Sheraz Pty Ltd v Vegas Enterprises Pty Ltd
[2015] WASCA 4
•16 JANUARY 2015
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: SHERAZ PTY LTD -v- VEGAS ENTERPRISES PTY LTD [2015] WASCA 4
CORAM: BUSS JA
MURPHY JA
CHANEY J
HEARD: 14 MARCH & 22 AUGUST 2014 & ON THE PAPERS
DELIVERED : 16 JANUARY 2015
FILE NO/S: CACV 26 of 2013
BETWEEN: SHERAZ PTY LTD as Trustee for the TERRANORA FAMILY TRUST
Appellant
AND
VEGAS ENTERPRISES PTY LTD
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :MASTER SANDERSON
Citation :SHERAZ PTY LTD -v- VEGAS ENTERPRISES PTY LTD [2013] WASC 45
File No :CIV 2648 of 2012
Catchwords:
Res judicata estoppels - Alleged attempt to relitigate matter determined in earlier proceedings in Federal Court - Relationship between claimant in earlier proceedings and plaintiff company in fresh proceedings - Claimant in earlier proceedings controlled the plaintiff company and it was his alter ego - Plaintiff company was trustee of discretionary trust - Plaintiff company had own (alleged) rights - No privity pursuant to general principles - No exception to privity doctrine - No res judicata estoppels
Practice and procedure - Preclusionary principles - Alleged attempt to relitigate matter determined in Federal Court - Abuse of process - Claim should have been raised in Federal Court - Substantial identity between earlier Federal Court action and Supreme Court action - Claimant in Federal Court action controlled the plaintiff company and it was his alter ego - No requirement for identity of parties - Plaintiff company's claim could and should have been raised in Federal Court - Supreme Court action unfairly burdensome and oppressive to defendant
Practice and procedure - Preclusionary principles - Attempt to litigate matter determined in Federal Court - Abuse of process - Potential for conflicting judgments - Collateral attack on earlier proceedings
Practice and procedure - Fresh evidence - Failure to postpone delivery of reasons - No affidavit provided - No error and in any event, no substance to claims - Turns on own facts
Practice and procedure - Pleadings - Misleading and deceptive conduct - Alleged representation not reasonably arguable - Turns on own facts
Practice and procedure - Application for leave to amend notice of contention during hearing of appeal - Opposed by appellant - No merit in grounds raised in opposition - Leave to amend granted
Legislation:
Corporations Act 2001 (Cth), s 1041H
Fair Trading Act 1987 (WA), s 10
Federal Court of Australia Act 1976 (Cth), S 37M, s 51A
Federal Court Rules 1979 (Cth), O 6 r 2, O 29 r 5
Rules of the Supreme Court 1971 (WA), O 16, O 20 r 19(1)(a), O 20 r 19 9(1)(b), O 20 r 19(1)(d)
Trade Practices Act 1974 (Cth), s 52, pt V
Result:
Appeal dismissed
Category: A
Representation:
Counsel:
Appellant: Mr P G Clifford & Mr A P Rumsley
Respondent: Ms P E Cahill SC & Mr N J Landis
Solicitors:
Appellant: Alan Rumsley
Respondent: Clifford Chance
Case(s) referred to in judgment(s):
A Goninan & Co Ltd v Atlas Steels (Aust) Pty Ltd [2003] NSWSC 956
Ann Street Mezzanine Pty Ltd (in liq) v Beck [2009] FCA 333; (2009) 175 FCR 532
Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175
Archer v Howell (No 2) (1992) 10 WAR 33
Aristocrat Technologies Australia Pty Ltd v Global Gaming Supplies Pty Ltd [2007] FCA 943
Asher v Secretary of State for the Environment [1974] EWCA Civ J 0131‑1; [1974] Ch 208
Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256
Blair v Curran [1939] HCA 23; (1939) 62 CLR 464
Bradford and Bingley Building Society v Seddon [1999] EWCA Civ J 0311‑6; [1999] 1 WLR 1482
Cannon Australia Pty Ltd v Patton [2007] NSWCA 246; (2007) 244 ALR 759
Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33; (2010) 75 NSWLR 245
Cheesman v Waters [1997] FCA 90; (1997) 77 FCR 221
Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 5] [2009] WASC 141
Clay v Karlson (1997) 17 WAR 493
Clifford v Vegas Enterprises Pty Ltd (No 4) [2010] FCA 326
Clifford v Vegas Enterprises Pty Ltd (No 5) [2010] FCA 916; (2010) 272 ALR 198
Clifford v Vegas Enterprises Pty Ltd [2011] FCAFC 135
Commonwealth Bank of Australia v Quade [1991] HCA 61; (1991) 178 CLR 134
Commonwealth Bank of Australia v Susan Hannaford Pty Ltd (No 5) [2013] NSWSC 1175
Connelly v Director of Public Prosecutions [1964] AC 1254
Dissidomino v Butcher Paull & Caulder (a firm) [2005] WASCA 210
Dow Jones and Company Inc v Gutnick [2002] HCA 56; (2002) 210 CLR 575
Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (in liq) [1993] FCA 342; (1993) 43 FCR 510
Gracechurch Holdings Pty Ltd v Breeze (1992) 7 WAR 518
Habib v Radio 2UE Sydney Pty Ltd [2009] NSWCA 231
Haines v Australian Broadcasting Corporation [1995] NSWSC 136; (1995) 43 NSWLR 404
Henderson v Henderson (1843) 3 Hare 100
Hinchcliffe v Carroll [1969] VR 164
Hunter v Chief Constable of the West Midlands Police [1982] AC 529
In the matter of HIH Insurance Ltd (in liq) Re; De Bortoli Wines (Superannuation) Pty Ltd v McGrath [2014] NSWSC 774
Island Maritime Ltd v Filipowski [2006] HCA 30; (2006) 226 CLR 328
Jago v District Court (NSW) [1989] HCA 46; (1989) 168 CLR 23
Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43; (2009) 239 CLR 75
Johnson v Gore Wood & Co [2002] 2 AC 1
Kermani v Westpac Banking Corporation [2012] VSCA 42; (2012) 36 VR 130
Lock v Norborne [1793] 3 Mod 141; 87 ER 91
MCC Proceeds Inc v Lehman Bros International (Europe) [1998] 4 All ER 675
Michael Wilson & Partners Ltd v Nicholls [2011] HCA 48; (2011) 244 CLR 427
Morris v Wentworth‑Stanley [1998] EWCA Civ J 0904‑6; [1999] QB 1004
Moti v The Queen [2011] HCA 50; (2011) 86 ALJR 117
Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd [2011] WASCA 76; (2011) 248 FLR 193
Partridge v McIntosh & Sons Ltd [1933] HCA 38; (1933) 49 CLR 453
Plaintiff S3/2013 v Minister for Immigration and Citizenship [2013] HCA 22; (2013) 87 ALJR 676
PNJ v The Queen [2009] HCA 6; (2009) 83 ALJR 384
Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589
Pyke v Crouch (1701) 1 LD Raym 730; 91 ER 1387
Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271
Reichel v Magrath (1889) 14 App Cas 665
Ridgeway v The Queen [1995] HCA 66; (1995) 184 CLR 19
Rippon v Chilcotin Pty Ltd [2001] NSWCA 142; (2001) 53 NSWLR 198
Rogers v The Queen [1994] HCA 42; (1994) 181 CLR 251
Rosebridge Nominees Pty Ltd v Commonwealth Bank of Australia [No 6] [2014] WASC 203
Sandtara Pty Ltd v Abigroup Ltd [1997] NSWSC 294; (1997) 42 NSWLR 5
Secure Parking (WA) Pty Ltd v Wilson [2012] WASCA 230
Sheraz Pty Ltd v Vegas Enterprises Pty Ltd [2013] WASC 45
Slinger v Southern White Pty Ltd [2005] SASC 267; (2005) 92 SASR 303
Spalla v St George Motor Finance Ltd (No 6) [2004] FCA 1699
Spencer v Williams (1871) LR 2 P & D 230
State Bank of NSW Ltd v Alexander Stenhouse Ltd (1997) Aust Torts Rep 81‑243
Thoday v Thoday [1963] EWCA Civ 1219‑1; [1964] P 181
Thomas v Balanced Securities Ltd [2011] QCA 258; [2012] 2 Qd R 482
Tiufino v Warland [2010] NSWCA 110; (2010) 50 NSWLR 104
Toubia v Schwenke [2002] NSWCA 34; (2002) 54 NSWLR 46
Trawl Industries of Australia Pty Ltd (in liq) v Effem Foods Pty Ltd [1992] FCA 272; (1992) 36 FCR 406
Walton v Gardiner [1993] HCA 77; (1993) 177 CLR 378
Weimann v Allphones Retail Pty Ltd (No 3) [2009] FCA 1292
Wentworth v Rogers (No 5) (1986) 6 NSWLR 534
White and Libut v Thompson [2011] NSWCA 161
Zavodnyik v Alex Constructions Pty Ltd [2005] NSWCA 438; (2005) 67 NSWLR 457
BUSS JA: I agree with the orders proposed by Murphy JA.
I agree with Murphy JA, for the reasons he gives, that:
(a)the respondent should be granted leave to amend its notice of contention;
(b)ground 1 of the appeal has been made out;
(c)ground 3 of the appeal is without merit;
(d)ground 4 of the appeal is without merit;
(e)it is unnecessary to consider the first aspect relating to abuse of process in ground 2 of the notice of contention; and
(f)the second aspect relating to the financial performance representation in ground 2 of the notice of contention has been made out, although it is unnecessary to rely upon that matter for the disposition of the appeal.
Subject to the following observations, I agree with Murphy JA's conclusions, and generally with his Honour's reasons, in relation to ground 2 of the appeal and amended ground 1 of the notice of contention.
Every court has inherent or implied power to prevent its procedures being abused. See Hunter v Chief Constable of the West Midlands Police [1982] AC 529, 536 (Lord Diplock); Rogers v The Queen [1994] HCA 42; (1994) 181 CLR 251, 286 (McHugh J).
What will constitute an abuse of process is incapable of being described exhaustively. See Batistatos v Roads and Traffic Authority (NSW) [2006] HCA 27; (2006) 226 CLR 256 [9] ‑ [15] (Gleeson CJ, Gummow, Hayne & Crennan JJ); PNJ v The Queen [2009] HCA 6; (2009) 83 ALJR 384 [3] (French CJ, Gummow, Hayne, Crennan & Kiefel JJ).
The High Court has stated, however, that at least one of three characteristics will be apparent in many cases of abuse of process, namely:
(a)a court's processes being invoked for an illegitimate or collateral purpose;
(b)the use of a court's procedures being unjustifiably oppressive to a party; or
(c)the use of a court's procedures bringing the administration of justice into disrepute.
See Rogers (286) (McHugh J); Batistatos [15]; PNJ [3]; Moti v The Queen [2011] HCA 50; (2011) 86 ALJR 117 [10] (French CJ, Gummow, Hayne, Crennan, Kiefel & Bell JJ).
Several propositions as to the nature of abuse of process, and what can constitute abuse of process, may be discerned from the reasons of French CJ, Gummow, Hayne and Crennan JJ in Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd [2009] HCA 43; (2009) 239 CLR 75 [27] ‑ [28].
First, a court has inherent or implied power to prevent misuse of its procedures in a manner which, although not inconsistent with the literal application of its procedural rules, would nevertheless be 'manifestly unfair to a party to litigation … or would otherwise bring the administration of justice into disrepute among right-thinking people' (Hunter (536) (Lord Diplock), adopted by the majority (Mason CJ, Deane & Dawson JJ) in Walton v Gardiner [1993] HCA 77; (1993) 177 CLR 378, 393). Secondly, abuse of process extends to proceedings that are 'seriously and unfairly burdensome, prejudicial or damaging' or 'productive of serious and unjustified trouble and harassment' (Ridgeway v The Queen [1995] HCA 66; (1995) 184 CLR 19, 74 ‑ 75 (Gaudron J), approved in Batistatos [14] (Gleeson CJ, Gummow, Hayne & Crennan JJ)). Thirdly, the categories of abuse of process are not closed, and a court may exercise its power in relation to an abuse of process 'as and when the administration of justice demands' (Jago v District Court (NSW) [1989] HCA 46; (1989) 168 CLR 23, 74 (Gaudron J), approved in Walton (394) (Mason CJ, Deane & Dawson JJ)). Fourthly, the categories of conduct which have attracted the intervention of the courts on the ground of abuse of process have included successive proceedings which cause or are likely to cause 'improper vexation or oppression' (Jacob IH, 'The Inherent Jurisdiction of the Court' (1970) 23 Current Legal Problems 23, 43).
In Reichel v Magrath (1889) 14 App Cas 665, Lord Halsbury LC said:
I think 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 …
I believe there must be an inherent jurisdiction in every Court of Justice to prevent such an abuse of its procedure (668).
See also the speech of Lord Watson (668).
In Walton, Mason CJ, Deane and Dawson JJ said the powers of a court in relation to proceedings that are an abuse of process extend to 'all those categories of cases in which the processes and procedures of the court, which exist to administer justice with fairness and impartiality, may be converted into instruments of injustice or unfairness' (393). An example given by their Honours of such an abuse of process is where an estoppel cannot be established, but the proceedings in question are unjustifiably oppressive in that it is sought to re‑litigate an issue which has already been disposed of by earlier proceedings.
It is well‑established by a long line of authority, including Reichel and Walton, that the principles of abuse of process are not confined by the doctrines of res judicata, issue estoppel and Anshun estoppel. A court may invoke those principles to prevent attempts to litigate an issue which should have been litigated in earlier proceedings, as well as to prevent attempts to re‑litigate an issue which has, in substance, been litigated and determined in earlier proceedings. See, for example, Connelly v Director of Public Prosecutions [1964] AC 1254, 1361 ‑ 1362 (Lord Pearce); Rogers (286 ‑ 287); Spalla v St George Motor Finance Ltd (No 6) [2004] FCA 1699 [58] ‑ [70] (French J); Island Maritime Ltd v Filipowski [2006] HCA 30; (2006) 226 CLR 328 [31] ‑ [32] (Gleeson CJ, Heydon & Crennan JJ); Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 [34] (French CJ); Plaintiff S3/2013 v Minister for Immigration and Citizenship [2013] HCA 22; (2013) 87 ALJR 676 [11] ‑ [12] (Gageler J).
Both Reichel and Rippon v Chilcotin Pty Ltd [2001] NSWCA 142; (2001) 53 NSWLR 198 concerned a plaintiff who sought to make a claim in later proceedings based wholly or substantially on the facts of an unsuccessful claim made by the plaintiff in earlier proceedings. The only material difference was that the later proceedings were brought against a different defendant. The later proceedings were dismissed as an abuse of process.
MCC Proceeds Inc v Lehman Bros International (Europe) [1998] 4 All ER 675 concerned two proceedings in English courts. Both actions arose out of transactions in the shares of Berlitz International Inc (Berlitz), a New York company, involving companies controlled by the late Robert Maxwell.
The plaintiff in the first action was Macmillan Inc, a Delaware company. The defendants in the first action included Shearson Lehman Bros Holdings plc (SL). In the first action Macmillan Inc sought to recover certain Berlitz shares from the defendants. Its claim was dismissed. There was an appeal from the dismissal of Macmillan Inc's claim but the appeal was dismissed by consent.
After the claim in the first action was dismissed, Macmillan Inc became insolvent and its rights in respect of the shares in Berlitz were assigned to MCC Proceeds Inc, a Delaware company.
The plaintiff in the second action was MCC Proceeds Inc. The defendant in the second action was Lehman Bros International (Europe).
Neither of the parties to the second action was a party to the first action. None of the parties to the first action was a party to the second action. However, the plaintiff in the second action (MCC Proceeds Inc) was the successor and assignee of the plaintiff in the first action (Macmillan Inc) in relation to the relevant Berlitz shares and share certificates, and the defendant in the second action (Lehman Bros International (Europe)) was a wholly‑owned subsidiary of SL, one of the defendants in the first action.
The shares the subject of the claim in the second action were the same as the shares the subject matter of the claim in the first action.
In the Court of Appeal, Mummery LJ (Pill LJ agreeing) held, relevantly, that the second action was an abuse of process because the substantial issue raised in the second action (that is, title to the relevant Berlitz shares) had already been decided, on both law and fact, in the first action in circumstances which precluded MCC Proceeds Inc from attempting to re‑litigate that issue (696).
As Mummery LJ noted, the focus in applying the principles of abuse of process should be on matters of substance, not form (695). His Lordship said in relation to the facts of the case before the Court of Appeal:
[T]here was a community of interest between [Lehman Bros International (Europe)] and SL in respect of the Berlitz shares claimed by Macmillan, such that the issue of title to the Berlitz shares and the certificates has been
finally resolved as between MCC Proceeds and [Lehman Bros International (Europe)], as well as between Macmillan and SL. SL had control of [Lehman Bros International (Europe)] in relation to the assertions of interest to the subject matter of the first action. There was no valid reason for Macmillan not joining [Lehman Bros International (Europe)] as a defendant to the first action, so that all claims in relation to the title to the Berlitz shares could be decided in the same action and bind all interested parties (696).
See also White and Libut v Thompson [2011] NSWCA 161 [51] ‑ [58] (Handley AJA, Basten & Young JJA agreeing).
In the present case, I am satisfied, generally for the reasons given by Murphy JA, that, in the circumstances, the commencement and maintenance by the appellant of the Supreme Court action against the respondent was seriously and unfairly burdensome or unjustifiably oppressive to the respondent; the action was an abuse of process; and the master's decision to dismiss the appellant's claim and enter judgment for the respondent was correct.
Finally, I record my agreement with Chaney J's comments about Mr Clifford having appeared for and argued the appeal, as a barrister instructed by Alan Rumsley (a solicitor), on behalf of the appellant.
MURPHY JA:
Introduction
The appellant company (Sheraz) was at all material times the trustee of a discretionary family trust. Mr Clifford, a barrister, at all material times controlled Sheraz. He was also a beneficiary under the terms of the discretionary family trust.
In 2006, Mr Clifford caused Sheraz to acquire shares in the respondent, a surf wear company (Vegas). By about July 2006, Vegas had acquired the controlling interest in the company which, in effect, owned the 'Rusty' surf wear brand.
Mr Clifford was, and had been for some time, an advisor to Vegas. Mr Clifford thought (as found by the primary judge in the Federal Court proceedings referred to below) that Vegas' 'star was on the rise' in the surf wear business: Clifford v Vegas Enterprises Pty Ltd (No 5) [2010] FCA 916; (2010) 272 ALR 198 [325]. The investment was a substantial one. The investment, according to Mr Clifford, proved not to be advantageous.
In 2009, Mr Clifford commenced proceedings in the Federal Court of Australia, in his own name, alleging that the investment was brought about by the misleading or deceptive conduct of Vegas. He alleged that the shares in Vegas which had been acquired by Sheraz were beneficially owned by him under a bare trust and that he had personally suffered the loss occasioned by the investment. The trial went for nine days. Mr Clifford's action was dismissed. Mr Clifford appealed. He lost the appeal.
After this, Mr Clifford caused Sheraz to commence proceedings in the Supreme Court of Western Australia against Vegas in relation to the same investment. This time, it was alleged that Sheraz, as trustee of the discretionary trust, was the entity that suffered the loss. The loss was again said to be caused by the misleading or deceptive conduct of Vegas.
On the application of Vegas, the learned master found that the principles precluding relitigation applied to Sheraz's action in the Supreme Court and he entered summary judgment in favour of Vegas. Sheraz appeals the learned master's decision. For the reasons which follow, the appeal should be dismissed.
(All references to paragraph numbers below are to those in the reasons for judgment of Barker J in the Federal Court: Clifford v Vegas Enterprises Pty Ltd (No 5) [2010] FCA 916; (2010) 272 ALR 198, unless otherwise indicated. Also, all figures or sums referred to below are approximate.)
The Federal Court action
In 2009, Mr Clifford brought proceedings against Vegas and two directors of Vegas in the Federal Court of Australia. The trial in the Federal Court occurred over the period 22 ‑ 26, 29 and 31 March 2010 and 1 and 16 April 2010 before Barker J.
Mr Clifford's allegations in those proceedings included allegations to the following effect:
(a)on 19 December 2006, Vegas issued 660,160 shares to Sheraz in consideration for the payment of $2.37 million [2];
(b)also on 19 December 2006, Sheraz purchased from a third party a further 41,229 shares in Vegas for the sum of $170,000 [2];
(c)the shares issued to and purchased by Sheraz were held beneficially by Mr Clifford and, in that regard, Sheraz held the shares as bare trustee pursuant to a 'common intention' trust [384] ‑ [388], [390] ‑ [400]; and
(d)the shares in Vegas were acquired by Sheraz as bare trustee for Mr Clifford in circumstances where (relevantly):
(i)Vegas made positive representations to Mr Clifford described as 'the bank debt representations', the 'product representations', and 'the sales representations' [24] ‑ [27]; and
(ii)Vegas failed to disclose to Mr Clifford certain alleged material facts by which he was deceived by Vegas' silence (which I will refer to as the 'alleged non‑disclosures') [22], [284] ‑ [285].
As to the facts the subject of alleged non‑disclosures, it was alleged, in effect, that [22], [284] ‑ [285]:
(a)in the period January up to about October 2006, Vegas was not meeting its budgeted sales;
(b)in July 2006 to November 2006, Vegas increased its overdraft limit with Westpac and drew down amounts beyond its overdraft in order to provide working capital to meet a shortfall in cash flow;
(c)Vegas also arranged for existing shareholders to pay $1.5 million (a sum of $1 million plus a further sum of $500,000) by way of loans for working capital; and
(d)on or about 19 December 2006, Vegas paid the $2.3 million received from Mr Clifford as follows:
(i)the sum of $500,000 was used to repay the existing shareholder loans; and
(ii)$1,870,987 was paid to reduce Vegas' overdraft facility with Westpac.
It was alleged that the positive representations and the alleged non‑disclosures constituted misleading or deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth) (TPA) and/or misleading or deceptive conduct contrary to s 1041H of the Corporations Act 2001 (Cth) [42], [46].
As to reliance and causation, it was alleged that:
(a)Mr Clifford paid to Vegas the sum of $2.37 million in return for the newly issued shares issued to Sheraz; paid to the third party the sum of $170,000 in return for the purchase of shares in Vegas; and borrowed the sum of $2.37 million from the ANZ Bank, which had been paid to Vegas [23];
(b)had Mr Clifford been told of the matters the subject of the alleged non‑disclosures, he would not have made the payments for the shares in Vegas on 19 December 2006 or borrowed such monies [23];
(c)Mr Clifford also entered into the share transactions on 19 December 2006 in reliance on the positive representations [30], [31]; and
(d)by reason of the alleged contraventions, Mr Clifford suffered loss or damage being costs and expenses incurred of approximately $2.7 million (the acquisition price plus borrowing costs) and on the basis that the shares held by Sheraz in Vegas as bare trustee for Mr Clifford were 'unsaleable' [44], [48].
Mr Clifford claimed:
(a)a refund of the acquisition price of $2,553,894.60, upon payment of which Mr Clifford would execute share transfers so as to retransfer the shares to Vegas or to Vegas' nominee;
(b)interest on that sum pursuant to s 51A of the Federal Court Act 1976 (Cth); and
(c)the sum of $206,964.69 representing the costs of bank fees, interest and stamp duty paid by Mr Clifford on monies borrowed by Mr Clifford to pay the acquisition price [378] ‑ [380].
Mr Clifford also had similar claims against the two directors of Vegas on the basis that they were allegedly directly or indirectly knowingly concerned in or a party to the alleged contraventions by Vegas and/or were directly liable for breaches of s 10 of the Fair Trading Act 1987 (WA) [43], [47], [49].
Vegas and its directors contested both liability and Mr Clifford's claim that he had suffered loss. Barker J, in his reasons referred to below, summarised the parties' basic contentions in these terms:
Mr Clifford's basic contention is that, from at least 19 July 2006, when Vegas purchased … and gained control of Rdot [the entity effectively owning the 'Rusty' brand], Vegas was under significant financial pressure. He says the evidence of this is incontrovertible. He seeks to imply the respondents were anxious to invite his investment in Vegas because of the financial pressure Vegas was under, and held back vital information that would have disclosed the problem and caused Mr Clifford to decline the investment opportunity. Indeed, Mr Clifford says he did not initiate the investment discussions; rather, Mr Hart did.
The respondents deny the applicant's pleaded case, reject the proposition that Mr Hart initiated investment discussions with Mr Clifford, refute the construction that the applicant places on known facts, seek to clarify the sequence of events, say that Mr Clifford knew all he needed to know about Vegas' financial position when he chose to take up the investment and should have asked for more information if he needed it, and contend none of the representations or conduct complained of was material to Mr Clifford’s investments decision in any event [57] ‑ [58].
The Federal Court decision
The primary judge in the Federal Court, Barker J, delivered reasons for judgment on 24 August 2010.
His Honour dismissed Mr Clifford's action on the basis that:
(a)he was not satisfied that the bank representations and the product representations had been made [5], [264], [283];
(b)the sale representations had not been relied upon by Mr Clifford and, in any event, Vegas had reasonable grounds for making them [6], [228], [243]; and
(c)there was no misleading or deceptive conduct by reason of the alleged non‑disclosures [7], [377].
In addition to the allegations of contravening conduct, in the Federal Court there was also an issue as to whether Mr Clifford himself suffered loss in relation to the acquisition of shares in Vegas by Sheraz [383]. His Honour also went on to consider, hypothetically, the question of relief in the event that Mr Clifford had established the alleged contravening conduct ([378] ff).
In relation to loss, Mr Clifford's case, in the end, was that Sheraz held the shares as bare trustee for him under a common intention trust [384] ‑ [386], [390], [392]. Vegas (and the directors), however, had alleged that Sheraz was the legal and beneficial owner of the shares [389]. In this regard, Vegas contended that Mr Clifford had referred in his evidence to the fact that Sheraz was a trustee for the Terranora Family Trust, which was a discretionary family trust, of which Mr Clifford was a beneficiary, and that Mr Clifford had (until 16 February 2010) relied on 'his position as a beneficiary of [that] trust to establish his beneficial trust [sic] in the shares' [407]. Vegas contended that Mr Clifford had no beneficial interest in the assets of that trust [408].
Mr Clifford resisted that argument. He said that Sheraz 'would be estopped' from denying that Mr Clifford was the beneficial owner of those shares in Vegas [391]. One of the arguments advanced by Mr Clifford in support of his claim that there was a common intention trust was the fact that Mr Clifford 'controlled Sheraz' [395].
In addressing this issue, Barker J said that the evidence in the case showed that Sheraz, at material times, acted as trustee of the Terranora Family Trust which was a discretionary trust of which Mr Clifford was a beneficiary [405], but there was 'of course, nothing to prevent Sheraz from acting as a trustee in different capacities' [418].
His Honour recorded that it was not contended by Mr Clifford that the shares were held by Sheraz on trust for him pursuant to a presumed resulting trust [410].
Barker J ultimately accepted Mr Clifford's arguments to the effect that Sheraz held the shares beneficially for Mr Clifford on a bare common intention constructive trust [421]. Amongst other things, his Honour found as a fact that Mr Clifford controlled Sheraz [421(2)].
On the question of hypothetical remedy, his Honour found, in effect, that:
(a)Sheraz held the shares as bare trustee for Mr Clifford on a common intention trust [421];
(b)the shares were unsaleable [436]; and
(c)it would (hypothetically) be appropriate in the circumstances to order a refund of the shares on the basis that Mr Clifford would execute transfers in favour of Vegas or its nominee [448], [454].
The Federal Court appeal
In 2010, Mr Clifford appealed Barker J's decision. The matter was heard by North, Besanko and Jessup JJ. The Full Court delivered reasons for judgment on 3 November 2011: Clifford v Vegas Enterprises Pty Ltd [2011] FCAFC 135 (Full Court reasons). In the appeal, Vegas and the directors also alleged, by way of notice of contention, that Barker J had erred in finding that the shares in Vegas held by Sheraz were held as bare trustee for Mr Clifford, and that his Honour erred in finding that it would have been appropriate, had liability been established, to order the return of the acquisition price [246]. The Full Court upheld the primary judge's findings on liability and dismissed the appeal on that basis [1] (North J), [183], [226] (Besanko J), [273] (Jessup J). The Full Court also held, however, that Barker J had erred in finding that the shares in Vegas were held by Sheraz as bare trustee for Mr Clifford [1] (North J), [261] (Besanko J), [273] (Jessup J).
The Supreme Court action
After the Federal Court action failed, further proceedings were commenced for alleged misleading or deceptive conduct in relation to the issue to Sheraz of the 600,160 shares in the capital of Vegas and the purchase by Sheraz of 170,000 shares in Vegas on 19 December 2006. This time, the forum was the Supreme Court of Western Australia. The plaintiff was not Mr Clifford, but Sheraz in its capacity as trustee for the Terranora Family Trust. The defendant was Vegas only (and not the directors).
In the Supreme Court, Sheraz pleaded allegations to the following effect:
(a)Sheraz was, at all material times, the trustee of the Terranora Family Trust (s/c par 1);
(b)Vegas was in the business of design, manufacture, distribution and wholesale of surf wear displaying the 'Rusty' brand (s/c par 3.3); and
(c)on 19 December 2006, Sheraz paid $2.37 million for the 600,160 shares issued to it in Vegas, and paid $170,000 for the shares it purchased in Vegas from the third party (s/c pars 28 and 53);
In relation to Sheraz's acquisition of shares in Vegas, it was alleged that Vegas:
(a)made a positive representation to Sheraz (s/c par 50) which was false (s/c pars 54, 63); and
(b)failed to disclose to Sheraz certain alleged material facts (the alleged non‑disclosures) (s/c pars 55, 64).
The positive representation pleaded by Sheraz was to the effect that 'the business of [Vegas] was capable of maintaining or improving its financial performance, and maintaining or reducing its level of debt' (I will refer to this as the 'financial performance representation') (s/c par 50). The representation was allegedly conveyed by Vegas providing to Mr Clifford on behalf of Sheraz in or about late October/early November 2006 certain financial statements between 2003 ‑ 2006 ('accounts') (s/c pars 48 ‑ 50).
Sheraz pleaded that the financial performance representation was false in that as at or about late October/early November 2006:
(a)Sheraz increased its overdraft limit beyond $1.5 million and drew down amounts on its overdraft in excess of $1.5 million as follows (s/c pars 54, read with 9 ‑ 13, 17 ‑ 18, 21 ‑ 22, 24 ‑ 26):
(i)Vegas had drawn down $2.172 million on its overdraft facility with Westpac on 25 July 2006 at a time when its limit was $1.5 million;
(ii)Vegas obtained temporary increases in its overdraft limit from $1.5 million to $2 million in respect of the period to 8 September 2006 and later up to 30 November 2006;
(iii)Vegas subsequently obtained further temporary increases in its overdraft limit to $2.5 million and then to $3 million up to 30 November 2006;
(iv)in the period 3 August ‑ 30 November 2006, Vegas' overdraft drawings fluctuated in a range between $1.73 million and $2.47 million; and
(v)the increases in overdraft were obtained, in effect, on the condition that Vegas also obtained certain shareholder loans;
(b)in the period 4 ‑ 23 August 2006, Vegas obtained $1 million in shareholder loans, and in October 2006, it obtained a further $500,000 by way of shareholder loans, thereby taking shareholder loans to $1.5 million by 30 November 2006 (s/c par 54 read with pars 14, 17.2, 23, 25.3, 54).
In relation to the alleged non‑disclosures, Sheraz pleaded, in effect, that Vegas had failed to disclose to Sheraz (pars 55, 64):
(a)the matters concerning the increases in overdraft and draw‑downs in excess of $1.5 million referred to in (a) above (s/c 9 ‑ 13, 17.1, 18.1 ‑ 18.2, 21 ‑ 22, 24 ‑ 26);
(b)the provision of shareholder loans to Vegas of $1.5 million referred to in (b) above (s/c 14, 17.2, 23, 24.3, 25.3);
(c)that Vegas had repaid $490,000 of shareholder loans by 18 December 2006 (s/c par 27);
(d)that sales were under budget in the period January 2006 to the end of September 2006 (s/c pars 8, 15, 16, 19);
(e)that by reason of the non‑disclosures referred to in (a) ‑ (d) above, without the temporary increases in the overdraft facility and the shareholder loans between 4 August and 18 December 2006, Vegas was unable to pay its debts as and when they fell due (s/c par 38);
(f)Vegas, on 19 December 2006, paid the sum of $2.37 million received from Sheraz into its overdraft facility account; the sum of $2.37 million and a further $11,000 was paid out of the overdraft between 19 December 2006 and 17 January 2007; on 17 January 2007 shareholder loans remained in the sum of $1 million; and by 30 June 2007, the overdraft facility was drawn to $236,000 and shareholder loans in the sum of $1 million remained in place (s/c pars 29 ‑ 32);
(g)that by reason of the payment by Sheraz (s/c par 28) and the matters referred to in subparagraph (f) above, without the shareholder loans and without Sheraz's payment of $2.37 million Vegas was unable, in the period from 12 January 2007 onwards, to pay its debts as and when they fell due (s/c par 39);
(h)that a document prepared by Vegas in October 2006 and given to Mr Clifford in November 2006 (s/c par 36) containing certain sales figures of Vegas from 2003/2004 to 2011/2012, including:
(i)actual figures for the years ending 30 June 2004, 30 June 2005 and 30 June 2006;
(ii)budgeted figures for the year ended 30 June 2007;
(iii)forecast figures for the years ended 30 June 2008 to 30 June 2012,
had been prepared by Vegas to provide to Deloitte for the purpose of obtaining finance for Vegas in the sum of $10 million ‑ $15 million (s/c pars 33, 35); and
(i)Vegas had also written an email to Westpac on 25 October 2006 in which it referred to 'Phillip's contribution of $2.5 million going in week ending 8 December' and in relation to the then negotiations with Westpac for an increase in the overdraft facility (s/c par 46).
It was then alleged that Vegas, by its conduct in October/November 2006, including, relevantly, by providing the accounts and making the false representation, in the 'relevant' circumstances (being, for the most part, the circumstances the subject of alleged non‑disclosure), engaged in misleading or deceptive conduct in contravention of s 52 of the TPA and in contravention of s 1041H of the Corporations Act 2001 (s/c pars 57, 66 and see appeal ts 14.3.14, 15).
Sheraz pleaded that it relied on the financial performance representation, and had the representation not been made, Sheraz would not have acquired the 600,160 shares in the capital of Vegas, or purchased shares in Vegas from the third party on 19 December 2006 (s/c pars 52 ‑ 53, 61 ‑ 62). Also, it alleged that had Vegas disclosed to Sheraz the matters the subject of the alleged non‑disclosure, Sheraz would not have acquired the 600,160 shares in the share capital of Vegas or purchased shares in Vegas from the third party on 19 December 2006 (s/c pars 56, 65).
It was alleged that as a result of the contravening conduct by Vegas, Sheraz suffered loss and damage, being:
(a)$2.54 million (ie, $2.37 million plus $170,000);
(b)alternatively, the difference between the value of the shares and the purchase price paid;
(c)the purchasing costs of the shares including stamp duty; and
(d)the borrowing costs, including bank charges, government duties and interest (s/c pars 58, 67).
Observations on the comparisons and contrasts between the Federal Court action and the Supreme Court action
The following observations may be made at the outset with respect to the claims in each case.
In broad terms, although Mr Clifford, and not Sheraz, was the named applicant in the Federal Court:
(a)Vegas was a defendant (or respondent) in each case;
(b)both cases involved allegations of misleading or deceptive conduct by Vegas in contravention of s 52 of the TPA and/or s 1041H of the Corporations Act 2001;
(c)the alleged misleading or deceptive conduct related to the issue of shares by Vegas to Sheraz on 19 December 2006 and Sheraz's acquisition, as legal owner, of shares in Vegas on that day from a third party;
(d)the alleged misleading or deceptive conduct arose from the conduct of Vegas through its two directors and through their dealings with Mr Clifford;
(e)in each case, the applicant/plaintiff alleged that Vegas made positive representations (although the terms of the representations differed); and
(f)in each case, the applicant/plaintiff alleged a number of non‑disclosures.
In each case, in substance, the alleged non‑disclosures were, relevantly, with respect to:
(a)the increases in the overdraft limit and draw‑downs in excess of $1.5 million in the period July to November 2006;
(b)the provision of shareholder loans to Vegas of $1.5 million in the period late 2006;
(c)under‑budget sales in the period January up to about October 2006; and
(d)the use of the monies paid to Vegas on 19 December 2006 to reduce Vegas' overdraft on that day (in the Federal Court it was said that $1.87 million was used to reduce the overdraft, but in the Supreme Court it was said that the whole of the $2.37 million was so used).
In relation to the accounts, in the Supreme Court, it was alleged that the financial performance representation was conveyed by the accounts. The representation was said to be falsified by, and the contravening conduct was said to arise in the context of, the allegedly non‑disclosed events concerning the increase in the overdraft, the increased drawings on the overdraft, the provision of shareholder loans and the under‑budget sales (s/c pars 54, 57). In the Federal Court, those events featured as separate allegations of misleading or deceptive conduct by silence. In the Federal Court, Mr Clifford led evidence that he received the accounts, but he did not there assert that they conveyed the financial performance representation (or any representation) on which he relied (see [200] (Barker J)).
Also, in each case, the claims had been formulated, inter alia, with respect to a document given to Mr Clifford in November 2006 setting out certain sales figures, including budgeted sales figures for the year ended 30 June 2007, and forecast sales figures for the years ended 30 June 2008 and 30 June 2009 (the 'sales spreadsheet'). In the Federal Court, the sales spreadsheet was said to convey the 'sales representation' which Barker J found was not relied on by Mr Clifford (see [22], [27] ‑ [28], [33], [222] ‑ [229]). In the Supreme Court, Sheraz referred to the sales spreadsheet in connection with non‑disclosure. It alleged that it was the purpose for which the sales spreadsheet was created, ie, to assist Deloitte in relation to the proposed financing by Vegas, which was undisclosed to Mr Clifford (and hence to Sheraz).
In relation to reliance, causation and loss:
(a)in each case, it was alleged that the loss was caused by reason of, or in reliance on, the alleged contravening conduct, and that the mental element for reliance reposed in Mr Clifford. Amongst other things it was alleged in each case, in effect, that had the non‑disclosed circumstances 'or any of them' been disclosed by Vegas, Mr Clifford would not have caused the payment of $2.54 million ($2.37 million plus $0.17 million) for the acquisition of shares in Vegas on 19 December 2006 (Federal Court s/c par 14, GB 218; Supreme Court s/c pars 56, 65 read with 28); and
(b)in each case, the alleged damage suffered was said to be the investment price of $2.37 million plus $170,000, and borrowing costs associated with the payment of the $2.37 million.
The application before the master and the master's decision
By amended chamber summons dated 16 November 2012, Vegas applied for defendant's summary judgment under O 16 of the Rules of the Supreme Court1971 (WA) and/or for orders that Sheraz's statement of claim be struck out under O 20 r 19(1)(a), (b) and/or (d). As to the strike out, Vegas asserted, inter alia, that the statement of claim disclosed no reasonable cause of action and/or was vexatious.
As to both the strike out application and the summary judgment application, Vegas' amended chamber summons included contentions to the effect that:
(a)the Supreme Court action was an abuse of process by reason of any or all of the following:
(i)the question of what should have been disclosed by Vegas prior to the share acquisition on 19 December 2006 and the issue of who had paid for the shares and for the costs associated with their purchase had been litigated to judgment in the Federal Court action;
(ii)the Supreme Court action amounted to a collateral attack on the Federal Court's determination of such matters;
(iii)Mr Clifford was a party to the Federal Court action and it was found that he controlled Sheraz at all relevant times; and
(iv)the causes of action maintained by Sheraz against Vegas were so relevant to the matters in issue in the Federal Court action that it was unreasonable for Sheraz not to have joined in the Federal Court action and advanced them in those proceedings (ground 2);
(b)by reason of the fact that Mr Clifford controlled Sheraz, Sheraz was estopped from challenging the determination in the Federal Court on the issue of whether there was a reasonable expectation that Vegas would disclose any particular matter or thing relevant to the acquisition in Vegas, and Sheraz was estopped from challenging the issue of who paid for the shares and for the costs associated with the purchase of the shares, or from relitigating those issues (ground 3); and
(c)Sheraz was estopped from litigating the causes of action alleged against Vegas because they were so relevant to matters in issue in the Federal Court that it was unreasonable for Sheraz not to have joined in the Federal Court action and advanced those causes of action in those proceedings (ground 4).
On 19 February 2013, Master Sanderson ordered that there be judgment for the defendant (Vegas) and that the plaintiff's (Sheraz's) claim be dismissed.
In his reasons for the decision (Sheraz Pty Ltd v Vegas Enterprises Pty Ltd [2013] WASC 45) the learned master:
(a)said that it was not in dispute that at all material times Sheraz was controlled by Mr Clifford and found that it was 'in every sense his alter ego' [3]; and
(b)held that Sheraz was the privy of Mr Clifford and was bound by the Federal Court decision [5] ‑ [12]. Master Sanderson said:
In my view this is a clear case where the privity doctrine applies. The position may be tested in this way. What is the legal difference between the position adopted by Mr Clifford in the Federal Court action and the position adopted by Sheraz in this case. The answer is none. Mr Clifford is the alter ego of Sheraz. In every sense he controls its actions. There is nothing Sheraz can add to the evidence except perhaps the certificate of its incorporation. Otherwise the witnesses at trial would be the same, the evidence would be the same, the discovered documents would be the same and the arguments put by both sides would be the same. In fact, if the matter were to go to trial perhaps an enormous amount of time could be saved simply by tendering the transcript of the Federal Court proceedings [11].
The master also said that Sheraz's application raised an estoppel argument. His Honour said that it was not strictly an Anshun estoppel, but 'an estoppel of a different nature' [13]. The master appears to have concluded that even if there were no privity, the 'result [was] the same' and he was satisfied that there was 'such identity between Sheraz and Mr Clifford [that] it would inappropriate to allow this matter to continue' [14].
Sheraz's grounds of appeal
Sheraz's grounds of appeal were to the following effect:
1.The master erred in finding that Sheraz was the privy of Mr Clifford in circumstances where Sheraz did not claim under or through Mr Clifford in the Supreme Court action.
2.The master erred in finding that Sheraz was bound by 'an estoppel of a different nature'.
3.The master erred in finding that no issue was taken in the Federal Court by Mr Clifford as to the conduct of those proceedings by Vegas.
4.The master erred in refusing to postpone finalising or publishing judgment on the application by Vegas when there was further relevant evidence available to both parties after the hearing of the application before the master on 30 January 2013.
Vegas' notice of contention
Vegas filed a notice of contention and applied to make an amendment to it in the course of the hearing on 14 March 2014. The court directed that the parties file and serve written submissions, both on the application to amend and on the substantive proposed amendment.
In its proposed amended form, the notice of contention is as follows (the amendments are underlined):
1.Having found that:
(a)the appellant was controlled by Mr Clifford and in every sense, the appellant was the alter ego of Mr Clifford (reasons at [3] and [11]);
(b)the subject matter of the appellant's action was litigated to judgment ([2010] FCA 916 and appeal [2011] FCAFC 135) (the Prior Proceedings) (Reasons at [3] ‑ [4]);
(c)the discovered documents, evidence, witnesses and argument put by the parties at a trial of the Supreme Court proceedings would be the same as the Federal court proceedings (Reasons at [11]);
(d)all of the matters pleaded by the appellant could have been raised in the Federal Court proceedings (Reasons at [12]), and
(e)Mr Clifford sought a refund order in the Prior Proceedings on his own behalf (Reasons [4]),
and in circumstances where the learned Master should have found that all the matters the subject of the Supreme Court proceedings should have been raised in the Prior Proceedings or in proceedings concurrent with the Prior Proceedings, the learned Master should have also found that the appellant sought to mount a collateral attack on the findings by the Federal Court and further or alternatively, that the Supreme Court proceedings were seriously and unfairly burdensome or unjustifiably oppressive to the defendant, and in those circumstances the learned Master should have made an express finding that the Supreme Court proceedings constituted an abuse of the processes of the court and were liable to be summarily dismissed on that basis.
2.Further or alternatively, the learned Master should have, but did not, find that the whole of the statement of claim disclosed no reasonable cause of action, alternatively that it was frivolous and vexatious and was liable to be struck out and judgment given for the defendant accordingly.
Sheraz opposed the application to amend the notice of contention. It appeared to put its opposition on five bases (see in particular appellant's written submissions, 30 May 2014):
(a)counsel for Sheraz had the 'understanding' that the amendment would only raise one additional point, being in effect, a cause of action estoppel (written submissions par 3);
(b)in the absence of Anshun estoppel, 'there is no authority, relevantly, characterising the making of a claim by a different party, who is not a privy, as one where unreasonableness is even applied' (written submissions par 10);
(c)the matters raised in the amendment were not raised before the master (written submissions par 12);
(d)as a matter of discretion, the court would not dismiss Sheraz's claim against Vegas as an abuse because Vegas was guilty of 'unfairness' toward Mr Clifford in the Federal Court action in relation, essentially, to procedural matters concerning the filing and tendering of witness statements (written submissions par 22); and
(e)there was, in any event, no direct evidence by Vegas to the effect that a trial of Sheraz's claim in the Supreme Court would be unfairly burdensome or unjustifiably oppressive (written submissions pars 13, 18, 23).
It is convenient to deal with the opposition to the application to amend the notice of contention at this point, as follows.
As to the first matter raised in opposition, this involves a misconception by counsel. Any such understanding could not reasonably have been held having regard to the terms of the proposed amendment and the context in which it arose. Counsel's state of mind is, in any event, irrelevant.
The second matter goes to the merits of the notice of contention in its amended form. The merits will be addressed later in these reasons.
As to the third matter, the substance of the point was sufficiently raised in the contentions in the chamber summons filed by Vegas (see (a)(iv) and (c) of [63] above) and it was not demonstrated that those points had been abandoned. In any event, the proposed amendment in effect invites the court to draw its own inferences on the materials before the master. It does not involve any additional evidence by Vegas. Insofar as Sheraz contends that other evidence is relevant, it has put on additional evidence by way of an affidavit sworn by Sheraz's solicitor, dated 30 May 2014 (solicitor's affidavit), dealing with the matters raised in relation to its fourth basis for opposition to the application to amend. It will be convenient to deal with the fifth basis before returning to the evidentiary matters raised in relation to the fourth basis for opposition.
In relation to the fifth matter, it is unnecessary for Vegas to give direct evidence as to these matters. The question of whether it would be unfairly burdensome or unjustifiably oppressive is a matter for inference to be collected from all the circumstances.
Returning to the fourth matter, as noted earlier, Sheraz filed the solicitor's affidavit dated 30 May 2014. The affidavit was a lengthy one and Sheraz was ordered, on 22 August 2014, to file and serve a schedule explaining the relevance and significance of the materials in the affidavit. Sheraz filed a schedule on 2 September 2014 (schedule). The schedule, in effect, raised the following matters concerning the conduct of the Federal Court action:
(a)in relation to a witness statement of Mr G Backshall (apparently served on behalf of Mr Backshall, the third respondent) (schedule pars 21 ‑ 22, 24 ‑ 27, 37):
(i)the statement was served on 3 December 2009, being the date on which it was due following an earlier extension of time, but it did not have the documents to which it referred annexed to it, as earlier directions of Barker J had required;
(ii)the witness statement with documents attached, identified by discovery numbers, but unpaginated, was served late on 18 March 2010 and it comprised, with the annexures, nine volumes (solicitor's affidavit pars 13 ‑ 14); and
(iii)a paginated version was provided to Mr Clifford and to the court on the first morning of the trial, 22 March 2010 (solicitor's affidavit par 16);
(b)Sheraz now contends that an aspect of Mr Backshall's evidence 'lacks credibility, and in any event, is a triable issue' (schedule pars 38 ‑ 39);
(c)a witness statement by Mr M Sutton was tendered by Vegas and admitted into evidence, during the course of the trial, over the objection of Mr Clifford (schedule pars 28 ‑ 30);
(d)complaints were made by counsel to Barker J concerning the matters in (a) and (c) above, and counsel also complained about discovery and the length of cross‑examination of witnesses at the trial (schedule pars 31 ‑ 36); and
(e)in the Federal Court, Vegas failed to plead or open a case on what Sheraz describes as the 'ask Mr Rayney' point (schedule par 42).
As to the matter in (a) above (service of Mr Backshall's statement), Sheraz's evidence does not establish that the documents, when they were attached on 18 March 2010, took Mr Clifford by surprise. As the documents were identified by a discovery number (solicitor's affidavit par 14) it would appear that the documents to which the statement referred had all been discovered. The absence of pagination may have been inconvenient for a time, but a paginated version was available as and from the first day of the trial. There does not appear to have been any application for an adjournment on account of the lack of pagination or the late attachment of the documents to the statement. Also, it does not appear that Mr Clifford alleged any relevant denial of procedural fairness in the appeal from the decision of Barker J on account of this matter.
As to the matter in (b) of [76] above, the credibility or otherwise of Mr Backshall's evidence was entirely a matter for Barker J, subject to the limited scope for an appeal in relation to findings based on credibility. The Full Court of the Federal Court recorded Barker J's acceptance of Mr Backshall's evidence that Mr Backshall had told Mr Clifford that he (Mr Clifford) should contact Mr Rayney for any financial information he required for his due diligence: Full Court reasons [103]. That finding was apparently not challenged on appeal. The submission that this court should form its own view on whether Mr Backshall's evidence was 'credible' is misconceived.
As to the matter in (c) of [76] above (Mr Sutton's statement), Mr Clifford's objection to the tendering of the evidence was overruled: Clifford v Vegas Enterprises Pty Ltd (No 4) [2010] FCA 326. This interlocutory ruling was not challenged in the appeal by Mr Clifford to the Full Court of the Federal Court: Full Court's reasons [211]. Nor, in any event, was Mr Sutton's evidence challenged by Mr Clifford in the trial before Barker J [353] ‑ [355].
The merits of the matter in (d) of [76] above, depend principally on the merits of the matters in (a) and (c), and those matters have no merit. Complaints about discovery and the length of cross‑examination made to Barker J during the course of the trial are not self‑evidently well‑founded on the materials annexed to the solicitor's affidavit. Even if it were established that the complaints were well‑founded at the time they were made, they do not appear to have been raised in the Federal Court by way of an application for an adjournment, or by way of a ground of appeal to the effect that the trial thereby miscarried.
As to the matter in (e) of [76] above, the 'ask Mr Rayney' point effectively became a term of art in Sheraz's submissions in this appeal. It refers to the finding in the Federal Court that Mr Backshall told Mr Clifford that he should contact Mr Rayney for any financial information he required for his due diligence. Sheraz did not refer the court to any evidence as to whether there was any interlocutory ruling by Barker J concerning the need to plead or open upon the 'ask Mr Rayney' point before evidence was led in that regard. Nor is there any indication that if there were such an interlocutory ruling, it went on appeal. Once the evidence was received, it was a matter for Barker J as to whether it should be accepted or not. The complaint, now, that the point was not pleaded or opened upon has, in itself, no relevance to the application to amend the notice of contention. The 'ask Mr Rayney' point is also the subject of other submissions by Sheraz in ground 4 of the appeal. Those submissions are dealt with later in these reasons.
In summary, none of the matters raised in the fourth ground of opposition to the application to amend the notice of contention has any merit. None of the matters raised by Sheraz arguably indicate that the trial in the Federal Court was 'unfair' in any relevant sense to Mr Clifford.
Subject to a consideration of the substantive merits of the point raised by the amendment, leave should be given to amend the notice of contention.
The suggestion of a possible amendment to the grounds of appeal
In written submissions dated 11 September 2014, Sheraz submitted:
48.In the event it becomes necessary, the Appellant moves for leave to amend the grounds of appeal to include ground 5 in terms:
'5.The learned master erred in finding the evidence in this court would be the same as the evidence in the Federal Court in that:
(a)The cause of action in this court is not the cause of action in the Federal Court;
(b)The pleading in this Court is materially different from the Federal Court pleading;
(c)Some critical evidence to be called in this court was not in existence at the time of the trial in the Federal Court (see Annexure A to the submissions of 11 September 2014 and the tabs attached thereto);
(d)Some evidence called in the Federal Court is not dealt with in the Federal Court reasons because that Court tried a different cause of action; and
(e)Some evidence called in the Federal Court is not relevant to the cause of action pleaded in this Court and thereby not admissible.
There was no affidavit deposing that the documents annexed to the submissions constituted fresh evidence.
Also, Sheraz made no application to amend in terms of the suggested potential amendment. The idea, apparently, was that if the appeal otherwise failed, or if the notice of contention succeeded, Sheraz would then move to amend its grounds of appeal. A 'wait and see' approach is impermissible and the suggested new ground does not arise for consideration. Even if it did, it would have no prospect of success. For the reasons given later, the master was plainly correct, as a matter of substance, when he said that the 'witnesses at trial would be the same, the evidence would be same, the discovered documents would be the same and the arguments put by both sides would be the same': master's reasons [11].
Disposition
Ground 1 of the appeal
Questions of privity commonly arise in connection with cause of action estoppel (as to which see Trawl Industries of Australia Pty Ltd (in liq) v Effem Foods Pty Ltd [1992] FCA 272; (1992) 36 FCR 406, 413 (Gummow J)) and issue estoppel (see Blair v Curran [1939] HCA 23; (1939) 62 CLR 464, 531 ‑ 532). There can be a cause of action estoppel whether the plaintiff succeeds or fails in the first action: Trawl (409) (Gummow J); Zavodnyik v Alex Constructions Pty Ltd [2005] NSWCA 438; (2005) 67 NSWLR 457 [33]; Thoday v Thoday [1963] EWCA Civ 1219‑1; [1964] P 181, 197 ‑ 198 (Diplock LJ). Where a cause of action is successfully litigated to judgment, there is an additional and more fundamental reason why that party cannot maintain a second proceeding with respect to that claim. That is because the cause of action merges into the first judgment and loses its independent existence: Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd [2011] WASCA 76; (2011) 248 FLR 193 [123].
Cause of action estoppel (like issue estoppel) involves mutual rights and obligations. The only persons who can take advantage of it are those who, if the decision had gone the other way, would have been bound by the estoppel, as res judicata estoppels are mutual: Ramsay v Pigram [1968] HCA 34; (1968) 118 CLR 271, 276, 282; Sandtara Pty Ltd v Abigroup Ltd [1997] NSWSC 294; (1997) 42 NSWLR 5, 8 ‑ 9; Spencer Bower & Handley: Res Judicata (4th ed, 2009) [9.05]. In Partridge v McIntosh & Sons Ltd [1933] HCA 38; (1933) 49 CLR 453, Starke J said:
[A]lthough the estoppel is only a personal matter between the particular parties, yet to really give the parties the benefit of it, and subject them to the burden of it, it is essential that not they only, but those of whom it can be predicated, that they are their 'representatives in interest' should likewise have the benefit of and be subject to the burden of the admission. Upon any one, therefore, upon whom all the rights and obligations of any legal entity devolve, such as an executor, administrator, or trustee in bankruptcy, there will devolve, as one of such rights and obligations, the right to exact, or the obligation to be subjected to the admission; and so, too, upon any one, upon whom the rights and obligations arising out of the particular transaction that give rise to the estoppel devolve, as, for example, a purchaser or assignee, that will also devolve this right and this obligation' (Cababé, Principles of Estoppel, (1888), pp 111 - 113 (463). (emphasis in original)
A party for this purpose may include the person who intervenes in the proceedings and takes an active part: Cheesman v Waters [1997] FCA 90; (1997) 77 FCR 221, 227. A person may also be a party where that person has, in substance, litigated a claim in an action even though the proceedings have been irregularly constituted because that person was not formally named or joined as a party: Dissidomino v Butcher Paull & Caulder (a firm) [2005] WASCA 210 [22], [39]. Similarly, in some circumstances a non‑party may participate so actively in proceedings as to assume de facto status as a party: Owston Nominees (No 2) [124].
As to privity, in this context, a person may be a privy of a party by blood, title or interest: Ramsay v Pigram (279) (Barwick CJ). In relation to privity in blood, in Lock v Norborne [1793] 3 Mod 141; 87 ER 91, the court said:
But if an ancestor has a verdict, the heir may give it in evidence, because he is privy to it; for he who produces a verdict must be either party or privy to it, and it shall never be received against different persons, if it do not appear that they are united in interest (142).
Spencer v Williams (1871) LR 2 P & D 230 was a case in which it was held that no privity in blood existed because the heirs did not claim through the ancestor but as the result of an independent right which had been acquired (236 ‑ 237).
In relation to identity of title, where several estates in remainder were limited by the one deed, and one remainderman obtained a verdict in an action brought by a plaintiff for the land, the plaintiff was precluded from asserting a second action against the other remaindermen for the same land, not because the defendant remaindermen in the second action claimed under the first remainderman, but because they all claimed under the same deed: Pyke v Crouch (1701) 1 LD Raym 730; 91 ER 1387.
The basic requirement of a privy in interest in relation to cause of action estoppel and issue estoppel is that the privy must claim 'under', or 'through' the person of whom he or she is said to be a privy: Ramsay v Pigram (279); Trawl (413) (Gummow J). The latter decision was confirmed on appeal: Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (in liq) [1993] FCA 342; (1993) 43 FCR 510. Privity has also been described as a 'mutual or successive relationship to the same right of property': Trawl (413 ‑ 414) (Gummow J). In ascertaining the requisite relationship for privity, the courts have looked to the legal rather than the economic indicia of the relationship: Trawl (414) (Gummow J); Owston Nominees [124].
Where a party claiming the benefit of a cause of action estoppel establishes mutuality (including, where necessary, through privity), a further question is whether the cause of action in the later proceedings is the same as the cause of action in the earlier proceedings: Trawl (418). For this purpose, the focus of the law is on the substance of both proceedings as distinct from their form: Trawl (418 ‑ 419) (Gummow J); Zavodnyik v Alex [25], [30]; Champerslife Pty Ltd v Manojlovski [2010] NSWCA 33; (2010) 75 NSWLR 245 [106]. In finding cause of action estoppel against the corporate plaintiff in Trawl, Gummow J said:
[T]his is a case where it can be said that the same evidence would be led to prove the case Trawl propounded in its pleadings in both actions. The one factual matrix has generated the controversy which is given legal form in the two pleadings. As a matter of substance, in this Court Trawl seeks to attack Effem again upon a corresponding cause of action (422).
The test for issue estoppel, on the other hand, is whether the precise question of fact or law sought to be litigated in the later proceedings was decided in the earlier action as a fundamental basis for the decision: Champerslife [106].
In my view, Sheraz's claim in the Supreme Court was not one which was made 'under' or 'through' Mr Clifford. Sheraz had (allegedly) its own cause of action with respect to misleading or deceptive conduct arising out of its acquisition of shares in Vegas. Sheraz was a trustee company of a discretionary trust. Mr Clifford had no beneficial interest in the assets of that trust, including in the (alleged) causes of action held by the trustee against Vegas. Sheraz had its own (alleged) rights which it was seeking to assert in the Supreme Court. It was not asserting a successive or mutual relationship to the rights of Mr Clifford.
In this appeal, Vegas essentially accepted what it described as the 'general Australian position' and that Sheraz did not claim 'under' or 'through' Mr Clifford. It nevertheless submitted that the case law indicated the possibility of a 'limited exception' to the general Australian position concerning privity (written submissions, par 15). In particular, it submitted that:
[T]here is some support for the … conclusion that there was sufficient privity of interest between Mr Clifford and the appellant as his alter ego, given the like nature of the causes of action pursued by each, to create an issue estoppel (written submissions, par 12).
Subject to a consideration of the authorities to which Vegas has referred, two preliminary observations may be made about Vegas' submission. First, it is not clear why it is said that the 'like nature' of the causes of action should bear upon the existence or otherwise of an issue estoppel. As noted earlier, the test for issue estoppel is whether the precise question of fact or law sought to be litigated in the later proceedings was decided in the earlier action as a fundamental basis for the decision. Thus, an issue estoppel may arise between the parties even if the causes of action in the two pieces of litigation are different: Tiufino v Warland [2010] NSWCA 110; (2010) 50 NSWLR 104, 111.
Secondly, a test propounded by reference to there being 'sufficient privity', as opposed to simply privity (of interest, blood or title) for the purposes of the doctrines of cause of action estoppel or issue estoppel is either tautological or, if not tautological, is apt to mislead insofar as it suggests that something less than privity may be sufficient for the purposes of those doctrines. The following observations in Res Judicata, 4th ed, are, with respect, apposite in this context:
Privity is not established by proof of curiosity or concern about the litigation, or 'some interest in the outcome'. Megarry VC [in Gleeson v J Wippel & Co Ltd [1977] 3 All ER 54; [1977] 1 WLR 510, 515] proposed as the test of privity, in cases outside any recognised category, the existence of 'a sufficient degree of identification between the two parties to make it just to hold that the decision to which one was party should be binding in proceedings to which the other was party'. This is circuitous and does not identify the necessary degree of identification [9.45]. (footnotes omitted)
The authorities to which Vegas referred are discussed below.
Vegas referred to certain dicta by Basten JA in Cannon Australia Pty Ltd v Patton [2007] NSWCA 246; (2007) 244 ALR 759 with respect to a point which, according to Campbell JA (with whose judgment Harris J agreed), was not a ground that had arisen in the course of argument [68]. Basten JA said, inter alia, that where guarantors control the principal (corporate) debtor they may be estopped from contesting the liability of the principal debtor established by earlier proceedings [8]. The cases to which his Honour referred in that regard included State Bank of NSW Ltd v Alexander Stenhouse Ltd (1997) Aust Torts Rep 81‑243 which was an abuse of process case. His Honour also referred to Gracechurch Holdings Pty Ltd v Breeze (1992) 7 WAR 518 (referred to below) and to the 1996, 3rd edition of Spencer, Bower, Turner and Handley: Res Judicata [224] where the estoppel there under consideration was not an estoppel by res judicata, but rather an estoppel by representation. I would not read Basten JA's dicta (the correctness of which Campbell JA and Harris J did not accept for the purposes of the disposition of the appeal) as impliedly conveying any statement as to the scope and content of the principles of privity in cause of action estoppel or issue estoppel.
Vegas also contended that a company controlled by a controlling shareholder may be regarded as the 'real defendant' of an action in accordance with the observations of Barwick CJ in Ramsay v Pigram (279). There are dicta in Champerslife by one member of the court (Handley AJA), to the effect that a controlling shareholder of a company who has a 'real financial interest' in the proceedings brought by the company against a defendant, may be a privy of the company and bound by any issue estoppels arising from the earlier litigation between the company and that defendant [131]. Handley AJA's dicta, appear broadly to reflect his Honour's discussion in Res Judicata, 4th ed, [9.47]. The decision of Champerslife is discussed in detail in relation to ground 2 below. At this point, it may be observed that even if the burden of the dicta of Handley AJA in that case were accepted, Mr Clifford might be regarded as bound by cause of action or issue estoppels binding Sheraz. The dicta do not necessarily support the proposition that Sheraz would be a privy of Mr Clifford and be bound by cause of action or issue estoppels binding Mr Clifford.
Vegas also referred to Thomas v Balanced Securities Ltd [2011] QCA 258; [2012] 2 Qd R 482 [49]. In that case, it was found that it was an abuse of process for a guarantor, in the particular circumstances of that case, to contest in subsequent proceedings, the debtor's liability to the creditor for indemnity costs under a facility agreement, where the debtor company was controlled by the guarantor and that issue had been adversely decided against the debtor in an earlier action. White JA (Margaret Wilson AJA and Martin J agreeing) said:
I would conclude that [the guarantor] should not be permitted, in these proceedings, to challenge the conclusion that the Facility Agreement entitled [the creditor] to an indemnity costs order on the ground that to do so would constitute an abuse of the court's processes in light of his close identification with [the corporate debtor] and the earlier proceedings rather than an estoppel. But if there were an inclination towards an estoppel then it should be on a similar basis, namely, that the issue has been determined between [the creditor] and [the corporate debtor] and [the guarantor] is so closely identified with [the corporate debtor] and its conduct of those proceedings as to preclude him from being heard again. With respect to the primary judge, estoppel by representation raises, at the least, difficulties of reliance not adverted to before his Honour [49]. (emphasis added)
Vegas emphasised the second sentence of that passage for present purposes.
The nature of the hypothetical estoppel to which her Honour referred in that passage was not expressly enunciated. It may be, however, that her Honour was referring to issue estoppel, having regard to her observations in [40] of that decision. Her Honour said that there was:
[A] body of dicta to the effect that where a person, such as a guarantor, is closely connected with the subject matter of the proceedings and takes no steps to defend (or advance) his own interest (where he is in a position to do so) he will become bound as a matter of issue estoppel by the result determined between those other parties on an identical basis which affects him [40].
Her Honour footnoted this statement by reference to Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 5] [2009] WASC 141 [62] ‑ [73] (E M Heenan J); Ann Street Mezzanine Pty Ltd (in liq) v Beck [2009] FCA 333; (2009) 175 FCR 532 (Finkelstein J); Canon (762 [8]) (Basten JA); and Gracechurch.
In Gracechurch, Ipp J was considering the question of whether, and in what circumstances, a party indemnifying another who is given notice of an action against the party to whom he or she has given the indemnity may be precluded from subsequently denying the effect or validity of the judgment. His Honour considered the relevant case law and the extent to which, and the basis upon which, there was a qualification to the general rule precluding the use of judgments against non‑parties or non‑privies (523 ‑ 524). His Honour said:
Further, the qualification to the rule … may, depending on the circumstances, not rest on an estoppel at all. Rather, there may well be, as explained in Res Judicata; (1969); Spencer Bower and Turner (at p 235):
'An election (implied from conduct and inaction) by the indemnifying party that he was content to treat the judgment in the first action as binding upon himself, although in fact and law, he not being a party thereto, it was not so.'
The passage in the 1969 (2nd ed) of Res Judicata at 'p 235' [sic par 235] referred to by his Honour stated relevantly that 'on a careful examination of [the authorities] … it is clear that it was not intended to suggest that this type of case raises any question of estoppel per rem judicatam at all' (original emphasis). Accordingly, his Honour in Gracechurch appears to have considered that the relevant qualification to the general rule in that case arose not from any res judicata estoppels, but by reason of estoppel by conduct, or the doctrine of election.
In Ann Street Mezzanine, Finkelstein J accepted that the Australian courts have rejected the broader view of privity taken in the United States [27] ‑ [30]. Cannon has been referred to above. In Clambake, E M Heenan J referred to Gracechurch, Ann Street Mezzanine and Trawl Industries (Gummow J) and appeared to consider that those cases provided support for the proposition that:
[If] a person closely affiliated with the subject matter of an action and with notice of the claim stands by and takes no steps to advance or to defend his own personal interest, he will become bound as a matter of issue estoppel by the result determined between those other parties on an identical issue which affects him [72].
His Honour added that the 'alternative view' was that:
[T]he jurisdiction of the court to prevent an abuse of process may be invoked to prevent a party litigating in one proceeding an issue determined in other proceedings between different parties to which he nevertheless had a sufficiently proximate interest [72].
It may be noted that in the appeal in that case from the decision of E M Heenan J, his Honour's ultimate conclusion that there was no preclusionary principle preventing the litigation of a claim was upheld. However, the relevant principles were explained and applied in this court in terms consistent with what Vegas has described in this appeal as the general Australian position: Owston Nominees (No 2) [123] ‑ [130].
The observations of White JA in Thomas [49] concerning abuse of process (but not estoppel) were applied by Campbell J in Commonwealth Bank of Australia v Susan Hannaford Pty Ltd (No 5) [2013] NSWSC 1175 [28]. Brereton J, in In the matter ofHIH Insurance Ltd (in liq) Re; De Bortoli Wines (Superannuation) Pty Ltd v McGrath [2014] NSWSC 774, referred to Thomas and suggested that it, and other cases to which his Honour referred, were 'best explained as a sub‑species of Anshun estoppel' [59].
In conclusion, I would not, with respect, read the observations of White JA at [49] of Thomas as unequivocally propounding a test of privity applicable to cause of action estoppel and issue estoppel. Nor would I read them as positively propounding an exception to the privity doctrine for issue estoppel, as Vegas has suggested.
Accordingly, I am not persuaded that there is an established 'limited' exception to the privity doctrine, as contended by Vegas, and, in my view, ground 1 of the appeal has been established.
Appeal ground 2 and amended ground 1 of the notice of contention
Ground 2 concerns the master's finding that there was 'an estoppel of a different nature' (master's reasons [13]).
There is an issue as to what the master meant by 'estoppel of a different nature' on the proper construction of his reasons as a whole. Sheraz contended, and senior counsel for Vegas accepted (appeal ts 48), that the master did not find an Anshun estoppel (Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; (1981) 147 CLR 589). If, as it appears, the master was not referring to cause of action estoppel, issue estoppel or Anshun estoppel, on one view of it, it might be thought that the master was intending to refer to an abuse of process. As noted in [126] below, at least one other court has referred to abuse of process in this area as a kind of 'estoppel'.
In terms of the principles to be considered, ground 2 of the appeal and amended notice of contention ground 1 are conveniently dealt with together.
In Dow Jones and Company Inc v Gutnick [2002] HCA 56; (2002) 210 CLR 575, the High Court said:
Clearly, the common law favours the resolution of particular disputes between parties by the bringing of a single action rather than successive proceedings. The principles of res judicata, issue estoppel, and what has come to be known as Anshun estoppel, all find their roots in that policy. … Effect can be given to that policy by the application of well‑established principles preventing vexation by separate suits or, after judgment, by application of the equally well‑established principles about preclusion, including principles of Anshun estoppel [36]. (footnotes omitted)
The doctrine of Anshun estoppel is allied to, but not co‑extensive with, cause of action estoppel and issue estoppel: Spalla [65].
These three preclusionary principles (res judicata/cause of action estoppel, issue estoppel and Anshun estoppel) operate against the broader background that the court has the inherent power to prevent its procedures from being abused. In Rogers v The Queen [1994] HCA 42; (1994) 181 CLR 251, McHugh J said:
Inherent in every court of justice is the power to prevent its procedures being abused. Although the categories of abuse of procedure remain open, abuses of procedure usually fall into one of three categories: (1) the court's procedures are invoked for an illegitimate purpose; (2) the use of the court's procedures is unjustifiably oppressive to one of the parties; or (3) the use of the court's procedures would bring the administration of justice into disrepute. … In Walton v Gardiner, Mason CJ, Deane and Dawson JJ said that the jurisdiction to stay proceedings that are an abuse of process 'extends to all those cases in which the processes and procedures of the court, which exist to administer justice with fairness and impartiality, may be converted into instruments of injustice or unfairness'. Their Honour's gave three examples of such an abuse of process. One of them is the case where an estoppel cannot be established but the proceedings are unjustifiably oppressive because it is sought to litigate an issue which has already been disposed of by earlier proceedings. Reichel v Magrath is the paradigm example of such a case (286 ‑ 287). (footnotes omitted)
Also, at the time of the Federal Court proceedings, s 37M of the Federal Court of Australia Act 1976 (Cth) provided:
(1)The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes:
(a)according to law; and
(b)as quickly, inexpensively and efficiently as possible.
(2)Without limiting the generality of subsection (1), the overarching purpose includes the following objectives:
(a)the just determination of all proceedings before the Court;
(b)the efficient use of the judicial and administrative resources available for the purposes of the Court;
(c)the efficient disposal of the Court’s overall caseload;
(d)the disposal of all proceedings in a timely manner;
(e)the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.
(3)The civil practice and procedure provisions must be interpreted and applied, and any power conferred or duty imposed by them (including the power to make Rules of Court) must be exercised or carried out, in the way that best promotes the overarching purpose.
(4)The civil practice and procedure provisions are the following, so far as they apply in relation to civil proceedings:
(a)the Rules of Court made under this Act;
(b)any other provision made by or under this Act or any other Act with respect to the practice and procedure of the Court.
Even where consolidation, in terms, is not ordered with respect to two sets of related proceedings, the court may order that evidence in one be treated as evidence in the other: Weimann v Allphones Retail Pty Ltd (No 3) [2009] FCA 1292 [1], [48], [54] ‑ [55]; A Goninan & Co Ltd v Atlas Steels (Aust) Pty Ltd [2003] NSWSC 956 [21].
In Weimann, Barker J made orders as follows:
1.These proceedings be heard by the same judge as hears [the related] Action.
2.These proceedings be heard immediately following [the related] Action … or as that judge directs.
3.The evidence in [the related] Action … or so much as that judge directs, stands as evidence in these proceedings [55].
Sheraz submitted, in effect, that it could not have invoked O 6 r 2 of the Federal Court Rules 1979 (Cth), or that at least it would have been unreasonable to do so. It was alleged that it was not open or practicable for Sheraz to commence proceedings in the Federal Court because any proceedings would have involved a conflict of interest, and a duplication of costs, and that the leave of the Federal Court would have been required and leave would not have been forthcoming.
The following observations may be made. First, Sheraz had no relevant fiduciary duty to Mr Clifford which would preclude it from bringing proceedings in respect of its own causes of action. Secondly, Sheraz would not have required the leave of the Federal Court to bring its own proceedings. Thirdly, on any view of it, there would be no duplication of costs. Even if Sheraz had instructed its own lawyers, there would have been no duplication of costs, as its costs would have been entirely referrable to its own causes of action. Fourthly, there is no doubt that in the management of the conduct of two separate proceedings by Sheraz and Mr Clifford, the court, on the application of orthodox principles in this context, would, at the very least, have made orders under O 29 r 5 of the kind made by Barker J in Weimann. Such orders would not be dependent upon Sheraz and Mr Clifford having the same legal representation.
That conclusion makes it unnecessary, for the disposition of this appeal, to consider whether Mr Clifford and Sheraz could have been joined as co‑applicants under O 6 r 2 of the Federal Court Rules. That question would, in turn, raise for consideration questions of conflict of interest and whether Mr Clifford and Sheraz could have instructed the same lawyers (although there is no absolute rule of law which requires co‑plaintiffs to have the same representation: Hinchcliffe v Carroll [1969] VR 164, 166; cf Rosebridge Nominees Pty Ltd v Commonwealth Bank of Australia [No 6] [2014] WASC 203 [28] ‑ [30]).
On the question of conflict, counsel for Sheraz (Mr Clifford) pointed out that Sheraz was the trustee of a discretionary trust, and emphasised the standards of propriety expected of trustees. He submitted, in effect, that those standards precluded Sheraz from being involved in the earlier Federal Court litigation. He said in written submissions (appellant's written submissions 11 September 2014, par 17):
To borrow from the relevant passage in Youyang [Youyang Pty Ltd (as Trustee of the Bill Hayward Discretionary Trust) v Minter Ellilson Morris Fletcher [2003] HCA 15; (2003) 212 CLR 484]:
'[32] Perhaps the most important duty of a trustee is to obey the terms of the trust …
[33] The rigour of the rule, as Augustine Birrell QC put it, that it is the duty of a trustee "to adhere to the terms of his trust in all things great and small, important, and seemingly unimportant"'
And as the joint judgment of Gaudron J and McHugh J put it in Breen v Williams [[1996] HCA 57; (1996) 186 CLR 71, 108]:
'The law of fiduciary duty rests not so much on morality or conscience as on the acceptance of the implications of the biblical injunction that [n]o man can serve two masters - duty and self‑interest, like God and Mammon, make inconsistent calls on the faithful.'
Vegas contended that the same lawyers could have acted had Sheraz and Mr Clifford given their fully informed consent: Archer v Howell (No 2) (1992) 10 WAR 33, 49. Sheraz, however, contends that even if informed consent had been given, the lawyers would not have been able to act for clients with conflicting interests as their duty to the court would preclude it. Reference was made to Clay v Karlson (1997) 17 WAR 493.
Three observations may be made in this regard. One is that Clay decided, in effect, that it was not appropriate for a solicitor to act in litigation for a client where the solicitor is likely to be called as a witness in the proceedings and, moreover, where the solicitor has a personal interest in the outcome of the litigation. Those considerations would not apply here. Secondly, Sheraz's appeal to propriety at this point might be thought to be somewhat confected, given that Mr Clifford, who at all material times controlled Sheraz, and for whom Sheraz was his alter ego, contended in the Federal Court that Sheraz not only had suffered no loss from the relevant transaction, but that Sheraz would be estopped from contending otherwise (see [42] above). Thirdly, although perhaps only of historical interest, Mr Clifford's solicitors in the Federal Court before Barker J were the same as in the proceedings below and in this appeal.
Ultimately, however, it is unnecessary to reach a final view on these matters given the conclusion that appropriate orders, at least of the kind referred to earlier, would have been made under O 29 r 5 of the Federal Court Rules in any event.
In all the circumstances, the continuation of the Supreme Court action would plainly have been seriously and unfairly burdensome or unjustifiably oppressive to Vegas. Sheraz was the alter ego of Mr Clifford, and Mr Clifford at all material times controlled Sheraz. Sheraz's claim could and should have been litigated in the Federal Court in connection with, in the sense of at least immediately following, Mr Clifford's claims with appropriate orders concerning the commonality of evidence. The result would have been that all of the claims of Sheraz and Mr Clifford would have been heard and determined effectively at the one time and with minimal additional time, cost and expense. The additional time, cost and expense would have been insignificant compared with the time, cost and expense involved with the pursuit of the Supreme Court action.
Subject only to a consideration of the 'fresh evidence' allegation raised in ground 4 of the appeal, the master was correct to conclude that Sheraz was precluded from its pursuit of the Supreme Court action. It is not necessary to decide, for the proper disposition of the appeal, whether the master's reference to an 'estoppel of a different nature', is to be read as a reference to an abuse of process. Even if his reasons, properly construed, are not to be understood as referring to an abuse of process, the master's decision should be upheld on the basis of amended ground 1 of the notice of contention (subject to a consideration of ground 4 of the appeal).
That conclusion is confirmed by, but not dependent upon, the following additional matter. The Supreme Court action also raised the prospect of conflicting judgments in the following respect. Mr Clifford controlled Sheraz and in each case it was his mind which directed the acquisition decision. In the Supreme Court action, Sheraz invited the court to find, in effect, that had any of the matters concerning the increases in the overdraft limit, the overdrawn amounts, the under‑budget sales or the shareholder loans in late 2006 been disclosed to him, he would not have caused Sheraz to acquire the shares in Vegas (s/c pars 56, 65 read with 28). Barker J found, however, that those matters were not material to Mr Clifford's decision to cause the investment in Vegas [284], [348], [358] ‑ [359] and [376].
Vegas also contended that the Supreme Court proceedings constituted a collateral attack on other findings of Barker J: that the reasonable expectation in the circumstances was not that Vegas would disclose anything in particular to Mr Clifford, but that it would respond to his reasonable requests for information in the course of his due diligence [331]; that pt V of the TPA had no application to the relevant acquisition [53] ‑ [55]; and that Mr Clifford borrowed the funds and paid for the shares (see, eg, Full Court's reasons [81] ‑ [82]). However, it is unnecessary to determine whether it is correct to characterise the Supreme Court action as constituting a collateral attack on those specific findings. For the reasons already given, the Supreme Court action was an abuse of process. This conclusion is subject only to a consideration of the 'fresh evidence' point raised in ground 4, to which I will now turn. (Ground 3 is more conveniently addressed after ground 4.)
Ground 4 of the appeal
In ground 4 of the appeal, Sheraz contends that the master erred in law in failing to 'postpone' delivery of his reasons for judgment on 19 February 2013 on account of an allegation of 'fresh evidence' made by Sheraz's solicitors in an email to the master's associate on 15 February 2013. In response to Vegas' amended notice of contention, Sheraz also contends that had the master postponed delivery of his reasons, the 'fresh evidence' would have precluded any finding of abuse of process.
In the letter from Sheraz's solicitor to the master dated 15 February 2013 (GB 331 ‑ 334), it was said that 'evidence came into existence' on 1 February 2013 'effectively negativing important parts' of the findings in the Federal Court. The letter stated that '[f]or the sake of clarity' the solicitor was obtaining a transcript of the evidence given by one of the directors of Vegas previously sued by Mr Clifford (Mr Backshall) in the Federal Court action. The evidence of Mr Backshall in respect of which the transcript was being sought, was given in certain proceedings in the Federal Magistrates Court on 1 February 2013.
As discussed below, the evidence arose in cross‑examination by Mr Clifford of Mr Backshall in the Federal Magistrates Court on 1 February 2013 in proceedings apparently concerning Mr Clifford's bankruptcy. There was, however, no application by Sheraz to reopen the hearing of Vegas' chamber summons. There was no affidavit sworn by Mr Clifford as to what had transpired on 1 February 2013 and its materiality to the decision in the Federal Court. In these circumstances, it was plainly open to the master not to 'postpone' the delivery of his reasons. No error is disclosed and ground 4 should be dismissed.
In any event, there is no substance to Sheraz's 'fresh evidence' point.
Sheraz made, in effect, two contentions. First, it was alleged that Mr Backshall's evidence in the Federal Magistrates Court on 1 February 2013, demonstrated that his evidence in the Federal Court trial, to the effect that he had told Mr Clifford to contact Mr Chris Rayney, the chief financial officer of Vegas, regarding any financial information Mr Clifford required for his due diligence process, was 'false'. It was said that Mr Backshall's 'false evidence' was material to Barker J's findings in that:
(a)his Honour accepted that Mr Backshall had told Mr Clifford that he should contact Mr Rayney for any financial information he required for his due diligence (Barker J's reasons [124], [223], [331] and [333];
(b)his Honour found that the reasonable expectation was that Mr Clifford would ask for whatever information he required [335] (see also [346]); and
(c)his Honour found that at no time did Mr Clifford make any enquiries of Vegas or its directors or anyone else such as Mr Rayney concerning the position of shareholder loans [356].
Secondly, it was alleged that Mr Backshall also gave evidence in cross‑examination on 1 February 2013 that Sheraz's investment of $2.5 million was to be, and was, used to pay trade creditors. It was said that this was 'not properly discovered or disclosed at any reasonable time prior to the trial' and was 'in direct conflict' with the findings of Barker J (see appellant's reply to notice of contention 28 June 2013, par 18,). The findings with which it was said this was in 'direct conflict' were to the effect that the payment of $2.5 million was not used to repay shareholder loans as alleged by Mr Clifford in the Federal Court, or to reduce a short term overdraft facility, but was rather used as 'additional working capital' for the Vegas business [260], and that the money was paid by Vegas into its overdraft facility account which, at that point in time, was in credit [169], [307] ‑ [309], [319] [373].
In this context, Sheraz contended that the Federal Court judgments were themselves 'obtained as an abuse of process' and referred in this regard to the observations of Handley JA (Heydon JA (as he then was) and Hodgson JA agreeing) in Toubia v Schwenke [2002] NSWCA 34; (2002) 54 NSWLR 46:
In an action for fraud, a plaintiff must prove that he was deceived but need not prove that he was diligent. Where the action seeks the judicial rescission of a judgment, the plaintiff must prove that he and the Court were deceived and he can only do this by showing that he has discovered the truth since the trial. Where this is done, and the fresh facts are material, fraud is established. Lord Buckmaster (at 301) said that if fraud was proved the judgment was vitiated, and he can only have meant that nothing else had to be proved apart from fraud. This means there is no need to prove due diligence as well [41].
An allegation of fraud is a serious matter and requires a proper factual basis.
Further, in Wentworth v Rogers (No 5) (1986) 6 NSWLR 534, 539, Kirby P (Hope & Samuels JJA agreeing) said:
Fourthly, although perjury by the successful party or a witness or witnesses may, if later discovered, warrant the setting aside of a judgment on the ground that it was procured by fraud, and although there may be exceptional cases where such proof of perjury could suffice, without more, to warrant relief of this kind, the mere allegation, or even the proof of perjury will not normally be sufficient to attract such drastic and exceptional relief as the setting aside of a judgment; Cabassi v Vila [[1940] HCA 41; (1940) 64 CLR 130, 147, 148]; Baker v Wadsworth (1898) 67 LJ QB 301; Everett v Ribbands [(1946) 175 LT 143, 145, 146]. The other requirements must be fulfilled. In hard fought litigation, it is not at all uncommon for there to be a conflict of testimony which has to be resolved by a judge or jury. In many cases of contradictory evidence, one party must be mistaken. He or she may even be deceiving the court. The unsuccessful party in the litigation will often consider that failure in the litigation has been procured by false evidence on the part of the opponent and the witnesses called by the opponent. If every case in which such an opinion was held gave rise to proceedings of this kind, the courts would be even more burdened with the review of first instance decisions than they are. For this reason, and in defence of finality of judgments, a more stringent requirement than alleged perjury alone is required.
Fifthly, it must be shown by admissible evidence that the successful party was responsible for the fraud which taints the judgment under challenge. The evidence in support of the charge ought to be extrinsic. Cf Perry vMeddowcroft (1846) 10 Beav 122 at 138 ‑ 139; 50 ER 529, 534, 535. It is not sufficient to show that an agent of the successful party was convicted of giving perjured evidence in the former proceeding, the result of which it is sought to impeach. It must be shown that the agent, in so acting, was in concert with the party who derived the benefit of the judgment. Ronald v Harper [[1913] VLR 311, 318]; Shedden v Patrick [(1854) 1 Macqueen 535, 643].
Sixthly, the burden of establishing the components necessary to warrant the drastic step of setting aside a judgment, allegedly affected by fraud or other relevant taint, lies on the party impugning the judgment. It is for that party to establish the fraud and to do so clearly. In summary, he or she must establish that the case is based on newly discovered facts; that the facts are material and such as to make it reasonably probable that the case will succeed; that they go beyond mere allegations of perjury on the part of witnesses at the trial; and that the opposing party who took advantage of the judgment is shown, by admissible evidence, to have been responsible for the fraud in such a way as to render it inequitable that such party should take the benefit of the judgment.
As to Sheraz's first contention, there was an email dated 25 October 2006 from Mr Backshall to Mr Clifford, tendered in the Federal Court action, which was headed 'New Share Register', which referred to the share register of Vegas and how it would appear if Mr Clifford were to 'come on board as a new shareholder subject to due diligence' (GB 337). It suggested a proposed settlement date for the transaction and referred to the possibility of Vegas' bank being able to help out Mr Clifford if he needed bridging finance. It concluded with the words:
If you have any queries give me a call, I'm in the office all day today.
The email attached a document recording various shareholdings or proposed shareholdings.
In the Federal Magistrates Court on 1 February 2013, Mr Clifford referred this email to Mr Backshall and asked, by reference to the document (GB 339):
And you finished it by saying if I had any queries, to give you a call. You were in the office all that day?
To which Mr Backshall said 'Yes'. Mr Clifford then asked:
And so what you had said to me was, 'Look at it', because we had a meeting the night before, and 'if you've got any questions' to ask you?
Mr Backshall again said 'Yes'.
The following observations may be made. First, if (it is not clear) the email dated 25 October 2006 in the appeal papers (GB 337) is the same email to which Barker J referred at [331] of his reasons, the particular finding that the email indicated that Mr Clifford could approach 'Mr Rayney' might be thought to be inaccurate in that the email does not, at least in terms, refer Mr Clifford to Mr Rayney. However, Mr Rayney was the Chief Financial Officer (CFO) of Vegas and the email of 25 October 2006 did refer to Mr Clifford's 'due diligence', and it may be that, construed in light of the other matters to which Barker J referred at [331], his Honour construed the email as implicitly indicating that Mr Clifford could approach Mr Rayney for financial information regarding his due diligence.
Secondly, and more fundamentally, Mr Backshall's acceptance that he wrote the email with the concluding words referred to by Mr Clifford is not inconsistent with his evidence in the Federal Court that he told Mr Clifford to contact Mr Rayney, the chief financial officer of Vegas, if Mr Clifford required any financial information for his due diligence. Mr Backshall's statement in the email that he was 'in the office all day' (on Wednesday, 25 October 2006) and that Mr Clifford could 'give [him] a call' does not negative a more general proposition that if at any time, Mr Clifford required financial information in relation to his due diligence, he could contact Mr Rayney, the CFO of Vegas. There is no reasonable basis for contending that Mr Backshall's answers in the Federal Magistrates Court provided any evidence that the Federal Court judgment was obtained by fraud or an abuse of process.
Thirdly, Sheraz has not established any relevant materiality. According to the letter written to Master Sanderson on 15 February 2013, Sheraz contended that the truth was that Mr Backshall 'told Mr Clifford to ask him (Mr Backshall) and not Mr Rayney regarding any financial information he required' (GB 333, third last par). However, the precise identity of the person whom Mr Clifford could approach has not been shown to be material. Mr Rayney was apparently not a director of Vegas, but the burden of Barker J's findings in this context was that Mr Clifford could approach either the directors, or Mr Rayney, about matters concerning the financial position of Vegas in relation to this due diligence enquiries. At [335], Barker J said:
The reasonable expectation was that Mr Clifford would ask for whatever information he needed.
At [356], his Honour found:
However at no time did Mr Clifford make any enquiries of Vegas or the directors (or anyone else such as Mr Rayney, apparently) concerning the position with shareholders loans.
At [375], his Honour said:
Put shortly, as in relation to the other alleged issues of non‑disclosure, the circumstances were such that the respondents were entitled to expect that Mr Clifford would raise with them any issues concerning the operation of the company that might touch on such issues. He did not.
Accordingly, there is no merit in Sheraz's first contention.
As to Sheraz's second contention, Mr Backshall was cross‑examined by Mr Clifford on 1 February 2013 with respect to an email dated 21 November 2006 from Mr Gordon McGuire (apparently of Deloitte) to Mr Rayney and Mr Backshall (see GB 345 ‑ 347) and an email dated 21 December 2006 from Mr McGuire to Mr Backshall (GB 348 ‑ 349). The former email was headed 'Updated List' and referred to a discussion earlier that evening. The attachment to the email had an overall heading 'Rusty Queries - Monday 20 November 2006' and contained a number of questions under various subheadings with certain answers inserted after the question. It contained the following:
Additional question for modelling purposes
1.Why are Trade Debtor and Trade Creditor days at June 2007 forecast to be significantly higher than at June 2006?
(a)Debtor days: 60 days as at June 2006, 86 days as at June 2007;
(b)Creditor days: 23 days as at June 2006, 61 days as at June 2007.
In the Federal Magistrates Court, Mr Backshall was asked, with respect to that item (GB 342):
Is it right to conclude that because Vegas was short of money, as at 21 November, when this was done, you were putting off paying the creditors and that you had put them out from 23 day[s] to 61 days?
Mr Backshall answered:
Let me just read this again. I don't know what the answer was.
The latter email contained an attachment which Mr Backshall accepted indicated that the Sheraz payment was 'taken against trade creditors' (GB 343).
Sheraz contends that this evidence was 'not properly discovered or disclosed' prior to trial (emphasis added). However, it has not been established that these emails or their attachments were 'fresh evidence' which has emerged since the trial. Nor has any application been made in the Federal Court to apply to set aside the judgment on the basis that proper discovery was not given in accordance with the principles in Commonwealth Bank of Australia v Quade [1991] HCA 61; (1991) 178 CLR 134. Nor in any event, has Sheraz demonstrated in this appeal that the information in the emails relating to creditors is in 'direct conflict' with the findings of Barker J to the effect that the sum of $2.5 million was not used to repay shareholder loans as Mr Clifford had alleged, or to reduce a short term overdraft facility, but was rather used as additional working capital. The use of money to pay trade creditors is not inconsistent with the use of money for working capital.
Nor has Mr Clifford commenced any process in the Federal Court seeking to set aside the judgments on the basis that they were obtained by fraud.
Ground 4 of the appeal should be dismissed and the alleged 'fresh evidence' point has no merit.
Ground 3 of the appeal
Ground 3, in effect, takes issue with the following passage of the master's reasons:
In answer to that the plaintiff says it is running a case which is pleaded in an entirely different way from the case that was pleaded in the Federal Court. That is so. Mr Clifford went through each paragraph of the statement of claim in this action and if these paragraphs are compared with the pleadings in the Federal Court proceedings it can be seen there is a material difference. But everything that is pleaded in this action could have been pleaded in the Federal Court action. During the course of submissions I put that to Mr Clifford (ts 36 ‑ 37). Mr Clifford['s] response was to criticise the conduct of the defendants in the Federal Court proceedings. But no issue was taken in relation to that conduct in the Federal Court trial or on appeal. There was no allegation by Mr Clifford in the Federal Court proceedings that he was unfairly treated because of the way the defendants ran their case. It is and remains the fact all of the matters presently pleaded could have been raised in the Federal Court action. They were not and the parties have to live with the consequences [12].
The effect of the passage is that there was no evidence that Vegas had somehow precluded Sheraz from asserting its own claims or rights in the Federal Court action. Sheraz has not pointed to any evidence which would indicate that the master's conclusion was wrong. The ground must fail.
Notice of contention ground 2
By its second ground of contention, Vegas contended that the master should have struck out the whole of the statement claim and Sheraz's action on two bases. The first was that it was an abuse of process to relitigate the issue of who paid for the acquisition of the shares and the costs associated with the acquisition and, accordingly, the action as a whole had no prospect of success. Secondly, it was alleged that the financial performance representation was not reasonably arguable and that the statement of claim should have been struck out on that account.
As I have already found that the first ground of contention succeeds on the basis that the Supreme Court action was an abuse of process, it is unnecessary to consider this particular allegation of abuse raised in ground 2 of the notice of contention.
As to the second matter, the financial performance representation was allegedly conveyed by the provision of the accounts.
Turning first to the audited accounts up to 30 June 2005, the provision of those accounts, without more, could not reasonably arguably convey a representation that, as at October/November 2006, Vegas had the capability of maintaining or improving its financial performance or reducing its debt levels. The same observation applies to the unaudited accounts for the year ended 30 June 2006. Without more, that historical information cannot reasonably convey anything about Vegas maintaining its financial performance and its ability to maintain or reduce its debt levels as at October/November 2006. Nor does the plea that the unaudited accounts contained a statement that since 30 June 2006, apart from a bad
debt provision, there was no 'item, transaction or event of a material and unusual nature' assist Sheraz (s/c par 49.2). It does not arguably convey a representation that as at October/November 2006, the company was capable of maintaining or reducing the debt disclosed in the unaudited accounts for the year ending 30 June 2006. Nor is there any allegation that there were, contrary to the fact, items of a 'material and unusual nature' that had occurred within the meaning of that statement, since 30 June 2006.
Sheraz, nevertheless, contends, in effect, that its plea must be arguable because the court in another case upheld, on differently pleaded facts, a pleaded representation to similar effect: Slinger v Southern White Pty Ltd [2005] SASC 267; (2005) 92 SASR 303. In that case, various documents were provided to the purchaser of a business by a vendor prior to contract. They included information as to the expectations of the gross income that would be generated by the business and various financial projections [10] ‑ [18], but they were inaccurate by the time of contract [30].
The decision of Slinger does not assist Sheraz. Here the financial performance representation is not arguably conveyed by the accounts as alleged. The second aspect of ground 2 of the notice of contention is made out, although it is unnecessary to rely upon that for the disposition of the appeal.
Conclusion
Leave should be given to amend the notice of contention. The appeal should be dismissed. I would add that I also agree with the additional observations made by Chaney J in this matter.
CHANEY J: I agree with Murphy JA that, for the reasons which he gives, leave should be given to amend the notice of contention and the appeal should be dismissed.
It will be noted that Mr Clifford appeared and argued this appeal, as a barrister instructed by Alan Rumsley (a solicitor), on behalf of Sheraz. He did so notwithstanding that:
a.as found by Barker J [421(2)], and submitted by Mr Clifford in the Federal Court [395], he controlled Sheraz at the time the relevant events took place, and he was described by Master Sanderson as the 'alter ego' of Sheraz;
b.Sheraz sought to bring the action in this Court as the trustee of the Terranora of Family Trusts, a discretionary trust of which Mr Clifford is a beneficiary; and
c.Mr Clifford would have been the key witness for Sheraz in the Supreme Court proceedings had they proceeded. It is highly likely that significant parts of his evidence (such as on questions of reliance) would have been challenged.
Rule 32 of the Legal Profession Conduct Rules 2010 (WA) made under the Legal Profession Act 2008 (WA) calls for independence by practitioners engaged to represent clients in a matter before a court. Rule 33(2) precludes a practitioner acting as counsel for a client 'if it would be difficult for the practitioner to maintain professional independence because of a connection with the client'. Rule 42 provides that a practitioner must not act for a client in the hearing of a case in which it is known, or becomes apparent, that the practitioner will be required to give evidence centrally material to the determination of contested issues before the court. That rule reflects the rationale underlying the decision of Templeman J in Clay, a case in which a firm of solicitors were restrained from continuing to represent a defendant where a practitioner from the firm was likely to be called as a witness in the proceedings and where the practitioner had a personal interest in the outcome of the action. Rule 95 of the Western Australian Barristers' Rules published by the Western Australian Bar Association requires a barrister to refuse to retain a brief to appear before a court where the barrister has reasonable grounds to believe that he or she may, as a real possibility, be a witness in the case, or where the barrister has a material financial or property interest in the outcome of the case.
The question of Mr Clifford's role as counsel was raised with him by the Court at the outset of the hearing of the appeal. He justified his appearance by saying that he had ceased to be a director of Sheraz, that he had no direct interest in the outcome of the proceedings because he was only one of a number of beneficiaries under a discretionary trust, and that, while he would be a witness if the matter proceeded to trial, he was not a witness for the purposes of the appeal.
Given Mr Clifford's intimate involvement in the transactions the subject of the action and his obvious personal interest in the outcome, there is at least a serious risk that he could not bring to the Court the independence expected of counsel. The rules which preclude a person from acting as counsel when they are to be a witness do not only apply to the hearing at which evidence is to be given. Once it becomes apparent that a practitioner's independence is affected by some personal connection, either with the client or the subject matter of the proceedings, of the type with which the rules referred to above deal, the practitioner should cease to act in the matter generally.
No objection was taken by Vegas to Mr Clifford's appearance as counsel for Sheraz. Although the court did not prevent Mr Clifford from presenting the case for Sheraz, as was in effect foreshadowed to Mr Clifford in the exchange on this issue, I would not wish it to be taken that I consider his appearance as counsel to have been appropriate.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: SHERAZ PTY LTD -v- VEGAS ENTERPRISES PTY LTD [2015] WASCA 4 (S)
CORAM: BUSS JA
MURPHY JA
CHANEY J
HEARD: 16 JANUARY 2015
DELIVERED : 16 JANUARY 2015
FILE NO/S: CACV 26 of 2013
BETWEEN: SHERAZ PTY LTD as Trustee for the TERRANORA FAMILY TRUST
Appellant
AND
VEGAS ENTERPRISES PTY LTD
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram :MASTER SANDERSON
Citation :SHERAZ PTY LTD -v- VEGAS ENTERPRISES PTY LTD [2013] WASC 45
File No :CIV 2648 of 2012
Catchwords:
Practice and procedure - Costs - Costs orders on appeal and at first instance
Legislation:
Rules of the Supreme Court 1971 (WA), O 66 r 1(1), O 66 r 10(2)
Supreme Court (Court of Appeal) Rules 2005 (WA), r 5(1)
Supreme Court Act 1935 (WA), s 37(1)
Result:
Orders made
Category: B
Representation:
Counsel:
Appellant: Mr A P Rumsley
Respondent: Mr B D Luscombe
Solicitors:
Appellant: Alan Rumsley
Respondent: Clifford Chance
Case(s) referred to in judgment(s):
Sheraz Pty Ltd v Vegas Enterprises Pty Ltd [2015] WASCA 4
REASONS OF THE COURT: This court has published its reasons for decision in the appeal today. See Sheraz Pty Ltd v Vegas Enterprises Pty Ltd [2015] WASCA 4. The solicitors for the parties were provided with an advance copy of the reasons to enable them to make submissions about the orders that should now be made.
The parties are in dispute as to the orders that should be made in relation to the costs of the appeal and the costs order made by Master Sanderson at first instance. The master ordered the appellant in effect to pay the respondent's costs of the action, including the costs of the respondent's application for summary judgment, alternatively, to strike out the action.
Section 37(1) of the Supreme Court Act 1935 (WA) confers a broad discretion on the court in relation to costs with full power to determine, relevantly, to what extent such costs are to be paid. This discretionary power enables the court to make orders with respect to the allowance of costs generally. See also O 66 r 1(1) of the Rules of theSupreme Court1971 (WA), which should be read together with s 37(1) of the Act.
By O 66 r 10(2) of the Rules of the Supreme Court, relevantly, in the case of an appeal, the costs of the proceedings giving rise to the appeal, as well as the costs of the appeal and of the proceedings connected with it, may be dealt with by the court hearing the appeal.
Rule 5(1) of the Supreme Court (Court of Appeal) Rules 2005 (WA) provides that the Court of Appeal Rules must be read with the Rules of the Supreme Court.
In the present case, the appellant relied on four grounds of appeal and the respondent relied on a notice of contention.
The appeal was part heard on 14 March 2014. It was necessary to adjourn the hearing on that date because the respondent applied in the course of the hearing for leave to amend its notice of contention. The amendment was significant. The appellant opposed a grant of leave to amend. The court directed the parties to file and serve written submissions in relation to the application to amend and the substantive proposed amendment. This was done. The appeal was relisted for a further hearing on 22 August 2014 and the hearing of the appeal was completed on that date.
The court has decided unanimously that the respondent should have leave to amend its notice of contention and that the appeal should be dismissed. However, the appellant had some success. It failed on grounds 3 and 4 but it made out ground 1 of the appeal.
The court considered ground 2 of the appeal and ground 1 of the amended notice of contention together. The respondent made out ground 1 of the amended notice of contention and the appeal was dismissed on that basis. The amendment to ground 1 was critical to the outcome of the appeal.
The respondent also made out the second aspect of ground 2 of the amended notice of contention, but the court decided it was unnecessary to rely upon that aspect in the disposition of the appeal. It was unnecessary for the court to deal with the first aspect of ground 2.
After taking into account the successes and failures of each of the parties on particular issues at first instance and on the appeal, the necessity to adjourn the appeal part heard on 14 March 2014 as a result of the respondent's application to amend its notice of contention, the necessity to order the parties to make written submissions in connection with the application to amend, the significant nature of the amendment, the court's reasons for decision in the appeal and the submissions of the parties on the orders that now should be made, justice would be done as between the parties if:
(a)the appellant was ordered to pay 70% of the respondent's taxed or agreed costs of the appeal, including the costs of the notice of contention, the amended notice of contention and any reserved costs; and
(b)the order as to costs made by Master Sanderson was not disturbed.
These orders are preferable to this court endeavouring to make individual orders by reference to particular issues or events in the appeal. Overall, the respondent has in the result been successful at first instance and on the appeal.
Accordingly, the orders that the court makes are as follows:
(1)Appeal dismissed.
(2)The appellant do pay 70% of the respondent's taxed or agreed costs of the appeal, including the costs of the notice of contention, the amended notice of contention and any reserved costs.
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