ReX v JiXXg (No 3) [2014] NSWCA 2XX (27 June 2014)

Court of Appeal

New South Wales

JUDGMENT

1. LEEMING JA: The question before me is whether I should grant leave to permit the 3rd applicant, Mr YX ChXXg JiXXg, to be separately represented, by solicitors and junior counsel, in pending proceedings in this Court. In order to answer that question, I need to say something about the nature of those proceedings, something about what is to happen to them in the future, and something about what has occurred in the past.

1. The applicants in this Court were defendants in proceedings at first instance determined by Black J on 29 June 2012: In the Matter of WaX ZX Property Development (Aust) Pty Ltd [2012] NSWSC 722; 90 ACSR 593. Orders were made on 19 July 2012. The nature of those proceedings is described in XX v WaX ZX Development (Aust) (in liq) [2014] FCA 461 at [8]- [21] and is unnecessary to repeat here. Amongst other orders, the first and second applicants Mr ReX and Ms XX were ordered to repay $2,364,995.70. The third applicant Mr JiXXg was ordered to repay $10,000, and was found to be a constructive trustee of one of the units (unit 16) developed by the parties at Baulkham Hills in Sydney. Black J's judgment was a summary judgment, and so an appeal lies only by way of leave. The application for leave to appeal filed 18 October 2012 is the first undetermined application in this Court.

1. A second application for leave had been brought from a subsequent interlocutory decision of his Honour. Quite recently, that application has been discontinued; I have been told that that was a consequence of the delivery of the judgment by the Federal Court after a trial lasting some 11 days to which I have referred. As much had been anticipated (if I may say so, constructively) by all parties earlier this year, and was the reason for my granting an adjournment by consent: ReX v JiXXg (No 2) [2014] NSWCA 119. The first of two unusual features of this litigation is that the judgment debt of some $2.3 million created by the orders has not been stayed, and indeed has been used to support bankruptcy notices served on Mr ReX and Ms XX. The principal purpose of the proceedings leading to a lengthy hearing in the Federal Court was to set aside those notices. Mr ReX's and Ms XX's application was dismissed on 12 May 2014. I have not been told whether an appeal has been brought.

1. In any event, what remains pending in this Court are three interlocutory applications: the applicants' application for leave to appeal from the first decision of Black J; the applicants' application for leave to proceed under s 471B of the Corporations Act 2001 (Cth); and a motion brought by the first and second respondents seeking to dismiss the applicants' motions summarily because of an alleged abuse of process. I call the latter the "abuse of process motion". Its purpose is to prevent a hearing on the merits of the applications brought by the applicants. It resembles a similar motion brought in the Federal Court proceedings when the first and second applicants sought to set aside the bankruptcy notices. Robertson J's reasons record at [25] that Ms HXXg JiXXg and Mr YoXXan XiX sought, by interim application filed on 6 September 2013, to stay the proceedings brought by Mr ReX and Ms XX because, inter alia, they were an abuse of process (paragraphs 4(b)). That application was not determined in advance of the substantive application to set aside the bankruptcy notice for reasons explained at [26]-[27], and in the event it was found unnecessary to deal with it at all: see at [34]-[39].

1. Perhaps surprisingly, given the delay and the fact that a series of applications including relating to security for costs was listed before Basten JA more than a year ago (see ReX v JiXXg [2013] NSWCA 194), the third respondent liquidator flags that he will, or may, seek security for his costs. I think it is appropriate to say at once, lest there by any doubt about it, that but for the recent application by the third applicant for separate representation, these applications would have been given a hearing date some weeks ago. All the parties are conscious of the need for applications for security for costs to be brought promptly. That said, I do not know to what extent this has been the subject of correspondence promptly after proceedings in this Court were commenced. In any event, there is no such application presently before me, and I do not regard the possibility of any such motion as relevant to the application which is before me.

1. It is the abuse of process motion which has given rise to a measure of complexity and dispute. It is complex because it is said on behalf of the first and second respondents that it will require reviewing an enormous amount of evidence. One example is an affidavit which has been served in support of it whose exhibit exceeds 1200 pages. Another is that it was this motion which gave rise to the threshold question determined by me in ReX v JiXXg [2014] NSWCA 1 as to whether the first and second respondents would be entitled to cross-examine one of the applicants' deponents at length and on his credit. At [7] and [10] of those reasons, I expressed some scepticism in relation to that motion. To that I would add the following. If leave to appeal be refused, then it is difficult to see any utility in the motion. Conversely, if the application otherwise be appropriate for a grant of leave to appeal, then it would seem inherently unlikely (I cannot readily bring to mind another instance) for a different course to be taken by reason of the Court determining to the requisite standard that there is an abuse of process. I would readily infer that similar considerations informed the way in which the substantially lengthier proceedings in the Federal Court were resolved.

1. The abuse of process motion has also given rise to a deal of disputation as to when it should be heard. That dispute has now been resolved, but it impacts upon the application presently before me, and I should explain how that came about.

1. The parties were agreed, ultimately, that the abuse of process motion should not be determined by a single judge, having regard to the right of review which exists under s 46(4) of the Supreme Court Act 1970(NSW). Prior to 10 June 2014, I advised the parties that my preliminary view was that all motions should be heard together, by a Court constituted by three judges. On 10 June 2014 I heard argument in respect of that preliminary view, and determined that that would occur, over the objection of the first and second respondents, who sought for their abuse of process motion to be heard and determined first. No party asked for reasons for that decision, but it would have been clear from the debate that that seemed to me to be the most efficient way to proceed, consistently with the parties', their lawyers' and my obligations under ss 56-59 of the Civil Procedure Act 2005 (NSW), especially when it is considered that an assessment of the strength of the application for leave to appeal is relevant (to say the least) to each of the other two pending motions. I indicated the dates I had available on that occasion, but agreed with the submissions that no date should be allocated until the question of the representation of the third applicant was resolved.

1. I now turn to the application which is presently before me. The third applicant was represented by the same solicitors and counsel as the other applicants, both at first instance and in proceedings in this Court for many months. During that time, Mr Ellicott of counsel appeared for all applicants, notwithstanding that there was a change of solicitor on the record. However, in around April or May 2014, new solicitors came onto the record, separately for the first, second and fourth applicants on the one hand, and the third applicant on the other hand. Each firm retained different counsel. Unless I have misremembered or misunderstood what Mr Ellicott told me last year, the present firms are the third and fourth solicitors who have appeared on the record for some of the applicants in proceedings seeking leave to appeal from the decision of the primary judge.

1. I have had the benefit of written submissions served in advance of a the hearing, and an oral hearing which lasted just under an hour. Regrettably, because an appeal already listed on the day took longer than I had anticipated, it was not possible to deliver reasons that afternoon. As I indicated on a previous occasion, it was and is important to resolve the question of representation as promptly as possible, because that is the only reason preventing the allocating a date for the hearing of all the parties' applications.

1. The parties were substantially agreed at the level of principle. It was common ground that it is possible, although highly unusual, for multiple appellants or applicants for leave to appeal in a single proceeding to appear through separate solicitors and counsel. It is common ground that leave is required to take that, relatively unusual, course. Given that commonality and the absence of argument, it is neither necessary nor desirable to say anything in any detail about the applicable principles.

1. Evidence of the third applicant's position was derived from his affidavit, much of which was admitted only as evidence of his statement of mind, but that is sufficient for present purposes. His position may be summarised as follows: he believes that his position is different from those of the other applicants, he has fallen out with former colleagues, he was not originally a party to the proceedings, his solicitor never filed a notice of appearance, he considers that says that he was not informed about the progress of the litigation and he does not wish to be represented by the same lawyers as the other applicants. In recording that position, I am not expressing a view one way or the other about the strength, or validity of those concerns. It is not seriously disputed that the third applicant's position is different from those of the other applicants. The amount he has been ordered to repay is much less than the amounts the first and second applicants have been ordered to repay, reflecting a significantly different case. He was not a party to the proceedings in the Federal Court, although he gave evidence.

1. The third applicant's counsel, Ms HoXXes, in substance contends that the points sought to be raised by her client are wholly subsumed by the existing grounds of appeal. She points to the forensic reality that her client will only serve evidence and make submissions to the extent that they are distinct from what is put forward by the other applicants. Although candidly acknowledging the line of authorities to the effect that there should be but one set of costs and the likelihood of that being the outcome in the event that all of the applicants obtain a favourable costs order, she proffers no undertaking in relation to costs which could provide a measure of comfort to the respondents (for example, her client does not undertake, as the price of separate representation, to bear his own costs whatever be the outcome), despite the invitation to do so the last time this proceeding was before me. She emphasises that it is important for parties to be able to choose their own lawyer, relying on what was said in Downs v Civil Aviation Authority (1992) 57 SASR 303 at 307. To that reference may be added the authorities collected by Whealy J in R v Khazaal [2006] NSWSC 1353; 167 A Crim R 565 at [23]- [27], which included Pullin J's statement in Franklin River Olive Company Ltd v Charters Securities Pty Ltd [2004] WASC 88 at [25]- [26] that "It is undoubtedly a serious step to deprive a party of counsel or solicitors of that party's choice".

1. Mr SeXXon SC for the other applicants submitted that there is a more conventional approach. It is plain that had the third applicant formed the views which he now holds at an earlier stage, he would have obtained separate representation at first instance, in which event he would have been able individually to seek leave to appeal. It is commonplace in this Court for defendants who were separately represented at trial and who are disappointed at the outcome each to appeal, and in the usual course those appeals are heard concurrently. That course remains open to the third applicant. He can discontinue, and apply to seek leave to appeal out of time. Mr SeXXon also submits that there may be procedural difficulties in the course proposed by the third applicant.

1. Mr SmaXXXone for the first and second respondents also submits that the third applicant can discontinue and bear the costs consequences for which the rules provide. This was not explored in any detail at the hearing, although I indicated an initial view that if the consequence was an obligation to pay his clients' costs thrown away, then although it was a matter ultimately for assessment, there might be relatively little costs thrown away. Mr SmaXXXone made a number of other submissions in opposition to the application, including that the fact that a defence was filed on behalf of the third applicant has the result under the rules of deeming him to have entered an appearance: r 6.9(2) of the Uniform Civil Procedure Rules 2005 (NSW). On the view I take, it is not necessary otherwise to deal with his submissions.

1. The liquidator takes a neutral stance.

1. I am obliged to have regard to the "overriding purpose" in determining the application. I am not sure that the procedural complexities in the course proposed by the third applicant are as great as may be feared. However, I am also sceptical that there is any overwhelming difficulty with adopting the more conventional course which the other applicants, as well as the first and second respondents, invite the third applicant to take (namely, discontinuance and starting afresh), although the need to produce additional documents was the primary reason put by Ms HoXXes in reply for not acceding to the approach proposed by all other active parties.

1. I confess that I considered at the outset imposing a series of conditions as to costs, the content of evidence, submissions upon the third applicant as the price of separate representation, and attempting to formulate orders so as to minimise the prejudice of the respondents facing an application advanced by separate legal teams. On reflection, I think there is force in the submission made by all other active parties that this is a case where any unnecessary procedural complexity should be avoided. Once one grapples with the details of formulating a regime whose purpose is designed to minimise prejudice to the other parties (on issues such as evidence, submissions and costs), it is easy to see that disputes could arise as to its practical operation in circumstances not all of which are capable of being foreseen. Further the worst thing that could happen would be for procedural complexity to derail the hearing which I have determined will be allocated to these parties, whose application in this Court has, in my opinion, already been pending for too long. I consider that I should place particular weight to the statement by senior counsel for the other applicants, who is well-placed (indeed, better placed than I am) to assess the likely conduct of the hearing.

1. That said, I well appreciate the force of the proposition that a person should be permitted to have the legal representation of his or her choice. The difficulty faced by the third applicant is that for very many months, he has chosen to have particular representation, and now, at the time the matter is ready to be listed for hearing, he has changed his mind. That is not to be unduly critical of him, but it is a factor which I am required to bear in mind in determining the application.

1. I propose not to grant leave for the third applicant to be separately represented on the application for leave to appeal. I do so essentially for three reasons. The first is that I think it will cause complexity and prejudice (at least in terms of time and cost) to all other parties in a way that cannot fully be compensated for. The second is that there is no particularly compelling explanation before me for the timing of the change of stance by the third applicant. The third is that the third applicant can, even though I am against him on this application, retain the lawyers of his choice. The third applicant is, if he chooses to do so, free to discontinue the proceedings insofar as they have been brought by him, and commence a fresh application for leave. I am not persuaded that, in the scheme of this litigation, to do so, and to do so speedily, will be unduly burdensome. Any such application will be out of time, but to the extent that it does not go beyond the terms of the application which has been pending in this Court for many months, so far as I can see there is likely to be little by way of prejudice. I cannot see why his applications (for extension of time, leave to proceed and leave to appeal) could not be heard concurrently with the other applications. Moreover, in circumstances where the critical questions are the strength of the application for leave to appeal and whether or not the respondents discharge their burden of persuading the Court of an abuse of process, it seems unlikely that the fate of that application will turn on the requisite extension of time. If he chooses to adopt that course, then the application for an extension of time should be listed for hearing at the same time as all the other applications. As presently advised, I very much doubt that it would materially add to the length or complexity of that hearing.

1. The third applicant may, if he chooses and they are willing to have him, retain the other applicants' solicitors. (They may or may not be willing to have him on terms that are acceptable to them or him; I am unaware of the terms of the former retainer, but his evidence is that he has not paid them any fees at all.) He may alternatively keep his newly chosen lawyers by discontinuing and starting afresh. I see no reason why the essentially mechanical task of preparing a summons for leave, a draft notice of appeal, and the summary of argument supplemental to the documents to be prepared by the other applicants need be particularly burdensome. Certainly, I see no need to duplicate material which is otherwise before the Court, and to the extent that the rules would otherwise require that to occur (for example, by the white folder containing the judgment and orders), I indicate that I would be disposed to dispense with the application of those rules to the third applicant if he wishes to discontinue. To that end, I should confirm that in the unusual circumstances of these proceedings, and subject to any agreement of the parties as to a course they regard as more efficient, it should be for the applicants to prepare materials in support of their applications, and for the respondents to prepare materials in support of their abuse of process application.

1. I propose to stand this matter in the Registrar's list in some 3 weeks time, on Monday 21 July 2014. That time period provides ample opportunity for any party disappointed with my decision to seek, if he, she or it chooses, to have it reviewed. It also provides, in my view, ample opportunity for the third applicant to determine his position, and to file and serve a notice of discontinuance and a fresh originating process in his own name if that is his choice. On the occasion it is next before the Registrar, a date should be allocated, with an estimate of 1 day plus, and directions made so that all applications can be determined fairly and efficiently on that date. The parties have not been heard on this, but it may assist if I confirm my preliminary view that the allocation of a date should not be impacted by the fact that the liquidator has made, or proposes to make, an application for security for costs. If and when such an application is made, it will be dealt with by me as part of the case management of these proceedings.

2. Accordingly, the orders which I make are that the application for the third applicant to be represented separately from the other applicants is dismissed, with costs. I stand over the proceedings to the Registrar's list on Monday 21 July 2014.