Mystic Crystals v Vynotas Pty Ltd

[2000] HCATrans 299

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  Nos B44 and B83 of 1999

B e t w e e n -

MYSTIC CRYSTALS FRANCHISES (AUSTRALIA) PTY LTD

Applicant

and

VYNOTAS PTY LTD

First Respondent

NORWICH UNION LIFE AUSTRALIA LIMITED

Second Respondent

JLW (QLD) PTY LIMITED

Third Respondent

ROBERTS, LEU & NORTH

Fourth Respondent

Applications for special leave to appeal

McHUGH J
GUMMOW J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON THURSDAY, 22 JUNE 2000, AT 9.48 AM

Copyright in the High Court of Australia

____________________

MR S.R. DART:   If it pleases the Court, I seek leave to appear on behalf of the applicant and those who stand behind the applicant.

McHUGH J:   There may be some problem about that.  Although the relevant sections of the Corporations legislation are arguably not binding on this Court, there are common law principles involved.  But rather than deal with that, or make any formal order in respect of the matter, we will hear what you have to say, Mr Dart.  You can proceed as if you had got a grant, without making any formal orders.

MR D.B. FRASER, QC:   If it please the Court, I appear with my learned junior, MR A.J. MOON, on behalf for the first and second respondents.  (instructed by Connolly Suthers)

MS.R.G. LYONS:   If it pleases the Court, I am a solicitor of this honourable Court and member of Messrs Flower and Hart, solicitors for the third respondent.  (of Flower and Hart)

MR R.N. TRAVES:   May it please the Court, I appear for the fourth respondent.  (instructed by Brian Bartley & Associates)

McHUGH J:   Yes, Mr Dart.

MR DART:   Your Honour, there are a couple of matters that I would like to clarify before proceeding.  There are two applications before the Court.  I understand I am entitled to 20 minutes.  To cover the issues that are involved in both matters, I would like to clarify whether I have 20 minutes on each application, or I am limited to 20 minutes.

McHUGH J:   You are entitled to 20 minutes on each, but looking at it, it seems to me that you would be well advised to direct your argument, really, to B44 because if you cannot get leave in B44, then it seems to me that a grant in B83 would be quite futile.  Unless you got leave to appeal against those orders which would enable you to challenge the statutory notice, then the B83 application would not warrant the grant of special leave.

MR DART:   Yes, your Honour.  I would ask the Court to make allowance for the obvious imbalance in legal representation.  I have been obliged to represent my family due to financial hardship, which makes it impossible for us to engage counsel.  That financial hardship, we claim, is attributable to the conduct of the defendants.

McHUGH J:   Could I just attempt to assist you in this way, Mr Dart.  The issues which are involved here are quite narrow.  If leave were granted and your appeal was allowed, it does not seem to me that there is anything that this Court could do for you other than to require the court to reconsider the orders which it made about staying the proceedings and requiring the grant of security.  We cannot look at the merits of the case in any way.

MR DART:   Yes, your Honour. 

McHUGH J:   So, you have to persuade us that there was some error of principle in what the Court of Appeal did – not really an error of principle, but sufficiently important to warrant the grant of special leave to appeal.  As you no doubt understand, there are hundreds of thousands of cases decided in Australia each year, there are only 60 or 70 that we can hear, and there has to be something very special about a case before we will take it, as you would have noticed from the last case, the State of Queensland, whose applications were dismissed.  So, we will listen to you, but I think you have a very heavy burden in front of you.  But you put your arguments as clearly as you can and you put it as forcefully as you can.  Do not hesitate to do that.

MR DART:   I shall, your Honour.  I believe the matters before the Court turn on several issues:  contravention of the Trade Practices Act, questions of law that the Court ought to consider, abusive process and dereliction of duty to the courts in respect of administration and justice by solicitors who have handled the matter since its inception in 1998.

There have been numerous hearings before the Queensland courts when the opposition had the opportunity to object to my representing the parties, and they never have.  They now seek to object to me representing the parties, in my estimation, by challenging the appellate jurisdiction of this Court and by challenging the grant of leave.

GUMMOW J:   Justice McHugh has indicated to you, you do not need to get into that aspect of it this morning.  What you need to get into, though, is B44, as his Honour pointed out to you.

McHUGH J:   These are what are called discretionary judgments in terms of ordering stays, ordering security for costs.  Courts do not have to make them, they weigh up a number of factors, they balance them up and they say, “In this particular case, we will order for security, and in another one, we will not”.  It is run of mill stuff from the point of view of courts, and you have to demonstrate to us that there is something special about what the court did that goes beyond your case and would be of importance throughout the whole of Australia, not in terms of the underlying orders that you seek in the action, but in relation to what they did in ordering security for costs.  Why should not the Court of Appeal have ordered security for costs?

MR DART:   Very well, your Honour.  I will have to go at quite some length.  We have always claimed that there was a variation to the lease that we held.  It was entered into on 22 September 1997 with the shopping centre manager.  We claim that statutory demands for payment of the debt alleged to exist in accordance with that lease could not be served.  We have also claimed that a winding‑up order could not be brought against the company because of the variation to the lease.  We have also claimed that Justice Cullinane ought to have brought the action to a halt on 30 November 1998 when I raised the issue of variation to a lease with him.

We have constantly argued that there was a variation to a lease and we have constantly argued in front of the courts.  In reference documents that I have filed with the Court, documents 2 through to 11, we say that we can prove that there was a variation to the lease.  In documents 8 through to 17, in the transcripts of proceedings before the various courts, we have ventilated that argument, we have agitated the issue time and time again.  It has never been acted on.  We say that Justice Cullinane ought to have brought the issue to a stop, or Justice Muir, or the Chief Justice himself of Queensland.

McHUGH J:   Yes, but you see, the only matter that we can deal with is this question of ordering a stay in B44 and requiring you to put up $18,000 in aggregate as security for costs by 15th July 1999, and that if you failed to do it, your appeal should be struck out without any further hearing.  Now, what was wrong with the Court of Appeal making that order?  You see, you have taken advantage of your legal rights to set up a corporation and, at the moment, it would appear that it may not be able to pay its debts as they become due.  But, the Court has taken the view, that being so, the defence in the action are entitled to financial protection.  You may have a good case, but the Court ordered you to pay this security.  What was wrong in a court making that order?

MR DART:   We had argued to the Court, your Honour, that the company did not have any debts up until the time that a statutory demand for payment of a debt was issued against us.  The company was not in a position where it could not pay its debts until Vynotas acted against us on a statutory demand for payment of a debt that could not exist by way of variation to the lease and doctrine of estoppel.  We have argued that that statutory demand for payment of a debt was unlawful in that Vynotas Pty Ltd was constrained by promissory estoppel which arose out of the variation to the lease.

McHUGH J:   I understand the way you put your case, but nevertheless you were seeking an extension of time, the court granted you that, did it not, but it made the grant subject to you providing the security.  When you did not, then the appeal was struck out without need for further order.  Courts make those orders every day.

MR DART:   The court was clearly incorrect, your Honour, in that we had argued the issue of variation to the lease since 30 November 1998, and the Queensland courts had failed to recognise it.  Had they recognised that, then the matter would have been brought to a stop on 30 November 1998 and there would not be any litigation.

McHUGH J:   But the matter would have proceeded if you had paid the $18,000.  The fact that the company did not provide the $18,000, itself, is rather powerful evidence that it was not in a position to meet the costs if it failed.  That is the difficulty you have.

MR DART:   The company was not in a position to pay the $18,000.  We argue that it was simply heaping one injustice upon another.

McHUGH J:   You see, this is the problem that people meet when they protect themselves by incorporating companies.  If you were a litigant in person, for example, it would be extraordinarily rare for a court to have made an order for security against you.  The fact that somebody is impecunious is ordinarily never a ground for ordering costs, but it is because you have put your business under the protection of a corporation to protect yourself personally, that the defendants, if they won the case, would have no rights against the company – no rights that they could enforce – and so the court orders security.  When you failed to supply it, that creates all the problems that you have got yourself into now.

MR DART:   Yet we maintain, your Honour, that we should not have had to commence litigation had the defendants abided by their promise in relation to the variation to the lease.

McHUGH J:   I understand the way you put it, but even assuming in your favour that you have a good case and that you would have won it, nevertheless, the court was entitled to say, “Well, nevertheless, in case you lose, you put up this security for the appeal, $18,000”.  After all, your case had been heard by Justice Muir at first instance and he had found against you.  You say wrongly, and you are entitled to appeal against it.  But this is the problem that you have, and it does not seem to me, Mr Dart, that there is anything in the case - and I have anxiously studied the papers, and so has Justice Gummow - that there is anything there that warrants the grant of special leave by this Court.

All we could do, we could not explore the underlying issues – the very best order we could make in your favour, it seems to me, is to ask the Court of Appeal to reconsider whether they should make an order.  Even that is debateable now that the appeal has been dismissed.

MR DART:   We believe there are questions of law here that ought to be considered by the High Court, your Honour.

McHUGH J:   But they are questions that, in the underlying action, do not arise.  That is the problem, Mr Dart.  I find it very painful when litigants in person get themselves in this situation.  It is terrible.  You face costs orders and potential costs orders against yourself in this litigation now.  You are entitled to pursue your rights, but for a judge sitting here, I studied the papers, and we will listen to you, and you put your arguments as strongly as you can, you have heard what I have had to say, but at the moment I do not think there is much we can do for you.  I have read your arguments, but you carry on, Mr Dart.  It is very distressing to see litigants in person against a battery of counsel and lawyers and you are likely to incur costs.

MR DART:   Your Honour, I believe the questions of law ought to sway the discretionary power of the Court to grant our applications.  There are questions of law related to programming a computer to falsify statistics and conceal the true state of things in a shopping centre.  To conceal misleading and deceptive conduct, to conceal fraud and misrepresentation, to deter tenants from litigating, to avoid litigation or prosecution within the Statute of Limitations as prescribed by section 82 of the Trade Practices Act, and to create statistics that will coerce tenants into signing deeds of settlement, the terms of which purport to indemnify the landlord from prosecution under the Trade Practices Act.  We filed ample evidence in the Court to prove all of these things. 

There are questions of law that relate to the administration of the Trade Practices Act, aiding and abetting contravention of the Trade Practices Act within section 75(b).  Abusive process by solicitors, dereliction of duty to the courts in respect of administration of justice, application of the doctrine of estoppel, application of current law relevant to variation to a lease, miscarriages of justice by Queensland courts who have been misled by solicitors and barristers even, and the waste of time and resources of the courts.  The questions ought to be considered by the Court in the interests of public importance, in the interests of administration of justice, in the interests of the welfare of small business, in the interests of the objectives of the Trade Practices Act, the national economy even, and the manner in which national superannuation funds are being invested in shopping centres at the expense of small business.

They are all matters of national importance, really that ought to be considered by the Court.  I believe those questions of law, alone, would sway the discretionary power of the Court to grant our applications and allow us to proceed.  I would ask the Court also to consider the very core of the litigation.  The litigation commenced in August 1998 when Roberts, Leu & North pursued a statutory demand for payment of a debt, despite being advised by us that there had been a variation the lease.  Documents 12 and 13 in our reference volume, No 2, proves that we advised them that there had been a variation to the lease.  They ignored that and continued pursuing the statutory demand.  We commenced litigation when they pursued that.  We had to, to protect ourselves and defend ourselves against unlawful statutory demands for payment of a debt.  We have constantly claimed that the debt cannot exist within the meaning of the doctrine of estoppel and we claim that the solicitors ‑ ‑ ‑

McHUGH J:   You see, none of what you are putting really bears on what this Court has before it.  The Queensland Court of Appeal had a situation where you raised these matters before Justice Muir and Justice Cullinane and you had lost.  In those circumstances, when the defendants ask for this company to put up security for costs, the court made an order.  Now, those orders are made, in my experience, now going back nearly 40 years, almost as of course.  If you have an insolvent company, and particularly where the liquidator was not interested in pursuing it, the courts make these orders for security of costs against insolvent companies almost as of course.  Now, it is done here, and it might strike you as an injustice that you have to find $18,000, but it is what the law has provided for, for more than 60 years, to my knowledge, since the 1936 Companies Act in New South Wales and probably even before then.

MR DART:   It is a case of having to find $18,000 for security ‑ ‑ ‑

McHUGH J:   I know, I know.

MR DART:    ‑ ‑ ‑ of costs in litigation that we should never have had to commence.  We commenced the litigation to defend ourselves against an unlawful statutory demand for payment of a debt and the matter should never have commenced in the first place.  We should never have been obliged to commence the action.

McHUGH J:   You say that, but look at it from the position of the Queensland Court of Appeal.  You have raised these issues before judges of the Supreme Court, they rejected your applications.  You say wrongly, and fair enough.  You had a right of appeal and you may have been proved to be right.  But the court says, “Well, you have lost.  Having lost, and you have brought this action in the name of a company, which cannot pay its way” – as you conceded a short while ago – “you have to put up this $18,000”.  They extended your time to appeal, but that seems to be the beginning and end of it, Mr Dart.

MR DART:   It was necessary to bring the action in the name of the company, your Honour, because the statutory demand for payment of the debt was served against the company.

McHUGH J:   I appreciate that, but if you had entered into these leases in your own name, personally, you would have been subject to personal liabilities.  But one thing you would not have been subjected to – I think I can say safely – is an order for security for costs.  It is that factor, that is the vital difference between you, between this company and yourself.  If you had been the appellant, you had been the plaintiff, then I would be very surprised indeed if you had been ordered to pay security for costs.  Impecuniosity is not a ground for ordering security against an individual as opposed to a company.

MR DART:   We sought, your Honour, to have my wife, myself and my son, the sole directors and shareholders of the company, as joint applicants and the court refused that.  We put up the money to start the company.  It is a family business, it is not a public company, and we were refused the right to join as plaintiffs in the matter.

The opposition has claimed that the proceedings today should be decided on established principles, yet we say the circumstances of this case overshadow established principles and the established principles, either new principles ought to be considered or, alternatively, established principles ought be modified to suit the unique circumstances of the case.  The circumstances of this case have never been before the High Court before.  The questions of law have never been before the High Court before.

McHUGH J:   But they would not be, if we granted leave to your appeal.  That is what I have been emphasising to you.  All that is involved is these orders requiring you to give security for costs.  That is the only thing this Court could do.  Our position is that we make the orders that the Court of Appeal should have made and, relevantly, that means the most favourably to you is that you be granted the extension of time but without any requirement for security.  That would be the maximum order that you could obtain from this Court.  We would not be entertaining any arguments about Trade Practices Act or any of the other issues.  They just do not arise.

MR DART:   I would submit, your Honour, under those circumstances that I would urge the Court to make whatever orders you can to assist us to proceed with this.  The defendants have acted unlawfully, your Honour, totally unlawfully in bringing us to this situation.

McHUGH J:   You assert that, but at the moment you have judgments against you.  That is one of the problems.  You may well be right; the judgments should not have been made against you, but they have been made against you, and they have the authority of the Supreme Court of Queensland.  Until they are set aside, they govern, and the only way they could be set aside was by an appeal, and your appeal was dismissed when you did not provide the $18,000.  I do not see, speaking for myself, how we could make any other order.  Even if we granted you leave, the most we could do would be to make some other order for costs, maybe more.  In fact, the $18,000 seems quite a small sum, really, having regard to all these counsel that are there for an appeal.

MR DART:   Eighteen thousand dollars when you do not have it, is quite a large sum.

GUMMOW J:   We understand that.

MR DART:   It is quite a large sum.

McHUGH J:   Of course it is, and please do not misunderstand me, but if they had made an order against you for $50,000, it would not have surprised me, given you probably have a two or three day appeal and you have all these parties.

MR DART:   When the order is made in an action that we should never have had to commence, when the entire conduct of the respondents, or defendants - whichever way we like to describe them - has been unlawful, when they have breached the law, constantly, consistently, over and over again, by misrepresentation, by misleading and deceptive conduct, by reneging on a promise and reneging on promissory estoppel, their entire conduct has been totally unlawful.  It is not only our small company, your Honour, there is a string of tenants at Willow Shopping Town, who have been sent to the wall.  There have been homes lost, families broken up, all by the unlawful conduct of the respondents.

Somebody has to bring it to a stop.  Somebody has to follow it through.  Somebody has to see that this High Court makes orders that reflect the justice that should exist within Australia, justice for small business, justice for small companies such as ours, who cannot stand up against the financial might of the respondents, who use their financial might, not to justify their actions, but to defend themselves against unlawful action and defend themselves simply by locking people out of the court.  This is what they have done to us.  They have never indicated that they are prepared to go to trial and argue the issues to defend themselves against their unlawful conduct.  They have only sought to lock us out of the court.

Their solicitor, when we first brought to his attention in September 1996 - and my son and I have both sworn to this in affidavit form - at a meeting with Stephen Weaver of Roberts, Leu & North, he said, “If you dare to take them to court, they will simply bury you with legal costs.  We have the money and you have not”.  This has been their entire attitude.  They know they are guilty of breaches of the Trade Practices Act, they know they are in contravention, they know they conducted misleading and deceptive conduct, they know that they coerced tenants into signing deeds of settlement, they know that they have acted unlawfully.  Yet, they have used their financial might to bury their tenants over and over again.  We were one of those tenants.

When we finally took them to court, they were in breach of estoppel.  To again try to stop us from proceeding, after Justice Cullinane on 18 December had stated they had a case to answer, they broke into the shop and destroyed it.  They destroyed our private property.  Again in breach of the Trade Practices Act, they acted unconscionably.

McHUGH J:   If your private property has been – when you say “we”, I do not know whether you mean the company or whether you mean your own personal property, but that gives rise to actions of tort, trespass to property, trespass to goods.  They are common law actions.  You can even get punitive damages.  But that is quite different from what we have to deal with here today.  You may have other remedies in terms of tortious actions, personal actions, but at the moment you are using the vehicle of the company and there is this order for security for costs having been made against you and your appeal in the Court of Appeal has been dismissed.  Now, from your point of view, that is a tragedy, but it seems to me at the moment that the Court of Appeal was entitled to impose that condition.  It was a common order and that is almost the beginning and end of it unless you can show that there is some error of principle on their part.

MR DART:   The error of principle, your Honour, is promissory estoppel and variation to a lease.

McHUGH J:   No, it is not.  It is not the question of what is the underlying action.  That is what you have to deal with.  You have an insolvent company, it cannot pay the costs if it loses the appeal.  You have lost before the trial judges, or the primary judges.  The court said, “Well, we will grant you an extension of time but you must provide $18,000 in security”.  That is all this case is about so far as this Court is concerned.

MR DART:   And yet, your Honour, the company was not insolvent until they served an unlawful statutory demand for payment.

McHUGH J:   Well, that may be ‑ ‑ ‑

MR DART:   It had no debts.

McHUGH J:   That depends, of course, on who is right and who is wrong about the unpaid rent.  There was, what, $94,000-odd they claim, was there not?

MR DART:   Of course that could not exist within the terms of doctrine of estoppel, your Honour, and variation to a lease.

McHUGH J:   Well, that is the way you put your case, of course.

MR DART:   In the case of Figgins Holdings v SEAA Enterprises, this honourable Court found that a variation to the lease discharged obligations.  That law, of course, did not exist at the time this matter commenced.  That law did not come into force until 6 May 1999 when this honourable Court made those decisions.  But doctrine of estoppel certainly did exist and has existed for many years, and existed on 30 November 1998 when I stated to Justice Cullinane there was a variation to the lease entered into, an agreement to vary the lease on 22 September 1997, when the shopping centre manager told my son and I, “If you can pay $100 a week until the shopping centre gets on its feet”, they will be happy.  I replied, “There are times when this shopping centre performs so poorly, we will not be able to pay you anything.  You will get nothing”, and he said, “That will be fine, that will be okay”.  We put it in writing to him.  We confirmed it and we paid the money - $100 a week, equivalent to.

They accepted the money; they never queried any of the letters that we wrote to them saying, “Here is a cheque in accordance with the current arrangements for rent and outgoings”.  Never queried it.  They cashed the cheques, they accepted the money, they bound the agreement, and then they reneged on it without notice.  They reneged on it by serving a statutory demand for payment of a debt in the terms of the lease as it existed before the variation came into effect.

Roberts, Leu & North were advised of that and they ignored the advice and continued to press the statutory demand for payment of the debt.  Their action was an abuse of process, your Honour. There was an abuse of process to lock us out of the court, to destroy us, to bury us with costs.  They continue in that abuse of process today.  We have been forced to pursue this matter and pursue it over and over again until we finally ended up here before this honourable Court seeking justice.  That is where the situation stands today.  We seek the Court to use its discretionary authority to grant us the justice that we are entitled to.

McHUGH J:   Well, Mr Dart, you have put your case eloquently and very powerfully, but the fact remains that we have to come back to this simple issue about this order for the $18,000.  This is the problem.

MR DART:   I must leave that, your Honour, to the discretionary power of the Court and your sense of justice.

McHUGH J:   Yes.  Mr Dart, as you are aware, the defendants in this case seek applications that you personally be ordered to pay the costs.  In fact, one of them seeks orders against other members of your family.  Do you have anything to say about that, other than that you should not pay?

MR DART:   Obviously, your Honour, we are not in a position to pay it, anyway.  It would be a futile order and they will have absolutely no hope – these days, your Honour, we rely on social security for our subsistence.  That has been thrust upon us by the unlawful conduct of the respondents.  Prior to that we had an income, we have never relied on social security in our life.  We have always been self-supporting.  We are a self-supporting, hard working family.  They have thrust that upon us.  Their chance of recovering one cent in costs from us, your Honour, is absolutely nil.  At my age, I do not expect to go into full time employment, and I do not expect to ever be again in a position to meet any of those orders.  We face a very bleak future because of the unlawful conduct of these people.  And, again, I beseech the Court to use its discretionary authority to dispense justice where it should be dispensed.

McHUGH J:   Thank you, Mr Dart.  Do counsel for the respondents press these orders against the personal applicants?

MR TRAVES:   I am instructed for the 4th respondent, and I have instructions not to seek costs against the applicants, other than Mr Dart, not members of the family.

MR FRASER:   We, too, seek only costs against Mr Dart.  We do not seek any orders against any other parties.

MS LYONS:   The same, your Honour.

McHUGH J:   The Court need not hear counsel for the respondent.

In this matter there are two applications for special leave to appeal and a number of ancillary notices of motion.  In matter No B44 of 1999 the applicant, through Mr Dart, a director, who has put its case powerfully and eloquently, seeks leave to appeal against orders granting it an extension of time but requiring the applicant to give security for costs and providing for the dismissal of the appeal if security was not provided.  The appeal was dismissed when the applicant failed to give the security by the due date of 15 July 1999.  The order was made by the Court of Appeal of Queensland.  It was a discretionary order.  It was an order made in respect of a company which was admittedly insolvent as at that date and it was an order that is made regularly in such circumstances. 

The application raises no question of principle, although there may well be, as Mr Dart argues, some very important issues of law and principle standing behind the appeal to the Court of Appeal of Queensland.  Notwithstanding the very powerful arguments put by Mr Dart about the justice of the case, the Court has no option but to refuse special leave in matter B44 of 1999.

In matter B83 of 1999, the applicant seeks special leave to appeal against an order of the Court of Appeal of Queensland dismissing an appeal against an order winding up the applicant.  The winding‑up order was based on a statutory notice of demand which was the subject of the appeal in matter B44 of 1999.  That being so, the basis of the appeal in B83 of 1999 is gone.  In any event, B83 of 1999 raises no question of principle warranting the grant of special leave to appeal. 

Both applications must be dismissed.  The costs of both applications and the ancillary motions must be paid by Mr Sydney Ronald Dart on the basis of a complete indemnity, subject to the exclusion of any costs that are of an unreasonable amount or unreasonably incurred by the respondents to the applications and notices of motion.

Thank you, Mr Dart.

Call the next matter.

AT 10.25 AM THE MATTER WAS CONCLUDED