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District Court 15 April 2016

Wallace v GWH Build Pty Ltd; GWH Build Pty Ltd & Anor v Wallace & Ors

[2016] NSWDC 51

Other
PRACTICE & PROCEDURE MULTIPLE INTERLOCUTORY ISSUES CONTEMPT

Citation: Wallace v GWH Build Pty Ltd; GWH Build Pty Ltd & Anor v Wallace & Ors [2016] NSWDC 51
Court: District Court of New South Wales
Date: 15 April 2016
Judge: Judge Levy SC

Background

A husband and wife entered into an employment contract to manage a motel business in Maitland, NSW. The contract was originally made with one company but, through a series of variations and corporate dealings, ultimately passed to the defendant company. The employment was terminated in May 2015, triggering a dispute over the plaintiffs' entitlements, including an alleged right to 10 per cent of annual net operating profit and 22 per cent of the profit above cost base on the sale of the business.

The dispute became procedurally complex because the relevant employer obligations had moved between multiple related entities sharing common directors. The plaintiffs encountered difficulty identifying the correct parties to sue, prompting them to seek leave to expand the range of defendants in their statement of claim.

Two notices of motion came before the court simultaneously. The defendant and cross-claimants sought to set aside a subpoena and a notice to produce issued by the plaintiffs, and further sought to have the plaintiffs' solicitors referred to the Supreme Court for alleged civil contempt. The plaintiffs, in turn, sought leave to file an amended statement of claim and to enforce production of documents.

  • Whether the plaintiffs should be granted leave to amend their statement of claim to enlarge the range of defendants and the basis of relief claimed.
  • Whether the subpoena and notice to produce issued by the plaintiffs should be set aside as an abuse of process.
  • Whether the plaintiffs' principal solicitor and employed solicitor should be referred to the Supreme Court for prosecution for alleged civil contempt, arising from a claimed breach of the implied undertaking as to the use of documents obtained in court proceedings (the Harman undertaking).

Decision

Issue 1 – Leave to amend: The court granted the plaintiffs leave to file an amended statement of claim. The amendments were necessary to reflect the genuinely complex web of corporate entities and individuals involved in the underlying dispute. The court found the amendments were not so prejudicial or untimely as to warrant refusal.

Issue 2 – Abuse of process: The court rejected the argument that the subpoena and the notice to produce constituted an abuse of process. The documents sought were found to be relevant to the plaintiffs' claims and the expanded proceedings, rather than being issued for some collateral or improper purpose.

Issue 3 – Alleged civil contempt: The court rejected the application to refer the plaintiffs' solicitors to the Supreme Court for contempt. The core question was whether documents obtained in court proceedings had been used for an alien, collateral, ulterior or extraneous purpose in breach of the implied Harman undertaking. The court found no such breach was established. Judge Levy SC noted the allegation had been "adamantly urged" but had produced a "paralysing effect" on the progress of the proceedings, and the application ultimately failed.

Orders Made

  • The plaintiffs were granted leave to file the amended statement of claim in the form of Exhibit A, subject to any necessary conforming amendments.
  • The defendant's and cross-claimants' applications to set aside the subpoena and notice to produce were dismissed.
  • The application to refer the plaintiffs' solicitors to the Supreme Court for contempt was rejected.
  • The defendant and cross-claimants were ordered to pay the plaintiffs' costs of the contempt application.
  • The plaintiffs' costs liability for wasted costs incurred by the defendant and cross-claimants before 18 January 2016 was preserved.
  • All parties were ordered to attend mediation pursuant to s 26 of the Civil Procedure Act 2005 by 31 July 2016, with equal sharing of mediator costs in the interim (costs to be costs in the cause if mediation failed).
  • If the parties could not agree on a mediator or arrangements within 28 days, each party was to submit two suggested mediator names to the judge's Associate for the court to make the relevant orders.
  • The plaintiffs were permitted to proceed immediately to a costs assessment if costs could not be agreed.
  • Liberty to apply on 7 days' notice.
  • If proceedings remained unresolved after mediation, a directions hearing was listed at the District Court at Newcastle in the sittings commencing 12 September 2016.
  • The court reserved the question of whether costs relating to the failed contempt allegation should be on an indemnity basis, and whether the solicitor for the defendant and cross-claimants should be personally liable for those costs.

Key Takeaways

  • The District Court confirmed that the Harman implied undertaking (as considered in Hearne v Street [2008] HCA 36) prohibits use of compulsorily produced documents for alien, collateral, ulterior or extraneous purposes, but found on the facts that no such misuse was established against the plaintiffs' solicitors.
  • Allegations of civil contempt against solicitors are treated as very serious matters; the court's language signalled that such applications carry real procedural consequences when pressed unsuccessfully, including potential exposure to indemnity costs and personal costs liability for the lawyers who bring them.
  • Where a plaintiff faces genuine difficulty identifying the correct defendants among a web of related corporate entities, that complexity can support the granting of leave to amend a statement of claim, even at an advanced procedural stage.
  • A subpoena or notice to produce will not be set aside as an abuse of process merely because a defendant objects to production; the documents must be shown to be sought for an improper or collateral purpose.
  • Courts retain active case management powers under the Civil Procedure Act 2005 to order mediation, including by appointing a mediator and setting cost-sharing arrangements, where parties cannot reach agreement on the process themselves.

Legislation and Cases Referenced

Legislation
- Civil Procedure Act 2005 (NSW), ss 26, 56, 57, 58, 61, 64
- Uniform Civil Procedure Rules 2005 (NSW), rr 5, 5.3, 5.4, 6.19, 6.24, 21.3, 33.4
- Australian Consumer Law, s 236
- Trade Practices Act 1974 (Cth), s 82
- District Court Act 1973 (NSW), s 203
- Legal Profession Act 2004 (NSW), s 357
- Legal Profession Uniform Law Application Act 2014 (NSW), cl 4 of Sch 2

Cases
- Harman v Secretary of State for the Home Department [1983] 1 AC 280
- Hearne v Street [2008] HCA 36
- Aon Risk Services Australia Limited v Australian National University [2009] HCA 27
- Witham v Holloway [1995] HCA 3; (1995) 183 CLR 526
- Pelechowski v Registrar, Court of Appeal [1999] HCA 19; (1999) 198 CLR 435
- Commissioner of Police v Hughes [2009] NSWCA 306
- Lin & Anor v Borrowdale & Ors [2011] NSWCA 65
- Riddick v Thames Board Mills Ltd [1977] QB 881
- Waind v Hill & Anor (1978) 1 NSWLR 372
- Nowlan v Marson Transport Pty Ltd [2001] NSWCA 346; (2001) 53 NSWLR 116
- White v Overland [2001] FCA 1333
- White v Tulloch (1995) 127 FLR 105
- Trade Practices Commissioner v Arnotts Ltd (1989) 21 FCR 306
- Court of Appeal v Maniam (No 1) (1991) 25 NSWLR 459
- GB v Greater Western Sydney Area Health Service [2010] NSWSC 181