Supreme Court New South Wales

• Medium Neutral Citation: Bank of Western Australia v Seventy Pty Ltd [2012] NSWSC 772
• Hearing dates: 27 June 2012
• Decision date: 11 July 2012
• Jurisdiction: Common Law
• Before: Schmidt J

Decision

The proceedings on the statement of claim against the fourth defendant and on the fourth defendant's cross-claims are stayed to the time at which the first, second or third defendants take steps in the proceedings to defend the claims brought against them by the plaintiff, or until further order.

• Catchwords: PROCEDURE - motion - order seeking stay of the cross-claim - order made
• Legislation Cited: Civil Procedure Act 2005; Uniform Civil Procedure Rules 2005
• Cases Cited: China and South Sea Bank Ltd v Tan Soon Gin [1990] 1 AC 536; St Pierre v South American Stores (Gath & Chaves Ltd [1936] 1 KB 382
• Category: Procedural and other rulings
• Parties: Bank of Western Australia Limited; ACN 050 494 454 (Plaintiff); Seventy Pty Limited (First Defendant); Gregory John Totten (Second Defendant); Anthony John Totten (Third Defendant); Ross John Furnari (Fourth Defendant)
• Representation: Counsel: Mr H Altan (Plaintiff); Mr T Brennan (Fourth Defendant); Solicitors: Gadens Lawyers (Plaintiff); unrepresented (Second Defendant); SBA Lawyers (Fourth Defendant)
• File Number(s): 2012/100144
• Publication restriction: None

Judgment

1 By motion filed on 8 May 2012, the fourth defendant Mr Furnari, sought orders as to the separate determination of a question as to the proper construction of the terms of a facility agreement between the parties and an order under s 58 of the Civil Procedure Act 2005, that the proceedings brought against him by the plaintiff and the cross-claim he had brought against the plaintiff Bank be stayed. At the hearing of the motion, the first order was not pressed and the motion was amended, to also seek the stay of the cross-claim which Mr Furnari had brought against the other defendants.

2 This course reflected other developments in the proceedings, which were commenced by a statement of claim filed by the plaintiff in which it seeks to recover some $629,807.58 outstanding under a loan which has fallen into arrears, repayment of which was guaranteed by the defendants on certain terms.

3 It appears that there is no issue that the loan was made to the first defendant, Seventy Pty Ltd and was guaranteed by the other defendants. In the case of the company, there was security provided in the form of a fixed and floating charge; in the case of the second and third defendants, Mr Gregory Totten and Mr Anthony Totten, security was provided by way of a mortgage over a property located at Bexley North. There was no security provided by Mr Furnari. He provided a guarantee at a time when he was involved with the other defendants in a business venture. His involvement in that venture came to an end some time ago and the defendants then entered into an agreement, under which they agreed with each other that Mr Furnari would be indemnified, in the event that the plaintiff acted in respect of the guarantee he had provided for the loan.

4 On 8 May 2012, Mr Furnari filed a defence to the plaintiff's claim. There he advanced a claim that the Bank had represented to him that in the event of any default by the company in respect of the loan, that the Bank would exhaust its remedies under the mortgage over the Bexley property, prior to requiring any payment by him under his guarantee. That claim was also advanced by way of the cross-claim which Mr Furnari brought against the Bank. By way of a second cross-claim brought against Mr Gregory Totten and Mr Anthony Totten, Mr Furnari sought orders of indemnity in his favour, relying on the indemnity agreement.

5 The other defendants have not filed any defence, either to the Bank's claim, or to the cross-claim pursued against them by Mr Furnari. Nor have they entered any appearance in the proceedings. The Bank has recently made an application for default judgment against the company and Mr Gregory and Mr Anthony Totten. That application has not yet been dealt with, but was the basis upon which Mr Furnari did not press an order as to separate determination of the construction question.

6 When the motion came on for hearing, Mr Gregory Totten appeared and without objection, relied on an affidavit he had sworn, to seek an adjournment of the hearing of the motion. That application was refused, in circumstances where Mr Gregory Totten had on some earlier occasions appeared before the Registrar and had been directed to provide the plaintiff with a copy of an application he said that he and his brother had made for Legal Aid, but that document had not been received by the plaintiff. Mr Gregory Totten and his brother had neither taken any steps to defend the claims brought against them, or to enter an appearance in the proceedings, as the Rules require. In these circumstances they were not entitled to take any steps in the proceedings (see Rule 6.1 of the Uniform Civil Procedure Rules 2005).

7 Mr Furnari accepted the plaintiff's right to pursue the guarantee he had given it, but pressed his stay application on what were explained to be essentially case management grounds, consistently with the provisions of s 56 and s 57 of the Civil Procedure Act, which provide:

"56 Overriding purpose

(cf SCR Part 1, rule 3)

(1) The overriding purpose of this Act and of rules of court, in their application to a civil dispute or civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the dispute or proceedings.

(2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule.

(3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court.

(3A) A party to a civil dispute or civil proceedings is under a duty to take reasonable steps to resolve or narrow the issues in dispute in accordance with the provisions of Part 2A (if any) that are applicable to the dispute or proceedings in a way that is consistent with the overriding purpose.

(4) Each of the following persons must not, by their conduct, cause a party to a civil dispute or civil proceedings to be put in breach of a duty identified in subsection (3) or (3A):

(a) any solicitor or barrister representing the party in the dispute or proceedings,

(b) any person with a relevant interest in the proceedings commenced by the party.

(5) The court may take into account any failure to comply with subsection (3), (3A) or (4) in exercising a discretion with respect to costs.

(6) For the purposes of this section, a person has a relevant interest in civil proceedings if the person:

(a) provides financial assistance or other assistance to any party to the proceedings, and

(b) exercises any direct or indirect control, or any influence, over the conduct of the proceedings or the conduct of a party in respect of the proceedings.

Note. Examples of persons who may have a relevant interest are insurers and persons who fund litigation.

(7) In this section:

party to a civil dispute means a person who is involved in the dispute.

57 Objects of case management

(1) For the purpose of furthering the overriding purpose referred to in section 56 (1), proceedings in any court are to be managed having regard to the following objects:

(a) the just determination of the proceedings,

(b) the efficient disposal of the business of the court,

(c) the efficient use of available judicial and administrative resources,

(d) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties.

(2) This Act and any rules of court are to be so construed and applied, and the practice and procedure of the courts are to be so regulated, as best to ensure the attainment of the objects referred to in subsection (1)."

8 In short, what was pressed was that given that the Bank had made an application for default judgment against the other defendants, who had taken no steps to defend the claims made against them, it would obtain judgment and an order for possession and be in a position then to sell the Bexley property. On the evidence it would be accepted that the proceeds of the sale were likely to satisfy what was owing to the Bank. In those circumstances, it would no longer have any need to pursue its case against Mr Furnari. That was a case of considerable complexity, which would require a significant amount of Court time to resolve; and would involve the parties in considerable costs and witnesses in considerable time. This would all be wasted, if these matters were to be litigated, ultimately for no purpose. This was likely to arise if the property was sold and the debt owing to the Bank thereby satisfied. That, it was submitted, had been conceded in the Bank's written submissions, where it was said that in the event that it obtained possession of the property, Mr Furnari would then be entitled to seek a stay of execution of any order made against him.

9 In those circumstances, it was argued to be just and consistent with the provisions of s 56 and s 57 to grant the stay sought. That would avoid unnecessary cost, expense and Court time involved in the resolution of the issues raised in the proceedings, so far as Mr Furnari's position was concerned.

10 The Bank opposed the stay sought, submitting that the application, pressed as it was on a case management basis, suffered from a number of fundamental difficulties. Firstly, it interfered with the Bank's fundamental right to pursue any of the guarantors, including Mr Furnari if it wished (see China and South Sea Bank Ltd v Tan Soon Gin [1990] 1 AC 536). Secondly, it presupposed that the Bank would obtain possession of the property and would be able to sell it for a price sufficient to satisfy what was owing under the loan. Thirdly, that in the event that the other defendants took steps to defend the claims it advanced against them, any stay of the case in respect of Mr Furnari was likely to result in a multiplicity of proceedings and resulting inefficiencies and cost, inconsistent with the requirements of the Civil Procedure Act. That this was a real risk was disclosed by Mr Gregory Totten's affidavit. Fourthly, the basis on which Mr Furnari pressed his application amounted, at its highest, to a mere balance of convenience. It was well settled that this is not a sufficient ground for the making of the order sought (see St Pierre v South American Stores (Gath & Chaves Ltd [1936] 1 KB 382 at 398). Fifthly, that any agreement as to indemnity between the defendants could have no effect on the Bank's pursuits of its rights against Mr Furnari. It followed that any stay, at this stage of the proceedings, was likely to result in a multiplicity of proceedings, in circumstances where it was possible that the matters which Mr Furnari relied on might, conceivably, provide a basis for him to make an application for a stay of execution of any judgment against him, under s 136 of the Act, pending the sale of the property, but would not be a sufficient basis to stay the Bank's pursuit of its rights against him.

11 Mr Gregory Totten, for his part, confirmed that he and his brother intended to take steps in the proceedings to defend the Bank's claims and to bring a cross-claim against Mr Furnari. They are waiting, he said, on a response to an application for legal aid made in April. By his affidavit he denied that he or his brother were ever made aware of what Mr Furnari claimed, that the Bank had represented that in the event of any default, it would seek to recover any amounts owing from them, in priority to recovering from Mr Furnari. Had they been made aware of such a term, they would not have entered into the transaction. The affidavit did not, however, deal with the indemnity agreement which he and his brother had reached with Mr Furnari, which he pursues against them by his cross-claim.

The stay should be granted on conditions

12 There is no question as to the Court's power to grant the stay sought, in accordance with the provisions of s 58 of the Act. In doing so it must act in accordance with the dictates of justice and in that respect s 58(2) provides:

"(2) For the purpose of determining what are the dictates of justice in a particular case, the court:

(a) must have regard to the provisions of sections 56 and 57, and

(b) may have regard to the following matters to the extent to which it considers them relevant:

(i) the degree of difficulty or complexity to which the issues in the proceedings give rise,

(ii) the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities,

(iii) the degree to which any lack of expedition in approaching the proceedings has arisen from circumstances beyond the control of the respective parties,

(iv) the degree to which the respective parties have fulfilled their duties under section 56 (3),

(v) the use that any party has made, or could have made, of any opportunity that has been available to the party in the course of the proceedings, whether under rules of court, the practice of the court or any direction of a procedural nature given in the proceedings,

(vi) the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction,

(vii) such other matters as the court considers relevant in the circumstances of the case."

13 On the material before the Court, it is clear that the loan is in default and that if Mr Gregory Totten and his brother do not take any steps to defend the Bank's claim, the Bank will obtain default judgment and an order for possession and will then be in a position to sell the property. There was no dispute that if the property is sold for a price sufficient to pay out what is owing, the Bank will not need to pursue Mr Furnari on his guarantee and he will not need to pursue the claims which he has advanced against the Bank and the other defendants by his cross-claims. On the evidence, given the terms of the guarantees, it would seem that the property is going to be sold at a price sufficient to repay there which is owed under the loan.

14 The position will be different if, as they have foreshadowed, Mr Gregory Totten and his brother become active parties in the proceedings and defend the Bank's claims. Despite what was put in his affidavit, an obvious explanation for their failure to defend the claims made against them to date, is that the loan has fallen into default and given the terms of their guarantees and the indemnity agreement which they reached with Mr Furnari, the reality is that they have no real basis upon which to resist the repayment of the loan out of the proceeds of the sale of the property.

15 Consistently with the requirements of the Rules and the Act, it cannot be assumed that the Totten brothers will become active parties in the proceedings. If they do not, it would appear that the Bank's pursuit of Mr Furnari will involve unnecessary cost, as well as an avoidable waste of judicial and administrative resources. The submission that Mr Furnari's application amounts to no more than an application on a balance of convenience basis, which must be refused, cannot be accepted. In St Pierre, Scott LJ said at 398:

"The true rule about a stay under s. 41, so far as relevant to this case, may I think be stated thus: (1.) A mere balance of convenience is not a sufficient ground for depriving a plaintiff of the advantages of prosecuting his action in an English Court if it is otherwise properly brought. The right of access to the King's Court must not be lightly refused. (2.) In order to justify a stay two conditions must be satisfied, one positive and the other negative: (a) the defendant must satisfy the Court that the continuance of the action would work an injustice because it would be oppressive or vexatious to him or would be an abuse of the process of the Court in some other way; and (b) the stay must not cause an injustice to the plaintiff. On both the burden of proof is on the defendant. These propositions are, I think, consistent with and supported by the following cases: McHenry v. Lewis (1); Peruvian Guano Co. v. Bockwoldt (2); Hyman v. Helm (3); Thornton v. Thornton (4); and Logan v. Bank of Scotland (No. 2). (5)"

16 There the claim in question was for rent due under a lease. There is no question that the Bank has the right to pursue Mr Furnari under his guarantee. What is pressed is for a stay of the Bank's pursuit of the guarantee Mr Furnari gave, for a period during which it is likely, as things presently stand, that the Bank will be able to recover what is owing to it under the loan from the sale of the property. That is what it is now actively pursuing. That, as matters presently stand, will not involve the Bank in any contested hearing. In so far as the application pressed in those circumstances raises questions as to the balance of convenience, they are matters which the Court is obliged to consider and weigh in the balance, when determining whether to exercise its discretion to grant a stay, given the obligations imposed upon it by the Civil Procedure Act. That is a situation which Scott LJ did not have to deal with in 1936.

17 That being so, it is clear, it seems to me that justice demands that a stay, on certain conditions should be granted, so that the application for default judgment against the other defendants and the ultimate sale of the property can be dealt with. That is not to deprive the Bank of the right to pursue Mr Furnari under the guarantee which he has given it, but rather to defer that pursuit for a time, to ensure that costs are not unnecessarily expended and court and administrative resources, not unnecessarily utilised in pursuit of an ultimately unnecessary application. That approach also has regard to the obligations imposed on the parties by s 56 of the Civil Procedure Act, which relevantly provides:

"(3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court.

(3A) A party to a civil dispute or civil proceedings is under a duty to take reasonable steps to resolve or narrow the issues in dispute in accordance with the provisions of Part 2A (if any) that are applicable to the dispute or proceedings in a way that is consistent with the overriding purpose."

18 It also has regard to what is provided in s 60 of the Act, as to the practice and procedures of the Court being 'implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute.' The order will avoid unnecessary hearings, in the event that the loan is prepaid out of the proceeds of the sale of the property.

19 The position will be different if the Totten brothers do take the steps Mr Gregory Totten foreshadowed in his affidavit. In that event, it seems to me that the Bank ought not to be further precluded from pursuing its case against Mr Furnari, at the same time as it pursues its claims against the other defendants. To adopt a different course would then be likely to result in a multiplicity of proceedings arising from the same factual matrix. That would be unnecessarily costly and involve an avoidable waste of judicial and administrative resources as well as unnecessary costs to witnesses, inconsistent with the requirements of the Civil Procedure Act.

20 In that event, all of the issues lying between the parties, arising as they clearly have out of the same factual matrix, ought to be heard and determined in the same proceedings.

Costs

21 The usual order as to costs is that they follow the event. I will hear the parties on costs if they wish. Unless the parties approach within 14 days, the Court's order will be that the Bank should bear Mr Furnari's costs of the motion, as agreed or assessed.

Orders

22 I make the following order:

The proceedings on the statement of claim against the fourth defendant and on the fourth defendant's cross-claims are stayed to the time at which the first, second or third defendants take steps in the proceedings to defend the claims brought against them by the plaintiff, or until further order.

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Decision last updated: 11 July 2012