Wool International v Sedgwick Ltd (No 3)

[1997] FCA 711

FEDERAL COURT OF AUSTRALIA

Practice and procedure - whether an address for service in an original application remained as the address for service - discontinuance of proceedings - leave to file cross-claim - parties to a proceeding - estoppel - proportionality between remedy and detriment - compliance with form - sufficient compliance.

Federal Court Act 1976 - s 23
Federal Court Rules - O 22 r 2, O 22 r 5, O 1 r 8, O 1 r 7(2)

Attorney-General for Ontario v Daley [1924] AC 1011- considered
Browne v Commissioner for Railways (1935) 36 SR (NSW) 21 - considered
Downey v Pryor, Woodward & Hunt (1960) 103 CLR 353 - considered
Paterson v Clarton (1885) 7 ALT 45- distinguished
Commonwealth v Verwayen (1990) 170 CLR 394 - applied
The Salybia [1910] P 25 - distinguished

WOOL INTERNATIONAL v SEDGWICK LIMITED (No. 3)

NG 721 of 1993

JUDGE:	BEAUMONT J
PLACE:	SYDNEY
DATED:	26 JUNE 1997

IN THE FEDERAL COURT OF AUSTRALIA	)
)
NEW SOUTH WALES DISTRICT REGISTRY	)  NG 721 of 1993
)
GENERAL DIVISION	)

BETWEEN:	WOOL INTERNATIONAL Applicant
AND:	SEDGWICK LIMITED Respondent

JUDGE:	BEAUMONT J
PLACE:	SYDNEY
DATED:	26 JUNE 1997

MINUTES OF ORDER

THE COURT ORDERS:

1. Make declaration 2 as sought in Sedgwick's amended notice of motion.

1. Adjourn the application sought in para 3 of the notice of motion to a date to be  fixed.

1. Grant leave to appeal.

1. Reserve costs of the argument on paras 1 and 3 of the amended notice of motion.

1. Order that the cross-respondents pay Sedgwick's costs of the argument on para 2 of Sedgwick’s notice of motion.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA	)
)
NEW SOUTH WALES DISTRICT REGISTRY	)   NG 721 of 1993
)
GENERAL DIVISION	)

BETWEEN:	WOOL INTERNATIONAL Applicant
AND:	SEDGWICK LIMITED Respondent

JUDGE:	BEAUMONT J
PLACE:	SYDNEY
DATED:	26 JUNE 1997

REASONS FOR JUDGMENT (No. 3)

These are supplementary reasons given on the question whether the Court should make the orders sought in para 2 of the amended notice of motion filed on behalf of Sedgwick.  I gave reasons yesterday, tentatively and provisionally, on the present question.

Overnight I have had an opportunity, and counsel have had an opportunity, to read the transcript of the directions hearings before Sheppard J in June and August 1996.  I will refer to one particular part of the August transcript later, but otherwise a perusal of that transcript does not indicate to me any reason for changing the tentative views I expressed yesterday.  It should also be noted that Mr Hodgekiss, who yesterday appeared only for the applicant, Wool International, now also appears for the cross-respondents, but only for the limited purpose of opposing the making of the orders sought in paras 2 and 3 of Sedgwick’s amended notice of motion.  That is to say, Mr Hodgekiss appears for the cross-respondents to argue the present matter and he has made it clear, and I accept, that his clients do not submit generally to the jurisdiction in any sense.  I have also had the benefit of reading a further outline of submissions provided this morning by Mr Hodgekiss, now MFI 3, together with an oral development of those submissions.  In addition, I have been taken to the correspondence between the solicitors in the matter, between April 1995 and March 1997, now marked as Exhibit B.

That correspondence shows that, from at least June 1996 when the application was made to Sheppard J for leave to discontinue, and thereafter, the parties proceeded upon the assumption that the applicants, other than Wool International, would, and intended to, discontinue.  Mr Hodgekiss has, in this connection, also referred to something said by Mr Walker, then appearing as Senior Counsel for Sedgwick, before Sheppard J on 22 August 1996 where Mr Walker said in the course of responding to his Honour's question "What is the case about?":

“It is about damage to bales of wool stored while Australia tries to sell them I think at a decent price in Defence buildings which it is alleged in one way or another my client carelessly vouched for in some statements which are said to partake of the nature of advice in relation to those premises, there is a large issue between us as to the commercial context in which those statements were made, that is suffice to say that for a long time which included the presence of the insurer against whom the Commission had made a claim in the proceedings the case is now between the Commission and us in relation to the alleged loss suffered by reason of spoiled wool.  I think my friend would agree could be described generally, noncontentiously as water damage.”

It will be noted that in that passage Mr Walker stated that "...the case is now between the [Australian Wool Realisation] Commission and us".  This is, of course, quite consistent with the conduct of the parties and their representatives which, as I have already indicated, demonstrated that the principal proceedings were going forward on the assumption that the applicants, other than the Commission, that is, Wool International’s predecessor, proposed to discontinue.

I have also been taken by Mr Hodgekiss to a decision in the Probate Division in England in The Salybia [1910] P 25. In my view the case is distinguishable because the Rules in England, at least at that time, were quite different from the Rules of this Court. Under O xxvi r 1 of the English Rules:

“The plaintiff may at any time before receipt of the defendant's defence... by notice in writing, wholly discontinue the action against all or any of the defendants.”

In The Salybia, such a notice in writing was given and it was held that the action had been discontinued.  Under the Rules of this Court, as was noted in my reasons yesterday, two distinct steps are involved.  First, where the matter has progressed to the point that this proceeding had reached, an application must be made to the Court under O 22 r 2 for leave to discontinue.   Secondly, pursuant to O 22 r 5 a notice of discontinuance must be filed.  I note in this connection that O 22 r 5 states in terms that a discontinuance "shall be made" by filing the prescribed notice.  This indicates, I think, a clear distinction from the English position.

On behalf of the applicant, it is submitted that in this area the Court should prefer substance over form, and should have regard not only to the assumption that I have mentioned, but also to the circumstance that, in due course, an amended application was filed omitting the cross-respondents as applicants.  But, in my view, in this area, form is important in the interests of certainty.

Litigation is not an informal process, and in some areas, there are good reasons why formality should be observed in the interests of certainty, so that the parties will know exactly where they stand.

Although the Court has a general power under O 1 r 8 to dispense with compliance with any of its Rules, ordinarily it would not be appropriate, in my view, to dispense with compliance with O 22 r 5.  One has only to look at the circumstances of the present application to appreciate why observance of the requisite formalities is essential in the interests of certainty.  Once there is a departure from the requirement of the filing of a notice of discontinuance, one inevitably moves into an area of contention and dispute, and thus into uncertainty of the kind that is now sought to be developed on behalf of the applicant.  Arguments of considerable sophistication, seeking to invoke doctrines such as estoppel and waiver are likely to be advanced, and until a court has ruled conclusively on the matter, the parties do not know where they stand.  It is not known, in other words, whether the proceedings have been discontinued or not.  In my view, as a matter of policy, this is an undesirable situation.

On behalf of the applicant, reference was also made to O 1 r 7(2) by which it is provided that it shall be sufficient compliance with the Rules as to the form of any document, if the document is substantially in accordance with the requirement, or has only such variation as the nature of the case requires.  It is well-established that where a form has not been prescribed, then it is for the Court to provide the procedural machinery most appropriate to the case (see Attorney-General for Ontario v Daley [1924] AC 1011 at 1015; Browne v Commissioner for Railways (1935) 36 SR (NSW) 21 at 29; and Downey v Pryor, Woodward & Hunt (1960) 103 CLR 353 per Kitto J).

It is sought also to rely upon the general power of the Court contained in s 23 of the Federal Court Act (1976) to make such orders as the Court thinks appropriate.  There is no doubt that in a proper case, these powers or jurisdiction are available.  Perhaps, if in June or August 1996 Sheppard J had been asked to dispense with the need or requirement to file a notice of discontinuance, or to direct and order that the filing of the amended application should be regarded as, or deemed to be, sufficient compliance with O 22 r 5, his Honour, in the exercise of his discretion, might have been of the view that such an order should be made.

I would not, myself, have been inclined to make such an order, but I can see that, in balancing all relevant considerations in the exercise of the judicial discretion to be considered in that behalf, it may have been reasonable so to order.  The fact is, of course, that no such application was made at the time, and although it was suggested yesterday by Mr Hodgekiss that I should now, nunc pro tunc, make an order under O 1 r 8 dispensing with requirements of the Rules in the relevant respect, I would not regard that approach as open to me, in the light of the supervening events.

As I indicated yesterday, I see the present question in much simpler terms, to be resolved by the application of the Rules and, in particular, by the application of O 22 and specifically, the mandatory requirement of r 5 that the discontinuance shall be made in one way and in one way only.  I see nothing artificial or unduly formalistic about this.  On the contrary, I see it as consistent with the sound policy of reducing the position to certainty in the interests of justice.

I should add that, in his written submission this morning and in his oral development of that submission, Mr Hodgekiss, in a very helpful argument, has referred me to a decision of Higinbotham J in Paterson v Clarton (1885) 7 ALT 45. In that case, a plaintiff purported to give a notice of discontinuance of an action. It was common ground that this was done irregularly. Thereafter, the plaintiff purported to deliver a defence to a counter-claim. Later the defendant obtained an appointment to tax his costs on the discontinuance.

Higinbotham J said (at 46):

"There have been irregularities on both sides.  The last irregularity has been committed by the plaintiff, and is one from which very great inconvenience will be caused at the trial.  The defendant cannot now take advantage of this irregularity, for he has taken a step in the action by serving notice of his intention to tax, and taking out an appointment, and now, after a lapse of time which is not reasonable, he makes this application.  I think the application ought not to be granted, because there has been a waiver by the defendant."

In the present case, as has been seen, the position is, in my view, different.  In essence, what happened here is that the cross-respondents, as the (then) first applicants, sought to discontinue the proceedings by seeking leave to that end.

All parties must have appreciated that if this leave were granted, it would carry the usual consequence in terms of costs.  When the matter was before Sheppard J in June 1996 an application for costs was foreshadowed, but not then dealt with.  Costs were reserved to be dealt with on the next occasion and were then dealt with in August.

It seems to me that it would be wrong to characterise the making of the application for costs as the taking of a fresh step in the proceedings, in the sense indicated by the circumstances in Paterson v Clarton.  Rather, the application for costs arose out of, and may be seen as inherent in, or an incident of, the (then) first applicants’ application for leave to discontinue.  In other words, the application for costs should not be seen as a fresh or independent step taken in the proceedings by Sedgwick of its own initiative.  Rather, what Sedgwick was doing was responding to an initiative which the (then) first applicants had elected to take.

In Paterson v Clarton the matter was looked at in the traditional terms as an application of the doctrine of waiver.  However, under the modern doctrine, it is now more appropriate, as the reasoning in Commonwealth v Verwayen (1990) 170 CLR 394 indicates, to consider the present question in terms of estoppel or under a doctrine of unconscionability. As I indicated yesterday, on any view of the appropriate doctrine, it is relevant for the Court to take into account the notion of proportionality, lest an injustice be done. For the reasons I gave yesterday on this question, I am of the view that, even if it might be thought that there were an assumption made here in circumstances where it would be unconscionable to resile from that assumption, the law should not hold this respondent to that assumption in the present context, on the ground that it would be a disproportionate outcome and thus an unjust one.

Therefore, the orders of the Court are as follows:

1. I make declaration 2 as sought in Sedgwick's amended notice of motion.

1. I adjourn the application sought in para 3 of the notice of motion to a date to be fixed.

1. I grant leave to appeal.

1. I reserve costs of the argument on paras 1 and 3 of the amended notice of motion.

1. I order that the cross-respondents pay Sedgwick's costs of the argument on para 2 of Sedgwick's notice of motion.

I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Beaumont

Associate:

Dated:  26 June 1997

Counsel for the Applicant:	C C Hodgekiss
Solicitor for the Applicant:	Norton Smith & Co
Counsel for the Respondent:	J B Simpkins
Solicitor for the Respondent:	Phillips Fox
Date of Hearing:	25, 26 June 1997
Date of Judgment:	26 June 1997