Devmin International Pty Ltd v Parity Partners Pty Ltd [2022] QDC 186

DISTRICT COURT OF QUEENSLAND CITATION: Devmin International Pty Ltd v Parity Partners Pty Ltd [2022] QDC 186 PARTIES: DEVMIN INTERNATIONAL PTY LTD ACN 146 701 377 (Plaintiff/ Respondent) v PARITY PARTNERS PTY LTD ACN 646 226 020 AS TRUSTEE FOR CONSUMER STAPLES INDUSTRY FUND NO.1 (Defendant/ Applicant) FILE NO: 850/22 DIVISION: Civil PROCEEDING: Application ORIGINATING COURT: Brisbane District Court DELIVERED ON: 21 July 2022 (ex tempore) DELIVERED AT: Brisbane HEARING DATE: 21 July 2022 JUDGE: Porter QC DCJ ORDER: 1. Application dismissed 2. Defendant pay the plaintiff’s costs of the application on the standard basis. CATCHWORDS: PROCEDURE – DISTRICT COURT PROCEDURE – PLEADINGS – THIRD PARY PROCEEDINGS – where the defendant applies for leave to file a third party notice – where the proposed third party pleading raises issues which already arise in the proceeding as well as unique issues – where the proposed third party is likely to be a witness in the proceedings for the plaintiff – whether the defendants have a sufficient explanation for the delay in filing the application – whether the third party proceedings would affect the viability or complexity of the plaintiff’s claim – whether granting leave would delay the proceedings in reaching a trial. COUNSEL: B. Whitten for the Plaintiff/ Respondent -- 1 of 6 -- 2 D. Clarry for the Defendant/ Applicant SOLICITORS: Kelly Legal for the Plaintiff/ Respondent RH Law for the Defendant/ Applicant [1] This is an application by the defendant, Parity Partners Pty Ltd, for leave to file a third party notice in a form set out in a supporting affidavit. The application is for leave in the current proceedings. Those proceedings were commenced in the Supreme Court in 2021. The proceedings sought the recovery of an amount of $2 million said to have been advanced by the plaintiff to the defendant along with interest at a relatively high level, at least in comparison to the then mortgage lending rates. The proceedings began in the Supreme Court on the filing of an originating application seeking recovery of the loan amount and interest on 28 October 2021. On 2 November 2021, an application was also made in that Court for a freezing order. A great deal of affidavit material was filed both in support of the originating application and freezing order. On 3 November 2021, Justice Applegarth dismissed the application for a freezing order, however that application was renewed before Judge Barlow and dealt with by consent. [2] In December 2021, the plaintiff sought judgment for the sum of $1.4 million in the Supreme Court, and that judgment was ordered by Justice Freeburn. That order was in respect of principle sums that were advanced, and the question of the amount of interest and other related sums in accordance with the terms of the agreement remained to be determined. That judgment was not resisted, at least in substance, by Parity, and its principal swore an affidavit accepting the obligation to repay the principal sum. It was then ordered that the balance of the issues proceed by way of pleading and on 14 January 2022, a statement of claim was filed in the Supreme Court. It was evident from that pleading that this was properly a matter for this Court, and agreement was reached to remit the matter to the District Court. [3] A defence was filed on 11 February 2022 while the matter was still in the Supreme Court. It is important to note that the gravamen of that defence was to raise two issues, albeit in fairly brief terms. The first was to dispute that a Mr James O’Dwyer was the agent of the defendant for the purposes of negotiating and agreeing to the terms of the advance, in particular, the terms relating to the amount of interest and the second is that the terms providing for the amount of interest were void as penalties.1 [4] Because the notice of intention to defend was filed on 11 February 2022, the effect of the Uniform Civil Procedure Rules 1999 (UCPR) was that any third party notice was required to be filed within 28 days after 11 February 2022, which was 11 March 2022.2 No third party notice was filed within the prescribed period. [5] The consequence is that the defendant requires leave in terms, identified in rule 194(1) of the UCPR, to issue its third party notice out of time. Although, strictly 1 See Defence (CD 29) at paragraph 4(c) 2 Uniform Civil Procedure Rules 1999 r 194(1)(b)(i) -- 2 of 6 -- 3 speaking, that is the time at which the third party notice was supposed to have been filed. It was evident by 11 March 2022 that this matter was, following the summary judgment, within the jurisdiction of this Court, and the parties agreed to arrange for its remittal to this Court. An application was filed for the remittal of the matter on 30 March 2022, and that order was made on the papers on 12 April 2022. On or about 11 March, there was an exchange between the solicitors in which the solicitor of the defendant suggested that no further steps be taken in the proceeding until the remittal had been completed, and it appeared to me there was no dissent from the plaintiff’s solicitor. At that time, it had been flagged that a third party notice may be filed, but there was no specific discussion about that. In any event, the email correspondence did indicate on behalf of the defendant that no further steps would be taken until the remittal occurred. Apart from the filing of the reply, no steps were taken. [6] The matter was ordered to be remitted to this Court on 12 April 2022. The parties then sought to have the matter placed on the commercial list. On 1 June, the applicant filed an application for a freezing order against the respondent in this Court. On 2 June, an interim order was made and a further order was made before me, by consent, on 9 June 2022 when the application for the matter to be placed on the commercial list was dealt with. On that date, it was made clear to me that it was contemplated that the third party proceedings would be sought to be commenced, and I made directions for that to occur and for the application to be heard before me today. The long delay for the hearing of that application, at least in the context of this commercial list, was because of my absence not because of delay by any party. The application was, more or less, pursued in accordance with those directions and heard by me today. [7] The proposed third party notice is exhibited to an affidavit of Mr Hocking for the defendant. It seeks to bring proceedings against Mr O’Dwyer and two companies related to him. It will be recalled that Mr O’Dwyer is alleged by the plaintiff to be the person who, as agent for the defendant, negotiated the loan of the capital sum and, relevantly to these proceedings, the terms of that loan including the relatively high interest rates which are the substantive part of the claim. [8] The third party statement of claim is fairly detailed. Importantly, however, it can be characterised as raising substantively two distinct issues. The first, which is generally covered by paragraphs 1 to 22, involve allegations the substance and effect of which are that it was Parity was not a party to the loan agreement with Devmin because Mr O’Dwyer did not have authority to enter into such a loan agreement on behalf of Parity and was not its agent for doing so. Although that part of the pleading raises a number of other transactions, the substance and effect of those are to provide factual matters from which it might be inferred that Mr O’Dwyer did not have authority as agent for Parity to enter into the loan terms, especially those objected to by Parity. Mr Clary who appeared for Parity characterised that part of the pleading in that way. I will call that Part A of the third party statement of claim. -- 3 of 6 -- 4 [9] The allegations in Part A concern matters that go to the principal issue in the extant proceedings and that was accepted by Mr Clary and not really disputed by Mr Whitten. [10] In that sense those matters arguably could and should be included in the defence. They are in that sense not truly third party issues, although they can be raised in proceedings against Mr O’Dwyer. But as I said, they are directly relevant to the issues as between the parties. [11] Part B of the third party statement of claim is what might be thought to be a more orthodox third party claim. Part B, proceeding from roughly paragraph 23 to the end of the proposed pleading, comprises allegations that if Parity is liable to Devmin for the interest as allegedly negotiated by Mr O’Dwyer, then Parity is entitled to, in various ways, to indemnity for that liability or damages in equity or at common law or under the Australian Consumer Law from Mr O’Dwyer and/or his related companies for various reasons including the making of misrepresentations by Mr O’Dwyer or his companies’, breaches of fiduciary duties by Mr O’Dwyer and his companies, and so on. Those are issues which have nothing to do with the principal proceedings and indeed, they are issues which will not arise unless Devmin succeeds against Parity in establishing it is liable for the interest and other costs that are disputed because of Parity’s arguments that it is not bound by Mr O’Dwyer’s conduct as its agent. [12] There is no doubt, having described the issues in that way, that the claims raised by the third party notice and the allegations raised therein are matters which may be the subject of a third party notice under rule 192 of the UCPR and Mr Whitten did not contend to the contrary. [13] The real issue is a discretionary one as to whether leave should be granted to issue the third party notice at this stage. Leave is required because, as I have explained, the notice was required to be filed under the UCPR by 11 March 2022. The plaintiff opposes leave. The principal authorities on leave are summarised in counsel’s submissions. I do not need to repeat them. The factors identified by the plaintiff telling against the grant of leave are, consistent with the authorities: delay, the complicating effect of the third party proceedings, that this proceeding will be soon ready for trial, the risk of disadvantage from insolvency or other proceedings which might happen if there is a delay in the trial and, the fact that it is open to Parity to bring its own proceedings against Mr O’Dwyer if it chooses to. [14] Parity, in its submissions, answers those matters and adds, as a matter favouring the exercise of the discretion, the risk of inconsistent judgments. I will deal with each of those factors, though not necessarily in that order. [15] First, as to delay, I do not find this a compelling factor against granting leave. The proceedings, frankly, have moved pretty promptly. The third party notice should have been filed by 11 March. It is true that there is no explanation as to why it was not ready by 11 March, but the meeting of the strict time limit for the filing of third party proceedings is honoured in the breach. I am not too concerned by the fact that it was not ready by the first day after the date that it was due. However, since -- 4 of 6 -- 5 then there has been explanations given for the failure to seek leave in respect of the third party proceedings. I do not need to recite them. To my mind they are sufficient explanations and the period of delay is not particularly long bearing in mind the fact that on 9 June, I set up the procedure to resolve this application and those directions were more or less complied with by the defendant. [16] Next, I turn to the question about whether the risk of insolvency or other proceedings affecting the viability of Devmin’s claim against Parity, is a reason against permitting the third party proceeding to be issued. In that regard, as to some disadvantage by deliberate or non-deliberate acts that would result in the frustration of the execution of a judgment, Parity says with some credibility that the fact that there is a freezing order in place provides such protection as an unsecured creditor is entitled to against those possibilities. And if, in any event, those possibilities manifest themselves, well, that is what happens to unsecured creditors. [17] There are some other questions about the place of Parity, for example, whether it will remain as trustee of the trust but I do not find any of those to be particularly compelling reasons why the third party proceedings should not be permitted to go ahead. Particularly because whether they are permitted to go ahead or not, the issue of whether Parity remains a trustee or not is likely to be resolved well before any trial of this matter. Further, in any event, Parity will be entitled to its indemnity for its costs incurred as trustee and there is no suggestion that that does not include the claims of Devmin against it. [18] Those two matters do not tell against granting leave. More compelling, however, is the argument about complication. I turn to that now. [19] I explained that the third party statement of claim can be divided into Part A and Part B. In respect of Part A, the argument by Devmin that it would add complication has no merit because those issues are clearly going to be issues that arise in the trial of the proceedings as currently constituted. However, in respect of the Part B issues, that is the claim for indemnity contribution, damages, or equitable compensation if indeed Mr O’Dwyer did bind Parity to the terms of the loan, those issue will greatly complicate the proceedings. They involve not just a simple case of breach of fiduciary duty (if there ever is such a thing), but also a case involving misrepresentation and other matters. Those are not matters that arise in any way in the principal proceedings. [20] Furthermore, if the Part B issues are included, not only will they greatly complicate this trial, but they will, in my view, very significantly delay it. That really is a compelling consideration in a case on the commercial list involving relatively modest sums. If leave was granted in respect of those third party claims, Mr O’Dwyer and his companies would be joining these proceedings from a standing start in circumstances where, as I explain below, the proceedings can otherwise be ready for trial within two or three months. If those claims are added, however, those proceedings will have to be pleaded out in full, with disclosure and, possibly applications for security for costs and so on. To my mind starting from, as it were, a standing start, it is likely to delay the proceedings by at least six months and, as that will take it into the long break, well into next year. As I said in submissions, if -- 5 of 6 -- 6 it was $40 million or $4 million, maybe that would be justified, but for $400,000 I do not think it can be. [21] The next issue that arose was the issue of the risk of inconsistent judgments. That obviously does not arise in respect of the indemnity-type Part B issues in the third party proceeding because those issues will not arise in this case as currently constituted. There is, in theory, a risk of inconsistent judgment on the Part A issues. That is, whether Mr O’Dwyer was the agent of Parity for the purposes of entering into the terms of the alleged loan agreement. However, in my respectful view, that risk is more theoretical than real. This case will involve a close examination of that exact issue. While it will not give rise to issue estoppels against Mr O’Dwyer, as the proceedings are currently constituted, one has to wonder what the realistic prospect would be of there being a credible case to reopen that issue if it is fully examined and resolved in this trial. [22] That is all the more so because the plaintiff, Devmin, has indicated that its intention is to call Mr O’Dwyer as a witness in the proceedings. That might not be as surprising as it might seem, because it does appear that Mr O’Dwyer has some history of dealings with Devmin, seemingly, at least in part, the history the subject of the Part A allegations in the third party proceedings. [23] While I was not offered an undertaking to call Mr O’Dwyer, and none was sought by me, that does not change the fact that, on Mr Whitten’s instructions for Devmin, it is their intention to call Mr O’Dwyer. If Mr O’Dwyer is called in the proceedings, he will give his version, and the defendant will have every opportunity to cross-examine him all it wants about what his version is about these events. And then I, as trial Judge, will make a decision about that issue, including on Mr O’Dwyer’s evidence. [24] In those circumstances, although it might not be the case that issue estoppels arise the idea that Mr O’Dwyer, if subsequently sued by Parity for indemnity, could credibly put that back in issue seems theoretical only. [25] Of course, the situation might be different if Devmin, on reflection, decides not to call Mr O’Dwyer and that could of course happen, notwithstanding the bona fide view of Devmin’s solicitors that that is the intention. But if that did happen, Devmin would have to think carefully about it, because that is a factor I am taking into account in dismissing this application. Therefore, it might be argued that circumstances have changed, and therefore a further application could be brought. [26] My overall view is that leave should not be granted. The fact is that, this is not a particularly large commercial case. It can be ready for trial within a couple of months. Trial dates are available in October or November. [27] For those reasons, I dismiss the application, and order the defendant to pay the plaintiff’s costs of the application on the standard basis. -- 6 of 6 --