Land Enviro Corp Pty Ltd (In Liq) v HTT Huntley Heritage Pty Ltd (No 2)

THE COURT: On 22 June 2015, the Registrar ordered that the appeal in proceedings 2012/156726 be dismissed. On 22 August 2017, for reasons then given, the Court ordered that, upon certain terms, the Registrar’s order be set aside. [1] The terms were that judgments against the appellant for costs be paid in full within 28 days. The Court also ordered that security for the Respondents’ costs of the appeal be provided by the appellant in the sum of $175,000, in such form and at such times as may be determined by the Registrar and that, if such security was not so provided, the appeal be dismissed with costs. In these reasons, terms are used as defined in the Court’s reasons of 22 August 2017 (the Earlier Reasons).

By notice of motion filed on 5 September 2017 (the Recall Application), the Company applied for an order pursuant to r 36.16 of the Uniform Civil Procedure Rules 2005 (UCPR) that the orders made on 22 August 2017 be recalled and be set aside to enable further oral hearing on the question of whether the Company should be required to give security for the costs of the appeal. The Recall Application was supported by written submissions by Mr Zdrilic on behalf of the Company. Following a direction given by the Registrar, written submissions were furnished on behalf of the Respondents and by the Company in reply. There has been no oral argument on the Recall Application.

In the Earlier Reasons, the Court indicated that, ordinarily, the question of reinstatement and the question of security for costs would require consideration of the prospects of success in the appeal. However, for the purposes of the argument, the Respondents conceded that the appeal is at least reasonably arguable. While it was asserted on behalf of the Company that the appeal had very strong prospects of success, the Respondents made no submissions on that topic. As indicated in the Earlier Reasons, the Court considered it immensely difficult to form any useful judgment as to the likely prospects of success of the appeal. In particular, the Court was of the view that it was not possible to conclude that the appeal had strong prospects of success. The matter was therefore decided on the basis of the concession made by the Respondents that the appeal is reasonably arguable.

Questions of delay on the part of the applicant for reinstatement and default in the payment of orders for costs were considered by the Court. The Court concluded that the delay should not be a bar to reinstatement. However, as indicated, payment of the judgments for costs was made a term of granting relief on the Reinstatement Application.

The Court also said in the Earlier Reasons that the considerations that led to the term of paying the outstanding costs also led inexorably to the conclusion that there should be security for the Respondents’ costs of the appeal if the appeal were to be reinstated. The basis for the present application to re-open the hearing of the Reinstatement Application is the contention that the Company was denied procedural fairness in so far as the Court did not have regard to all of the submissions advanced on its behalf concerning the merits of the appeal and its prospects of success.

The Respondents oppose the orders sought by the Company in the Recall Application on the ground that they lack utility. Thus, they say, further oral hearing of the Security Application could only have utility if the orders for security were extant. However, at this stage, both the appeal and the Security Application have been dismissed because the Company did not avail itself of the right given by the earlier orders to have the appeal reinstated by paying in full the judgments for costs and providing evidence of that fact to the satisfaction of the Registrar within 28 days of 22 August 2017. The failure to pay the costs judgments was a matter squarely in issue at the hearing of the Reinstatement Application. Extensive written submissions about that matter were made on behalf of both the Company and the Respondents.

It is clear that the Court had regard to all of the submissions made in relation to the question of the unsatisfied costs judgment when making the orders that it made on 22 August 2017. The non-compliance by the Company with the unsatisfied judgment was relied upon by the Respondents in opposing the Reinstatement Application and arose in the context of the Reinstatement Application and not in the context of the Security Application. The Respondents contend that the two are not linked, although the Company contends that they are.

The parties made detailed submissions on the question of whether, as an element in the exercise of discretion, there should be a term that the Company pay the unsatisfied judgments. The Court concluded that such a term should be imposed and, as noted above, it was imposed. That is to say, it was a term of the order setting aside the dismissal of the appeal by the Registrar that the unsatisfied costs judgments be paid. That term has not been satisfied. Therefore, the appeal stands dismissed. The respondents contend that there is therefore no utility for the Court to receive further submissions in relation to the Security Application, which would be of consequence only if the appeal were on foot. It is not.

However, the Company asserts that the strength of its prospects in the appeal is also a relevant consideration in determining the extent to which the failure to meet the costs judgments bears on the exercise of discretion to order security for costs. It is therefore desirable to consider the submissions now advanced on behalf of the Company.

The Company now says that it wishes the Court to be led through the main points in all of the submissions made by it as to the merits of the appeal to enable the Court to form a judgment about its prospects. The Company asserts that the fact that the Respondents made no submissions on the prospects “should work against them” and that the Court should accept the Company’s submissions that the appeal “will almost certainly succeed”.

In its submissions in support of the Recall Application, the Company expresses concern that the “strong prospects” of the appeal and the conduct of the Respondents were not considered by the Court and that, if they had been considered, there would have been a different outcome in relation to the term of reinstatement requiring the judgment debts to be paid. The Company asserts that the written submissions now made on its behalf, although made by way of summary, show why the Company would almost certainly succeed and that the success of the appeal is “much more than reasonably arguable”.

The Company relies on the principle that the Court ought not to order security for costs of an appeal where the appeal is “more than reasonably arguable” and asserts that the same principle should apply to the imposition of the term as to payment of the judgment debts and “any other obstacles to the appeal going ahead”. It asserts that more weight should be given to that principle when “the conduct of the Respondents” is considered. The Company asserts that the conduct of the Respondents led to error on the part of the primary judge and the impecuniosity of the Company.

The Company asserts that there is significant evidence “about the unchallenged fraudulent conduct by the [R]espondents and their previous advisers [sic]”. It is asserted that, by not admitting and advising the Court that the Company’s assertions are accurate, the Court continues to be misled. The Company asserts that the Respondents have not been held to account for their conduct but appear to have been “unjustly rewarded because of the non-consideration of all relevant matters”.

The Company’s written submissions assert that there were 17 false representations particularised in its third amended statement of claim. The present submissions deal with four of those representations; the second, third, fourth and seventeenth representations. The second, third and fourth representations, it is alleged, should be read together. The seventeenth representation is, presumably, to be considered independently.

The second, third and fourth representations are as follows:

The Company alleged that the second representation was made by Mr Renshall. In cross-examination, Mr Zdrilic said that he could pinpoint that the representation was made on 28 February 2004. He said that he was able to pinpoint the date because the conversation occurred on the Saturday after he received a copy of a letter sent on 27 February 2004. Mr Zdrilic said that he remembered that fact at the time when he was preparing his affidavit but did not specify the date since that would have been inconsistent with an earlier affidavit he had sworn.

The primary judge considered that the difficulty with the evidence of Mr Zdrilic was that he had given evidence of the conversation with Mr Renshall following receipt of the letter of 27 February 2004 in which no reference was made to the alleged second representation. His Honour considered that the preparedness of Mr Zdrilic to pinpoint 28 February 2004 as the date of the conversation caused his Honour to approach the evidence about the matter with great care. In the absence of any note made by Mr Zdrilic about the alleged representation, and in the light of Mr Zdrilic’s plainly wrong assertions about being able to pinpoint when the conversation took place, his Honour was not satisfied that Mr Renshall said anything to Mr Zdrilic about a prospective funder that led Mr Zdrilic to have any particular state of satisfaction about the availability of such a funder. His Honour was not satisfied that, at that time, Mr Renshall said anything to Mr Zdrilic that conveyed that a funder with substantial resources would take control of the project or would inject substantial funds into the project. Further, his Honour held, if anything was said by Mr Renshall at that early stage about a funder, it could only have been at such a high state of generality that Mr Zdrilic could not reasonably have relied on it. There is no obvious error in that reasoning.

The alleged third representation was said to have arisen from the letter of 27 February 2004, which was sent by Mr Gillard (the then solicitor for HTT) to Mr Hilliard (the then solicitor for the Company). The letter from Mr Gillard said that his client was not in a position to negotiate a number of the concessions that Mr Hilliard’s client sought on the basis that it was restricted by the requirements of incoming financiers. Mr Gillard said that, in particular, his client could not concede a directorship of his client to Mr Zdrilic, security as set out in cl 3.7 of the draft heads of agreement that Mr Hilliard had prepared or the veto right as set out in cl 3.9 of the draft heads of agreement.

After referring to affidavit evidence as to the relevant matters, which was not challenged in cross-examination, the primary judge concluded that Mr Gillard’s letter reflected Mr Renshall’s instructions to him and correctly stated the “requirements of incoming finance” and was thus neither misleading nor deceptive nor in any other way properly the subject of complaint. His Honour also referred to the fact that, in any event, Mr Zdrilic did become a director as an alternative to Mr Renshall and attended board meetings concurrently with Mr Renshall. There is no obvious error in that reasoning.

The fourth representation is alleged to have arisen from an email sent by Mr Gillard to Mr Hilliard saying that it was unlikely that the new funder would accept Mr Zdrilic as a director. His Honour concluded, for the reasons outlined in relation to the third representation, that Mr Gillard’s statement reflected his instructions and was neither misleading nor deceptive. There is no obvious error in that reasoning.

The 17 representations were alleged to have been made during a settlement meeting of 27 August 2004. The purpose of the meeting was the completion of heads of agreement. The primary judge recorded that, according to Mr Zdrilic’s evidence, Mr Renshall made the representations orally, for the most part in one continuous monologue. Mr Zdrilic made no note of the alleged representations and Mr Renshall denied making the representations. Further, Mr Hilliard made no reference in his evidence to Mr Renshall having made representations of the kind alleged by Mr Zdrilic. In the circumstances, the primary judge was not satisfied that any of the representations alleged by Mr Zdrilic were made. There is no obvious error in that reasoning.

As indicated in the Earlier Reasons, the first and second grounds of appeal asserted that the primary judge erred in concluding that the plaintiffs were not induced to enter into the heads of agreement by the alleged representations. It is asserted that his Honour erred:

The third ground asserts that the primary judge erred by not finding that a particular representation was misleading or deceptive. Other grounds assert that the primary judge erred in allowing the defendants to rely upon affirmations as an answer to the claim to be entitled to rescind and in allowing the defendants to rely upon the impact of third party rights that were not pleaded.

As observed in the Earlier Reasons, no attempt was made in the submissions to direct attention to specific grounds of appeal stated in the amended notice of appeal. The further submissions assert that all but one of the 17 alleged false representations were:

The further submissions then assert that, prior to HTT’s “incoming JVP representations”, agreement had already been reached to settle and discontinue the 2001 Proceedings. The further submissions assert that “the terms provided Zdrilic with veto [sic] over HTT decisions”. The further submissions then assert:

The further submissions then deal with two so-called errors described as follows:

The Company ends its further written submissions by asserting that, for the reasons given, it would be a denial of justice for it not to be heard on all the relevant matters. It asserts that the submissions set out in the appendix show that the Court has significant justification in re-opening the case to make that possible. The further submissions reiterate that the Company seeks to be heard orally on the application in order “to inter alia stress that point”.

The further written submissions are accompanied by some 17 extracts from various documents including the pleadings, the reasons of the primary judge, the transcript of the hearing before his Honour, the transcript of a hearing before the Court of Appeal in 2013 and some of the documentary evidence. It is well-nigh impossible to discern any specific complaint about the reasons of the primary judge. It is certainly not possible to conclude that the Company has any real prospects of success in the appeal.

The jurisdiction to grant a re-hearing is to be exercised with great caution, having regard to the importance of the finality of litigation: interest reipublicae ut finis sit litium. The jurisdiction will generally not be exercised unless the applicant can show that by accident without fault on his part he has not been heard. The public interest in the finality of litigation will not preclude re-hearing an issue when there is good reason to suggest that the earlier judgment proceeded on a misapprehension as to the facts or the law. [2]

There must be some finality to the extensive litigation involving these parties. The Company has had ample opportunity to demonstrate that the appeal has strong prospects of success and there is no basis for any suggestion that the Earlier Reasons were based on a misunderstanding of the relevant facts or the applicable law. In all of the circumstances, the Recall Application should be dismissed with costs.