & Associates of February 1995 (“the Young Report”), presented as containing all the facts required by KCPS to determine whether to enter into the lease. There is also a complaint that ATI did not disclose to KCPS, Kamer and Lester that it had plans to build on the property over an access laneway providing one entry point to the car park, and which if built would obstruct the visual attractiveness of access to the car park (called ‘the non-disclosure’ herein and in the statement of claim), when ATI was under a duty of disclosure to them. It is then alleged that each of the representations referred to was false and misleading, and to the extent that they are with respect to future matters, that ATI did not have reasonable grounds for making them. It is also alleged that the non-disclosure was itself false and misleading. There is an alternative plea based on negligence. KCPS, Kamer and Lester thereby claim to have suffered loss. They seek orders that the lease and the personal guarantee be set aside or varied to relieve KCPS from obligations to pay rent under the lease, and rescission of the lease, together with damages. It is not presently necessary to refer in detail to the claims for relief in the application.
ATI contends that the proceedings should be dismissed, or stayed except on terms as to payment of monies owing under the lease and as to the provision of the required guarantee, for two reasons:
that this proceeding is brought for an improper or collateral purpose and not for the purpose of genuinely asserting rights of KCPS, Kamer and Lester, cp. White Industries (Qld) Pty Ltd v Flower & Hart (A Firm) (Goldberg J, 14 July 1998, unreported), and alternatively
that this proceeding could, and should, have been brought by way of defence and counterclaim to one of the earlier proceedings brought by ATI for recovery of rent and other monies due by KCPS under the lease, so that KCPS, Kamer and Lester are now estopped from asserting the claimed rights in this proceeding, cp. Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589.
ATI’s application, in respect of its first ground, is in essence an application to dismiss the proceeding as an abuse of process, under O 20 r 2(1)(c) of the Federal Court Rules (“the Rules”). Order 20 r 2(1)(a) or (c) also provides the foundation for the second ground of the application. It is accepted that the exercise of that power should occur only in the plainest of cases: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 128-130. In Walton v Gardiner (1993) 177 CLR 378, Mason CJ, Deane and Dawson JJ said (at 392-393):
“The inherent jurisdiction of a superior court to stay its proceedings on grounds of abuse of process extends to all those categories of cases in which the processes and procedures of the court, which exist to administer justice with fairness and impartiality, may be converted into instruments of injustice or unfairness. Thus, it has long been established that, regardless of the propriety of the purpose of the person responsible for their institution and maintenance, proceedings will constitute an abuse of process if they can be clearly seen to be foredoomed to fail.”
That the power should be exercised with exceptional caution, and only when it is clear that there is no real question to be tried was reinforced in the judgment of Mason CJ, Deane and Dawson JJ in Webster v Lampard (1993) 177 CLR 598 at 602 and at 603 where their Honours said:
“Nowhere is that need for exceptional caution more important than in a case where the ultimate outcome turns upon the resolution of some disputed issue or issues of fact. In such a case, it is essential that “great care . . . be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal”.”
I bear that stricture carefully in mind.
Nevertheless, there have been cases where the Court has exercised its powers under O 20 r 2 of the Rules to dismiss a proceeding as an abuse of process because it is brought as a means of obtaining some advantage for which such proceedings are not designed or some collateral purpose: eg. Second Life Decor Pty Ltd v Comptroller-General of Customs (1994) 53 FCR 78 especially per Heerey J at 85; and where an Anshun type estoppel by way of defence to a claim is asserted, eg. Bryant v Commonwealth Bank of Australia (1994) 51 FCR 529.
It is necessary, therefore, to have careful regard to the evidence before me to determine whether the necessary level of satisfaction has been reached.
There is no real conflict on the material before me. Lester by affidavit sworn on 17 July 1998 has acknowledged the accuracy of most of the primary factual material relied upon by ATI. ATI seeks that I infer from the material before me that KCPS, Kamer and Lester each has as the purpose for bringing and maintaining this proceeding the illegitimate purpose of simply delaying as long as possible the payment of amounts due to ATI, or achieving a better bargaining position and without any intention of maintaining the proceedings to their conclusion with any real prospect of succeeding in obtaining all or any of the relief sought; cp. Williams v Spautz (1992) 174 CLR 509.
It is plain that KCPS has been consistently in breach of the lease since March 1997 by failing to make payments due under it in a timely manner. That has led to ATI bringing proceedings for recovery of rent and other charges against KCPS under the lease, and against Kamer and Lester as guarantors, on fifteen separate occasions in the District Court of Adelaide. ATI has been put to the trouble and expense of serving each of those persons, then of obtaining judgment, and of taking steps to recover the judgment. Sometimes the judgment has been obtained in default of the filing of an appearance, and sometimes in default of the filing of a defence following an appearance. Sometimes, ATI has had to go to the further trouble and expense of issuing and serving bankruptcy notices on Kamer and Lester before the judgment sum was paid, and then it has been paid only shortly before the time fixed for compliance with the bankruptcy notice.
The brief history of those proceedings and their outcomes between March 1997 and April 1998 is as follows:
March 1997Judgment in default of defence entered on 18 June 1997 for $1128.24 interest on late payment of March rent, and paid on 25 July 1997.
April 1997Judgment in default of defence entered on 18 June 1997 for $93,823.61 for April rent, various rates and charges, and interest for late payment, and paid by 25 July 1997.
May 1997Judgment in default of defence entered on 19 June 1997 for $3,226.84 for certain charges and interest for late payment, after May rental of $80,208 paid following proceedings, and paid on 25 July 1997.
June 1997Judgment in default of appearance entered on 7 August 1997 for $84,235.51 for June rental, certain charges and interest for late payment, and paid with further interest on 3 October 1997 following service of bankruptcy notices on 12 September 1997.
July 1997Judgment in default of appearance entered on 7 August 1997 for $82,915.91 for July rental, certain charges and interest for late payment, and paid with further interest on 3 October 1997 following service of bankruptcy notices on 12 September 1997.
August 1997 Judgment in default of appearance entered on 10 September 1997 for $6,645.78 for certain charges and interest for late payment, after August rental of $80,208 paid following proceedings, and paid with further interest on 28 October 1997 following service of bankruptcy notice on Kamer on 11 October 1997.
September 1997 Judgment in default of appearance entered on 17 October 1997 (against Kamer and Lester) and on 21 November 1997 (against KCPS) for $88,523.13 for September rent, certain charges and interest for late payment, and paid on 15 December 1997 following service of bankruptcy notices on Kamer and Lester on 24 and 25 November 1997 respectively.
October 1997 Judgment in default of appearance entered on 7 November 1997 for $83,133.64 for October rent, certain charges and interest for late payment, and paid on 22 December 1997 following service of bankruptcy notice on Kamer on 30 November 1997.
November 1997 Judgment in default of appearance entered on 23 December 1997 for $90,303.72 for November rent, certain charges and interest for late payment, and paid on 12 February 1998 following service of bankruptcy notices on Kamer and Lester on 21 and 27 January 1998 respectively.
December 1997 Judgment in default of appearance entered on 7 January 1997 against KCPS and on 11 and 19 February 1998 against Kamer and Lester respectively for $120,801.31 for December rent, certain charges and interest for late payment, and paid on 2 April 1998 following service of bankruptcy notices on Kamer and Lester on 12 March 1998.
January 1998 Judgment in default of appearance entered on 4 February 1998 against KCPS and on 11 and 19 February 1998 against Kamer and Lester respectively for $86,824.74 for January rent, certain charges and interest for late payment, and paid on 2 April 1998 following service of bankruptcy notices on Kamer and Lester on 12 March 1998.
February 1998 Judgment in default of appearance entered on 18 and 19 March 1998 for $103,369.69 for February rent, certain charges and interest for late payment. Bankruptcy notices were served on Kamer and Lester on 19 April 1998. They have each applied to set aside the bankruptcy notices, and on 16 June 1998 application was made to set aside the default judgments. None of those applications has yet been resolved. The judgment has not been paid.
March 1998Judgment in default of appearance entered on 6 April 1998 for $110,207.87 for March rent, certain charges and interest for late payment. Bankruptcy notices were served on Kamer and Lester on 17 April 1998. They have each applied to set aside the bankruptcy notices, and on 16 June 1998 application was made to set aside the default judgments. None of those applications has yet been resolved. The judgment has not been paid.
April 1998Action to recover $87,774.16 for April rent, certain charges, and interest for late payment was instituted and served on 17 April 1998. There was a defence, set-off and counterclaim filed on 15 May 1998. The set-off and counterclaim largely reflects the statement of claim in this proceeding. By agreement between the parties, that action was discontinued, to the intent that the claim would be determined as a consequence of these proceedings and would, if necessary, be included by way of cross-claim with further amounts said to be owing under the lease and the personal guarantee in this proceeding.
No further payments have been made. ATI therefore now alleges that there is owing under the lease and the personal guarantee at 15 June 1998 some $482,319.91 plus interest, including the default judgments obtained on 17 and 19 March 1998, and on 6 April 1998, and the amount owing will continue to accrue at about $92,000 per month or perhaps more until the hearing.
In a separate proceeding in the District Court, ATI sought an order that KCPS provide the required guarantee. That proceeding was adjourned from time to time, whilst KCPS’ solicitors investigated a potential claim under the Trade Practices Act 1974 (Cth) against ATI, but in October 1997 in default of defence, and apparently without opposition, an order was made for specific performance of that clause of the lease. It appears that after that order an arrangement was made, as recorded in a letter from KCPS of 15 December 1997, for KCPS to provide to ATI $5,000 per day until the sum of $100,000 on account of the guarantee was paid. Only $60,000 has been paid under that arrangement.
There have been discussions between John Charles Barrett (“Barrett”), the manager of ATI’s parent company and Peter David Tonkin (“Tonkin”), a solicitor acting for ATI with Robert Belteky (“Belteky”), the chief executive officer of KCPS and with Lester from time to time.
Barrett acknowledges that on occasions both Belteky and Lester have asserted to him in those discussions that ATI made misrepresentations and engaged in misleading and deceptive conduct during negotiations. They sought rental concessions, and explored other means of varying or being released from the terms of the lease.
On 15 May 1997, Belteky told Barrett that he wanted to negotiate a “sensible” rental for the car park, and otherwise KCPS would bring a proceeding such as that now instituted. Shortly thereafter, on 6 June 1997, solicitors for KCPS, wrote to solicitors for ATI in respect of certain then current District Court actions, including the following:
“I am now instructed by my client that they will make payment of all rental and other arrears which are the subject of these claims.
Accordingly, we will not be filing a defence or counterclaim to these actions.
My client stresses that these payments are made reluctantly and under protest. The payments in no way constitute an abandonment of the potential claim against your client for misrepresentation made by and on behalf of your client prior to the execution of the lease.
. . .
I am investigating my clients’ complaints concerning the car park and once that task is completed I will write to advise you of the substance of the claim. In the meantime my client has reluctantly and under protest agreed to continue paying the rent stipulated under the lease. In due course I anticipated (sic) that my client will bring an application to pay a lesser rental once the claim and losses have been formulated.”
At about that time, in a discussion between solicitors for the parties, the solicitor for KCPS identified misrepresentations concerning the non-disclosure, and as to future turnover as contained in the Young Report. She also indicated further investigations were being carried out, in contemplation of proceedings such as those now instituted.
The applicant on the motion contends that the payment of rental and other charges, under the pressure of the proceedings referred to above, has a particular significance. It is said to identify the point in time at which at the latest KCPS, Kamer and Lester were aware of their potential claims against ATI but chose not to pursue them in defence of ATI’s claims for rental and other charges. It was not until the defence filed on 15 May 1998 in the proceedings to recover the April 1998 rental payment and other charges under the lease that the current claim was expressed as a defence and set-off, and counterclaim, to the claims for payments under the lease.
At a meeting in October 1997, Kamer and Lester told Barrett, according to Barrett, that they were “fully aware of their potential claims regarding the negotiation of” the lease, and that they again sought concessions from ATI with respect to its terms. On 20 November 1997 Belteky in a telephone conversation with Tonkin said that KCPS was losing about $300,000 per annum under the lease, and could not afford to pay the rental on time, that its conduct in failing to do so until ATI obtained judgments enabled KCPS to assist its cash flow by remaining about two months behind in rental payments, and that one option was for KCPS to go into liquidation and for Kamer and Lester to go bankrupt.
KCPS is one of a number of companies which operate some one hundred and seventy car parks throughout Australia under the name ‘K.C. Park Safe’, and of which Kamer and Lester are the joint managing directors. Many of the payments made in respect of the default judgments referred to were made by K.C. Park Safe (Vic) Pty Ltd. KCPS does not apparently have any significant assets, or issued capital; it has issued only two shares with a nominal value of $1 each.
The material in response is that comprised in Lester’s affidavit sworn on 17 July 1998.
He deposes to KCPS, and Kamer and Lester, being induced to enter into the lease and the personal guarantee by reason of the misrepresentations alleged in the statement of claim, referred to above. He also asserts that KCPS could not raise the matters now sought to be raised in this proceeding in defence of the District Court proceedings for the following reasons: Belteky was, in the course of negotiations leading up to the lease, refused access to the car park and its records and its staff because the existing operator of the car park had a right of first refusal on any proposed new lease (presumably so the existing operator was not made aware of another interested party), and KCPS was confined to consideration of the Young Report provided by ATI in deciding to enter into the lease. Its predictions as to achievable revenue levels and possible reductions in overhead costs for staff and security have not been correct. It was the predictions and representations in the Young Report which induced KCPS to enter into the lease. KCPS was losing some $300,000 per annum in operating the car park. Since early 1997, it has tried to renegotiate the terms of the lease, but has been unsuccessful. In June 1997, when KCPS realised that such negotiations would be fruitless, it decided to investigate in greater detail the extent to which the predictions and representations were incorrect and to ensure that the losses were not caused by its manner of operating the car park. He then says:
“It took me a long time to assemble the facts required to articulate our claim in this proceeding. During those investigations, I interviewed staff of the car park who know its history, and communicated with Adelaide Police and the Fire Brigade. It was not until about October 1997 that I felt in a position to engage Messrs Phillips Fox of Adelaide to advise on our prospects for success in mounting a claim to set aside the lease. They provided advice in December 1997, which necessitated further inquiries. Those inquiries were pursued, but in late March 1998, Phillips Fox informed us that they now had a conflict of interest, and could not act for us if proceedings were to issue against the respondent.’
I interpose to note that clearly that is partly incorrect, as the solicitors were engaged at least by about May or June 1997 as the facts noted above indicate. Nor do I regard that explanation as entirely satisfactory because of its generality in the face of the assertions as to the proposed claim made from about April or May 1997, and the obvious need for KCPS to assert that claim at an early stage. However, for reasons which appear below, I do not need to make a final decision on the matter. I accept that, as appears, KCPS engaged solicitors in about May 1997 to advise in relation to the proposed claim and that, to some extent, KCPS was then in the hands of those solicitors as to the nature and extent and timing of the investigations.
Following the reported conflict of interest of those solicitors in March 1998, KCPS engaged its present solicitors on 1 April 1998 and these proceedings were instituted on 9 April 1998.
THE ALLEGED ULTERIOR PURPOSE
ATI submits that this proceeding has been commenced for the improper or collateral purpose of delaying payment of the rental and other charges for which it is liable under the lease, and to enable negotiation of new lease terms or to force the respondent to the negotiating table.
There is no dispute about the power of the Court to dismiss or stay proceedings brought for an improper or collateral purpose: Williams v Spautz (above). In the joint judgment of Mason CJ, Dawson, Toohey and McHugh JJ, their Honours referred to the need to ensure that proceedings are not stayed as an abuse of process simply because their ultimate objective is to bring a result for which the law provides in the event that the proceedings terminate in the applicant’s favour, when the immediate purpose is to achieve that result properly within the law. Their Honours then said (at 526-527):
“It is otherwise when the purpose of bringing the proceedings is not to prosecute them to a conclusion but to use them as a means of obtaining some advantage for which they are not designed or some collateral advantage beyond what the law offers.”
Their Honours also clearly indicated (at 529) that if the improper purpose is the predominant purpose of the applicant, that will be sufficient to make out an abuse of process. Goldberg J in White Industries (above) reviewed and discussed the recent authorities on this topic (see his Honour’s reasons at 100-102) and I adopt those reasons.
Needless to say, the onus of satisfying the Court that there is an abuse of process lies upon the party alleging it, and it is a heavy onus as the power to grant a permanent stay or to dismiss a proceeding on that basis is “. . . one to be exercised only in the most exceptional circumstances”. (Williams v Spautz, above at 529).
I am not persuaded, to the appropriate level of satisfaction, that the current proceedings should at this stage be dismissed or permanently stayed on the basis that KCPS has instituted and maintained them for the improper purpose or purposes of avoiding or delaying the obligation to meet its liabilities under the lease, or to force ATI to renegotiate the terms of the lease. It is implicit in the submission of ATI that KCPS has, and is aware that it has, no or little prospect of success in its application.
In my view, it has not been shown that KCPS has little prospect of success in its claim. I simply do not have sufficient information to form a judgment on the merits of the claim one way or the other. Counsel for ATI referred to certain other material, including a letter of 23 August 1995 from KCPS to John Barrett which, it was contended, indicates that KCPS had conducted its own assessment of the prospects for the car park, and determined to enter into the lease solely upon the basis of its own investigations and assessment. That reference could only be of significance if it were ATI’s contention, or one of its contentions, that the claim should be dismissed because as a matter of fact KCPS had no prosect of making out its allegations in the statement of claim. I was not taken to the Young Report, nor other material dealing with the course of the discussions between ATI and KCPS. Without reference to other material, I am not of the view that the letter referred to does indicate that KCPS did not receive from ATI any representations relevant to its decision to enter into the lease. Nor do I have sufficient information to decide whether any such representations were either correct or were not relied upon by KCPS in determining to enter into the lease. Such matters may be ventilated at trial.
It may be that it is sufficient to show that KCPS has the state of mind that it has little or no prospect of success in its claim. For this contention of ATI, it must at least be shown that its purpose in these proceedings is otherwise than to assert and make out the legal entitlement which it has pleaded. ATI refers to the history of the various proceedings, to the indications referred to above that KCPS was embarking upon a course of action involving delaying payment of its obligations under the lease to assist its cash flow, to the timing of the present proceedings and the awareness of KCPS considerably earlier of the prospect for such a claim and its failure to pursue that claim earlier, to its desire to use the threat of these proceedings to renegotiate the terms of the lease, and to its apparent lack of assets.
However, those considerations, whilst they may be ultimately evidence pointing to the conclusion contended for, do not persuade me that I should exercise that judgment at this point. None are unequivocally or firmly indicative that KCPS did not think it had a claim or a potential claim for misrepresentation. There is no direct evidence that KCPS does not believe it has any such claim. Indeed, it has asserted the claim in a general way from about May 1997. I am not therefore prepared to conclude, at an interlocutory stage for summary judgment, that KCPS is not bringing this proceeding genuinely to assert its rights, albeit whilst also engaging in a strategy (until it proposed to vacate the car park) of paying the monies due under the lease as late as possible and endeavouring to renegotiate the lease terms.
THE ANSHUN ESTOPPEL
As noted above, the facts are not in issue.
Counsel for KCPS acknowledged that the matters now raised in this proceeding are within the jurisdiction of the District Court of South Australia, and could as a matter of form have been raised in those proceedings by way of set-off and counterclaim. That was done in respect of the claim by ATI for the April rental and other charges.
In Anshun (above) Gibbs CJ, Mason and Aickin JJ at 602-603 discussed the application of the abuse of process test to a fresh proceeding which is said to be estopped because the applicant omitted to plead a defence in an earlier action. The present contention of ATI is that such an estoppel arises here. It accepts that the proposition that:
“. . . there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff’s claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few.”
The Court reinforced that a party will be estopped from bringing an action which, if it succeeds, will result in a judgment which conflicts with an earlier judgment, and where the two judgments may appear to declare rights which are inconsistent in respect of the same transaction.
One matter confronting ATI is that each of the judgments referred to was in form a default judgment. Reference was made by counsel to Rogers v Legal Services Commission (1995) 64 SASR 572 which reaffirmed that there are circumstances where a plea of res judicatam will be successful, even though there has been no earlier trial on the merits of the matter, for example where consent orders are made: The Bellcairn (1885) 10 P. 161; Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502. Lander J (with whom Cox and Prior JJ agreed) said at 596:
“A judgment entered by reason of the default of another party can give rise to an estoppel per rem judicatam. It has been said that a default judgment can be looked at as another form of a judgment by consent, and as such, then becomes capable of giving rise to all of the consequences of a judgment contained in a contested action.”
The basis of the present claim is not a res judicatam. There has been no consent judgment in a formal sense. At the highest, on the evidence, KCPS and Kamer and Lester have elected not to defend the proceedings. The one exception may be the order for specific performance for the provision of the required guarantee, but it is not clear to what extent there was full consent to that order.
In Tanning Research Laboratories Inc v O’Brien (1989-90) 169 CLR 332 at 346, Brennan and Dawson JJ said:
“A plaintiff who has an unadjudicated cause of action which can be enforced only in fresh proceedings cannot be precluded from taking fresh proceedings merely because he could have and, if you will, should have counterclaimed on that cause of action in a forum chosen by the opposite party in proceedings in which the opposite party sued him. We do not read the majority judgment in Port of Melbourne Authority v. Anshun Pty. Ltd. as holding the contrary, except in a case where the relief claimed in the second proceeding is inconsistent with the judgment in the first: see especially at pp. 599-601.”
Those references are sufficient, in my view, to conclude that it is arguable that an Anshun estoppel will not arise by reason of the default judgments, at least so long as the default judgments do not necessarily result in a judgment which will conflict with any judgment or order sought in the current proceedings, either directly or by appearing to determine rights which are inconsistent as to the existence and validity of the lease and the personal guarantee.
It may be argued that those default judgments are determinative of the existence and validity of the lease and the personal guarantee. It is not necessary for me to decide whether, in the circumstances of the default judgments referred to, the proceedings necessarily involved a conclusion as to the validity of the lease and of the personal guarantee so as to entitle ATI, in its defence to these proceedings, to assert that KCPS cannot now pursue that portion of the relief which it seeks setting aside the lease and the personal guarantee. I suspect that ATI’s defence might raise that question. Its primary application is more ambitious, namely to have the proceedings themselves dismissed or permanently stayed.
I am not persuaded that there is by reason of the several default judgments any inherent determination that the entry into the lease and the personal guarantee by KCPS or by Kamer and Lester respectively was not in reliance upon any of the alleged misrepresentations. In the sense in which the High Court explained “conflicting judgments” in Anshun (above, at 603), I do not think that it is shown to the level of satisfaction necessary to exercise my powers under O 20 r 2 that the findings upon which the present claim is premised would be contradictory of the rights determined by the default judgments, or that at the least an award of damages (which is one of the types of relief claimed) would be so. Whether all the relief claimed is still available to KCPS and Kamer and Lester, in the light of the default judgments, is a matter which can be determined at trial. Although it is dealt with in the written outline of submissions, counsel did not separately address that issue. It gives rise to considerations as to the nature and scope of the remedy which s 87 of the Trade Practices Act 1974 provides for, including as to whether the exercise of the powers available to the Court under that section, upon which it is sought to have the lease and the personal guarantee declared to be at an end or substantially varied, would result necessarily in a “conflicting” judgment. As that matter was not dilated upon by counsel, I do not think it is necessary to go further than to conclude that in respect of that more limited application, I am again not persuaded that the position of KCPS, Kamer and Lester is unarguable so that those parts of their claim for relief should be now struck out or dismissed.
I have not overlooked the decision of the Full Court of this Court in Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287. The proceedings in that case were summarily dismissed. The circumstances were somewhat different from the present. It is not necessary to refer to them in detail, save to note the observation of the Court (Beaumont, Wilcox and Moore JJ) at 298:
“But, where, as here, a defendant’s claim is intimately connected with that of the plaintiff, in the sense that each arises, substantially, out of the same matters of fact, there is every reason to require that both be litigated at the one time, thereby minimising costs and avoiding the possibility of inconsistent judgments”.
The case provided a “classic example of the evil that the Anshun principle was intended to prevent” (at 298). The present circumstances, although to some degree similar, are in my view sufficiently different that that decision does not dictate the result that the proceeding should be dismissed. There has been no trial at all. All judgments in favour of ATI have been by default. The present claim was not pleaded by way of defence, set-off or counterclaim in any of those proceedings except in relation to the claim for the rental and other charges due for April 1998. In respect of that particular proceeding, it has been by the agreement of the parties that that proceeding, including the set-off and counterclaim, not be pursued in that action. KCPS and Kamer and Lester have not otherwise elected expressly not to pursue the present claim elsewhere, and at least since June 1997 have expressed the view that they would pursue it if a commercial resolution in the light of their claims was not reached.
Accordingly, I refuse ATI’s application for summary judgment.
I will adjourn its notice of motion to a date to be fixed, as requested by the parties, with leave to bring it on for further hearing in relation to the claim for security for costs should that become necessary.
I certify that this and the preceding seventeen (17) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.
Associate:
Dated: 17 September 1998
Counsel for the Applicants: Mr R Sallis
Solicitors for the Applicants: Best Hooper
Counsel for the Respondent: Mr M Abbott QC
Solicitors for the Respondent: Fisher Jeffries
Date of Hearing: 6 August 1998
Date of Judgment: 17 September 1998
0
2
2