FEDERAL COURT OF AUSTRALIA

Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited; In the Matter of Treasury Wine Estates Limited [2016] FCA 787

ORDERS

THE COURT ORDERS THAT:

1.    This proceeding be permanently stayed as an abuse of the process of the Court.

2.    The plaintiff pay the defendant’s costs of and incidental to the Interlocutory Application filed by the defendant in this proceeding on 31 March 2015.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

FOSTER J:

1    On 22 December 2014, in circumstances which I shall explain below, the plaintiff (MCI) commenced this proceeding in the Supreme Court of Victoria as a representative proceeding under Pt 4A of the Supreme Court Act 1986 (Vic) (Supreme Court Act). The causes of action relied upon and the claims for relief made in this proceeding are identical to the causes of action relied upon and the claims for relief previously made by MCI in proceeding S CI 2013 5731 in the Supreme Court of Victoria between MCI, as plaintiff, and the present defendant (TWE), as defendant (the first MCI proceeding). The first MCI proceeding had been commenced on 4 November 2013. That proceeding was also a representative proceeding under Pt 4A of the Supreme Court Act.

2    The only difference between the first MCI proceeding and this proceeding concerns the identity of the solicitor on the record for MCI. At the time when the first MCI proceeding was commenced and for some time thereafter, the solicitor on the record for MCI in that proceeding was Mark Edward Elliott who is an Australian legal practitioner. Mr Elliott has also been the sole director, the sole secretary and the sole shareholder of MCI at all times since its incorporation. In this proceeding, the solicitor on the record for MCI is, and always has been, Mr Anthony Zita of Portfolio Law Pty Ltd (Portfolio Law). There is no direct evidence before me which establishes that Mr Zita or Portfolio Law has made any agreement or arrangement with Mr Elliott in relation to the professional fees likely to be earned by Portfolio Law from representing MCI and the group in and in connection with this proceeding. On the face of things, Portfolio Law does not appear to have any connection with Mr Elliott other than as the solicitor for MCI in this proceeding and as the solicitor for MCI in other proceedings.

3    Earlier on the same day as this proceeding was commenced (22 December 2014), the Victorian Court of Appeal made an order permanently staying the first MCI proceeding as an abuse of process (see Treasury Wine Estates Ltd v Melbourne City Investments Pty Ltd (2014) 318 ALR 121 (TWE No 1)).

4    The Court of Appeal (by majority) held that the predominant purpose of MCI in bringing the first MCI proceeding was to enable Mr Elliott to earn fees as the solicitor on the record in that proceeding and that that purpose was an improper purpose.

5    On 16 January 2015, MCI filed an application for Special Leave to Appeal to the High Court from the Court of Appeal’s decision in TWE No 1. That application was dismissed with costs by the High Court on 15 May 2015.

6    It is clear that this proceeding was instituted as a substitute or fallback proceeding designed to keep alive MCI’s claims as the plaintiff and lead claimant in a representative action against TWE in order to protect itself against the possibility that the Court of Appeal’s decision in TWE No 1 was not overturned by the High Court. Before me, MCI did not cavil with this view of its conduct. MCI submitted that, if the High Court overturned the Court of Appeal’s decision, it would not need to maintain this proceeding. It also argued that, if the High Court did not overturn the Court of Appeal’s decision, it would press on with this proceeding.

7    On 13 February 2015, TWE filed a Summons in this proceeding while it was still in the Supreme Court.

8    By that Summons, TWE sought an order transferring this proceeding to this Court and an order staying this proceeding upon the limited discretionary basis that there was already on foot in this Court a representative proceeding (Jones v TWE, NSD 660 of 2014) (the Jones proceeding) brought against TWE on behalf of the same or substantially the same class in which substantially the same or similar claims as those made by MCI in this proceeding were being made. In the alternative, TWE sought an order that this proceeding not continue as a representative proceeding based upon the same limited ground. The Jones proceeding was commenced on 2 July 2014 which was after the date when the first MCI proceeding was commenced but before the date when this proceeding was commenced.

9    On 3 March 2015, Justice Elliott, a judge of the Supreme Court, made an order transferring the whole of this proceeding to the New South Wales District Registry of this Court.

10    As at 3 March 2015, the Supreme Court had not determined the remaining claims for relief made by TWE in its Summons filed on 13 February 2015. By agreement between the parties which was sanctioned by the Court, those residual claims have been left in abeyance pending the determination of the claims for relief made by TWE in an Interlocutory Application filed by it in this Court on 31 March 2015 (TWE’s Interlocutory Application), to which I now turn.

11    By that Interlocutory Application, TWE sought the following relief:

1.     Pursuant to Rule 26.01(d) of the Federal Court Rules, alternatively pursuant to the inherent jurisdiction of the Court, that judgment be given against the Applicant, alternatively that this proceeding be permanently stayed, on the ground that it is an abuse of the process of the Court.

2.     Alternatively, pursuant to section 33N or section 33ZF of the Federal Court of Australia Act 1976 (Cth), an order that the proceeding no longer continue as a group proceeding pursuant to Part IVA of the Federal Court of Australia Act.

3.     Alternatively, pursuant to section 33ZF of the Federal Court of Australia Act, an order that the Applicant be restrained from continuing as the representative Applicant in this proceeding.

4.     Alternatively to the order sought in paragraph 1 above:

(a)     pursuant to Rule 19.01 of the Federal Court Rules and/or section 1335 of the Corporations Act 2001 (Cth) and/or pursuant to the inherent jurisdiction of the Court, an order that the Applicant provide security to the Respondent for the costs of and incidental to this proceeding up to the stage of mediation, in the amount of $630,000, or such other amount as the Court determines to be appropriate, by payment of that amount into Court within 28 days of the making of this order, or in the event that the security has not been provided within that period, that the proceeding be stayed;

(b)     an order that the Respondent have liberty to apply for additional security for costs at any stage of the proceeding.

5.     The Applicant pay the Respondent’s costs of and incidental to this application.

6.     Such further orders as the Court considers appropriate.

12    In support of Order 1, TWE relied upon r 26.01(d) of the Federal Court Rules 2011 (FCR) and the inherent jurisdiction of the Court. It relied upon s 33N and s 33ZF of the Federal Court of Australia Act 1976 (Cth) (FCA Act) as the sources of power for the Court to make Orders 2 and 3. Although Order 2 claimed by TWE in the Interlocutory Application filed by it in this proceeding seeks the same relief as Order 2 claimed by it in the Summons filed by it in the Supreme Court on 13 February 2015, the claim made in the Interlocutory Application filed in this Court is not limited to any particular ground or grounds whereas its claim for discretionary relief made in the Summons filed by it in the Supreme Court is based solely upon the circumstance that the Jones proceeding is on foot and that, in that proceeding, Mr Jones makes the same or substantially the same or similar claims as the claims made by MCI in this proceeding and does so on behalf of the same or a substantially overlapping class of group members. Order 4 raises an entirely separate matter for consideration (security for costs).

13    By these Reasons for Judgment, I determine the claims for relief made by TWE in its Interlocutory Application.

Abuse of Process

MCI’s Conduct

14    MCI was incorporated on 1 November 2012 at the instigation of Mr Elliott.

15    On the same day as it was incorporated, MCI purchased 140 ordinary fully paid shares in TWE at a cost of $4.95 per share. The total cost to MCI of the shares which it purchased at this time was therefore $693. MCI continues to hold that parcel of shares in TWE.

16    In the period from November 2012 to 15 May 2014, MCI also purchased small parcels of shares in approximately 157 other publicly listed companies, the cost of most of those parcels of shares ranging between $600 and $900. The total amount outlaid in this fashion was of the order of $120,000.

17    As mentioned at [1] above, MCI commenced the first MCI proceeding on 4 November 2013. In that proceeding, MCI claimed that TWE had contravened its continuous disclosure obligations under s 674(2) of the Corporations Act 2001 (Cth) (the Corporations Act) and that it had engaged in misleading or deceptive conduct or conduct that was likely to mislead or deceive in contravention of s 1041H of the Corporations Act by reason of TWE having failed to make timely disclosures to the Australian Securities Exchange (ASX) of certain price sensitive information and having made misleading announcements to the ASX. The core complaint made by MCI in the first MCI proceeding was that, throughout the period from 17 August 2012 to 15 July 2013, TWE concealed the true state of affairs concerning its US inventory which was, in truth, at excessive levels, slow-moving and, in some cases, obsolete. It makes the same allegations in this proceeding.

18    In the first MCI proceeding, the group is defined as “… all persons who acquired ordinary shares in [TWE] on or after 17 August 2012 and who were at the commencement of trading on 15 July 2013 holders of any of those shares”. That definition of the group is the same definition of the group found in MCI’s Statement of Claim filed in this proceeding.

19    In the first MCI proceeding, MCI alleged that TWE’s failure to disclose the true position concerning its US inventory and its publication of misleading and deceptive ASX releases on 17 August 2012 and on 28 February 2013 caused the market price for TWE ED securities prior to 15 July 2013 (when appropriate disclosures were made) to be substantially greater than the true value of those securities. MCI went on to plead that, as a result, MCI and the class members suffered loss and damage because they paid inflated prices for the TWE securities which they purchased in the period from 17 August 2012 to 15 July 2013. It makes the same allegations at pars 21 to 25 of its Statement of Claim filed in this proceeding.

20    In both this proceeding and the first MCI proceeding, MCI’s alleged loss is described as:

… the difference between the prices at which the TWE ED securities were acquired by [MCI] and the Group Members and the prices that would have prevailed at the times of those acquisitions had the information about the US inventory matters been disclosed at those times …

21    In the Jones proceeding, the definition of the group is, in substance, the same as the definition of the group in the first MCI proceeding and in this proceeding. Further, although the latest iteration of the Statement of Claim in the Jones proceeding (the Further Amended Statement of Claim filed on 22 December 2015) is a much longer document than either Statement of Claim filed in the two MCI proceedings, the essence of Mr Jones’ complaints and the consequences of the contraventions alleged by him against TWE are, at core, substantially the same as are alleged by MCI in its proceedings. Mr Jones relies upon a larger number of contraventions and additional causes of action. Notwithstanding those differences, he also relies upon a market-based causation theory as providing the necessary causal link between the contravening conduct alleged against TWE and the loss and damage claimed. Mr Jones is represented by very experienced class action lawyers. He is also well supported by an experienced litigation funder, IMF Bentham Limited.

22    There is no doubt that the case sought to be made in the first MCI proceeding and in this proceeding is comprehensively captured by the case currently pleaded by Mr Jones in the Jones proceeding.

23    It is clear from the judgment of Ferguson JA delivered on 12 December 2014 in the first MCI proceeding (Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited (No 7), unreported, Sup Ct, Vic, Ferguson JA, 12 December 2014) that, by no later than 27 November 2014, Mr Elliott and thus MCI were aware of the existence of the Jones proceeding (see, in particular, her Honour’s remarks at [11]). It is likely that Mr Elliott became aware of the Jones proceeding soon after it was commenced, that is, in early July 2014. I find, therefore, that Mr Elliott and MCI were aware of the existence of the Jones proceeding prior to the date when MCI commenced this proceeding (22 December 2014) and that they had probably been aware of the existence of the Jones proceeding for approximately five months before MCI commenced this proceeding. It is also likely that Mr Elliott and thus MCI knew that the Jones proceeding was on foot at the time when TWE sought leave to appeal from Ferguson J’s refusal to stay the first MCI proceeding. MCI confined itself to opposing TWE’s application for leave to appeal as its primary stratagem in the period from late July 2014 to 22 December 2014. As noted at [6] above, the present proceeding was only commenced as a fallback. MCI had determined to press the first MCI proceeding for so long as the Courts permitted it to do so while at the same time holding this proceeding in abeyance pending the High Court’s decision. Senior Counsel for MCI conceded as much at the hearing of MCI’s Special Leave Application in the High Court (see HCA Transcript 2/20–37).

24    Even if it is established at trial that the price of the relevant securities that would have prevailed on the date when MCI acquired its 140 shares in TWE (1 November 2012) had the truth as to the US inventory been disclosed was $0, MCI’s loss would be $693 plus interest. Further, as explained at [19] above, MCI does not contend that it directly relied upon TWE making appropriate, comprehensive and accurate disclosures as required by the Corporations Act or that it directly relied upon the various positive statements made by TWE which MCI pleads were misleading or deceptive. Rather, MCI relies upon a market-based causation theory as providing the necessary causal link between the alleged contraventions and the losses suffered by it and by the group members.

25    On 6 November 2013, MCI commenced a representative proceeding in the Supreme Court of Victoria against Leighton Holdings Limited (Leighton). On 18 December 2013, it commenced a similar proceeding in the Supreme Court of Victoria against Worley Parsons Limited. On 25 March 2015, it commenced another similar proceeding in the same Court, on this occasion against Myer Holdings Limited. On 1 April 2015, MCI commenced yet another representative proceeding in the Supreme Court of Victoria, on this occasion against UGL Limited. MCI holds a small parcel of shares in each of the companies to which I have just referred. In each of these other proceedings, MCI has made similar claims to those which it had made against TWE in the first MCI proceeding and similar claims to those which it now makes against TWE in this proceeding.

Other Matters

26    The solicitors for TWE made enquiries and conducted searches in relation to Mr Zita and Portfolio Law. Those enquiries and searches proved the following facts and matters:

(a)    Portfolio Law was registered on 29 August 2014. This was after the date when the principal judgment in TWE No 1 was delivered by Ferguson J but before the Court of Appeal’s judgment in that case. It was also soon after TWE filed an application for security for costs in the first MCI proceeding and soon after MCI applied for leave to appeal from the judgment of Ferguson J in TWE No 1.

(b)    From 29 August 2014 up to the date of the hearing before me, the principal place of business of Portfolio Law was Level 3, 362 Little Collins Street, Melbourne.

(c)    At all relevant times, the directors and shareholders of Portfolio Law have been Angela Romeo, Anthony Sica and Anthony Zita.

(d)    Anthony Zita and Angela Romeo retain their connections with another law firm, John V Hayes & Co Pty Ltd. Anthony Sica appears also to practise under the firm name Sica & Co.

(e)    Neither Mr Zita nor Mr Sica has ever conducted a class action proceeding in Australia which can be found in the Case Base database. Nothing in the publicly available marketing material concerning their firms suggests that either of them has any expertise or experience in conducting a class action as solicitor on the record.

27    By letter dated 26 March 2015 sent to Portfolio Law, TWE’s solicitors sought information about Mr Elliott’s role (if any) in connection with this proceeding and information about the involvement of a litigation funder (if any). That letter was ignored.

The Judgment of Ferguson J in the First MCI Proceeding

28    On 21 March 2014, TWE filed an application in the Supreme Court of Victoria seeking an order that the first MCI proceeding be permanently stayed as an abuse of the process of the Court or, alternatively, an order that MCI be restrained from retaining Mr Elliott as its solicitor for so long as the proceeding continued as a class action. That Application was heard by Ferguson J (as her Honour then was) on 16 May 2014 and determined by her Honour on 23 July 2014 (Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd (No 3) [2014] VSC 340). In support of its application that the first MCI proceeding constituted an abuse of process, TWE argued that the predominant purpose of MCI in bringing the proceeding was not to recover damages but rather was to provide a personal financial benefit to Mr Elliott by presenting him with the means to earn substantial fees as the solicitor on the record for the class in respect of which MCI was the lead plaintiff. At the same time, Leighton also sought a permanent stay of its proceeding. Her Honour dealt with both applications in her judgment.

29    At [9]–[11] of her Honour’s Reasons for Judgment, her Honour said:

9    In my opinion, it is probable that the reason for MCI’s existence is to launch proceedings, such as the present proceedings, to enable its sole director and shareholder to earn legal fees from acting as the solicitor for MCI. This conclusion is based on:

(a)    the initial purchase of small parcels of shares in 20 companies on the day that the company was incorporated;

(b)    the subsequent commencement of three group proceedings by MCI, with Mr Elliott acting as its solicitor; and

(c)    the later purchase of similarly small parcels of shares in Treasury, Leighton and WorleyParsons and in another 145 publicly listed companies.

10    Whilst Mr Elliott is acting on a ‘no win, no fee’ basis, it is common knowledge that most litigation settles before judgment and that this is treated as a ‘win’, such that the lawyers’ fees are paid. So much is recognised by Mr Elliott on websites that have been established for each of the group proceedings. In the question and answer section, the following appears under a heading ‘IMPORTANT NOTE FROM MARK ELLIOTT, SOLICITOR FOR THE CLASS ACTION PLAINTIFF, MELBOURNE CITY INVESMENTS LIMITED [sic]’:

Is the case likely to go all the way to Court or to settle earlier?

The overwhelming majority of cases that are issued in the Supreme Court of Victoria (and in every other court) do not go to trial or judgment, but settle earlier. I think this case is likely to settle before judgment as well. However there is the possibility that the case will go to a contested trial and to a judgment and I am preparing the case with the legal team on that assumption.

What will your legal fees be and who will pay them?

If we do not win the case I will not charge any fees and will pay out of my own resources the barristers, expert witnesses and others involved in the case, so there will be no responsibility for any member of the class to pay anything. If the case is successful, then the professional costs of the proceeding (solicitors’ costs, barristers’ fees and the costs of expert witnesses, etc.) will be recovered from the total amount which is recovered from the defendants by judgment or settlement. (The pages from the website were exhibited to affidavits filed in respect of the application.)

11    Leighton submitted that it can be inferred that MCI commenced the proceeding against it for the purpose of having Mr Elliott act as its solicitor so that he could earn fees. Again, it seems to me that this is the probable inference to be drawn in respect of both the Leighton and Treasury proceedings. The quantum of any damages claim being, as I have said, at best less than $700 in each, makes it unlikely that the proceedings were commenced for the purpose of recovering compensation. Another possible, but far less probable, inference would be that MCI is motivated by some general desire to assist shareholders to recover compensation from publicly listed companies which breach the law, or that MCI has some general desire to ensure that publicly listed companies comply with the law. Such inferences may have been likely if MCI had engaged independent solicitors. In circumstances, however, where Mr Elliott acts as the solicitor and has a significant financial interest in doing so, such inferences are less probable than the inference that I draw. They are certainly not inferences of equal probability to the inference that I draw. Again, the absence of evidence from Mr Elliott is something to be taken into account. It gives more comfort in drawing the inference that I do and leads to a conclusion that his evidence would not have helped MCI’s case (Jones v Dunkel (1958) 101 CLR 298, 308 (Kitto J), 312 (Menzies J), 321 (Windeyer J)).

30    At [28]–[29], her Honour said:

28    The Defendants submitted that MCI is not assisted by reference to litigants with a genuine cause of action that they would wish to pursue in any event, because the position is quite different here. They submitted that the only inference open, given the quantum of MCI’s claim, is that MCI would not wish to pursue the proceeding but for the improper purpose. They contended that MCI’s submission to the contrary is untenable and that it is noteworthy that MCI has adduced no evidence to support it when it would have been a simple thing to do so. They also observed that, if the predominant purpose of the litigation were to enable Mr Elliott to earn legal fees, then that purpose is not a by-product of the litigation — it is the predominant purpose which is improper. They contended that the proper purpose of the litigant commencing litigation is an honest desire to recover the relief which is sought in the proceeding. So, they say, the fees charged by solicitors (whether they are acting for themselves or others) are a consequence of litigation; they are not the purpose of the litigation.

29    As I have said above, I have formed the view that MCI commenced the proceeding for the purpose of generating legal fees for Mr Elliott. I agree with the Defendants that that purpose is not a purpose of earning legal fees as a desired by-product of the litigation. It is the predominant purpose [footnote removed].

31    Notwithstanding the findings which her Honour made at [9], [11], [28] and [29] of her judgment, Ferguson J concluded that neither the first MCI proceeding nor the Leighton proceeding was an abuse of the process of the Court. However, her Honour also decided that Mr Elliott ought to be restrained from acting for MCI for so long as it remained the lead plaintiff in the first MCI proceeding and in the Leighton proceeding and that neither proceeding ought to be permitted to continue as a group proceeding for so long as MCI and Mr Elliott continued to act in tandem as plaintiff and solicitor.

32    On 25 July 2014, after Ferguson J had delivered judgment but before orders were made in order to give effect to that judgment, MCI served a Notice of Change of Practitioner. By that Notice, Tan Partners then became MCI’s solicitor on the record in the first MCI proceeding in place of Mr Elliott.

33    On 31 July 2014, Ferguson J accepted certain undertakings the effect of which was to ensure that Mr Elliott took no further part as solicitor for MCI in the first MCI proceeding. In light of those undertakings, her Honour did not make any other substantive orders although it was implicit in the course which her Honour took that she had rejected TWE’s claim for a permanent stay of the first MCI proceeding.

The Appeal from the Judgment of Ferguson J

34    On 14 August 2014, TWE applied to the Court of Appeal for leave to appeal from the decision of Ferguson J not to stay the first MCI proceeding as an abuse of process. The Application for Leave was treated as the hearing of the Appeal.

35    On 22 December 2014, the Court of Appeal by majority (Maxwell P and Nettle JA, as his Honour then was, Kyrou JA dissenting) allowed the Appeal and held that the first MCI proceeding should be permanently stayed upon the ground that it constituted an abuse of process.

36    None of the findings of fact made by Ferguson J were challenged by MCI at the hearing in the Court of Appeal. It follows that the Court of Appeal proceeded upon the basis that the findings of fact made by her Honour at [9], [11], [28] and [29] were correct. By the time that the matter was heard by the Court of Appeal, Mr Elliott was no longer the solicitor on the record for MCI in the first MCI proceeding and had given to the Court the undertakings to which I have referred at [33] above. In the Court of Appeal, only Kyrou JA referred to these changed circumstances. At 137 [74]–[75] in TWE No 1, his Honour said that he would not deal with MCI’s submission that, even if the proceeding constituted an abuse of process at the time when it was commenced by reason of MCI’s predominant purpose of Mr Elliott earning legal fees from acting as the solicitor on the record, once Mr Elliott ceased to be the solicitor on the record, the proceeding was no longer an abuse of process. His Honour did not find it necessary to deal with this submission because he concluded that MCI’s predominant purpose was not improper in any event.

The Court of Appeal Judgment in TWE No 1

37    Maxwell P and Nettle JA commenced their joint judgment by saying:

1    This proceeding is one of a number of class actions brought by the respondent, Melbourne City Investments Pty Ltd (MCI) for the predominant purpose of enabling MCI’s sole director and shareholder (Mr Elliott) to earn legal fees by acting as solicitor for MCI in the proceeding. As counsel for the applicant, Treasury Wine Estates Ltd (Treasury) described it in argument, each of the proceedings is “make work” for a solicitor.

2    The principal question before the judge below was whether, because that is so, the proceeding should be stayed as an abuse of process. Her Honour concluded that there was no abuse of process and refused the application for a stay. At the same time, her Honour ruled that Mr Elliott ought to be restrained from acting for MCI while it was the lead plaintiff in the class actions.

3    Kyrou JA, whose draft reasons we have had the advantage of reading, would refuse leave to appeal from that decision. For reasons which follow, we respectfully disagree. We would grant leave to appeal, allow the appeal and order that the action be stayed permanently.

The findings below

4    The relevant facts are set out in the judgment of Kyrou JA They are not in dispute. On the basis of those facts, her Honour was invited to draw, and did draw, the following inferences:

(a)    MCI was created by Mr Elliott as a vehicle for bringing representative proceedings against listed companies alleging breaches of continuous disclosure obligations;

(b)    MCI would be the representative plaintiff in such proceedings; and

(c)    Mr Elliott would act as its solicitor, and would earn fees from doing so (Melbourne City Investments Pty Ltd v Treasure Wine Estates Ltd (No 3) [2014] VSC 340 at [7] and [8] (reasons)).

38    At 123 [5] in TWE No 1, Maxwell P and Nettle JA observed that Ferguson J had noted (at [11] of her judgment) that, given that the quantum of MCI’s damages claim was less than $700, it was unlikely that the first MCI proceeding had been commenced for the purpose of recovering compensation. Their Honours then continued to refer to the judgment of Ferguson J. At 126 [6], their Honours quoted [29] in the judgment of Ferguson J and said that, on appeal, there was no challenge to any of these findings. At 123 [8], their Honours said that, notwithstanding the earlier findings which her Honour had made, Ferguson J had found that MCI’s immediate purpose in commencing the proceedings had been to obtain pecuniary relief and that success in that endeavour would naturally have led to an award of costs.

39    At 123–124 [9]–[13] in TWE No 1, their Honours said:

Consideration

9    As the law stands, the only legitimate purpose for bringing a proceeding is to vindicate legal rights or immunities by judgment or settlement. Consequently, unless the predominant purpose of bringing a proceeding is a legitimate purpose, the proceeding is an abuse of process and is liable to be stayed (Williams v Spautz (1992) 174 CLR 509 at 533 and 543; 107 ALR 635 at 652 and 660 (Williams)).

10    The question for determination, therefore, is whether MCI’s purpose of “generating legal fees for Mr Elliott” is a legitimate purpose. Plainly enough, generating legal fees does not constitute a purpose of vindicating legal rights or immunities. Obtaining payment of legal costs is but a corollary, or an incident, or a by-product, of the successful vindication of rights.

11    It is necessary, then, to examine the notion of “collateral advantage”. The authorities distinguish between two types of case. On the one hand, a proceeding will not be regarded as an abuse of process by reason only that it is brought for the purpose of taking collateral advantage of any judgment or settlement in vindication of legal rights or immunities which might be obtained in the proceeding. On the other hand, if a proceeding is brought for the predominant purpose of obtaining collateral advantage from the existence of the proceeding as such, as opposed to collateral advantage flowing from any judgment or settlement in vindication of legal rights or immunities which might be obtained in the proceeding, it will be an abuse of process and liable to be stayed (Goldsmith v Sperrings Ltd [1977] 1 WLR 478 at 489–90; [1977] 2 All ER 566 at 574–5 (Goldsmith) per Lord Denning MR; Flower & Hart v White Industries (Qld) Pty Ltd (1999) 87 FCR 134; 163 ALR 744; [1999] FCA 773 at [63]–[64] (Flower)).

12    In our view, the proceeding by MCI against Treasury falls into the second of these categories. What distinguishes the two categories is the use to which the proceeding is put (Williams at CLR 527, 530 and 531; ALR 647, 649 and 650; Maxwell-Smith v S & E Hall Pty Ltd (2014) 86 NSWLR 481; 308 ALR 149; [2014] NSWCA 146 at [41]; Paradise Grove Pty Ltd v Stubberfield [2001] QCA 117). In the present case, MCI is using the cause of action to create an income-generating vehicle for its solicitor. It has no interest in vindicating its rights, or obtaining a remedy, as such.

13     The nature of the cause of action — as a claim based on an alleged breach of disclosure requirements — is immaterial to MCI’s purpose. Its sole purpose has only ever been to create for itself — in this case, by acquiring a small parcel of shares — a cause of action of sufficient merit to induce the defendant company to pay Mr Elliott’s fees.

40    The statement of principle set out at 123 [9] was supported by references to Williams v Spautz (1992) 174 CLR 509 (Spautz) at 533 and at 543.

41    At 124 [14], their Honours held that the case before the Court was a clear example of an abuse of process. They said that the processes of the Court do not exist (and are not to be used) merely to enable income to be generated by solicitors. They held that the processes of the Court exist in order to enable legal rights or immunities to be asserted and defended.

42    At 124–125 [15]–[18], their Honours referred to Spautz at 526–527 and emphasised the point that the critical distinction between a proceeding which is an abuse of process and one which is not lies in the use to which the relevant proceeding is put. In the case of MCI in the first MCI proceeding, MCI had no wish, and no need, to prosecute its claims against TWE to conclusion. The question of ultimate success after a trial was immaterial to MCI’s purpose. It had no interest in recovering the paltry sum of $700. Using the words of Mason CJ, Dawson, Toohey and McHugh JJ in Spautz, it was no part of MCI’s purpose to receive “a result for which the law provides in the event that the proceedings terminate in [its] favour” (at 125 [18]).

43    At 125 [19], their Honours said:

That conclusion is unaffected by the fact that, in order to generate maximum fee income for Mr Elliott, the cause of action had to be strong enough to create the risk for the defendant company that it might be liable to pay costs. All that was needed to make this “vehicle” suitable for the purpose of generating costs was that any claim issued on behalf of MCI be sufficiently arguable to encourage the defendant to negotiate a settlement and pay MCI’s costs.

44    At 125 [20], their Honours held that an appropriate analogy was Flower & Hart v White Industries (Qld) Pty Ltd (1999) 87 FCR 134. In that case, the plaintiff had no interest in securing the remedy sought. Rather, its purpose was to delay. The proceeding had been commenced for that purpose.

45    Maxwell P and Nettle JA ultimately held that MCI had instituted the first MCI proceeding not in order to vindicate the right to compensation which it asserted in that proceeding but rather in order to produce legal fees for its solicitor (Mr Elliott).

46    At 126 [22], their Honours expressed their conclusion in the following terms:

Ultimately, the policy considerations which inform the law relating to abuse of process are twofold: to ensure that the processes of the court are used fairly, and to maintain public confidence in the ability of the court to function in that way (Williams at CLR 520; ALR 641). In this case, there is a palpable unfairness in a defendant being brought to court for the predominant purpose of enriching the plaintiff’s solicitor, and the community’s confidence would undoubtedly be shaken if that were held to be a legitimate purpose for bringing proceedings.

47    Having accepted as a fact that MCI had been created by Mr Elliott as a vehicle for bringing representative proceedings against listed companies alleging breaches of continuous disclosure obligations and that the first MCI proceeding had been instituted by MCI for the predominant purpose of enabling Mr Elliott to earn legal fees by acting as the solicitor for MCI in that proceeding, the majority went on to hold that that predominant purpose was improper and that the proceeding was an abuse of process and liable to be permanently stayed. They held that the predominant purpose of generating legal fees for Mr Elliott was a purpose intended to obtain a collateral advantage from the mere existence of the proceeding as such, and thus improper, as distinct from a collateral advantage flowing from any judgment or settlement in vindication of legal rights or immunities which might be obtained in the proceeding, which was a legitimate purpose. Thus, the critical matter upon which the Court’s reasoning was founded was the finding of fact that the predominant purpose of MCI in instituting the first MCI proceeding was to enable Mr Elliott to earn legal fees by acting as the solicitor for MCI in that proceeding.

48    Kyrou JA dissented.

49    At 133 [57] in TWE No 1, his Honour said:

The question of whether the purpose of bringing a proceeding is improper must be assessed in the context of statements in the authorities that the legitimate purpose for bringing a proceeding is the protection or vindication of particular legal rights or immunities (Williams at CLR 532; ALR 651; White Industries (Qld) Pty Ltd v Flower & Hart (unreported, FCA, Goldberg J, 14 July 1998) at 102 (White Industries); Flower & Hart v White Industries (Qld) Pty Ltd (1999) 87 FCR 134; 163 ALR 744; [1999] FCA 773 at [63] and [64] (Flower)).

50    His Honour then referred to and discussed the decision of the Privy Council in Crawford Adjusters (Cayman) Ltd v Sagicor General Insurance (Cayman) Ltd [2014] AC 366 (Crawford Adjusters). In that case, Lord Wilson JSC approved a statement by Isaacs J in Varawa v Howard Smith Co Ltd (1911) 13 CLR 35 (Varawa) that a purpose is improper if it is “entirely outside the ambit [emphasis added] of the legal claim on which the court is asked to adjudicate” (Varawa at 91). At 422 [149] in Crawford Adjusters, Lord Sumption JSC described an improper purpose as a “purpose of obtaining some wholly extraneous benefit other than the relief sought and not reasonably flowing from or connected with the relief sought”.

51    At 134 [59]–[63] in TWE No 1, Kyrou JA said:

59    There is a distinction between bringing proceedings to a successful conclusion, so as to take advantage of an entitlement or benefit which the law gives the litigant in that event, and bringing proceedings when the purpose is not to prosecute them to a conclusion but to use them as a means of obtaining some advantage for which they are not designed or some collateral advantage beyond what the law offers (Williams at CLR 526–7; ALR 647; Klement v Randles [2010] VSCA 336 at [32]).

60    Where a proceeding is instituted for the purpose of vindicating a right but with the aim of settling the claim before trial, the proceeding is not an abuse of process (Williams at CLR 533 and 543; ALR 652 and 660; White Industries at 102; Flower at [63]). In Crawford Adjusters, Lord Wilson JSC rejected the proposition that the bringing of a proceeding in the hope of settling it rather than securing a judgment is improper. His Lordship said (at [64]):

[64]    But the settlement of an action is often reached on terms which, had it proceeded, the court could not have ordered; and not infrequently claimants reasonably initiate actions in the hope that some such settlement might eventuate. In Goldsmith v Sperrings Ltd … Bridge LJ neatly allowed for this possibility in suggesting … that

“when a litigant sues to redress a grievance no object which he may seek to obtain can be condemned as a collateral advantage if it is reasonably related to the provision of some form of redress for that grievance.” (Crawford Adjusters at [64] (citations omitted)).

61     In Williams, the plurality referred to Goldsmith v Sperrings Ltd ([1977] 1 WLR 478; [1977] 2 All ER 566 (Goldsmith)) and agreed with the doubt expressed by Bridge LJ as to whether an abuse of process would exist where a litigant with a genuine cause of action which the litigant intends to pursue has an ulterior purpose in view as a desired by-product of the litigation (Williams at CLR 522; ALR 643)

62    The onus of satisfying the court that there is an abuse of process lies on the party alleging it. The onus is a heavy one and the power to grant a permanent stay is one to be exercised only in the most exceptional circumstances (Williams at CLR 529; ALR 649).

63     If a proceeding is an abuse of process, there is no discretion to refuse a stay (Batistatos at [7]).

52    At 135 [65], his Honour said:

In my opinion, the judge correctly applied the principles summarised at [53]–[63] above. Fundamentally, this is because an order for costs is at the discretion of the court and such an order ordinarily follows from pursuing litigation to a successful conclusion rather than being independent of, or collateral to, such success (The court’s power to award costs is set out in ss 33ZD and 33ZJ of the Act).

53    At 135–136 [67]–[68], his Honour went on to say:

67    MCI could not achieve its predominant purpose of earning fees for Mr Elliott unless it pursues this proceeding to a successful conclusion and obtains an order for costs from the court or negotiates a favourable settlement which is approved by the court. The outcome of the proceeding, the nature and scope of any costs order, and the question of whether a settlement should be approved are matters to be determined by the court in accordance with well-established legal principles. A costs order cannot be pursued by MCI separately from the substantive relief sought in the proceeding. Likewise, there would have to be very good reasons for the court to approve a settlement which merely involves payment of MCI’s costs. In other words, the legal process contains robust safeguards against abuse.

68    It follows that the judge’s analysis as set out at [41] above is correct. Her Honour’s reference to immediate and ultimate purposes simply sought to explain that, while the substantive relief sought in the proceeding was a means to an ultimate end, both the means and the ultimate end were standard and legitimate components of any litigation. Similar language was used by the plurality in Williams (Williams at CLR 526–7; ALR 647). Given that costs cannot be awarded without a court order and such an order is usually not made unless a plaintiff is successful in obtaining substantive relief, there is nothing improper about a party commencing a proceeding which has legal merit for the purpose of obtaining such relief and such an order, even if the predominant purpose is to obtain such an order. This is because that predominant purpose cannot be achieved without the court being satisfied that it is appropriate to award costs.

54    At 137 [77], his Honour concluded that the decision of Ferguson J to refuse to grant a permanent stay of MCI’s case was neither wrong nor attended by sufficient doubt to warrant the grant of leave to appeal. Therefore, his Honour would have refused leave to appeal.

MCI’s Application for Special Leave to Appeal to the High Court

55    As I have already mentioned (at [5] above), MCI’s Application for Special Leave to Appeal to the High Court was heard and determined by that Court (Hayne and Keane JJ) on 15 May 2015. This was after I had reserved my decision upon the present applications. At HCA Transcript 10, Hayne J said:

The issues which the applicant seeks to agitate in this Court have been rendered substantially academic by the applicant’s decision to institute a second proceeding. In any event we are not persuaded that an appeal to this Court would enjoy sufficient prospects of success to warrant a grant of special leave. Special leave to appeal is refused with costs.

56    The Court did not call upon Counsel for TWE before dismissing MCI’s Application for Special Leave to Appeal.

57    In argument before the High Court, Senior Counsel for MCI submitted that:

(a)    It was not the law in Australia that the only legitimate purpose for bringing a proceeding is to vindicate legal rights or immunities by judgment or settlement as Maxwell P and Nettle JA stated in the first sentence of 123 [9] in TWE No 1 of their Honours’ judgment;

(b)    It is not the law in Australia that, if a proceeding is brought for the predominant purpose of obtaining collateral advantage from the existence of the proceeding as such, as opposed to collateral advantage flowing from any judgment or settlement in vindication of legal rights or immunities which might be obtained in the proceeding, it will be an abuse of process and liable to be stayed (as to which see the last sentence of 124 [11] in TWE No 1 in the majority judgment);

(c)    While it must be accepted that the first MCI proceeding was instituted for the purpose of generating fees for Mr Elliott, that purpose was not an improper purpose and the institution of the first MCI proceeding for that purpose was not an abuse of process because costs would only be payable by TWE if it agreed to pay costs as part of a settlement or if the Court made an order to that effect consequent upon success by MCI in its claims for substantive relief; and

(d)    Because the first MCI proceeding was a representative proceeding under Pt 4A of the Supreme Court Act, there was never any possibility of Mr Elliott recovering anything whether by way of judgment or settlement or in respect of legal costs without the sanction and approval of the Court.

58    These arguments did not find favour with the Court.

59    At the commencement of the hearing of MCI’s Special Leave Application, Hayne J observed that the issue sought to be raised by MCI had been rendered “moot” or “effectively academic” by the institution of this proceeding. That thinking was ultimately reflected in the brief reasons given by the Court for not granting special leave (as to which, see [55] above).

TWE’s Contentions in this Court

60    TWE filed a Written Submission dated 27 April 2015 in support of its ultimate proposition that this proceeding should be dismissed or permanently stayed on the ground that it is an abuse of process. It also supplemented those submissions with oral submissions made at the hearing before me.

61    In broad terms, TWE submitted that this proceeding is an abuse of process because:

(a)    It has been brought for an illegitimate or collateral purpose;

(b)    To allow it to remain on foot would be unjustifiably oppressive to TWE; and/or

(c)    To allow it to remain on foot would bring the administration of justice into disrepute.

62    These three bases were identified by the High Court in PNJ v The Queen (2009) 252 ALR 612 (PNJ) at 613 [3] as well-established available alternative bases for the Court’s finding that a particular proceeding constitutes an abuse of process.

Improper Purpose

Issue Estoppel

63    In support of its abuse of process arguments, TWE claimed that MCI was estopped from asserting anything to the contrary of the following findings of fact and law, all of which were said to have been necessarily established as the legal foundation or justification of the Court of Appeal’s conclusion that the first MCI proceeding was an abuse of process, including:

(a)    The statement of legal principle made by the majority at 123 [9] in TWE No 1 to the effect that:

… the only legitimate purpose for bringing a proceeding is to vindicate legal rights or immunities by judgment or settlement.

(b)    The second statement of principle made by the majority at 123 [9] in TWE No 1 to the effect that:

… unless the predominant purpose for bringing a proceeding is a legitimate purpose, the proceeding is an abuse of process and is liable to be stayed.

(c)    The finding of fact to the effect that, in the first MCI proceeding, MCI was using that proceeding to create an income-generating vehicle for its solicitor, Mr Elliott. MCI’s purpose in suing was not to vindicate the right to compensation asserted by it in the first MCI proceeding but rather to produce legal fees for Mr Elliott in his capacity as its solicitor.

(d)    The finding of fact that the nature of the pleaded cause of action was immaterial to MCI’s purpose.

(e)    The finding of fact that the question of ultimate success was also immaterial to MCI’s purpose. MCI had no interest in recovering the relatively de minimis sum of $700.

(f)    The finding of mixed fact and law that, by commencing the first MCI proceeding for the predominant purpose of enriching its solicitor, and not for the purpose of vindicating legal rights or immunities by judgment or settlement, MCI had abused the processes of the Court.

64    TWE contended that each of the issues or matters to which I have referred at [63] above constituted an issue estoppel against MCI. In support of that proposition, TWE relied upon the statements of principle made by Dixon J (as his Honour then was) in Blair v Curran (1939) 62 CLR 464 at 531–532; by Barwick CJ in Ramsay v Pigram (1968) 118 CLR 271 at 276; and by the High Court in Kuligowski v Metrobus (2004) 220 CLR 363 (Kuligowski) at 373 [21] and 379 [40].

65    TWE submitted that there are three requirements for the creation of an issue estoppel, namely:

(a)    The same question must necessarily have been decided in the first matter;

(b)    The judicial determination which is said to create the relevant estoppel must have been final, conclusive and “on the merits”; and

(c)    The parties to the judicial determination or their privies must be the same persons as the parties to the proceedings in which the estoppel is raised or their privies,

all of which were satisfied in the present case.

66    TWE also contended that an issue estoppel can arise in respect of either a factual determination or a legal determination made in a prior judicial decision between the same parties or their privies.

67    TWE argued that the requirement that the earlier decision be final and conclusive may be satisfied even though, technically speaking, the earlier decision may have been interlocutory in form. TWE went on to submit that, in the present case, the decision of the Court of Appeal in TWE No 1 to the effect that the first MCI proceeding was an abuse of process was plainly a decision which was final and “on the merits” because the decision established certain facts as proved or not in dispute, set out the relevant principles of law and expressed a conclusion with regard to the effect of applying those principles to the factual situation concerned (The Sennar (No 2) [1985] 1 WLR 490 at 499 per Lord Brandon). For all intents and purposes, given that MCI’s appeal rights from the Court of Appeal’s decision in the first MCI proceeding have now been exhausted, the Court of Appeal’s decision has finally determined the claims for relief made by MCI in the first MCI proceeding by staying that proceeding permanently.

68    TWE also submitted that, even if, contrary to its submissions, no issue estoppel has arisen in the present case because the decision of the Court of Appeal was not final and conclusive in the relevant sense, it can still be relied upon as finally determining various issues as between MCI and TWE within the meaning of the principles discussed by Edmonds J in Windsor v Sydney Medical Service Co-operative Ltd (No 2) [2009] FCA 704 (Windsor) at [29]. TWE emphasised the findings of fact and law set out at 123–125 [5], [6], [9], [10], [12], [13], [14], [18] and [20] of the judgment of the majority in TWE No 1, the effect of which is summarised at [63] above.

69    The first group of submissions made by TWE in support of the proposition that the Court should conclude that this proceeding has not been brought by MCI for the predominant purpose of vindicating legal rights or immunities by judgment or settlement and has therefore been brought for an illegitimate purpose focussed on the matters in respect of which TWE contended that MCI was estopped (as to which see [63] above). In respect of these matters, TWE submitted that it was not necessary for it to establish MCI’s actual predominant purpose in bringing this proceeding and that it was sufficient if TWE established that, whatever MCI’s predominant purpose might be, it was not to vindicate legal rights or immunities. TWE emphasised the fact that the cause of action and relief claimed in each of the two MCI proceedings brought against it were identical.

70    TWE placed particular reliance upon the findings of fact made by Ferguson J and accepted by the Court of Appeal that the nature of the pleaded cause of action in the first MCI proceeding was immaterial to MCI’s purpose and that the question of ultimate success in that proceeding was also immaterial to MCI’s purpose. In addition, TWE relied upon the finding that MCI had no interest in recovering the paltry sum of $700 in the first MCI proceeding.

71    Alternatively, TWE submitted that, if it were open to MCI to explain why the particular findings accepted by the Court of Appeal and relied upon by TWE had no application in the present case, it had chosen not to do so. In those circumstances, so it was submitted, the Court should infer that the circumstances which led to the relevant findings were still in play.

Other Arguments (Improper Purpose)

72    Next, it was submitted by TWE that I should follow the decision of the Court of Appeal in TWE No 1 as a matter of precedent. TWE submitted that I should apply the relevant principles of law explained by the majority in the Court of Appeal and also apply the reasoning of the majority in order to arrive at the same conclusion as that to which that Court came in TWE No 1.

73    TWE then moved on to make a series of submissions to the effect that, even if MCI was not estopped from acting inconsistently with the findings set out at [63] above, I should nonetheless infer from the evidence before me that MCI’s predominant purpose in bringing this proceeding was not to vindicate legal rights or immunities by judgment or settlement but to benefit Mr Elliott financially other than by way of an award of damages to MCI. In support of this submission, TWE relied upon the following matters:

(a)    The paltry return to MCI itself by way of damages or settlement did not, on any rational basis, justify the commencement or maintenance of the present proceeding. The costs of litigating the issues raised in the present proceeding and the risk of an adverse costs order would plainly militate against pursuing this proceeding to judgment or settlement;

(b)    If MCI is unsuccessful in the present proceeding, it will not be able to meet any order for costs and will ultimately be placed into liquidation;

(c)    The material placed on MCI’s website by Mr Elliott in respect of the first MCI proceeding makes clear that, in the event that MCI is not successful in either proceeding, Mr Elliott will pay the lawyers and experts involved in the case on behalf of MCI out of his own resources;

(d)    The legal fees to be earned by the solicitor for MCI in the present proceeding are likely to be very substantial. It is inherently improbable that Mr Elliott intends to permit all of those legal fees to be earned by Portfolio Law given that that firm has had no experience in class action litigation. The Court should infer that Mr Elliott will derive some benefit from the conduct of the present proceeding; and

(e)    MCI’s business model or scheme is to acquire small parcels of shares in listed companies so as to be in a position to launch legal proceedings by way of shareholder class actions against such companies at a later time notwithstanding that the damages likely to be claimed by MCI in any such proceeding are de minimis and could not on any rational basis justify the costs or the risk of an adverse costs exposure associated with the bringing of such proceedings. It is unlikely that this business model has been abandoned as a result of the Court of Appeal’s decision in TWE No 1. The likelihood is that it has been adapted. It must be remembered that MCI is maintaining several other proceedings against other defendants alleging substantially the same contraventions of the law as are alleged in this proceeding.

74    TWE submitted that the Court should draw an adverse inference against MCI for the reasons explained at [73] above and also because MCI has failed to adduce evidence as to its actual purpose in bringing the present proceeding. MCI has effectively hidden from scrutiny any material that might be used to cast light upon its actual predominant purpose in commencing this proceeding. The Court should infer that Mr Elliott is deriving some financial benefit from this proceeding other than solely in his capacity as the shareholder and controller of MCI. Why else would a corporation in the hands of a rational human being take expensive and risky proceedings in order to recover a few dollars?

75    TWE then submitted that, if it were necessary for it affirmatively to establish MCI’s predominant purpose in bringing this proceeding (which it submitted it was not obliged to do) then it urged the Court to draw the inference that MCI’s predominant purpose was to enable Mr Elliott to obtain a payment, remuneration or other financial benefit as a consequence of the bringing of the proceeding or the conduct or outcome of the proceeding. That benefit did not necessarily need to take the form of legal fees as the solicitor on the record for MCI but could be obtained by other means and through other arrangements. TWE submitted that, in all of the circumstances established before me, the logical inference is that Mr Elliott is deriving some other undisclosed collateral benefit from this proceeding notwithstanding that he is no longer MCI’s solicitor on the record. I pause to note that Mr Elliott was never MCI’s solicitor on the record in this proceeding.

76    TWE then submitted that the failure by Mr Elliott to lead any evidence as to MCI’s purpose coupled with the other facts and matters proven constitutes a sufficient basis for the necessary inferences to be drawn.

Unjustifiable Oppression

77    TWE submitted that it is well established under Australian law that prima facie it is vexatious and oppressive (and therefore an abuse of process) for a second or subsequent action to be commenced in a court in Australia if an action between the same parties is already pending with respect to the same subject matter in an Australian court. It submitted that, although the first MCI proceeding has now been stayed, it is still on foot and thus engages the relevant principles.

Bringing the Administration of Justice into Disrepute

78    TWE argued that the predominant purpose of MCI in bringing the present proceeding is still to benefit Mr Elliott financially by some undisclosed method other than by the recovery of damages in circumstances where the predominant purpose is kept secret from the Court and from TWE.

79    It must be an abuse of process, so TWE submitted, for MCI to have commenced this proceeding whilstever the first MCI proceeding remains on foot.

80    In support of this argument, TWE also argued that the commencement of the present proceeding is just a device to circumvent the effect of the Court of Appeal’s decision in TWE No 1.

MCI’s Contentions

Improper Purpose

81    In relation to issue estoppel, MCI relied upon the statement of principle approved by the High Court in Kuligowski at 379 [40]. It then submitted that one of the requirements for issue estoppel is that the precise matter at issue must already have been necessarily and directly decided by the relevant tribunal in the earlier decision and that the issue thus determined, as distinct from the cause of action in relation to which it arose, must have been identical in each case.

82    MCI submitted that, in the present case, the precise matter in question (namely whether MCI has committed an abuse of process on several different bases) was not directly decided by the Court of Appeal in the first MCI proceeding. It argued that the facts in the present proceeding are fundamentally different from those in the first MCI proceeding because Mr Elliott has never been the solicitor on the record for MCI in this proceeding. The vice in the first MCI proceeding was that MCI had brought that proceeding for the predominant purpose of allowing Mr Elliott to earn substantial fees as its solicitor. That circumstance has never been in play in relation to this proceeding. That which is precluded by the Court of Appeal’s decision in TWE No 1 is the institution of any fresh proceeding by MCI the predominant purpose for which is to enable Mr Elliott to earn fees having regard to the principles of law articulated and applied by the majority judgment in TWE No 1.

83    MCI then submitted that this Court should not follow the reasoning of the majority of the Court of Appeal in any event.

84    It was submitted on behalf of MCI that the decision of the majority in the Court of Appeal in TWE No 1 was plainly wrong, that it created a new and indeterminate category of abuse of process in Australian law and that it contradicted the ratio decidendi of the High Court in Spautz. It was contended on behalf of MCI that, under existing Australian law, as stated in Spautz, collateral abuse of process occurs only if the purpose of the proceeding is not to pursue it to its conclusion but rather to use it to obtain an outcome that is not within the scope of any remedy that the proceeding permits, whether by judgment, settlement or otherwise. It was submitted on behalf of MCI that, if the end sought by the plaintiff (ie the purpose of the proceeding) is within the scope of any remedy or outcome which the proceeding allows, there is no abuse of process. In making this latter submission, Senior Counsel for MCI emphasised that there is a difference between motive and purpose and that MCI’s motive for commencing the present proceeding is irrelevant. MCI contended that the majority in the Court of Appeal erred when they explained the relevant principles at 123 [9] in TWE No 1 because their explanation was founded upon the proposition that there can only be one legitimate purpose for commencing a proceeding. The true position is that there may be more than one legitimate purpose. The true principle is that the party alleging abuse of process must establish that the predominant purpose of the plaintiff for instituting the proceeding was not to pursue the litigation but to use it for a collateral end not within the potential range of remedies that could reasonably relate to an action of that nature.

85    Senior Counsel for MCI then developed these submissions by reference to the High Court’s judgment in Spautz. He also submitted that there was no evidence before me from which the Court could conclude that Mr Elliott was deriving any collateral benefit from this proceeding.

86    MCI argued that there were three errors in the reasoning which led the majority in the Court of Appeal in TWE No 1 to conclude that MCI’s sole purpose in commencing the first MCI proceeding was to create for itself a cause of action of sufficient merit to induce TWE to pay Mr Elliott’s fees.

87    First, MCI submitted that, if the Court of Appeal’s conclusion as to MCI’s purpose was correct, that purpose could only be achieved if the case had merit and was successful.

88    Second, MCI submitted that the mere acquisition of a small parcel of shares in TWE did not, of itself, provide a necessary cause of action to MCI.

89    Third, MCI argued that the Court of Appeal erred when it concluded that MCI had no wish, and no need, to prosecute its claims against TWE to their conclusion. MCI argued that the fact that Mr Elliott had publicly expressed the view that the first MCI proceeding might settle before judgment did not make either the cause of action or the question of ultimate success immaterial. The conclusion reached by the majority failed to pay due regard to the fact that no settlement of a class action in the Supreme Court of Victoria can occur without the sanction of that Court. In addition, the majority’s reasoning ignored the fact that the law has long recognised that cases may be settled on terms which are different from, or go well beyond, the orders that could reasonably be made by a court in a judgment.

90    The proper outcome in the first MCI proceeding should have been that which was ordered by Ferguson J and approved by Kyrou JA, namely, restraining Mr Elliott but finding no abuse of process.

Unjustifiable Oppression

91    MCI took issue with TWE’s submissions in support of its unjustifiable oppression argument. Contrary to the submissions of TWE, MCI submitted that, once the first MCI proceeding was permanently stayed, that proceeding was brought to an end. It then submitted that there is no abuse of process where a new proceeding is commenced following the termination of prior proceedings (as to which see Thirteenth Corp Pty Ltd v State (2006) 232 ALR 491 per Jessup J). MCI also submitted that there was a fundamental contradiction between the position adopted by TWE for the purpose of its issue estoppel arguments (viz that the first MCI proceeding has been finally determined) and the position adopted for the purpose of its unjustifiable oppression argument (viz that the first MCI proceeding is still on foot).

Bringing Administration of Justice into Disrepute

92    MCI met this argument advanced by TWE by submitting that nothing of substance was added to TWE’s submissions by the arguments advanced by it under this heading. MCI submitted that, under this heading, TWE merely repeated the same points made by it in support of its arguments based upon issue estoppel and collateral abuse of process.

Orders 2 and 3

93    The only specific submission made by TWE in support of Orders 2 and 3 claimed in its Interlocutory Application filed in this Court was made in par 60 of its Written Submissions. In that paragraph, TWE said:

The Court may consider that these alternative orders can be made, instead of an order for a permanent stay or dismissal, although this is only put as a possible but not preferred result.

94    No specific submissions in support of these orders were made orally by TWE.

95    Notwithstanding that no submission was specifically directed by TWE to these claims for relief, I took TWE to be relying upon all of the submissions which it made in support of its abuse of process claim as justifying the making of one or other of these orders.

96    MCI too did not address specific submissions to TWE’s claims for orders in the terms of Orders 2 and 3.

Discussion and Decision (Abuse of Process)

97    The High Court has said on more than one occasion that it is not possible to describe exhaustively what will constitute an abuse of process (Batistatos v Roads & Traffic Authority of New South Wales (2006) 226 CLR 256 (Batistatos) at 265–267 [9]–[15] per Gleeson CJ, Gummow, Hayne and Crennan JJ and the cases cited in those paragraphs; PNJ at 613 [3] per French CJ, Gummow, Hayne, Crennan and Kiefel JJ).

98    In Ridgeway v The Queen (1995) 184 CLR 19 (Ridgeway) at 74–75, Gaudron J observed that the courts have resisted laying down hard and fast rules as to what constitutes an abuse of process. Her Honour continued (at 75):

Abuse of process cannot be restricted to “defined and closed categories” (Hamilton v Oades (1989) 166 CLR 486 at 502, citing Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 639 and Tringali v Stewardson Stubbs & Collett Ltd (1966) 66 SR (NSW) 335 at 340, 344. See also Jago v District Court (NSW) (1989) 168 CLR 23 at 25-26, 47-48, 74; Walton v Gardiner (1993) 177 CLR 378 at 393-395; Rogers v The Queen (1994) 68 ALJR 688 at 689, 706; 123 ALR 417 at 419, 443) because notions of justice and injustice, as well as other considerations that bear on public confidence in the administration of justice, must reflect contemporary values and, as well, take account of the circumstances of the case (See Dietrich v The Queen (1992) 177 CLR 292 at 328-329, 364). That is not to say that the concept of “abuse of process” is at large or, indeed, without meaning. As already indicated, it extends to proceedings that are instituted for an improper purpose (As to what constitutes improper purpose, see Williams v Spautz (1992) 174 CLR 509 at 526-530, 532-537, 553-556; see also at 543-551) and it is clear that it extends to proceedings that are “seriously and unfairly burdensome, prejudicial or damaging” (Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 at 247) or “productive of serious and unjustified trouble and harassment” (Hamilton v Oades (1989) 166 CLR 486 at 502).

99    In Ridgeway, at 46, Brennan J affirmed the views which he had expressed in Jago v District Court (NSW) (1989) 168 CLR 23 (Jago) at 47–48 where his Honour explained that:

An abuse of process occurs when the process of the court is put in motion for a purpose which, in the eye of the law, it is not intended to serve or when the process is incapable of serving the purpose it is intended to serve.

100    In the same case, at 60, Toohey J said that:

The concept of abuse of process is not a precise one. Nor can it be; it gives effect to a concern on the part of courts that may arise in a variety of circumstances. But at the heart of the concept lies the legitimate power of the courts to stay prosecutions brought in exercise of the prerogative of the Crown. In Connelly v Director of Public Prosecutions ([1964] AC 1254 at 1354) Lord Devlin addressed the fundamental issue in this way:

“Are the courts to rely on the Executive to protect their process from abuse? Have they not themselves an inescapable duty to secure fair treatment for those who come or are brought before them? To questions of this sort there is only one possible answer. The courts cannot contemplate for a moment the transference to the Executive of the responsibility for seeing that the process of law is not abused.”

That passage asserts the power of the courts to act; it does not, and does not purport to, identify the scope of the power.

Generally, abuse of process derives from a concern that judicial process be not invoked for an improper purpose (the issue in Williams v Spautz) and that the process be not abused in a way that interferes with the conduct of a fair trial (the issue in Jago v District Court (NSW) and Walton v Gardiner). There are distinct aspects of abuse of process in that proceedings may be stayed if it appears that they have been brought for an improper purpose even though there is no reason to doubt that the accused will receive a fair trial. Equally, an accused may not receive a fair trial, by reason of delay for instance, though there is no improper purpose in bringing the proceedings. But the power of a superior court to stay its proceedings on grounds of abuse of process is not confined to those situations (Walton v Gardiner (1993) 177 CLR 378 at 395).

101    At 61, his Honour observed that a finding of abuse of process does not necessarily lead to a stay of proceedings and that there may be other ways of remedying the abuse.

102    In PNJ at 613 [3], the Court said:

It is not possible to describe exhaustively what will constitute an abuse of process (Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256; 27 ALR 425; 45 MVR 288; [2006] HCA 27 at [9]–[15] (Batistatos) per Gleeson CJ, Gummow, Hayne and Crennan JJ). It may be accepted, however, that many cases of abuse of process will exhibit at least one of three characteristics (Rogers v R (1994) 181 CLR 251 at 286; 123 ALR 417 at 443–4; [1994] HCA 42 per McHugh J. See also Batistatos at [15] per Gleeson CJ, Gummow, Hayne and Crennan JJ):

(a)    the invoking of a court’s processes for an illegitimate or collateral purpose;

(b)    the use of the court’s procedures would be unjustifiably oppressive to a party; or

(c)    the use of the court’s procedures would bring the administration of justice into disrepute.

103    Although PNJ was a criminal proceeding, the remarks made by the Court were not limited to criminal proceedings but were intended to apply to both civil and criminal proceedings. This much is made clear from the references to Batistatos in the footnotes referred to in [3] of PNJ, Batistatos itself being a civil case and some of the cases discussed in the passages from Batistatos which are referred to in the footnotes to [3] of PNJ also being civil cases. This is consistent with observations made by the Court in Batistatos at 264 [8] and by the majority in Moti v The Queen (2011) 245 CLR 456 at 464 [11].

104    In argument before me in the present case, both parties drew heavily upon the High Court judgment in Spautz.

105    In Spautz, Dr Spautz, who was a Senior Lecturer in the Department of Commerce at the University of Newcastle, commenced an action against that university for wrongful dismissal. Dr Spautz had been dismissed for misconduct constituted by his campaign against another academic who had been appointed as the Chair of Commerce at the same university. Dr Spautz believed that he (Spautz) should have been appointed to that position.

106    Subsequently, Dr Spautz laid criminal informations against various officers of the university alleging a number of offences including criminal conspiracy to defame and conspiracy to injure him without justification and by illegal means. On the application of some of those persons for declarations that particular prosecutions were an abuse of process, the primary judge found that Dr Spautz’s predominant purpose in instituting and maintaining the criminal proceedings was to exert pressure upon the university to reinstate him and/or to agree to a favourable settlement of his wrongful dismissal case. In light of those findings, the primary judge made declarations as sought by the persons against whom the informations had been laid and stayed the prosecutions permanently.

107    On appeal, the New South Wales Court of Appeal overturned the primary judge’s decision. It did so by majority. The leading majority judgment in that Court was delivered by Priestley JA who considered that the governing principle was that supervising courts should restrict use of their power to control abuses of process in relation to criminal proceedings to those cases in which the exercise of the power is the only way of ensuring that an accused person is not deprived of a fair trial by reason of such abuse. His Honour concluded that, on the materials before the Court, the persons against whom the informations had been laid would not have been deprived of a fair trial. The Court of Appeal rejected a challenge to the primary judge’s central findings concerning Dr Spautz’s predominant purpose which I have extracted at [109] and [111] below.

108    Dr Spautz’s opponents then appealed to the High Court. By majority, that Court allowed the appeal. Four judgments were delivered. The first was the judgment of the plurality (Mason CJ, Dawson, Toohey and McHugh JJ). Each of Brennan J (as his Honour then was), Deane J and Gaudron J delivered a separate judgment. Both Deane J and Gaudron J dissented in the result.

109    At 516, the plurality recorded the primary judge’s critical finding in the following terms:

The trial judge’s findings of fact and the conclusions reached by the Court of Appeal

After examining in detail the conduct of Dr. Spautz during his self-proclaimed campaign for justice, Smart J. made this finding of fact:

“The predominant purpose of Dr. Spautz in instituting and maintaining the criminal proceedings, the subject of the present applications, against Profs. Gibbs and Williams and Mr. Morris was to exert pressure upon the University of Newcastle to reinstate him and/or to agree to a favourable settlement of his wrongful dismissal case.” (Emphasis added.)

As Priestley J.A. noted in the Court of Appeal, there was ample material before the trial judge from which he could draw that conclusion.

110    The primary judge also found that Dr Spautz had other purposes in instituting the various criminal proceedings and that most of those purposes were also improper.

111    At 517, the plurality explained the ultimate conclusion of the primary judge in the following terms:

The trial judge expressed his understanding of the concept of abuse of process, which was based on the formulation by Hunt J. in Spautz v. Williams ([1983] 2 N.S.W.L.R., at p. 539), in these terms:

“The essence of an abuse of process action is that the proceedings complained of were instituted and/or maintained for a purpose other than that for which they were properly designed or exist, or to achieve for the person instituting them some collateral advantage beyond that which the law offers, or to exert pressure to effect an object not within the scope of the process. The focus in such a suit is on the purpose for which the proceedings exist, and on the dominant purpose of the person charged with abuse of process in instituting them.”

His Honour then concluded that the fundamental purposes of a criminal defamation prosecution are to punish the defamer and to protect the community and that the dominant purpose of the prosecutor must be to bring the offender to justice. As the respondent’s predominant purpose in bringing the prosecutions, namely, to secure his reinstatement, was improper and ulterior, the trial judge declared each of the relevant proceedings an abuse of process and ordered them stayed permanently.

112    At 518, the plurality said that it is well established that Australian superior courts have inherent jurisdiction to stay proceedings which are an abuse of process. In support of that proposition, their Honours cited Clyne v Bar Association (NSW) (1960) 104 CLR 186 at 201; Barton v The Queen (1980) 147 CLR 75 at 96, 107 and 116; and Jago. The jurisdiction extends to both civil and criminal proceedings.

113    At 521–522, the plurality discussed the power to prevent an abuse of process when the conduct on the part of the claimant in instituting and maintaining the relevant proceeding constitutes oppression. At 522, after referring to Goldsmith v Sperrings Ltd [1977] 1 WLR 478 (Goldsmith), their Honours said that the Court would prevent an abuse of process where, though the process might appear to be entirely proper and correct, it was used for an improper purpose. The particular example with which the plurality dealt at this point in their judgment concerned the case in which the plaintiff does not wish to pursue his or her cause of action to a conclusion because he or she intends to use the proceeding for a collateral and improper purpose.

114    At 522–526, the plurality discussed the relationship between the inherent jurisdiction to prevent an abuse of process and the tort of collateral abuse of process.

115    At 524, the plurality cited with apparent approval the following passage from the judgment of Isaacs J in Varawa (at 91):

In the sense requisite to sustain an action, the term ‘abuse of process’ connotes that the process is employed for some purpose other than the attainment of the claim in the action. If the proceedings are merely a stalking-horse to coerce the defendant in some way entirely outside the ambit of the legal claim upon which the Court is asked to adjudicate they are regarded as an abuse of process for this purpose.

116    At 524–525, the plurality also quoted with apparent approval the statement of principle made by Isaacs J in Dowling v Colonial Mutual Life Assurance Society Ltd (1915) 20 CLR 509 (Dowling) (at 521–522) where his Honour said:

If the object sought to be effected by the process is within the lawful scope of the process, it is a use of the process within the meaning of the law, though it may be malicious, or even fraudulent, and in the circumstances the fraud may be an answer; if, however, the object sought to be effected by means of the process is outside the lawful scope of the process, and is fraudulent, then — both circumstances concurring — it is a case of abuse of that process, and the Court will neither enforce nor allow it to afford any protection, and will interpose, if necessary, to prevent its process being made the instrument of abuse. Grainger v. Hill laid down the distinction.

117    Their Honours then moved on to refer to King v Henderson [1898] AC 720 at 731 (Henderson). Having done so, their Honours observed that the existence of an unworthy or reprehensible motive for bringing the action was not enough and that it must appear that the purpose sought to be effected by the litigant in bringing the proceeding was not within its scope and was improper.

118    At 526–527, the plurality said:

The boundaries of abuse of process

The observations of the Privy Council in King v. Henderson ([1898] A.C., at p. 731) and those of Isaacs J. in Dowling ((1915) 20 C.L.R., at pp. 521-522), to which we referred earlier, represent an attempt to achieve a formulation which keeps the concept of abuse of process within reasonable bounds. To say that a purpose of a litigant in bringing proceedings which is not within the scope of the proceedings constitutes, without more, an abuse of process might unduly expand the concept. The purpose of a litigant may be to bring the proceedings to a successful conclusion so as to take advantage of an entitlement or benefit which the law gives the litigant in that event.

Thus, to take an example mentioned in argument, an alderman prosecutes another alderman who is a political opponent for failure to disclose a relevant pecuniary interest when voting to approve a contract, intending to secure the opponent’s conviction so that he or she will then be disqualified from office as an alderman by reason of that conviction, pursuant to local government legislation regulating the holding of such offices. The ultimate purpose of bringing about disqualification is not within the scope of the criminal process instituted by the prosecutor. But the immediate purpose of the prosecutor is within that scope. And the existence of the ultimate purpose cannot constitute an abuse of process when that purpose is to bring about a result for which the law provides in the event that the proceedings terminate in the prosecutor’s favour.

It is otherwise when the purpose of bringing the proceedings is not to prosecute them to a conclusion but to use them as a means of obtaining some advantage for which they are not designed (In re Majory, [1955] Ch. 600, at pp. 623-624) or some collateral advantage beyond what the law offers (Goldsmith v. Sperrings Ltd., [1977] 1 W.L.R., at pp. 498-499; [1977] 2 All E.R., at pp. 581-582; see also Varawa (1911), 13 C.L.R., at p. 91). So, in Dowling ((1915) 20 C.L.R., at p. 524), Isaacs J. pointed out that “if, for instance, it had been shown that the Society had simply threatened Dowling that unless he did what they had no right to demand from him, namely, give up certain names, they would proceed to sequestration, and they had proceeded accordingly, there would have been in law an abuse of the process”. However, because the Society wished to use the process for the very purpose for which it was designed, there was no abuse of process.

119    At 527–528, their Honours stressed that it is the use of the proceeding which must be examined and which may constitute an abuse of process. They also held that neither the authorities in England nor those in Australia require that there be an improper act as an essential ingredient of the concept of abuse of process.

120    At 528, the plurality said:

In his dissenting judgment in Goldsmith v. Sperrings Ltd., Lord Denning M.R. was of the view that to issue a writ for an improper purpose constitutes without more an abuse of process ([1977] 1 W.L.R., at pp. 489-490; [1977] 2 All E.R., at pp. 581-582). His Lordship appears to have regarded the cases on the tort of collateral abuse of process, including Grainger v. Hill, as supporting this proposition. In this respect, Lord Denning may well have been incorrect. However, his Lordship was right in treating the comments of Lord Evershed M.R., when he delivered the judgment of the Court of Appeal in In re Majory, as supporting the proposition. There, Lord Evershed referred ([1955] Ch., at pp. 623-624) to a general rule “that court proceedings may not be used or threatened for the purpose of obtaining for the person so using or threatening them some collateral advantage to himself, and not for the purpose for which such proceedings are properly designed and exist; and a party so using or threatening proceedings will be liable to be held guilty of abusing the process of the court and therefore disqualified from invoking the powers of the court by proceedings he has abused”. In our view, that is a correct statement of the principle.

121    At 529, the plurality held that it was sufficient that the predominant purpose for the institution and maintenance of the proceeding is an improper purpose in order to found an entitlement to restrain or terminate the proceeding as an abuse of process. The improper purpose need not be the sole purpose for the institution or maintenance of the proceeding. The plurality also held that it was well established that the onus of satisfying the Court that there is an abuse of process lies upon the party alleging it. They said that the onus was “a heavy one” and that the power to grant a permanent stay is one to be exercised only in the most exceptional circumstances.

122    At 530–531, the plurality expressed their ultimate conclusion allowing the appeal in the following terms:

Conclusion

Although the primary judge did not express his findings in terms that the use of the proceedings was for an improper purpose, the findings are so expressed as to make it clear that Dr. Spautz threatened to use the proceedings for an improper purpose and that his commencement and maintenance of the proceedings were, in pursuance of that purpose, undertaken predominantly to that end. There was therefore a relevant use of the proceedings for an improper purpose.

123    Justice Brennan commenced his Reasons for Judgment with the following (at 531):

The jurisdiction of a court to prevent an abuse of its process and the power of a court to mould its procedures to ensure a fair trial are distinct aspects of curial authority (Barton v. The Queen (1980), 147 C.L.R. 75, at pp. 95-96; Jago v. District Court (N.S.W.) (1989), 168 C.L.R. 23). In Jago v. District Court (N.S.W.), this Court considered the power of a court to eliminate or diminish the prejudice created by an unjustifiable delay in bringing an accused person to trial and the manner in which that power should be exercised. That case was concerned with the court’s procedures to ensure a fair trial. In this case, the other aspect of curial authority falls for consideration.

As I said in Jago (at pp. 47-48):

“An abuse of process occurs when the process of the court is put in motion for a purpose which, in the eye of the law, it is not intended to serve or when the process is incapable of serving the purpose it is intended to serve ... Although it is not possible to state exhaustively all the categories of abuse of process, it will generally be found in the use of criminal process inconsistently with some aspect of its true purpose, whether relating to the hearing and determination, its finality, the reason for examining the accused’s conduct or the exoneration of the accused from liability to punishment for the conduct alleged against him. When process is abused, the unfairness against which a litigant is entitled to protection is his subjection to process which is not intended to serve or which is not capable of serving its true purpose.”

124    His Honour then briefly described the criminal proceedings which Dr Spautz had instituted.

125    Then, at 532–533, his Honour said:

… To establish that the proceedings in the Local Court are an abuse of process which the Supreme Court of New South Wales ought to stay (In exercise of its supervisory jurisdiction: see s. 23 of the Supreme Court Act 1970 (N.S.W.) and Herron v. McGregor (1986), 6 N.S.W.L.R. 246, at p. 251), it is necessary to show that the purpose of those respective proceedings — seen as part of an entire criminal process — is not a purpose which they are designed to serve, that is, not a legitimate purpose. But what is meant by purpose when used in reference to a “proceeding”?

Purpose, when used in reference to a transaction, has two elements: the first, a result which the transaction is capable of producing; the second, the result which the person or persons who engage in or control the transaction intend it to produce. Or, to express the concept in different terms, the purpose of a transaction is the result which it is capable of producing and is intended to produce (See the reference to intention in Federal Commissioner of Taxation v. Whitfords Beach Pty. Ltd. (1982), 150 C.L.R. 355, at pp. 370, 381). When the transaction is the commencement or maintenance of a legal proceeding, its purpose is to be ascertained by reference to the intention of the party who commences or maintains it (hereafter “the plaintiff”). The intention of the plaintiff can be proved by what the plaintiff said and did, and from any inference that might be drawn from what was said or done (including the commencing and maintaining of the proceeding) in the circumstances of the case. The testimony of the plaintiff, though admissible to prove intention, is not conclusive.

The purposes which legal proceedings are designed to serve are the protection or vindication of particular legal rights or immunities, the maintenance or affection of particular legal relationships, and the imposition or enforcement of particular legal penalties, liabilities and obligations. The means by which these purposes are achieved in a proceeding consist in the verdict which might be returned or the order which might be made in the proceeding, in the consequences that flow naturally from a verdict that might be returned or from an order that might be made (for example, the vindication of a plaintiff’s reputation flowing from a verdict in a civil action for defamation) and in compromise of the claims made in the proceeding. The achievement of any of the purposes mentioned by any of the means mentioned is within the scope of the remedy for which a proceeding is designed. But a proceeding may be intended to produce and may be capable of producing results that are not within the scope of the remedy.

The possibility of producing results that are not within the scope of the remedy arises from the variety of situations and interests that can be affected by the commencement or maintenance of a proceeding and, in particular, by the burdens, the delay and the publicity of litigation. Where a plaintiff commences or maintains a proceeding with the intention of obtaining a result falling outside the scope of the remedy, a question can arise as to whether the purpose of the proceeding is legitimate or not.

In the early formulation of the test of an abuse of process, emphasis was placed on the scope of the process to determine the legitimacy of the purpose of a proceeding. …

126    After referring to Grainger v Hill (1838) 132 ER 769, Brennan J noted that the criterion adopted by the Court for abuse of process was the character of the result which the plaintiff intended to achieve and that character was to be ascertained by comparing the object which the plaintiff intended to achieve with the scope of the process by which he intended to achieve it.

127    At 533–534, his Honour then discussed Dowling and Henderson. At 534, his Honour held that the pursuit of a legitimate remedy is not converted to an abuse of process by an unworthy and ulterior motive. His Honour then said (at 534–536):

These cases show that a plaintiff’s intention to achieve a result must be distinguished from his motive for commencing or maintaining a proceeding, though the distinction may be elusive. In Bayne v. Baillieu ((1908) 6 C.L.R. 382, at p. 403), O’Connor J. cited with approval a statement by Holroyd J. in a Victorian case (In re Morrissey (1899), 24 V.L.R. 776, at p. 778):

“‘I think that if the object of an act is legal, and there is no wrongful intention in it, but the intention is to do something also legal, founded upon that act — it is perfectly immaterial what the ulterior motive of the party may be — what it may be that prompts him to do the legal act.’”

That principle was held to be applicable to an act done in exercise of a legal right arising under a contract or other instrument in Chapman v. Honig ([1963] 2 Q.B. 502, at p. 520) in which Pearson L.J. said:

“I cannot think of any case in which such an act might be invalidated by proof that it was prompted by some vindictive or other wrong motive. Motive is disregarded as irrelevant.”

In a given case, a distinction may have to be drawn between the purpose of the proceeding and the motive of the plaintiff in commencing or maintaining it (XCO Pty. Ltd. v. Federal Commissioner of Taxation (1971), 124 C.L.R. 343, at pp. 350-351). That distinction depends on a disparity between the plaintiff’s intention and the plaintiff’s motives. Intention relates to the result which the plaintiff desires to obtain by commencing or maintaining the proceeding; motive relates to all the considerations which move that party to commence or maintain the proceeding. The desired result is no doubt an element of the moving considerations, but it does not exhaust those considerations.

In a case where a plaintiff intends to obtain relief within the scope of the remedy available in a proceeding, there is no abuse of process whatever the plaintiff’s motives may be. Isaacs J. said in Dowling ((1915) 20 C.L.R., at pp. 521-522):

“If the object sought to be effected by the process is within the lawful scope of the process, it is a use of the process within the meaning of the law, though it may be malicious, or even fraudulent, and in the circumstances the fraud may be an answer; if, however, the object sought to be effected by means of the process is outside the lawful scope of the process, and is fraudulent, then — both circumstances concurring — it is a case of abuse of that process, and the Court will neither enforce nor allow it to afford any protection, and will interpose, if necessary, to prevent its process being made the instrument of abuse.”

For the reasons given by the majority judgment in this case, his Honour’s reference to fraud should be understood as importing a purpose outside the scope of the remedy and improper.

There is no impropriety of purpose (whatever may be said of motive) when a plaintiff commences or maintains a proceeding desiring to obtain a result within the scope of the remedy, even though the plaintiff has an ulterior purpose — or motive — which will be fulfilled in consequence of obtaining the legal remedy which the proceeding is intended to produce. To amount to an abuse of process, the commencement or maintenance of the proceeding must be for a purpose which does not include — at least to any substantial extent — the obtaining of relief within the scope of the remedy. As Isaacs J. said in Varawa v. Howard Smith Co. Ltd. ((1911) 13 C.L.R. 35, at p. 91):

“the term ‘abuse of process’ connotes that the process is employed for some purpose other than the attainment of the claim in the action. If the proceedings are merely a stalking-horse to coerce the defendant in some way entirely outside the ambit of the legal claim upon which the Court is asked to adjudicate they are regarded as an abuse of process for this purpose.”

Putting to one side, then, the cases where the plaintiff intends to obtain relief within the scope of the remedy, the problematic cases arise when the plaintiff’s purpose is to obtain some benefit, to impose some obligation or to affect some relationship otherwise than by verdict, by order or by compromise of the particular claims made in the proceeding. …

128    At 536–537, his Honour discussed the English decisions of In re Majory [1955] Ch 600 at 623–624 and Goldsmith. After doing so, his Honour said (at 537):

… I would formulate the test in this way: if there be a reasonable relationship between the result intended by the plaintiff and the scope of the remedy available in the proceeding, there is no abuse of process. If there be mixed purposes — some legitimate, some collateral — I would restate his Lordship’s test that “but for his ulterior purpose, [the plaintiff] would not have commenced proceedings at all”. So expressed, the test casts on the other party an onus of proving what the plaintiff would not have done if he had not formed the intention of obtaining a collateral advantage. That onus may be impossible to discharge. If that onus were discharged, the other party would establish that the plaintiff had not commenced or maintained the proceeding for any substantial legitimate purpose. The gravamen of the test, I apprehend, is that the plaintiff did not commence or maintain the proceeding for any substantial legitimate purpose. I would state the test in that way. Substantiality is a matter of degree, ascertained by reference to the intention attributed to the plaintiff in all the circumstances of the case. At the end of the day, the court must determine, by reference to the intention attributed to the plaintiff, not merely whether the collateral purpose of the proceeding outweighs any legitimate purpose but whether the plaintiff entertained any substantial intention that the proceeding should achieve a legitimate purpose.

For these reasons, I would hold that an abuse of process occurs when the only substantial intention of a plaintiff is to obtain an advantage or other benefit, to impose a burden or to create a situation that is not reasonably related to a verdict that might be returned or an order that might be made in the proceeding.

129    His Honour then moved to discuss the application of the relevant principles to the case before the Court. In concluding, his Honour found that the appeal should be allowed and the trial judge’s orders restored.

130    Justice Deane took a different view of the relevant law from the views expressed by the plurality and Brennan J.

131    Justice Gaudron, on the other hand, agreed with the explanation of the relevant principles given by the plurality. At 552–554, her Honour said:

It is convenient to adopt the expression “improper purpose” to describe the kind of purpose that must be established before proceedings or some step in proceedings can be characterized, by reason of the purpose involved, as an abuse of process. And, on that basis, I can at once state my agreement with Mason C.J., Dawson, Toohey and McHugh JJ. that an improper purpose is sufficient, without an improper act, to justify a stay. That, of course, says nothing as to the tort of collateral abuse of process which, I am inclined to think, requires some act amounting to a misuse or attempted or threatened misuse of the process involved. And I agree with their Honours that a stay may be granted on the basis of improper purpose even though there are reasonable grounds for the proceedings or for the taking of the particular step concerned. However, I differ from their Honours in that, in my view, something over and above what is involved in this case is necessary before a purpose can be identified as improper.

The kind of purpose that will indicate that proceedings should be stayed as an abuse of process is the same kind that marks out the tort of collateral abuse of process, they being different remedies deriving from the same law and based on those principles which protect the courts and their processes (In re Majory, [1955] 1 Ch. 600, at pp. 623-624). The tort was recognized by this Court in Varawa v. Howard Smith Co. Ltd. ((1911) 13 C.L.R. 35. For earlier discussion see Bayne v. Ballieu (1908), 6 C.L.R. 382, at p. 401; Bayne v. Blake (1909), 9 C.L.R. 347, at pp. 358-359) and in Dowling v. Colonial Mutual Life Assurance Society Ltd. ((1915) 20 C.L.R. 509). However, in neither of those cases was the tort established. The tort was made out in QIW Retailers Ltd. v. Felview Pty. Ltd. ([1989] 2 Qd R. 245). And in Hanrahan v. Ainsworth ((1990) 22 N.S.W.L.R. 73) it was held that there was sufficient evidence to be left to a jury. These appear to be the only reported cases in this country in which a plaintiff has succeeded on the tort or on some aspect of it. The same pattern can be observed in other jurisdictions, there being few successful claims since Grainger v. Hill ((1838) 4 Bing. (N.C.) 212 [132 E.R. 769]), the case in which the tort was established. Successful claims were made in Gilding v. Eyre ((1861) 10 C.B. (N.S.) 592 [142 E.R. 584]) in the United Kingdom, in Guilford Industries Ltd. v. Hankinson Management Services Ltd. ((1973) 40 D.L.R (3d) 398) in Canada and in Dishaw v. Wadleigh ((1897) 44 N.Y.S. 207) in the United States of America. The list is not exhaustive.

The cases in this area speak in terms that are not entirely explicit. The terms used include “[a purpose] foreign to the scope of the process” (Varawa v. Howard Smith Co. Ltd. (1911), 13 C.L.R., at p.55, per Griffith C.J. See also, at p.70, per O’Connor J.), “an object not within the scope of the process” (Parton v. Hill (1864), 10 L.T. (N.S.) 414, at p. 415), “some collateral advantage ... [other than] the purpose for which such proceedings are ... designed” (In re Majory, [1955] 1 Ch. 600, at pp. 623-624), or a “collateral advantage ... beyond what the law offers” (Goldsmith v. Sperrings Ltd., [1977] 1 W.L.R. 478, at pp. 498-499; [1977] 2 All E.R. 566, at p. 582). These expressions can be traced to Grainger v. Hill where the expressions used included “an object not within the scope of the process” ((1838) 4 Bing. (N.C.), at p. 221, per Tindal C.J. [132 E.R., at p. 773]) and “an ulterior purpose” (ibid., at p. 224, per Bosanquet J. [E.R., at p. 774]. See also Varawa v. Howard Smith Co. Ltd (1911), 13 C.L.R., at p. 91, per Isaacs J.). The terms leave it to be discovered from the facts of the cases in which abuse has been established (or potentially established) what it is that makes a purpose “foreign” or “ulterior”.

I have already stated my agreement with the conclusion of Mason C.J., Dawson, Toohey and McHugh JJ. that an improper act is not essential. However, it should be noted that many, if not all, of the cases in this area and in which it has been held that there was an abuse of process have involved some positive act. That is not surprising: many cases are cases in tort where damage is essential, and it is difficult to conceive of damage occurring in this area without some act or threat; and, at least ordinarily, improper purpose is discoverable only because of some act done in furtherance of the purpose. Notwithstanding my view that improper purpose is sufficient to justify a stay, it is necessary to have regard to the cases involving an improper act for, otherwise, very little useful guidance is to be had.

The cases in which abuse of process has been established have usually involved an act described in terms such as “extortion” (Gilding v. Eyre (1861), 10 C.B. (N.S.), at p. 605 [142 E.R., at p. 590]. See also Guilford Industries (1974), 40 D.L.R. (3d), at p. 405, where the act was described as obtaining “a settlement by means of legal ‘blackmail’”), “coercing” (Dishaw v. Wadleigh (1897), 44 N.Y.S., at p. 210) or “bring[ing] pressure to bear ... to force [a result]” (QIW Retailers Ltd. v. Felview, [1989] 2 Qd R., at p. 258). These terms signify a claim or demand made without right and without claim of right. And without going to the detail of the cases in which those expressions were used, it is fair to say that, save in the case of Gilding v. Eyre, what was demanded was unrelated to the right, interest or wrong asserted in the proceedings which were held to constitute an abuse of process or, in the case of ancilliary proceedings, the right, interest or wrong asserted by the particular process involved.

132    In Walton v Gardiner (1993) 177 CLR 378, complaints which had been made against three medical practitioners were referred to the Medical Tribunal constituted under the Medical Practitioners Act 1938 (NSW). The complaints alleged misconduct in the treatment of patients at Chelmsford Private Hospital in Sydney. The complaints were accompanied by wider allegations of the inappropriateness of the kind of treatment being given at Chelmsford, including the use of deep sleep therapy in conjunction with electro-convulsive therapy. In 1986, on the application of two of the doctors in question, the Court of Appeal (NSW) granted a stay of the proceedings before the Tribunal as against those practitioners. The basis for the stay was that there had been a prolonged delay in dealing with the alleged misconduct after the relevant facts had become known. The Medical Tribunal itself stayed proceedings against the third practitioner. A subsequent Royal Commission reported adversely on the conduct of all three practitioners. In 1991, fresh complaints were made against them which, though not the same as the earlier complaints, arose out of the same pattern of professional conduct as had given rise to the earlier complaints and raised issues which substantially overlapped those that would have arisen under the earlier complaints. The Court of Appeal (NSW) stayed the new complaints on the ground that they were so unfairly and unjustly oppressive as to constitute an abuse of process.

133    The High Court, by majority, held that the proceedings had been properly stayed.

134    The majority (Mason CJ, Deane and Dawson JJ) recounted the history of the disciplinary proceedings against Dr Gardiner and the other two doctors at 382–392 and then discussed the grounds that had been advanced in support of the stay granted by the Court of Appeal.

135    At 392, their Honours referred to the essence of the judgments in the Court of Appeal. They noted that Gleeson CJ and Kirby P considered that the Court of Appeal has power to make an order staying proceedings if it is satisfied that the continuation of the proceedings would be “so unfairly and unjustifiably oppressive” as to constitute an abuse of process. Mahoney JA considered that the question for the Court of Appeal was whether, in all the circumstances, the continuation of the proceedings before the Tribunal would involve unacceptable injustice or unfairness. The majority judges in the High Court observed that, in their view, the test propounded by Mahoney JA was, in substance, the same as that which had been propounded by Gleeson CJ and Kirby P. The majority in the High Court expressly approved the approach adopted by the Court of Appeal.

136    At 392–393, the majority said:

The inherent jurisdiction of a superior court to stay its proceedings on grounds of abuse of process extends to all those categories of cases in which the processes and procedures of the court, which exist to administer justice with fairness and impartiality, may be converted into instruments of injustice or unfairness. Thus, it has long been established that, regardless of the propriety of the purpose of the person responsible for their institution and maintenance, proceedings will constitute an abuse of process if they can be clearly seen to be foredoomed to fail (See, e.g., Metropolitan Bank v. Pooley (1885), 10 App. Cas. 210, at pp. 220-221; General Steel Industries Inc. v. Commissioner for Railways (N.S.W.) (1964), 112 C.L.R. 125, at pp. 128-130). Again, proceedings within the jurisdiction of a court will be unjustifiably oppressive and vexatious of an objecting defendant, and will constitute an abuse of process, if that court is, in all the circumstances of the particular case, a clearly inappropriate forum to entertain them (See, generally, Voth v. Manildra Flour Mills Pty. Ltd. (1990), 171 C.L.R. 538). Yet again, proceedings before a court should be stayed as an abuse of process if, notwithstanding that the circumstances do not give rise to an estoppel, their continuance would be unjustifiably vexatious and oppressive for the reason that it is sought to litigate anew a case which has already been disposed of by earlier proceedings (See, e.g., Reichel v. Magrath (1889), 14 App. Cas. 665, at p. 668; Connelly v. Director of Public Prosecutions, [1964] A.C. 1254, at pp. 1361-1362). The jurisdiction of a superior court in such a case was correctly described by Lord Diplock in Hunter v. Chief Constable of the West Midlands Police ([1982] A.C. 529, at p. 536) as “the inherent power which any court of justice must possess to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people”.

137    The majority then referred to Jago and said that at least three of the five members of the Court who decided that case had specifically rejected the narrower view that a court’s power to protect itself from an abuse of process in criminal proceedings is limited to traditional notions of abuse of process. At 393–395, the majority said:

His Honour quoted, with approval, the following remarks of Richardson J. of the New Zealand Court of Appeal in Moevao v. Department of Labour ([1980] 1 N.Z.L.R. 464, at p.481):

“public interest in the due administration of justice necessarily extends to ensuring that the Court’s processes are used fairly by State and citizen alike. And the due administration of justice is a continuous process, not confined to the determination of the particular case. It follows that in exercising its inherent jurisdiction the Court is protecting its ability to function as a Court of law in the future as in the case before it. This leads on to the second aspect of the public interest which is in the maintenance of public confidence in the administration of justice. It is contrary to the public interest to allow that confidence to be eroded by a concern that the Court’s processes may lend themselves to oppression and injustice.”

Deane J. expressed a similar view in his judgment in Jago ((1989) 168 C.L.R., at p. 58):

“The power of a court to stay proceedings in a case of unreasonable delay is not confined to the case where the effect of the delay is that any subsequent trial must necessarily be an unfair one. Circumstances can arise in which such delay produces a situation in which any continuation of the proceedings would, of itself, be so unfairly and unjustifiably oppressive that it would constitute an abuse of the court’s process. Multiple prosecutions arising out of the one set of events but separated by many years or a renewed charge brought years after the dismissal of earlier proceedings for want of prosecution could, in a case where the relevant material had been available to the prosecution from the outset and depending on the particular facts, provide examples. Where such circumstances exist, the power of a court to prevent abuse of its process extends to the making of an order that proceedings be permanently stayed.”

In her judgment in Jago (ibid., at p.74), Gaudron J. stressed that the power of a court “to control its own process and proceedings is such that its exercise is not restricted to defined and closed categories, but may be exercised as and when the administration of justice demands.” Her Honour added the comment (ibid., at p.74) “that, at least in civil proceedings, the power to grant a permanent stay should be seen as a power which is exercisable if the administration of justice so demands, and not one the exercise of which depends on any nice distinction between notions of unfairness or injustice, on the one hand, and abuse of process, on the other hand”. Subsequently in her judgment (ibid., at p.77), her Honour made clear that, subject to some refinements which she identified, that comment was also appropriate to be adopted in relation to criminal proceedings.

It should be mentioned that there was considerable discussion in the course of argument about the effect of some comments in the judgment of the majority of the Court in Williams v. Spautz ((1992) 174 C.L.R. 509, at pp. 519-520). When those comments are properly understood in context, however, there is nothing in them which supports the proposition that a permanent stay of proceedings can only be ordered on the ground of either improper purpose or no possibility of a fair hearing. Indeed, careful examination of them discloses that they lend some support to a denial of that proposition (ibid., at p. 520, see, in particular, the approving reference to the judgment of Richardson J. in Moevao v. Department of Labour, [1980] 1 N.Z.L.R 464, at p. 482).

138    Justice Brennan was of the opinion that the Court of Appeal’s supervisory jurisdiction under s 23 of the Supreme Court Act 1970 (NSW) is confined to ensuring that the relevant tribunal acts within its jurisdiction and power, that its jurisdiction has not been invoked for an impermissible purpose and that the way in which it exercises its jurisdiction is not oppressive so as to prevent the proceeding before it from being fairly tried.

139    At 416, his Honour said:

The traditional view with respect to the scope of abuse of process has been described as “narrower” than the scope of abuse of process endorsed by some of the judgments in Jago ((1989) 168 C.L.R., at pp. 27-30, 58, 74). I adopt the narrower view not only because it is traditional but because it denies to judges and to other repositories of jurisdiction conferred for the public benefit (that being the character of the jurisdiction conferred on the Tribunal by Pt 3A of the Act) any discretion to refuse to do justice according to law. It is the very absence of that discretion which maintains the rule of law and the authority of courts and of judicial tribunals to administer the law.

140    His Honour held that the stay order granted by the Court of Appeal was erroneous in principle.

141    At 420, Toohey J indicated general agreement with the reasons of Brennan J. At 421, his Honour emphasised that Walton v Gardiner was not a case where the basis of the alleged abuse of process was improper purpose.

142    In Rogers v The Queen (1994) 181 CLR 251 (Rogers), the High Court again dealt with the question of abuse of process in the criminal context.

143    At 255, Mason CJ said:

I agree with the reasons given by Deane and Gaudron JJ. for concluding that the prosecution’s tender of the records of interview constituted a direct challenge to the 1989 determination and was therefore an abuse of process. The concept of abuse of process is not confined to cases in which the purpose of the moving party is to achieve some foreign or ulterior object, in that it is not that party’s genuine purpose to obtain the relief sought in the second proceedings. The circumstances in which abuse of process may arise are extremely varied and it would be unwise to limit those circumstances to fixed categories (Hunter v. Chief Constable, [1982] A.C., at p. 536, per Lord Diplock). Likewise, it would be a mistake to treat the discussion in judgments of particular circumstances as necessarily confining the concept of abuse of process.

144    The Chief Justice adverted to the majority judgment in Walton v Gardiner at 393 and 395 in order to emphasise the proposition that the power of a superior court to grant a permanent stay of proceedings was not limited to cases where the proceeding was brought for an improper purpose or where there was no possibility of a fair hearing.

145    After referring to Walton v Gardiner, the Chief Justice said (at 256):

… there are two aspects to abuse of process: first, the aspect of vexation, oppression and unfairness to the other party to the litigation and, secondly, the fact that the matter complained of will bring the administration of justice into disrepute. This led the majority in Walton v. Gardiner to state that the question whether criminal proceedings should be permanently stayed was to be determined by a weighing process involving a balancing of a variety of considerations ((1993) 177 C.L.R., at pp. 395-396). Those considerations, which reflect the two aspects of abuse of process outlined above, include (ibid., at p. 396):

“the requirements of fairness to the accused, the legitimate public interest in the disposition of charges of serious offences and in the conviction of those guilty of crime, and the need to maintain public confidence in the administration of justice.”

In the present case, a weighing of these considerations inevitably compels the conclusion that a stay should be ordered. ...

146    Justice McHugh commenced his discussion of abuse of process at 286. There, and at 287, his Honour said:

Inherent in every court of justice is the power to prevent its procedures being abused (Hunter v. Chief Constable of the West Midlands Police, [1982] A.C. 529, at p. 536). Although the categories of abuse of procedure remain open, abuses of procedure usually fall into one of three categories: (1) the court’s procedures are invoked for an illegitimate purpose; (2) the use of the court’s procedures is unjustifiably oppressive to one of the parties; or (3) the use of the court’s procedures would bring the administration of justice into disrepute. Many, perhaps the majority of, cases of abuse of procedure arise from the institution of proceedings. But any procedural step in the course of proceedings that have been properly instituted is capable of being an abuse of the court’s process. In Walton v. Gardiner ((1993) 177 C.L.R. 378, at p. 393), Mason C.J., Deane and Dawson JJ. said that the jurisdiction to stay proceedings that are an abuse of process “extends to all those cases in which the processes and procedures of the court, which exist to administer justice with fairness and impartiality, may be converted into instruments of injustice or unfairness”. Their Honours gave three examples of such an abuse of process. ((1993) 117 C.L.R., at p. 393). One of them is the case where an estoppel cannot be established but the proceedings are unjustifiably oppressive because it is sought to litigate an issue which has already been disposed of by earlier proceedings (See, e.g., Reichel v. Magrath (1889), 14 App. Cas. 665, at p. 668; Connelly v. Director of Public Prosecutions, [1964] A.C. 1254, at pp. 1361-1362). Reichel v. Magrath ((1889) 14 App. Cas. 665) is the paradigm example of such a case.

147    The following propositions may be distilled from the above discussion of Spautz, Walton v Gardiner, Rogers, Ridgeway, Batistatos and PNJ:

(a)    Every superior court has an inherent power to prevent its procedures from being abused (Hunter v Chief Constable of the West Midlands Police [1982] AC 529 at 536; Spautz at 518 and the cases there cited; and Rogers at 287).

(b)    The categories of abuse of process are not closed (Batistatos at 265–267 [9]–[15]; PNJ at 613 [3]; and Ridgeway at 75). The concept is not at large or without meaning. Notions of justice and injustice must reflect contemporary values if the courts and the administration of justice are to continue to enjoy the confidence of the public (Ridgeway at 75).

(c)    Abuses of procedure usually fall into one of the following three broad categories:

(i)    The court’s procedures are invoked for an illegitimate or improper purpose;

(ii)    The use of the court’s procedures is unjustifiably oppressive to one of the parties or vexatious; or

(iii)    The use of the court’s procedures in the manner contemplated would bring the administration of justice into disrepute.

(Rogers at 287; PNJ at 613 [3]).

(d)    An improper purpose is a purpose to use a proceeding as a means of obtaining some advantage for which that proceeding is not designed (Varawa at 91; Dowling at 524; and Spautz at 526–527). It is the use of the proceeding which must be examined and which may constitute an abuse of process (Spautz at 527–528). It is not necessary that, in addition to the improper purpose, the abuser must have committed an improper act. In this context, the purpose of the plaintiff is the result which the institution of the relevant proceeding is capable of producing and the result which it is intended to produce (Spautz at 532–533). The purposes which legal proceedings are designed to serve are the protection or vindication of particular rights or immunities, the maintenance or affection of particular legal relationships and the imposition of particular legal penalties, liabilities and obligations (Spautz at 532–533). The pursuit of a legal remedy is not converted into an abuse of process merely by an unworthy or ulterior motive (Spautz at 533–534).

(e)    An abuse of process occurs when the processes and procedures of the court are utilised as instruments of injustice or unfairness. For example, a proceeding will constitute an abuse of process if it can be clearly seen to be foredoomed to fail (Walton v Gardiner at 392–393). Other examples of unjustifiably oppressive and vexatious proceedings are: where the proceeding seeks to litigate anew a case which has already been finally disposed of by earlier proceedings even though no res judicata or issue estoppel can be established; where unreasonable delay on the part of the plaintiff has made it extremely difficult for the defendant to marshal and bring forward evidence in her defence; and where the legitimate public interest in having those who commit offences brought to justice promptly is not served by reason of delay.

(f)    The onus of proving an abuse in any given case rests upon the party alleging abuse. That onus is a heavy one (Spautz at 529).

148    In their textbook Class Actions in Australia (2nd ed, Thomson Reuters, 2012) at pp 7–8 [1.170], the learned authors (Messrs Grave, Adams and Betts) summarise the views expressed by the Australian Law Reform Commission (ALRC) in its report, Grouped Proceedings in the Federal Court, Report No 46 (1988). At [2] of the Report, the ALRC said:

Allowing proceedings to be brought on behalf of a group or class of persons can ensure that persons who have a cause of action arising from multiple wrong-doing are not prevented or discouraged from having that claim determined by a court as a result of lack of resources, cost barriers or ignorance of legal rights. In addition, the grouping of many claims into one proceeding may be a more efficient way of determining the issues which are common to those claims than separate proceedings would be.

149    The ALRC considered that the class actions procedure had a number of advantages. These are set out by the learned authors at p 7 in their textbook in the following terms:

    Reducing the cost of court proceedings to the individual;

    Enhancing access by the individual to legal remedy;

    Promoting efficiency in the use of court resources;

    Ensuring consistency in the determination of common issues; and

    Making the law more enforceable and effective.

150    Overall, the ALRC considered the class action procedure to provide a desirable mechanism for the expeditious, fair and cost effective determination of claims with common features made by a large number of persons. The procedure is regarded as particularly useful when each individual claim is for a relatively small amount of money.

151    It is now also well accepted that the lawyers who represent the lead claimant in a class action owe a fiduciary duty to the members of the class in that proceeding, even where those lawyers have not been retained by some members of the class (King v AG Australia Holdings Ltd (2002) 121 FCR 480 at 488–489 [24]–[27] per Moore J).

152    This Court has developed special procedures for dealing with class actions. Integral to those procedures is effective case management in which the Court retains a keen ongoing interest.

153    TWE’s abuse of process application must be considered in the class action context which I have briefly described at [148]–[152] above.

154    As already noted, TWE relies upon all three of the broad categories of abuse of process identified by the High Court in PNJ at 613 [3].

155    The main focus of TWE’s submissions was on the first category of abuse, namely, the invoking of the Court’s processes for an illegitimate or collateral purpose.

156    In order to address TWE’s arguments in support of their broad contention that the present proceeding has been brought for an illegitimate or collateral purpose, I make the following findings:

(a)    Mr Elliott’s purpose in causing MCI to bring this proceeding may be safely attributed to MCI as its purpose for bringing this proceeding. This is because Mr Elliott is the sole director and sole shareholder of MCI and because there is no evidence to suggest that any other person has any say in the affairs of MCI.

(b)    Mr Elliott did not give evidence before me. Thus, there is no direct evidence from Mr Elliott explaining his purpose in causing MCI to behave as it has done in bringing this proceeding. However, for reasons which I will outline below, I consider that, in the circumstances of this case, it was incumbent upon Mr Elliott to proffer an explanation for MCI’s conduct in evidence given to the Court. In particular, in my view, he was obliged to explain his purpose in bringing this proceeding. In all of the circumstances, his failure to do so provides a basis for the Court to draw certain adverse inferences against MCI.

(c)    In the period between November 2012 and May 2014, Mr Elliott caused MCI to purchase a small parcel of shares in each of 157 corporations listed on the ASX. Mr Elliott did not cause MCI to make those purchases because he was interested in investing in each of the corporations in which shares were purchased either as a long-term investor or as a trader.

(d)    As found by Ferguson J in TWE No 1, MCI was created by Mr Elliott as a vehicle for bringing class actions against listed corporations alleging (inter alia) breaches of continuous disclosure obligations by those corporations.

(e)    Mr Elliott caused MCI to make the share purchases which it made in order to enable MCI to position itself to move quickly to commence a class action as the lead plaintiff against any one or more of the corporations in which the shares were purchased and, to the extent possible, to enable Mr Elliott himself to earn legal fees from the exercise. By positioning MCI in this way, Mr Elliott intended that MCI would be best placed to initiate class actions as the lead claimant in the event that opportunities to do so presented themselves in the future. MCI would then be well-placed to negotiate with other relevant parties in relation to such actions for its own financial benefit. These parties would include class action lawyers, litigation funders and, of course, the proposed defendants themselves.

(f)    The causes of action pleaded in this proceeding are immaterial to MCI’s purpose in commencing it. The question of ultimate success is also immaterial to MCI’s purpose. As found by Ferguson J in TWE No 1, MCI had no interest in recovering the insignificant amount of $700 when it launched this proceeding. Its purpose was to gain a financial benefit for itself which was likely to exceed that amount to a very significant degree. MCI’s purpose is not altruistic. It has not positioned itself in the manner which I have described in order to champion at its own cost and risk shareholders who have suffered losses at the hands of defaulting corporations.

(g)    These findings are broadly in line with the findings made by Ferguson J and the Court of Appeal in the first MCI proceeding although the focus of the Court in that proceeding was on Mr Elliott’s role as the solicitor for MCI.

(h)    Given the reasons for MCI’s purchases of shares which I have found, it is very difficult, if not impossible, for Mr Elliott to contend in the present proceeding that MCI actually relied upon the various positive statements made by TWE to the ASX said to constitute contraventions of the Corporations Act or that MCI actually relied upon the integrity of the share market including adherence by TWE to its statutory obligations to make accurate ongoing material disclosures from time to time. Furthermore, it would be very difficult for MCI to persuade the Court at a final hearing that, in the circumstances to which I have referred, it should be able to rely upon market-based causation theory to establish an indirect basis for reliance by it on the alleged contraventions committed by TWE. In blunt terms, Mr Elliott and MCI almost certainly did not rely upon anything TWE said or failed to say or do when it purchased the 140 ordinary fully paid shares in TWE which it purchased on 1 November 2012. This was the very first parcel of shares acquired by MCI. That circumstance is suggestive of the possibility that Mr Elliott may, by 1 November 2012, already have formed the view that there may be grounds for MCI to mount a class action against TWE alleging contraventions of the type now incorporated in the Statement of Claim filed by MCI in this proceeding.

(i)    MCI’s efforts to dissociate Mr Elliott from the present proceeding began immediately after Ferguson J gave judgment in TWE No 1. Very soon after that judgment was delivered, MCI took steps to replace Mr Elliott as the solicitor on the record in the first MCI proceeding with Tan and Partners.

(j)    In late August 2014, Portfolio Law was incorporated. Those who appear to stand behind that incorporated legal practice have no experience in running class actions and have ongoing connections with other practices. Neither Mr Zita nor Mr Sica gave evidence before me. Although TWE did not establish by direct evidence that Mr Elliott was involved in the management of Portfolio Law or that he stood to gain financially from its operations, I think that it is more probable than not that Mr Elliott is concerned in the affairs of Portfolio Law in some fashion designed to bring him or MCI financial reward. No-one came forward to explain the circumstances in which Portfolio Law came to be incorporated nor did anyone explain why it was incorporated when it was. No-one came forward to deny that Mr Elliott was involved in the affairs of Portfolio Law. Evidence of these matters could easily have been brought forward but it was not.

(k)    The insignificant amount sought to be recovered for itself by MCI in the present proceeding does not, on any rational basis, justify the commencement and maintenance of this proceeding. The costs of litigating the issues raised and the risk of an adverse costs order clearly militate against pursuing this proceeding to judgment or settlement. There is no evidence that MCI is being funded by an established litigation funder nor is there any evidence which would otherwise support the proposition that MCI has the capacity both to maintain the present proceeding and meet any adverse costs order.

157    The Court should not permit MCI to institute and maintain this class action when, as I have found, it is not doing so in order to obtain a remedy which the law provides either for itself as an individual claimant or for the members of the class which it purports to represent. In addition, it plainly does not have the capacity to fund this proceeding itself and has not attempted to satisfy the Court that it has put in place secure litigation funding which will cover its own costs and the amount of any adverse costs order. MCI’s claims are, at best, very weak if not hopeless. Its causation theory is problematic. MCI commenced this proceeding knowing that the Jones proceeding was on foot. It also commenced this proceeding with the intention of using it as a “fallback” or “failsafe” against the possibility that the first MCI proceeding would remain permanently stayed as an abuse of process.

158    The purposes of MCI identified and discussed at [156]–[157] above demonstrate that this proceeding has been brought for an illegitimate or collateral purpose. For that reason, it constitutes an abuse of process and should be permanently stayed. It is also oppressive and vexatious vis-à-vis TWE and, if allowed to be maintained, will bring the administration of justice into disrepute. Nonetheless, I note that the claims made by MCI in this proceeding on its own account will be able to be litigated in due course in the Jones proceeding if MCI does not opt out of that proceeding. For this reason, the orders which I propose to make will not deny to MCI any legitimate remedy to which it may be entitled.

159    In light of the findings which I have made and the conclusions which I have reached, I have not found it necessary to consider in detail whether the decisions of Ferguson J and the Court of Appeal in the Supreme Court gave rise to the estoppels by way of issue estoppel for which TWE contended. However, in deference to the parties’ submissions, I will briefly state my conclusions in relation to the arguments based upon issue estoppel.

160    First, I am of the view that the Court of Appeal’s decision has the necessary quality of being final and on the merits for the purposes of considering the arguments based upon issue estoppel. While that decision may technically be interlocutory, it has the legal and practical effect of terminating the first MCI proceeding.

161    Second, I think that the statements of legal principle extracted by me at [63(a)] and [63(b)] above do bind both MCI and TWE in the present proceeding. I pause to observe that, in my view, in any event, those statements of principle correctly state the law.

162    Third, I am of the opinion that both MCI and TWE are bound by the findings to which reference is made in subpars (c) to (f) of [63] above. However those findings have to be viewed in the context in which they were made. In particular, they have to be viewed against the ultimate conclusion expressed by the Court of Appeal that the vice in MCI’s conduct in instituting the first MCI proceeding was that it did so in order to provide a means for Mr Elliott to earn legal fees from that proceeding. The particular findings to which I have referred can only have relevance to the present proceeding if they can be viewed as extending beyond the context in which they were made in the first MCI proceeding. I do not think that they can be so viewed.

Other Matters

163    Given that I propose to stay this proceeding permanently, I do not think that it is necessary to deal with TWE’s claim that MCI should post security for its costs of this proceeding. Nor, in the circumstances, will it be necessary in due course for me to deal with the residual claims made by TWE in its Summons filed in the Supreme Court on 13 February 2015. At the appropriate time, I propose to dismiss that Summons upon the basis that there be no orders as to the costs thereof.

164    However, before leaving these topics I should record that, in my opinion, there is considerable force in the proposition which underpins the remaining claims in TWE’s 13 February 2015 Summons, namely, that the Jones proceeding is a preferable vehicle for litigating the core claims made by MCI in the first MCI proceeding and in this proceeding.

165    As to remedy, I think that a permanent stay is the appropriate remedy rather than dismissal or either of the other orders sought by TWE in its Interlocutory Application. I have concluded that the whole proceeding is an abuse not merely the class action aspect of it.

166    Finally, there is no reason why costs should not follow the event. For this reason, I propose to order MCI to pay TWE’s costs of the application with which I am presently dealing.

167    There will be orders accordingly.

Associate:

Dated:    5 July 2016