Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd
[2012] VSC 274
•21 June 2012
| Send for Reporting | ||
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2011 03809
| PORTBURY DEVELOPMENT CO PTY LTD (ACN 065 713 760) | Plaintiff |
| v | |
| OTTEDIN INVESTMENTS PTY LTD (ACN 119 590 395) | First Defendant |
| and | |
| Goldcare Developments Pty Ltd | Second Defendant |
| and | |
| Peter Alan Ottewell | Third Defendant |
| and | |
| George Kosta | Fourth Defendant |
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JUDGE: | GARDINER AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 14 December 2011 (Last submissions 24 January 2012) | |
DATE OF JUDGMENT: | 21 June 2012 | |
CASE MAY BE CITED AS: | Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd and ors | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 274 | |
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PRACTICE AND PROCEDURE – Application for summary judgment – Civil Procedure Act 2010 (Vic), s 63 – Supreme Court (General Civil Procedure) Rules 2005 (Vic), rr 23.01, 23.02 – Application granted
Application by defendants pursuant to r 11.05 (2)(b) for leave to join third party after expiry of thirty days from time for delivery of defence – Application refused.
REAL PROPERTY – Contract for sale of land – Rescission notice for default in payment of purchase monies– Default not remedied and contract rescinded – Claim for shortfall and expenses after resale of property – Defences considered to have no real prospect of success.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Cawthorn SC with Mr A Kirby | Nicholas O’Donohue & Co |
| For the Defendant | Mr W Wikramanayake QC with Mr P Marzella | Russell Kennedy |
HIS HONOUR:
By an application filed 10 November 2011, the plaintiff (“Portbury”) makes application for summary judgment against the defendants pursuant to s 63 of the Civil Procedure Act 2010 (“CPA”) and r 22.02, alternatively r 23.01(2) of the Supreme Court (Civil General Procedure) Rules 2005 (“the Rules”). Alternatively, Portbury seeks an order under rr 23.01 and 23.02 of the Rules that the amended defence and counterclaim dated 27 October 2011 be struck out.
Last year, in an earlier proceeding, the first named defendant (“Ottedin”) as plaintiff sought a declaration that it was entitled to have repaid to it a deposit paid in respect of a sale of a property at Lecky Road, Officer in Victoria (“the property”). The defendant in the earlier proceeding, Portbury, made application for summary judgment. The application resulted in findings by Dixon J in relation to events from the time of formation of the contract for the purchase of the property in December 2008 to the rescission of the contract for the sale of the property by Portbury on the expiry of Portbury’s rescission notice in April 2011.[1] In his reasons, Dixon J held that there was no relevant factual dispute and that the issues were encapsulated in written communications between the respective parties’ solicitors generated in the course of events between entry into the contract and its rescission. His Honour’s detailed factual findings are in paragraphs 22 to 39 of his reasons.[2]
[1]Ottedin Investments Pty Ltd v Portbury Development Co Pty Ltd & Anor [2011] VSC 222 (“the Ottedin proceeding”).
[2]Ibid [22]-[39].
Portbury’s application for summary judgment was successful. Dixon J dismissed Ottedin’s proceeding with costs and in the course of that application, determined that Portbury was entitled to and had validly rescinded the contract on 14 April 2011.
This proceeding arises out of a subsequent resale of the property. The shortfall on the sale and resulting expenses (less the deposit and allowing for some rent) are alleged by Portbury to amount to $3,683,382.07. Subsequent to the rescission of the contract in April 2011, the property was put up for sale by tender. The tender closed on 12 May 2011 without any offer to purchase being submitted. The property was auctioned on 29 June 2011 and was passed in. It was subsequently sold to the only bidder the next day and settlement took place on 30 August 2011.
Ottedin was the initial purchaser under the contract of sale, with the second defendant, Goldcare Developments Pty Ltd (“Goldcare”) being substituted as purchaser. The third and fourth defendants, Messrs Ottewell and Kosta, were guarantors of Portbury and Goldcare’s obligations under the contract.
Portbury relies on affidavits of Susan Mary Kelly and Francis James Lynch, both sworn 27 October 2011, in support of its application. The defendants themselves have not filed affidavits in the applications before me and rely on affidavits of their solicitor, Leonard Adrian Warren, sworn 9 December 2011 and 13 December 2011.
The defendants’ application for leave to file a third party notice
On 13 December 2011, the defendants filed an application pursuant to r 11.05(2)(b) of the Rules seeking leave to file a third party notice upon Duffy & Simon Lawyers. Such leave was required by reason that more than 30 days had elapsed after the time limited for the defendants’ defence. Duffy & Simon were the solicitors engaged by the defendants in the purchase of the property. That application was supported by Mr Warren’s affidavit of 13 December 2011. Mr Warren’s affidavit exhibits a copy of the proposed third party notice. Portbury opposed the grant of such leave for reasons which I will elaborate upon below.
Mr Warren states in his affidavit of 13 December 2011 that the third party notice was not served within the time stipulated by the Rules as Ottedin had previously intended to seek leave to appeal against the decision of Dixon J in the Ottedin proceeding. Mr Warren asserts that any application to join Duffy & Simon would have been premature until the outcome of that application and appeal (if any) were known. He indicates that Ottedin now no longer proposed to seek leave to appeal the earlier decision.
Mr Warren also asserts that the issues which are raised by Portbury’s application for summary judgment and outline of submissions have confirmed the necessity of joining Duffy & Simon as a third party but he does not elaborate as to why this is so.
Mr Warren states if the Court makes an order granting the defendants leave to file and serve the proposed third party notice, that Portbury’s application for summary judgment should be adjourned for several reasons. They are:
(a) to avoid a multiplicity of proceedings and additional costs;
(b)to avoid inconsistent findings between this proceeding and any other proceeding brought by the defendants against Duffy & Simon;
(c)common facts and issues arise in both the current proceeding and the proposed third party proceedings; and
(d)the proposed claim against the third parties is intimately connected with the plaintiff’s summons and outline of issues.
In short compass, the statement of claim on the proposed third party notice pleads the retainer of Duffy & Simon, which included acting on behalf of Ottedin and the other defendants in and about the purchase of the property and subsequently on behalf of Ottedin in the conduct of the Ottedin proceeding. The breaches of the terms of the retainer are particularised in paragraph 13. It is appropriate to focus on those allegations when considering the defendants’ application for leave to file a third party notice. The particulars describe alleged failures by Duffy & Simon in going about its retainer in connection with the conveyancing transaction which was the subject of the Ottedin proceeding. In essence, it is said in paragraphs (i) to (iv) that Duffy & Simon neglected to take certain steps to protect Ottedin and Goldcare’s interests in that transaction. It is then subsequently alleged that Duffy & Simon were negligent in the conduct of the Ottedin proceeding. In that regard it is said that there was a failure on Duffy & Simon’s part to make certain submissions and adduce evidence which would have altered the outcome of the Ottedin proceeding, including neglecting to produce and make submissions in respect of the Explanatory Memorandum and Second Reading Speech by the Attorney‑General to explain the reason and purpose of the amendments to the Sale of Land Act 1962 (Vic) (“the SL Act”) by the 2008 amendments. The defendants claim a declaration that they are entitled to be indemnified by Duffy & Simon for the full amount of any judgment, including costs and interest which Portbury may obtain in this and the Ottedin proceeding.
The claim made on the third party notice has all the features of a conventional professional negligence claim against a firm of solicitors in the context of a conveyancing transaction which has gone awry and the subsequent litigation arising from it. On several occasions during the course of the hearing of this matter, I enquired of senior counsel for the defendants, Mr Wikramanayake QC, why the third party proceedings against Duffy & Simon could not be brought independently, as professional negligence claims of this character against solicitors often are. Mr Wikramanayake responded that the claim by Portbury was a $3.5 million claim and if Portbury succeeded the defendants will be “wiped out” and that there would be no money to then pursue the solicitors.[3]
[3]Transcript of Proceedings, Portbury Development Co Pty Ltd v Ottedin Investments Pty Ltd (Supreme Court, Gardiner AsJ, 14 December 2011), 10.15-18, 11.5-8; 14-19 and 29-31.
Mr Cawthorn, senior counsel for Portbury, in opposing the grant of leave, states that there are two fundamental reasons why the third party proceedings could not possibly succeed and why leave should therefore be refused. First, he referred to paragraph 13 of the statement of claim in the proposed third party notice to which I have already referred. At sub-paragraphs 13(a)(i) to (iv) are allegations concerning the avoidance of the Contract of Sale all of which Mr Cawthorn submitted were the subject of argument and findings in the Ottedin proceeding. He submitted that the defendants now seek to relitigate matters which were the subject of findings by Dixon J. Paragraphs 13(a)(v) and following all involve criticism with respect to the manner in which the Ottedin proceeding was conducted by Duffy & Simon, either in court or in work intimately connected with the conduct of the case in court. Duffy & Simon, Mr Cawthorn states, would be immune from suit under the advocate’s immunity principle. He pointed to the decision of the High Court in D’orta-Ekenaike v Victoria Legal Aid[4] which confirmed the immunity from suit for lawyers for things either done in court or intimately connected with the conduct of the case in court and observed that the principle applies to solicitors as well as advocates.
[4](2005) 223 CLR 1 (“D’orta-Ekenaike”).
In my view, there is no basis for contending that the proposed proceeding against Duffy & Simon should be heard at the same time as the trial of this proceeding. The matters sought to be agitated do not involve Portbury, which has the benefit of a judgment of this court which has not been appealed from. It is entitled to enjoy the benefit of that judgment. The issues between Portbury and Ottedin in relation to the 2008 contract up to and including its rescission in April 2011 are the subject of Dixon J’s decision and cannot now be relitigated. The alleged breaches of retainer concern the alleged negligence in and about the conveyancing transaction for the property and the manner in which the litigation before Dixon J was conducted. They are matters between the defendants and their former solicitors and there is no reason why Portbury’s claim, which is concerned with recovery of the damages consequently crystallised by the resale of the property, needs to be heard at the same time.
The defendants have not established why the failure to grant leave will result in a multiplicity of proceedings in the relevant sense or how it may result in inconsistent findings between this proceeding and the proposed third party proceedings against Duffy & Simon. This proceeding is one in which Portbury seeks to recover its losses consequent on a failure to perform obligations under a contract of sale of land. The proposed third party proceedings are based in negligence against the defendants’ formers solicitors.
In addition, the reason proffered for not making the claim earlier is not, to my mind, at all plausible. The defendants say there were contemplating an appeal from the judgment of Dixon J and, having been recently told that the prospects of such an appeal were poor, they have elected instead to pursue their former solicitors. They have chosen to sit on their hands. In addition, the grant of such leave would have the effect of delaying this matter to the prejudice of Portbury. As Kearney J observed in Phonesivorabouth & Ors v Tops Services Pty Ltd:[5]
The grant of leave under r 11.05(2)(b) to file a third party notice out of time is discretionary. In general there is a strong argument against granting such leave where the effect of doing so would be to embarrass or delay the plaintiff. Nevertheless, it is a matter of balancing the inconvenience to the plaintiffs of the inevitable delay which will be caused by a late joinder in this case, against the inconvenience to the defendant of not having the claims of the plaintiffs and its claim against the Northern Territory of Australia heard at the same time.
[5](1992) 106 FLR 471, 475-6.
I consider that the defendants’ application should be refused. Although in reaching my decision to reject the defendants’ application, I have not felt the need to rely on Mr Cawthorn’s submission that the proposed third party proceedings are forlorn by reason of an application of the principle in D’orta-Ekenaike, I consider it has some force. That issue should more properly be agitated by Duffy & Simon in defence to any proceedings which may be issued against it.
The pleadings
Before turning to the evidence before me and the parties’ submissions, it is appropriate to survey the pleadings which have been filed by the parties.
In the first several paragraphs of the amended statement of claim, Portbury pleads uncontroversial matters relating to the incorporation and directorship of the parties to the proceeding and the ownership of the property.
Portbury then pleads particulars of the Contract of Sale entered into between Portbury and Ottedin on 18 December 2008 whereby Ottedin agreed to purchase the property for $6.5 million. In paragraph 7 of their amended defence and counterclaim, the defendants admit the contract was entered into and that it contained the written conditions described in paragraph 8 of the amended statement of claim. The amended defence and counterclaim goes on to contend that the contract of sale contained certain implied terms, including those involving the exercise of the power of resale. These are described in paragraphs 8A to 8C of the amended defence and counterclaim. It includes terms that Portbury would act reasonably and in good faith in the exercise of such rights and not wilfully or recklessly disregard the defendants’ rights nor exercise its right to resale in a way which increased the loss or damage occasioned by any default by Ottedin or Goldcare. However, even if it is accepted that such duties as pleaded exist, it will be seen that no evidence at all has been put up by the defendants to impeach the sale process ; the allegation is not developed beyond mere assertion in the amended defence and counterclaim.
Paragraphs 10 and 11 of the amended statement of claim plead that Mr Ottewell, the third defendant, executed a guarantee and indemnity on 18 December 2008 and so much is admitted. In paragraphs 11, 11A and 11B of the amended defence and counterclaim, certain duties to Mr Ottewell as guarantor are pleaded as being implied in respect to the resale process which are of the same ilk as those mentioned in paragraphs 8A to 8C but again it will be seen that no evidence is put up by the defendants to support any contention that those duties, if they exist, have been breached as asserted.
In paragraphs 12 to 14 of the amended statement of claim, it is alleged that there was a nomination by Ottedin of Goldcare under the contract in March 2009 and that both Ottedin and Goldcare became jointly and severally liable for the due performance of the obligations under the contract and the payment of any expenses. The nomination form contained an acknowledgement from both Ottedin and Goldcare that “they will henceforth be jointly and severally liable for the due performance of the obligations of the Purchaser under the contract and payment of any expenses resulting from the nomination (including any Stamp Duty)”. The execution of the nomination form is admitted by the defendants.
Paragraphs 15 to 17 of the amended statement of claim deal with the deed of variation of contract and the payment of a deposit of $1 million. Again, those matters, which were the subject of findings by Dixon J in his judgment[6] are admitted by the defendants in their defence and counterclaim.
[6][2011] VSC 222, [25]-[28].
Paragraphs 18 and 19 of the amended statement of claim allege that Messrs Ottewell and Kosta, the third and fourth defendants, executed a deed of guarantee in respect of the contract of sale and the deed of variation of contract. The defendants admit the signatures of Messrs Ottewell and Kosta to the deed of guarantee. They go on to assert, in paragraphs 19, 19A and 19B of the amended defence and counterclaim, that Portbury owed them various duties as guarantors which are of the same ilk as those pleaded earlier by Ottedin and Mr Ottewell in relation to the exercise of a power of resale to which I have already referred.
Paragraph 20 of the amended statement of claim deals with the extension of settlement date which was agreed to on 15 December 2010 to 20 December 2010. The defendants admit that such an extension was granted and that settlement did not take place on 20 December 2010.
Paragraphs 21 to 26 deal with the further extension of the settlement date agreed to on 12 January 2011 to 17 January 2011 (which is detailed in Dixon J’s judgment at paragraphs 35 and 36) and the failure of Ottedin and Goldcare to settle the sale on 17 January 2011. Paragraph 25 of the amended statement of claim alleges that in breach of the varied contract of sale, Ottedin and Goldcare failed to pay Portbury on 17 January or at all the sum of $5,175,000 which was comprised of the interim payment agreed to of $3,675,000 and the balance of $1.5 million. The defendants admit that such payments were not made but for various reasons, including those referred to in paragraph 23 of the amended defence and counterclaim, deny there was an obligation to make such payments. In addition, it is contended in paragraphs 24(c) and 25(c) that Ottedin had avoided the varied contract of sale pursuant to s 29O(2) of the SL Act.
In my view, it is clear that it is not open to the defendants to plead such matters as they were given detailed consideration by Dixon J in the course of the Ottedin proceeding and rejected.[7]
[7][2011] VSC 222, [43]-[54], [76]-[82].
Portbury submits that some of the alleged defences raised in the amended defence and counterclaim were either considered (and rejected) or could have been but were not raised in the Ottedin proceeding and the defendants are thereby estopped from now raising them.[8]
[8]Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 598, 604 (“Anshun”); Solak v Registrar of Titles [2011] VSC 279.
I accept Portbury’s submission that, to the extent that the defences that are now raised were determined in the Ottedin proceeding, they are res judicata. The legal policy underlying Anshun estoppel is the need to avoid inconsistent decisions. As between the same parties, a matter raised in the current proceeding that could have been raised in the Ottedin proceeding will be barred from being relitigated by operation of the estoppel.
Where the parties are different, the existence of the Ottedin proceedings is not conclusive in that way and rather the question arise as to whether the invoking of the issues sought to be raised in the current proceeding amounts to an abuse of process.[9] It is submitted by Portbury that it is an abuse of process for the defendants now to try and rely on these defences. In Rippon v Chilcotin Pty Ltd, Handley JA stated at paragraph 15: [10]
However in Reichel v Magrath the House of Lords held that a defence which was not barred by res judicata estoppel may nevertheless be struck out as an abuse of process. Lord Halsbury LC said:
‘…it would be a scandal to the administration of justice if, the same question having been disposed of by one case, the litigant were to be permitted by changing the form of the proceedings to set up the same case again…there must be an inherent jurisdiction in every Court of Justice to prevent such an abuse of its procedure…’.
[9][2011] VSC 279, [68]; Redwood Pty Ltd v Link Market Services Pty Ltd [2007] NSWCA 286, [45].
[10][2001] 53 NSWLR 198, [15] (citations omitted).
Portbury submits that in the Ottedin proceeding, Ottedin raised, or could have raised, matters which are now raised by it in the defence in this proceeding. Insofar as the other defendants now raise defences, most of those defences at least are defences which they raise through Ottedin, which as Ottedin’s privies, are common to them and to Ottedin. As Dixon J observed in the decision of Blair v Curran:[11]
A judicial determination directly involving an issue of fact or of law disposes once and for all of the issue, so that it cannot afterwards be raised between the same parties or their privies.
[11](1939) 62 CLR 464, 531 (emphasis added).
In those circumstances, the question of issue estoppel (Anshun estoppel), res judicata and abuse of process arise and they are as applicable to Goldcare as nominee and Messrs Ottewell and Kosta as guarantors as they are to Ottedin. I shall return to the application of this decision later in these reasons.
In paragraph 26 of the amended statement of claim it is alleged that Ottedin and Goldcare wrongfully purported to avoid the varied contract of sale pursuant to s 29O(2) of the SL Act. In the particulars to that paragraph, reference was made to the decision of Dixon J in the Ottedin proceeding, in particular to the finding that Ottedin and Goldcare wrongfully purported to avoid the varied contract of sale.
In response, the defendants deny that the avoidance of the varied contract of sale was wrongful. Curiously, in apparent support of such a plea, they refer to the judgment in the Ottedin proceeding where Dixon J held that Ottedin had no real prospect of success in contending that it avoided the varied contract of sale pursuant to s 29O(2) of the SL Act. There is now to be no application for leave to appeal from the judgment of Dixon J in the Ottedin proceeding.
Despite the findings of Dixon J and the fact that there is no appeal from his judgment, the defendants plead in paragraph 26B of the amended defence and counterclaim that on 17 January 2011 (when settlement was appointed to occur) the varied contract of sale was still on foot and not rescinded by Portbury and that the letter of that date from Ottedin was sufficient to avoid the varied contract of sale under s 29O(2) of the SL Act. This allegation runs completely counter to the findings of Dixon J in respect of the effectiveness of the rescission notice by Portbury.[12]
[12][2011] VSC 222, [62].
Paragraphs 29 to 34 of the amended statement of claim then move on to allege the service of the notice of rescission by Portbury dated 31 March 2011, the failure to remedy the default specified in the notice and the rescission of the varied contract of sale on 14 April 2011. In that regard, Dixon J observed at paragraph 62:
… it is clear that if the contract had not been already avoided, Portbury was entitled under the contract to serve the notice. Ottedin was in default as particularised in the notice. The validity of the notice was not challenged and the default was not remedied, Ottedin contending that it was not in default as it had earlier validly avoided the contract.
Again, paragraphs 26A through to 34 of the amended defence and counterclaim, the defendants persist in the quest to raise the matters which were clearly before Dixon J in the Ottedin proceeding and which were the subject of detailed findings. In my view, the matters sought to be raised are either res judicata or not able to be contended by reason of an application of the Anshun principle. Insofar as the issues were the subject of consideration in the earlier ruling, there is an issue estoppel and the res judicata doctrine operates to bar such a plea. In particular, the issue concerning the SL Act was expressly decided by the earlier ruling which despite the submission of the defendants’ counsel to the contrary, is clearly final. In the absence of an appeal, I consider that it is an abuse of process to attempt to litigate it. It was suggested by the defendants that the principle of Anshun has no application to this application but even if that be accepted, there was no cogent submission made as to why in any event, I should not follow Dixon J’s reasons in the Ottedin proceeding if I were considering the matter afresh.
From paragraphs 35 to the conclusion of the amended statement of claim, Portbury pleads and particularises the expenses and losses which have been occasioned as a result of the defendants’ breaches. It will be seen below that those matters are the subject of Ms Kelly’s affidavit sworn in support of the application for summary judgment.
In response, the amended defence and counterclaim asserts various matters by way of criticism of the sale process which are not supported by any evidence by the defendants in opposition to Portbury’s application for summary judgment. In paragraph 36, the defendants assert a denial that they have defaulted under the varied contract of sale, which runs completely counter to the findings of Dixon J and is not supported by any evidence. It is said that Portbury has failed to account for any income received by it from tenants but it will be seen that Ms Kelly’s affidavit deposes that Portbury has accounted in that regard. The defendants do not admit that the various costs, fees and expenses resulted from the purported exercise of the power of resale but descend to no particulars in their amended defence and counterclaim as to why this is so, nor do they file any evidence in that regard to support such an assertion.
In paragraph 37 of the amended defence and counterclaim, it is alleged that the costs, fees and expenses referred to in paragraph 36 of the amended statement of claim are in the nature of general damages. That matter was not developed in argument and I do not consider it is sustainable as the items claimed are clearly in my view in the nature of liquidated damages.
In paragraph 38, it is alleged by the defendants that there was no entitlement to exercise a right of resale pursuant to the general conditions of the varied contract of sale but no particulars are provided in that regard nor was such an allegation developed in argument.
Paragraphs 39, 40 and 41 again attempt to relitigate issues which were before Dixon J concerning the operation of s 29O(2) of the SL Act and for the reasons that I have already laboured, such allegations can not be maintained in the face of the decision of Dixon J.
The same situation applies to paragraph 42 where it is again sought to be alleged that the varied contract of sale was a terms contract as defined in the SL Act. Clearly, this runs counter to the findings of Dixon J and, in particular, to paragraph 72 where his Honour states as follows:
I do not consider that the circumstances of this contract will ever provide a basis for contemplation by a court whether there is any ambiguity or uncertainty in the type of contract Parliament intended to be prohibited, or regulated, by Division 4 of Part 1 of the Act. No occasion to imply words into that section, in order to arrive at a different meaning one capable of characterising the contract in this proceeding as a terms contract enabling the purchaser to avoid the contract in the circumstances I have described above, will ever arise in this proceeding. What the Act makes unambiguously clear in my view is that this contract is not a terms contract.
Exactly the same observations are appropriate to be made in respect of paragraphs 43, 43A, 43B, 43D and 43E of the amended defence and counterclaim.
The penalty argument and argument about relief from forfeiture in paragraphs 43D and 43E of the defence and counterclaim cannot in my view to be maintained. The amended statement of claim alleges in paragraph 33 that only 10 percent is forfeited absolutely. As Portbury submits, it is well settled in any event that even the forfeited deposit will have to be brought to account when the vendor calculates its damages upon a resale at a deficiency in price from the original contract.[13] The evidence filed by Portbury reveals that both this amount and any other payments have to be, and have been, accounted for when assessing Portbury’s damages. In its submissions, Portbury made reference to clauses 28.4(d) and (e) of the contract and pointed out that there is no question of ‘forfeiting’ 20 percent of the price. Portbury’s evidence reveals that it has clearly been brought to account.
[13]Holland v Wiltshire (1954) 90 CLR 409; Mallett v Jones [1959] VR 122, 134; Zieme v Gregory [1963] VR 214, 219.
In paragraph 44 of the amended defence and counterclaim, it is alleged that in going about the resale of the property, Portbury has breached the duties to which I have referred to earlier which have been alleged in paragraphs 8B and 8C, paragraphs 15A and 15B, paragraphs 11A and 11B and paragraphs 19A and 19B. It will be recalled that those duties related to the implied requirements of the exercise of the power of sale. The particulars subjoined to paragraph 44 make criticisms of the manner in which the power of sale was exercised. It is asserted that at the time Portbury purported to exercise its right to sell the property it or its agent was or should have been aware of various matters which are detailed in the particulars.
Again, the most obvious point to make about the assertions made in the particulars are that the defendants have not chosen to support them by any evidence in opposition to this application. In addition it will be seen that Ms Kelly details the method by which Portbury embarked on the resale of the property which, despite the various efforts it made, resulted in a significant shortfall on its security. There is no explanation as to why the defendants, if they had evidence to support the matters contended for in the particulars, have not done so in affidavit material. There is reference in subparagraph (a)(viii) of paragraph 44 of the amended defence and counterclaim, for example, that on 15 December 2010 Goldcare received a valuation for the property of $8.1 million and in subparagraph (xi) that in May 2011 Mr Ottewell informed Mr Portbury a director of Portbury that he had that valuation. No evidence at all was put forward to support this. In subparagraph (e) of the particulars it is asserted that on 30 June 2011 the property was worth “well in excess of the resale price” and various assertions are made as to its value ranging from $4.5 million to $8.1 million but again there is no evidence presented at all in support of such assertions. In addition, subparagraph (i) asserts that Portbury failed to adequately market the property and contends that a sale by auction was an inappropriate method to resell it. Such assertion is nowhere developed by admissible evidence. On the other hand, Ms Kelly’s affidavit reveals a tender process which resulted in no offers being submitted, followed by a public auction at which the property was passed in, after which the property was sold to the only bidder at the auction.
Relevant legal principles in applications for summary judgment
Section 63 of the CPA provides:
(1)subject to section 64, a court may give summary judgment in any civil proceeding if satisfied that a claim, a defence or a counterclaim or part of the claim, defence or counterclaim, as the case requires, has no real prospect of success.
(2) A court may give summary judgment in any civil proceeding under subsection (1) –
(a) on the application of a plaintiff in a civil proceeding;
(b) on the application of a defendant in a civil proceeding;
(c)on the court’s own motion, if satisfied that it is desirable to summarily dispose of the civil proceeding.
Section 64 provides:
Despite anything to the contrary in this Part or any rules of court, a court
may order that a civil proceeding proceed to trial if the court is satisfied
that, despite there being no real prospect of success the civil proceeding
should not be disposed of summarily because-
(a) it is not in the interests of justice to do so; or
(b)the dispute is of such a nature that only a full hearing on the merits is appropriate.
The “no real prospect of success” test is less stringent than the “old” test that the claim is hopeless, untenable or bound to fail.[14] In JBS Southern Australia Pty Ltd v Westcity Group Holdings Pty Ltd, Croft J observed at paragraph 44:[15]
It has been held that “real prospect” means that the case must be stronger than merely arguable. However, a party does not need to show that they will probably succeed at trial. Such a requirement would be costly, time consuming and be almost equivalent to running the trial. Nothing would therefore be gained by the summary judgment procedure.
[14]Matthews v SPI Electricity Pty Ltd (Ruling No 2) [2011] VSC 168, [18]-[22].; Spencer v Commonwealth (2010) 241 CLR 118, [24] (French CJ and Gummow J).
[15][2011] VSC 476, [44] (“JBS Southern Australia Pty Ltd”) (citation omitted).
Dixon J’s reasons for judgment in the Ottedin proceeding, which was one of the earlier authorities dealing with the summary procedure under s 63 of the CPA, comprehensively surveyed the principles to be applied in applications of this type. That discussion is set out in paragraphs 7 to 18 of the reasons for judgment. At paragraph 18 he summarised the principles which now apply, stating them to be as follows:[16]
[16][2011] VSC 222, [18].
(1)If a proceeding or defence, or any particular claim, cause of action or ground of defence (“claim”) is hopeless, untenable, bound to fail, or could not possibly succeed, then it ought be summarily dismissed. In other words, a claim which ought be dismissed under the old test will be dismissed under s 63.
(2)Section 63, however, is less stringent. It does not direct an inquiry into whether a certain and concluded determination could be made that the proceeding, or a claim, would necessarily fail. What is required is a practical judgment by the court as to whether a claim has more than a “fanciful” prospect of success.
(3)The court’s discretion whether to exercise the power of summary dismissal is very wide. Section 64 of the Act expresses that the power is based in a consideration of the interests of justice. The Act provides direction in Part 2.1.[17] The discretion is to be exercised to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute between the parties. The court’s powers in furthering the overarching purpose are facilitated by having regard to the objects and matters set out in s 9 of the Act.
(4)The court may be satisfied, on an interlocutory application, that there is no real prospect of success in a civil proceeding but nevertheless consider the dispute to be of such a nature that only a full hearing on the merits is appropriate. Whether a full hearing on the merits is appropriate is a relevant discretionary consideration in the circumstances of each proceeding.
(5)The power to order summary dismissal is to be exercised with great care, as a trial upon evidence of issues raised is the well-settled approach to the determination of litigation. When proceeding on a summary application to assess the prospect of success, a judge ought to feel confident that an assessment can properly be made of whether the overarching purpose is facilitated on dismissal of the impugned claims.
(6)That argument directed to the issues relevant on the application, perhaps even extensive submissions, may be necessary to demonstrate that the case of the plaintiff has no real prospect of success is not ordinarily a relevant consideration.
[17]Sections 7-9.
The principles to be applied are also comprehensively surveyed by Croft J in JBS Southern Australia Pty Ltd in paragraph 36 to 50.[18]
[18][2011] VSC 476, [36]-[50]
The evidence filed in this application
I now turn to the evidence filed by the parties in the application for summary judgment.
Mr Lynch, in his affidavit of 27 October 2011, deposes to the events leading up to the decision by Dixon J in the Ottedin proceeding. That affidavit establishes that Ottedin defaulted under the Contract of Sale for the property and that on 31 March 2011, Portbury’s solicitors served a rescission notice on all the defendants requiring payment of the balance due under the varied Contract of Sale. Ottedin failed to remedy the default and the varied Contract of Sale was brought to an end upon the expiry of the rescission notice.
This prompted Ottedin to commence the Ottedin proceeding, culminating in the judgment of Dixon J. In the Ottedin proceeding, Ottedin alleged that because of non‑compliance by Portbury with provisions of s 29O of the SL Act, Ottedin was entitled to and did terminate the varied Contract of Sale. As a result, it alleged that it was entitled to recover the deposit which it had paid Portbury. Dixon J summarised the issues for his consideration as being:
1)whether the contract a terms contract;
2)if so, whether Ottedin was able to avoid it under s 29O of the SL Act;
3)if it was, whether had Ottedin waived that right.
Dixon J concluded[19] that the contract was not a terms contract, resulting in an order that Ottedin’s proceeding be dismissed and that the caveat which had been placed on the property be removed.
[19][2011] VSC 222, [67].
The matters deposed to by Mr Lynch in his affidavit merely reiterate the findings made by Dixon J in his judgment up to and including the rescission of the contract and, in my view as I have said earlier, such findings cannot now be revisited.
In her affidavit, Ms Kelly deposes that she is the business manager of Portbury. Her evidence is directed to the events surrounding the resale of the property subsequent to Dixon J’s judgment. In her current capacity, she is involved in the overall financial and business management of Portbury and other related companies within the Portbury group. She is responsible for all accounting, financial, legal, insurance and banking requirements for the group of companies, including Portbury itself. She was involved in the events surrounding the aborted sale of the property to Ottedin, culminating in the rescission of the contract in April 2011, a subsequent attempt to sell the property in May 2011, the auction sale of the property on 29 June 2011 and its sale on the following day to the only bidder at the auction.
Ms Kelly deposes that the property was previously part of a larger land holding comprising five adjoining lots of land totalling approximately 49.2 hectares, which she describes in her affidavit as “the development site”. In May 2011, the development site was offered for sale by tender, either as a whole or in separate lots. The tender closed at 4 pm on Thursday 12 May 2011. No offers were received to purchase the property. This caused Portbury embarrassment with its banker, National Australia Bank, who became concerned that Portbury’s loan to value ratio was unacceptably high. As a result, Portbury indicated to the National Australia Bank that it would auction the property before 30 June 2011.
The property was auctioned on 29 June 2011. The auction was advertised in the Saturday and Wednesday editions of The Age and Pakenham Gazette in the weeks leading up to the auction. While there was a good crowd in attendance at the auction, there was only one bid received and the property was passed in. After further negotiations with the bidder and because of the pressure to sell coming from the National Australia Bank, Portbury entered into a contract of sale with Parklea Estate Pty Ltd for the sale of the property for $2.1 million.
Settlement of the sale to Parklea Estate Pty Ltd occurred on 30 August 2011. The varied contract with Ottedin provided for a sale price of $6.5 million and Portbury suffered a shortfall of $4.4 million on the resale of the property.
Ms Kelly makes reference to clause 28.4 of the contract between Portbury and Ottedin and Goldcare. Under that clause, Portbury may within one year of the contract ending resell the property in any manner and recover the deficiency on the price and any resulting expenses by way of liquidated damages.
Ms Kelly details the losses which represent those damages in paragraph 15 of her affidavit. Her evidence is not contradicted by the defendants, it is not suggested that it is in any way implausible and I consider that there is no reason not to accept Ms Kelly’s evidence. As I have stated above, it will be seen that in their amended defence and counterclaim, certain duties were said to be owed to the defendants in the resale process. Even if it is accepted that those duties existed, the defendants have not, by any evidence, developed the assertions made in that regard in the amended defence and counterclaim.
In paragraph 16 of her affidavit, Ms Kelly summarises how the indebtedness to Portbury in the amount of $3,691,902.29 as at 2 August 2011 is arrived at. That date is the date of the amended statement of claim. The shortfall of $4.4 million, together with the attendant expenses and interest is totalled. Applied against that figure is the deposit of $1.325 million paid pursuant to the Contract of Sale and Deed of Variation of Contract. In addition, there was a tenancy to a Mr and Mrs Phelan who had occupied the property pursuant to a lease which expired on 1 January 2011. On expiry of the lease, Mr and Mrs Phelan were permitted to remain in possession of the property as month to month tenants. Portbury accepts that the amount of the net rent derived, $8,520.77, should also be deducted from the total owing. This results in an amount of $3,683,382.07 as being owing to Portbury by the defendants.
As I have said, the defendants themselves have not filed affidavits in opposition to this application and rely on the affidavit of their solicitor, Mr Warren, affirmed 9 December 2011 in opposition to Portbury’s application for summary judgment. Mr Warren was not the solicitor for the defendants in the Ottedin proceeding. The first 17 paragraphs of that affidavit depose to factual background which is not controversial. Mr Warren relates his instructions from the third defendant, Mr Ottewell, in relation to events leading up to the hearing before Dixon J. Mr Warren seeks to raise in paragraphs 20 to 23 of his affidavit arguments which were not raised but which clearly could have been raised before Dixon J in the Ottedin proceeding. The same is the position in regard to the matters mentioned in paragraphs 25 and 26.
In my view, by reason of Dixon J’s judgment in the Ottedin proceeding, it is not permissible for me to take such matters into account in hearing an application for summary judgment in this proceeding, which is confined to Portbury’s rights to recover its damages subsequent to the rescission of the contract by Portbury and the resale of the property and what defences and counterclaims have arisen since the events which have been the subject of findings in the Ottedin proceeding. The remainder of the affidavit raises no substantive evidence in opposition to Portbury’s application for summary judgment. In particular, there is no evidence directed to impeaching the process involved in the resale of the property.
In terms of r 22.04 of the Rules, which provides that a defendant to an application for summary judgment may “show cause” against the application, the affidavit of Mr Warren does not put forward any evidence or provide any basis for persuading me that there is a need for a trial to resolve this proceeding.
I consider that Portbury has established the matters required to be proved in order for it to be entitled to summary judgment and that a full hearing on the merits is not justified. Further, I cannot accept that there is any discretionary basis why, under the terms of s 64, the matter is one which should be permitted to proceed to trial by reason of the interests of justice or that, by reason of the nature of the proceeding, only a full hearing would be appropriate. The defendants’ counterclaim is based on the same averments and admissions in the defence and its existence would not be a reason in my view to postpone Portbury’s entitlement to judgment now.
In my view, Portbury is entitled to judgment against the defendants including interest and costs. I will also order the defendants to pay the costs of the proceeding including the costs of this application and any reserved costs. Further, the defendants’ application filed 13 December 2011 for leave pursuant to r 11.05(2)(b) to file a third party notice upon Duffy & Simon Lawyers is dismissed. The defendants are ordered to pay the costs of that application.
I will ask the plaintiff to submit a form of order consistent with the above for my consideration.
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