Howard v National Bank of New Zealand Limited [2003] FCA 41 (4 February 2003)

Last Updated: 7 February 2003

FEDERAL COURT OF AUSTRALIA

Howard v National Bank of New Zealand Limited [2003] FCA 41

GREGORY JOHN HOWARD, BLANCH FRANÇOISE AND MICHELINE MCDONALD v NATIONAL BANK OF NEW ZEALAND LIMITED, P K MURDOCH, KEVIN LUFF, GLENN RUSBATCH, ROD HUTTON, JOHN BOYD AND SIR JOHN ANDERSON

Q 226 OF 2001

DRUMMOND J

4 FEBRUARY 2003

BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q 226 OF 2001

BETWEEN:	GREGORY JOHN HOWARD FIRST APPLICANT BLANCH FRANÇOISE SECOND APPLICANT MICHELINE MCDONALD THIRD APPLICANT
AND:	NATIONAL BANK OF NEW ZEALAND LIMITED FIRST RESPONDENT P K MURDOCH SECOND RESPONDENT KEVIN LUFF THIRD RESPONDENT GLENN RUSBATCH FOURTH RESPONDENT ROD HUTTON FIFTH RESPONDENT JOHN BOYD SIXTH RESPONDENT SIR JOHN ANDERSON SEVENTH RESPONDENT

JUDGE:	DRUMMOND J
DATE OF ORDER:	4 FEBRUARY 2003
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1. The proceedings be stayed until the hearing and determination by judgment given after trial of proceeding CP223/01 pending in the Wellington Registry of the High Court of New Zealand.

2. The applicants have liberty to apply with respect to the stay order.

3. Costs of the respondents' notice of motion filed 6 December 2002 be costs in the proceedings.

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

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	Q 226 OF 2001

BETWEEN:	GREGORY JOHN HOWARD FIRST APPLICANT BLANCH FRANÇOISE SECOND APPLICANT MICHELINE MCDONALD THIRD APPLICANT
AND:	NATIONAL BANK OF NEW ZEALAND LIMITED FIRST RESPONDENT P K MURDOCH SECOND RESPONDENT KEVIN LUFF THIRD RESPONDENT GLENN RUSBATCH FOURTH RESPONDENT ROD HUTTON FIFTH RESPONDENT JOHN BOYD SIXTH RESPONDENT SIR JOHN ANDERSON SEVENTH RESPONDENT

JUDGE:	DRUMMOND J
DATE:	4 FEBRUARY 2003
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1 The respondents in this action, the National Bank of New Zealand Limited ("the Bank") and certain officers and employees of the Bank, seek by motion an order that the action be stayed or, alternatively, stood out of the list until the hearing and determination of proceeding CP223/01 pending in the Wellington Registry of the High Court of New Zealand.

2 In this New Zealand action, the Bank is the plaintiff and the applicants in the Federal Court action are the defendants.

3 Both actions arise out of two loans made by the Bank through its Queenstown, New Zealand, branch to the three applicants, one in late 1994 for $110,000 and the other in June 1995 for $115,000. The applicants took out these loans to purchase residential investment properties in Queenstown. The loans are secured by, among other things, mortgages over these New Zealand properties.

4 The applicants claim in the Federal Court proceedings declarations that the loan agreements and associated securities are void and unenforceable against them and they also claim damages for negligence, fraud and conspiracy and for various contraventions of the Trade Practices Act 1974 (Cth). The applicants' case is that, due to the alleged misconduct on the part of the Bank and certain of its officers in connection with its administration of these loans and in connection with attempts to resolve the ensuing dispute in proceedings before the New Zealand Banking Ombudsman, the Bank has lost all rights to recover both the capital sums advanced and interest thereon; various contraventions of the Trade Practices Act are also relied on in support of their attack on the enforceability of the loan agreements and securities. In addition to contending that they are not liable to repay any of the loan moneys advanced or any interest thereon, the first applicant claims damages totalling $2,283,000, including damages for injury to his health, to his reputation and creditworthiness and for financial loss. The second and third applicants claim on similar bases damages totalling $572,000 and $509,000 respectively. The case upon which the applicants rely for contending that their entry into the two loan transactions has resulted in their being in the position of having good claims to avoid repayment of any of the loan moneys and for damages totalling, in all, over $3¼ million, is pleaded in a complex way. The amended statement of claim filed by the applicants at my direction, in an attempt to reduce their case to its essentials, runs to forty-five pages. Proceedings in this Court have progressed no further than the filing on 15 November 2002, at my direction, of this amended statement of claim. The Bank and the other respondents have not yet pleaded to the applicants' amended statement of claim.

5 In the New Zealand proceedings in which the Bank is plaintiff, the Bank, by its statement of claim of 11 September 2001, claimed judgment for the whole of the principal moneys advanced by it to the applicants totalling $225,000 and interest thereon at the non-default rate provided for in each loan agreement. However, the Bank has recouped some of the moneys it alleges is due to it in respect of these loan agreements. On 15 October 2002, it provided particulars of its statement of claim in the New Zealand action; by these particulars, it seeks, in respect of the first loan, repayment of the principal amount of $110,000 and unpaid interest set out in the particulars and, in respect of the second loan, it seeks repayment of the amount of principal outstanding of $102,169 and unpaid interest that is also set out in those particulars.

6 The dispute out of which litigation between the parties has arisen, both in Australia and New Zealand, was a protracted one, erupting in 1996. In an attempt to settle it, the parties agreed in 1998 to refer the matter to the New Zealand Banking Ombudsman. The proceedings before the Ombudsman themselves became protracted. It was against this background that the Bank commenced its proceedings in the New Zealand court on 11 September 2001. As I noted in pars [24] to [26] of the reasons for judgment which I published on 11 October 2002, the Bank put the applicants on notice of its intention to do this in mid June 2001. On 25 October 2001, the applicants commenced the proceedings in this Court. In separate applications to the Master of the New Zealand High Court, the applicants objected to the jurisdiction of the New Zealand court to deal with the matter, applied to strike out the Bank's proceedings as disclosing no proper cause of action and sought a stay of those proceedings on the ground that they involved an abuse of process of the New Zealand court. The Master had dismissed all these challenges to the Bank's action by July 2002. Hammond J dismissed the applicants' application for review of the Master's decisions in November 2002 and directed that they deliver their defence to the Bank's claim by 13 December 2002.

7 The applicants filed their defence and counter-claim in the New Zealand action late, on 30 January 2003 and the Bank has now filed its reply and answer. By their pleading, the applicants set up, in answer to the Bank's claim for repayment of the loan moneys and interest thereon, essentially the same factual case upon which they are relying in the Federal Court action to show that the loan agreements and associated securities are void and unenforceable against them and that the Bank, in consequence, is not entitled to repayment of anything in respect of the two advances it made to them. Their counter-claim in the New Zealand action is confined to a declaration that these agreements and associated securities are void and unenforceable. They have deliberately refrained from counter-claiming in the New Zealand action for the millions of dollars of damages they have included in their claim in the Federal Court action. Subject to the applicants' insistence on full particulars of the Bank's claim, the pleadings in the New Zealand action appear to have closed. Obtaining what they consider to be proper particulars of the Bank's claim in the New Zealand action appears to have become a major focus of the applicants' activities. It is likely there will be further interlocutory litigation in this action. In so far as the Bank's solicitor implies in his affidavit that the New Zealand proceedings might come to trial in September 2003, that is, I think, an optimistic assessment of things.

8 But with or without the applicants' co-operation, the Bank can be expected to pursue its action in the New Zealand court.

9 In so far as the applicants challenge the enforceability of their loan agreements with the Bank and the associated securities they gave to the Bank on fairly complex factual grounds, both courts will have to determine the same range of factual issues. The New Zealand proceedings are not complicated by the applicants' claim made only in this Court for very substantial damages, but that is only because the applicants have elected not to raise their damages claim in the New Zealand court. There is no reason to think they could not do that. It was submitted by the Bank that, in so far as the applicants rely in this Court on various provisions of the Trade Practices Act both in asserting the unenforceability of the loan agreements and associated securities and in claiming damages, the New Zealand Fair Trading Act 1986 contains similar provisions upon which the applicants could rely, if they wished, in the New Zealand proceedings. The solicitor for the applicants, who has also appeared for them on the hearing of all applications in this Court and who has been admitted to practice in New Zealand and appeared for the applicants in the proceedings before Hammond J, did not contend otherwise. The applicants submit that there are material differences between the New Zealand and Australian laws of mistake which make it preferable for the applicants to proceed with their damages claim in Australia. The applicants rely upon s 94A the Judicature Act 1908 (NZ). But I do not understand this provision to establish any different rule from Australian law with respect to the circumstances in which relief will be available in respect of payments made under a mistake. The applicants did not, however, explain how they would suffer any detriment because of what they contend is the difference between the law of mistake in the two countries if they had raised the subject matter of their damages claim in the Federal Court proceedings in the New Zealand action. In any event, the Bank does not dispute the applicants' entitlement to pursue their damages claim in the Federal Court, they having chosen not to raise those claims in the New Zealand action, only that the issues common to both the New Zealand and Australian actions should be determined in the New Zealand proceedings before the Australian action, including the applicants' damages claim, is heard.

10 The applicants' solicitor repeatedly invoked Voth v Manildra Flour Mills Pty Ltd [1990] HCA 55; (1990) 171 CLR 538. There, a New South Wales resident company sued a Missouri accountant for damages for professional negligence in the New South Wales court. The accountant succeeded in having the New South Wales action stayed on the ground that the New South Wales court was an inappropriate forum in which to permit the action to proceed. That case is authority for the proposition that an Australian court should only decline jurisdiction regularly invoked by an applicant if satisfied that the local court is a clearly inappropriate forum for resolution of the dispute, where there is available a foreign tribunal which can deal with the matter. The applicants' solicitor relied on Voth for the proposition that an Australian court should be reluctant to prevent an Australian litigant proceeding against a foreign resident in the Australian court. But Voth does not purport to give effect to such simple nationalistic considerations. The issue for determination raised by the Bank's motion is not whether the Federal Court should decline to entertain the action brought before it by the applicants. Senior counsel for the Bank accepts that this Court has jurisdiction to deal with the action and, in any event, my ruling of October 2002 to that effect has not been appealed. The Bank also acknowledges that the applicants are free to pursue their claim for damages, which they have raised only in this Court. What the Bank seeks to achieve by its motion, however, is to ensure that it does not have to prepare and litigate any of the issues in the Federal Court action, including those issues which will be determined in the New Zealand proceedings, until after the New Zealand proceedings have been finalised.

11 In support of its motion, the Bank and the other respondents in the proceedings in this Court rely upon Sterling Pharmaceuticals Pty Limited v The Boots Company (Australia) Pty Limited (1992) 34 FCR 287, a decision of Lockhart J followed in other cases in this Court and referred to with approval by the High Court in cases such as Henry v Henry [1995] HCA 64; (1996) 185 CLR 571 at 590. There, the High Court said:

Foreign proceedings usually fall for consideration in a context in which they involve the same or related factual issues as those involved in the local proceedings, but not the same legal issue and, perhaps, not the same parties. Even in cases of that kind it may sometimes be appropriate to grant a temporary stay of the local proceedings to allow the factual issues to be determined in the other jurisdiction ... There are more compelling considerations in favour of a stay of the local proceedings if, as can happen, there are proceedings in another country which has jurisdiction to entertain those proceedings and the proceedings are between the same parties and with respect to the same issue or controversy.

12 In Sterling Pharmaceuticals, the applicant was the Australian subsidiary of a United States company and the respondent, the Australian subsidiary of a United Kingdom company. The applicant brought proceedings against the respondent in Australia alleging breaches of the Trade Practices Act. However, the New Zealand subsidiary of the United States company had already commenced proceedings against the New Zealand subsidiary of the United Kingdom company in the New Zealand court in reliance on provisions of the Fair Trading Act 1986 (NZ) equivalent to the Trade Practices Act and based on facts similar to those relied on in the Australian case. The respondent sought a stay of the Australian action until determination of the New Zealand action. At that time, the pleadings in the Australian action had closed while, in the New Zealand action, an application for an interlocutory injunction had been heard and refused. Lockhart J said, at 290 - 291:

The court has a general power to control its own proceedings, and that power extends to enable it to order a temporary stay of proceedings in various circumstances including the case where proceedings are pending in another court and it is desirable that those proceedings should proceed to their conclusion first ...

In my opinion relevant considerations to be taken into account in the present case include the following:

[1] ? Which proceeding was commenced first.

[2] ? Whether the termination of one proceeding is likely to have a material effect on the other.

[3] ? The public interest.

[4] ? The undesirability of two courts competing to see which of them determines common facts first.

[5] ? Consideration of circumstances relating to witnesses.

[6] ? Whether work done on pleadings, particulars, discovery, interrogatories and preparation might be wasted.

[7] ? The undesirability of substantial waste of time and effort if it becomes a common practice to bring actions in two courts involving substantially the same issues.

[8] ? How far advanced the proceedings are in each court.

[9] ? The law should strive against permitting multiplicity of proceedings in relation to similar issues.

[10] ? Generally balancing the advantages and disadvantages to each party.

[I have numbered the considerations identified by Lockhart J.]

13 Lockhart J granted the stay, though the parties in the Australian and the New Zealand proceedings were different legal entities and had different management and though the issues in the two sets of proceedings were not precisely the same. But, as his Honour observed at 292: "...there is a substantial identity of issues in the two proceedings, though the issues in the New Zealand proceeding are wider". He considered that the resolution of the questions which arose in the New Zealand proceeding could be expected, for all practical purposes, to resolve the critical issues in both proceedings.

14 I propose to follow the approach of Lockhart J.

[1] WHICH PROCEEDING WAS COMMENCED FIRST?

15 I have already set out at some length the circumstances in which the two actions were commenced. The New Zealand action having been commenced first is a consideration favouring the grant of the stay.

16 On the material before me, I am not satisfied that there is any basis for thinking that the Bank commenced its New Zealand action in order to achieve a tactical advantage over the applicants, who had previously indicated their intention to sue in Australia if litigation became necessary. The Bank's case is that it advanced a substantial sum of money to the applicants, received little repayment and had become involved in a very long-running dispute. It only commenced proceedings in New Zealand, against this background, after giving the applicants substantial notice of its intention to do that.

17 As Hammond J observed, the applicants have not been dragged into the New Zealand jurisdiction by colourable manoeuvring by the Bank. His Honour noted:

The applicants elected to pursue business interests in New Zealand (the purchase of the units was apparently in connection with a commercial enterprise). They took out loans in this country, secured by registered mortgages against Torrens system titles, on which no monies have been paid.

[2] WILL TERMINATION OF ONE PROCEEDING BE LIKELY TO HAVE A MATERIAL EFFECT ON THE OTHER?

18 The officers and employees of the Bank who are respondents in the Federal Court action are not parties in the New Zealand action. But it is common ground that findings of fact relevant to the question of the enforceability or non-enforceability of the loan agreements and the securities, whether made in this Court or the New Zealand court, will give rise to issue estoppels between the applicants and the Bank upon which the party in whose favour any such findings are made will be able to rely in the other court. To adopt the language of Henry, this is a "compelling consideration" against allowing the Federal Court action to proceed simultaneously with the New Zealand action.

[3] THE PUBLIC INTEREST.

19 Considerations [4], [7] and [9] referred to in Sterling Pharmaceuticals are, in my opinion, aspects of the public interest. They are each considerations that will generally tell in favour of permitting only one action to proceed to a determination ahead of the other. Here, they tell against allowing the Federal Court action to proceed while the New Zealand action is being litigated.

20 The applicants contend in effect that there is a public interest in Australian courts generally acting to ensure that Australian residents will be able to litigate their claims against foreign residents in Australian courts. I have explained why I do not accept the applicants' submission that Voth is authority for this proposition.

[5] THE POSITION RELATING TO WITNESSES

21 Neither side put on evidence that dealt with this matter. Because the applicants have not pursued their damages claim in the New Zealand action, the issues for determination there will be in a considerably narrower compass than are the issues in the Federal Court action. So far as I can gather from the pleadings, each applicant will be a necessary witness in the New Zealand action. Their solicitor told me from the bar table that they intended to, or had retained, two persons described as "banking experts", who are presumably Australian residents. I am unable to make any assessment on whether they will give evidence of any relevance in either the Australian or the New Zealand proceedings. The six natural respondents in the Federal Court proceedings, all New Zealand residents, are likely to be witnesses. It is also probable that there will be a number of other New Zealand residents who will be called as witnesses on behalf of the Bank. The likelihood is that, on all the issues in the New Zealand action, which are also all issues common to the Federal Court action, there will be substantially more New Zealand residents called as witnesses than Australian residents. The costs associated with witnesses on the common issues are likely to be less, to a not insignificant degree, if the New Zealand action goes to a hearing ahead of the Australian action.

[6] WILL WORK DONE ON PLEADINGS, PARTICULARS, DISCOVERY, INTERROGATORIES AND PREPARATION BE WASTED IF BOTH ACTIONS PROCEED?

22 If both actions proceed simultaneously, all parties are likely to have to bear significantly more costs overall, including the costs of duplicating interlocutory steps and trial preparation (and, in the Bank's case, the costs of dual legal representation), than if the New Zealand action proceeds to a determination ahead of the other and the common issues are resolved in the New Zealand action. This consideration favours the grant of the stay.

[8] HOW FAR ADVANCED THE PROCEEDINGS ARE IN EACH COURT.

23 I have set out above the position in relation to the two actions. This consideration favours the grant of the stay since the New Zealand action is rather more advanced than the action in this Court.

[10] THE BALANCING OF ADVANTAGES AND DISADVANTAGES TO EACH PARTY.

24 The position relating to witnesses can be taken into account here. I have explained why I think that consideration favours the grant of the stay. The applicants also contend that the procedures of the Federal Court are such as are likely to lead to a more expeditious resolution of the dispute than will occur in the New Zealand court. I do not accept this submission. It appears from the Practice Note issued by the New Zealand High Court which is in evidence before me that that Court follows a similar approach to this Court in managing the pre-trial preparation of litigation and a similar approach in seeking to confine litigation to critical issues and to reduce interlocutory litigation. Further, it appears from the evidence of the Bank's solicitor that once the New Zealand case is ready for trial, it is likely that there will be no undue delay in obtaining a hearing. The applicants also complain about the Bank's pleading in the New Zealand action in response to their defence. They say it contains evasive denials. But as they point out, that would be a contravention of r 130 of the New Zealand High Court Rules. I cannot see how any such contravention, presumably curable by application to the New Zealand court, can provide any ground for resisting the Bank's motion.

25 The applicants submitted that they would be disadvantaged if they have to litigate in New Zealand because their solicitor and advocate, though admitted to practice in New Zealand, is a Brisbane resident and they will have to meet the additional burden of his travel and accommodation costs if he has to appear for them in the New Zealand action. The difficulty with this submission is that, as I have explained, the New Zealand action can be expected to proceed with or without the applicants' co-operation and whether or not the proceedings in this Court are stayed. There is nothing before me to indicate that the applicants do not intend to continue to participate in the New Zealand action. They therefore appear to be committed to meeting these additional costs whatever happens to the present motion. Each of the applicants also has health problems. There is, however, no evidence before me to indicate how those problems may favour permitting the Federal Court action to proceed simultaneously with the New Zealand action, given that the latter proceedings are going to continue to a determination.

26 Moreover, as Hammond J noted, at par [62]:

... to endeavour to argue today, with modern communications, and air travel, that litigation of this character between parties in Wellington and Queensland is grossly unfair is simply untenable. Indeed, the applicants are even able to have their own Queensland counsel appear for them, as he has already done, which from their perspective must improve the logistics and communications issues, not to mention the reduction of expense.

27 There is one further matter. In the judgment I gave in October last, I dealt with the consequences of the respondents in the Federal Court action agreeing by their solicitor to accept service in New Zealand of the originating proceedings in this action. In a sense, they can be said to have encouraged the applicants to bring these proceedings. But that was against the background already referred to of the Bank having long made clear to the applicants its intention to have the dispute resolved in the New Zealand court. I do not think the respondents' agreement to accept service in New Zealand of the Federal Court proceeding is sufficient to outweigh all the other considerations that favour the grant of the stay.

28 I will order that these proceedings be stayed until the hearing and determination by judgment given after trial of proceeding CP223/01 pending in the Wellington Registry of the High Court of New Zealand. The applicants will have liberty to apply with respect to this stay order.

I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Drummond.

Associate:

Dated: 5 February 2003

Solicitor for the Applicants:	Cusack Galvin & James
Counsel for the Respondents:	Mr P McMurdo QC
Solicitor for the Respondents:	Minter Ellison Lawyers
Date of Hearing:	3 February 2003
Date of Judgment:	4 February 2003