RAYBOS AUSTRALIA PTY LTD v TECTRAN CORPORATION PTY LTD [1992] NSWCA 203

RAYBOS AUSTRALIA PTY LTD v TECTRAN CORPORATION PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

KIRBY P; PRIESTLEY JA and Hope AJA 9 August 1992, 24 November 1992 [1992] NSWCA 203

PRACTICE and PROCEDURE — order of hearing of related proceedings — complex litigation — primary judge (Rolfe J) orders trial of proceedings for breach of contract commenced in 1980 by T Co against R Co and R take place before proceedings commenced in 1985 by R Co and R against T Co and its solicitors for tortious abuse of process and conspiracy — judge orders 1980 proceedings to be heard also before 1986 proceedings brought by R Co and R against subsequent solicitors of TCO, DW — challenge to orders in Court of Appeal upon the grounds (a) of reasonable apprehension of bias on the part of Rolfe J; and (b) error in the exercise of the discretionary decision involved — held: (Priestley JA; Kirby P and Hope A-JA concurring): (1) No ground for apprehension of bias was established on the part of the primary judge; (2) The discretionary determination of the order of proceedings miscarried and was clearly wrong for various mistakes concerning the nature of the proceedings; the respective convenience of proceeding separately; the practical utility of proceeding first with the claim by T Co, it now having no assets; the respective strengths of the parties' several claims and the effectiveness of undertakings proposed by the judge to be secured as a means of preventing re-litigation of issues; (3) The errors were sufficient to authorise the Court of Appeal to set aside the discretionary orders made. In re the Will of F B Gilbert (1946) 46 SR (NSW) 318 (FC); Mace v Murray (1955) 92 CLR 370 applied; (4) But because of other procedural determinations yet to be made, the proceedings should be returned to the Division of the Supreme Court for re-determination of the order of proceedings in the light of the errors disclosed by the Court of Appeal.

JUDGES — bias — apprehension of — alleged apprehension based upon suggested reluctance of judge, when a barrister, to accept brief for party or by reason of suggested acquaintance with parties or their solicitors — held: (Priestley JA; Kirby P and Hope AJA concurring): The challenges were not made out, being based upon no material evidence and the evidence being incapable objectively of establishing apprehension of bias on the part of the judge.

ABUSE OF PROCESS — tortious claim of — ingredients of — institution of proceedings for a purpose, or to effect an object, beyond that which the legal process offered — whether such purpose and object sufficient although reasonable grounds otherwise existed — held: In the circumstances, as the claim made by R Co and R was that T's claim against them in contract was concocted, resolution of the contract issue in favour of T Co would, in the issues presented for trial effectively determine the claim for tortious abuse of process against R Co and R. Williams v Spautz (1992) 66 ALJR 585 (HC) and Speed Seal Ltd v Barrington [1985] 1 WLR 1327 (CA) considered.

Kirby P I agree with Priestley JA.

Priestley JA On 8 April this year Rolfe J published a 71 page opinion in whichhe reached the conclusion that he should dismiss a notice of motion filed by the first defendant, Raybos Australia Pty Ltd ("Raybos") and the second

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defendant, Lesjek Rajski ("Dr Rajski") in proceedings number 16938 of 1980 which had been commenced against them in the Commercial Division by Tectran Corporation Pty Ltd ("Tectran'"). These 1980 proceedings must be mentioned frequently in what follows and for brevity I will call them 1980P.

The precise order sought in the motion was that two other proceedings, number 14716 of 1985 (1985P) and number 15424 of 1986 (1986P), which were commenced in the Common Law Division, should be heard together with 1980P. (Rolfe J permitted the notice of motion to be amended to seek this order on 2 March 1992, the day the substantive hearing of the motion began.)

Rolfe J, after indicating on 8 April that he would dismiss the motion, stood over to a later date the question of what orders he should make. After hearing argument, the two principal orders he made, (on 21 May 1992), were that the motion be dismissed, and that 1980P be heard before 1985P and 1986P.

The defendants have submitted in this court that Rolfe J's orders were wrongly made, that they should be set aside, and that this court should order that the three proceedings be heard together. I note here that although the defendants' primary submission has at all times been that the three proceedings be heard together, there were occasional references in the hearing before Rolfe J to an alternative submission of the defendants that if all three proceedings were not to be heard together, then 1980P and 1985P should be heard together: see among other indications, what was said by Rolfe J at 110.1 and 127.1 of the transcript of 4 March 1992. His reasoning and conclusion were directed to both submissions. The arguments in support of the alternative submission seem to me to have been much stronger than those for the primary one. When I come to deal with the various arguments I will therefore direct myself to the question whether there was a miscarriage of discretion in holding that 1980P must be heard and decided before 1985P.

The history of 1980P, 1985P and 1986P is now a long one. Rolfe J's reasons are the latest place among a number where it has been summarised. I will not set it all out again. I have however accepted Rolfe J's recommendation (at 16 of his reasons of 8 April 1992) that any court having to review his decision should have regard to the whole transcript of what took place before him. In trying to understand this fully I have had also to read much of the material referred to in the transcript; I have also reconsidered the oral argument in this court, and the many written submissions that accompanied and followed that argument. Complaints came from both sides of the record that some of the written submissions were (i) not within the leave granted by the court for the filing of further written submissions and (ii) contained evidentiary material not before Rolfe J and not the subject of any formal application for its reception in this court. I have not formed any opinions about the merits of these complaints and counter complaints. The conclusion I have reached does not depend upon any of the detail in the final rounds of written submissions but on more general considerations, and, in view of my conclusion I see no utility in the making of rulings now on those matters of complaint.

Nor do I see any need to list or decide all of the matters now in issue on this appeal, in order to decide it. I will aim at keeping what I say to the minimum necessary to explain my reasons on those matters that must be decided for the purposes of the appeal. The main questions are whether Rolfe J's principal orders should be set aside, and if so, what course this court should take.

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As Rolfe J's principal orders were interlocutory, leave had to be sought to appeal against them. Amongst the grounds in respect of which the defendants sought leave to argue on appeal were two concerning disqualification. One alleged that Rolfe J was disqualified by reasonable apprehension of bias from hearing the defendants' motion; the other, that he was, following delivery of his reasons of 8 April, similarly disqualified from hearing argument about, or making, the second of the two principal orders he made on 21 May; this was said to be because his reasons of 8 April involved prejudgment of the appropriate order.

After hearing argument on the application for leave, the court came to the view that no ground for leave had been shown on the disqualification points, but that leave should be granted on the question whether the discretion exercised by Rolfe J in making the two principal orders had miscarried. Kirby P indicated that reasons would be given in due course for the conclusions reached on the disqualification questions.

My reasons for thinking leave should be refused on the disqualification issues were uncomplicated. As to the first, which claimed reasonable apprehension of bias because of the judge's previous knowledge of the case, and/or previously stated reluctance to deal with it when a barrister, and/or acquaintance with parties, I do not think there was any evidence, either before the court, or likely to be obtainable, upon which the court would be justified in giving the claimed apprehension further consideration. In my opinion no material evidence supporting the claim rose above the level of hearsay. Such first hand evidence as there was, or, on the material before the court, there might conceivably be, gave no foothold at all (in my opinion) for objective apprehension of bias.

As to the claim concerning the second of the two principal orders made by Rolfe a on 21 May 1992, I think that the reasons published on 4 April inevitably led to the making of that order. All substantial matters relevant to that order had been fully argued in the hearing which preceded the reasons of 4 April. The arguments put forward in support of this claim of reasonable apprehension seek by logical extension, to press the rules concerning disqualification for bias past the area of substance into a realm of pure form. I do not think even the most rigorous application of the rules, stated at their strongest, supports such an approach.

Tectran's claim in 1980P was that Raybos and Dr Rajski were in breach of an agreement made with Tectran on 15 February 1980. Tectran claimed damages. Raybos and Dr Rajski filed defences denying any breach. Raybos filed a cross-claim against Tectran and Arunta Investments Pty Ltd ("Arunta"). Arunta had guaranteed Tectran's obligations under the agreement. The cross-claim claimed damages for breach of contract and for breach of 8 duty of trust and confidence.

In 1981 Raybos and Dr Rajski sought a stay of 1980P on the ground inter alia that those proceedings were an abuse of the court's process. Yeldham J dismissed the application on 12 August 1982. Tectran then took no further step in 1980P.

In June 1984 Raybos and Dr Rajski filed an application for leave to join Dr Rajski as an additional cross-claimant and to amend the cross-claim. The application was heard by Miles J during thirty hearing days, from November 1984 to May 1985. He delivered judgment on 5 June 1985.

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The cross-claim in its proposed amended form was against Tectran, Arunta, individuals connected with those companies, a partner in a firm of solicitors who had advised them, a solicitor employed by that firm, and others. The causes of action alleged were tortious abuse of process, malicious prosecution (which has since been dropped) and conspiracy.

Miles J saw himself (at 10) as required to decide (a), whether Raybos and Dr Rajski had established whether they had an arguable case both in fact and law to go to trial on the proposed cross-claim; (he also stated this issue as being whether an appropriately arguable case on a tenable evidentiary basis had been shown); (b), whether the proposed amendments were permissible within the Rules of Court; and (c), whether as a matter of general discretion the amendments ought to be permitted.

Knowledge of the essential allegations of fact in the proposed cross-claim makes it easier to follow the reasons of both Miles J and Rolfe J. Miles J's summary of them is reproduced in a Schedule at the end of these reasons. If proved those facts would undoubtedly entitle Raybos and Dr Rajski to heavy damages.

In regard to issue (a) of his three questions, Miles J considered the position regarding each proposed cross defendant in turn. As against a number of them he found an arguable case. Although he used somewhat different terms in doing this in the different instances, I do not think he was intending to apply different tests. I give a few examples of the different terms he used. In regard to Mr Yerushalmy he said "An arguable case for abuse of process or conspiracy... has been made out" (at 46). As to Mr Cowper: "... the evidence as it stands is capable of a finding that he became part of a conspiracy to injure" (at 50). As to Tectran: it was "prima facie liable for the tortious conduct of Messrs Richardson, Yerushalmy, Brinsden and possibly Cowper". As to Mr Jones (the partner in the firm of solicitors earlier mentioned, Messrs Allen Allen and Hemsley): "... an arguable case had been made out... to the effect that he or his employee or both were party to a conspiracy to injure Raybos" (at 57).

Miles J made it clear he was not making any final findings of fact. No evidence was adduced before him on behalf of the proposed cross defendants. A good deal of evidence was before the court on behalf of Raybos and Dr Rajski, both in documentary form and by the reading of affidavits, on which there was considerable cross-examination. Miles J refused a request by the proposed cross defendants to adduce evidence at the end of the case (at 7). In no sense did he treat the proceedings before him as a trial. He said that "for the purpose of the application" he was accepting the evidence "at its face value unless reason to the contrary can be shown''; that at that stage he was "not concerned with the weight of the evidence"; but also that "Despite the extensive cross-examination of most of the deponents, I have no hesitation in saying that the ultimate tribunal of fact at a trial would be entitled to accept their evidence insofar as it supports the allegations..." (at 39). Later, he said that in the application he was taking the view on the evidence "most favourable" to Raybos and Dr Rajski; at a trial a completely different picture might emerge (at 65).

In regard to a number of proposed cross defendants Miles J found there was no evidence to implicate them in any of the allegations.

In regard to his question (b), (that is, whether the proposed amendments were permissible within the Rules of Court), Miles J said the rules would only permit what was proposed if there was a sufficient nexus between the issues as they stood at the time of the application and as they would be if the application were

UFRAYBOS AUSTRALIA PTY LTD v TECTRAN CORPORATION PTY LTD (Priestley JA) 5

granted; as things stood the dispute was between Raybos and Dr Rajski on one hand and Tectran and Arunta on the other, and was of a commercial nature essentially confined to an interpretation of the written contract of 15 February 1980 and the events surrounding its making and alleged discharge. He was of the view that the further allegations in the proposed cross-claim raised entirely different issues only marginally of a commercial nature. He did not think it could be said that the real questions raised by or otherwise depending on the existing proceedings needed to be determined by reference to the matters raised in the proposed cross-claim. That did not decide the matter however; to decide whether an amendment should be made under Pt20 R1 in order to avoid "multiplicity of proceedings" other matters had to be considered. These would involve discretionary considerations. He therefore moved on to deal with the third of the three matters he had earlier listed.

In regard to his question (c), (the generally discretionary question whether the amendments ought to be permitted) Miles J said there were the competing interests of the parties to be weighed; there was also the interest of the general administration of justice. He came to the conclusion that he should refuse the application on the discretionary basis.

He stated a number of reasons for this which I will list in a slightly different way from that he used.

1. The joint trial of the issues under the existing pleadings ant those additionally raised in the proposed cross-claim would impose an intolerably heavy burden on the tribunal trying the case, on the administration of the court, and on at least some of the parties and their legal representatives.

2. The proposed cross-claim raised issues which would not normally be determined in the Commercial List and which would have entitled one or other of the proposed cross defendants, if the litigation had not been in the Commercial List, to seek trial by jury.

3. If the dispute confined to the agreement of 15 February 1980 were determined first and in favour of Tectran it was likely that for practical purposes the claims for abuse of process and conspiracy could not succeed; another aspect of this consideration was that if the contractual dispute were resolved in favour of Raybos then the barrier to the claim by Raybos for malicious prosecution would be removed. Miles J seems to have had in mind in making this observation that a claim for malicious prosecution would be a simpler one for Raybos to pursue than what he regarded as the more subtle and elusive torts of abuse of legal process and conspiracy.

4. Tectran was entitled to the solicitors and counsel of its choice, and, in his opinion this entitlement should not be interfered with by the device of allegations being made against Tectran's legal representatives resulting in their becoming parties to still unresolved proceedings. He was of the view that if what he referred to as the commercial dispute went ahead without the joinder of the solicitors then there was no reason why they should not continue to act for Tectran in those proceedings whereas if the proposed cross-claim were allowed to be added they could not so continue.

5. He also took into account that refusal to allow the proposed cross-claim to be added did not prevent Raybos and Dr Rajski taking separate proceedings on their causes of action. He thought the likelihood of any real injustice consequent upon separate hearings was slight whereas the likelihood of prejudice to the other side in the event of a joint hearing was substantial.

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6. Following from what he had said about the likelihood of prejudice in the event of a joint hearing, he was of the view that complex questions of admissibility of evidence would make a joint hearing much more difficult.

7. The proposed cross-claim on which the application was made had in effect been abandoned and not replaced in a form enabling the proposed cross-defendants to know with any precision the type of case they would have to meet. He thought the appropriate way of dealing with this unsatisfactory situation, taken together with the other matters he had mentioned, would be to reject the proposed amended statement of cross-claim in full so that the cross-claimants would have the opportunity of representing their proposals in the form of a complete statement of claim (I assume he meant in separate proceedings) in due course.

The principal relief sought in the defendants' notice of motion was therefore refused.

Later in 1985 Raybos and Dr Rajski began 1985P. In these proceedings, speaking generally, the claims considered by Miles J were made against the parties in respect of whom he had found there was an arguable case fit to go to trial. The defendants included Mr Jones and the employed solicitor earlier mentioned, Mr Esler. By a logical extension flowing from vicarious liability all the partners of Messrs Allen, Allen and Hemsley were also made defendants. That firm later ceased to act in 1980P and retained other solicitors to appear for it in 1985P.

The original plaintiff then retained a further firm of solicitors, Messrs Dawson Waldron. Before long Raybos and Dr Rajski, claiming that a member of that firm had become involved in what they said was a further conspiracy against them, began 1986P. In these proceedings Mr Carson of Messrs Dawson Waldron was named as a defendant and by the same logical extension as before so were all the other partners in the firm.

Although Raybos and Dr Rajski contend otherwise, I think it is clear that there is a much weaker case for 1986P to be heard before or together with 1980P than for 1985P. To mention only the two most obvious points, the matters alleged in 1985P substantially involve the actions of those concerned with the Raybos-Tectran contract at the times when it was allegedly broken by Raybos, proceedings subsequently begun by Tectran, and those proceedings carried forward as recounted by Miles J in his summary of the case brought by Raybos and Dr Rajski which I have scheduled to these reasons. The allegations in 1986P are not bound up in the same way with the events of the same period. The other major difference is that there has been no hearing in regard to the allegations in 1986P equivalent to that held by Miles J into the allegations which became the foundation of 1985P. Thus, as I indicated before, I think the real question in the appeal is whether Rolfe J's exercise of discretion miscarried in deciding that 1980P must be heard before 1985P.

Matters arising from or in some way or other connected with all three cases have been before the courts frequently since Miles J's decision. As I indicated earlier the history is documented in various places and I see no need to repeat it here. The motion regarding which Rolfe J made his decision of 8 April, notwithstanding what had happened since Miles J's decision, raised much the same issue in substance, although in a different form, as that decided by Miles J when he said there should not be a joint trial of the issues raised by 1980P and what became 1985P. The substantial question was whether those proceedings

UFRAYBOS AUSTRALIA PTY LTD v TECTRAN CORPORATION PTY LTD (Priestley JA) 7

should be heard together; to this substantial question was added a further question whether 1986P should also be heard at the same time.

Although Rolfe J came to what appears to be the same conclusion as Miles J had done, in fact both the conclusion and the reasoning involved some differences from Miles J, one of them being to my mind of considerable significance. A minor difference was that Rolfe J did not agree that so much of Miles J's first reason as relied upon the burden that the judge would bear if the proceedings were heard together was a material consideration (at 18).

The most significant respect in which Rolfe J differed from Miles J was that he saw no objection to the cross-claim in 1980P being amended to allege all damages arising out of the alleged breach of that agreement (at 9). He noted that counsel for Tectran and its officers and the partners of Messrs Blake Dawson Waldron (the successors to Messrs Dawson Waldron) suggested that such an amendment could be made (at 10), (but later recorded, in para7 at 59, what seems to be a much more equivocal position taken up by counsel). Rolfe J made his own intentions clear in several places. For example, at 28:

"... aS at present advised, I consider Raybos and Dr Rajski should be allowed to amend the cross-claim to claim additional damages flowing from the breaches alleged by them in the original cross-claim."

Generally speaking, Rolfe J otherwise agreed with the reasons given by Miles J for exercising his discretion against allowing the cross-claim proposed before him being tried jointly with 1980P. He also added some reasons of his own. I will need to consider the most significant of his observations.

Before doing that, there is a matter to be cleared out of the way. Under a sub-heading in his reasons "Judicial Views As To How The Proceedings Should Be Heard" Rolfe J considered "certain judicial views already expressed as to how the proceedings should be heard". He did this "for the purpose of considering for myself matters which appealed to other Judges as supporting one view or another" (at 17). He said once he had done that he would make up his own mind as to what he considered the correct result. He went on to discuss first the reasons of Miles J which I have already mentioned. This was quite legitimate, since the reasoning of Miles J on this matter had been a necessary ingredient in that judge's reasons for his decision.

Rolfe J also considered views expressed by Clarke JA, Badgery-Parker J, Kirby P on an appeal from orders made by Badgery-Parker J, and Mahoney JA in the same appeal (in dissent), and concluded that "There is a strong body of judicial opinion which favours the view that the 1980 proceedings should be heard separately from the 1985 and 1986 proceedings" (at 25).

Any reasons given on this question in the succession of opinions were relevant to the argument before Rolfe J, and indeed, so far as I can see, were all in fact argued before him. It was thus unnecessary for him to pay attention to the obiter dicta in those opinions, expressed after varying degrees of consideration, as if they carried some weight as "judicial opinion". There is no doubt that the views of Clarke JA, Kirby P and Mahoney JA were not material to the decision of the particular issues they were dealing with. The views of Kirby P and Mahoney JA were expressed without their having had the benefit of the detailed materials and argument which were before Rolfe J himself. Clarke JA's opinion stands on a somewhat different footing. He stated it in Rajski v Bainton (unreported, 19/12/1987) and it seems clear to me, after reading that decision, that Clarke JA considered quite thoroughly the strength of the claim in 1985P as shown by the

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evidence before Miles J, and that it was his feeling for the strength of that case that led him to the provisional view that the proceedings should be heard together.

The opinion to which Rolfe J appears to have given most attention after that of Miles J was that of Badgery-Parker J. This opinion fell into a different class from all the others. Rolfe J noted that Dr Rajski submitted that he was not entitled to rely on what Badgery-Parker J had said. However, Rolfe J considered himself to be entitled to read the opinion "for the purpose of examining for myself possible problems and coming to my own conclusion about them if I think it appropriate" (at 22). The legal position concerning Badgery-Parker J's reasons seems not to have been fully appreciated. Those reasons were given for making orders which became the subject of appeal to this court. The appeal was upheld, and the orders set aside on the basis that because of an association Badgery-Parker J had had with the case while still at the Bar, there was reasonable apprehension of bias. (This court made it clear there was no question raised concerning Badgery-Parker J's integrity.) The effect of the court's order was to deprive Badgery-Parker J's reasons of any legal authority. They had no more authority, in a legal sense, than would have been the case if Badgery-Parker J had still been at the Bar, had written an opinion on the matter and the opinion had been tendered to the judge.

In my respectful opinion, Rolfe J was significantly overstating the position in saying that a strong body of judicial opinion favoured the view that 1980P should be heard separately from 1985P and 1986P. Miles J certainly expressed that opinion, at least in regard to 1980P and what became 1985P, but not in regard to 1980P2, which was what Rolfe J was considering, and which was going to range (if Rolfe J carried out his stated intention) over much wider issues than 1980P. This is the significant difference between the approaches of Miles J and Rolfe J to which I earlier referred.

If I thought Rolfe J had been materially influenced in his own exercise of discretion by this "strong body" of opinion, I would regard that as giving weight to a wrong consideration. However, I do not think he was thus materially influenced. In my view, he in fact did what he said he did which was to consider for himself all reasons relevant to the making of his discretionary decision, including those mentioned by the earlier judges, including Badgery-Parker J, in expressing their opinions. The potentially most effective criticism that Raybos and Dr Rajski could make of this was that Rolfe J appeared to attach some weight to arguments relied on by Badgery-Parker J simply because that judge, in his judicial capacity, had favoured them. However, it seems to me that this was a matter of appearance rather than fact. A reading of the full transcript of the proceedings before Rolfe J and of his reasons has left me in no doubt that he was more than capable of making up his own mind about the arguments and issues, and did so. As numerous cases have shown in recent years however, the appearance of independence in decision is quite possibly of equal importance to that of independent decision making in fact. It is therefore understandable that Raybos and Dr Rajski emphasised this argument. In the circumstances of this case however it does not in my opinion succeed.

For my part, in approaching Rolfe J's exercise of discretion, I will consider the arguments for and against his decision in light of reasons he himself gave or adopted, without giving any weight to the fact the previously named judges (Clarke JA, Badgery-Parker J, Kirby P and Mahoney JA) had expressed opinions touching on the central topic in the present proceedings.

URFRAYBOS AUSTRALIA PTY LTD v TECTRAN CORPORATION PTY LTD (Priestley JA) 9

Rolfe J first stated his own principal reasons for dismissing the defendants' application. In doing this he incorporated most of Miles J's reasons. He then considered the reasons advanced by the parties for and against his conclusion, and in discussing them and rejecting those of Raybos and Dr Rajski amplified to a considerable degree the reasons for dismissal he had already given.

Rolfe J seems to have adopted as material that part of Miles J's reason I have listed as 1. which took into account the burden that joint proceedings would place upon the general administration of the court and at least some of the parties and their legal representatives (at 19, 30-31). He also recognised however that the court must deal with all cases properly before it, long, short, stressful or easy. This must be the right rule, and I do not think he departed from it.

Rolfe J does not appear to have taken Miles J's reason 2. into account beyond observing that if he came to think the proceedings should be heard together, he would make orders effecting the result that the proceedings were all in the one division. No reference was made to this matter in this court. This reason can be left out of account from here on.

Rolfe J substantially adopted Miles J's reason 3. in the form that it was possible that 1980P would be decided in favour of Tectran in which event Raybos and Dr Rajski would either have no case or a very reduced case in 1985P and 1986P. To my mind, for reasons I will elaborate later, the way he approached this possibility led to a significant imbalance in his approach to the exercise of discretion.

Rolfe J does not appear to have placed any particular weight upon Miles J's reason 4., saying that he did not think that Dr Rajski had the motive of seeking to deprive Tectran of its chosen legal representation by a device nor did he think Miles J was attributing any such motive to Dr Rajski. His comment therefore that the position remained that if the three proceedings were heard together it would be impossible for Messrs Blake Dawson Waldron to continue to act in 1980P should have had no relevance to the exercise of his discretion. In any event, the practical difficulties of representation would be less if 1980P and 1985P were heard together, and 1986P left to be dealt with separately.

Rolfe J adopted Miles J's statement in his reason 5. that the likelihood of any real injustice to Raybos and Dr Rajski consequent upon a separate hearing was slight but that the likelihood of prejudice to the defendants in 1985P and 1986P in the event of a joint hearing was substantial (at 20 and 56). In my opinion this approach contributed to the same imbalance I mentioned in regard to reason 3. to which I will come back later.

Rolfe J also agreed with Miles J's reason 6. concerning complex questions of admissibility in a joint hearing (at 20 and 52). He added an observation, based on having had Dr Rajski appearing for himself in the four day hearing on the motion, which was that submissions about admissibility of evidence became very long drawn out when Dr Rajski was arguing them. Rolfe J's view was that if Dr Rajski appears in person at a final joint hearing, evidentiary arguments "will take an inordinate time to determine, and after the determination is made, to resume the orderly hearing of the case" (at 21).

No reference was made to Miles J's reason 7., presumably because the statement of claim in 1985P had achieved sufficient precision to overcome the objections referred to by Miles J to the proposed cross-claim in its last form before him.

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As well as going through Miles J's reasons, and the further submissions of the parties, Rolfe J considered what would be determined in 1980P2 if heard separately. He thought that proceedings so constituted in the way he had in mind would determine whether Tectran or Raybos and Dr Rajski were in breach of contract and the measure of damages to which the party not in breach was entitled. He was also of the view that consideration of Tectran's case that Raybos and Dr Rajski had been in breach of contract would involve an examination of the matters which motivated Tectran to seek to terminate the contract. For that examination it would be relevant for Raybos and Dr Rajski to litigate the issue that Tectran had sought to terminate the contract for the improper commercial purposes of seeking to avoid Tectran's obligations under the agreement and to crush Dr Rajski commercially (at 28-29). Rolfe J thought Raybos and Dr Rajski would be entitled to seek to prove those improper purposes because they were relevant to the issue whether the real reason for seeking to terminate the contract validly was that asserted by Tectran or some other reason; further the evidence would be permissible, in his view, on the issues of the entitlement of Raybos and Dr Rajski to the claimed punitive damages, and credit (at 29). Rolfe J then noted that the investigation of the issues which he foresaw as properly triable in 1980P2 could take many months. He rejected any idea of dividing the issues in 1980P2 by having, for example, separate hearings on liability and damages.

He next expressed the view that if 1985P and 1986P were to be heard with 1980P2 the already considerable period which he foresaw for 1980P2 to be heard if dealt with separately would be greatly extended (at 30). He then referred to the strain such very lengthy proceedings would put upon the court and the court's obligation to work out the most efficient and practical method of disposition of such litigation (at 31). Bearing this in mind he then considered the possibilities. (He did this on the assumption that the defendants in 1985P and 1986P agreed to be bound by the "ultimate findings" in 1980P2. I will come back to this later.)

The first possibility which Rolfe J mentioned clearly played a considerable part in his decision. It was that if Tectran succeeded in 1980P2 the foundation for the causes of action in 1985P would, strongly arguably, disappear; likewise with 1986P. Indeed, in his view, a finding that Tectran was entitled to terminate the agreement would have the practical effect of determining against Raybos and Dr Rajski the issues raised by them in 1985P and 1986P (at 32).

Having formed that view about the consequences of the first possibility, he considered the alternative possibility that Raybos and Dr Rajski would be successful against Tectran in 1980P2 proceedings. Rolfe J said that because, in that event, the measure of punitive damages if Raybos and Dr Rajski succeeded on that issue would cover at least in part the separate amount claimed by Raybos and Dr Rajski in 1985P and 1986P the court's task when it came to deal with the 1985P and 1986P, would, on this hypothesis, be greatly simplified.

On these grounds Rolfe J positively concluded that the proper exercise of his discretion demanded that 1980P2 be heard separately from and prior to 1985P and 1986P. Having reached that position he then considered a number of specific arguments put to him by the parties; some of these, as earlier mentioned, led to his amplifying matters he had already discussed; others he had not yet dealt with. After considering them all in turn Rolfe J remained of the opinion that he had earlier expressed. Because of the view I have formed about this matter it will not be necessary for me to deal with each of the further arguments listed by Rolfe J or to go into his reasons for rejecting those of Raybos and Dr Rajski. I will only mention such of them as are material to the conclusion I have reached.

URRAYBOS AUSTRALIA PTY LTD v TECTRAN CORPORATION PTY LTD (Priestley JA)11

There are several factors in Rolfe J's reasoning to his conclusion about which, after giving them the fullest consideration I can, I have reached a different opinion.

What struck me in the course of oral argument as being the most important of these factors concerns a step regarded by Rolfe J as essential to his conclusion; this was his assumption that the undertaking that had been offered by the defendants in 1985P and 1986P to be bound by the ultimate findings in 1980P2 if heard separately could be put into a practical and workable form. Rolfe J's recognition that the correctness of this assumption was an essential precondition to his discretionary decision is shown by what he said fairly early in his reasons: "T would not countenance a separate hearing of the 1980 proceedings if the consequence of that was that the defendants in the 1985 and in the 1986 proceedings required the same matters to be relitigated in the 1985 and/or 1986 proceedings." (at 23)

I think his Honour, in taking this position, quite correctly recognised that in 1980P2 there would be a number of issues which would also be issues in 1985P and 1986P. However, with the greatest respect, I do not think he fully took into account (1) the consequences of the overlapping of the issues and (2) the difference between (a) 1980P as considered by Miles J when he concluded those proceedings should be heard without being encumbered by the issues which became the basis of 1985P, and (b) 1980P2. I have already noted what Rolfe J said (at 9, 28 and 29 of his opinion) about the issues which would be litigated in 1980P2. In other places in his opinion also he describes the prospective issues in 1980P2 in a way which makes it clear that the question whether such proceedings should be heard together with 1985P or/and 1986P is quite different from that considered by Miles J, which was whether 1980P as it then stood should be heard together with the issues subsequently embodied in 1985P. Rolfe J referred again to the wider issues in 1980P2 at 64 of his reasons:

"T consider, subject to any submissions, that in the 1980 proceedings it is open to Raybos and Dr Rajski to explore the motivation of those associated with Tectran for alleging a breach of contract."

He then went on to say that nevertheless the fact that such an exploration would in his view be possible did not require the conclusion that 1985P should be heard at the same time. The fact nevertheless seems to me to be a very weighty one. Once the step is taken of permitting Raybos and Dr Rajski, in 1980P2, to explore the motivation of Tectran's people (which for practical purposes include the defendants in 1985P) I do not see how it will be possible to limit 1980P2 in a way not involving very considerable overlapping with what would be involved in the hearing of 1985P. What seems to me to be the crucial point is a very short one. By deciding to enlarge 1980P to 1980P2 in the way he proposed, Rolfe J supplied the nexus between that case and 1985P which Miles J (see at 7 above) had said was missing, and the absence of which was an important factor in his decision.

No doubt it was with a view to avoiding the consequences of the overlapping which Rolfe J recognised as flowing from the amendment he proposed to allow that the defendants in 1985P and 1986P offered the undertakings which they did, and that Rolfe J indicated that they were necessary to the decision he arrived at. To my way of thinking this is not a satisfactory way of dealing with the proceedings. Even if the undertakings were adequate for their purpose, it would not seem to me to be appropriate in proceedings in which the facts relevant to the

12 UNREPORTED JUDGMENTS

causes of action in 1985P are going to be extensively canvassed, that it should be made impossible for judgment on those causes of action to be given in the proceedings.

One aspect of this inappropriateness is that the plaintiffs in 1985P are entitled to interrogate the defendants to those proceedings and obtain discovery from them. To cause the subject matter of those proceedings to be litigated, even if only partially, without the plaintiffs in them having the ordinary auxiliary facilities of interrogatories and discovery raises the possibility of less factual material being available to the court in regard to the particular issues than would be the case if the proceedings were to be heard together. Thus the undertakings, even if a truly practical form for them could be found, would not be sufficient to overcome the problems caused by not allowing the proceedings to be heard together.

But further, I am not persuaded that a clearly practical form for them can be found; I do not see how the court can be sure they will do the job intended for them.

The undertaking given by the first to sixth defendants in 1985P was that they undertook to the Court, "until further order, to admit, for the purpose of [1985P] only, any finding of fact in [1980P] made on an issue presently pleaded in [1980P] being relevant to an issue in [1985P]".

The undertaking given by the seventh to ninth defendants in 1985P was that they undertook to the Court, "until further order, to admit each finding on the issues defined by the present pleadings (or any amendment consented to by the seventh, eighth and ninth defendants) in [1980P] in their present form which is relevant to any issue in [1985P]". (Similar undertakings were given in regard to 1986P).

The potential for practical problems involved in the implementation of the undertakings seems to me to be very great They are intended to deal with the situation anticipated by Rolfe J to be a possible consequence of his intention that 1980P2 should be conducted on a particular basis which will mean that a number of matters will be in contest in those proceedings which will also be in contest in 1985P, if Tectran loses 1980P2. If Tectran loses 1980P2 a probable result will be that Raybos and/or Dr Rajski will obtain judgment on the cross-claim which Rolfe J proposes to permit them to pursue against Tectran and, subject to the provisions of Arunta's guarantee, presumably also against Arunta. Those damages will not be co-extensive with the damages which the plaintiffs in 1985P would recover if successful in any of the tort claims in those proceedings. Rolfe J appears to have accepted that Tectran would have no funds, and that fact has not been disputed in the appeal. Further, whatever may be the financial position of Arunta today, I see no reason to be confident that it will ensure it has sufficient assets available to meet any judgment which Raybos and Dr Rajski may obtain in the event of their succeeding in 1980P2.

It therefore must be regarded as a real possibility that in the event Raybos and Dr Rajski were to succeed in 1980P2 they would only be able to get the fruits of that victory by litigating 1985P. In that event what would the undertaking given by the first to sixth defendants in those proceedings mean, in practical terms? I think, at this moment, it is impossible to say. The amendment which Rolfe J has in mind should be made to settle the issues in 1980P2 has not yet been made. The undertaking is given "until further order". The prospect of applications for variation is therefore a live one in theory, and I see no reason why a party who thought some practical advantage might be obtained by making an application

UFRAYBOS AUSTRALIA PTY LTD v TECTRAN CORPORATION PTY LTD (Priestley JA)13

would not make it. Granted that any such application will be decided fairly, nevertheless the prospect of extended argument must be very real.

Next, the undertaking of the first to sixth defendants relates only to issues presently pleaded in 1980P. It is the present intention of Rolfe J that those issues will be widened. Another area for potential argument,

Then there is the question of the meaning of a "finding of fact... made on an issue... pleaded [in one case] being relevant to an issue in [another case]. On the hypothesis presently being considered the defendants in 1985P will be facing the prospect of heavy damages being awarded against them. It will be in their interest to comb through the pleadings in the two cases and argue that findings relied on by their opponents from the previous case do not fall within the category covered by the undertaking. It does not seem to me to be an unrealistic prediction that if 1985P is litigated then many days will be spent in arguing the effect of the undertakings.

The same problems seem to me to be inherent in the undertaking by the seventh to ninth defendants in 1985P. The potential for trouble seems to me to be heightened in the case of that undertaking by the words in brackets "or any amendment consented to by" those defendants.

The more the specifics of what is proposed are examined, the clearer it becomes, in my opinion, that the procedure contemplated by Rolfe J as the basis for the discretionary order he made is likely to result in 1980P2 being an unsuccessful hybrid of 1980P and 1985P. The trial of 1980P would in my opinion suffer from substantial practical problems which would not occur if 1980P was heard separately, or if 1980P and 1985P were heard together.

A second factor which seems to me to have some weight is that Rolfe J's reasoning appears to have been to some extent influenced by his having asked first, what happens if Tectran wins its contract case? and then having asked second, what happens if Tectran loses? When the full effect of what Miles J decided in 1985 is taken into account, it seems to me that the first question to be asked should have been, what happens if Tectran loses?

Rolfe J gave two reasons for dealing with this question second. One was that Tectran's allegations were first in point of time (at 32-33). The other was that the possibility that Tectran would lose was "but one of two hypotheses" (at 33).

Having reflected on the full effect of Miles J's decision, I have come to the conclusion that both reasons advanced by Rolfe J for the order in which he considered the questions are factually and logically outweighed by the considerations I now mention.

Miles J was scrupulously careful to emphasise the nature of the proceedings before him, which he said involved "whether the applicants have established... an arguable case both in fact and in law to go to trial" (at 10). As earlier mentioned, he stressed that for the purposes of the application he took the view of the evidence most favourable to Raybos and Dr Rajski.

The emphasis by Miles J on the nature of the proceedings before him tends to distract a reader's attention from the fact that he found there was an arguable case along the lines of his summary of the allegations which I have included in the Schedule to these reasons. As allegations they are very powerful; and, on the limited basis which he described, Miles J thought there was evidence of them. This came from the witnesses whose affidavits were read in the proceedings before Miles J and who were extensively cross-examined by Tectran's counsel. A number of these witnesses had been working in Tectran's offices at the relevant time. They gave direct evidence of the matters asserted by Raybos and Dr Rajski.

14 UNREPORTED JUDGMENTS

These circumstances give some significance to Miles J's remark that although he had seen most of the deponents extensively cross-examined he had "no hesitation in saying that the ultimate tribunal of fact... would be entitled to accept their evidence..." (at 39).

The situation can be restated by saying that the only substantial judicial examination of the evidence upon which Raybos and Dr Rajski rely for their basic claim in 1985P, after testing by cross-examination, and always keeping in mind that their opponents had yet to give evidence, resulted in a very carefully reached judicial decision that, in plain language, Raybos and Dr Rajski had a real chance of winning against Tectran and associated individuals and Tectran had a real chance of losing its case against Raybos and Dr Rajski.

The converse cannot be said of Tectran's case in 1980P. Of course, no judge has had to consider that case in any direct way equivalent to Miles J's consideration of Raybos's and Dr Rajski's case in 1985P. I am not suggesting anything more than this: a court considering the notice of motion in question in this case on the one hand knows that Raybos and Dr Rajski are in a position to lead evidence at a trial upon which it is possible they will establish their claims and defeat those of Tectran and on the other hand does not know whether or not Tectran is in such a position in regard to its case.

These considerations weaken Rolfe J's two reasons for taking as his first question what the position would be if Tectran won its contract point. In the circumstances the fact that Tectran brought its claim to court first actually supplies a reason, given that the claim by Raybos and Dr Rajski is arguably right, in which case starting the proceedings was an essential part of Tectran's plan, why, at the very least, the abuse of process claim should be heard no later than Tectran's claim, rather than heard after it. Appreciation of the full effect of Miles J's decision also negates any idea that the two hypotheses that Tectran might win and Tectran might lose should, on presently available materials, be treated as having equal standing.

Three further matters are relevant here. From the time in August 1982 when Yeldham J dismissed the application by Raybos to strike out the statement of claim in or stay 1980P, Tectran took no step in the proceedings until it responded to the launching by Raybos and Dr Rajski of their counter claims in June 1984. Tectran divested itself of all assets. The Director of Public Prosecutions commenced perjury proceedings against two of Tectran's actors and potential witnesses. The two men charged are presumed to be innocent unless and until found guilty. The charge against one of them appears to go to an aspect of credit rather than any factual issue in 1980P or 1985P. Nevertheless, an outsider to the proceedings, trying to form an objective assessment about which side stands better on what is presently known, could in my opinion only conclude that subject to the uncertainty caused by not knowing what Tectran's evidence will be, that it is Raybos and Dr Rajski, not Tectran.

Another matter on which I take a different view from Rolfe J is the weight he gave to two evidentiary considerations. One of these was that with the greater number of parties that would be involved if the proceedings were heard together, and in the absence of the proceedings being consolidated, it would become very difficult to make correct rulings concerning what evidence was admissible against which parties, and to keep track of the consequences of such rulings. I acknowledge that this is indeed likely to cause difficulties, but the difficulty is of a kind with which courts are increasingly confronted in latter day litigation and

UFRAYBOS AUSTRALIA PTY LTD v TECTRAN CORPORATION PTY LTD (Priestley JA)15

with which, under pressure of necessity, they seem to be coping. It does not seem to me to be relevant to deciding the issue in question.

The other evidentiary matter concerns legal professional privilege. It was submitted by counsel for the solicitor defendants in 1985P that there could be a difference between Tectran and the solicitors concerning the claiming of legal professional privilege. It was said that it would be unjust for the solicitors to be defendants in proceedings along with their former client in which by that former client's insistence on preservation of professional legal privilege they would be prevented from properly defending themselves. It was submitted that this difficulty could be overcome by hearing 1980P first; this because it could be assumed that in such proceedings Tectran would claim legal professional privilege; if Tectran lost then Raybos and Dr Rajski could press on with 1985P; in those circumstances Tectran might be prepared to waive legal professional privilege; then the solicitors could defend themselves without the inhibition of the previous professional restraint. Rolfe J appears to have accepted this submission. In my opinion the submission is unsound.

The most striking thing about it is that if matters were to fall out in accordance with counsel's forecast, Tectran would have the comfort of being able to rely on legal professional privilege in 1980P (or 1980P2 if Rolfe J permits the amendment he has foreshadowed he will) and then, when, presumably (on counsel's hypothesis) Tectran has no further interest in 1985P (it will lose in those proceedings on this hypothesis but since it has no assets that will not matter in economic terms) it will waive its privilege for the benefit of the solicitor defendants and they will then be able to defend themselves to the fullest. I call this train of events striking because it gives Tectran its best possible position in 1980P or 1980P2 in which the solicitors will not be parties, and the solicitors their best possible position in 1985P. These advantages are to be conferred on them in the situation I have already described, where on the evidence so far available Raybos and Dr Rajski have an arguable chance of succeeding in 1985P. It seems to me to be wrong that this should be taken as a factor in deciding that the hearing of 1980P and 1985P should be separated, and that priority should be given to the hearing of the proceedings brought by the party the substance of whose evidence is not yet known, to the benefit of two different categories of party opposed to Raybos and Dr Rajski and to what they perceive as to their disadvantage and against their wishes.

Thus, the problem I see with the legal professional privilege submission, in the event that matters were to work out along the lines which are said to justify the course proposed, is that it advantages one side of the record and disadvantages the other when it seems to me to be wrong that the court should favour one side or the other. If, leaving aside the evidentiary difficulties, the court were to conclude that the proper exercise of discretion led to hearing 1980P and 1985P together, then the fact that there were evidentiary difficulties involved in the matters being heard together, could only become a factor in reaching a different conclusion on the exercise of discretion if the evidentiary difficulties could be overcome in separate hearings without favouring any party as against any other. In the absence of such a possibility (and I do not think there is one) the answer would remain that the proceedings should be heard together, let the evidentiary difficulties be what they may. Further, I am not at all persuaded that the foreshadowed legal professional privilege difficulties are any different in kind from ordinary forensic problems it is a court's duty to solve in the hearing of a trial; questions of legal professional privilege may well pose practical problems

16 UNREPORTED JUDGMENTS

for Tectran and the solicitor defendants; those would be problems arising from the rules regulating the relationship of solicitor and client; the obligations that solicitors and barristers have to keep their lips sealed about their clients' business is an obligation they assume as part of their professional duties. I do not think they are entitled to special treatment in litigation because of obligations and restrictions which are part and parcel of their professional life.

In any event, there does not seem to me to be any very firm foundation for some of the predictions involved in counsel's submission about legal professional privilege. It is not clear to me that it will necessarily be to Tectran's advantage not to waive its privilege. If Tectran does seek to maintain its privilege, then the difficult area of law mentioned by Miles J at 29 and following of his decision might need to be considered. After briefly examining the authorities he there concluded that it is arguable that an action for abuse of process is not to be defeated because, among other things, the defendant is a legal practitioner who is party to the abuse of the process of which he has the conduct (at 30). He had earlier referred to the case of Ali v Sydney Mitchell and Co [1980] AC 198 in which Lord Diplock had observed (at 219) that a legal practitioner's immunity lasts only whilst the practitioner "observes the rules". Difficult arguments may well arise in either or both 1980P2 and 1985P about the entitlement of Tectran to insist on its privilege being maintained. The potential for those difficulties will exist whether or not those proceedings are heard separately or 1980P and 1985P are heard together. If the result of such an argument should at some stage of a trial result in the court holding that Tectran is not entitled to the privilege, then the evidentiary difficulties upon which Rolfe J was placing reliance would disappear. If they remained throughout a trial then Tectran would have the benefit of the privilege and, in my view, the solicitors would have to put up with the consequences of their professional obligations.

Nor do I see any particular reason for making the further prediction involved in the submission; that is, that if Tectran lost in 1980P2 heard separately and before 1985P, it would be likely to waive its privilege upon the hearing of 1985P. Ican see no more reason for it doing so in the later proceedings than in the earlier.

The various ways of looking at this submission all seem to me to highlight that if it were to be accepted the court would be positively encouraging the possibility that some of the issues of fact common to 1980P2 and 1985P if heard separately would be decided on different bodies of evidence. With all respect to those who put the submission and to Rolfe J who accepted it, I must say that it is in my opinion mistaken.

The matters I have mentioned seem to me to be critical to Rolfe J's exercise of discretion. This court should not lightly interfere with exercise of discretion by a judge at first instance. One of the many statements of the rule in the High Court is that "a court of appeal is not justified in interfering with the decision appealed from unless it reaches a clear conclusion that by reason of some error, whether of fact or law, the primary judge not only has taken a view different from that which the judges of the court of appeal would have taken if they had been in his place, but has failed properly to exercise the discretion committed to him." (Mace v Murray (1955) 92 CLR 370 at 378)

Some years earlier, Kitto J had put it in a nutshell when he said, referring to an appeal against an exercise of a discretion: " 'A clear conclusion that the judge... was plainly wrong' is the sole justification for a reversal of his decision." (Lovell v Lovell (1950) 81 CLR 513 at 533)

UFRAYBOS AUSTRALIA PTY LTD v TECTRAN CORPORATION PTY LTD (Priestley JA)17

Counsel for the respondents in the appeal very properly reminded us on a number of occasions about the position concerning discretionary decisions, pointing out that it applied even more strictly in cases of practice and procedure, and reminding us of In re the Will of Gilbert, 46 SR 318. This is particularly to be borne in mind in cases, such as the present, where different opinions may reasonably be held on discretionary matters that must be decided. The need for caution on appeal is further sharpened when the judge below had come to his decision in what appear to have been trying circumstances, in which, so far as one can judge from the printed page, he seems to have managed to combine firmness and patience to a remarkable degree. Nevertheless, the matters upon which I have expressed my disagreement with Rolfe J's views seem to me to have been critical to his exercise of discretion, they were in my respectful opinion errors, and caused him to reach a decision which was, in my opinion, plainly wrong. In my opinion his order dismissing the notice of motion should be set aside.

The question then arises whether this court should itself make orders in the motion, or remit it to first instance. Raybos and Dr Rajski ask us to do the former. They point out that this court has spent almost as much time on the matter as did Rolfe J. The respondents submitted the matter should be returned for decision at first instance. They recognised however that the court had a discretion to choose which was the more appropriate course in the circumstances.

Before deciding which is the better course to follow, there are further matters to be mentioned.

One of them is one which at one stage of the oral argument I thought might be of greater importance than I now do. This concerned Rolfe J's opinion that if Tectran succeeded in 1980P2 by showing that Raybos and Dr Rajski and not Tectran were in breach of contract when Tectran commenced 1980P then the prospects of Raybos and Dr Rajski succeeding in 1985P would be negated. It then seemed possible to me that what the High Court had said in Williams v Spautz (1992) 66 ALJR 585 about the tort of abuse of process makes it either quite clear, or at the least very strongly arguable, that proof of Tectran's correctness on the breach of contract point would neither mean that Raybos and Dr Rajski must fail on their tort claim nor that the damages they might recover would necessarily be insignificant.

In Williams the joint reasons of a majority of the court (Mason CJ, Dawson, Toohey and McHugh JJ) made a number of propositions plain. 1. The existence of the tort of collateral abuse of process was confirmed (at 589). 2. Essential to establishing the tort is proof that the defendant (D) instituted the proceedings complained of by the plaintiff (P) for a purpose or to effect an object beyond that which that legal process offered (at 590). 3. In bringing proceedings for the tort P need not show that the proceeding by D of which P complains has terminated in P's favour or that D had no reasonable and probable cause for the institution of D's proceeding (at 590). 4. (As a corollary of 3.) there is nothing to stop P alleging that D's pending proceedings are unjust or amount to an abuse of process (at 591).

The majority also referred with approval to the English Court of Appeal decision, Speed Seal Ltd v Paddington (1985) 1 WLR 1327. In this case, the plaintiff was claiming an injunction to restrain the defendants from communicating confidential information; the defendants, denying the information was confidential, applied to strike out the statement of claim and also for leave to add a counter claim that the action was brought in bad faith for the purpose of damaging the defendant's business and not for the protection of any

18 UNREPORTED JUDGMENTS

legitimate interests of the plaintiff. At first instance both of the defendants' applications were granted. On appeal the primary judge's decision to strike out the plaintiff's statement of claim was overturned, but the leave to the defendants to amend by adding the counter claim for collateral abuse of process was allowed to stand. Fox LJ, with whom Lloyd LJ and Sir George Waller agreed, said that the claim and counter claim should go to trial together.

It seemed to me to be arguable on the basis of what the majority said in Williams that if Tectran were to succeed in its contract claim it would still be open to Raybos and Dr Rajski in 1985P to allege that although Tectran had had a good cause of action when it commenced 1980P nevertheless both the purpose of commencing the proceedings and their use were to effect an object not within the scope of the process causing damage to Raybos and Dr Rajski quite separate from and exceeding the damages Tectran itself suffered from (on this hypothesis) the breach of contract by Raybos and Dr Rajski. If this were right, then one of the principal reasons relied on by Rolfe J would disappear. The High Court's observations and the example of Speed Seal would show that there was no need for the hearing of 1985P to await the determination of 1980P or 1980P2.

However, although, as I understood them, counsel for the respondents conceded that it was possible, at least in theory, for Tectran to succeed on the contract issue and Raybos and Dr Rajski nevertheless to succeed on either or both of their tort claims, I eventually came to the opinion that I should not give any weight to this possibility in considering whether the orders made below should be set aside. The reason is that so far as I can see from the pleadings the substance of the tort claims by Raybos and Dr Rajski has always been that Tectran's claim that it was entitled to terminate the contract was a concocted one. I am not aware that any particular attention has been paid at any stage to an alternative case, that if the concoction claim failed, then Raybos and Dr Rajski would still claim substantial damages from Tectran. Both Miles J and Rolfe J in commenting that it was unlikely, if Tectran won the contract issue, that any part of the tort claims by Raybos and Dr Rajski would survive, were doing so on the assumption which they were making, with some justification, that those tort claims were being primarily pressed by Raybos and Dr Rajski on the footing that Tectran's contract claim was false and unsustainable.

Also relevant to considering what course should now be taken is that there are a number of matters which have to be decided before any proceedings go to trial.

First, there is the question of the amendment that Rolfe J contemplates, which will turn 1980P into 1980P2. That might involve further consideration of the form of the undertaking, if anyone wants to persist with that idea.

Tectran, for its part, wishes to amend its pleadings in 1980P to raise a claim that some part of Raybol was incorporated in it by Dr Rajski in breach of copyright. Tectran wishes to argue that if it can establish this claim then, at the time Tectran purported to terminate the contract that fact, even if unknown to Tectran at the time, can now be seen as justification for doing so. Rolfe J mentioned in his reasons that he would consider Tectran's application to amend in due course.

There are also other interlocutory applications outstanding in the three proceedings. In the written submissions filed after the end of the oral argument in this court a dispute broke out about the number of these, the Tectran side claiming that there was a larger number outstanding than was conceded by Raybos and Dr Rajski. Whatever the number may be, at least some of them must be decided before any trial can commence.

URFRAYBOS AUSTRALIA PTY LTD v TECTRAN CORPORATION PTY LTD (Priestley JA)19

Another matter, about which I am not clear, is the status of the evidence both before Rolfe J and in this court concerning the financial position of Arunta. That should be cleared up. It seems to me to be obviously a matter relevant to the exercise of discretion about the order of hearing, or the hearing together, of the proceedings.

A further matter which is unclear is whether it is possible that Raybos and Dr Rajski could succeed in 1985P in establishing tort claims against Tectran and perhaps some individuals without Arunta being held similarly liable. If that is possible, and if Arunta's guarantee of Tectran does not extend to Tectran's tort liability (and ordinarily it would not) then the possibility exists that if 1980P2 is litigated to finality before 1985P then, some considerable time from now, if Tectran fails in its contract claim in 1980P2, Raybos and Dr Rajski will be left to go to trial in 1985P, which in those circumstances they would be pretty sure to win, after having had to go through a trial, and succeed in it, from which they would have got no benefit at all although a great part of the issues upon which they would eventually succeed had been fully litigated. This would seem to be highly undesirable.

These further matters all lead me to think that it was premature to decide that the hearing of 1980P must precede that of 1985P. A decision on the question of the order of hearing is likely to be much more soundly based if the various matters I have last touched on are taken into account when making the decision, along with those earlier considered. It therefore seems to me that this court should do no more than set aside the orders subject to appeal.

A substantial part of the application for leave to appeal and the appeal was concerned with the argument on which Raybos and Dr Rajski have succeeded. On the other hand, leave was refused on two of the three points argued in the leave application and Raybos and Dr Rajski did not wholly succeed on the point argued in the appeal. The parties have not had an opportunity to address the court on the costs consequences of the position that has arisen. I suggest the costs question should be dealt with upon written submissions: one set to be filed by Raybos and Dr Rajski; one set by the parties for whom Mr Bainton QC appeared; one set by the parties for whom Mr Heydon QC appeared; each set to be filed no later than 4 pm on the fourteenth day from the publication of these reasons and to be served on the other parties; one reply to be permitted to each of the three sets of parties just mentioned to be filed no later than 4 pm on the twenty-first day from the publication of these reasons; no other submissions to be filed or received; and no submissions to be received after the stipulated times.

SCHEDULE

(Extract from Miles J's reasons of 5 June 1985 - see at 6 and 11 above.)

"In 1979 Tectran became interested in acquiring rights to the marketing of Raybol [a software system]. Approaches were made to Leszek Rajski. Investigations were made on Tectran's behalf as to the quality and performance of Raybol. These included the obtaining of a report from a company called Datastream Pty Ltd, an evaluation by Mr Adrian Wood, a computer expert and then general manager of Tectran, and an evaluation by Mr Alexander Donaldson, an outside computer expert who was subsequently employed by Tectran to work on the Raybol project. The report from Datastream (or 'the Shrimski report') suggested that Raybol had shortcomings or limitations but it was accepted by Tectran and Scitec that these could be overcome within an acceptable period by further work to be carried out on Raybol by Leszek Rajski with the assistance of Tectran people and resources. It was envisaged that Scitec would supply capital

20 UNREPORTED JUDGMENTS

backing for the project. The improvements proposed became known in the case as 'enhancements'. On 15th February, 1980 a written agreement was entered into between Tectran and Arunta Investments Pty Ltd on the one hand and Raybos and Leszek Rajski on the other hand for the development and marketing of Raybos as a joint venture. The agreement provided inter alia that Tectran and Raybos should jointly own Raybos until the sum of $2 million had been paid by Tectran to Raybos in accordance with other provisions in the agreement. It was further provided that 'in respect of each of Raybol, only two master copies of all designs, programmes, listings, documentation, tapes and discs shall be brought into existence', and in effect, that Raybos would deliver to Tectran the second of such master copies. Thereafter the master copies were to be kept in a safe deposit with a bank on the term that access could be gained jointly only. There was a further provision that Raybos warranted that Raybol would perform in all respects all of the functions listed in Annexure 'A' to the written agreement. There were many other provisions to which I think it is not necessary to refer. None of the foregoing is in dispute.

What is alleged by the applicants to have happened thereafter is as follows.

After the agreement was entered into it was put into effect to all appearances for a certain time satisfactorily. Leszek Rajski arrived at Tectran's premises with tapes and documents and loaded the contents of the tapes on to discs on the Tectran computer. Mr Wood carried out tests as to what was on the discs and concluded that it was the Raybol software system and that it operated efficiently.

(at page 43) Mr Cole, company secretary, arranged for Tectran's copies of the muster tapes to be lodged with the bank. Leszek Rajski and staff engaged by Tectran for the particular purpose worked on the enhancements and carried out the steps towards the proposed marketing of Raybol. Raybol (or at least what was on the discs at Tectran) was in fact used to produce a stock and budget system for Scitec. It was also used to produce a system called Fleetmaster for vehicle fleet control. Prospective customers appeared to be interested in purchasing Raybol once the enhancements were put into effect. By June 1980 a high point of optimism was reached. Thereafter however things began to change. The funds necessary for the further enhancement or marketing or both of Raybol were not as readily available as had been hoped. Tectran began to look at ways of selling off its interest in Raybol or alternatively terminating the agreement with Raybos. It received legal advice from Allens, who had drawn up the written agreement in the first place, that it could not sell off its interest in Raybol without the consent of Raybos and that it was in effect locked into the existing contract unless it paid the sum of $1.5 million. This advice was confirmed by a second firm of solicitors. Nevertheless it was determined on the part of Tectran to cease the relationship with Raybos. Leszek Rajski was dismissed, and in effect, ejected from the Tectran premises in accordance with threats that had previously been made. It was determined as between the solicitors and the officers and directors of Scitec and Tectran that an action would be commenced against Raybos and Rajski in order to bring it to the bargaining table or, if the commencement of the action did not have that desired effect, to prolong the litigation (whilst retaining the Raybol software) until Raybos and Rajski were destroyed commercially. In the meantime however Tectran had lost the services of Mr Donaldson and Mr Wood, so that it was in effect left without anyone competent in computer technology. For this reason an employee of Scitec claiming but actually lacking any significant computer expertise, Mr David Bruce Cowper, the seventh proposed cross-defendant, was instructed on behalf of Scitec, with the connivance of

URFRAYBOS AUSTRALIA PTY LTD v TECTRAN CORPORATION PTY LTD (Priestley JA)21

Tectran, to prepare a report setting out alleged defects in Raybol. This was done in order to found a false allegation in the statement of claim that Raybos and Leszek Rajski were in breach of the warranty, or warranties, in the written agreement. According to the allegations of the applicants it was known to the Tectran and Scitec directors and officers and to the active solicitors before action was commenced that the Cowper Report was a fraud, that the action had no proper legal basis and was brought simply for the purpose of defeating the commercial interests of Raybos. Alternatively it is alleged against the solicitors that if they did not know prior to action, then they became aware of it very shortly thereafter.

The statement of claim was filed. It was subsequently amended before leave was necessary, in circumstances upon which the applicants rely. An application was made to Rogers J on behalf of Tectran through the solicitors that access be had to the master tapes in the bank and that an independent expert opinion as to the contents of the tapes be obtained from Touche Ross Services Pty Ltd (Touche Ross). It is alleged that the application for access to the master tapes was made fraudulently in order to raise false issues, that it was falsely claimed on behalf of Tectran that the contents of the tapes were unknown to Tectran and falsely claimed that Tectran did not have in its possession a copy of what was on the tapes. It is alleged further that it was in fact known to Tectran and the solicitors and to counsel that what was on the tapes was on the discs that had at all times remained in Tectran's possession. It is further alleged that the application to obtain a further expert opinion on the contents of the tapes was simply to obtain a repetition of what had become known to Tectran before the written agreement by means of the Shrimski report and otherwise. It is argued that these general allegations are supported by disparate pieces of evidence which go to prove the pretence that Raybol had never been delivered, the pretence that Raybol had never been examined, the pretence that Tectran or Scitec did not have in their possession the Raybol User's Manual, the pretence that the manual was a necessary tool for the examination of any material in Tectran's possession, the withholding of the Shrimski report from the Touche Ross team and from solicitors acting for Raybos, failure to invoke the so-called 30 day rectification clause in the contract. The applicants rely also on the omission to disclose certain documentation on discovery and the disappearance of documents tapes and discs in the cur,tody of the respondents.

In the event, no order for access was made by Rogers J and the application before His Honour seems to have been overtaken by the application made by Raybos to stay the proceedings or strike out the statement of claim. When the application came before Yeldham J, Mr Cowper gave evidence. It is alleged that the solicitors and counsel in particular presented his evidence to the Court knowing that it was false and further that they fraudulently failed to disclose other material to the Court, particularly evidence which was available from Donaldson. After hearing the evidence and the submissions of the parties Yeldham J in a reserved written judgment on 12th August, 1982 dismissed the application to strike out the statement of claim as an abuse of process. His Honour made certain remarks relating to the credit of some of the witnesses although he expressly refrained from making detailed findings of fact in order us he said to avoid any question of estoppel arising. Nevertheless the respondents make a preliminary submission that the application before me is essentially concerned with issues that have already been litigated before Mr Justice Yeldham and for that reason cannot be re-litigated at this stage."

UNREPORTED JUDGMENTS

Hope AJA I agree with Priestley JA.

1.

AY

[Confirming order previously made] Application for leave to appeal based upon the two suggested grounds for disqualification of Rolfe J, dismissed;

Application for leave to appeal in respect of the procedural orders of Rolfe J published with his reasons of 8 April 1992 granted;

Appeal against such orders allowed;

Order that such orders be set aside;

Proceedings returned to the Commercial Division for reconsideration of the defendants' motion that proceedings numbers 14716/85 and 15424/86 (commenced in the Common Law Division) should be heard with proceedings number 16938/80 (commenced in the Commercial Division);

Direct that questions of costs of the proceedings before Rolfe J and the Court of Appeal be the subject of written submissions: costs in question should be dealt with upon written submissions: one set to be filed by Raybos and Dr Rajski; one set by the parties for whom Mr Bainton QC appeared; one set by the parties for whom Mr Heydon QC appeared; each set is to be filed no later than 4 pm on the fourteenth day from the publication of these reasons and to be served on the other parties; one reply to be permitted to each of the three sets of parties just mentioned to be filed no later than 4 pm on the twenty-first day from the publication of these reasons; no other submissions to be filed or received; and no submissions to be received after the stipulated times.

Counsel:

Ist Claimant: J Basten

2nd Claimant (Dr Rajski): In person

1-8 and 12-13 Opponents: RJ Bainton QC/ M Bozic

9-11 Opponents: JD Heydon QC/RJ Powell

Solicitors:

Claimants: Craddock Murray Neumann

1-8 and 12-13 Opponents: Blake Dawson Waldron

9-11 Opponents: Minter Ellison