Telstra Corporation Limited v ACN 155 795 930 Pty Limited

[2019] NSWDC 322

District Court

New South Wales

Medium Neutral Citation:

Telstra Corporation Limited v ACN 155 795 930 Pty Limited [2019] NSWDC 322

Hearing dates:

20 June 2019

Date of orders:

20 June 2019

Decision date:

20 June 2019

Jurisdiction:

Civil

Before:

Russell SC DCJ

Decision:

1. The plaintiff’s motion filed on 17 May 2019 is dismissed;
2. Order the plaintiff to pay the defendant’s costs of the motion;
3. Order that the exhibits and the MFIs on the motion be returned.
4. Extend time for the plaintiff to serve its expert evidence to 2 July 2019.
5. Extend time for the parties to participate in an informal settlement conference to 5 July 2019.

Catchwords:

PROCEDURAL – summary judgment – need for further evidence and further submissions of law – application refused

 

PROCEDURAL – separate determination of questions – disagreement about form of questions – no savings in time or expense – application refused

  PROCEDURAL – security for costs of cross-claim – trial due to start in near future – impecuniosity of cross-claimant apparent for a long time – timing of application for security – application refused

Legislation Cited:

Uniform Civil Procedure Rules

Cases Cited:

Bass v Permanent Trustee Co Ltd 198 CLR 334
Dey v Victorian Railways Commissioner 78 CLR 62
FanCourt v Mercantile Credits Ltd 154 CLR 887
General Steel Industries v Commissioner for Railways (NSW) 112 CLR 125
Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 1 NSWLR 114
Tallglen Pty Ltd v Pay TV Holdings Pty Ltd 22 ACSR 130

Category:

Procedural and other rulings

Parties:

Telstra Corporation Limited (Plaintiff)
ACN 155 795 930 Pty Limited (Defendant)

Representation:

Counsel:
A Ahmad (Plaintiff)
B Michael (Defendant)

  Solicitors:
Holman Webb (Plaintiff)
Cooper Mills (Defendant)

File Number(s):

2015/374665

EX TEMPORE Judgment

1. This is a judgment on the plaintiff’s notice of motion filed on 17 May 2019. The plaintiff seeks four orders. The first is for summary judgment on its claim. The second is for summary dismissal of the defendant’s cross-claim. The third is in the alternative, that the Court order the hearing of two separate questions. The fourth is that the cross-claimant gives security for costs in respect of the cross-claim.

Background

2. The proceedings were commenced on 21 December 2015 by a statement of claim which sought a money judgment for $464,000 approximately. The cause of action is based upon an alleged failure to pay moneys due under a wholesale telecommunications agreement between the plaintiff and the defendant. On 23 November 2016 a defence was filed. The defence pleaded that two large payments were made by a third party, a corporation which has been referred to as 286 Pty Ltd. I will continue to refer to it by that shorthand.

3. The defence pleaded a payment of $253,037.48 and a second payment of $190,000. I pause to remark that from the very start Telstra, the plaintiff, has been aware that while certain moneys were paid to it by 286 Pty Ltd, those moneys were later, to use a neutral term, recalled by 286 and repaid to it, meaning that Telstra has been out of pocket. On 3 May 2018, a cross-claim was filed by the defendant. The cross-claim pleaded that the plaintiff had wrongfully terminated the wholesale telecommunications agreement and thus damages had been suffered by the cross-claimant. A defence to that pleading was put on promptly on 14 June 2018.

4. The cross-claim will stand or fall with the plaintiff’s claim in the sense that if the defendant has failed to pay the moneys due under the agreement, then Telstra correctly and properly terminated that agreement. If, on the other hand, it turns to be the finding of the Court that the moneys have been paid, then Telstra had no right to terminate the agreement and damages may well flow.

5. Finally, on 2 April this year the proceedings generally were set down for hearing for two days commencing on 17 July 2019. As I have previously recited, this motion was filed six weeks later. There has been no explanation of why it is that proceedings now filed three and a half years ago are not coming on for hearing until the middle of this year, and while I have sought an explanation I have not received, to my mind, a satisfactory explanation as to why any application of the kind made by the plaintiff was not made much earlier. The issue as to payment or non-payment has been on the table since at least 2016.

Summary Judgment

6. I will deal first with the claim for summary judgment. This is made under Uniform Civil Procedure Rules 13.1. Subrule (1) reads:

“If, on application by the plaintiff in relation to the plaintiff’s claim for relief or any part of the plaintiff’s claim for relief:

(a)   there is evidence of the facts on which the claim or part of the claim is based, and

(b)   there is evidence, given by the plaintiff or by some responsible person, that, in the belief of the person giving the evidence, the defendant has no defence to the claim or part of the claim, or no defence except as to the amount of any damages claimed,

the Court may give such judgment for the plaintiff, or make such order on the claim or that part of the claim, as the case requires.”

7. The principles in relation to summary judgment are well-known. The power to enter summary judgment should be exercised with great care and an order under the Rule should only be made where it is clear that there is no real question to be tried. The reference for that proposition is FanCourt v Mercantile Credits Ltd 154 CLR 887. If there is a real question either of fact or law, and the rights of the parties depend on it, it is not open for the Court to intervene summarily. The authority for that proposition is Dey v Victorian Railways Commissioner 78 CLR 62. It must be clear that there are no facts in issue.

8. The High Court in General Steel Industries v Commissioner for Railways (NSW) 112 CLR 125 expressed the test in various ways. These included: “so obviously untenable that it cannot possibly succeed”, “manifestly groundless”, “so manifestly faulty that it does not admit of argument”, “discloses a case which the Court is satisfied cannot succeed”, “under no possibility can there be a good cause of action”, “be manifest that to allow the pleadings to stand would involve useless expense”. That principle as laid down in General Steel of course applies to dismissal but the General Steel principles are equally applicable to an application for summary judgment.

9. The defendant accepts by way of submission in these proceedings that if the defendant failed to pay in accordance with the agreement, then the plaintiff was entitled to terminate the agreement and no damages flow to the defendant. So far as the factual issues in relation to the summary judgment application are concerned, there is evidence that money was paid by 286 Pty Ltd to Telstra. It is not clear on the facts as to the course of events after the payments were made or purportedly made. The first payment of approximately $253,000 was, on the evidence, paid into the plaintiff’s Westpac account. It remained there for some time and it was reversed out. The plaintiff was notified that a reversal would take place, and was offered the opportunity to respond to the proposal for reversal of the money. It took no steps to oppose that course.

10. The second payment of $190,000 may or may not have been paid into the Westpac account, and that is unclear on the evidence. There’s a question as to whether it was not paid at all, or was paid and the payment was somehow dishonoured by the bank, or it was paid into the bank and later reversed out. The terminology used in the correspondence does not make that plain. However, all the evidence does disclose that whatever was paid to the plaintiff was returned by Westpac to 286 Pty Ltd, and therefore the amounts owing by the first defendant remaining outstanding, to use a neutral term.

11. The primary evidence of the plaintiff is the affidavit of an officer, Ms Domingues. Her affidavit evidence shows that money was paid by 286 Pty Ltd, that there was, to use a neutral term, a refund of those payments back to 286 Pty Ltd, and thus that the plaintiff has still not received payment of the two large amounts. There is an affidavit by Ms Toniato, solicitor, of 19 June 2019, and her para 7 satisfies the requirements of r 13.1(1)(b) that, in her belief, the defendant has no defence to the claim.

12. The plaintiff submitted that there was no triable issue to be determined. It was pointed out that the debts have not been paid and, if I may say so at this preliminary stage, there is much force in that submission. It is really counterintuitive to suggest that while money was paid to Telstra and was paid back by Telstra’s bank to the payer, what has happened is that somehow the debts have been paid. Nevertheless, the defendant made the following submissions. That there was firstly a factual issue as to whether the second payment ever went into the Telstra account. Attention was drawn to the distinction between dishonour and reversal. The plaintiff’s response to that was that it did not matter even if the money had been paid in and then reversed, because it could not be said, giving commercial common sense to the contract, that the money had been paid.

13. The second submission put by the defendant was that the defendant did discharge its contractual obligation to pay by procuring a third party to pay the amounts to the plaintiff, Telstra. The rhetorical question was raised, what did Telstra do when its bank said that it would reverse the payments. The submission for the defendant was that there would be cross-examination of Ms Domingues as to why nothing was done to prevent the reversal. It was pointed out in submissions that Telstra had emails from Mr Widdowson, who was the officer of 286 Pty Ltd who caused the payment to be made, which indicated that he did authorise the payments.

14. So the defendant submitted there were two triable issues. One of fact as to the nature of the payment made by 286 Pty Ltd in relation to the second payment and the circumstance in which that money was not retained by Telstra, and the second being an issue of law as to whether Telstra could and should have done something to retain money to which it was entitled.

15. The plaintiff submitted in response that the Court has all the evidence which the trial judge would have and that I would be in as good a position today to decide this case as the trial judge would be if there was all of the evidence before the Court. I pause to remark that I do not accept that submission in full. I do not have cross-examination of Ms Domingues. That may or may not reveal a legal defence available to the defendant.

16. Further, I have not had the benefit today of any detailed submissions on a matter of law, which is the effect of Telstra’s action or inaction as to whether it could have responded when Westpac, its bank, said that the money was going to be reversed from the account. The issue of law which arises is whether, having received the money from 286 Pty Ltd and having held it for some short significant period of time, it could be said that the debt was in law paid or remained unpaid. I am certainly not being critical of counsel in this case on either side, who have assisted me greatly with their submissions. I do not think that either party would be in a position to make detailed submissions about the legal effect of what Telstra did or did not do when it was notified by its bank of the proposed reversal, because the facts in relation to that proposed reversal are not fully established and could not fully be established until there was cross-examination of the plaintiff’s primary witness.

17. My conclusion on the application for summary judgment is that there are triable issues for determination and that both of those triable issues, one of fact and one of law, depend upon necessary cross-examination of the plaintiff’s primary witness, Ms Domingues. I therefore propose to reject the plaintiff’s application for summary judgment.

Separate Questions

18. I move to deal with the third prayer for relief, which is an order for the hearing of two separate questions. This is an order sought under Uniform Civil Procedure Rule 28.2 which simply says, “The Court may make orders for the decision of any question separately from any other question, whether before, at or after any trial or further trial in the proceedings”. Again, the principles upon which such an order can be made are well known. The separate and preliminary determination of a question may be appropriate where the question is critical to the outcome of the proceedings and, if decided in one way, would bring the proceedings to an end, where it would obviate the unnecessary and expensive hearing of other questions or where there is a strong prospect that the parties would agree upon the result if the core of their dispute was decided. The references given for that proposition include Tallglen Pty Ltd v Pay TV Holdings Pty Ltd 22 ACSR 130.

19. All facts relevant to determination must be found or agreed. Reference for that is the High Court in Bass v Permanent Trustee Co Ltd 198 CLR 334. However, savings in time and expense for the determination of a separate question are often illusory. An order for the separate determination of a question or questions should only be made where the utility, economy and fairness to the parties of a separate hearing is beyond question. The authority for that proposition is Tepko Pty Ltd & Ors v Water Board 206 CLR 1.

20. The parties could not agree on appropriate wording for a separate question.

21. The plaintiff’s formulation is set out in prayer 3 in the notice of motion. Paragraph 3(a) specifically refers to the first transfer, that’s the $213,000 transfer, as being reversed from the plaintiff’s account. Paragraph 3(b) of the notice of motion refers to the second payment of $190,000 as being dishonoured by the bank of 286 Pty Ltd and never being placed into the plaintiff’s bank account. As I have previously indicated, the facts in relation to that need to be established. I have not been presented with any evidence as to movements in and out of Telstra’s bank account. Rather, I have been presented with ledgers of Telstra itself, which record credits and debits, but it is not clear to me from those documents that the money was paid into Telstra’s bank account at all. I do not think it can be said that the facts have been established to prove that the second payment was dishonoured by the bank of 286 Pty Ltd.

22. An alternative formulation of the questions was put forward by the defendant. I certainly would see no utility in ordering a separate question on the basis of the defendant’s formulation, because that formulation excises altogether the notion of the effect of the reversal of the first payment or the dishonour of the second payment, and of course those two matters are crucial to the defendant’s propositions that it has paid the plaintiff. I find that all of the facts relevant to determination of any separate question have not yet been established.

23. An additional consideration is this. The matter was set down for hearing on 2 April 2019 with directions for the service of evidence for a defended hearing. If there was such a clear, separate question for determination which would have bound the parties to a particular outcome, this application could and should have been made a long time ago. It should have been made, if it had merit, well prior to this Court setting the matter down with directions to be followed. I therefore propose to decline to order determination of the separate questions put forward by the plaintiff.

Security for Costs

24. That leaves me with para 4 of the notice of motion, which is an application that the cross-claimant give security in respect of the cross-claim in an amount of $40,000. Applications for security for costs made under Uniform Civil Procedure Rule 42.21(d) reads as follows:

“If, in any proceedings, it appears to the Court on the application of a defendant that there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so, the Court may order the plaintiff to give such security as the Court thinks fit.”

25. In relation to a cross-claim, the defendant is to be regarded as a plaintiff and the plaintiff, the cross-defendant, is to be regarded as the defendant. Subrule (1A) sets forward a non-exhaustive list of matters relevant to the exercise of any discretion to order security for costs. It seems to me that the plaintiff applicant has satisfied the Court that there is reason to believe that the defendant corporation would be unable to pay the costs of the defendant if ordered to do so. However, an important matter in the exercise of discretion is in subr (1A)(l), which entitles the Court to have regard to the timing of the application for security for costs.

26. The authorities say that delay by a party in bringing the application for security is a relevant factor in the exercise of discretion, that the application should be brought promptly. The usual relevance of delay is that a party has spent money that would be wasted if security is awarded, and the conduct of a party as it relates to a delay would be taken into account. Delay will weigh less significantly if, for example, the hearing is not imminent or there has been some forewarning in correspondence foreshadowing an application. The longer the delay and the greater the costs that the other party has been allowed to incur, the less likely an order will be made. Reference for that is Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 1 NSWLR 114 at p 123.

27. In this case there is evidence that a year ago on 2 July 2018 a letter was sent foreshadowing an application for security for costs in precisely the same amount as is presently sought, $40,000. I previously recited that on 2 April 2019 the matter was set down for hearing. If there was concern about the inability of the defendant to pay costs on the cross-claim should it fail, an application should have been made well before the matter was set down for hearing and both parties embarked upon compliance with Court directions which would mean further expense. It was not until mid-May this year that an application for security was filed. That is in spite of the fact that the impecuniosity of the defendant has been known since 2015.

28. The plaintiff says that the cross-claim is hopeless. It says that on a legal basis, that is that it was entitled to terminate the agreement and thus there can be no success on the cross-claim. But that has been known to the plaintiff cross-defendant since 2015. The plaintiff has not put on any expert evidence as it was directed to do, and thus it has not incurred expense in preparation for hearing on the cross-claim as yet, whereas the defendant cross-claimant has commissioned an expert report on damages.

29. It has been pointed out in submissions that, in the absence of having any expert evidence, the preparation of the plaintiff for defending the cross claim will be one which involves only a defence of the damages aspect because the liability aspect flows automatically from success or failure on the plaintiff’s own claim. Preparation for dealing with that expert evidence will involve consideration of the lengthy report on damages served by the defendant, and preparation for cross-examination. But in my view that will not incur fees of anything like $40,000. Indeed, there has been no real justification put forward as to how the $40,000 figure is reached in any event.

30. To my mind, the factor of timing of this application is overwhelmingly against the plaintiff. Such an application could have been brought on solid ground at least three years ago. It was foreshadowed a year ago and yet nothing was done until two months before the hearing. I propose to dismiss that part of the application. In summary then, my final orders will dismiss the plaintiff’s motion.

Costs

31. Mr Ahmad, counsel for the plaintiff, submits that costs of the motion should be costs in the cause. That would be a discretionary order available to me. It is one that has crossed my mind because, as I have put it, the defendant’s proposition about non-payment is counterintuitive. I do think, however, that one has to treat the motion separately from any result of the final hearing, which I cannot possibly anticipate and I have made some remarks in this judgment critical of the plaintiff for bringing this application at a very late stage of the proceedings.

32. The order I will make is the ordinary order for costs. I see no reason to make any order that costs be payable forthwith. The hearing is looming and the parties should be preparing for that hearing rather than being diverted into assessing and paying costs at this stage.

Orders

33. So, my orders are these:

1. The plaintiff’s motion filed on 17 May 2019 is dismissed;

2. Order the plaintiff to pay the defendant’s costs of the motion;

3. Order that the exhibits and the MFIs on the motion be returned.

4. Extend time for the plaintiff to serve its expert evidence to 2 July 2019.

5. Extend time for the parties to participate in an informal settlement conference to 5 July 2019.

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Decision last updated: 12 July 2019