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Supreme Court 15 April 2011

Wakim v Tadros

[2011] NSWSC 308

Other
PROCEDURE CIVIL PLEADINGS STATEMENT OF CLAIM APPLICATION TO DISMISS CROSS CLAIM

Citation: Wakim v Tadros [2011] NSWSC 308
Court: Supreme Court of New South Wales
Date: 15 April 2011
Judge: Associate Justice Macready

Background

The plaintiff advanced over $1,000,000 in compensation payout funds to his brother and others, intending the money to be invested in a used car dealership venture operated by the first defendant. When the venture soured, the plaintiff commenced proceedings against eight defendants including the car dealer, a family company, family members, an accountant, and two solicitors. The plaintiff sought to recover his funds on various grounds.

The first defendant filed a cross-claim against the other defendants and one further party, seeking damages and an account of profits. The cross-claim substantially repeated allegations that had previously been the subject of proceedings in the Federal Court, which were dismissed under section 31A of the Federal Court of Australia Act 1976.

By the time of this hearing, six notices of motion were before the court. The motions addressed a wide range of procedural disputes: leave to amend pleadings, applications to strike out or dismiss for want of prosecution, applications to stay the cross-claim pending payment of outstanding costs orders, and questions of res judicata and issue estoppel arising from the Federal Court proceedings.

  • Whether the plaintiff's solicitor restraint motion costs should be borne by one party or shared equally
  • Whether the plaintiff should have leave to file an amended statement of claim
  • Whether the plaintiff's statement of claim and the first defendant's cross-claim should be struck out or dismissed for want of prosecution
  • Whether the cross-claim was barred by res judicata or issue estoppel arising from the Federal Court proceedings
  • Whether the Federal Court's dismissal under section 31A was a final or interlocutory order, for the purposes of determining whether it could found an issue estoppel
  • Whether the Supreme Court had jurisdiction to stay the cross-claim pending payment of Federal Court costs
  • Whether the proposed amended cross-claim was statute-barred
  • Whether the proposed new causes of action in the amended cross-claim arose from the same or substantially the same facts as those in the existing cross-claim

Decision

Costs of the restraint motion: The court found that neither party had acted unreasonably in relation to the motion to restrain the eighth defendant from acting as solicitor for other defendants. Because the relief became moot before any hearing on the merits, the court ordered each party to bear their own costs.

Leave to amend the statement of claim: The court granted the plaintiff leave to file the proposed amended statement of claim. The court was satisfied that the amendments were appropriate and consistent with the overriding purpose provisions of the Civil Procedure Act 2005, applying the principles from Aon Risk Services Australia v Australian National University [2009] HCA 27.

Dismissal for want of prosecution: The court dismissed the defendants' motions to strike out or dismiss the plaintiff's statement of claim and the cross-claim for want of prosecution. The court was not satisfied that the delay was so unreasonable, or the prejudice to the defendants so significant, as to warrant that drastic remedy.

Res judicata and issue estoppel arising from the Federal Court: The court considered whether the Federal Court's dismissal under section 31A gave rise to a res judicata or issue estoppel precluding the cross-claim. The court found that a dismissal under section 31A is an interlocutory order, not a final judgment on the merits. Accordingly, no issue estoppel or res judicata arose from those Federal Court proceedings.

Stay pending payment of Federal Court costs: The court held that the Supreme Court did have jurisdiction to stay the cross-claim pending payment of outstanding Federal Court costs, relying on section 67 of the Civil Procedure Act. A costs order from the Federal Court had been registered in the Supreme Court as a judgment for $15,891.32, and the court ordered that the cross-claim be stayed until that amount was paid.

Proposed amended cross-claim and limitation: The court found that the proposed new causes of action in the amended cross-claim arose from the same or substantially the same facts as those already pleaded in the existing cross-claim. Under section 65 of the Civil Procedure Act, the amendment therefore related back and was not statute-barred. The court also noted that no specific allegation of fraud was made in the proposed pleading that would independently operate to defer any limitation period under section 55 of the Limitation Act 1969.

Orders Made

  • Each party to bear their own costs in relation to the motion filed 10 July 2008 seeking to restrain the eighth defendant from acting as solicitor for other defendants
  • The plaintiff is granted leave to file an amended statement of claim in the form attached to the affidavit of Mr Ling dated 14 May 2010
  • The second to eighth defendants' motions to strike out or dismiss the plaintiff's statement of claim and the cross-claim for want of prosecution are dismissed
  • The cross-claim is stayed pending payment of Federal Court costs (NSD1924 of 2006), registered as a judgment in this court in the amount of $15,891.32
  • Directions as to further conduct of the matter to be made

Key Takeaways

  • A dismissal by the Federal Court under section 31A of the Federal Court of Australia Act 1976 is an interlocutory order, not a final determination on the merits, and therefore cannot found a res judicata or issue estoppel in subsequent proceedings.
  • Where a party has failed to pay a costs order from another court that has been registered as a judgment, the Supreme Court may exercise its jurisdiction under section 67 of the Civil Procedure Act 2005 to stay related proceedings until that debt is satisfied.
  • Under section 65 of the Civil Procedure Act, proposed amendments to a pleading are not statute-barred where the new causes of action arise from the same or substantially the same facts as those already pleaded in the existing document.
  • In dismissing the want-of-prosecution motions, the court reaffirmed that striking out or dismissing proceedings remains a serious remedy that requires a clear finding of unreasonable delay combined with real prejudice.
  • Where a motion becomes moot before any hearing on the merits, and neither party has acted unreasonably, an order that each party bear their own costs is an appropriate outcome.

Legislation and Cases Referenced

Legislation:
- Civil Procedure Act 2005 (NSW), ss 4, 22(2), 56, 57, 58, 64(2), 65(2)(c), 67
- Federal Court of Australia Act 1976 (Cth), s 31A
- Limitation Act 1969 (NSW), s 55
- Uniform Civil Procedure Rules 2005 (NSW), rr 1.5, 12.4, 12.7, 12.10, 14.28

Cases:
- Ainslie v Ainslie (1927) 39 CLR 381
- Aon Risk Services Australia v Australian National University [2009] HCA 27
- Australian Securities Commission v Aust-Home Investments Limited (1993) 44 FCR 194
- Beach Petroleum NL v Abbott Tout Russell Kennedy [1999] NSWCA 408
- Blythe v Northwood [2005] NSWCA 221
- Bracks v Smyth-Kirk [2009] NSWCA 401
- Cement Australia Pty Ltd v Australian Competition and Consumer Commission [2010] FCAFC 101
- Effem Foods v Trawl Industries of Australia Pty Ltd (1993) 43 FCR 510
- Jennings Construction Ltd v Burgundy Royal Investments Pty Ltd (1986) 161 CLR 681
- Lenijamar Pty Ltd v AGC Advances Ltd (1990) 27 FCR 388
- Luck v University of Southern Queensland [2009] FCAFC 73
- One.Tel Ltd v Deputy Commissioner of Taxation [2000] FCA 270
- Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45
- Re Minister for Immigration and Ethnic Affairs; ex parte Qin [1997] HCA 6
- Rogers v The Queen (1994) 181 CLR 251
- Simundic v University of Newcastle [2007] FCAFC 144