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Fudo Ninjas Pty Ltd v HSW Nominees Pty Ltd QSC 351
SUPREME COURT OF QUEENSLAND
Fudo Ninjas Pty Ltd v HSW Nominees Pty Ltd  QSC 351
FUDO NINJAS PTY LTD
ACN 620 750 245
vHSW NOMINEES PTY LTD
ACN 166 209 874
BS No 4808 of 2021
Supreme Court of Queensland
DELIVERED EX TEMPORE ON:
2 December 2021
2 December 2021
The orders of the Court are that:
PROCEDURE – STATE AND TERRITORY COURTS: JURISDICTION, POWERS AND GENERALLY – INHERENT AND GENERAL STATUTORY POWERS – TO PREVENT ABUSE OF PROCESS – ATTEMPTS TO RELITIGATE – where the plaintiff commenced proceedings against the defendant, in November 23019, in separate proceedings in the Magistrates Court by way of a third party notice – where the plaintiff defended that claim in the Magistrates Court but also brought a third party notice against the defendant in respect of alleged wrongful termination of the contract between the plaintiff and the defendant – where the defendant defended the third party proceeding and also brought a counter-claim – where the defendant brought an application seeking orders against the plaintiff that pursuant to rule 16(g) of the Uniform Civil Procedure Rules 1991 (Qld) (UCPR), or the inherent jurisdiction of the Court, the proceedings be permanently stayed – where the defendant contends that the plaintiff’s proceedings in the Supreme Court are an unjustifiable oppression to the defendant, tat the use of the Court’s procedures serves to bring the administration of justice into disrepute and that the plaintiff should be estopped from claiming the relief sought in the proceedings – where the defendant alternatively seeks that pursuant to rule 670(1) UCPR or section 1335(1) Corporations Act 2001 (Cth) the plaintiff provide security within 28 days – whether an order should be made permanently staying the proceedings or alternatively, whether an order for security for costs should be made
Corporations Act 2001 (Cth), s 1335(1)
Uniform Civil Procedure Rules 1999 (Qld), r 5, r 16, 670(1)
Tyne v UBS AG (No 2) (2017) 250 FCR 341, cited
UBS AG v Tyne (2018) 265 CLR 77;  HCA 45, cited
Van Amstel v Country Roads Board  VR 780, cited
N H Ferrett, and J P Morris, for the plaintiff
M S Henry SC, and N J Derrington, for the defendant
JHK Legal for the defendant
Arnold Bloch Leibler for the plaintiff
- This is an application by the defendant HSW Nominees Pty Ltd. The application seeks orders against the plaintiff, Fudo Ninjas Pty Ltd that pursuant to rule 16(g) of the Uniform Civil Procedure Rules 1991 (Qld) (UCPR), or the inherent jurisdiction of the Court, the proceedings be permanently stayed. Alternatively, that pursuant to rule 670(1) of the UCPR, or s 1335(1) of the Corporations Act 2001 (Cth), the plaintiff provide security within 28 days. Submissions have been made before the Court in relation to both aspects of the application. Logically, it is necessary or appropriate for me to consider the application in respect of the permanent stay at the outset.
- The application for a permanent stay is brought on the basis that the plaintiff’s proceedings in the Supreme Court are an unjustifiable oppression to the defendant, that the use of the Court’s procedures serves to bring the administration of justice into disrepute, and thirdly, that the plaintiff should be estopped from claiming the relief sought in these proceedings by an Anshun estoppel. Leaving aside the issue of the Anshun estoppel, I will use the abbreviation of “an abuse of process” in relation to the first two bases for the application.
- The factual background to the proceedings is of significance. On 29 November 2019, Fudo Ninjas Pty Ltd (Fudo Ninjas), the plaintiff, commenced proceedings against HSW Nominees Pty Ltd (HSW), the defendant, in separate proceedings in the Magistrates Court by way of a Third Party Notice. In those proceedings, Hammer Brothers Pty Ltd brought proceedings against Fudo Ninjas in relation to fit-out costs in respect of the establishment of a proposed restaurant at Howard Smith Wharves in Brisbane.
- Fudo Ninjas defended that claim in the Magistrates Court, but also brought a Third Party Notice, in effect, separate proceedings against HSW in respect of alleged wrongful termination of the contract between Fudo Ninjas and HSW. HSW defended that third party proceeding and also brought a counter-claim.
- What was clearly in issue on the Third Party Notice and between Fudo Ninjas and HSW Nominees was an alleged agreement for lease dated 5 December 2017, the alleged unlawful termination and repudiation of the agreement for lease, the acceptance by Fudo Ninjas of the unlawful termination, and the consequent termination by Fudo Ninjas of the agreement for lease. In the Magistrates Court proceedings, damages for breach of contract were claimed in the sum of $111,314.92, or a sum equivalent to any amounts awarded against the first defendant in favour of the plaintiff.
- The proceedings in the Magistrates Court proceeded, including requests for further and better particulars of the proceedings between Fudo Ninjas and HSW Nominees. Those particulars were provided. As indicated previously, there was a defence and counter-claim. The defence to the proceedings included a pleading that HSW Nominees considered that Fudo Ninjas was not entitled to damages in the amount it claimed or in any other amount.
- In the counter-claim, HSW sought recovery of an amount of a $240,000 contribution which was made to Fudo Ninjas under the agreement for lease in respect of the fit-out of the proposed lease premises. The Magistrates Court proceedings also saw an amended statement of claim filed, and further particulars in respect of the counter-claim filed.
- There was also, in about April 2020, a reply by Fudo Ninjas to the defence and counter-claim. This raised an issue in respect of the $240,000 that had been claimed for contribution to the fit-out and it was alleged that this was not recoverable under the agreement for lease or by way of restitution, and in any event, was subject to a set-off in the amount of $33,916.66 on account of rent prepaid by a third person on behalf of Fudo Ninjas. Further, there was a reply filed by HSW, which included a notice that it disputed the allegations as to non-recoverability of the $240,000 fit-out contribution, and the availability of any set-off in respect of the $33,916 amount.
- At some point in or about late 2020, the primary Magistrates Court proceedings between Hammer Brothers and Fudo Ninjas was settled. Subsequent to that, negotiations pursued between Fudo Ninjas and HSW in relation to a settlement of the third party proceedings, being both the Third Party Notice and the counter-claim. On or about 23 December 2020, the proceedings were settled on the basis that HSW agreed to pay Fudo Ninjas $7,500 in full and final satisfaction. The precise terms of that agreement I will refer to further later. A notice of discontinuance was filed and there was no order as to costs.
- On 5 January 2021, the amount of the settlement was paid and on 13 January 2021, the notice of discontinuance was filed. On 29 April 2021, the Supreme Court proceedings the subject of this application were commenced. The Supreme Court statement of claim reiterates the same factual basis for the breach of contract claim as was set out in the Magistrates Court Third Party Notice.
- The difference in the Supreme Court claim is the quantification of damages. As previously indicated, the damages claimed in the Magistrates Court was an amount of $111,314.92, or alternatively, a sum equivalent to any amounts awarded against the first defendant in favour of the plaintiff. In these proceedings, the very general quantification is that the damages are expected to be not less than $16 million.
- The application for a permanent stay proceeds on the basis that these proceedings have previously been litigated, and the same factual circumstances and the basis of the same claim is reflected in the Supreme Court proceedings as was in the original Magistrates Court proceedings. A consideration of the current pleadings in the Supreme Court highlights some aspects of this.
- The plaintiff’s statement of claim sets out the contractual terms and the alleged wrongful termination. It includes a pleading in relation to a letter dated 21 February 2021, where it is alleged that there was a wrongful termination and the defendant was advised that the plaintiff accepted the repudiation of the agreement and elected to terminate the agreement.
- That letter also stated and is pleaded at paragraph 31 of the statement of claim that the plaintiff put the defendant on notice that the plaintiff intended to claim damages. I consider that is relevant, as the Magistrates Court proceedings were commenced following that, and it was foreseeable that damages would be claimed following the dispute that had risen about the termination of the contract.
- In the amended defence in the Supreme Court proceedings, the defendant pleads some issues that also are reflective of the proceedings in the Magistrates Court. The contractual pleading in many respects is similar to the position taken below. But there is also the issue pleaded at paragraph 41(c) in respect of the amount the defendant paid to the plaintiff, $264,000 as a contribution towards the costs of the plaintiff’s fit-out works. It also pleads at subparagraph (d) the contract that was entered into between the plaintiff and Hammer Brothers in respect of the fit-out works, and there is an allegation in respect of the plaintiff not being ready and willing to perform the agreement.
- The defendant also pleads the third party claim from the Magistrates Court, and specifically pleads the terms of the settlement agreement. The specific term of the settlement agreement, which is pleaded in the defence, at section 43(e), is that the defendant would pay the plaintiff the sum of $7,500 by 7 January 2021, and payment of the settlement sum would be in full and final satisfaction of the third party claim by the plaintiff against the defendant and the defendant’s counter-claim against the plaintiff in the proceeding.
- The defendant also pleads that the amount was paid, and that the settlement constituted an accord and satisfaction by which the plaintiff accepted the settlement sum in full and final satisfaction of its claim for damages caused by the defendant’s alleged wrongful termination of the agreement on 7 February 2019, and the plaintiff’s termination of the agreement in reliance thereon.
- In the reply to the amended defence of the defendant, the plaintiff admits subparagraphs 41(a), (c) and (d). As previously indicated, paragraph 41(c) raises the issue of the contribution towards the costs of the plaintiff fit-out works in the amount of $264,000. This appears to be the same sum that was subject to the counter-claim in the Magistrates Court.
- Further, the plaintiff then pleads in response to the defendant’s pleading in respect of the settlement, that it denies the conclusion pleaded in subparagraph (h), because (a) the claim the subject of the settlement agreement was for damages for a particular breach of contract by the defendant; and (b) properly construed, the settlement agreement operated only to compromise the plaintiff’s claim in respect of that particular breach.
- Further, at paragraph 16(c), the plaintiff pleads that it denies the conclusion pleaded in subparagraph (i), because (a) as the defendant pleads the third party claim was brought in the Magistrates Court proceeding already brought against the plaintiff by Hammer Brothers Pty Ltd; (b) the Magistrates Court limited monetary jurisdiction precluded the claim in this proceeding being pursued in that proceeding; and (c) those things being so, the Magistrates Court proceeding was not a convenient occasion on which to pursue the claim now pursued in this proceeding.
- The pleading in the Supreme Court highlights the difficulties which arise when, in effect, similar or same proceedings are commenced in relation to the same subject matter. As I have highlighted, there is some overlap between the matters which, even on the plaintiff’s own case, would be subject to the compromise in respect of part of the claim arising out of the alleged breach of contract.
- On the plaintiff’s case, it is not entirely clear whether the defendant would be precluded from, in effect, setting off or claiming the amount of $264,000 in respect of the contribution towards the cost of the fit-out. This is the type of overlap between the two cases which causes practical difficulties in the attempt to carve out a settlement in respect of part of a breach of the same breach of contract. In this respect, the submissions on behalf of the applicant, HSW Nominees, refers me to cases in support of the proposition that it is not possible to, in effect, carve out different parts of a claim in this manner. In particular, I have been referred to the Supreme Court of Victoria decision of Justice O'Bryan in Van Amstel v Country Roads Board  VR 780. In that case, his Honour identified that case was an attempt to bring a separate action for different relief in respect of the one cause of action, and this offended the principle that he had identified that for one cause of action, you must recover all damages incidental to it by law, once and forever.
- It is clear that this Court has power to permanently stay proceedings on the basis of an abuse of process. The exercise of the discretion in respect of finding or granting a permanent stay requires the Court to make a broad and merits-based judgment which also considers the public and private interests involved, and also takes account of all of the facts of the case.
- It is also clear from the authorities, and in particular UBS AG v Tyne (2018) 265 CLR 77 that it is not possible to define with precision all categories of cases which would be covered by this principle. As recognised in the majority judgment of Kiefel, Bell and Keane JJ, that case concerned an appeal with the power to permanently stay proceedings as an abuse of process of the Court.
- It was noted that the varied circumstances in which the use of the court’s processes will amount to an abuse, notwithstanding that the use is consistent with the literal application of its rules, do not lend themselves to an exhaustive statement. Either of two conditions enlivens the power: where the use of the court’s procedures occasions unjustifiable oppression to a party, or where the use serves to bring its administration of justice into disrepute.
- The Court went on to state that the issue in that appeal was whether one or both of those conditions was met, in circumstances in which the factual merits of the underlying claim have not been determined, and any delay in prosecuting the claim has not made its fair trial impossible.
- The circumstances of the case before me are that a notice of discontinuance was filed in the Court below. It was not subject to a judgment or a final determination by the Court.
- Further, in the circumstances of this case, there has not been a delay in prosecuting the claim between the Magistrates Court proceedings and the proceedings in this Court, as it was a relatively short time between the two proceedings. So it could not be said that a fair trial was impossible in this Court. However, that is not the central issue to be determined. It really is a policy issue, in part, about the finality in litigation, and whether a party should be put to the ordeal of having to litigate the same proceeding twice.
- It is also relevant to consider rule 5 and the obligation in relation to dealing with the real issues in dispute in an expeditious manner. Rule 5 is part of the UCPR. It applied equally to the proceedings in the Magistrates Court as it does to the proceedings in the Supreme Court. Therefore, the consideration of the proceedings in the Magistrates Court also required the plaintiff to consider the real issues in dispute, and to deal with them in the most efficient way possible.
- As indicated previously, one of the factors which is of relevance is that the primary proceedings in the Magistrates Court were settled at a time prior to the settlement of the third-party proceedings and the counter claim. In submissions on behalf of the plaintiff, it was recognised that to in effect transfer the Magistrates Court proceedings to the Supreme Court when they had been commenced by Hammer Brothers would have meant that the plaintiff in the Magistrates Court proceedings would have been affected by that transfer.
- However, that argument only goes so far. At a point in time when the third-party notice was the proceeding that was on foot in the Magistrates Court, as far as the dispute that existed between Fudo Ninjas and HSW steps could have been taken to transfer those proceedings to the Supreme Court so that all live issues in dispute between the two parties were dealt with. That did not occur.
- What occurred was that the dispute between Fudo Ninjas and HSW was settled. That settlement dealt with damages that arose out of the alleged wrongful termination of the contract. It also included issues such as the amount claimed as contribution under the agreement for lease towards the fit-out costs. It also would appear to include the set-off in relation to an account of rent pre-paid by a third person on behalf of Fudo Ninjas.
- It is clear that those issues go beyond damages which just address the liability to Hammer Brothers. As previously indicated, there was an indication in correspondence that Fudo Ninjas would bring a claim for damages arising out of a wrongful termination, as it alleged. It did so. It did so in the Magistrates Court.
- When the proceedings were settled in the Magistrates Court, there was no settlement agreement that was prepared. The agreement was contained in correspondence, and a contract was formed by way of the agreement set out in the exchange of correspondence.
- It is clear that there was no indication of any qualification or carve-out in respect of the discontinuance and [included] the statement that it was in full and final settlement. This is identified in UBS as being a relevant consideration. There was no indication that Fudo Ninjas proposed to further pursue any client for breach of contract in separate proceedings. As indicated in correspondence, it had been foreshadowed that a claim would be made. It was made, and it was settled.
- In relation to the Magistrates Court jurisdiction being a limited jurisdiction, it is submitted on behalf of HSW that does not assist Fudo Ninjas in the current situation. While it did choose to seek to sue for breach of contract in the Magistrates Court, there were avenues available to it to claim any larger amount of damages that was identified. As previously indicated, the authorities support the principle that a party cannot bring separate actions to recover different items of loss or damage for breach of the same clause in a contract, arising from the same act or omission.
- As indicated, the way that the proceedings as pleaded in the Supreme Court would proceed highlights the difficulties, as there are matters which are subject to the settlement which are now the subject of the pleadings, which if these proceedings continue would need to be dealt with. It in effect is re-agitating the same issue twice. But also, because of the way that the settlement was structured, there is little or no transparency over what was actually compromised, to the extent that whether the full amount of the set-off amounts was considered.
- It is also relevant to consider that the defendant in these proceedings, HSW in settling the proceedings in the Magistrates Court, may have taken a different approach if it was aware that Fudo Ninjas was intending to bring separate proceedings. While it is submitted that the tactical manoeuvring referred to in the majority decision in UBS is not apparent in the current case, it may be able to be argued that the discontinuance of proceedings in one court, and then within only a couple of months commencing proceedings on the same breach on exactly the same facts, matters and circumstances, but claiming substantially more money, in effect was tactical manoeuvring in some respect.
- Supreme Court proceedings take time to prepare, and thought would need to go into the nature of the claim in this Court, and in particular the nature of the claim in this Court is a loss of opportunity case, with a substantial amount of money being claimed. There was no notice of that given to HSW at the time that the settlement was entered into. If the offer to settle had been put on the basis that it was qualified, such that the notice of discontinuance was subject to Supreme Court proceedings or the like being commenced for the broader claim, the defendant may have taken steps to protect its interests that were different.
- To that extent, it may be seen that there was some sort of similar reliance to what was in the UBS case, where the party there was led to believe that the notice of discontinuance was, in effect, to their advantage.
- In circumstances where there had been a foreshadowed claim of damages, that claim of damages had been brought, and a settlement had been reached, it was reasonable to believe that was the end of the dispute between the parties, particularly in circumstances where the wording was “in full and final satisfaction of the third-party claim by Fudo Ninjas against HWS”, where that third-party claim was a claim for damages arising out of breach of contract, which is exactly the same breach of contract which is alleged in the Supreme Court proceedings.
- It is interesting to note the comments of Justice Dowsett at the Full Federal Court hearing in respect of Tyne v UBS AG (No 2) (2017) 250 FCR 341. Justice Dowsett was in dissent in the Full Federal Court, but his Honour does identify some factors which are relevant considerations. It is relevant that his Honour noted at :
“The focus in some of the cases upon the ‘right’ of a litigant to discontinue, and later commence fresh proceedings is inconsistent with modern views as to case management. The courts are now more inclined to infer prejudice to one party where conduct by the other has unnecessarily extended the time taken to resolve a dispute, or necessitated the duplication of process.”
- His Honour referred to section 37M of the Federal Court of Australia Act 1976 (Cth), which has similar effect to rule 5 of the UCPR. It requires that disputes be resolved as quickly, inexpensively and efficiently as possible. His Honour went on:
“To allow a party to discontinue, and then re-commence proceedings will not generally be conducive to the achievement of that goal. The older cases must be seen in light of that provision.”
- In respect of the decision of UBS AG v Tyne in the High Court, in the reasons of Kiefel CJ, Bell and Keane JJ, reference is made to serial proceedings discontinued prior to judgment would be an obvious example of an abuse of process. Their Honours continued:
“The pursuit of substantially the same claim by serial proceedings conducted by different entities under common control is no less obviously an abuse of process.”
- Their Honours concluded that, in effect, staged conduct of proceedings involved the duplication of court resources, delay, expense and vexation, and that also it was likely to give rise to the perception that the administration of justice was inefficient, careless of cost and profligate in its application of public moneys. It is this prejudice that the High Court recognised was the basis of the abuse of process.
- The Court also recognised that an abuse of process is no less an abuse because the party adversely affected might have a greater diligence in its own interests preventing the abuse.
- The prejudice suffered in this case is also real. As indicated previously, the defendant might have taken different steps had it been apparent that the plaintiff considered that the settlement operated only in respect of a particular breach of contract, as opposed to the breach of contract generally in respect of all damages that arose out of it.
- In these circumstances, I am satisfied that the commencement of Supreme Court proceedings is in substantially the same form and, in effect, covers the same subject matter in that it claims an amount which is damages for a different type of loss suffered for breach of the same clause in a contract arising from the same act or omission.
- Here, prejudice has been suffered and continues to be suffered by HSW Nominees, in effect, needing to defend the Supreme Court proceedings on the same basis as it defended them in the Magistrates Court. There is the additional potential prejudice that it may be precluded from running one of the set-off claims that it ran in the Magistrates Court as that claim may have been part of the compromise that was reached, even on the plaintiff’s case. In these circumstances, I am satisfied that there is a current abuse of process in the proceedings which have been brought in the Supreme Court on the basis that the proceedings occasion an unjustifiable oppression to the defendant, and the bringing of these proceedings serves to bring the administration of justice into disrepute. It is not necessary for me to determine conclusively whether there is also an estoppel of the claim based on Anshun.
- Being satisfied that there is an abuse of process, I am also satisfied that it is appropriate in the circumstances to order that the proceedings be permanently stayed pursuant to section 16(g) of the UCPR. In these circumstances, it is not necessary for me to go on to consider whether security of costs should be payable. I will hear the parties in respect of costs of the application.
- I will make a formal order that, pursuant to rule 16(g) of the UCPR, the proceedings be permanently stayed. I direct that the defendants file and serve any affidavit and submissions in respect of costs by Tuesday 7 December 2021 that the plaintiff file and serve any affidavit and submissions in respect of costs by Monday 13 December 2021.
- Published Case Name:
Fudo Ninjas Pty Ltd v HSW Nominees Pty Ltd
- Shortened Case Name:
Fudo Ninjas Pty Ltd v HSW Nominees Pty Ltd
 QSC 351
02 Dec 2021