Federal Court of Australia

Directed Electronics OE Pty Ltd v Isuzu Australia Limited (No 2) [2024] FCA 1198

ORDERS

THE COURT ORDERS THAT:

1.    The respondent’s interlocutory application dated 23 June 2021 for a permanent stay or dismissal of these proceedings (Application) be dismissed.

2.    The matter be listed for case management hearing on a date to be fixed by arrangement with the Associate to Rofe J.

3.    Within 14 days of the date of this order, the parties file and serve short written submissions limited to 4 pages in relation to the costs of this Application.

4.    Liberty to apply.

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

REASONS FOR JUDGMENT

ROFE J:

1.    Introduction

1    This is the continuation of an interlocutory application (Application) brought by the respondent (Isuzu) pursuant to ss 23 or 31A of the Federal Court of Australia Act 1976 (Cth) (FC Act) or r 26.01(1)(d) of the Federal Court Rules 2011 (Cth) (FC Rules), or the Court’s implied or inherent jurisdiction, to dismiss or permanently stay this proceeding (2020 Proceeding). At the oral hearing of this Application, Isuzu only pressed for orders to permanently stay this proceeding. The cross-respondents, being Hanwha Aus Pty Ltd, Hanhwa Hightech Co Ltd, Kichang (Ryan) Lee and Leemen Co Ltd (Hanhwa Parties) and Johnny Meneses previously made the same application. The cross-respondents have now entered insolvency, bankruptcy, or formal administration and did not participate in the oral or written submissions in relation to this Application.

2    I previously stayed this application until 28 days after the Liability Judgment (Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 8) [2022] FCA 1404) in proceeding VID 1157 of 2017 (2017 Proceeding) was handed down: Directed Electronics OE Pty Ltd v Isuzu Australia Limited [2022] FCA 254 (Prior Judgment). I adopt the terms used in the Prior Judgment herein.

3    Isuzu was not a party to the 2017 Proceeding. Isuzu contends that the claims brought by Directed in the 2020 Proceeding constitute an abuse of process as the claims in the 2020 Proceeding substantially overlap with the claims which it brought against the cross-respondents in the 2017 Proceeding.

4    As previously noted in the Prior Judgment, in large part, Directed’s case in the 2020 Proceeding concerns the knowledge and conduct of Isuzu for the purposes of establishing accessorial liability for the claims the subject of the 2017 Proceeding.

5    When I first heard this Application in 2021, the progress of the 2020 Proceeding was not sufficient to engage abuse of process remedies, and I held that it would have been premature to dismiss the 2020 Proceeding at that point.

6    Isuzu’s Application is being heard once more in light of the following developments:

(a)    the handing down of judgments in the 2017 Proceeding listed at (i)−(iii) below;

(i)    Liability Judgment;

(ii)    Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 9) [2023] FCA 462 (Secret Commissions Judgment); and

(iii)    Directed Electronics OE Pty Ltd v OE Solutions Pty Ltd (No 10) [2023] FCA 1656 (Quantum Judgment);

(b)    the cross-respondents in the 2020 Proceeding each having entered insolvency, bankruptcy, or formal administration;

(c)    Isuzu having changed the firm of solicitors representing it in the 2020 Proceeding;

(d)    Isuzu’s indication that it intends to discontinue its cross-claim dated 18 December 2020 against the cross-respondents; and

(e)    Directed filing its further amended statement of claim on 22 May 2024 and Isuzu providing its proposed defence dated 12 July 2024 (including new apportionment claims against the cross-respondents) (together, the Amended Pleadings).

7    Isuzu again contends that the 2020 Proceeding is an abuse of process and should be stayed. At the hearing of this Application, Isuzu appeared to no longer press for a dismissal of the 2020 Proceeding. Directed denies that there has been any abuse of process and that the continuation of this proceeding would amount to an abuse of process.

8    For the reasons that follow, I consider that this Application should be dismissed as the nature and extent of any abuse of process or oppression may be avoided or minimised by appropriate case management. Further, in the event that despite such case management, a material risk of prejudice to Isuzu may materialise, it will remain open for it to file a fresh application for a dismissal or permanent stay of proceedings arising from any putative abuse of process at that time.

2.    Background

9    I discussed the relevant background to the 2017 Proceeding and the 2020 Proceeding in the Prior Judgment at [10]–[22].

10    I note that the matters discussed at [6] above have occurred which are relevant to my consideration.

3.    Evidence

11    In support of its Application at the initial hearing, Isuzu previously relied on four affidavits of Mark Anthony Farquhar, being those sworn on 22 June 2021, 30 July 2021 and 18 August 2021, and a confidential affidavit sworn on 22 June 2021.

12    In response, Directed relied upon four affidavits of Anthony Brooke Watson affirmed 10 August 2021, 13 August 2021, 18 August 2021 and 20 August 2021.

13    Isuzu has since filed the affidavit of Emma Lee-Anne Iles (a partner of its new firm of solicitors) affirmed on 2 August 2024 and sought to rely on this affidavit. In written submissions, Directed opposed leave being granted to Isuzu to rely upon this additional affidavit, however it did not press this at the hearing.

4.    Principles

14    There was no disagreement about the applicable principles between the parties and the same principles apply now as they did for the Prior Judgment.

15    I discussed the relevant principles in the Prior Judgment at [30]–[39].

16    More recently, the High Court in GLJ v Trustees of the Roman Catholic Church for the Diocese of Lismore (2023) 414 ALR 635 expressed that an order for a permanent stay to prevent an abuse of process is a decision of “last resort”: at [3] (per Kiefel CJ, Gageler and Jagot JJ). The High Court in GLJ considered an application for a permanent stay of proceedings in the context of a criminal justice process, whereby a permanent stay would involve the extinguishment of a right said to have been infringed. While the High Court’s consideration must be viewed in the factual context of that case, their Honours’ statements may also be seen to apply at a level of generality regarding the point in time at which Courts should grant a permanent stay and whether any alternative case management mechanisms can be canvassed in lieu of a permanent stay, and that a stay is a “last resort”.

5.    Submissions

5.1    Case management issue

17    In its written submissions, Isuzu submitted that several aspects of the 2020 Proceeding render it an abuse of process. These factors, which were also raised when this Application was first heard, include Directed’s delay in bringing the 2020 Proceeding, the overlap of the claims, the likelihood for inconsistent findings and the public interest.

18    The matter was put differently in oral submissions. In oral its submissions, Isuzu advanced that this hearing was to “pick up” the observations from the Prior Judgment at [126], where I expressed that:

… the Court will know the result and be in a position to evaluate the likelihood of any abuse of process, and case manage the 2020 Proceeding accordingly to ensure there is no abuse of process or oppression.

19    Isuzu expressed that it had not received any correspondence from Directed indicating their proposed case management strategy for the 2020 Proceeding which would ameliorate any potential abuse of process.

20    Isuzu submitted that the Court at this stage required specific proposed case management ideas from Directed to ensure that there is no abuse of process moving forward. Isuzu also contended that such case management could be canvassed by exchanges between the parties, but with Directed going first. Conversely, Isuzu admitted that it had not written to Directed requesting proposed case management orders in advance of the hearing of this Application. In the absence of proposed case management orders, Isuzu proposed that there should be a stay of the 2020 Proceedings.

21    This change in focus by Isuzu during the hearing did not reflect its written submissions, which were largely a reiteration of the submissions previously before me. In response to Directed’s insistence at the hearing of this Application that case management orders should be made at this stage to eliminate any risk of an abuse of process, Directed contended that in the Prior Judgment at [120], I had already accepted that there are significant areas of overlap that create the possibility of substantially re-litigating points in the 2017 Proceeding, or the possibility of inconsistent findings between the 2017 Proceeding and the 2020 Proceeding — however, it noted that I also expressed that, Directed will not be permitted to re-litigate any point on which it did not succeed on in the 2017 Proceeding: Prior Judgment at [125(a)].

22    Further, Directed submitted that Isuzu may nevertheless be granted the opportunity to fight findings on certain points of liability from the 2017 Proceeding it may wish to contest. Directed submitted that I had already accepted the possibility of Isuzu being granted this course in the Prior Judgment at [124].

23    In reply, Isuzu submitted that the position Directed argues for is contrary to the import of [126] of the Prior Judgment and my reasons more broadly. Isuzu expressed that the Prior Judgment does not lend itself to Directed’s proposed course, as the reasons stipulate that the present consideration of the Application would be in circumstances where the outcomes from the 2017 Proceeding are known and there are no further case management contingencies hypothetically available for consideration.

5.2    Solvency of the Hanhwa Parties and overlap issues

24    Isuzu submits that Directed has staged separate proceedings against it and that the Court should not lend its processes to this conduct, given that the alleged prejudice suffered by Isuzu is a direct result of Directed’s actions. Given the scale and complexity of the 2017 Proceeding, the extent of the obvious overlap with the 2020 Proceeding and the scale and complexity of the 2020 Proceeding, Isuzu submits that the interests of the timely and efficient administration of justice favour a permanent stay of the 2020 Proceeding, citing the High Court authority UBS AG v Tyne (2018) 265 CLR 77 at [45] (per Kiefel CJ, Bell and Keane JJ), [70]–[71] (per Gageler J). Isuzu contends that such an order will avoid any perception that the administration of justice is inefficient and careless of costs, citing UBS at [59] (per Kiefel CJ, Bell and Keane JJ).

25    Isuzu submits that, while Directed could have pleaded a case against Isuzu by mid-2019, it should have done so for the reasons below.

(1)    By mid-2019, Directed would have been aware of the risk that both Hanhwa AU and Hanhwa Korea would become insolvent if Isuzu ceased to be a customer by reason of the 2017 Proceeding or if Directed obtained judgment against them. In the event of insolvency, it was reasonably foreseeable that the Hanhwa Parties would not satisfy a judgment debt or participate in a meaningful way in the 2020 Proceeding. Further, it was foreseeable that non-participation of the Hanhwa Parties would significantly prejudice Isuzu’s ability to defend a subsequent proceeding brought against it by Directed.

(2)    The potential for unnecessary expense, duplication and wasteful use of the Court’s resources as a result of separate staged proceedings against Isuzu would have been plain to Directed from at least mid-2019. Further, it would have been apparent that, by bringing a separate claim against Isuzu, significant unnecessary duplication, expense and delay would result from the inevitable joinder by Isuzu of the Hanhwa Parties and Mr Meneses to the subsequent proceeding (whether as cross-respondents, or as a result of Isuzu pleading apportionment defences against these parties).

(3)    Despite the Court having already expended considerable resources in the 2017 Proceeding hearing evidence and making findings relevant to Isuzu, if the 2020 Proceeding is not stayed, large parts of the case that have already been determined will need to be re-heard and separately determined, leading to potential duplication. In support of this point regarding the potential for duplication, Isuzu submitted that following the amended pleadings, the fact of material overlap remains and, in several respects, the extent of the overlap has increased.

26    Directed correctly submits that Isuzu’s allegation of deliberate staging was previously argued before me, and subsequently determined against Isuzu in the Prior Judgment. Directed contends that the claim that Directed staged separate proceedings against Isuzu is illogical as there has only ever been one proceeding against Isuzu. Further, the underlying public interest for applications of this kind — that a party should not be twice vexed in the same matter — has never applied in respect of Isuzu. Directed submits that, by its Application, Isuzu now also seeks to reagitate the question of whether Directed should have proceeded against Isuzu in about mid-2019 in terms of overlap — a matter which was already determined against Isuzu.

27    Further, Directed submits that this Court has already found that there will be areas of overlap, but that this would not amount to a re-run of the 2017 Proceeding, with the 2020 Proceeding being a small subset of that proceeding primarily going to Isuzu’s knowledge and that different relief is sought: Prior Judgment at [120]–[121].

28    Directed submits that Isuzu’s allegation that Directed would have been aware of any risk of insolvency of the Hanhwa Parties is a misplaced example of hindsight analysis which ignores all of the possible exigencies which existed in mid-2019 such as, lack of success on all or some claims, a settlement, or the cessation of any of the impugned conduct.

29    Directed submits that Isuzu’s argument implies that, when this Application was first heard, Directed withheld knowledge from the parties and the Court about the solvency of the Hanhwa Parties, and that it would have been obvious that their insolvency would cause prejudice to Isuzu. However, concerns about the solvency of the Hanhwa Parties were the subject of detailed evidence before the Court at the first hearing of the Application.

30    Directed submits that an inference may be drawn that that Isuzu made a forensic decision when this Application was first heard not to raise the issue of potential insolvency of the Hanhwa Parties and any resulting prejudice. Directed contends that Isuzu adopted this course likely because it originally relied on the Hanhwa Parties being active parties in the 2020 Proceeding, otherwise there was no party who could be described as potentially “twice vexed”.

31    As such, Directed submits that Isuzu ought not be permitted now to assert that Directed should have joined Isuzu to the 2017 Proceeding in mid-2019 because Directed should have been aware of the risk of insolvency for the Hanhwa Parties and Mr Meneses. The fact that Isuzu did not raise this issue when the Application was first heard speaks against this submission, and belies the prejudice asserted to exist now.

32    Nevertheless, Directed submits that, on the evidence before the Court in mid-2019, there was no apparent risk that the Hanhwa Parties would become insolvent. Directed noted that the evidence cited by Isuzu to substantiate its claim regarding the apparency of this risk was based on a misapprehension that the decline in Directed’s revenue would equate to its ultimate damages claim. Directed submitted that this was an incorrect view, with the question as to damages being related not to what revenue Directed has lost, but what profits it had lost or was likely to lose. Given that, as Beach J found in the Quantum Judgment, the conduct continued for five years (and is potentially still continuing), the nature of the size of the damages claim was not reasonably foreseeable. For this reason, Directed submits that it had no way of knowing the scale of damages and the likelihood that the Hanhwa Parties would become insolvent.

33    Directed contends that it would have been more reasonable for it to assume in mid-2019 that Isuzu would change suppliers and revert to purchasing the AV units from other Original Equipment Manufacturers, instead of Hanhwa. As such, any potential damages claim foreseen by Directed in mid-2019 was likely to be limited and confined. As at mid-2019, such a risk of insolvency would have been beyond Directed’s reasonable expectations.

5.3    Ability to test overlap issues has been compromised

34    Isuzu submits that witnesses for the Hanhwa Parties (Hanhwa Witnesses) gave extensive evidence in the 2017 Proceeding, including regarding the areas of overlap. If Isuzu had been a party to the 2017 Proceeding, it could have sought to rely on, clarify, test or challenge this evidence as it saw fit. Instead, it now faces the prospect of defending allegations in the 2020 Proceeding without the active involvement of the Hanhwa Parties. Isuzu contends that this reflects a significant change since this Application was originally heard and is a matter that will cause Isuzu a special prejudice. Further, Isuzu submits that it will be impractical to lead evidence from Hanhwa Witnesses and result in a waste of resources. Isuzu gave examples regarding two distinct points of overlap, where the relevant witnesses would necessarily be employees or former employees of the Hanhwa Parties who are now employed at Directed and are based in South Korea.

35    Isuzu submitted that securing evidence from Hanhwa Witnesses will be difficult for Isuzu for the following reasons. First, given that at least five key Hanhwa Witnesses are now employed by Directed, this places Isuzu in the position where it will need to lead evidence relevant to the overlap issues from witnesses who are in Directed’s “camp” and may be reluctant to give evidence that is contrary to Directed’s interests. Second, given Hanhwa’s insolvency, the Hanhwa Parties intend to play no substantive role in this proceeding, leaving Isuzu to rely on the Court’s processes to secure the attendance of the relevant Hanhwa Witnesses. Third, securing the attendance of South Korean-based Hanhwa Witnesses will involve complex procedural steps that may take several months, and reliance on South Korean authorities if witnesses do not cooperate. Fourth, if the Hanhwa Witnesses are available to give evidence, Isuzu’s ability to lead evidence would be severely compromised because:

(a)    neither the Court nor Isuzu will have the benefit in advance of each witness’s evidence-in-chief via affidavit;

(b)    instead, Isuzu will need to lead evidence-in-chief on highly technical and historic matters spanning a number of years, most likely without the benefit of prior witness conferences or the ability of witnesses to adequately prepare or, in the case of former Hanhwa employees, without access to relevant documents;

(c)    Isuzu will only be permitted to cross-examine Hanhwa Witnesses with leave; and

(d)    depending on the procedural method used, Isuzu may not be able to have its counsel examine Hanhwa Witnesses, instead relying on foreign officials to do so in accordance with foreign procedural laws.

36    Directed submits that it has agreed to make any witnesses which it employs available to give evidence at trial, and that these witnesses have already given evidence adverse to Directed’s interests in the 2017 Proceeding: see Liability Judgment at [160]–[170] (per Beach J). Directed further contends that Isuzu has failed to articulate with precision why such witnesses are necessary. With respect to the Hanhwa Witnesses based in South Korea, Directed submits that these witnesses may be permitted to give evidence by video-link, as was done in the 2017 Proceeding.

37    Further, Directed expressed that the 2017 Proceeding was primarily a documents case as certain witnesses were not available for cross-examination. In that matter, Beach J formed his views based on documentary evidence which satisfied the standard in Briginshaw v Briginshaw (1938) 60 CLR 336 and s 140 of the Evidence Act 1995 (Cth): Liability Judgment at [1203] (per Beach J). Directed submits that the documents common to the 2017 Proceeding and this proceeding have already been made available to Isuzu and that this will eliminate any potential prejudice in this proceeding.

6.    Disposition

6.1    Case management issue

38    The case management concerns raised by Isuzu advance no prejudice against it in the circumstance of this case. The crux of Isuzu’s case in this respect is that, because there is a possibility of inconsistent findings of fact, this means that a stay of proceedings should be granted as there is an abuse of process on foot. This proposition cannot be entertained.

39    Isuzu’s Application has, in this sense, again been pressed prematurely. Directed filed its Further Amended Statement of Claim, Further Amended Originating Application and Confidential Amended Schedule of Particulars to the Proposed Further Amended Statement of Claim on 22 May 2024.

40    At a case management hearing before me on 13 March 2024, Isuzu pressed for its Application to be heard on 30 August 2024, prior to leave being granted for the filing of the amended pleadings discussed above at [39]. Isuzu pressed for its Application to be heard before any further opportunity for case management was raised, and then without notice, sought case management orders at the hearing of its Application.

41    In this sense, Isuzu has pressed its Application prior to any opportunity for either party to raise appropriate case management orders which could have resulted in Directed being bound by findings of fact and determinations of law common to both the 2017 Proceedings and the 2020 Proceedings. Had Isuzu pressed its Application following such an opportunity, the Application could have proceeded on a basis apparent to the parties and to the Court that an abuse of process does arise.

42    Instead, apart from the developments discussed at [6] above, the Application is brought in circumstances where the Court is asked to consider a hypothetical situation where an abuse of process may arise, without an appropriate opportunity to case manage the 2020 Proceeding.

43    On this basis, it is again inappropriate to grant a stay in the absence of any attempts to case manage this matter. As such, I will order that this matter be listed for case management.

6.2    Solvency of the Hanhwa Parties and overlap issues

44    With respect to whether Isuzu ought to have raised concerns regarding insolvency when this Application was originally heard, I consider that Isuzu had the opportunity to raise this issue when this Application was first before me and should have done so then. In support of the proposition that the risk of insolvency was known to Directed and that the 2020 Proceeding against Isuzu should have been commenced in mid-2019, Isuzu relied on the affidavit of Emma Lee-Anne Iles. The materials discussed in and annexed to this affidavit in support of Directed’s purported knowledge of this risk were in Isuzu’s custody prior to the original hearing of this Application. As such, it is clear that this argument could have been raised at the earlier hearing. I infer that it was not raised at that time as it suited Isuzu’s argument for the Hanhwa Parties to be potentially “twice vexed”.

45    Putting this to one side and considering the evidence put forward by Isuzu, I still consider that as at mid-2019, Directed was unlikely to appreciate any risk that the Hanhwa Parties would become insolvent. While Directed’s financial statements indicated a decline in revenue, this did not correlate with the size of the ultimate damages awarded by Beach J in the Quantum Judgment and Secret Commissions Judgment. This is particularly so in light of the fact that the conduct continued in some cases up until the point of his Honour’s judgments. I accept that Directed could not have reasonably anticipated the scale of damages and the likelihood that the Hanhwa Parties would become insolvent. On this basis, there was no foreseeable need to have brought proceedings against Isuzu in mid-2019.

46    At [120]–[121] of the Prior Judgment, I expressed that any overlap would be appropriately case managed. As such, I consider that any previous issues relating to overlap have been already addressed. With respect to the new issues of overlap raised as a result of the amended pleadings, only one example is given, which is a discrete point relating to quantum. I consider that this point of overlap may again be dealt with by appropriate case management.

6.3    Ability to test overlap issues has been compromised

47    As addressed by Isuzu, the issues raised by Directed relating to the availability of the Hanhwa Witnesses and their reluctance to give evidence may be appropriately accommodated by the Court’s processes.

48    The necessity for these witnesses to give evidence is a matter which can be considered at a later date. However, it is clear that any potential prejudice to Isuzu in relation to the fact that these witnesses are now employed by Directed and are based in South Korea is unfounded. Directed has agreed to make those witnesses available, and if these witnesses are required, they may be able to give evidence by video-link.

49    To some extent Isuzu already has more information about the South Korean witnesses and their likely evidence available to it than would be the case in ordinary litigation. Isuzu has the evidence that these witnesses gave in the 2017 Proceeding and the transcript of their cross-examination in that proceeding.

50    Further, as Directed has submitted, Isuzu has already been provided with documents from the 2017 Proceeding and has the capacity to make forensic assessments to press the issues it contends should be reheard in respect of its liability and knowledge. Isuzu may, if the witnesses are required, also test this evidence in cross-examination at trial.

51    Isuzu maintains the ability to test any potential overlap issues by cross-examining the Hanhwa Witnesses. As such, no prejudice arises which would require a permanent stay of proceedings.

7.    Conclusion

52    For the reasons given above, the Application should be dismissed.

53    The proceeding will now be listed for case management.

54    The costs of this Application will be determined on the papers and I will make orders for the parties to file and prepare written submissions relating to costs.

Associate:

Dated:    17 October 2024

SCHEDULE OF PARTIES