Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited

[2015] HCATrans 116

[2015] HCATrans 116

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M10 of 2015

B e t w e e n -

MELBOURNE CITY INVESTMENTS PTY LTD (ACN 161 046 304)

Applicant

and

TREASURY WINE ESTATES LIMITED (ACN 004 373 862)

Respondent

Application for special leave to appeal

HAYNE J
KEANE J

TRANSCRIPT OF PROCEEDINGS

AT MELBOURNE ON FRIDAY, 15 MAY 2015, AT 9.37 AM

Copyright in the High Court of Australia

MR N.J. O’BRYAN, SC:   May it please the Court, I appear with MR M.W.L. SYMONS for the applicant.  (instructed by Portfolio Law Pty Ltd)

MR A.G. UREN, QC:   If the Court pleases, I appear with my learned friend, MR M.C. GARNER, for the respondent.  (instructed by Herbert Smith Freehills)

HAYNE J:   Yes, Mr O’Bryan.

MR O’BRYAN:   Thank you, your Honour.  Your Honours, the critical error in the judgment of the majority below is submitted to be found in the two propositions in paragraph 9 which your Honours will find on page 43 of the application book.

HAYNE J:   Before we come to that, why has your client not rendered the issue moot or effectively academic by instituting the further proceeding?

MR O’BRYAN:   Your Honour, the further proceeding is more than a year since the first proceeding and we submit that, as we have submitted to the court before which that proceeding was issued, that in the event that this proceeding is revived by order of this Court that proceeding, of course, will not continue. 

HAYNE J:   Your client has chosen to go down that path, Mr O’Bryan.  Why should it not live or die by the sword which it has taken up?

MR O’BRYAN:   Because, we submit, your Honour, that would be most unjust to the class members in circumstances in which the earlier proceeding, issued more than a year earlier, has a very substantial potential amount of judgment interest accrued on it and the circumstances of the termination of that proceeding are such that this Court should intervene to revive it.  It does not, we submit, either constitute an abuse of process to recommence in those circumstances or provide a reason why the earlier proceeding should not be revived in circumstances in which it was wrongly terminated.  Your Honours, in paragraph 9, the majority stated two propositions:  the first that:

the only legitimate purpose for bringing a proceeding is to vindicate legal rights or immunities by judgment or settlement.

The second that -

Consequently, unless the predominant purpose of bringing a proceeding is a legitimate purpose, the proceeding is an abuse of process and is liable to be stayed.

Footnote 9 to paragraph 9, cites two passages from the judgments in Williams.  Neither of those passages is to be found in the reasons of the plurality which we submit contained the ratio of that decision.  The first of those passages cited – Williams, your Honours, is in tab 7 of our bundle of authorities.  If your Honours have the decision there, the first passage is found in the judgment of Justice Brennan and it is submitted that nothing on page 533 supports the reasoning in paragraph 9.

HAYNE J:   Did the primary judge find that the dominant purpose for instituting this first proceeding was the generation of legal fees?

MR O’BRYAN:   The primary judge found that, yes, your Honour.

HAYNE J:   That finding of fact was not disturbed?

MR O’BRYAN:   It was not disturbed but, your Honour, we pointed out to the Court of Appeal that pursuant to her Honour’s reasons below there had been a change of practitioner immediately after that judgment was handed down and therefore ‑ ‑ ‑

HAYNE J:   Therefore, what?  The purpose of the proceeding which had begun with one purpose was miraculously transformed?

MR O’BRYAN:   No, probably not, your Honour.

HAYNE J:   No.

MR O’BRYAN:   But it did constitute fresh evidence before the Court of Appeal which was ‑ ‑ ‑

HAYNE J:   Be it so, the proceeding was instituted for the purpose of generating fees.

MR O’BRYAN:   Yes.

HAYNE J:   Is that right?

MR O’BRYAN:   Yes.

HAYNE J:   That finding of fact remains undisturbed.

MR O’BRYAN:   Yes, that is so, your Honour.

HAYNE J:   Yes.

MR O’BRYAN:   That is not, we submit, an improper purpose as understood by the law.  That is not inconsistent with the ratio of Williams v Spautz because the ‑ ‑ ‑

HAYNE J:   Williams v Spautz is a particular example of abuse of process.  Abuse of process is the use of process for purposes for which the processes do not exist.  Do you contend, do you, that the institution of a proceeding for the generation of legal fees is a proper purpose?

MR O’BRYAN:   Yes, your Honour, we do.

HAYNE J:   I see.

MR O’BRYAN:   It is not an abuse of process as understood in Australian law because the generation of the legal fees – or the winning of the legal costs, more accurately – necessarily follows as a consequence of the success of the proceeding.  For the reasons given by both Justice Ferguson below and by Justice of Appeal Kyrou in his dissenting judgment in the Court of Appeal, it cannot be an abuse of process in circumstances in which those fees cannot be earned unless the proceeding has merit and unless the proceeding is either completed to judgment or, alternatively, it is settled.

KEANE J:   But that is because it is the predominant purpose of those proceedings to achieve a success for the client.  Here, the client’s purpose is for the solicitor to generate fees. 

MR O’BRYAN:   Your Honour, we submit that that does not make any difference to the position in circumstances in which the solicitor is, in effect, acting for himself – he being the controlling mind and will of the corporate plaintiff.  That will be the case always when a solicitor is acting for him or herself and particularly in cases in which it is possible or likely that the fees or the costs that might be generated by the pursuit of that action might be worth more than the action itself.  That is a commonplace situation.

KEANE J:   The purpose of judicial power is to quell controversies.  Surely, it is an abuse of the judicial power to generate controversies for the profit that can be made from doing so.

MR O’BRYAN:   Your Honour, I do not disagree with that proposition and do not submit ‑ ‑ ‑

HAYNE J:   Therefore, what is different between this case and the proposition his Honour puts to you?

MR O’BRYAN:   I was just coming to that, your Honour.  The difference is that there was no generation of a dispute.  The dispute arose because of the wrong which is alleged to have been done to the corporate plaintiff below, the applicant here, and the circumstance that the dispute has the result, it being characterised as a class action, that the costs which might be generated at the end of that action outweigh the value of the individual claim is commonplace in class actions. 

It will occur for just about every claimant, if not every claimant, in every class action and it will always be the case in respect of the representative plaintiff.  The representative plaintiff will never have a claim which is likely to be greater than the value of the cost that might be awarded at the end of the class action. 

For that reason, your Honours, we submit, there is no distinction that can be drawn between the position of the plaintiff in this case, controlled by the solicitor, and the position of any other plaintiff in a class action.  If it is not an abuse to commence a class action in circumstances in which the costs will inevitably outweigh the value to that representative plaintiff, it could not be an abuse here, we submit. 

The test which the majority has created in this case, we submit, runs flatly contrary to the ratio of Williams v Spautz, a decision which has stood the test of time, is cited repeatedly in judgments of this Court, is submitted to be correct, is submitted to have a very sound policy foundation and places a heavy onus of proof on the defendant to demonstrate that the purpose of the proceeding, first, is not to continue it to its conclusion. 

That is a very important initial negative criterion in the ratio decidendi and the corollary, not only does the plaintiff not intend to pursue the proceeding to its conclusion, but the corollary is that it is being used for a purpose which is wholly unrelated to the range of remedies which might reasonably be considered to be within the scope of the proceeding whether by judgment or settlement.

Both the plurality and the other judges in Williams pointed out – or it has been pointed out on many subsequent occasions including by this Court, I think, most recently in the Batistatos Case – that the range of remedies that might be achievable on the settlement of a case goes well beyond those which could be achieved by judicial determination of the case.  Therefore, it cannot be an abuse for a plaintiff to commence a proceeding anticipating that it might be settled, perhaps even desiring that it might be settled, even on terms which go beyond that which could conceivably be incorporated in a prayer for relief, for example, or be submitted to a court as appropriate for the disposition of the case in due course.

That, in effect, is all that the majority found here.  The majority found that it was Mr Elliott’s ambition to settle the case in due course purely on the basis that Mr Elliott had published the fact, the obvious fact, that the overwhelming majority of cases in the Supreme Court of Victoria and, indeed, in every other court are settled and, therefore, there was a reasonable prospect that this case would settle. 

That, we submit, cannot constitute or found the basis of an abuse.  The finding to the contrary by the majority in its reasons, to be found on pages 43 and 44, to the effect that the expectation of settlement gives rise to an inference that there was never any serious endeavour to pursue the case, we submit is not capable of being found simultaneously with the conclusion that Mr Elliott’s intention was to earn legal fees as found by Justice Ferguson.

HAYNE J:   Do you challenge the last sentence of paragraph 11 of the judgment of the Court of Appeal?

MR O’BRYAN:   Yes, your Honours.  That is inconsistent with the ratio of Williams v Spautz.  Footnote 10, which is attached to that sentence, refers only to the dissenting judgment of Lord Denning in the Goldsmith Case.   

HAYNE J:   Be it so, I am concerned with the principle, not with its support for the moment.  Do you say that that is not a correct principle?

MR O’BRYAN:   It is not a correct principle.  It has been abjured in the UK.  The English Court of Appeal has made clear its disagreement with the dissenting judgment of Lord Denning and it no longer represents the law.  It is stated far too widely.  It was rejected by the UK Court of Appeal in the Land Securities Case which is No 6 on our list of authorities.  It is flatly inconsistent, we would submit, with the recent decision of the Privy Council in the Crawford Adjusters Case which is tab 3.  It is far too broadly expressed – inconsistent with the two‑pronged test.

KEANE J:   Well, in terms of the suggestion that the approach of the Court of Appeal was too broad, in paragraph 12, on page 44, in the penultimate sentence, it said that your client:

is using the cause of action to create an income‑generating vehicle for its solicitor.

Is there any authority – or is there any statement of principle or authority in the cases you have mentioned which supports the view that where a client uses the cause of action to create an income‑generating vehicle for its solicitor, that that is not an abuse of process?

MR O’BRYAN:   There is no authority that says that, your Honour, but there are plenty of authorities that say ‑ ‑ ‑

KEANE J:   I suspect the reason is there is no authority that says that is that none of the authorities to which you have referred ever had it in mind that it could be thought that a solicitor – or that a solicitor could procure a client to commence proceedings for the predominant purpose of generating fees for the solicitor. 

MR O’BRYAN:   Your Honour, we disagree with that proposition because ‑ ‑ ‑

HAYNE J:   I understand that, but the proposition is one which hitherto has been thought unthinkable, Mr O’Bryan.

MR O’BRYAN:   We submit not, your Honours, because far worse things have been accepted as legitimate purposes for commencing proceedings and the cases are full of outcomes identified as ultimate motives of the plaintiff in proceedings which ought to cause far more concern to the law than the circumstance of a company controlled by a solicitor commencing a class action and thereby enabling a proceeding to begin without all of the normal delay and effort and the entry into agreements for litigation funding and the like. 

That is all that this case amounts to in practical terms.  Given the things which have been accepted by the courts for a very long time as legitimate uses of proceedings – and one classic example, of course, was given by the so‑called “alderman” example in the Williams v Spautz Case - if the outcome is within the range of remedies which it is reasonable to suppose might be achieved by judgment or settlement, there cannot be an abuse.   

Therefore, for example, in the Dowling Case, a hundred years ago, this Court decided that it was not an abuse to take proceedings for the sequestration under bankruptcy for the express purpose – and, indeed, the sole purpose – of obtaining the means to identify persons who had been involved in alleged defamation of Mr Dowling. 

If that be the case – that the proceeding can be taken legitimately to obtain an end which flows naturally from the outcome, we submit it cannot be abuse of process for a proceeding to be commenced by a solicitor who controls a company which is a shareholder in the defendant that has suffered loss along with all other members of the class, even though his ultimate motive – and motive is to be distinguished from purpose here, as has been repeatedly stated – even though his ultimate motive is to earn legal fees from the prosecution of that proceeding.

We submit that a conclusion to the contrary simply cannot stand with the authorities that accept that a motive is irrelevant – the purpose of the proceeding is relevant and unless the double‑pronged test of Williams v Spautz is satisfied, the purpose is not an abuse of process.  That is this case, your Honours, consistently with the authority of this Court.  It is submitted, there is no doubt that Williams v Spautz remains the authority of this Court and that this decision is – the majority’s decision – flies directly in the face of it.

By contrast, we submit, when one has consideration to the reasons of the minority judgment, Justice Kyrou, the principles are correctly expounded and his Honour concludes, consistently with the decision of Justice Ferguson below, that it cannot be an abuse, albeit at the time of the case before Justice Ferguson, the finding was made and it was not challenged on the appeal but the circumstances had, of course, radically altered.  It was accepted that the finding was correct that the proceeding had been commenced with that purpose in mind.

For those reasons, your Honours, we submit, this decision cannot stand alongside Williams v Spautz – is inconsistent with it – and sets a new precedent in Victoria which is a highly undesirable precedent which now requires plaintiffs to justify their proceedings unless they satisfy the test as articulated in paragraph 9 of the judgment and that is, it is submitted, a highly undesirable development in the law and quite inconsistent with 100 years of judicial development of that law.

There is also submitted, your Honours, to be another and very powerful reason why it was incorrect for the majority in the Court of Appeal to conclude that the merits of this case and its prospects of success were immaterial to Mr Elliott’s purpose and this relates to the latter part of paragraph 12 of the judgment, the proposition that the plaintiff had no interest in vindicating its rights or obtaining a remedy and that is because, of course, the case was a class action. 

It was regulated by Part 4A of the Supreme Court Act.  There was, therefore, no possibility from the outset of Mr Elliott recovering anything, whether by way of judgment or settlement or in respect of legal costs – fees in respect of legal costs – without the sanction and approval of the court.  The Supreme Court is, of course, given very close supervisory powers in respect of class actions under the Act.  They cannot be settled without court approval and no costs can be recovered, whether out of or above any settlement sum, without court approval.

Therefore, assuming that the case concluded successfully below, not only was it inevitable that the court would, as a matter of fact, be the final arbiter of any such claim for costs, but it was also a necessary condition as a matter of law that court approval be obtained.  The majority does not address that key feature of the case at all in its reasons.  It is submitted to be an important consideration which one would have expected to be taken into account and, by contrast, your Honours, both Justice Ferguson below, and Justice Kyrou in the Court of Appeal addressed those matters.

Finally, your Honours, we do, of course, rely upon the overarching principles which applied in this case which we have addressed in our written submissions at appeal book page 78.  In paragraphs 5, 6 and 7, we have addressed the three matters which we submit the majority in the Court of Appeal have entirely overlooked.  The first one, I have addressed your Honours on – the fact of the change of solicitor and the importance of that change of position on the rehearing before the Court of Appeal.  The other matter which we have addressed in paragraph 6 on page 78 of the application book is:

The majority also failed to apply the principle that appellate review of the decision of –

Justice Ferguson below -

not to stay or dismiss a proceeding –

required their Honours to identify that Justice Ferguson had either acted on a wrong principle – that is submitted not to have been the case here and no action or any wrong principle was identified - that her Honour had been:

guided or affected by extraneous or irrelevant matters ‑ ‑ ‑

HAYNE J:   But why was this not a classic fourth category House v The King Case.  The decision is one that cannot stand.  Is that not the basis on which the Court of Appeal intervened?

MR O’BRYAN:   Your Honours, it can stand.  It is entirely consistent with Williams v Spautz.

HAYNE J:   You have said that, yes.

MR O’BRYAN:   If the Court pleases.

HAYNE J:   Yes, thank you, Mr O’Bryan.  We will not trouble you, Mr Uren.

The issues which the applicant seeks to agitate in this Court have been rendered substantially academic by the applicant’s decision to institute a second proceeding.  In any event we are not persuaded that an appeal to this Court would enjoy sufficient prospects of success to warrant a grant of special leave.  Special leave to appeal is refused with costs.

AT 9.58 AM THE MATTER WAS CONCLUDED