Mango Boulevard P/L v Spencer & Ors [2010] QCA 207
PARTIES:
MANGO BOULEVARD PTY LTD ACN 101 544 601 (plaintiff/appellant) v RICHARD WILLIAM SPENCER (first defendant/first respondent) SILVANA PEROVICH (second defendant/second respondent) MIO ART PTY LTD ACN 121 010 875 (fourth defendant/third respondent) KINSELLA HEIGHTS DEVELOPMENT PTY LTD ACN 100 373 368 (third defendant/not party to the appeal) PAUL DESMOND SWEENEY AND TERRY GRANT VAN DER VELDE as trustees of the property of RICHARD WILLIAM SPENCER (fifth defendants/not party to the appeal) PAUL DESMOND SWEENEY AND TERRY GRANT VAN DER VELDE as trustees of the property of SILVANA PEROVICH (sixth defendants/not party to the appeal)
FILE NO/S:
Appeal No 14571 of 2009 SC No 1999 of 2006
DIVISION:
Court of Appeal
PROCEEDING:
General Civil Appeal
ORIGINATING COURT:
Supreme Court at Brisbane
DELIVERED ON:
6 August 2010
DELIVERED AT:
Brisbane
HEARING DATE:
9 June 2010
JUDGES:
Muir and Fraser and White JJA Separate reasons for judgment of each member of the Court, each concurring as to the orders made
ORDERS:
1. Appeal allowed;
2. Set aside the order made by McMurdo J that the order made by the Chief Justice on 3 April 2007 be varied by deleting subparagraph (d) and the word “and” at the end of subparagraph (c) from paragraph 7 of that order;
3. Otherwise dismiss the appeal;
4. Appellant to pay the respondents’ costs of the appeal to be assessed on the standard basis.
CATCHWORDS:
ESTOPPEL – FORMER ADJUDICATION AND MATTERS OF RECORD OR QUASI OF RECORD – FORMER ADJUDICATION – JUDGMENT INTER PARTES – RES JUDICATA DISTINGUISHED FROM ISSUE ESTOPPEL – where the plaintiff, first defendant (as trustee) and second defendant were parties to a joint venture conducted through the third defendant company – where the plaintiff held half the shares and the first and second defendants held twenty-five percent respectively – where the plaintiff claimed declarations that the first and second defendants were in default under the Shareholders Deed entitling it to an option to acquire their shares – where the first and second defendants defended the claim and made a counterclaim for the plaintiff’s shares – where the first and second defendants defaulted in disclosure and a self-executing order was made – where the fourth defendant replaced the first defendant as trustee and filed a defence and counterclaim – where the first, second and fourth defendants defaulted in disclosure and further orders struck out the fourth defendant’s defence and counterclaim and gave summary judgment to the plaintiff – where the primary judge dismissed the plaintiff’s application for summary judgment and varied part of the self-executing order – where the plaintiff appealed against the orders of the primary judge arguing that the orders were inconsistent with res judicata or issue estoppel under the self-executing order – whether the primary judge’s orders gave rise to res judicata or issue estoppel under the self-executing order – whether the primary judge’s orders gave rise to res judicata or issue estoppel under the further…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
Keep reading for free
Create a free CaseChat account to read Mango Boulevard Pty Ltd v Spencer and more:
Mango Boulevard Pty Ltd initiated proceedings against Spencer and others, claiming declarations that Spencer and Perovich were in default under a Shareholders Deed, entitling Mango Boulevard to an option to acquire their shares. Spencer and Perovich defended the claim and counterclaimed for the plaintiff’s shares. They defaulted in disclosure, leading to a self-executing order that, if not complied with, would strike out certain parts of their pleadings and grant judgment to Mango Boulevard on its counterclaim. The first and second defendants failed to comply with the self-executing order, resulting in the striking out of specified paragraphs and the entry of judgment for Mango Boulevard. The fourth defendant, Mio Art, replaced Spencer as trustee and filed a defence and counterclaim, which were also struck out, and summary judgment was granted to Mango Boulevard. Mango Boulevard appealed the primary judge's dismissal of its application for summary judgment and the variation of part of the self-executing order.
The central legal issues were whether the primary judge’s orders gave rise to res judicata or issue estoppel under the self-executing order and the further orders. The court had to determine whether the self-executing order operated as a judgment, if it gave rise to an issue estoppel precluding the fourth defendant from relying on a defence, and whether the primary judge erred in concluding that the fourth defendant’s counterclaim did not plead a defence. The court also needed to decide whether the further orders gave rise to an issue estoppel against the fourth defendant, precluding its defence relating to the plaintiff’s default.
The court found that the self-executing order did not operate as a final judgment because it did not comply with the requirement to be filed. Consequently, it did not give rise to res judicata. However, it did give rise to issue estoppel, precluding the fourth defendant from relying on certain defences. The court concluded that the primary judge did not err in striking out the fourth defendant’s counterclaim as an abuse of process, but this was not due to res judicata. Instead, it was because the counterclaim effectively repeated claims that had already been struck out. The court held that the further orders did not give rise to an issue estoppel against the fourth defendant. The appeal was allowed in part, with the order to vary the self-executing order set aside, and the appellant was ordered to pay the respondents’ costs of the appeal.
Orders
Orders of the court
1. Appeal allowed;
2. Set aside the order made by McMurdo J that the order made by the Chief Justice on 3 April 2007 be varied by deleting subparagraph (d) and the word “and” at the end of subparagraph (c) from paragraph 7 of that order;
3. Otherwise dismiss the appeal;
4. Appellant to pay the respondents’ costs of the appeal to be assessed on the standard basis.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
I return to McMurdo J’s summary:“[12] Between the filing and the determination of that application [Mango Boulevard’s application to strike out the defence and counterclaim and for judgment on the counterclaim, or alternatively for a self-executing order that the same results unless there was proper disclosure relating to Spencer and Perovich’s respective financial positions], Spencer and Perovich amended their pleading. There was no material change to the Defence. The counterclaim, however, was much expanded. The alleged breaches of fiduciary duties by Mango Boulevard were said to have resulted in loss to Spencer, in his capacity as trustee of the Spencer Family Trust, of the order of $100 million. Further, Spencer and Perovich pleaded that they had exercised their options to purchase the shares of Mango Boulevard in consequence of its defaults and there was a claim for an order that a transfer of those shares to them be registered. [13]On 3 April 2007, the Chief Justice ordered the provision of a further list of documents by each of Spencer and Perovich and made a self-executing order in these terms: ‘7. Unless by 4:00pm on 27 April 2007: (a)The first defendant has complied with the orders in paragraphs 1 and 2 above; and (b) The second defendant has complied with the orders in paragraphs 4 and 5 above; Then upon the solicitors for the plaintiff filing an affidavit deposing to the failure of the first and/or second defendants to do so: (c) Paragraphs 8, 10 and 22 to 285 of the amended defence and counterclaim filed on 29 March 2007 shall be struck out; and (d) There shall be judgment for the plaintiff against the first and second defendants on the counterclaim and an order that the first and second defendants pay the plaintiff’s costs of and incidental to the counterclaim of the first and second defendants to be assessed on the standard basis.’ [14]As appears from subsequent judgments, the defaults of Spencer and Perovich in making disclosure had related to the issue alleged of their insolvency. There was no complaint that they had failed to disclose documents (if any) which were directly relevant to the alleged defaults of Mango Boulevard, by its changing its directors.[15]Spencer and Perovich failed to comply with those further orders for disclosure and on 30 April 2007 an affidavit deposing to such defaults was filed. However, no judgment was entered, or, as UCPR r 611[52] now provides, filed. There is a note on the file that a deputy registrar was of the view that ‘in particular order 7 [of the order of 30 April 2007[53]] on the face of it, does not require a judgment to be signed by the Registrar’. That view was incorrect. A final judgment had to be filed according to r 661(3).[54] [52](sic) This was intended as a reference to r 661.[53](sic) This was intended as a reference to 3 April 2007.[54]Mango Boulevard contends that the Deputy Registrar was correct in thinking that the 3 April 2007 itself operated as a judgment and that no further judgment was necessary. [16]On 8 May 2007 Spencer and Perovich filed an application to vary the order of 3 April 2007 to delete that paragraph of the order which I have set out above or alternatively, to amend it so that it would affect only their pleadings in relation to insolvency. Their application was dismissed by a judgment of Margaret Wilson J, [[2007] QSC 276]] against which there was no appeal. Her Honour found that the response of Spencer and Perovich ‘to the self-executing order had been casual and their attempts at compliance desultory’. [[2007] QSC 276 at [28]]. Her Honour’s view of the then state of the litigation was as follows: ‘[30] In consequence of the first and second defendants’ non-compliance with the self-executing order, the issues on the plaintiff’s claim are very narrow – the construction of the Shareholders Deed and the exercise of the discretion in relation to declaratory relief. If the self-executing order were set aside, the issue of their solvency would again be a live one on the claim. It would also be relevant to the counterclaim, in that the plaintiff alleges that the first and second defendants were themselves in default and so not entitled to issue a default notice against it. The first and second defendants’ response to their disclosure obligations so far provides no basis for confidence that they would meet those obligations fully if the self-executing order were set aside or varied. The plaintiff would be prejudiced in the litigation by incomplete disclosure.’ [17]By that stage Spencer and Perovich had each been made bankrupt. Subsequently Spencer retired as trustee of the Spencer Family Trust and was succeeded by Mio Art Pty Ltd (‘Mio Art’). [18]Further applications were argued over two days in March 2008 before Chesterman J. Mango Boulevard then applied for and obtained leave to proceed against Spencer and Perovich (which was necessitated by their bankruptcies) and for the joinder of their trustees in bankruptcy who became the fifth and sixth defendants. Mio Art applied to be substituted for Spencer. Chesterman J ordered that it be joined as a defendant but not substituted for Spencer. [19]At this same hearing, Mio Art was then given leave to read and file what was said to be an amended defence and counterclaim, but which was, of course, its original pleading. Mango Boulevard then applied for an order that various paragraphs of that pleading be struck out and that it have judgment against Mio Art upon its counterclaim pursuant to UCPR r 293. [20]The Mio Art pleading largely corresponded with what had been Spencer’s pleading which, for the most part, had been struck out by the order of 3 April 2007. However, Mio Art also pleaded in its Defence as follows: ‘9. In relation to the directors of Mango Boulevard: (a)On or about 30 July 2004 Russell John Thomson (‘Thomson’) was appointed a director of Mango Boulevard (‘the Appointment’). (b) At no time from the date of the Appointment until 10 April 2006 were any formally constituted Board Meetings of KHD held. (c) Perovich and RW Spencer: (i)first learned of the Appointment on 24 March 2006; (ii) issued a Notice of Default under clause 10 of the SHD on 28 March 2006; and (d) In the premises pleaded in paragraphs (a) to (c) herein, from the date of the Appointment, Mango Boulevard was and remained in default under paragraph 10.1(e) of the SHD. … 22. … (b) on the proper construction of the SHD, clause 10 did not entitle Mango Boulevard to deliver notices of default to Perovich and RW Spencer, because it was itself in default within the meaning of clause 10 of the SHD as particularised in paragraph (9) above.’[21]Mio Art’s counterclaim repeated the allegations in its Defence, and sought, amongst other relief, an injunction to restrain Mango Boulevard for ‘acting in reliance’ upon its notice of default. Spencer and Perovich had pleaded a breach of the Shareholders Deed by a change in the directors of Mango Boulevard by the appointment of Thomson. But they had done so in their counterclaim, to the end of making a claim for the shares of Mango Boulevard. They had not pleaded this defence raised by Mio Art, which was that upon the proper construction of the Shareholders Deed, a party which was itself in default could not be the ‘Non-Defaulting Party’ thereby entitled to an option to purchase under cl 10.[55] It is that case, which I will call the Thomson case, which counsel for Spencer, Perovich and Mio Art now argue is a complete defence to this claim. [55]Mango Boulevard contends that Spencer and Perovich had pleaded this in their counterclaim: see footnote 4.[22] Chesterman J ordered that Mio Art’s defence and counterclaim (save for its first paragraph which contained admissions) be struck out and that there would be no leave to re-plead. At the same time, he gave judgment for Mango Boulevard upon Mio Art’s counterclaim pursuant to r 293. He held that certain parts of Mio Art’s pleading were on their face embarrassing and raised no arguable case. Those parts did not include the Thomson case. He further held that it was an abuse of process for Mio Art, as the successor of Spencer, to effectively re-plead what had been struck out of Spencer’s pleading. Thirdly, his Honour discussed and ultimately accepted the argument for Mango Boulevard that Mio Art was precluded from advancing anything which had been struck out by the order of 3 April 2007 because, in consequence of that order and the non-compliance with it, any such case was res judicata. But he remarked that he had reached that conclusion with some hesitation and that he preferred not to base his judgment upon it. In relation to the Thomson case, he concluded as follows: ‘[77] The appropriate relief in the circumstances is to order that the defence and counterclaim … be struck out. There should be no leave to re-plead because the proceedings are an abuse of process. There is no point in exempting the defence from Thomson’s [appointment] from the order. It is res judicata.’ [Mango Boulevard Pty Ltd v Spencer & Ors [2008] QSC 117.] [23]An appeal against that judgment was dismissed. [Mango Boulevard P/L v Spencer & Ors [2008] QCA 274.] Mio Art argued that at least the Thomson case should have been left open and that Chesterman J had refused leave to re-plead that case upon the reasoning that it was res judicata. It further argued that there was no res judicata. Each argument was rejected. The Court of Appeal held that Chesterman J had considered that the entirety of that which had been struck out was an abuse of process, including the Thomson case, and that there was no error in that finding. This made it unnecessary for the court to consider whether there was a res judicata from the order of 3 April 2007.[56] However, that question was considered, and the view of Chesterman J in this respect was also upheld. [24]Perovich was not a party to that appeal. But there is no suggested basis for distinguishing her case, or that of her trustees in bankruptcy, from that of Mio Art.[25]They are the circumstances in which these present applications are made. Mango Boulevard seeks summary judgment, pointing to the fact that there is effectively no pleading by any defendant which raises a defence. And the insolvency of each of Spencer and Perovich as at 22 February 2006 is now conceded. But the argument on behalf of Spencer, Perovich and Mio Art is that Mango Boulevard cannot succeed because of the Thomson case, notwithstanding the conclusions of the Court of Appeal. [26]Their principal argument is that the Thomson case involves questions which must be pleaded and proved by Mango Boulevard. It is said that Mango Boulevard is entitled to acquire these shares only if it was not in default when it gave its notice, and that it must allege in its statement of claim either that it was not in default or that, for some reason, its default does not disentitle it to the defendants’ shares. Because it has not pleaded or proved such a case, it should not be given judgment and, indeed, the defendants should be given judgment upon the plaintiff’s claim. [27]Alternatively, it is argued that the grant of declaratory relief is discretionary, and the court should decline to grant this relief to a party which is itself in default.”[56]Mango Boulevard took issue with these conclusions.
