Yunghanns v Merim Pty Ltd
[2000] VSC 316
•29 August 2000
| SUPREME COURT OF VICTORIA | |
| COMMERCIAL AND EQUITY DIVISION COMMERCIAL LIST | Not Restricted |
No. 2053 of 1999
F5035
| DAVID BRIAN YUNGHANNS and SARAH JANE MAHON | Plaintiffs |
| v | |
| MERIM PTY LTD (ACN 004 986 181) and | Defendants |
A N D B E T W E E N: | |
| PETER NICHOLAS YUNGHANNS | Plaintiff by counterclaim |
v | |
| DAVID BRIAN YUNGHANNS and SARAH JANE MAHON and MARGARET BRUCE YUNGHANNS | Defendants by counterclaim |
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JUDGE: | Warren J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 1 August 2000 | |
DATE OF JUDGMENT: | 29 August 2000 | |
CASE MAY BE CITED AS: | Yunghanns & Anor v Merim Pty Ltd & Ors | |
MEDIUM NEUTRAL CITATION: | [2000] VSC 316 | |
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O.23.01 of the Rules – abuse of process
Summary dismissal – improper purpose of proceeding
Tort of Abuse of Process – admission in affidavit in separate proceedings –
evidence – desirability of hearing evidence – lack of cross-examination of deponent of affidavit containing alleged admission – evidence necessary to establish intention – exercise of discretion under O.23.01
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiffs | Mr D. Collins | B 2 B Lawyers |
| For the Defendants | Dr C.L. Pannam QC with Mr R. Rosenberg | Strongman and Couch |
| For the Third Defendant by counterclaim | Ms J.E. Richards | Mills Oakley Lawyers |
HER HONOUR:
The present proceeding (referred to as the "Merim proceeding") is concerned with two discretionary trusts. The first defendant, Merim Pty Ltd ("Merim") is the trustee of each trust. Until recently, David Brian Yunghanns and Sarah Jane Mahon (formerly Yunghanns) were each a sole beneficiary of one of the trusts. Initially, the dispute between the parties was over ownership of a large valuable rural property at Ballan in Victoria and whether Merim held the beneficial interest in the property as trustee of the two trusts or in some other capacity. More recently, the proceeding has expanded to include a dispute over the purported appointment of a new beneficiary of each of the trusts to the exclusion of David Yunghanns and Sarah Mahon and the purported vesting of those trusts.
The Merim proceeding forms part of ongoing litigation between a father, Peter Nicholas Yunghanns, and his adult children, David Yunghanns and Sarah Mahon and their related corporate and trust interests. The defendants being Peter Yunghanns and his interests seek orders pursuant to Order 23.01 of Chapter 1 of the Rules, alternatively, pursuant to the inherent jurisdiction of the court, that the plaintiffs' claim being that of David Yunghanns and Sarah Mahon and their interests be stayed, alternatively, there be judgment for the defendants on the grounds that the proceeding is frivolous or vexatious or is otherwise an abuse of the process of the court.
It is necessary for the purposes of considering the present application to set out the nature of the history and relief sought in the Merim proceeding.[1]
[1] Drawing on reasons in Yunghanns v Candoora (No. 19) Pty Ltd (No. 2) 2000 VSC 3000.
The Merim Proceeding
The first defendant, Merim is the trustee of two trusts. The first trust is the David Brian Yunghanns Trust Fund. The second trust is the Sarah Jane Yunghanns Trust Fund. Both trust funds were constituted by separate trust deeds each executed on 30 April 1973. Merim was incorporated on 17 April 1973. The first plaintiff, David Yunghanns, is the sole specified beneficiary of the first trust. The second plaintiff, Sarah Mahon, previously Sarah Jane Yunghanns, is the sole specified beneficiary of the second trust. Peter Yunghanns is the second defendant in the Merim proceeding. Under the trust deed for each trust Peter Yunghanns has the power and role of appointor. The second power and role of Peter Yunghanns is that of guardian. It is alleged by David Yunghanns and Sarah Mahon that as a consequence of the role of Peter Yunghanns with respect to both trusts his consent is required before certain steps can be taken by the trustee and that at all relevant times Peter Yunghanns was and is the controlling mind of Merim.
It seems that there is no dispute between the parties in the Merim proceeding that Merim owns the three issued shares in a company known as Ballan Pastoral Co Pty Ltd and which in turn owns a large rural property south of Ballan in Victoria. Up until recently the primary issue in the proceeding was whether Merim owns the shares in Ballan Pastoral Co Pty Ltd ("Ballan Pastoral") as trustee of the two trusts or in some other capacity.
The proceeding was commenced in June 1999 in the Commercial List. It was fixed for trial to commence on 8 November 1999, was stood over and re-fixed for 7 February 2000 but subsequently adjourned off and refixed to be heard at the same time as the Candoora and Rentiers proceedings.
Very shortly before the second trial date of 7 February 2000 an event of some apparent significance occurred. On 28 January 2000 Merim and Peter Yunghanns executed two deeds. One deed related to the David Brian Yunghanns Trust Fund and the other to the Sarah Jane Yunghanns Trust Fund. The two deeds executed on 28 January 2000 were executed by Merim and Peter Yunghanns purporting to exercise a power of nomination under the two trust fund deeds of 30 April 1973. By virtue of the deeds of nomination executed by Merim and Peter Yunghanns on 28 January 2000, Merim and Peter Yunghanns purported to nominate another entity, M & M Taylor Nominees Pty Ltd as a beneficiary of each of the two trust funds. It appears that M & M Taylor Nominees Pty Ltd is the trustee of another trust fund called the Jessie Yunghanns Trust Fund.
The first of the amending deeds executed on 28 January 2000 purported to nominate M & M Taylor Nominees Pty Ltd as a beneficiary of each of the David Brian Yunghanns Trust Fund and the Sarah Jane Yunghanns Trust Fund. The second amending deed executed on 28 January 2000 purported to appoint M & M Taylor Nominees Pty Ltd as the beneficiary entitled to the relevant trust funds, that is, the assets constituting the trust fund upon the vesting of that trust fund. In other words, M & M Taylor Nominees Pty Ltd by virtue of the deeds executed on 28 January 2000 purportedly became the beneficiary under both the David Brian Yunghanns Trust Fund and the Sarah Jane Yunghanns Trust Fund to the exclusion of all others.
Under the second amending deed, Merim and Peter Yunghanns, purported to vest or appoint a vesting date for each of the David Brian Yunghanns Trust Fund and the Sarah Jane Yunghanns Trust Fund as at 29 January 2000. On 7 February 2000 the first and second defendants, Merim and Peter Yunghanns sought and were granted leave to file an amended defence pleading the events that had occurred at the end of January 2000 and, in particular, the alleged vesting of each of the David Brian Yunghanns Trust Fund and the Sarah Jane Yunghanns Trust Fund on 29 January 2000. As a consequence, the plaintiffs, David Yunghanns and Sarah Mahon sought and were granted leave to amend their statement of claim to plead that the events that occurred at the end of January 2000 were invalid and, further, that the plaintiffs were entitled to relief by way of the setting aside of the deed of nomination and deed of appointment executed on 28 January 2000 as being invalid acts by the trustee Merim. The plaintiffs sought and were granted leave, also, to join M & M Taylor Nominees Pty Ltd as a third defendant to the proceeding.
The Merim proceeding has been the subject of ongoing interlocutory disputes and directions as it heads towards a joint trial date on 29 January 2001 with other related proceedings.
The first of the related proceedings is that known as "the Candoora proceeding". The salient features of this proceeding ought be set out also.[2]
[2] Again drawing on reasons in Yunghanns v Candoora (No. 19) Pty Ltd (No. 2), supra.
The Candoora proceeding
In the Candoora proceeding the defendant, Candoora is the trustee of a trust known as "The Yunghanns Children's Trust" ("the trust") which was established by a deed of settlement dated 27 June 1992. It is a discretionary family trust. Candoora as trustee holds the issued share capital of Ligon 211 Pty Ltd which in turn holds all the issued capital in Wingara Wine Group Pty Ltd which in turn owns all the issued share capital in Sunnycliff Orchards Pty Ltd and all of the issued share capital in Sunnycliff Investments Pty Ltd. Candoora and the other companies conduct a substantial vineyard, wine producing, farming and citrus business with an annual turnover in excess of $30M. The business was developed by Mr Yunghanns from about 1967 onwards. As a result, Candoora as trustee administers a very large estate of considerable value.
Candoora as trustee is now controlled by the children David Yunghanns and Sarah Mahon who are the only directors and equal shareholders of Candoora.
The father, Peter Yunghanns, and the two adult children, David Yunghanns and Sarah Mahon, have fallen out and are parties in a number of pieces of litigation in this court. They have fought other litigation in the Family Court, the High Court and have been parties or in control of parties to Federal Court proceedings. On 25 July 1996 Mr Yunghanns married Patricia Gaye Yunghanns. In 1999 Patricia Yunghanns became pregnant. Peter Yunghanns brought these proceedings on behalf of the unborn child and sought an order pursuant to Rule 16.01 of the Rules of Court that he be appointed to represent the unborn child.
On 25 October 1999 Peter Yunghanns, on behalf of his then unborn child, applied to Gillard J for an ex parte injunction to restrain the defendant as trustee of the Yunghanns Children's Trust from taking steps to exclude the then unborn child as a primary beneficiary of the trust.
The trust was created by a deed of settlement dated 27 June 1992. The settlor was Norman Messey Taylor, the trustee is the defendant and Dariway Pty Ltd (a company controlled by Peter Yunghanns) was the appointor and guardian. The deed of settlement established a discretionary trust for the benefit "of the children of Peter Nicholas Yunghanns, living at the date of making this deed or born thereafter and prior to the vesting day". The children of Peter Yunghanns living at the date of making the deed were his son David and his daughter Sarah. The vesting date has not occurred. At the time of the creation of the trust Peter Yunghanns apparently did not contemplate having other children. However, the terms of the trust are expressed as describing the primary beneficiaries as the children of Peter Yunghanns rather than specifically nominating David Yunghanns and Sarah Mahon. In other words, it is relevant that the primary beneficiaries can encompass the children of Peter Yunghanns at the time of the creation of the trust and, also, children born thereafter.
On 25 October 1999, Gillard J granted an ex parte interim injunction restraining the defendant as trustee from exercising any power to vest the trust or to exclude the unborn child as a beneficiary of the trust.
On 4 November Gillard J granted an interlocutory injunction in the same terms and published reasons for his orders on 15 December 1999.
On 1 August 2000 I ordered the appointment of a receiver over the trust assets and undertakings of the Yunghanns Children's Trust.
The remaining related proceeding is referred to as "the Rentiers proceeding". This proceeding ought be described also.[3]
[3] Further drawing upon reasons in Yunghanns v Candoora (No. 2), supra.
The Rentiers proceeding
Peter Yunghanns and his former wife, Margaret Yunghanns were divorced by decree of the Family Court of Australia in early 1995. Their property dispute was compromised and consent orders were made by the Family Court on 26 June 1996.
The Rentiers proceeding consists of the consolidation of a number of earlier proceedings between David Yunghanns and Sarah Mahon against Peter Yunghanns and their associated corporate interests. In summary, in the Rentiers proceeding Peter Yunghanns and his corporate interests seek declarations that various assets are held on trust by David Yunghanns and Sarah Mahon and their associated corporate interests for Peter Yunghanns and his interest. Part of the dispute between the parties in the Rentiers proceedings involves consideration of the effect of the orders made by the Family Court of Australia on 26 June 1996 and the extent to which, if any, they affected the businesses conducted by Peter Yunghanns through various corporate entities.
In addition to the three proceedings in this court in the Commercial List fixed for trial on 29 January 2001 there has been ongoing litigation in the Family Court of Australia, the Federal Court of Australia and the High Court. Furthermore, it has been observed on a number of occasions by the various courts that there is substantial ill-feeling between Peter Yunghanns and his adult children, David Yunghanns and Sarah Mahon.[4] Yunghanns v Candoora No. 19 Pty Ltd (1999) VSC 524, 23-24; Yunghanns v Candoora No. 19 Pty Ltd (No. 2) (2000) VSC 300, 29-30).
[4]Yunghanns v Candoora No. 19 Pty Ltd (1999) VSC 524, 23-24; Yunghanns v Candoora No. 19 Pty Ltd (No. 2), supra.
The application
In essence in the present application in the Merim proceeding the defendants challenge the purpose of the institution of the Merim proceeding by David Yunghanns and Sarah Mahon. The basis for the challenge lies in an affidavit sworn by David Yunghanns on 10 May 2000 in the Candoora proceeding in relation to the application by Peter Yunghanns for the appointment of a receiver of the trust assets and undertakings of the Yunghanns Children's Trust. In that affidavit David Yunghanns deposed that he was a director of Candoora No. 19 Pty Ltd and that he was authorised to swear the affidavit on behalf of his sister, Sarah Mahon. He deposed that the matters deposed to in the affidavit were from his own knowledge. In paragraphs 15 and 19 of the affidavit sworn 10 May 2000 in the Candoora proceeding David Yunghanns deposed:
"15.One of the substantial claims that are being pursued in the Consolidated Statement of Claim is that Ligon 221 Pty Ltd (a company which forms part of the assets of the Trust) ('Ligon') is indebted to Ballan Pastoral Co Pty Ltd ('Ballan') for interest in the sum of $5,187,878 together with further interest accruing on a principal sum of $19,527,149 from 30 June 1999 (sic (1996)). That claim is made by Ballan in the consolidated proceeding on the instructions provided by my father. Sarah and I allege that Merim Pty Ltd ('Merim') owns Ballan as trustee of trusts known as the David Brian Yunghanns Trust and the Sarah Jane Yunghanns Trust of which Sarah and I are the specified beneficiaries. Sarah and I decided to commence proceedings 2053 of 1999 (which have been referred to as the Merim proceedings) in which we seek declarations concerning the beneficial ownership of the Ballan shares, and for orders removing Merim as the trustee of those trusts and for the appointment of another trustee. We decided to commence proceedings to ensure that my father did not wrongly use his control of Ballan to the detriment of the Trust.
…
For the reasons referred to above, whether my father is entitled to control Ballan and therefore to give instructions on its behalf to pursue the claims made against Ligon is of critical importance to the Trust. If my father is entitled to cause Ballan to pursue the demand for the amounts claimed by it against Ligon, and it is entitled to do so despite the operation of the Family Court Orders, the consequences to the trust are potentially devastating. While it is in the interests of Sarah and I to protect our entitlements as specified beneficiaries of the David Brian Yunghanns Trust and the Sarah Jane Yunghanns Trust, as we seek to do in the Merim proceeding, the principal reason those proceedings have being pursued is to prevent my father from wrongly causing Ballan to pursue its debt claim against Ligon. It is contrary to the interests of the Trust, and therefore the interests of Sarah and I as primary beneficiaries of that Trust for that claim to be made. As is apparent from the chronology, pre-trial discovery proceedings were pursued prior to the commencement of the Merim proceedings. The history of those proceedings is referred to in the chronology, and has been the subject of various applications with which the Court is familiar. Those proceedings are now to be heard and determined before the same judge and at the same time as the consolidated proceeding 2043 of 1998."
(Emphases added).
On the basis of the matters deposed to by David Yunghanns in the affidavit sworn on 10 May 2000 in the Candoora proceeding, in particular, the sections underlined in the extract previously set out, the defendants in the Merim proceeding assert that the real principal object of the Merim proceeding is not to obtain a declaration that Merim holds the Ballan shares as trustee for the two relevant trusts. Rather, the real object of the Merim proceeding is to obtain control of Ballan and to determine the debt claim made by Ballan against Ligon.
The defendants submit that such objective or purpose fails to take account of the fact that there are interested parties to each of the two trusts, including Peter Yunghanns and potentially the infant Yunghanns. It is further asserted that such objective or purpose fails to take account of the fact that if David Yunghanns and Sarah Mahon succeed in the Merim proceeding it does not automatically follow that Merim in its capacity as trustee will or should act as the "pawn" of David Yunghanns and Sarah Mahon in achieving the objective of bringing the claim by Ballan against Ligon to an end. In addition, it is submitted on behalf of the defendants that such objective or purpose does not take account of the fact that it may constitute a breach of duty for Ballan's directors to cause Ballan to refrain from exercising its rights to get in debts properly owed to it. The defendants submit that the affidavit of David Yunghanns sworn 10 May 2000 and filed in the Candoora proceeding is evidence of the misuse of the legal process because, whether or not the plaintiffs have a proper claim to make, the admitted purpose for which it is prosecuted is not the relief sought rather it is to bring an end to legal process in other proceedings that are being defended. On this basis the defendants submit that the purpose of the plaintiffs, David Yunghanns and Sarah Mahon, in the Merim proceeding is improper, ulterior or collateral because it is outside the ambit of the claim upon which the court is being asked to adjudicate in the Merim proceeding.
Essentially, the defendants allege perpetration of the tort of abuse of process. The tort has been the subject of some consideration in Australia. Grainger v Hill (1836) 4 Bing NC 212; 132 ER 769 seems to have established or at least stated the tort of abuse of process of the courts. Tindal CJ (at 221; 773) said:
" … This is an action for abusing the process of the law, by applying it to extort property from the Plaintiff, and not an action for a malicious arrest or malicious prosecution, in order to support which action the termination of the previous proceeding must be proved, and the absence of reasonable and probable cause be alleged as well as proved."
Bosanquet J in Grainger said (at 294; 774):
" … I think, under the circumstances of this case … (this) … is not an action for a malicious arrest or prosecution, or for maliciously doing that which the law allows to be done: the process was in force for an ulterior purpose; to obtain property by duress to which the Defendants had no right. The action is not for maliciously putting process in force, but for maliciously abusing the process of the court."
It appears that foundation for the tort in this jurisdiction also lies in Gilding v Eyre (1861) 10 CBNS 592; 142 ER 584. In Gilding the court held (at 604-605; 589-590):
"It is a rule of law, that no-one shall be allowed to allege of a still pending suit that it is unjust. This can only be decided by a judicial determination, or other final event of the suit in the regular course of it. That is the reason given in the cases which established the doctrine, that, in actions form malicious arrest or prosecution, or the like, it is requisite to state in the declaration the determination of the former suit in favour of the plaintiff, because the want of probable cause cannot otherwise be properly alleged … in the present case, the complaint is not that any undetermined proceeding was unjustly instituted. The alleged cause of action is, that the defendant has maliciously employed the process of the court in a terminated suit, in having by means of a regular writ of execution extorted money which he knew had already been paid and was no longer due on the judgment".
Gilding stands for the principle that it is for the court before which the proceedings are pending to determine whether the charge (of malicious prosecution) has been established or not.[5]
[5] See Hanrahan v Ainsworth (1990) 22 NSWLR 111 per Clarke JA.
The High Court has considered the tort of abuse of process on few occasions.[6] In Varawa v Howard Smith Co Limited[7] all the judges of the High Court accepted that Gilding expressly stated the rule in relation to the tort of abuse of process.
[6]Bayne v Baillieu (1908) 6 CLR 382, 401; Bayne v Blake (1909) 9 CLR 347, 358-359; Varawa v Howard Smith Co Limited (1911) 13 CLR 35, 56, 70-71, 90; Dowling v Colonial Mutual Life Assurance Society Limited (1915) 20 CLR 509, 521-522.
[7] Supra, in particular at 80.
In Williams & Ors v Spautz (1992) 174 CLR 509, the High Court considered abuse of process. In the joint judgment of Mason CJ, Dawson J, Toohey J and McHugh J, the well‑established jurisdiction to grant a permanent stay for abuse of process was recognised as part of the inherent jurisdiction of Court. The judgment also recognised that the principle was not limited to cases where a moving party has a prima facie case or must be assumed to have such a case and that central to the tort was that the party had instituted the proceeding for a purpose or to effect an object beyond that which the legal process offered [see 523].
In Williams v Spautz a university lecturer commenced an action against a university for wrongful dismissal and later laid informations against officers of the university alleging criminal conspiracy to defame and injure without justification and by illegal means. Upon applications for declarations that the prosecutions were an abuse of process the judge at first instance found that the lecturer's predominant purpose in instituting and maintaining the criminal proceedings was to exert pressure upon the university to reinstate him and/or to agree to a favourable settlement of the case for wrongful dismissal. The trial judge made declarations and stayed the prosecutions permanently. Ultimately, the High Court held (Deane and Gaudron JJ dissenting) that the prosecutions were an abuse of process and properly stayed. In their joint judgment Mason CJ and Dawson, Toohey and McHugh JJ considered the inherent jurisdiction and the tort of collateral abuse of process (at 522-523):
"In elucidating the principles governing the exercise of the inherent jurisdiction, the courts have had regard to the tort of collateral abuse of process …
The tort of collateral abuse of process differs from the older action for malicious prosecution …
Central to the tort … is the requirement that the party who has instituted proceedings has done so for a purpose or to effect an object beyond that which the legal process offers".
In the joint judgment, their Honours cited and considered the extracts from the judgments of Tindal CJ and Bosanquet J in Granger v Hill already referred to and then said (at 524):
"In conformity with the approach adopted in Granger v Hill, this court has regarded the purpose of the party instituting the proceedings as of crucial importance."
Next, their Honours considered the earlier High Court judgment in Varawa v Howard Smith Co Limited and Dowling v Colonial Mutual Life Assurance Society Limited, supra and said (at 526):
"It is otherwise when the purpose of bringing the proceedings is not to prosecute them to a conclusion but to use them as a means of obtaining some advantage for which they are not designed[8] or some collateral advantage beyond what the law offers[9]."
[8] In Re Majory (1955) Ch 600, 623-624.
[9]Goldsmith v Sperrings Limited (1977) 1 WLR 498-499; also Varawa, supra, at 91.
In Williams v Spautz (at 535) Brennan J said:
"There is no impropriety of purpose (whatever may be said of motive) when a plaintiff commences or maintains a proceeding desiring to obtain a result within the scope of the remedy even though the plaintiff has an ulterior purpose - or motive – which will be fulfilled in consequence of obtaining the legal remedy which the proceeding is intended to produce. To amount to an abuse of process, the commencement or maintenance of the proceeding must be for a purpose which does not include – at least to any substantial extent – the obtaining of relief within the scope of the remedy."
Further (at 537) Brennan J concluded:
"For these reasons, I would hold that an abuse of process occurs when the only substantial intention of a plaintiff is to obtain an advantage or other benefit, to impose a burden or to create a situation that is not reasonably related to a verdict that might be returned or an order that might be made in the proceeding."
Brennan J in Williams v Spautz also considered the consequences that flow "naturally" from a verdict or order made in a proceeding (at 532-533):
"The purposes which legal proceedings are designed to serve are the protection or vindication of particular legal rights or immunities, the maintenance or affection of particular legal relationships, and the imposition or enforcement of particular legal penalties, liabilities and obligations. The means by which these purposes are achieved in a proceeding consist in the verdict which might be returned or the order which might be made in the proceeding, in the consequences that flow naturally from a verdict that might be returned or from an order that might be made (for example, the vindication of a plaintiff's reputation flowing from a verdict in a civil action for defamation) and in compromise of the claims made in the proceeding. The achievement of any of the purposes mentioned by any of the means mentioned is within the scope of the remedy for which a proceeding is designed. But a proceeding may be intended to produce and may be capable of producing results that are not within the scope of the remedy.
The possibility of producing results that are not within the scope of the remedy arises from the variety of situations and interests that can be affected by the commencement or maintenance of a proceeding and, in particular, by the burdens, the delay and the publicity of litigation. Where a plaintiff commences or maintains a proceeding with the intention of obtaining a result falling outside the scope of the remedy, a question can arise as to whether the purpose of the proceeding is legitimate or not."
On the basis of the principles expressed in Williams v Spautz the defendants on the present application submitted that if a declaration was made in the Merim proceeding that Merim held the Ballan shares as trustee of the relevant children's trust (as asserted by the children David Yunghanns and Sarah Mahon) it would not follow as a natural consequence that Merim or any subsequent trustee of those trusts would as a matter of fact be entitled to or would in fact act to achieve the purpose admitted in the affidavit of David Yunghanns sworn 10 May 2000 in the Candoora proceeding.
Dr C. Pannam QC who appeared with Mr R. Rosenberg for the defendants on the present application submitted that as a consequence of the statement made by David Yunghanns in his affidavit of 10 May 2000 there is a clear admission as to the principal or dominant motive of David Yunghanns and Sarah Mahon for the institution of the Merim proceedings. Dr Pannam submitted that the court is in a position to know of the principal or dominant motive because "David has told us". In this respect, it was submitted, the case differs from the authorities considered by the High Court in Williams v Spautz and indeed that case itself because there is no need to hear evidence to determine initially the threshold question of the dominant or principal purpose for the commencement of the subject proceedings. Rather here there is an admission by the plaintiffs as to their dominant or principal purpose. Dr Pannam urged, therefore, that all I need do is determine whether the admitted purpose is an improper one on the basis of the authorities. He was also at pains to emphasise that David Yunghanns did not depose in the affidavit of 10 May 2000 as to any basis to provide a proper foundation for the Merim claim. It was emphasised that there was no attempt to explain as to why the claim should not be made, to describe the interests of the creditors of Ballan or, indeed, any reference to other proper reasons for the institution of the proceedings. As a consequence, Dr Pannam invited me to draw the inference that there is no proper purpose just the principal reason expressed by David Yunghanns in the relevant affidavit. It must be observed that notwithstanding the application being brought on notice no attempt was made on behalf of David Yunghanns or Sarah Mahon to clarify or explain the matters deposed in the affidavit of 10 May 2000.
Mr D. Collins for the plaintiffs sought to rebut the submissions on behalf of the defendants on the basis that those submissions overlooked the basis upon which the plaintiffs say they will succeed. The plaintiffs, David Yunghanns and Sarah Mahon say that they will succeed in not having to answer the Ballan claims if a declaration is made that the shares in Ballan are held on trust for them under the respective trusts being the David Yunghanns Trust and the Sarah Mahon Trust. The plaintiffs say, further, that those shares are vested in the new trustee and that a new trustee acting properly would not pursue those claims. Mr Collins submitted that these were the only bases upon which relief was sought in the Merim proceeding. On that basis, therefore, he submitted that the purpose that is sought to be achieved can only be achieved by succeeding in the claim for the relief sought and is the consequence of the relief sought. Mr Collins submitted, further, that it is the consequence of a new trustee being appointed to hold the Ballan shares on the trust alleged by David Yunghanns and Sarah Mahon and that the allegation is that Peter Yunghanns is wrongfully exercising his control over Ballan to pursue the debt claims in his own interests. It was urged that on proper analysis Peter Yunghanns is not concerned about the creditors of Ballan or the shareholders of Ballan rather he disregards the interests of those with the beneficial interest or ultimate beneficial interest in the two trusts. It was submitted, also, by Mr Collins that the defence of the interests of David Yunghanns and Sarah Mahon in the Rentiers proceeding deals with relevant matters concerning various assignments by reason of which it is alleged that the Ballan debt is owed. The plaintiffs in the Merim proceeding put the matter thus that Ballan in fact is not suing for any principle but is precluded from doing so by operation of the Family Court orders made on 26 June 1998. The particulars of the agreement said to give rise to the entitlement of the interest is that Peter Yunghanns agreed with himself, acting on behalf of both Ballan and Ligon, that interest would be paid. As a consequence the defence raises a conflict of duty. Furthermore, there is the additional pleading that the debt claim of Ballan against Ligon is in any event subordinated to a facility with the Bank of South Australia pursuant to a deed or subordination.
Hence, Peter Yunghanns exercises control over Merim which owns Ballan. The plaintiffs in the Merim proceeding allege that Merim owns Ballan in its capacity as trustee ultimately for the benefit of David Yunghanns and Sarah Mahon and that against their wishes and contrary to their interests the debt claim is made. As a consequence confronted by the debt claims and the general conduct of Peter Yunghanns, David Yunghanns and Sarah Mahon as beneficiaries of the Children's Trust cannot be motivated by the conduct of Peter Yunghanns. Furthermore, it is submitted that David Yunghanns and Sarah Mahon are entitled to seek to have the control of Peter Yunghanns over the trustee of their respective trusts removed. In addition, they are entitled to have the position of Ballan determined by the court.
Such proposition fails to recognise that the relevant children's trusts are not exclusively for the benefit of the plaintiffs as they are not the sole beneficiaries. Further, the proposition fails to recognise the fact that a trustee acting properly and having regard to the interests of other beneficiaries will not necessarily act in the way contemplated by the admission contained in the affidavit of David Yunghanns. Further it does not necessarily follow that if the plaintiffs are successful in the Merim proceeding that the trustee will act pursuant to the purpose the plaintiffs admit. Indeed, if such purpose was carried into effect it would inevitably constitute a breach of trust.
Dr Pannam submitted that the admission made in the affidavit of David Yunghanns is that the principal purpose or the "pre‑dominant purpose" of the Merim proceeding is evident in the decision to commence the Merim proceeding to ensure that Peter Yunghanns did not use his control of Ballan to the detriment of the Yunghanns Children's Trust. It was urged that the principal purpose of the Merim proceedings is to prevent Peter Yunghanns from allegedly causing Ballan to pursue its debt claim. That debt claim, it is clear, has been prosecuted through statutory demands, both in the Family Court and Federal Court and then in the consolidated proceedings. David Yunghanns in his affidavit does not address the merit of the defence of those claims.
Ultimately, Mr Collins submitted on behalf of the plaintiffs David Yunghanns and Sarah Mahon that the issue of the litigation to be determined in the Merim proceeding is whether Peter Yunghanns ought be in a position to control Ballan. David Yunghanns and Sarah Mahon say he should not because the Ballan shares are held on trust pursuant to the David Yunghanns Trust and Sarah Jane Yunghanns Trust. The difficulty with the position submitted by Mr Collins is that it fails to overcome the declared motive set out in the affidavit of David Yunghanns of 10 May 2000. Indeed, it is to be observed that during the course of submissions no attempt was made to clarify, correct or avoid the admission by David Yunghanns in the affidavit.
In any event, the High Court has stated the position plainly in Williams v Spautz that the improper purpose need not be the sole purpose it is sufficient if it is a collateral purpose.[10] More recently, William v Spautz was considered by Goldberg J of the Federal Court of Australia in White v Flower & Hart (1998) 156 ALR 169 where (at 239-240) his Honour considered the tort of abuse of process and observed:
"It was submitted by Flower & Hart relying on Williams v Spautz at CLR 533 per Brennan J and at CLR 543 per Deane J, that conducting litigation with the ultimate aim of settling the case advantageously does not constitute the proceeding an abuse of process. However, that proposition is predicated upon the fact and assumes, that the applicant or plaintiff is instituting the proceeding to vindicate a right asserted by it. The passage relied upon in the judgment of Brennan J assumes that seeking the compromise of a claim made in the proceeding is a legitimate means to achieve the purpose of the protection or vindication of particular legal rights and immunities and the other legitimate purposes to which his Honour refers. In my opinion instituting a proceeding not for the purpose of vindicating a right but for the purpose of delaying or deferring the time for payment of an obligation where the proceeding has no or little prospect of success is not the same as instituting a proceeding to vindicate a right but with the aim of settling or compromising the claim before trial."
[10] At 522, 526-527 per Mason CJ and Dawson, Toohey and McHugh JJ; 531, 535 Brennan J; 543 Deane J.
The relief sought by the defendant on this application is draconian. It seeks to stay the plaintiffs' claims in the Merim proceeding, alternatively, seeks judgment for the defendants on the plaintiffs' claims. The court will not make an order under Rule 23.01 unless it is clear on the pleadings or from extrinsic evidence that the claim is unsustainable in fact or in law. It is only in exceptional circumstances that a party will be denied the opportunity to have the validity of its case tested through the ordinary processes of litigation: Dey v Victorian Railways Commissioners (1949) 78 CLR 62, 92. The observation was made by Dixon J in Dey (at 92) concerning the importance of maintaining "the integrity of the principle that under cover of the inherent jurisdiction to stop abuse of process litigants are not to be deprived of the right to submit real and genuine controversies to the determination of the courts by the due procedure appropriate for the purpose". Hence, great care must be exercised to ensure that a plaintiff is not improperly deprived of the opportunity for trial of its cause of action: see General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125, 129.
Before dismissing a proceeding as an abuse of process whether pursuant to Order 23.01 or the inherent jurisdiction the burden of proof that lies with an applicant is a very high standard: Williams v Spautz, supra at 541; Hanrahan v Ainsworth, supra at 95; Re VMF Holdings Pty Ltd (1998) 28 ACSR 625, 629.
The present case is unusual and complex. Bearing in mind the burden carried by the applicant a number of observations are called for. First, the affidavit that provided the evidence relied upon by the defendants in the Merim proceeding in support of dismissal for abuse of process (the affidavit of David Yunghanns sworn 10 May 2000) was filed in the Candoora proceeding and for a different purpose. The subject affidavit was a response to an application, again by Peter Yunghanns and his interests, seeking the appointment of a receiver of the trustee, Candoora. It was not an affidavit sworn and filed for the purpose of the issues in the Merim proceeding. Whilst it may ultimately be a matter of regret on the part of David Yunghanns that he made the utterances that he did in the subject affidavit as to his motive or purpose with respect to the institution of the Merim proceeding, nevertheless, when considered in isolation it is not a sufficient basis to warrant dismissal or the order of a stay in another proceeding.
It appears that on the authorities there is nothing to prevent the defendant from relying upon the affidavit of David Yunghanns sworn 10 May 2000 notwithstanding that it was filed for the purposes of another application: see Muirfield Properties Pty Ltd v Erik Kolle & Associates and Ors (1988) VR 167, 171. However, in my view a reasonable inference can be drawn that at the time David Yunghanns deposed to the matters he did in the affidavit of 10 May 2000 he was focussing upon entirely different issues from the question of his dominant purpose in instituting the Merim proceeding.
The second factor to be considered is the fact that the subject affidavit has been relied upon in the present application in the Merim proceeding on a selective basis. That is to say, that the affidavit of David Yunghanns sworn on 10 May 2000 in the Candoora proceeding is not before the court in the Merim proceeding in its entirety. In my view it is undesirable for the court to make the order sought on the basis of selective evidence.
The third observation to be made is that neither David Yunghanns nor Sarah Mahon were cross-examined about the matters contained in the relevant parts of the affidavit of 10 May 2000. Dr Pannam QC put the matter on the basis that unlike the authorities where at first instance a trial judge made a determination on evidence as to the facts that supported or did not support a finding of abuse of process[11] no evidence or indeed any determination was necessary because of the blatant admission made by David Yunghanns in the subject affidavit. Be that as it may the statement was made in a different context and put before the court on a selective basis. As was observed by Kirby P in Wickstead v Browne (1992) 30 NSWLR 1 at 5:
"Common experience teaches us that it is usually more efficient and just to consider the viability of a cause of action when the facts said to support it are adduced and the suggested action can be judged with a full understanding of all relevant evidence. Testimony gives colour and content to the application and development of legal principle".[12]
[11] e.g. Williams v Spautz; Hanrahan v Ainsworth.
[12] See also Meadow Gem Pty Ltd v ANZ Executors and Trustee Co Limited, unreported judgment of Hedigan J dated 25 August 1993; Countrywide Building Society (in liq) v Day Neilson Jenkins and Johns (a firm), unreported judgment of Hansen J dated 21 March 1996.
As Danckwerts LJ observed years ago in Wenlock v Moloney (1965) 2 All ER 871 at 874:
" … summary jurisdiction of the court was never intended to be exercised by a minute and protracted examination of the documents and facts of the case, in order to see whether the plaintiff really has a cause of action. To do that is to usurp the position of the trial judge, and to produce a trial of the case in Chambers, on affidavits only, without discovery and without oral evidence tested by cross‑examination in the ordinary way. This seems to me to be an abuse of the inherent power of the court and not a proper exercise of that power".
In this respect I bear in mind the complexity and interaction of the Candoora, Merim and Rentiers proceedings. In my view it is inappropriate to adopt a clinical approach in the present application and look at the selective use of an affidavit sworn by a party in another proceeding for another purpose, seize upon a statement made in another context and dismiss a proceeding on the basis of that evidence.
The fourth matter to be borne in mind is the nature of the allegations contained in the pleadings in the Merim proceeding. I do not consider it appropriate to disregard those allegations and make orders against the plaintiffs merely on the basis of the matters deposed to by David Yunghanns in the subject affidavit. On the other hand, in the context of the complex litigation between the members of the Yunghanns family I do not consider it appropriate that I embark upon the clinical exercise of wading through all the material to determine whether or not the statement contained in the affidavit of 10 May 2000 contradicts or is qualified by matters contained in the pleadings. These are matters ultimately for determination by the trial judge.
Whilst David Yunghanns may be criticised for the potential rashness of the statement contained in the subject affidavit and even more so for the potential impudence that underlies the statement it is not appropriate to dispense the punishment of dismissing the Merim proceeding. The four factors I have considered distinguish the present matter from the circumstances in Williams v Spautz and the other authorities.
Ultimately, in the exercise of the discretion I consider that on the grounds of the four factors I have identified it would be tantamount to an abuse of process itself to stay or dismiss the plaintiffs' claim in the Merim proceeding. In my view, to do so would constitute an injustice.
It follows from these reasons that the application by the defendants in the Merim proceeding for a stay or judgment is dismissed.
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CERTIFICATE
I certify that this and the 19 preceding pages are a true copy of the reasons for judgment of Warren J of the Supreme Court of Victoria delivered on 29 August 2000.
DATED: this twenty ninth day of August 2000.
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Associate
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