In UBS AG v Tyne [2018] HCA 45, a 4-3 decision of the High Court of Australia has made it harder for litigants to bring a claim that could have been determined in an earlier proceeding, even if that claim had never been determined on the merits. The decision rested on the interpretation of the doctrine of the abuse of the court's process, as well as the overarching purpose of case management in provisions such as s 56 of the Civil Procedure Act 2005 (NSW) and s 37M of the Federal Court of Australia Act 1976 (Cth)—that is, that the resolution of disputes should be "just, quick and cheap" or "quick, inexpensive, and efficient".
This post explains the decision, including the strong dissents by three members of the bench, and why the plaintiff who now will never have his claim determined probably could not have brought it in any event.
The facts
The basic facts of the case were as follows. Mr Tyne and his wife and children were the sole beneficiaries under the Argot Trust. The trustee of the Trust was a company called ACN 074 971 109 Pty Limited, which was controlled by Mr Tyne. Mr Tyne also controlled a company called Telesto Investments Limited, which was incorporated in the tax haven of Jersey.
In about 2007, Telesto obtained a credit facility from UBS, a Swiss bank, and Mr Tyne gave a personal guarantee on the facility. The facility was "booked" in Singapore. Telesto then proceeded to borrow money from UBS to invest in certain Kazakhstani bank bonds, which later turned out to be worthless.
When the value of the security declined, UBS made a margin call on the Telesto facility. In order to avoid UBS calling in the debt, Mr Tyne caused the Trust to loan additional securities to Telesto which Telesto then used to further secure the loan.
Eventually, however, UBS lost its patience. On 15 October 2010, UBS commenced proceedings to enforce the debt in Singapore against Telesto and against Mr Tyne as the guarantor of Telesto's debt. It also began selling off the security to pay down the loan.
On 2 November 2010—about 3 weeks later—Telesto, Mr Tyne, and the trustee of the Trust commenced proceedings in the Supreme Court of NSW against UBS in relation to the same subject matter. Mr Tyne and his companies made a number of claims, which relevantly included that Telesto had been induced to buy the Kazakhstani bonds by misleading or deceptive conduct on the part of UBS, in breach of what was then s 52 of the Trade Practices Act 1974 (Cth) ("TPA") (now s 18 of the Australian Consumer Law). Such a claim was not available under Singaporean law.
There was then a complicated series of applications for anti-suit injunctions in the two jurisdictions, which I do not want to go into in too much detail. The important point is that the NSW proceedings were temporarily stayed while the Singapore proceedings were allowed to go ahead: Telesto Investments Ltd v UBS AG (2012) 262 FLR 119. In the interim, UBS had sold all of the security and paid off the whole loan. At that stage the Singapore proceedings were therefore confined to a claim for declaratory relief and costs.
On 6 March 2012, Mr Tyne and the trustee discontinued their claims against UBS in NSW, leaving Telesto as the only remaining plaintiff. On 27 July 2012, the Singapore proceedings were heard and determined in favour of UBS, without any appearance from Mr Tyne or Telesto.
After the determination of the Singapore proceedings, UBS applied for a permanent stay of the NSW proceeding, and Telesto applied for the stay to be lifted. Those applications were both heard by Sackar J in November 2012, who delivered judgment on 9 May 2013, granting a permanent stay of the proceeding on the basis that Telesto's claim was barred by res judicata as Telesto was seeking to re-litigate the issues already determined in Singapore: Telesto Investments Ltd v UBS AG (2013) 94 ACSR 29.
On 9 January 2014, Mr Tyne was appointed as the new trustee of the Argot Trust. Four days later he commenced proceedings in the Federal Court of Australia in his capacity as trustee of the Trust, seeking essentially the same relief as the previous trustee had sought in its discontinued claim in the NSW proceeding. UBS applied for that proceeding (the "FCA proceeding") to be stayed. The primary judged granted UBS's application and stayed the FCA proceeding as an abuse of process: Tyne v UBS AG (No 3) (2016) 236 FCR 1. On appeal to the Full Court, the majority overturned that ruling and revoked the stay; however in a dissenting judgment Dowsett J said that he would have upheld the primary judge's decision: Tyne v UBS AG (No 2) (2017) 250 FCR 341.
UBS then appealed to the High Court which, in a 4-3 decision, overturned the Full Court's judgment and permanently stayed the FCA proceeding.
The majority decision
The leading judgment was given by Kiefel CJ, Bell and Keane JJ. Gageler J agreed with the majority but delivered a separate judgment containing further reasons.
While recognising that the Trust's claim was not barred by res judicata, issue estoppel, or Anshun estoppel (see, Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589; [1981] HCA 45), their Honours held that the claim was nevertheless an abuse of process. This was on the basis that Mr Tyne was the controlling mind of all of the parties involved, and he had made a tactical decision to withdraw the Trust from the NSW proceeding while letting that proceeding run to finality.
Their Honours held that it was an abuse of the court's process for different entities controlled by the same person to seek to bring serial proceedings in relation to the same subject matter, notwithstanding that the claims being brought had never been determined on the merits. Their Honours held that the Trust's claims could and should have been determined in the NSW proceeding, and Mr Tyne should not be permitted to raise them after that proceeding had been finalised, even though it had not ultimately been heard and determined.
As Kiefel CJ, Bell and Keane JJ said at the end of their joint reasons:
The fact that UBS is a large commercial corporation does not deny that permitting the Trust's claim to proceed will subject it to unjustifiable oppression. That oppression is found not only in the significant delay in the resolution of the dispute and the inevitability of increased costs to UBS. At its core is the vexation of being required to deal again with claims that should have been resolved in the SCNSW proceedings. The fact that UBS has not been required to admit or defend the Trust's claim does not lessen that vexation. Between December 2010 and May 2013, when the SCNSW proceedings were finally determined, UBS was engaged in litigation with a party controlled by Mr Tyne, arising out of its alleged dealings with Mr Tyne in respect of the loss that is claimed by the Trust in these proceedings. On the final determination of the SCNSW proceedings, it was reasonable for UBS to order its affairs upon the understanding that the dispute between it and Mr Tyne, and the entities that he controlled, arising out of those dealings was at an end.
For the Federal Court to lend its procedures to the staged conduct of what is factually the one dispute prosecuted by related parties under common control with the attendant duplication of court resources, delay, expense and vexation, as Dowsett J found, is likely to give rise to the perception that the administration of justice is inefficient, careless of costs and profligate in its application of public moneys. The primary judge was right to permanently stay the proceedings as an abuse of the processes of the Federal Court.
The dissents
The dissenting judgments were delivered by Edelman and Nettle JJ and by Gordon J. Their Honours emphasised that the TPA claims that the Trust now sought to raise had never been determined after a contested hearing. In fact, UBS had never even had to plead a defence to the claims—it had successfully stayed every proceeding where they had been raised. Their Honours therefore held that it was not an abuse of process for the Trust to seek to raise the claims again.
Edelman and Nettle JJ focussed on the statutory regime which allowed Mr Tyne to discontinue the NSW proceeding. That is, r 12.1 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), which permits a proceeding to be discontinued with the leave of the court, with or without conditions, and r 12.3, which states that, "A discontinuance of proceedings with respect to a plaintiff's claim for relief does not prevent the plaintiff from claiming the same relief in fresh proceedings".
As their Honours found, UBS could have demanded that Mr Tyne agree to terms of discontinuance, such as that he would not raise the same claims again in a later proceeding. However, it did not do so, meaning that r 12.3 of the UCPR permitted Mr Tyne to claim the same relief in fresh proceedings.
Their Honours further found that Mr Tyne had given a reasonable explanation for why the NSW proceeding had been discontinued, which was essentially that the Trust was short on funds, its claim would be more expensive to run than Telesto's claim, and if Telesto won its claim then the Trust would have suffered no loss. On that basis, it made sense to discontinue the Trust's claim and focus on Telesto's claim. Note that the majority found that this explanation was not sufficient, and inferred that Mr Tyne had discontinued the claims for a forensic advantage.
The dissenting judges also found that there was no significant delay caused by Mr Tyne's conduct. As their Honours noted, the NSW proceeding had been stayed pending the outcome of the Singapore proceeding. The time between the application to lift the stay being determined and the FCA proceeding being commenced was eight months. Accordingly, the delay in the determination of the claims could have been no longer than eight months, and that relatively minor delay did not cause any particular unfairness for UBS, especially considering that UBS had itself caused a delay in the proceeding of about 2.5 years by obtaining various stays.
Further, while the majority of the Court had found that there was a real question of whether UBS would have applied for a permanent stay if the Trust had not discontinued its claims in the NSW Supreme Court, the dissenting judges very much doubted that UBS would have acted any differently had that been the case.
The Trust would have lost anyway
While the majority decision may seem a little unfair to Mr Tyne, in that it allows UBS to succeed in its claim without ever having to face the allegations of misleading or deceptive conduct, one thing jumps out at me that seems to indicate that in the long run their Honours may have just saved Mr Tyne from further grief.
Mr Tyne's claim for damages for breach of s 52 of the TPA must have been brought under s 82 of the TPA. However, he brought those claims in his capacity as the new trustee of the Trust. The actual damages were suffered by the old trustee of the Trust.
In Lanai Unit Holdings Pty Ltd v Mallesons Stephen Jaques (No 2) [2016] QSC 242; [2017] 2 Qd R 456, Jackson J in the Queensland Supreme Court held that claims brought under s 82 of the TPA by a former trustee do not vest in a new trustee when it is appointed. On that basis, Mr Tyne would not have standing to bring the claims he was trying to bring, and so he would not have succeeded in the substantive proceedings even if the High Court had decided in his favour in relation to the stay.
That point does not seem to have been raised in Mr Tyne's case, but given that the law firm acting for UBS was the defendant in the Lanai case, no doubt it would have come up sooner or later.
Full disclosure: as a solicitor I acted for the plaintiff in the Lanai case.