Re Western Australia v Bond Corporation Holdings Ltd; Wardley Australia Limited; Lawrence Robert Connell; Wardley Australia Securities Limited; Rothwells Limited (In Liquidation) and James Philip Yonge [1993] FCA 20 (5 February 1993)

FEDERAL COURT OF AUSTRALIA

Re: STATE OF WESTERN AUSTRALIA
And: BOND CORPORATION HOLDINGS LTD; WARDLEY AUSTRALIA LIMITED; LAWRENCE ROBERT
CONNELL; WARDLEY AUSTRALIA SECURITIES LIMITED; ROTHWELLS LIMITED (In
Liquidation) and JAMES PHILIP YONGE
Nos. 115, 116 and 118 of 1990
FED No. 52
Number of pages - 7
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
French J.(1)

CATCHWORDS

Practice and Procedure - abuse of process - pending proceedings in State Supreme Court identical proceedings commenced by way of cross-claim in Federal Court - proceedings in Supreme Court subject to application to cross-vest in Federal Court - whether relevant elements of cross-claim in Federal Court should be stayed or struck out.

Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 (WA)

Trade Practices Act 1974

HEARING

PERTH, 2 February 1993
5:2:1993

Counsel for Rothwells Limited (In Liquidation): Mr G. Murphy

Solicitors for Rothwells Limited (In Liquidation): Blake Dawson Waldron

Counsel for KMG Hungerfords: Mr P. van Hattem

Solicitors for KMG Hungerfords: Freehill Hollingdale and Page

ORDER

On the KMG Hungerfords' motion filed 22 December 1992:
1. Paragraphs 11 to 62 inclusive of the Rothwells' cross-claim

against KMG Hungerfords and paragraph 2 of the relief claimed
therein be struck out.
2. The motion is otherwise dismissed.
3. Rothwells to pay the costs of the motion in any event unless
within 7 days it files submissions seeking a different order.

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

DECISION

FRENCH J. On 10 September 1992 Rothwells Limited (In Liquidation) ("Rothwells") filed a cross-claim in these proceedings against numerous persons who were partners in the firm KMG Hungerfords as at August 1985, September 1986 and August 1987 respectively. These were designated the Schedule 1, Schedule 2 and Schedule 3 cross-respondents referring to lists of partners names set out in three Schedules to the cross-claim. By a motion filed on 22 December 1992 KMG Hungerfords seeks to strike out or stay various aspects of the cross-claim. The motion is based partly on the contention that the cross-claim is an abuse of process to the extent that it raises claims identical to those raised in pending proceedings in the Supreme Court of Western Australia. It is otherwise based upon the contention that certain of the causes of action pleaded are out of time and that one of the prayers for relief is not supported by any allegation contained in the pleading. Before turning to the submissions in detail, it is helpful to refer briefly to the principal proceedings in this Court.

2. In the principal proceedings the State of Western Australia seeks relief by way of damages against various respondents including Rothwells by reason of alleged torts of misrepresentation and contraventions of s.52 of the Trade Practices Act 1974 committed in October 1987 in connection with a proposal that the State lend its financial support to the then failing Rothwells. Leave was granted on 30 July 1992 to various of the respondents to cross-claim against Rothwells and cross-claims were filed and served by Yonge, Wardley Australia Ltd, Wardley Australia Securities Limited and Bond Corporation. Yonge, Wardleys and Bond Corporation have also filed cross-claims against KMG Hungerfords. On 6 August 1992, Rothwells lodged an application for leave to appeal against the decision giving leave to Yonge and Wardleys to cross-claim against it. On 10 September 1992 it filed the present cross-claim. Rothwells and KMG Hungerfords agreed on 25 September 1992 that no defence would be filed to the cross-claim until the outcome of the Rothwells appeal. In the event the Rothwells appeal was discontinued on 22 October 1992.

3. Rothwells' proceedings against KMG Hungerfords in the Supreme Court of Western Australia, action number 2462 of 1990, were instituted in 1990. By order of a Master of the Court made on 22 November 1991, Rothwells was given leave to file an amended statement of claim which it did. It is common ground that the amended statement of claim is identical to the cross-claim in this Court so far as it relates to causes of action in contract and negligence. The cross-claim in this Court seeks indemnity or contribution against KMG Hungerfords in relation to the various cross-claims against Rothwells by Yonge, Wardley and Bond Corporation. The claim for indemnity and/or contribution is based on the Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 (WA) and alternatively on principles of equitable contribution arising out of alleged co-ordinate liabilities. Causes of action in contract, negligence and contravention of the Trade Practices Act are also raised. On 27 November 1992, Rothwells applied in the Supreme Court to transfer the proceedings in that Court to the Federal Court under the provisions of the cross-vesting legislation. That application has yet to be heard although it is expected that it will be given a hearing date within the next four weeks or so.

4. The circumstances surrounding the steps taken by Rothwells in this Court and in the Supreme Court are set out in an affidavit of Paul Kenneth Bailey, a chartered accountant employed by Ferrier Hodgson and Co., two of whose principals, Mr Ian Ferrier and Mr Robert Tuckey are joint official liquidators of Rothwells. Prior to the issues of cross-claims against it in these proceedings, Rothwells had an agreement with the State in relation to the State's claim against it in the principal proceedings that the State, if successful, would not prove in the liquidation until all other creditors were paid in full. On that basis the liquidators' view was that Rothwells had no exposure in this litigation other than in relation to its own costs. However in light of the cross-claims brought against it, Rothwells has now been obliged to take a very active role at all stages and to take whatever action is necessary to protect its position. At para.5 of his affidavit, Mr Bailey said that Rothwells acknowledged that its cross-claim against KMG Hungerfords would duplicate proceedings in the Supreme Court action and instructed its solicitors to apply to transfer the Supreme Court action under the cross-vesting legislation to this Court after the appeal against the decision of this Court to allow cross-claims against Rothwells had been determined. Rothwells, he said, considered that it would be improper to apply to cross-vest before the determination of the appeal, as the appeal if resolved in Rothwells' favour, would have returned it to a position of not being commercially exposed in this litigation. There would have then been no need to apply to transfer the Supreme Court proceedings.

5. It was conceded by counsel for Rothwells that the commencement of proceedings in this Court, identical to pending proceedings in the Supreme Court, is prima facie vexatious and oppressive. He contended however, that on the facts of this case the prima facie presumption is rebutted. He submitted, and I accept, that the jurisdiction of this Court to stay or dismiss proceedings on the grounds that they are vexatious or an abuse of process is to be exercised with restraint. The risk to Rothwells of a judgment against it on cross-claims brought against it in this Court and the fact that there might be nothing more to mitigate that risk than a contentious claim for indemnity or contribution and the possibility of success in the Supreme Court action were outlined. It was suggested that a judgment against Rothwells in this Court would be unlikely to be stayed while it pursued proceedings in the Supreme Court. It would have to amend its claim in those proceedings to raise the liability under a judgment in this Court as an element of the loss claimed against KMG Hungerfords.

6. Accepting that the possibilities adverted to by counsel for Rothwells are open, they are matters which are quite properly to be put before the Supreme Court in support of the cross-vesting application. In the event that a transfer is ordered, then the question of the management of the transferred proceedings would have to be addressed in this court. If no transfer is ordered then that may raise questions of management, in the event of a judgment against Rothwells, that will have to be decided in both courts. But on no hypothesis in my opinion, is Rothwells entitled to maintain two substantially identical proceedings in both courts. I am unable to accept that there is any useful purpose served by allowing elements of the cross-claim identical to the claim in the Supreme Court to continue in this Court while Rothwells is committed, as it plainly is, to continuing with the earlier proceedings. It is a waste of judicial resources to allow the time of two superior courts to be taken up dealing with congruent claims. That waste is highlighted by other aspects of KMG Hungerfords' motion which raise questions of time limitation in relation to the common law claims made in Rothwells' cross-claim.

7. The questions of time limitation do not apparently arise in the Supreme Court proceedings. While I do not accept the submission by KMG Hungerfords that Rothwells' cross-claim against it has been instituted in part to strengthen its case for an order from the Supreme Court under the cross-vesting legislation, I do regard those elements of the cross-claim which are identical to claims raised in the Supreme Court as vexatious and necessarily involving a waste of judicial resources. I will therefore accede to the motion in so far as it seeks an order that paras. 11 to 62 inclusive of the cross-claim be struck out.

8. Paragraphs 63 to 74 inclusive of the cross-claim set up causes of action based on alleged contraventions of s.52 of the Trade Practices Act 1974 in its extended application to conduct in the course of trade and commerce among the States. These claims are not reflected in the Supreme Court proceedings. I accept that they could have been raised in those proceedings and that they are closely related factually to the common law claims. The close relationship of those claims to the common law causes of action in the Supreme Court is also invoked by counsel for KMG Hungerfords as a reason for striking them out. These elements of the cross-claim were also attacked as relying upon causes of action which accrued more than three years prior to the filing of the cross-claim. In my opinion, however, the fate of the trade practices claims can await the determination of the cross-vesting application in the Supreme Court. I am reluctant to determine questions of limitation in the absence of any defence and in the light of the remarks of the High Court on that question in relation to the State's claim against Wardleys. If the Supreme Court proceedings are not transferred then the question of a transfer of the trade practices claims from this Court may arise.

9. The relief claimed in para.2 of the cross-claim appears to rely upon s.87(2)(d) as a source of indemnity in the event that Rothwells is found liable to pay the State any sum. I accept the submission that there is no basis in the pleading to support that claim and that it should be struck out. So far as paras. 3A and 3B of the claims for relief are concerned they are sought to be supported by both the common law and the trade practices claims and I think for that reason it better that they be allowed to stand for the time being. Orders will be made accordingly.