Equus Financial Services Ltd & Ors v Glengallan Investments Pty Ltd [1998] QSC 28

IN THE SUPREME COURT OF QUEENSLAND Brisbane No. 1688 of 1991 BETWEEN: EQUUS FINANCIAL SERVICES LIMITED First Plaintiff AND: RURAL FINANCE PTY LTD (RECEIVERS & MANAGERS APPOINTED) (IN LIQUIDATION) Second Plaintiff AND: GLENGALLAN INVESTMENTS PTY LTD Defendant No. 1689 of 1991 BETWEEN: EQUUS FINANCIAL SERVICES LIMITED Plaintiff AND: HGT INVESTMENTS PTY LTD Defendant No. 1690 of 1991 BETWEEN: EQUUS FINANCIAL SERVICES LIMITED Plaintiff AND: BARRY THORNTON Defendant No. 1691 of 1991 BETWEEN: EQUUS FINANCIAL SERVICES LIMITED Plaintiff AND: BRIAN JAMES PRENDERGAST Defendant -- 1 of 17 -- No. 1692 of 1991 BETWEEN: EQUUSCORP PTY LIMITED (FORMERLY EQUUS FINANCIAL SERVICES LIMITED) Plaintiff AND: CYRIL WILLIAM ANDERSON Defendant REASONS FOR JUDGMENT - MOYNIHAN J. Judgment delivered 5 February 1998 CATCHWORDS: PRACTICE - joinder of action - commonality - joinder of plaintiff - standing to sue - abandonment of action - leave to proceed under O.90 r.9 of the Supreme Court Rules. CONTRACT - assignment of loan agreement - equitable assignment. Counsel: P.D. McMurdo Q.C. for the plaintiff. D.R. Cooper for the defendant. Solicitors: Gadens Ridgeway for the plaintiff. Lees Marshall Warnick for the defendant. Hearing Date: 21 October 1997 -- 2 of 17 -- IN THE SUPREME COURT OF QUEENSLAND Brisbane No. 1688 of 1991 BETWEEN: EQUUS FINANCIAL SERVICES LIMITED First Plaintiff AND: RURAL FINANCE PTY LTD (RECEIVERS & MANAGERS APPOINTED) (IN LIQUIDATION) Second Plaintiff AND: GLENGALLAN INVESTMENTS PTY LTD Defendant No. 1689 of 1991 BETWEEN: EQUUS FINANCIAL SERVICES LIMITED Plaintiff AND: HGT INVESTMENTS PTY LTD Defendant No. 1690 of 1991 BETWEEN: EQUUS FINANCIAL SERVICES LIMITED Plaintiff AND: BARRY THORNTON Defendant No. 1691 of 1991 BETWEEN: EQUUS FINANCIAL SERVICES LIMITED Plaintiff AND: BRIAN JAMES PRENDERGAST Defendant -- 3 of 17 -- 2 No. 1692 of 1991 BETWEEN: EQUUSCORP PTY LIMITED (FORMERLY EQUUS FINANCIAL SERVICES LIMITED) Plaintiff AND: CYRIL WILLIAM ANDERSON Defendant REASONS FOR JUDGMENT - MOYNIHAN J. Judgment delivered 5 February 1998 INTRODUCTION By summonses issued in each of actions 1689, 1690, 1691 and 1692 of 1991 on 28 May 1997, Equuscorp Pty Limited (“Equuscorp”) the plaintiff in each of the actions, seeks:– (1) Leave pursuant to O.90 r.9 to proceed; (2) Leave to join Rural Finance Limited (Receivers and Managers appointed) (in liquidation) (“Rural”) as a plaintiff in each of actions 1689, 1690, 1691 and 1692 with consequential amendments to the pleadings; (3) Orders that actions 1688, 1689, 1690, 1691 and 1692 be heard together. BACKGROUND All of the actions referred to (and four District Court actions mentioned in the material) arise out of negotiations which took place between Barry Thornton either on his own behalf or as the agent of the other defendants on the one hand and agents of Rural on the other. The negotiations led to the various defendants acquiring units in the “Red Claw Project”. The consequential agreements were entered into at essentially the same time and for material purposes are essentially in the same terms. Thornton, a defendant in action 1690, has a controlling interest in Glengallan Investments Pty Ltd, the defendant in 1688 and apparently has business and/or family relations with the defendants in each of the other actions. -- 4 of 17 -- 3 In conjunction with their acquisition of units in the Red Claw Project, on 30 June 1989, each of the defendants entered into a loan agreement with Rural. On 2 October 1991 Equuscorp (claiming to be entitled to do so as the consequence of assignments by Rural) issued specially endorsed writs to recover the balance of monies allegedly outstanding under the loan agreements and interest. The same solicitor acted for each of the defendants who delivered defences and counterclaims in essentially the same terms. The defendants have continued to be represented by the same solicitors and counsel. Each defence admitted the assignment of the defendants’ loan agreement by Rural to Equuscorp but went on to allege that Equuscorp took with notice that it had no further rights under the loan agreement. This reflected a plea by the defendants to the effect that Thornton (either for himself or as agent for the other defendants) had agreed with Rural’s agents that the loan agreements would not be enforced and that the true relationship between the parties in each case was governed by a separate “operative agreement”. It was alleged that as a consequence of the operative agreements the loans were “capped” and that any money owing had been paid. Equuscorp joined issue with these allegations and the process of discovery was embarked on in the various actions. On 10 December 1993 Glengallan Investments Pty Ltd (the defendant in action 1688) successfully applied for leave to withdraw its admission of Rural’s assignment to Equuscorp and the action was then struck out on the basis that Equuscorp had no standing to bring it. Leave to withdraw the admission was granted on the basis that Glengallan only became aware of circumstances putting the effectiveness of the assignment in issue as a consequence of further discovery in its action. There seems no occasion to doubt that a similar consideration would not apply to the other actions; indeed the parties seem to have assumed this to be so. On 19 May 1994 the Court of Appeal upheld Equuscorp’s appeal against the dismissal -- 5 of 17 -- 4 of its action and reinstated it. The reasons of Fitzgerald P. proceeded on the basis that there was “at least an equitable assignment by Rural to Equuscorp”, McPherson J.A’s reasons were on the basis that there was “at least an agreement to assign”. Derrington J. concluded that there was an effective statutory assignment. In his reasons McPherson J.A. referred to the desirability, if not need, for Equuscorp to be joined as a party to the action. I should mention at this stage that I do not think that there is any basis for concluding that McPherson J.A’s remarks in some way limited the basis of any subsequent application to join Rural as a party if it was otherwise appropriate to do so. By an order made on either 24 January or 17 February 1995 Rural, apparently with the consent of the receivers and managers who had by then been appointed, was joined as a plaintiff in action 1688. During 1995 there were applications about the pleadings in action 1688 and correspondence concerning discovery. Action 1688 was certified for speedy trial on Equuscorp’s application on 7 December 1995. In a letter dated 6 September 1995 the solicitors for the defendant wrote to the plaintiff’s solicitors referring to the successful application in action 1688 for leave to withdraw the admission of assignment. The letter went on to state that if the other actions followed a similar course (which seems to have been contemplated by both sides):– (a) each defendant would get leave to withdraw the admission of assignment by Rural to Equuscorp; (b) Equuscorp would obtain leave to join Rural as a plaintiff. In the course of a continuing, if intermittent, exchange of correspondence, the defendants’ solicitors wrote to the plaintiffs on 17 January 1996 contending that the appropriate course would be for each defendant to apply to withdraw their admission of the assignment by Rural to Equuscorp in each action, and for the plaintiff to apply to join Rural as co-plaintiff. The -- 6 of 17 -- 5 correspondence canvassed difficulties in procuring the transfer of the District Court action previously mentioned to this Court so as to permit them being disposed of with the actions instituted in this Court. This seems to have been regarded by all parties to be a desirable outcome. It should be noted that Equuscorp was given leave to proceed in the District Court actions on 28 February 1997. On 31 January 1997 Equuscorp issued summonses in each action in this Court seeking relief in a number of aspects. Applications dealing with amendments, particulars and discovery were disposed of. Applications concerning the transfer of the District Court actions, consolidation, joinder of Rural and associated directions were adjourned. On 27 May 1997 Equuscorp issued the summonses in the actions other than 1688 with which I am dealing and brought on the adjourned summons in action 1688 in so far as it founds an order to have that action heard together with the others. THE PLAINTIFF’S ALLEGATIONS OF ABANDONMENT OF THE ACTIONS Before dealing with the applications for leave to proceed and for joinder, I should deal with the defendants’ submission to the effect that the plaintiff’s conduct in issuing fresh writs constitutes an election or abandonment of the actions and raises “an equity in the defendants’ favour which can only be satisfied by curial enforcement”; The Commonwealth v. Verwayen1 was cited in support of the submission. What occurred is this. When the matters first came before me on 18 June 1997 counsel for Equuscorp raised, in the course of the hearing, the impending expiration of the limitation period. I stated to the effect that the parties should not rely on my delivering judgment prior to that occurring and that his client should take such steps as it saw fit 1 (1990) 170 CLR 390 at 482-5, 422 and 469 -- 7 of 17 -- 6 to protect its interests in that respect. On 25 June 1997 Equuscorp and Rural as co-plaintiffs issued fresh specially endorsed writs against each of the defendants in the existing actions in this Court other than 1688. The statements of claim endorsed on each of the writs was, in relevant respects, the same form as in the pre-existing actions. The writs were not served but the defendants, learning of them, entered appearances, delivered defences and counterclaims and took steps to obtain judgment in default of pleading to the counterclaims. By the time the matters came back on before me on 21 October 1997 in circumstances subsequently referred to judgment had been obtained in most of all of the actions. Argument before me on 18 June 1997 concluded on the basis that further written material would be lodged to deal with an issue which arose during argument. In the course of this process the submission that the fresh actions constituted abandonment and other issues began to emerge. Eventually I listed the summons on 21 October 1997 for further argument. The defendants cannot have been under any illusion that the institution of fresh proceedings was for any purpose other than to protect Equuscorp’s position in the event that its applications before me were unsuccessful and that the limitation period had expired. The defendants acted on any other basis at their own risk and Equuscorp is, in my view, free to pursue the summonses I am dealing with and the actions in which they have been issued. LEAVE TO PROCEED Determining whether the plaintiff would have leave to proceed under O.90 r.9 involves “an examination of all relevant matters to see if there is good reason for exempting (each action) from the general prohibition contained in the rules”; William Crosby and Co Pty Ltd v. The -- 8 of 17 -- 7 Commonwealth2 and Dempsey v. Dorber3. Although the exercise is to be undertaken in respect of each action the task is simplified by the many common features, some of the more salient of which were identified earlier. A chronology, (it is not exhaustive), is annexed to these reasons and can be referred to for a fuller appreciation of the progress of the actions. The crucial issue in the actions is whether the rights of the parties reflected in the loan agreements were varied by the operative agreements with the consequence that the defendants’ liabilities under the loan agreements were discharged by the time the actions were commenced. The resolution of this issue turns on the evaluation of the evidence of Thornton on the one hand and the representatives of Rural on the other of conversations which took place more than eight years ago. As a consequence of discovery an issue arose as to whether Rural’s rights under the loan agreements had been effectively assigned to Equuscorp. More recently again, apparently in the course of the protracted discovery, it seems that an issue has begun to emerge as to whether there was ever in fact a loan as is purportedly evidenced by the loan agreements. 2 (1963) 190 CLR 490 3 (1991) Qd.R. 418 (F.C.) Despite the apparent simplicity of these issues, the pleadings have progressed through a number of editions and requests for particulars without yet being finalised. There has been -- 9 of 17 -- 8 protracted discovery with a number of affidavits of discovery and tracts of forest has been destroyed in correspondence and for the material in support of the seven or more chamber applications (which no doubt played their part in delaying the progress of the actions as well as the appeal to the Court of Appeal referred to earlier). It cannot be said that either party is free of responsibility for what I regard as the unsatisfactory progress of these actions towards trial. Neither party advances a particularly satisfactory explanation for its role in the painful progress. The actions were commenced in October 1991. Up until mid 1993 they progressed in parallel at a relatively acceptable rate. The application to withdraw the admission of assignment was brought in the Glengallan action (1688) and determined on 10 December 1993. The consequent appeal was disposed of in May 1994. This provides an explanation for some of the delay. There was at tacit acceptance (if not agreement) that issues relating to the validity of Rural’s assignment to Equuscorp be determined in the Glengallan action and it was jointly contemplated (if not agreed) that the outcome in that action would determine the course of the others. The Glengallan action was certified for speedy trial on 7 December 1995 but bickering between the solicitors concerning discovery, pleadings, particulars and the like continued during 1996 as did, in a rather desolatory way, discussions about how the actions might be progressed. By February of that year, Rural had been joined as a co-plaintiff in the Glengallan action, on the basis that the receiver consented, effectively without opposition. The parties seem to have conducted the actions at a pace which suited them and it seems that it is only fairly recently that the defendants’ solicitors had been actively complaining about delay. No specific prejudice has been demonstrated, apart from that inherent in delay. Taking these considerations into account, it is in my view, appropriate to give the plaintiff leave to proceed in the actions. THE JOINDER OF RURAL The application anticipates the defendants’ withdrawal of their respective admissions of -- 10 of 17 -- 9 Rural’s assignment of the loan agreements to Equuscorp in the actions other than 1688. The applications are opposed on the basis that Rural’s joinder is not authorised by those who now control it. Compliance with the statutory requirements for the assignment of a chose in action has the consequence that the assignee can sue in his own name without the need to join the assignor. It will be recalled that one judge determined the appeal in action 1688 on this basis. The other two judges disposed of the appeal without it being necessary for them to determine that point but on the basis that there had been, in any event, an equitable assignment. The common law would not permit an action to be brought against the debtor in the assignor’s name. This prohibition was frequently dealt with by a power of attorney authorising the assignee to take proceedings in the name of or on behalf of the assignor and to retain the proceeds of the assigned agreement without the need to account to the assignor. The defendants submit that the powers of attorney relied on by the plaintiffs do not satisfy these requirements. The submissions are not without merit; that is, however, not necessarily the end of the matter. Where there was an equitable assignment of legal property equity intervened to support the assignment. It regarded the assignor as a necessary party to an action to enforce the interest assigned and permitted the assignee to sue in the assignor’s name or to join the assignor, subject to the assignor’s right to demand security for costs and to a stay until security was provided; see Norman v. Federal Commissioner of Taxation4 , Imbrae v. Griffin5, Durham Brothers v. Robertson6 . The consent of the assignor does not seem to have been an essential precondition 4 (1963) 109 CLR 9 5 (1888) 10 NSWLR 114 6 (1898) 1 QB 765 -- 11 of 17 -- 10 to joinder and it seems not to have been an answer to the action at law that the assignor had become bankrupt; Winch v. Keeley7. It is further submitted for the defendants that the proposed joinder and consequential amendments “are now irrelevant”. This is because by notice of 3 June 1997 received by the defendants on 25 June, Rural stated that it had sold:– “All of its rights of equity of redemption in the debt and under the loan contract . . with the intention that Equuscorp should be entitled to all the rights and remedies against you in connection with the debt in the loan contract. You should now make all future payments to Equuscorp”. 7 (1787) 1 TR 619 (99 ER 1284) Equuscorp has not so far pleaded that it relies on those transactions to sustain the current actions. It does not seem to me to be appropriate to determine in applications such as these whether the June 1997 transactions defeats (as distinct as from provide an alternative to) any rights Equuscorp may have obtained by way of the earlier assignments which it pleads. Those considerations are properly dealt with on the basis of pleadings in the context of an action. It is far from clear that the June 1997 transactions preclude relief founded on the assignment pleaded. Put shortly, in my view it is appropriate to allow Equuscorp to join the assignor (Rural) as a plaintiff. This does not preclude the receiver or liquidator (or whoever has the standing to do so) taking such steps as they might be advised to protect whatever interest they might have in the situation. ACTIONS 1688, 1689, 1690, 1691 AND 1692 HEARD TOGETHER There is much to be said in favour of the actions being heard together. The common -- 12 of 17 -- 11 features of the actions and of the evidence relating to the crucial consideration of whether the relationship between the parties is determined not by the loan agreements but by the operative agreements have been mentioned earlier. The major differences between actions seem to be the proof of different amounts of indebtedness but that would seem to be essentially a matter of calculation (I do not suggest that there might not be differences about the basis of calculation) and amenable to proof by affidavit. It is true that the actions are at different stages of preparation, the most advanced being 1688 which was certified on speedy trial as long ago as 7 December 1995. It would militate against an order that the actions be heard together if a defendant keen to have the actions in which he is a defendant directly or indirectly (as Thornton apparently is) unduly delayed. In the present circumstance however, there are strong features of commonality, neither side is free of blame for delay and neither has provided a satisfactory explanation for their role. There will, in any event, have to be amendments to the pleading with consequences for discovery and directions can be given which, if they are complied with, will allow the actions to be quickly brought in to alignment and to be tried without undue delays. I therefore propose to order that the actions be tried together. DIRECTIONS It is clear from what I have already said that there has been inordinant delay in the resolution of these actions whether by trial or otherwise. A crucial feature of the actions turns on the recollection of individuals of an oral transaction which occurred eight years ago. I did give consideration to revoking the certification of action 1688 for speedy trial but I think the better course is to give direction and to enforce compliance with them so that the actions are brought into alignment and disposed of together without further delay. There should be directions as to:– -- 13 of 17 -- 12 · The delivery of amended statements of claim. · Consequential amendments to the defences and counterclaims. · The delivery of amended replies to and answers. · Completion of discovery. · Any other matters the parties wish to raise to facilitate the speedy and effective resolution of the matter. · A time for the filing of certificates of readiness. There should be a tight timetable for the performance of the directions. · That the defendants certify the matters as being ready for trial by . SUMMARY I give leave to Equuscorp to join Rural and I direct that actions 1688, 1689, 1690, 1691 and 1692 be heard together. I will hear submissions as to directions and costs. The orders should provide for liberty to apply. -- 14 of 17 -- 13 APPENDIX CHRONOLOGY 30 June 1989 - loan agreements. June 1989 - negotiations founding alleged “operative agreement”. 7 January 1991 - alleged assignment Rural to Equus. 2 October 1991 - writs issued. 11 October 1991 - entry of conditional appearance. 9 December 1991 - entry of appearance. 5 February 1992 - defence and counterclaim. 13 March 1992 - reply and answer. 12 May 1992 - plaintiffs’ first affidavit of documents. 2 July 1992 - defendants’ first affidavit of documents. 6 October 1992 - amended defence and counterclaim. 9 October 1992 - plaintiff requests further and better particulars of the amended defence and counterclaim. 15 October 1992 - further and better particulars of amended defence and counterclaim. 22 October 1992 - amended reply and answers. 9 November 1992 - defendant requests further and better particulars of the plaintiff’s amended reply and answer. 18 December 1992 - (1688) defendant ordered to deliver further particulars. 24 December 1992 - further and better particulars of amended reply and answer. 7 January 1993 - plaintiffs’ supplementary affidavit of documents. 8 January 1993 - defendants deliver further and better particulars. 15 January 1993 - defendants’ supplementary affidavit of documents. -- 15 of 17 -- 14 May 1993 - inspection of discovered documents, including requesting and delivering copies of discovered documents. 10 December 1993 - (1688) order giving leave to withdraw admission of assignment by Rural to Equuscorp and action struck out on the basis Equus had no standing. 19 May 1994 - (1688) Court of Appeal upholds appeal and reinstates action. 16 November 1994 - alleged assignment (alternative to 7 January 1991) Rural to Equus. 7 December 1994 - (1688) Equus files application to join Rural. 21 February 1995 - defendant delivers amended defence and counterclaim (as a result of orders made on 7 December 1994). 24 January 1995 - plaintiffs’ joinder application heard. (5 May 1995 - last proceedings, particulars clarified). 7 August 1995 - plaintiffs give notice of intention to proceed. 8 August 1995 - plaintiffs’ summons seeking, amongst other things, leave to amend their reply and answer. 15 August 1995 - (1688) part of further amended defence struck out. 7 December 1995 - (1688) certified for speedy trial. 17 January 1996 - defendants’ solicitors indicate that they had instructions to proceed in each action in the matters agreed and set out in their letter of 6 September and the plaintiffs’ solicitors’ letter of 12 September. 24 January 1996/17 February 1996 - (1688) leave to join Rural and to amend defence and counterclaim. 31 January 1996 - (1688) second plaintiff’s affidavit of discovery. March 1996 - inspection of documents by all parties of documents so far discovered completed. -- 16 of 17 -- 15 1996 - bickering about discovery, pleadings and particulars, particularly in the Glengallan action into and during 1996. -- 17 of 17 --