Willoughby & Ors v Clayton Utz

[2007] HCATrans 305

[2007] HCATrans 305

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Perth  No P4 of 2007

B e t w e e n -

BERYL FRANCES WILLOUGHBY

First Applicant

JOHN FRANCIS WILLOUGHBY

Second Applicant

MICHAEL STEPHEN WILLOUGHBY

Third Applicant

MARK ROBERT WILLOUGHBY

Fourth Applicant

and

CLAYTON UTZ

Respondent

Application for special leave to appeal

HAYNE J
CRENNAN J

TRANSCRIPT OF PROCEEDINGS

FROM CANBERRA BY VIDEO LINK TO PERTH

ON FRIDAY, 15 JUNE 2007, AT 2.24 PM

Copyright in the High Court of Australia

__________________

MR K.C. FLEMING, QC:   If the Court pleases, I appear with MR P.F. MYLNE for the applicants.  (instructed by Sajen Legal)

MR P.C.S. van HATTEM:   If the Court pleases, I appear for the respondent.  (instructed by Freehills)

HAYNE J:   Yes, Mr Fleming.

MR FLEMING:   Thank you, your Honours.  Your Honours, this matter has had a troubled and troubling past, if not to say a messy past, created in part by the process of bankruptcy itself which, of course, deprives a litigant of the capacity, first, to pursue and, second, to fund any action.  The matter was initiated in the Federal Court and moved painfully through that court to the point that upon the application of the respondent – perhaps we can more precisely say that by the insurer of the respondent – applying to have the matter removed to the Supreme Court.  At no point in the Federal Court had the issue of the applicants’ standing to bring the action been raised.

It was referred back to the Supreme Court and it was there raised upon an application which was brought concurrently with an application by the applicants here to amend the pleadings.  The pleading was initially in contract and in negligence.  The pleading was inadequate as it first appeared.  It had been done by the applicant himself, or one of the applicants themselves, and it needed amending.  It was sought to amend not only the contract and negligence parts but also to add in a claim for breach of fiduciary duty.  That issue of breach of fiduciary duty is the one principally with which the Master, Master Newnes, dealt with.  In fact, he did not mention the application to amend the other two courses of action.

HAYNE J:   Understanding that to be so, was it then part of the amendment to plead an assignment to the plaintiffs of the cause of action by their trustee?

MR FLEMING:   I do not understand so, your Honour, no.

HAYNE J:   The cause of action that they sued on was a cause of action that had vested in the trustee?

MR FLEMING:   Yes, it arose in their first bankruptcy and vested in that and also, of course, it was as they were bankrupts in the second bankruptcy that they commenced the action.

HAYNE J:   If they had a cause of action, the cause of action vested in the trustee and the second bankruptcy?

MR FLEMING:   Yes, your Honour.

HAYNE J:   Does it follow that in order to make good their claim they would have to plead and prove assignment to them of the cause of action vested in the trustee an assignment by the trustee to them?

MR FLEMING:   Yes, your Honour.

HAYNE J:   Even if that application to amend, which was made and to which you have already referred, had included an amendment referring to an assignment of the cause of action, that amendment would have been sought after time run?

MR FLEMING:   After time had run and the assignment was obtained after the action was commenced.

HAYNE J:   Regardless of that fact, the amendment would have been to plead a cause of action as assignee which was an action in respect of which time had run, would it not?

MR FLEMING:   Yes, your Honour.

HAYNE J:   Why then is this anything other than an orthodox application of principles of Weldon v Neal?  It has taken me a long time to get there but that is the bottom line.

MR FLEMING:   Your Honour, there is a difference in the interpretation of similar rules in Queensland and New South Wales.

HAYNE J:   Queensland at least has explicitly done away with Weldon v Neal, has it not?

MR FLEMING:   Yes, it has.

HAYNE J:   Western Australia has, I think, not?

MR FLEMING:   No, that is so, your Honour.

HAYNE J:   Therefore, is it not an orthodox application of the principles of Weldon v Neal in a procedural milieu different from that which obtains in Queensland, different radically because Weldon v Neal still applies in full force?

MR FLEMING:   No, your Honour, because Queensland prior to the amendments that it made – and this is contained in that important footnote in Stone in Justice McMurdo’s decision – in exceptional circumstances allowed such an amendment to include a party after the limitation period had expired.  We have to concede that Stone was not argued before Master Newnes but it was certainly argued in the Court of Appeal.

HAYNE J:   Can I tell you the bottom line, Mr Fleming, of what worries me, and I speak only for me.  It seemed to me that when you dug down through a very large history which may have excited a degree of passion in those who are associated with the case, I understand all that, but when you dig down you get ultimately to a straight case of Weldon v Neal and a straight case of Weldon v Neal which does not run in your favour.  Now, that is the difficulty you are batting against.

MR FLEMING:   Yes.  Your Honour, we say that it does run in our favour because Queensland had already said under the old regime – under our order 3 which is in almost identical terms as the same order in Western Australia – that leave could be given in special circumstances.  There is that distinction.  We have to say, of course, that Queensland no longer has that regime.  It has done away with Weldon v Neal entirely, but we say that it had almost in any event prior to that. 

It is our submission that they should have taken into account the differences in interpretation and, in fact, have preferred the Queensland interpretation because the modern regime is that you do not discard an action if in fact something can be done to keep it alive, especially in an environment such as this where an applicant has not had the capacity to run the actions as he ought to have run them, or would like to have run them, and especially in the environment when most of the difficulties in respect of time were created by the fact that LawCover, the insurer of Clayton Utz, purchased the cause of action itself, and it took something like a number of years to actually get it back, and by then it was almost statute barred and there was a very small opportunity by which anything could be done.

So in these particular circumstances, we say they are those which Justice McMurdo would bring into the exceptional category.  The matter should have been kept alive and, of course, there are some subsidiary issues to that and that is the Temsign issue of whether or not a bankrupt can purchase the cause of action from the trustee.  If we get that far we say there is certainly a High Court issue there because of the difference in interpretation between the Federal Court and the Western Australia Court, and I am told now there is a federal magistrate who has ruled the same way as Justice Wheeler found in Temsign, but we realise we have to get over the first one.

HAYNE J:   You get to that if and only if you get over the first hurdle, is that right?

MR FLEMING:   Yes, your Honour, and we can only say that, given the facts of this case, we should fall within that category of exceptional circumstances and the Western Australian interpretation of their rule is incorrect and, rather, the Queensland interpretation of the rule, which would allow an amendment out of time to bring in a new party, should be preferred.  We have to say to the Court that even when we get there, there are issues still confronting because we have to go back to the trustee.  If the trustee does not respond favourably and he has assigned it to us, but belatedly, we would have to go under section 178 to the Federal Court for presumably a nunc pro tunc order that the applicants here can in fact be the plaintiffs in the action which would correct that.

So there are some steps to go.  I should inform the Court as well that the statement of claim, as we understand it, has now been struck out.  It was left alive in respect of one party, but it has now been struck out as well in respect of that party.  However, that would still leave the issues of negligence and breach of contract alive.  Your Honours, we can say no more about the bedrock point that your Honour Justice Hayne took us to other than we have already said.

CRENNAN J:   Just remind me, the cause of action arose about 1993, I think, is that right?

MR FLEMING:   The cause of action arose probably in November 1993, yes, and, of course, as I said, it has had a troubled life since then, a very very successful litigant in person who carried it a long way but sadly not to Master Newnes.  Thank you, your Honours.  That is all we can say about the matter.

HAYNE J:   Thank you, Mr Fleming.  We need not trouble you, Mr van Hattem.  It is not necessary to reach any conclusion about the sufficiency of the reasons of the Court of Appeal for making the orders that that court did. 

We are not persuaded that there is a sufficient prospect of disturbing the actual orders made by the Court of Appeal as would warrant a grant of special leave to appeal in this matter.  Special leave to appeal is accordingly refused. 

Yes, Mr van Hattem.

MR van HATTEM:   Yes, the respondent does seek an order for costs, your Honours.

HAYNE J:   Mr Fleming, is there any reason not to order costs?

MR FLEMING:   No, your Honour, I cannot put forward any reason.

HAYNE J:   Leave is refused with costs.

AT 2.37 PM THE MATTER WAS CONCLUDED