Introduction
In UBS AG v Tyne, The High Court of Australia (by a 4-3 majority) held that a new proceeding commenced by a related party in the Federal Court on similar issues to those in previous proceedings in Singapore and the NSW Supreme Court should be permanently stayed as an abuse of process.
Background
The dispute arose over the management of a family trust known as the Argot Trust. The trust was managed by the Respondents Scott Francis Tyne and a company incorporated in Jersey called Telesto Investments Ltd. The beneficiaries of the trust consisted of Mr Tyne and his family. In 2007, Telesto opened an investment account with a financial services company with the Applicant, UBS AG, in Singapore. The arrangement was that UBS lent money to Telesto as a secured loan to the trustees and provided investment advice. Mr Tyne was the guarantor of this facility. These investments involved purchasing bonds, which were later found to be worthless.
In September 2008, the value of Telesto’s collateral declined and UBS requested Telesto to either provide more security or reduce the overall amount owing. Telesto and Mr Tyne requested UBS not to sell the existing collateral in exchange for an undertaking under a StandStill Agreement in December 2009. In October 2010, UBS purported to terminate the Agreement and issued proceedings in Singapore for the amount owing, alleging default.
On 2 November 2010, the Respondents issued proceedings in the Supreme Court of NSW against UBS claiming misrepresentation, negligence, breach of fiduciary duty and misleading or deceptive conduct on the grounds that UBS gave them negligent investment advice. The grounds for breach of fiduciary duty arose out of UBS’ arrangement with the government of Kazakstan in advising them to restructure their banking industry and the Respondents were advised by UBS to purchase Kazak bonds. In 10 November 2010, UBS brought an anti-suit injunction in the High Court of Singapore to restrain the Respondents from pursuing their action in NSW.
In December 2010, UBS was granted a temporary stay of the NSW proceedings pending the decision in the Singapore proceedings. Telesto was unsuccessful in an application to stay the Singapore proceedings. An Appeal was dismissed in May 2011. At that point, UBS sold the collateral and the Respondents’ liability to UBS was reduced to nil. UBS still sought declaratory relief and costs on an indemnity basis.
On 24 October 2011, UBS applied for a permanent stay of the NSW proceedings but was granted a temporary stay pending the original proceeding (The Singapore 801 proceeding) for the declaratory relief in relation to the termination of the StandStill Agreement. The Respondents did not appear to defend the Singapore 801 proceeding and judgment was entered in UBS’ favour on 27 July 2012.
On 6 September 2012, UBS again sought a permanent stay of the NSW proceedings on the and the Respondents sought a dissolution of the temporary stay. On 9 May 2013, Sackar J granted a permanent stay of the NSW proceedings. This was because “Telesto’s principal claims occurred before the execution of the Standstill Agreement and that Lai J’s finding – that all the rights and liabilities arising as the result of those facts were the subject of a compromise or settlement agreement that should not be set aside – “included everything which Telesto pleaded against UBS in the [SCNSW proceedings]””.
On 9 January 2014, Mr Tyne became trustee of the trust and commenced proceedings with his partner Ms Marks in the Federal Court on similar grounds to those in the NSW proceeding.
Primary Decision
UBS applied for a permanent stay of the Federal Court proceeding. At first instance, Greenwood J considered that Laj J’s judgment was on the merits, not a default judgment because Tyne and Telesto had an opportunity to contest the Singapore proceedings on the merits but chose not to. The pleadings in both the Singapore 801 proceedings and the NSW Supreme Court proceedings were similar those in the Federal Court. He held that this made the proceeding oppressive and thus an abuse of process.
Full Court Decision
Telesto and Tyne appealed to the Full Court, which found in their favour. Jagot and Farrell JJ found that there was no abuse of process, as Telesto and Tyne had sought leave to file a further amended summons with additional undertakings that Telesto would not defend the Singapore 801 proceedings and would drop some of its claims in the NSW Supreme Court proceeding. The amended summons sought to omit Tyne, which meant that Tyne was not a party to the NSW proceeding. According to the majority, this did not prohibit Tyne from bringing proceedings in the Federal Court in relation to the same matter, especially since they unconditionally withdrew their claims in the NSW proceeding and this was no bar to bringing fresh proceedings either in NSW or in the Federal Court under r 12.3(1) of the Uniform Civil Procedure Rules 2005 (NSW) and r 26.14 of the Federal Court Rules 2011 (Cth).
In dissent, Dowsett J cited Batistatos v Roads & Traffic Authority of New South Wales which outlined the principles of abuse of process. Abuse of process may involve issuing proceedings for an improper purpose as well as proceedings that are vexatious, frivolous or oppressive, but is otherwise not limited to these scenarios. As Dowsett J put it, abuse of process can be construed from the effect of a party’s conduct in the proceeding. In this case, this involved relitigating the matter, as the substance of the proceedings in the Federal Court was substantially similar to those in the NSW proceedings.
The High Court decision
UBS appealed to the High Court and, in a 4-3 majority, the High Court allowed the appeal and set aside the Full Federal Court’s decision. The majority referred to French CJ in Aon Risk Services Australia Ltd v Australian National University, in which he stated that abuse of process may arise if a party litigates a claim that should have been litigated in earlier proceedings. This principle overlaps with Anshun estoppel where parties may be estopped from litigating claims where they could have or should have raised them in a previous proceeding.
Although discontinuance is not a bar to fresh proceedings, Kiefel CJ, Bell J and Keane J held that this does not preclude the court from deciding whether an abuse of process has occurred. If conduct results in increased costs and delays and/or prejudices the other party in trying to finalize the dispute, it may amount to an abuse of process, even if a different but related entity issues the proceeding.
One of the majority, Gageler J, referred to Johnson v Gore Wood & Co, an English negligence case against a law firm by a company, which was settled but the controlling party of the company then issued proceedings in his own name. He considered that the case was an abuse of process rather than estoppel because a different but related party issued the new proceeding on similar issues. The majority emphasized that the court’s inherent jurisdiction to deal with an abuse of process was paramount, even if the Court Rules were complied with. Gageler J identified four reasons why the proceeding was an abuse of process:
- it was irrelevant that Mr Tyne, the previous trustee and Telesto were separate parties because Mr Tyne was the controlling mind of Telesto and the trustee;
- the complexity of the factual and legal issues warranted an immediate resolution which arose out of the NSW proceedings;
- the Respondent had no juridical disadvantage in bringing the proceedings in the NSW Supreme Court; and
- the Respondent provided no adequate explanation for bringing the proceedings in the Federal court, instead of continuing the NSW proceeding.
Dissenting judgments
Nettle, Gordon and Edelman JJ in dissent agreed with the majority view of the Full Court that the Respondent was within his right to bring a fresh proceeding and UBS had not objected to the discontinuance of the NSW proceedings, nor did it seek any conditions for the discontinuance. In light of this, Nettle and Edelman JJ considered that there was no injustice done to UBS, particularly since the NSW proceeding was stayed as soon as they were issued and UBS did not change its position in reliance of the discontinuance. The Respondents’ financial difficulty influenced their conduct in discontinuing the NSW proceeding and bringing a new proceeding in the Federal Court. The Respondents also believed that they could recover more damages in the Federal Court than in NSW Supreme Court.
Conclusion
The High Court’s decision in UBS AG v Tyne reflects an arguably stricter approach to the conduct of litigants and emphasizes the paramountcy accorded to the protection of court process from abuse, notwithstanding that the conduct may be permitted by the Court Rules. The decision also highlights the vigilance which the court exercises over litigants and its extension to related parties, particularly the controlling minds of an entity engaged in litigation.
Chris Goddard
chris.goddard@chrisgoddardsolicitors.com.au
Paul Goddard