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Cite as: September 2015 89 (9) LIJ, p.59

Summary judgment application where defendant relies on a counterclaim
De Saram & Anor v Brown & Anor [2015] VSCA 142 (unreported, 10 June 2015, No S APCI 2014 0083, Ashley and Tate JJA and Digby AJA).

This appeal against a judgment of a judge of the County Court raises questions which often occur on an application for summary judgment.

The principal judgment was given by Digby AJA.

At issue on the appeal was whether the judge at first instance, on the materials before him, had erred in giving judgment against the defendant de Saram and in striking out a counterclaim filed by de Saram and a company, Rhodium Australia Pty Ltd (Rhodium) (the appellants in the appeal) against the plaintiff, Brown, and Margaret Cunniffe (the respondents to the appeal).

The plaintiff alleged that de Saram had borrowed $200,000 from him, to be repaid with interest and associated fees, and had signed a promissory note in his favour as evidence of that indebtedness. Four loan payment instalments had been made. De Saram denied a loan and said that the payment of the $200,000 was part of a broader commercial transaction sworn to be as follows:

“Initially the funds were given to me to use towards the acquisition of a property at 127-129B Brisbane Street, Berwick, but that purchase did not proceed. In about June 2012 we discussed the funds and we agreed that it will be kept by me as a performance bond (being a pre-payment as surety for deliverables to be undertaken and provided) and to cover their liabilities (incurred prior to that date and later liabilities). The deliverables (to provide direct or in management services to myself and related entities in the conduct of business and investments) that the performance bond sustained were undertakings by the plaintiff and second defendant by counterclaim to carry out work obligations to me and the second plaintiff by counterclaim and we were to share in the profits generated from successfully carrying out those obligations.” (at [13])

De Saram’s affidavit also deposed to losses said to have been sustained by him as a result of the plaintiff and Cunniffe failing to carry out their work obligations. De Saram also sought to set off rental payments said to be owing in relation to the Berwick property.

In earlier interlocutory proceedings, several orders were made by consent.

On 19 May 2014, the respondents to the appeal made application pursuant to ss61 and 63 of the Civil Procedure Act 2010 (CP Act) for judgment and an order that the appellants’ counterclaim be struck out. On 1 July 2014, relevantly, judgment was given in favour of the plaintiff for $201,000, together with damages by way of interest of $94,795. It was ordered that the counterclaim be struck out and that de Saram pay the plaintiff’s costs including reserved costs.

Digby AJA set out the relevant principles at [42]:

“The appellant also submitted that the principles applicable to the disposal of an application for summary dismissal are, in essence:

(a) A court should be slow to dismiss a proceeding depriving a party of opportunity to present its case at trial.

(b) In order to dismiss summarily an action at a preliminary stage, it must be very clear indeed that the action is absolutely hopeless or so clearly untenable that it cannot succeed.

(c) Analogously, the inherent jurisdiction of the court to dismiss an action was a jurisdiction which ought to be very sparingly exercised and only in very exceptional cases.

(d) In relation to the underlying rationale for s63 of the CP Act, the authorities make it clear that an inquiry as to whether a case has ‘no real prospects of success’ involves considerations extending beyond an analysis of the sufficiency of the statement of claim to plead a cause of action.

(e) The power under s63 is not one to be exercised by reference only to the sufficiency of the pleading. The Appellant submits that ‘even if the court had doubts as to the prospect of success of a defendant’s claims’ assessed by reference to s63 of the CP Act, the proper course would be to exercise the discretion under s64 and to require a full trial of the claims’.

(f) Although as noted in (b) above the appellant at one point referred to the statement of an earlier and somewhat different test the appellant accepted that the present test for summary judgment under s63 of the CP Act is as stated in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd, which test was approved in Feldman v Frontlink Pty Ltd.

(g) Section 64 affirms the Court’s broad discretion regarding whether or not to order summary dismissal of a claim.

(h) A judge is required to conduct judicial proceedings in accordance with natural justice. The content of the requirement of fairness will depend upon the circumstances and may be affected by what is said and done during the proceedings. The focus is upon the consequences of any departure from proper procedures because what is ultimately in issue is whether unfairness has resulted from the process, not whether an expectation has been disappointed.

(i) Where the judgment and orders are the product of a process infected by serious procedural unfairness, the orders must be set aside.

(j) When considering an appeal against a discretionary decision, appellate intervention with respect to the challenged decision may be warranted in accordance with the principles stated in House v The King”.

His Honour noted that the Court of Appeal in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA [24] had expressed the test for summary relief under s63 as follows:

“(a) whether the respondent to the application for summary judgment has a ‘real’ as opposed to a ‘fanciful’ chance of success;

(b) the ‘real chance of success’ test is to some degree a more liberal test than the ‘hopeless’ or ‘bound to fail’ test and permits of the possibility that there may be cases, yet to be identified, in which it appears that, although the respondent’s case is not ‘hopeless’ or ‘bound to fail’, it does not have a real prospect of succeeding;

(c) the test as to whether a claim, defence or counterclaim, or part thereof, has no real prospect of success, is to be applied by reference to its own language and without paraphrase or comparison with the ‘hopeless’ or ‘bound to fail test’ referred to in earlier cases; and

(d) the power to terminate a proceeding summarily should be exercised with caution and should not be exercised unless it is clear that there is no real question to be tried” (at [44]).

In relation to the claim for summary judgment, Digby AJA noted that a credible claim had been properly verified (at [88]). The affidavit material relied upon by de Saram to defend the claim “is lacking in detail and particularisation and is vague and unpersuasive” (at [91]).

His Honour added:

“. . . it is also inherently implausible that Brown would advance $200,000 to de Saram, and have de Saram acknowledge that debt by the Promissory Note which, inter alia, provided for interest penalties for late payment, if the true arrangement was one under which de Saram was to retain the $200,000 to secure the performance of services by Brown and Cunniffe” (at [92]).

In relation to the counterclaim, however, his Honour noted at [133] that none of the affidavits filed sought to address the matters of counterclaim. There was also reliance by the respondents to the counterclaim on the failure by the appellants to comply with court orders. To the extent that the trial judge’s decision to strike out the counterclaim was based upon the failure of the counterclaimants to comply with earlier orders, the strike out order was not justified. The striking out of the counterclaim was not justified “either on the basis of there being no reasonable prospect of the counterclaims success or because of non-compliance with Court orders” (at [151]).

It was noted that, even if the Court has doubts as to the prospects of success of the claims, there should be a full trial of the claims. Reference was made to the judgment of Croft J in JBS Southern Aust v Westcity Group Holdings [2011] VSC 476 [66] and to that of Redlich JA and Judd AJA in Manderson M & F Consulting (A Firm) v Incitec Pivot Ltd (2011) 35 VR 98 at 108-9.

The order striking out the counterclaim should be set aside but there should be orders made for the expedition of the trial of the counterclaim.

Professor Greg Reinhardt is executive director of the Australasian Institute of Judicial Administration and a member of the Faculty of Law at Monash University, ph 9600 1311, email Gregory.Reinhardt@monash.edu. The numbers in square brackets in the text refer to the paragraph numbers in the judgment. The full version of this judgment can be found at www.austlii.edu.au.

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