New Resource Holdings Pty Ltd v Lunt [No 3]
[2008] WASC 221
•15 OCTOBER 2008
NEW RESOURCE HOLDINGS PTY LTD -v- LUNT [No 3] [2008] WASC 221
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2008] WASC 221 | |
| Case No: | CIV:1489/2001 | 17 SEPTEMBER 2008 | |
| Coram: | TEMPLEMAN J | 15/10/08 | |
| 26 | Judgment Part: | 1 of 1 | |
| Result: | Application to reopen dismissed Application for suspension order granted Plaintiff have costs of action on indemnity basis to be taxed if not agreed Costs of application for suspension order be costs in the cause of actions 1501 and 1974 of 2001 Application for solicitor to pay wasted costs dismissed | ||
| A | |||
| PDF Version |
| Parties: | NEW RESOURCE HOLDINGS PTY LTD WILLIAM TREVOR LUNT WASTE RECOVERY SYSTEMS LTD |
Catchwords: | Practice and procedure Evidence becomes available after conclusion of trial and before judgment Further evidence necessary to respond to the new evidence Whether appropriate to reopen trial Judgment Suspension orders Application based on impecuniosity and the likelihood of retrying this action and of success in future trials Whether pending actions amount to counterclaims of this action Greater amounts at stake in the pending actions No evidence of prejudice Pending actions likely to be tried soon Whether suspension order Whether suspension order on terms Costs False documents by unsuccessful party at trial Whether indemnity costs Lack of costs agreement relevant only to taxation Costs Whether payable by first defendant's solicitor Plaintiff seeking proof foreign corporate defendant existed Wasted costs Whether any irregularity to put first defendant's solicitor on enquiry Similar previous application not successful |
Legislation: | Civil Judgments Enforcement Act 2004 (WA), s 15 Rules of the Supreme Court 1971 (WA), O 18 r 2, O 34 r 5 |
Case References: | Burnet v Francis Industries plc [1987] 1 WLR 802 Eastland Technology Australia Pty Ltd v Whisson (2003) 28 WAR 308 Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S) Fountain Selected Meat (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 Ladang Jalong (Australia) Pty Ltd v Callander [2005] WASCA 203 Lee v Mavaddat [2005] WASC 68 (S) New Resource Holdings Pty Ltd v Lunt [No 2] [2008] WASC 140 Slater v Cathcart (1891) 8 TLR 92 State Bank of Victoria v Parry [1989] WAR 240 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
WILLIAM TREVOR LUNT
First Defendant
WASTE RECOVERY SYSTEMS LTD
Second Defendant
Catchwords:
Practice and procedure - Evidence becomes available after conclusion of trial and before judgment - Further evidence necessary to respond to the new evidence - Whether appropriate to reopen trial
Judgment - Suspension orders - Application based on impecuniosity and the likelihood of retrying this action and of success in future trials - Whether pending actions amount to counterclaims of this action - Greater amounts at stake in the pending actions - No evidence of prejudice - Pending actions likely to be tried soon - Whether suspension order - Whether suspension order on terms
(Page 2)
Costs - False documents by unsuccessful party at trial - Whether indemnity costs - Lack of costs agreement relevant only to taxation
Costs - Whether payable by first defendant's solicitor - Plaintiff seeking proof foreign corporate defendant existed - Wasted costs - Whether any irregularity to put first defendant's solicitor on enquiry - Similar previous application not successful
Legislation:
Civil Judgments Enforcement Act 2004 (WA), s 15
Rules of the Supreme Court 1971 (WA), O 18 r 2, O 34 r 5
Result:
Application to reopen dismissed
Application for suspension order granted
Plaintiff have costs of action on indemnity basis to be taxed if not agreed
Costs of application for suspension order be costs in the cause of actions 1501 and 1974 of 2001
Application for solicitor to pay wasted costs dismissed
Category: A
Representation:
Counsel:
Plaintiff : Mr P G McGowan
First Defendant : Mr B W Duckham
Second Defendant : No appearance
Solicitors:
Plaintiff : Vincent Partners
First Defendant : B W Duckham & Co
Second Defendant : No appearance
(Page 3)
Case(s) referred to in judgment(s):
Burnet v Francis Industries plc [1987] 1 WLR 802
Eastland Technology Australia Pty Ltd v Whisson (2003) 28 WAR 308
Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S)
Fountain Selected Meat (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397
Ladang Jalong (Australia) Pty Ltd v Callander [2005] WASCA 203
Lee v Mavaddat [2005] WASC 68 (S)
New Resource Holdings Pty Ltd v Lunt [No 2] [2008] WASC 140
Slater v Cathcart (1891) 8 TLR 92
State Bank of Victoria v Parry [1989] WAR 240
(Page 4)
1 TEMPLEMAN J: On 16 July 2008, I delivered my judgment in this action and published my reasons for concluding that the first defendant should refund the sum of $200,000 to the plaintiff and pay interest on that sum from 15 April 1995: New Resource Holdings Pty Ltd v Lunt [No 2] [2008] WASC 140. In these supplementary reasons I shall continue to use the same names and designations as previously.
2 Counsel for the plaintiff then foreshadowed an application for a special or indemnity costs order in relation to the action itself and an order for costs thrown away as a result of it emerging, at a late stage in the proceedings, that when an appearance was entered for the second defendant, it did not exist. (This is a shorthand - and inaccurate - statement of the position of the second defendant, to which I shall refer in more detail below.)
3 At the same time, counsel for Mr Lunt foreshadowed an application for a stay of execution on the basis that he was claiming some $2 million against the plaintiff in actions pending in this court, two of which had been entered for trial. As counsel put it, if the actions were successful, 'the ledger comes our way' (ts 621).
4 Pending the formulation and hearing of these applications, counsel for the plaintiff proffered an undertaking that although he would extract an appropriate order, he would not enforce it in the meantime.
5 On 6 August, the parties filed their respective summonses, as foreshadowed. Then on 25 August, Mr Lunt made a further application. He sought to reopen the trial 'on the ground of recently located evidence of an independent third party'. Mr Lunt also sought to have removed from the court file two affidavits sworn by the plaintiff's solicitor in opposition to the stay application.
6 All these applications came on for hearing on 17 September. By then, the plaintiff's application for costs thrown away by reason of the alleged non-existence of the second defendant, had been refined to include an order against Mr Lunt's solicitor personally.
7 At the hearing, I dealt first with Mr Lunt's application to reopen the trial. However, I soon came to the conclusion that it would be inappropriate to make that order, for reasons which I then gave. As that application provides a background for the stay application, it will be convenient to revisit it in these reasons.
(Page 5)
Mr Lunt's application to reopen the trial
8 In my original reasons, I held that Mr Lunt, as a director of the plaintiff, had acted improperly in transferring $200,000 of the plaintiff's funds out of the plaintiff's bank account to himself and his wife.
9 In his defence to the claim, Mr Lunt alleged that the payment of $200,000 (albeit to the second defendant) had been approved by Mr Briggs and that his approval was recorded in a document dated 11 April 1995 entitled Waiver of Pre-Emptive Rights which he and Mrs Briggs (a director of the plaintiff) had signed at their home on that date, in Mr Lunt's presence. Mr and Mrs Briggs denied that they had signed the document. I held that it was probable the disputed signatures were not genuine. I therefore placed no weight on the document: reasons [149] - [150].
10 In 1996, the plaintiff sold its assets to Max Resources Ltd, a public company listed on the New Zealand Stock Exchange. At the time, the directors of Max Resources included Thomas William Johnson and Owen McShane.
11 During the course of the trial, Mr Lunt made several references to his inability to access documents which were held by the New Zealand regulatory authorities, apparently in connection with some proceedings arising out of the transaction between the plaintiff and Max Resources.
12 In an affidavit sworn on 25 August 2008, Mr Lunt deposed to the fact that on 11 August, he contacted the New Zealand Securities Commission to enquire about the current addresses of Messrs Johnson and McShane who, Mr Lunt said, he had not met or contacted for approximately eight years. Mr Lunt said his purpose was to obtain information in relation to the two actions awaiting trial in this court, to which I have referred above.
13 Mr Lunt said the Commission was able to assist him: and that on 16 August, he telephoned both Mr Johnson and Mr McShane and asked whether they could recall the due diligence investigation into the plaintiff in early 1997.
14 Mr Lunt said he received a faxed statement from Mr Johnson dated 21 August 2008. In that statement, which Mr Lunt exhibited to his affidavit, Mr Johnson said, in substance, that he had been informed by Mr Briggs that he had approved the payment of $200,000 out of the plaintiff's assets to Mr Lunt and his company. Mr Johnson annexed to his
(Page 6)
- statement a copy of what he said was the original Waiver of Pre-emptive Rights document which had been provided to him by Mr Briggs.
15 Mr Johnson subsequently swore an affidavit to the same effect. Mr McShane has also sworn an affidavit. However, it carries little weight. Mr McShane said he read Mr Johnson's statement
and endorsed the general series of events as set out by him … I am reluctant to comment on events which occurred over 11 years ago when I did not retain my file of documents.
16 Mr Johnson describes himself in his affidavit as a senior lecturer in business studies. In his statement, he gave his qualifications as 'MBA, MMGMT, Dip Bus, Sport & Rec'. Mr Johnson said it was he and Mr McShane who instigated the New Zealand Government's Commission of Enquiry into the truth of information given to them by, inter alia, Mr Briggs.
17 Counsel for Mr Lunt submitted that Mr Johnson and Mr McShane are apparently reputable and independent: and that if their evidence had been given at trial, it is likely the outcome would have been different. It would therefore result in an injustice to Mr Lunt not to permit the trial to be reopened so as to receive this new evidence.
18 I take the law relating to reopening a trial to be as summarised in Seaman on Civil Procedure [34.5.17]. I accept that there is a judicial discretion to allow further evidence to be called. In particular:
If the interests of justice demand it, a judge may permit the reopening of a case after he or she has delivered judgment but before the judgment has been extracted … , but he or she should exercise his or her discretion to do so sparingly and upon strict terms to prevent or limit the working of injustice to the other side … There is an incalculable prejudice to any party in having a question reopened after all the evidence has been heard and a determination made, and in those circumstances it is not for the respondent to the application to reopen to demonstrate prejudice. Rather, it is for the applicant to demonstrate a case for the exercise of a discretion in its favour ... If judgment has been delivered the rules relating to fresh evidence on appeal … may be a useful but not exclusive guide: Smith v New South Wales Bar Association (1992) 176 CLR 256 at 266, 267.
19 In the present case, I did not think it necessary for the purpose of the application to reopen to investigate the reasons for Mr Lunt's apparent failure to make the enquiries of Messrs Johnson and McShane at a much earlier stage. Mr Lunt says in his affidavit that he was not a party to or aware of the pre-settlement discussions between Mr Briggs, Mr McShane
(Page 7)
- and Mr Johnson and that their important evidence was not known to him previously. Mr Briggs, on affidavit, denies this: and he denies having given the Waiver of Pre-emptive Rights document to Messrs Johnson and McShane.
20 I came to the conclusion that it was unnecessary to consider the threshold criteria for the exercise of the discretion to reopen, because a reopening would not avail Mr Lunt: he really requires a retrial. In my view, it would not be enough simply to call Messrs Johnson and McShane. It would be necessary for Mr Briggs to give further evidence. Furthermore, Mr Lunt would have to overcome the difficulty arising from the lack of challenge to Mrs Briggs' evidence that she had not signed the Waiver of Pre-emptive Rights document.
21 When dismissing Mr Lunt's application to reopen, I said that, having seen and heard the witnesses and reached my conclusion based on the evidence as it stood - or in some cases, on the lack of evidence - it would be necessary for me to go 'back to square one' as I then put it. I did not think it was appropriate for me, as the trial judge, to undertake this task. It would therefore be necessary for Mr Lunt to seek a re-trial not from me, but by way of appeal, from the Court of Appeal.
Mr Lunt's application for a suspension order
22 Initially, Mr Lunt applied for a stay under O 47 r 13(1) of the Rules of the Supreme Court 1971 (WA). However, as he acknowledges, the jurisdiction is now founded on s 15 of the Civil Judgments Enforcement Act 2004 (WA). This section provides that a person against whom a judgment is given, may apply for an order suspending the enforcement of all or part of that judgment. The application may be made to the court that gave the judgment or to the Court of Appeal. Section 15(3) provides that on such an application, the court may make such an order only if there are 'special circumstances that justify doing so'.
23 Although this provision is new, the requirement to identify special circumstances is not: under the previous O 47 r 13(1)(b), the discretion to grant a stay could be exercised only if the court was satisfied that 'by reason of special circumstances it is inexpedient to enforce the judgment'.
24 Mr Lunt contends that the special circumstances in the present case are three-fold:
1. He is likely to succeed in actions 1974 of 2001 and 1501 of 2001, against the plaintiff and Mr Briggs respectively, and will recover
- in excess of the amounts of the judgment against him in this action.
- 2. He is impecunious; so that the execution of the judgment against him is likely to lead to bankruptcy.
3. He is likely to obtain an order for a retrial on the basis of the evidence of Mr Johnson and Mr McShane: and on the basis of that evidence, he is likely to be successful.
25 Grounds 1 and 2 above, if made out, would justify the making of a suspension order until the trial of the two other actions. That was the order Mr Lunt sought in his application of 6 August 2008.
26 Different considerations apply to ground 3 above which, if made out, would justify a stay pending the hearing of the appeal.
27 In Ladang Jalong (Australia) Pty Ltd v Callander [2005] WASCA 203, McLure JA held that the principles applicable to the exercise of the discretion under s 15 of the Civil Judgments Enforcement Act were 'materially the same' as those applicable formerly under the Supreme Court Act 1935 (WA) and the rules. Her Honour held further that the principles were collected conveniently in Eastland Technology Australia Pty Ltd v Whisson (2003) 28 WAR 308.
28 In that case, the Full Court was concerned with an application for a stay of execution of the judgment and orders pending an appeal. In a joint judgment, the court held that the generally applicable relevant principles were as follows:
• The successful litigant at first instance will ordinarily be entitled to enforce the judgment pending the determination of any appeal.
• It is for the applicant for a stay to move the court to a favourable exercise of its discretion.
• It will not do so unless special circumstances are shown justifying the departure from the ordinary rule.
• The central issue will be whether the grant of a stay is perceived to be necessary to preserve the subject matter or the integrity of the litigation, or where refusal of a stay could create practical difficulties in respect of the relief which may be granted on appeal. It is often put shortly that it will first and foremost be necessary to establish that without the grant of a stay, the right of appeal, whether upon the grant of leave or special leave or not, will be rendered nugatory.
(Page 9)
- • If that can be demonstrated, the stay will generally still be refused unless it can be established that the appeal process, whether upon the grant of leave or special leave or not, has ultimately reasonable prospects of success so as to result in the grant of relief to the appellant.
• If that hurdle can be overcome, the stay may still be refused where it appears that the balance of convenience does not lie in favour of the applicant; where, for example, the grant of a stay will occasion hardship to the respondent which may not be alleviated by the terms upon which the stay may be granted.
29 Clearly, these principles are referable only to an application for a stay of execution pending appeal. However, the Full Court identified as '[p]erhaps the leading authority in this jurisdiction', the decision of Malcolm CJ in State Bank of Victoria v Parry [1989] WAR 240, 244 - 247, where the ambit of both the power granted by the rules and the inherent jurisdiction of the court were discussed.
30 In State Bank of Victoria v Parry, the plaintiff obtained summary judgment against two defendants under O 14 of the Rules of the Supreme Court. Before the judgment was given against them, the defendants commenced third party proceedings in which they claimed that if the plaintiff was successful against them, they were entitled to be indemnified by the third party. The defendants contended also that execution of the judgment against them would lead to their bankruptcy and liquidation respectively, resulting in an inability to pay the judgment debt. In these circumstances, the defendants sought a stay of execution pending the determination of the third party proceedings.
31 It is therefore clear that State Bank of Victoria v Parry is of greater relevance in relation to grounds 1 and 2 above, than Eastland v Whisson.
32 In State Bank of Victoria v Parry, Malcolm CJ noted that a stay of execution on a summary judgment is often granted where the defendant has a counterclaim against the plaintiff. Indeed, as his Honour pointed out, O 14 r 3(2) makes express provision for such a stay. His Honour went on to note that where the counterclaim arose out of a separate and distinct transaction, or where there was no connection between the claim and the counterclaim, the proper order was for judgment for the plaintiff with costs, without a stay pending the trial of the counterclaim. His Honour continued:
The degree of connection between the claim and counterclaim, the strength of the counterclaim and the ability of the plaintiff to satisfy any judgment
(Page 10)
- on the counterclaim are some of the considerations which the Court may take account of in the exercise of its discretion whether or not to order a stay. In general, therefore, a counterclaim which is in effect an unconnected cross-action will not provide a basis for a stay under order 14, rule 3. Consistently with this position a stay of execution of a judgment will not ordinarily be granted simply because the defendants bring a cross-claim in another action against the plaintiff, in the absence of special circumstances rendering it inexpedient to enforce the judgment: Wagner v Laubscher Bros & Co [1970] 2 QB 313.
33 A little later in his judgment, Malcolm CJ said:
It would seem that where company A sues company B and obtains judgment and company C, which is very closely associated with company B, has a claim against company A for an amount not less than the amount of the judgment, the Court may be prepared to lift the corporate veil and grant a stay. Where it does so, it is in effect treating the claim by company C as if it were a counterclaim by company B. In substance, this was the position in Burnet v Francis Industries plc [1987] 1 WLR 802 (at page 246).
34 In Burnet v Francis Industries plc [1987] 1 WLR 802, Bingham LJ (agreeing with Ralph Gibson LJ, the other member of the Court of Appeal) identified a number of matters requiring consideration by a judge in deciding whether there are special circumstances which will justify a stay. Malcolm CJ considered each of those matters in State Bank of Victoria v Parry, thereby tacitly adopting the approach of Bingham LJ.
35 In Burnet v Francis Industries plc, Bingham LJ formulated the matters requiring consideration by reference to a situation which his Lordship described schematically in the following way:
A sues B and obtains judgment. B is associated with C. C has an unresolved claim against A. B seeks a stay of execution of A's judgment to await the outcome of C's claim against A.
36 In the present case, the position is somewhat different. In this action, the plaintiff sued Mr Lunt. In action 1974 of 2001, Mr Lunt sued the plaintiff (albeit then known as WRS Pacific Pty Ltd: see my reasons [18]). The claim is for an amount of $482,000 said to have become due pursuant to a consultancy agreement between the plaintiff and Mr Lunt during the period 1991 to 1997. Action 1974 of 2001 might therefore be regarded as a counterclaim to this action. Although the causes of action are different, O 18 r 2(1) of the Rules of the Supreme Court permits a counterclaim to be brought in respect of any relief or remedy against a plaintiff and in respect of any matter 'whenever and however arising'.
(Page 11)
37 Action 1501 of 2001 is brought by Mr Lunt against Mr Briggs. The claim is for $517,900 said to have been due under the consultancy agreement which is the subject of action 1974 of 2001. Mr Briggs is said to have guaranteed payment of that amount personally.
38 Although action 1501 of 2001 could not be said to constitute a counterclaim in the present action, there is an order that it be tried together with action 1974 of 2001, no doubt because of the commonality of the subject matter.
39 For completeness, I note that counsel for Mr Lunt referred to two further actions brought by his client against the plaintiff or Mr Briggs. These are CIV 2762 of 2002 and COR 9 of 2007. However, it is not necessary to take them into account, because they are not relied on in the chamber summons as providing a basis for the application for a suspension order.
40 Having regard to the constitution of actions 1501 and 1974 of 2001, it is necessary to reformulate the issues identified by Bingham LJ in Burnet v Francis Industries plc, to make them applicable to the present case. On that basis, I set out and deal with each of the matters in the following way.
1. The nature of the plaintiff's claim
The point made by Bingham LJ under this head, is that if the claim was (for example) based on a dishonoured bill of exchange, a judgment based on such a claim would rarely, if ever, be stayed. That is not the case here.
2. The extent of the identity between the parties
As I have said, there is a complete identity of the parties in this action and 1974 of 2001. There is not a complete identity as between this action and 1501 of 2001. However, as I said in my reasons, Mr Briggs is the majority shareholder and ultimate controller of the plaintiff: [99] - [100].
3. The interrelationship of the respective claims
In the present action, the claim brought by the plaintiff was for the refund of moneys removed from the plaintiff company by Mr Lunt, in breach of his duties as a director. It is a claim of a different nature from those made by Mr Lunt in his actions. However, as I have noted above, that does not prevent Mr Lunt's claims being regarded as counterclaims in the plaintiff's action.
(Page 12)
- 4. The strength of Mr Lunt's claim
Paraphrasing Bingham LJ:
The more obvious it appears that [the plaintiff] will have to pay [Mr Lunt] eventually, the less likely it is that he will be prejudiced by a denial of the fruits of his judgment against [Mr Lunt] in the short term.
It is difficult, if not impossible, to gauge Mr Lunt's prospects of success in actions 1501 and 1974 of 2001 from the pleadings. In each case, there are denials of liability on various grounds, including challenges to the authenticity of documents, a challenge which has a now familiar ring. However, it seems likely that in the pending actions, Mr Lunt's evidence will be corroborated by that of Mr Johnson who says he was so concerned about the extent of the indebtedness of the plaintiff and Mr Briggs to Mr Lunt, that he recommended that Max Resources purchase the plaintiff's assets rather than its shares.
In these circumstances, Mr Lunt's prospects of success are perhaps rosier than they might otherwise have been. I emphasise, however, that I am not seeking in any way to pre-judge the outcome of Mr Lunt's actions. I simply proceed on the basis that he appears to have reasonable prospects of success.
5. The size of Mr Lunt's claim relative to the plaintiff's claim
As I have noted above, the amounts claimed by Mr Lunt exceed the amount of the judgment against him in this action.
6. The likely delay before the merits of Mr Lunt's claim will be adjudicated
As far as I can tell, there is unlikely to be any great delay in bringing Mr Lunt's actions to trial. They have both been entered and are now awaiting trial dates. Having regard to the present state of lists, I expect that they will come to trial later this year, or early next year.
7. The prejudice to the plaintiff if it is denied the fruits of its judgment until Mr Lunt's claims are determined
There is no evidence on this point. However, the plaintiff does not contend that it will suffer any prejudice if execution is delayed.
8. The risk of prejudice to Mr Lunt if he makes payment to the plaintiff under the judgment
The potential concern identified by Bingham LJ was that the judgment creditor might dissipate the fruits of the judgment or remove them from the jurisdiction. There is no suggestion in the present case that any such risk exists.
(Page 13)
41 Bingham LJ emphasised that the list of matters set out above was not intended to be exhaustive and that the relative significance of the factors among themselves would vary enormously from case to case. I do not think there are any additional factors in the present case. The question is, therefore, whether these factors, taken together, constitute special circumstances such as to justify a suspension order.
42 After some hesitation, I have come to the conclusion that they do. I place considerable weight on the fact that the writ in this action was issued on 9 April 2001 and the writs in Mr Lunt's action were issued on 11 April and 11 July 2001 respectively. The action 1974 of 2001 could have been the subject of a counterclaim in this action. Furthermore, on 25 June 2008, while judgment in this action was reserved, the plaintiff's solicitors (as solicitors for the defendants to actions 1501 and 1974 of 2001) wrote to Mr Lunt's solicitors to request a stay of those proceedings pending the delivery of my judgment, because 'findings in that action will impact directly on the pleadings in [1501 and 1974 of 2001]'.
Should the suspension order be made on terms?
43 Under s 15(4) of the Civil Judgments Enforcement Act, a suspension order may be made for any period and may be made on terms as to costs or otherwise.
44 In State Bank of Victoria v Parry, Malcolm CJ said that in a proper case, the court might order payment into court of any part of the claim in respect of which judgment had been given, with a stay of execution pending the counterclaim. His Honour cited Slater v Cathcart (1891) 8 TLR 92, as authority for that proposition. In that case, a solicitor brought an action for unpaid legal fees against his former client and applied for summary judgment under O 14, subject to taxation of his bill. The defendant sought to defend and counterclaim for negligence.
45 The amount claimed was £500. The amount of the counterclaim was £600. The master gave the defendant leave to defend the action on condition that she paid £200 into court. On appeal, the court held that it was 'reasonable' that £200 should be paid into court or secured. The court ordered that the taxation of the solicitor's costs should proceed but that the action be stayed until the counterclaim had been tried.
46 In State Bank of Victoria v Parry, Malcolm CJ took a similar course. In granting a stay, his Honour imposed a condition that the defendant should make a payment to the plaintiff of such amount as he was able to pay in partial satisfaction of the debt (253 - 254).
(Page 14)
47 In the present case, Mr Lunt pleads poverty. In his affidavit sworn in support of the application for a suspension order, he says that the only assets he possesses are claims he has against Mr Briggs and associated entities. Mr Lunt says he lives in rented accommodation and that his income is fully utilised in meeting his everyday living expenses and other commitments. He says he has no material assets of value, but that he has liabilities as a guarantor to 'certain borrowings', apparently in common with his two daughters.
48 Mr Lunt says he leases a motor vehicle which has a value of less than $7,500 and that he works part-time as an insurance consultant, not being physically or mentally able to undertake full-time work. Mr Lunt places the responsibility for his difficulties on Mr Briggs. He says he has been receiving medical attention from 1998, including counselling from the Ministry of Justice Victims of Crime Support Unit. He says he has been unfit for work because of severe depression and anxiety and financial difficulties, all caused by Mr Briggs. None of this is corroborated by independent evidence.
49 Under the old O 47 r 13(3), an applicant for a stay who was 'unable from any cause' to pay the judgment sum was required to disclose his income, assets and liabilities.
50 The suspension order provisions of the Civil Judgments Enforcement Act do not impose a similar obligation on an applicant for such an order. However, s 15(5) provides that when or after making a suspension order, the court may make any 'necessary ancillary or consequential order' including an order that a means enquiry be adjourned or not be held for such period as the court specifies.
51 A means enquiry is a defined term: s 3 and s 26. The latter section provides:
A means inquiry in respect of a judgment debtor is an inquiry conducted before a court in order to determine -
(a) the judgment debtor's means to pay the judgment debt having regard to the income, assets and liabilities of the judgment debtor and, if applicable, his or her spouse or de facto partner and any dependents of the judgment debtor and his or her spouse or de facto partner;
(b) whether there are or will be any earnings of the judgment debtor that might be appropriated to satisfy the judgment debt and, if there are, the net earnings for the purpose of Division 4;
(Page 15)
- (c) whether there is or will be any available debt that might be appropriated to satisfy the judgment debt; and
(d) the existence and whereabouts and value of any property of the judgment debtor that might be seized and sold to satisfy the judgment debt.
52 By s 27, a judgment creditor may apply for a means enquiry to be held in respect of the judgment debtor: and by s 28, a judgment debtor who applies for a suspension order on the grounds of his inability to pay may himself apply for a means enquiry to be held.
53 In the present case, neither the plaintiff nor Mr Lunt has applied for a means enquiry. I do not think such an enquiry can be ordered by the court, of its own motion.
54 In response to Mr Lunt's claim of poverty, the plaintiff's solicitor swore an affidavit to which he exhibited eight bank cheques in amounts totalling $74,360.30 by which Mr Lunt made payment in respect of costs orders in favour of the plaintiff or Mr Briggs. These cheques were drawn in the period 1 November 2005 to 9 November 2007.
55 Counsel for the plaintiff submits that these circumstances give rise to an inference that Mr Lunt has arranged his affairs so as to place his assets out of the reach of creditors while yet having access to third party funds, when required. However, I was told from the bar table that bank cheques had been requested. In any event, I do not overlook the fact that Mr Lunt appears to have been able to fund extensive litigation, including this action, actions 1501 and 1974 of 2001 and the other two pending proceedings to which I have referred above.
56 How Mr Lunt has been able to undertake all these activities, is not clear. In an affidavit made on 10 September 2008, Mr Lunt responded to assertions by the plaintiff or Mr Briggs that he had not been candid about his financial position. He said he had no foreign bank account or assets and that his local cheque account had a negligible balance. He said the $200,000 the subject of the judgment had been used to reduce his personal business accounts and debts which arose due to the non-payment of entitlements due to him by the plaintiff or Mr Briggs. He said he did not hold shares in ACT or Crocker Place Pty Ltd, the company which is the registered proprietor of the apparently substantial property of which Mr Lunt is a tenant.
57 Mr Lunt said also that he held no shares, either directly or indirectly, in Waste Recovery Systems India Ltd and PT WRS Indonesia. He said he
(Page 16)
- was not a 'primary beneficiary' of the Lunt Family Trust, they being his daughters. As to Crocker Place Pty Ltd, Mr Lunt said he is not now a shareholder of the company, nor had he been for about 20 years. He said his daughters have held shares for more than 10 years and that his elder daughter had been a director for 10 years. The property was 'substantially mortgaged'. The property is the subject of a mortgage granted to the Commonwealth Bank in July 2005, but nothing has been disclosed about the loan, or the use to which the funds were put.
58 Mr Lunt accepted that he had not mentioned the receipt of some $75,000 from the liquidators of Max Resources. However, he said he used the funds to reduce his personal business debts and to pay living expenses while unemployed. He said he utilised 'part' to make the bank cheque payments to which I have referred above.
59 As to the funding of the appeal, Mr Lunt said he had the assistance of his solicitor 'on credit', thus far, without the involvement of counsel.
60 This evidence does not disclose the source of the funds used in the purchase of the bank cheques other than the 'unspecified' part referred to above. Nor does it provide any explanation as to the availability to Mr Lunt of assets in the Lunt Family Trust: nor the extent of those assets. As to Mr Lunt's assertion that he has no overseas assets, I note that although Mr Lunt's evidence during the trial was that he was not and had never been either a shareholder or director of the Hong Kong WRSL, it was nevertheless his company, having been established for his benefit: see reasons [34] and [35].
61 Assuming for present purposes (without deciding) that Mr Lunt might have access to assets - perhaps offshore - which are not held in his name, I do not think this is a case in which it would be appropriate to require him to make a payment into court as a condition of a suspension order. There are three reasons:
(1) The plaintiff has opposed a suspension order. It has not sought the imposition of any conditions should an order be made.
(2) The actions 1501 and 1974 of 2001 are in the nature of counterclaims to this action, and should be tried in the relatively near future. Having regard to the fact that the plaintiff has been kept out of its $200,000 for over 13 years, I do not regard the further delay as being of great consequence.
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- (3) Mr Lunt appears to have reasonable prospects of success in the two pending actions. If successful, there would be a substantial balance in his favour.
Mr Lunt's impecuniosity as a basis for a suspension order
62 As I have noted above, the statutory regime relating to suspension orders does not require an applicant to disclose his assets and liabilities. However, I do not see how a suspension order could be made on the basis of impecuniosity, unless the applicant did so. Alternatively, the applicant could initiate or submit to a means enquiry.
63 For the reasons given above, the possibility that Mr Lunt has not made full disclosure of his financial position is such that I would not be prepared to make a suspension order solely on the grounds of his impecuniosity.
The fresh evidence as a basis for a suspension order
64 It is clear from Mr Lunt's affidavit of 10 September 2008, that the evidence he seeks to adduce from Mr Johnson has been available at all material times but that it did not occur to Mr Lunt to make any enquiry of Mr Johnson in relation to this action. Mr Lunt says that in August 2008, when he was preparing proofs of evidence for actions 1501 and 1974 of 2001, he recalled that Mr Johnson and Mr McShane were aware of his claims, as he had discussed them after settlement of the sale of the plaintiff's assets to Max Resources.
65 There is an issue between Mr Lunt and Mr Briggs as to who was engaged or involved in the asset sale and the subsequent due diligence process by Max Resources.
66 I find it somewhat surprising that, knowing as he did of the involvement of Messrs Johnson and McShane in the due diligence process, Mr Lunt should not have at least made some general enquiry of them in preparation for this action. However, accepting for present purposes that his lack of enquiry was justified, I do not think the emergence of Mr Johnson's evidence would warrant a suspension order.
67 A suspension order on these grounds would take effect only until the hearing of the appeal in which Mr Lunt sought a retrial. That being so, the principles in Eastland v Whisson would be applicable.
68 There, the central issue was said to be whether the grant of what would now be a suspension order would be necessary to preserve the
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- subject matter or integrity of the litigation: whether, without a suspension order being made, the right of appeal would be rendered nugatory.
69 In my view, it would not. That is because there is no evidence to suggest that the judgment sum would not be repaid if Mr Lunt was successful in a retrial ordered by the Court of Appeal.
70 Mr Lunt's ultimate position, therefore, must be that the right of appeal would be rendered nugatory because if the judgment is enforced against him, he will become bankrupt and therefore unable to prosecute his appeal. The answer to that proposition, I think, lies in Mr Lunt's apparent ability to fund litigation.
71 For all these reasons, I do not consider that the emergence of Mr Johnson's evidence constitutes special circumstances such as to justify the making of a suspension order pending the appeal.
The plaintiff's application for indemnity costs or a special costs order
72 The plaintiff contends that an indemnity or special costs order should be made against Mr Lunt.
73 A special costs order may be made under s 215 of the Legal Practice Act 2003 (WA) if a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a legal costs determination is inadequate 'because of the unusual difficulty, complexity or importance of the matter'.
74 In my view, which I understood to have been accepted by counsel for the plaintiff (ts 697), there was nothing unusually difficult, complex or important in this action to warrant a departure from the scale established by the relevant legal costs determinations.
75 The real issue is whether an indemnity costs order should be made. In dealing with that issue, I must consider the position as I have found it to be in my reasons, leaving out of account the possibility that if there was to be a retrial, the result might be different.
76 The plaintiff relies on the decision of Pullin J in Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S). There, his Honour followed the decision of the Full Court of the Federal Court in Fountain Selected Meat (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397. In that case, it was held that an award of indemnity costs should be considered whenever it appeared that an action had been commenced or continued in
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- circumstances where the unsuccessful party, properly advised, should have known that he or she had no chance of success.
77 The plaintiff relies also on the decision of Roberts-Smith J in Lee v Mavaddat [2005] WASC 68 (S). An indemnity costs order was made in that case, Roberts-Smith J having found that the defendant's claim and supporting evidence was a deliberate concoction, which involved propounding false documents to the court.
78 On the facts as I have found them to be, that is essentially the position in the present case. In my view, it is no answer to assert, as Mr Lunt does, that he was justified in relying on the impugned documents given that a handwriting expert considered they were genuine. If, as I have found, documents (and in particular, the Waiver of Pre-emptive Rights document) were not genuine, Mr Lunt must have known that to be the case: and must always have known it.
79 That being so, I think the circumstances do warrant an indemnity costs order because the plaintiff has been put to unnecessary trouble and expense in the prosecution of its claim.
80 It was submitted by counsel for Mr Lunt that it was inappropriate to make an indemnity costs order in this jurisdiction. Counsel relied on the passage in Seaman on Civil Procedure [66.1.16], where it was said that the significance of an indemnity costs order
may not be as great in this court as it may be in some other jurisdictions. Indemnity is the basis of such an order, so the receiving party cannot recover from the paying party costs which he or she has no legal liability to pay his or her solicitor. In the absence of an agreement pursuant to section 221 of the Legal Practice Act 2003, in general he or she cannot recover a sum greater than his or her solicitor is allowed to charge, and it may be that, generally, costs claimed in excess of the scale may be held to be unreasonable in amount or unreasonably incurred.
81 In my view, these considerations do not exclude the jurisdiction to make an indemnity costs order in a proper case: they are relevant only to taxation of costs.
82 I conclude, on the facts as I have found them to be, that this is a proper case for ordering Mr Lunt to pay the plaintiff's costs of the action on an indemnity basis.
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The plaintiff's claim for costs thrown away by reason of the non-existence of the second defendant
83 The plaintiff contends that it should recover costs thrown away in proceeding against the second defendant for the return of the sum of $200,000 the subject of the action when, as it transpired subsequently, the recipients were Mr and Mrs Lunt.
84 In my reasons, I dealt with the status of the company WRSL which was a party to the May 1991 agreement. In that agreement, the address of WRSL was said to be 6th Floor, Bank of America Tower, Harcourt Street, Central Hong Kong: see reasons [31].
85 However, WRSL was a Liberian company. It continued in existence until 30 June 1996. As from 1 July 1996, at least, Mr Lunt was the beneficial owner of a Hong Kong company, also known as WRSL: see reasons [45].
86 By letter dated 20 December 2000, Mr Lunt's solicitor wrote to the plaintiff's solicitors enclosing a notice of demand by WRSL against the plaintiff, in the sum of $125,000. The demand was signed by Mr Lunt as attorney for WRSL.
87 On the following day, the plaintiff's solicitors wrote to Mr Lunt's solicitor asking him to have Mr Lunt
produce evidence of the existence of the company he is claiming he is attorney of and also a copy of the relevant instrument evidencing your client's alleged capacity as attorney.
88 On 16 January 2001, Mr Lunt, as attorney for WRSL, issued a statutory demand against the plaintiff. The debt the subject of the demand was set out in the schedule. It made reference to the purchase price payable by the plaintiff 'upon the sale of technology and interest in joint ventures'. This was clearly a reference to the May 1991 agreement. The amount of the purchase price was said to be $325,000. The schedule made reference also to an amount of $200,000 said to have been paid on 11 April 1995. There were additional claims for interest, to which it is not now necessary to refer.
89 The statutory demand was supported by an affidavit sworn by Mr Lunt in which he said he was the duly appointed attorney of WRSL.
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90 Following a further letter from the plaintiff's solicitors, Mr Lunt's solicitor wrote a letter dated 23 January 2001 in which he said:
I believe you can verify the existence of the company creditor.
- He enclosed with the letter a copy of the power of attorney bearing the common seal of WRSL and the signature of Samantha Hong as a director.
91 In application COR 24 of 2001, the plaintiff applied to set aside the statutory demand. At about the time the proceedings were commenced, the plaintiff's solicitors instructed Hong Kong agents to search WRSL in that jurisdiction. The search showed that the company had been incorporated on 22 February 1996. That being so, it must have been apparent to the plaintiff's solicitors that the WRSL company, which had issued the statutory demand, could not have been the company which was a party to the May 1991 agreement. However, according to the statutory demand, it was the company which had received the disputed sum of $200,000.
92 The plaintiff's solicitors did not then attempt to investigate this anomaly before commencing the present action in which, not surprisingly, the plaintiff sought to recover $200,000 from the Hong Kong WRSL. What is somewhat surprising, is that the plaintiff alleged in its statement of claim that it had entered into a written agreement with the Hong Kong company on 21 May 1991. The plaintiff alleged that on or about 11 April 1995, that company had been paid the sum of $200,000 by the plaintiff, under the direction of Mr Lunt.
93 Subsequently, an appearance was entered for Mr Lunt and the Hong Kong company by Mr Lunt's solicitor, acting for both parties.
94 A defence was filed in which it was admitted both that the Hong Kong company had been a party to the 1991 agreement and that it had received the amount of $200,000.
95 The plaintiff did not learn of the existence of the Liberian WRSL company until it was served with an affidavit sworn by Mr Lunt on 16 September 2004 in action CIV 2289 of 2000. In that affidavit, Mr Lunt deposed to the fact that he had given instructions to his then solicitor and accountants to incorporate a company known as WRSL: and that it had been incorporated in Liberia at his solicitor's request. Mr Lunt went on to say that when the Liberian company was deregistered, its assets were assigned to him: and that the Hong Kong WRSL company was acquired 'as a replacement' for the Liberian company.
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96 As a result of receiving this information, the plaintiff believed that the Liberian WRSL company had ceased to exist in 1994.
97 On 21 September 2004, the plaintiff's solicitors wrote to Mr Lunt's solicitor requesting information about both the Liberian and Hong Kong WRSL companies to which Mr Lunt had referred in his affidavit. The plaintiff's solicitors asked for discovery of the certificates of incorporation, all documents concerning the incorporation and deregistration or winding up, and documents evidencing the relationship between Mr Lunt and each company. Although the letter was written in reference to action CIV 2289 of 2000, the plaintiff's solicitors reserved the right to use the letter in relation to other actions.
98 Mr Lunt's solicitor replied:
I am instructed that the existence of Waste Recovery Systems Limited (in its Liberian status) has been proved to the satisfaction of your client on various occasions including and most importantly at the time leading up to the entering up to the Sale Agreement dated the 21st May 1991. The information as to its existence therefore is/was with your clients then solicitors at the very least. I therefore point out that the documents you require are or have been in the possession custody or power of your client at all times.
The alternative proposition you are espousing is that your client contracted through its solicitors with a non existent entity in the period leading up to the Contract and thereafter. The burden of proving such a facsimile/proposition [sic] is clearly on your client.
99 The plaintiff's solicitors apparently expected that there would be an amendment to the defences in this action. In all the circumstances, that seems to me to have been a reasonable expectation. However, no amendment was forthcoming. That being so, on 5 October 2005, the plaintiff's solicitors wrote again to Mr Lunt's solicitor noting that there had not been an amendment to the defence and asking him to obtain his client's instructions in relation to the following:
(a) What was the name of the account into which the $200,000 (the subject of the claim) was paid.
(b) Identify the payee:
a. Was it Waste Recovery Systems Limited, incorporated in Liberia?
b. Was it Waste Recovery Systems Limited, incorporated in Hong Kong?
- c. Was it some third party? If so, who?
- (c) What was the account number?
(d) Provide the name of the bank and the branch location.
100 On 11 October 2005, Mr Lunt's solicitor replied:
I have your letter of the 5th October 2005.
I advise as follows:
1. Your request is clearly a request for particulars and infringes Order 20 Rule 13(6).
2. The details of the payee or the ultimate recipient of the $200,000.00 I suggest in any event is not relevant as your client company received credit for the payment made and credit has been recognised in subsequent balance sheets of your client.
3. Further I am advised that my instructions are that the details of the payee were designated / arranged orally between Mr Lunt and Mr Briggs. You may wish to make enquiries with Mr Briggs as to the ultimate payee if you consider it still to be relevant.
101 In early May 2007, this action was entered for trial. Some two months later, Mr Lunt gave further discovery by way of a supplementary list of documents dated 9 July 2007. The list made reference to a bank statement dated 26 April 1995 relating to Mr and Mrs Lunt. The plaintiff's solicitor inspected the document, from which it appeared that the sum of $200,000 had never been paid to WRSL but had been deposited in Mr and Mrs Lunt's bank account at the Karrinyup branch of BankWest. I dealt with those matters at [73] to [96] of my reasons.
102 In the circumstances as summarised above, it is clear that the plaintiff has wasted time and costs in suing the Hong Kong WRSL company. It was induced to do so by a misleading statutory demand and it persisted in its action because the defence was also misleading.
103 In my view, Mr Lunt must accept the full responsibility for the plaintiff's wasted effort. At all material times, he knew the true position but did not disclose it. I therefore consider that the plaintiff is entitled to include in its bill of costs in this action the costs of:
1. obtaining leave to serve notice of the writ in Hong Kong;
2. engaging agents to serve notice of the writ in Hong Kong;
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- 3. the preparation of the statement of claim insofar as it made a claim against the Hong Kong company;
4. taking instructions on the defences insofar as they contained assertions or admissions that the Hong Kong company had been the recipient of $200,000;
5. the preparation for trial down to about July 2007 (when it became apparent to the plaintiff that the sum of $200,000 had been received by Mr and Mrs Lunt, not the Hong Kong WRSL company) insofar as those costs were increased as a result of the plaintiff's action against the second defendant.
104 The plaintiff's contention that Mr Lunt's solicitor should be liable also for these wasted costs, must be based on O 66 r 5 of the Rules of the Supreme Court which provides that the court may order any practitioner to pay costs personally if it considers the practitioner to be responsible for 'any improper, unreasonable, or negligent act or omission'.
105 In essence, the plaintiff's contention is that Mr Lunt's solicitor must either have known the true position, as I have outlined it above, or failed to make enquiries of his client which would have revealed the true position.
106 In response to the claim against him, Mr Lunt's solicitor made an affidavit in which he referred to an affidavit made by Mr Briggs in COR 24 of 2001. Mr Briggs there said:
I have instructed the Applicant's solicitors to commence proceedings against Lunt and the Respondent for the sum of $200,000. These proposed proceedings will be commenced once the issue of whether the Respondent exists or not [has been resolved]. If the Respondent does not exist, the proceedings will be limited to being against Lunt for breach of his fiduciary duties owed to the Plaintiff. If the Respondent does exist, the Respondent will be made a party to these proposed proceedings …
- Mr Lunt's solicitor went on to say that he received no subsequent communication from the plaintiff or its solicitors that they had not made such an investigation or were not satisfied that WRSL existed.
107 This is, I think, somewhat disingenuous. That is because, the plaintiff's solicitors had pressed Mr Lunt's solicitor for information about the Hong Kong and Liberian companies. However, I am not prepared to draw the inference that Mr Lunt's solicitor knew the true position. He was not a party to the establishment either of the Liberian or Hong Kong companies. That being so, there was nothing to put him on notice of any irregularity which required him to question his instructions. At least, not
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- at any time when it mattered. I put it that way because, having regard to the pleadings to which I have referred above, the fact that the Hong Kong WRSL company could not have been a party to the May 1991 agreement was not an issue in this action. That is so, despite the fact that by letter dated 22 December 2004, Mr Lunt's solicitor invited the plaintiff to discontinue its action against the second defendant on the basis of the plaintiff's assertion that 'the company did not exist at the time of the issue of the proceedings'. This must have been a reference to the Liberian company.
108 The plaintiff wasted costs in pursuing the Hong Kong company not for that reason, but because that company did not receive the $200,000. In all the circumstances, therefore, I am not persuaded that Mr Lunt's solicitor is responsible for the plaintiff's wasted costs.
109 Furthermore, a similar application to impose a personal costs order on Mr Lunt's solicitor was made unsuccessfully by the plaintiff in COR 24 of 2001. The application was heard by Master Newnes (as his Honour then was). In the course of his judgment, the Master held that 'the defendant' (which I take to be a reference to the Liberian company) 'ceased to exist by no later than 2004' (ts 67).
Costs
110 I have not heard the parties in relation to costs. I propose the following orders, which will be made unless either party objects within seven days of the publication of these reasons (which will take place electronically).
1. Mr Lunt's summons to reopen
Although Mr Lunt was partially successful in a related summons to strike out inadmissible evidence in an affidavit made by the plaintiff's solicitor, his application to reopen was dismissed. Mr Lunt should therefore pay the costs of the application, to be taxed if not agreed.
2. Mr Lunt's application for a suspension order
Although this application has been successful, I think the appropriate course is to make the costs in the cause of actions 1501 and 1974 of 2001, which are to be tried together.
3. The plaintiff's application for an indemnity costs order
The plaintiff has been successful in this application. Mr Lunt should therefore pay the costs, to be taxed if not agreed.
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- 4. The plaintiff's costs thrown away in pursuit of the second defendant
I have dealt with this matter above.
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