A & S Oayda Investments P/L v Burns Philp Trustee Company Ltd

A AND S OAYDA INVESTMENTS PTY LIMITED, THE SHIRT FACTORY PTY LIMITED,
CONTINENTAL SHIRTS HOLDING CO PTY LIMITED, CONTINENTAL SHIRTS MANUFACTURING CO
PTY LIMITED, ROBERT RAFEC OAYDA AND ALLEN OAYDA v BURNS PHILP TRUSTEE COMPANY
LIMITED (IN LIQUIDATION), ESTATE MORTGAGE MANAGERS LTD (IN LIQUIDATION),
ESTATE MORTGAGE FINANCIAL SERVICES LTD (IN LIQUIDATION), MERCANTILE MUTUAL
LIFE INSURANCE CO LIMITED, MARTIN MADDEN AND GREGORY ROBERTSON
No. NG259 of 1994
FED No. 935/94
Number of pages - 18
Interlocutory Motions

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
LOCKHART J

CATCHWORDS

Interlocutory Motions - motion to strike out statement of claim on the ground that there is no reasonable cause of action disclosed or there is a tendency to cause prejudice, embarrassment or delay - determination of parties to case - costs.

Federal Court Rules, O 11 r 16; O 20 r2

HEARING

SYDNEY, 31 October, 1 November 1994
#DATE 25:11:1994

Counsel for Applicants: Mr C J Stevens QC

Mr A M Gruzman

Solicitors for Applicants: Williams Palmer Noss

Counsel for Second Respondents: Mr L S Einstein

Solicitors for Second
Respondents: Middletons Moore and Bevins

Counsel for Third Respondents: Mr P Brereton

Solicitors for Third
Respondents: Mallesons Stephen Jaques

Counsel for Fourth and
Fifth Respondents: Mr S M P Reeves

Solicitors for Fourth and
Fifth Respondents: Mallesons Stephen Jaques

ORDER

THE COURT ORDERS THAT:

1. The matter be stood over to a date to be fixed;

2. Mercantile Mutual bring in short minutes of order on the said date to give effect to the Court's reasons for judgment.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

LOCKHART J This case arises out of problems associated with what is known as the Estate Mortgage Trusts of which the first respondent, Burns Philp Trustee Company Limited (In Liquidation) was the trustee. It concerns the negotiations in 1988 between certain of the parties and others relating to the financing of a commercial/retail development at Darling Harbour in Sydney and the refinancing of certain loans of a property in the Sydney central business district, known as Daking House. The case also concerns the loan documents and guarantees which arose from the negotiations and the conduct of the parties after the loan documents were executed.

Various causes of action are asserted by the applicants, ranging from alleged contraventions of ss. 52 and 51A of the Trade Practices Act 1974 (the TP Act), consequent claims for damages under s. 82 and ancillary relief under s. 87; damages for alleged breaches of contract and of duties of care; and assertions that securities were procured by one of the respondents unconscionably. Claims are made for rectification of deeds of loan, declarations that the fifth and sixth respondents were invalidly appointed as receivers and managers of the property of the third and fourth applicants and claims for consequential damages. Other relief is also sought which it is unnecessary to mention.
There are before the Court six interrelated notices of motion in this proceeding. I heard four of them together, and, upon the conclusion of argument, heard the remaining two.
The proceeding has become complex. The application was filed on 6 May 1994, amended on 27 July 1994 and further amended on 13 October 1994. A statement of claim was filed on 13 October 1994. The further amended application of 13 October 1994 purports to add two respondents, John William Murphy and Peter Bernard Allen. It is common ground that they should not have been added in the absence of leave by the Court pursuant to Order 6 rule 8; hence one of the motions filed by some of the applicants seeks such leave. Some of the notices of motion bear the correct heading and others bear the heading which it is anticipated by some of the parties they will bear if the relevant motions succeed. The heading to these reasons is the correct heading as it presently is.
The matter is further complicated by the fact that some of the applicants and some of the respondents are in liquidation or have receivers and managers appointed, with the consequence that they have not all appeared in the proceeding and this has given rise to a motion for security for costs.
It is convenient if I refer to the parties by abbreviated titles rather than by their numerical placement as applicants or respondents, especially in view of the purported addition of certain respondents without leave. The abbreviated forms shall be as follows:-

. The first applicant, A and S Oayda Investments Pty Limited (A and S Oayda);

. The second applicant, The Shirt Factory Pty Limited (The Shirt Factory);

. The third applicant, Continental Shirts Holding Co Pty Limited (Continental Shirts Holdings);

. The fourth applicant, Continental Shirts Manufacturing Co Pty Limited (Continental Shirts Manufacturing); . The fifth applicant, Robert Rafec Oayda (Mr Robert Oayda); . The sixth applicant, Allen Oayda (Mr Allen Oayda); . The first respondent, Burns Philp Trustee Company Limited (In Liquidation) (Burns Philp);

. The second respondent, Estate Mortgage Managers Limited (In Liquidation) (Estate Mortgage Managers); . The third respondent, Estate Mortgage Financial Services Limited (In Liquidation) (Estate Mortgage Financial Services); . The fourth respondent, Mercantile Mutual Life Insurance Co Limited (Mercantile Mutual);

. The fifth respondent, Martin Madden (Mr Madden) . The sixth respondent, Gregory Robertson (Mr Robertson).

I shall refer to the further parties whom certain of the applicants seek to join as respondents, being the new trustees of the Estate Mortgage Trusts, John William Murphy and Peter Bernard Allen, as Mr Murphy and Mr Allen.
The insolvency of Burns Philp, Estate Mortgage Managers and Estate Mortgage Financial Services means that the applicants obviously have taken the view that they are not worth powder and shot so they seek to recover damages against parties who may be liable on a secondary basis (by assignment in the case of Mercantile Mutual and as receivers and managers in the case of Mr Madden and Mr Robertson, also Mr Murphy and Mr Allen) and who are not insolvent. This is the genesis of many of the problems which arise in the statement of claim.
Although the case was commenced on 6 May 1994 it has witnessed many directions hearings and notices of motion; but the only pleading that has been filed is a statement of claim; and that was filed well out of time in contravention of a number of directions given by judges of the Court.
Various notices of motion were filed or foreshadowed by parties. When the matter came before me for directions on an earlier occasion, I thought the only sensible way to get the case moving was to have all relevant motions heard on the same occasion before me. This course was taken.
I shall now describe the notices of motion. Two motions are brought by Mercantile Mutual and two by Mr Madden and Mr Robertson, the receivers and managers of Continental Shirts Holdings and Continental Shirts Manufacturing. Those four notices of motion seek in substance the following orders (the relevant notices of motion have many paragraphs, but may be conveniently summarized):

(a) that the statement of claim filed on 13 October 1994 be struck out as against Mercantile Mutual, Mr Madden and Mr Robertson pursuant to O 11 r 16 on the ground that there is no reasonable cause of action disclosed or there is a tendency to cause prejudice, embarrassment or delay in the proceeding which is otherwise an abuse of process of the Court. In the alternative O 20 r 2 is invoked on the ground that no reasonable cause of action is disclosed or the proceeding is frivolous or vexatious or an abuse of process of the Court;

(b) that the further amended application be dismissed;

(c) in the alternative, that the causes of action pleaded in paragraphs 1 - 69 of the statement of claim be dismissed as against the moving parties;

(d) that the claims for relief in the relevant paragraphs of the further amended application be dismissed;

(e) orders for costs including costs on an indemnity basis and a stay of the proceedings until costs are paid;

(f) in the alternative, that the solicitor on the record for the Shirt Factory be personally liable for any costs ordered against the Shirt Factory;

(g) in the alternative, that the applicants provide security for costs of the moving parties and that the proceeding be stayed until the security for costs is provided;

(h) that the proceeding against the moving parties be dismissed for want of prosecution.

The other two notices of motion were filed by certain of the applicants. They seek the following orders:-

(a) that leave be granted pursuant to Order 71 rule 46 to continue the proceeding against Burns Philp;

(b) that leave be granted pursuant to Order 6 rule 8 to join Mr Murphy and Mr Allen as respondents;

(c) that Continental Shirts Manufacturing remain as an applicant in the proceeding, but that Mr Robert Oayda be authorized to use that company's name as a co-applicant with the remaining applicants;

(d) in the alternative, that the liquidator of Continental Shirts Manufacturing be given leave to enter a submitting appearance on behalf of that company.

Mr Murphy and Mr Allen are named as respondents in the further amended application and the statement of claim. As mentioned earlier, they have not been properly joined as parties. They seek to have the statement of claim or the proceeding dismissed as against them.
I turn first to the motions seeking the striking out of the statement of claim in whole or in part. This motion occupied most of the time on the hearing of the motions.
The statement of claim consists of paragraphs numbered 1 to 96. They contain a miscellany of diverse allegations, sometimes in diffuse terms and cast in language of cimmerian obscurity. It is a difficult document to follow. I have adopted a broad and somewhat tolerant approach to it rather than analyse it with a fine and hairsplitting eye.
The statement of claim is far too long (31 pages) to set out in full and there is no need to attach it to these reasons for judgment. Broadly speaking it falls into two divisions. The first section consists of paragraphs 1 to 69 which relate primarily to allegations of representations made in the course of trade or commerce and which are said to contravene ss. 52 or 51A of the TP Act with claims for damages under s. 82 or other relief under s. 87. The relevant paragraphs are interspersed with other allegations alleging breaches of contract which it is not entirely easy to sever from facts relating to the claims based upon the TP Act. The second section contains the balance of the statement of claim from paragraph 70 onwards. This section is introduced with the unfortunate heading "COMPROMISE/WAIVER/ESTOPPEL"; unfortunate because the reader is kept in a state of suspense waiting to see what is alleged with respect to waiver and estoppel, but the end of the document is reached without any factual material or other assertions being made that could be characterized, even liberally construed, under either of those headings. The status of the heading is in any event a matter of some doubt and I propose to ignore it.
I turn to paragraphs 1 to 69 which allege seven sets (on my count) of representations.
In the first 69 paragraphs, representations are said to have been made, not by Burns Philp itself, but by persons who are said to be actual or ostensible agents of Burns Philp. No material facts are pleaded to show actual authority and no material facts are pleaded which, if established, would show ostensible authority. Therefore a critical element in the statement of claim of the cause of action relied upon is missing from the statement of claim. Unless the persons said to have made the representations were authorized to do so the case against Burns Philp must fail. So must the claim against Mercantile Mutual as assignee of interests of Burns Philp in certain securities fail. This is a fundamental defect in the pleading.
Continental Shirts Manufacturing remains an applicant in the proceeding. It is still represented on the record by the solicitor for the applicants; but that solicitor has not signed the statement of claim or the further amended applicant on behalf of it. Continental Shirts Manufacturing was wound up by order of the Supreme Court of New South Wales on 30 June 1994 (after the commencement of this proceeding) and its liquidator is Mr M J Green. He has given evidence that unless an order is made in this proceeding in favour of that company or some settlement is achieved in its favour there will be no assets available for distribution to unsecured creditors. He is not in principle opposed to the proceeding continuing in the name of the company with a creditor or contributory of the company authorized to do so, provided he is not personally exposed to any order as to costs and provided none of the assets of the company, which are negligible, are exposed to any such risk. I am satisfied that Continental Shirts Manufacturing is not prosecuting the proceeding. Mr Green is not prepared to continue the litigation on behalf of the company. Indeed, Mr Green has sworn an affidavit from which it appears that he is not prepared to instruct solicitors to pursue the existing proceeding in the absence of funds to either consider the merits of the proceeding or prosecute it.
Since the proceeding commenced, Burns Philp has been wound up. It has not appeared. Leave to continue the proceeding against it has not been obtained, so the proceeding against it must be stayed unless and until leave is granted.
Paragraphs 4 and 5 raise the issue of the authority of Estate Mortgage Managers and Estate Mortgage Financial Services to negotiate and make representations on behalf of Burns Philp. But the paragraphs (together with later paragraphs) do not plead material facts showing the conferring of actual authority or any holding out such as would create ostensible authority.
Paragraph 10 of the statement of claim is a critical paragraph. It is the only paragraph in the first 69 paragraphs which refers to Mercantile Mutual and that is the only source of any liability alleged against Mercantile Mutual. Paragraph 10 reads as follows:

"By Deeds of Assignment dated 3rd March, 1988, 19th March, 1990 and 22nd October, 1993 BPTC and/or the Trustees purported to assign its interest in various Deeds of Loan and collateral securities to the Third Respondent ("MMI"). In the premises MMI taking subject to the equities, became liable to the Applicants for and in respect of the breaches, failures and contraventions of BPTC and alternatively the Deeds of Assignment were invalid or ineffective to confer upon MMI any interest which it may claim, or were unenforceable as having been made in breach of trust."

Particulars of the alleged breaches are then referred to in this pleading. Particular (a) states that a deed of assignment of 3 March 1988 purported to assign Burns Philp's interest in non-existent mortgages to Mercantile Mutual. Particular (b) alleges a breach of a trust deed whereby Burns Philp purported to assign to Mercantile Mutual its interest in the assigned portion of the mortgage. This particular does not identify what the breach of the trust deed is. Particular (c) asserts that Burns Philp, not Mercantile Mutual, was aware of "set-off or counter-claims against it" by Continental Shirts Holdings and Continental Shirts Manufacturing. Nowhere is one told what set-off or what counter-claims Burns Philp is said to have been aware of. Material facts are not pleaded. Then the pleader proceeds to the deed of assignment of 19 March 1990. The various particulars (d), (e) and (f) relating to this deed have the same faults in substance as those in (a) to (c). The pleader states that under a deed of loan of 22 October 1993, the trustees, in purporting to assign to Mercantile Mutual the balance of Burns Philp's interest in the mortgage, aided and abetted the breaches of Burns Philp. This is not a particular of any allegation whatever in paragraph 10.
There is an assertion in the body of paragraph 10 that "In the premises" Mercantile Mutual takes subject to "the equities" and thus became liable to the applicants for and in respect of the breaches, failures and contraventions of Burns Philp. It is unclear what the "premises" and the "equities" are said to be. This is a paragraph which is too uncertain and imprecise to stand.
There is a more fundamental objection to paragraph 10. All that it said against Mercantile Mutual is that in the premises it takes "subject to the equities" and became liable to the applicants "for and in respect of the breaches, failures and contraventions of" Burns Philp and that, alternatively, the deeds of assignment were invalid or ineffective to confer upon Mercantile Mutual any interest which it may claim or were unenforceable as having been made in breach of trust. No allegation is made against Mercantile Mutual that it is a person involved in any contravention of the TP Act under s. 75B. Nor is there any allegation of knowledge by Mercantile Mutual of any of the misconduct which is asserted against Burns Philp. What is alleged is that, because Mercantile Mutual acquired certain interests of Burns Philp in certain securities, Mercantile Mutual as assignee, has become liable to the applicants for the misconduct of Burns Philp. In my opinion this cause of action is fundamentally flawed in so far as it is based on alleged contraventions of the TP Act. Liability for misrepresentations under the TP Act rests with the contravener and persons involved in the contravention pursuant to s. 75B. Mercantile Mutual is not said to be a contravener, nor a person involved in any contravention of Burns Philp. In my opinion, it is impossible to establish a case against Mercantile Mutual based on Burns Philp's alleged contraventions of the TP Act when the underlying premise is the fact that Mercantile Mutual acquired interests as assignee in certain of the securities held by Burns Philp.
As paragraph 10 of the statement of claim must be struck out, so must the remaining paragraphs up to paragraph 69 be struck out as against Mercantile Mutual because the later paragraphs are derived from paragraph 10. It must follow that the case against Mr Madden and Mr Robertson must similarly fail because they are sued as receivers and managers of Continental Shirts Holding and Continental Shirts Manufacturing.
Paragraph 11 asserts that Mr Madden and Mr Robertson are the receivers and managers of EMM and EMFS. This is plainly an error; and it is common ground that the reference must be to Continental Shirts Holding and Continental Shirts Manufacturing. This raises another curious feature of the case because the companies Estate Mortgage Managers and Estate Mortgage Financial Services are still parties to the proceeding, but the statement of claim and further amended application do not refer to them as parties. They appear to have been de facto removed as parties whereas in truth they still are parties. These companies are still on the record but no-one appears to be proceeding against them. Also, the allegation in paragraph 11 leads nowhere. It seems to serve no purpose in the body of the pleading at all.

The first TP Act cause of action is pleaded in paragraphs 15 to 18 and the ground for the allegations starts to be laid in paragraph 12. Paragraph 17 alleges that the representations were misleading or deceptive because "as at the time they were made they did not have the means and did not have the means of anticipating" that Burns Philp, Estate Mortgage Managers and Estate Mortgage Financial Services "would have the ability to provide funds as and when required to complete the development in breach of s. 51A and 52" of the TP Act and "to the extent that they were relation to future conduct there were no reasonable grounds for making the representations". The first "they" is a reference to the representations and the second "they" must be to the people who made them. The representations are the representations (a) to (q) mentioned in paragraph 15 of the pleading. To the extent that the pleader relies on future conduct, reliance is placed on s. 51A. The relevant representations which are sought to be relied upon in support of the allegations relating to future conduct have not been properly identified. As French J pointed out in Hunt Contracting Co Pty Ltd v Roebuck Resources NL (1992) 110 ALR 183 at 190:

"A party invoking s. 51A of the Trade Practices Act does not discharge the duty of informing the court and the respondent of its case by resorting to an ambit claim for the application of the section in respect of any representation which might turn out to be a representation as to future matter. If the section is to be invoked then the representations to which it is sought to be applied must be identified."

Paragraph 18 then proceeds to allege reliance upon various representations.
Paragraph 20 deals with reliance on representations. It pleads in a general form that, in reliance upon the representations together with certain other matters, Continental advanced moneys to Gardenside Development Pty Ltd (Gardenside). But the pleader does not state which of the representations pleaded in para 15 are intended to be encompassed.
Paragraph 21 pleads a further representation. The difficulty with this paragraph is that no subsequent paragraph refers back to it alleging that it was misleading or deceptive. It is possible that paragraph 21 should be read together with paragraph 22 because paragraphs 23 and 24 allege misleading and deceptive conduct in terms which would embrace the representations pleaded in paragraph 22, and probably paragraph 21; but this is not clear. Paragraph 22 is the paragraph which pleads what appears to be the third set of representations. Paragraphs 23 and 24 allege that they were misleading and deceptive and paragraph 25 alleges reliance upon them.
Then comes paragraph 27 which illustrates a shift from causes of action based on the TP Act to alleged breaches of contract arising from a failure by Burns Philp to pay the progress claim under the deed of loan. The problem is that it is clear that the pleading refers to several deeds of loan which are said to have been breached, but the particular deed of loan to which paragraph 27 is directed is not identified. Nor is the particular provision of the deed of loan sufficiently identified. The paragraph fails to disclose a cause of action.
Paragraphs 28 to 32 deal with the fourth set of representations. Paragraph 32 alleges that "in breach of the representations the progress payment was not paid on 21st July 1989". It is not clear to me how there can be a "breach" of a representation. What is important about this paragraph is that there must have been some quantifiable damage by 21 July 1989 because, if the representation was not honoured, assuming this to be what is meant, it was not honoured on 21 July 1989 and some damage was then suffered. This is relevant to the assertion by the respondents that the relevant claims under s. 82 of the TP Act are statute barred (three year limitation).
Paragraphs 34 to 37 deal with the fifth set of representations. They suffer the same vices as earlier paragraphs.
Paragraph 38 is a curious paragraph. It says:

"BPTC wrongfully denied its obligations to make such payments and wrongfully represented that although funds were not then available, they shortly would be."

It is not clear whether the wrongful denial is said to be wrongful because of representations made or wrongful because it was a breach of contract or both. If it is a breach of contract, the relevant obligations to make the payment have never been pleaded. If it is a representation, no material facts have been pleaded to show when, where, by whom, in what terms the representation was made.

Paragraph 39 alleges a "breach" of a representation as did paragraph 32. It suffers from the same difficulty.
Paragraph 40 pleads the sixth set of representations but nothing appears to depend upon it. No subsequent paragraph alleges that the representations were misleading or deceptive or were made in trade or commerce. It seems to stand on its own without a future.
Paragraph 41 is important because it demonstrates how part of the damages which the applicants say they suffered first accrued. This paragraph alleges:

"Between July and late September 1989 Continental and the applicants to the knowledge of BPTC by their agents EMM and EMFS proposed refinancing of the project and its continuation."

Paragraph 42 alleges the seventh set of representations.
Paragraphs 43 and 44 assert that the representations were made in trade or commerce for a particular purpose and that they were misleading or deceptive.
Paragraph 45 alleges a breach of an undertaking; but the effect of the undertaking is never pleaded, so it is not possible to discern what the breach is said to be of.
Paragraph 46 refers to "breach" of representations, doubtless referring back to paragraph 42; but it is impossible to see from the pleading how, in fact, it can refer to paragraph 42 because the representations pleaded in paragraph 42(c), (e), (f), (g), (h), (m), (o), (p), (r) or (s) have nothing to do with the breach identified in paragraph 46. So it is impossible to discern what representations are said to have been breached.
Paragraph 47 again refers to a "breach" of representations and does not identify the representations said to have been breached.
Paragraph 48 asserts breach of trusts and of deeds of loan, but the terms of the trusts and of the deeds are not pleaded.
Paragraph 49 alleges breach of contractual obligations without identifying what the contractual obligations are.
Paragraph 51 alleges "breach" of representations and an undertaking, but it is not possible to discern how "in making the demand" Burns Philp was in breach of an undertaking. As mentioned earlier, I do not understand the notion of a "breach" of a representation.
Paragraph 52 is irrelevant to the causes of action as pleaded. The reference to the expression "In the premises" is confusing because it is impossible to discern what the "premises" are from the earlier paragraphs in the pleading.
Paragraphs 53 and 54 identify further damage said to be suffered in or about late 1989, namely, refusal to release the Daking House security to enable refinancing (53) and the prevention of refinancing (54). The paragraphs therefore assert that damage was suffered in or about late 1989.
Paragraph 55 is headed "RECTIFICATION". This paragraph alleges an agreement arising from representations and the acceptance thereof by the applicants. Agreements arise from the exchange of promises, not from representations. Also, it is nowhere identified with clarity which representations are said to have given rise to the agreement. Paragraph 56 bears no relationship to any claim whatever in rectification.
The essence of the rectification claim is paragraph 58. It asserts that "the said written documents" (which I assume are deeds of loan, guarantees and other supporting documents) were executed by the applicants and others in the belief that they embodied the agreement referred to in paragraph 55 whereas they do not in fact contain or embody this agreement. This all concerns what happened with respect to execution of the documents on 6 September 1988, the benefit of which is asserted to be subsequently assigned to Mercantile Mutual.
Counsel for Mercantile Mutual referred me to a number of cases supporting the proposition that where third parties have acquired rights and altered their position on the faith of an agreement sought to be rectified, without notice of the claim or the facts giving rise to it, the remedy of rectification ought to be refused. The cases were Smith v Jones (1954) 2 All ER 823 at 827 per Upjohn J; Coolabah Pastoral Company v The Commonwealth (1967) 11 FLR 173 per Blackburn J at 190; Maywood Holdings Pty Limited v Lyrical Holdings Pty Limited, Murray J (Supreme Court WA) unreported, 14 April 1992, at 17 where his Honour said that in general the remedy of rectification will not as a matter of law survive as against a defendant who was a bona fide purchaser for value without notice; GPI Leisure Corporation Limited v Herdsman Investments Pty Limited (No 4), Young J (Supreme Court of NSW), unreported, 17 August 1990 at p 17. Reference was made also to Spry on Equitable Remedies, (1990) 4th edition, p. 593 and Meagher Gummow and Lehane on Equity, (1992) 3rd ed., para 2619. Counsel argued that even if, as between Burns Philp and the applicants, there was some claim for rectification, it cannot possibly succeed against Mercantile Mutual as an assignee from Burns Philp who did not have notice, and there is no suggestion anywhere in the pleading that Mercantile Mutual as the assignee acquired its interests with notice of the relevant matters. This cause of action alleged against Mercantile Mutual must fail as presently pleaded.
The pleading then proceeds (from paragraphs 59 through to 64) to a different complaint concerning an "acknowledgment". It is said to be an acknowledgment directed to Mercantile Mutual with respect to the Daking House loan, arising from an alleged requirement in about March 1990 by Burns Philp, Estate Mortgage Managers and Estate Mortgage Finance Services, as agents of Burns Philp requiring Continental Shirts Manufacturing to execute an acknowledgment directed to Mercantile Mutual with respect to the Daking House loan. This pleading against Mercantile Mutual relies upon the establishment of the authority of persons to make representations on behalf of Mercantile Mutual. The only place where this is alleged seems to be paragraphs 74 and 77 concerning an entity known as Global (see also the particulars to paragraph 79). It appears that Global was the manager of the Estate Mortgage trusts. The acknowledgment is said to have been executed pursuant to a threat of undue influence and economic duress by Burns Philp; but nowhere is this said to be by Mercantile Mutual or with its knowledge or consent.
This sufficiently deals with the set of allegations from paragraphs 1 to 69. At this point what has been established is that rectification is not available as against Mercantile Mutual, there is no assertion of relevant notice or knowledge as against Mercantile Mutual and no equity subject to which Mercantile Mutual takes that has been adequately identified.
In any event, the damage which has been identified as having been sustained by the relevant claimant appears to have been suffered outside the three year limitation period referred to in s. 82 of the TP Act. I note that although the time limit in s. 82(2) is expressed in terms which indicate that it is a condition precedent to jurisdiction, nevertheless it is to be pleaded as a defence: Acardi v Colonial Mutual Life Assurance Society Limited (1984) ATPR 40-473; Elna Australia Pty Limited v International Computers (Aust) Pty Limited (No 2) (1987) 16 FCR 410. However, generally, limitation questions of this kind should not be decided in interlocutory proceedings except in the clearest of cases: Wardley Australia Limited v Western Australia (1992) 175 CLR 514 at 533; Magman International Pty Limited v Westpac Banking Corporation (1991) 32 FCR 1 at 17 and 26. I therefore have reached no firm view at this stage of the case whether the claims by the applicants based on s. 82 of the TP Act are statute barred.
Stopping at this point, it seems to me that no cause of action that has been pleaded can be sustained against Mercantile Mutual or Messrs. Madden and Robertson.
I turn to the section of the statement of claim titled "COMPROMISE/WAIVER/ESTOPPEL". As mentioned earlier, there are no facts pleaded which can be said, on any view of the matter, to constitute waiver or estoppel.
Paragraphs 70 onwards are not expressed to be in the alternative, but I suspect they are intended to be so read. But in this case, where the pleading suffers from a multitude of defects, I do not think it would be appropriate to take this course. Plainly one cannot read a claim of compromise consistently with the first 69 paragraphs of the statement of claim; they are completely inconsistent. If they are repleaded so as to make it clear they are in the alternative, the position may be different. A party who seeks to include alternative and inconsistent allegations of material facts in a pleading can only do so if it is done separately and distinctly: Caboolture Park Shopping Centre Pty Ltd v White Industries (Qld) Pty Ltd, Ryan J, 25 May 1988 at 18. The facts are not pleaded separately in these paragraphs. They are interwoven so that it is impossible to distil precisely what the respondents are supposed to plead to.
The position is complicated further by the fact that paragraphs 71 to 74 refer to representations and reliance upon them in terms consistent with a TP Act misrepresentation claim. They seem to me to have little, if anything, to do with an assertion of compromise. In fact they are inconsistent with it.
Paragraph 74 alleges that an agreement was made in terms of a letter of 1 April 1992, but nowhere is the effect of the document pleaded, in no way does it state what the terms of the letter are: Thompson v Council of the Municipality of Randwick (1953) 90 CLR 449 at 457. This point arises with other documents. It is not a mere technical point because it is impossible for the respondents to know from paragraph 74 what the agreement is said to be and therefore what the breaches are as asserted in paragraph 75. The point arises also with respect to subsequent documents which are referred to in this form, in particular in paragraphs 77 and 78. Paragraph 78 is in any event a meaningless paragraph; it appears to have little, if any, nexus with anything else in the statement of claim.
Paragraphs 79 to 82 appear to revert to representations under the TP Act, namely, representations said to have been made by Mr Murphy and Mr Allen who are the new trustees of the Estate Mortgage Trusts appointed by order of the Court in place of Burns Philp.
The paragraphs also assert representations made by Mr Madden and Mr Robertson, managers of the Estate Mortgage Trust, now called the Meridian Investment Trust. The problem is that, having reached paragraph 82 after reading paragraphs 79, 80 and 81, there follows an allegation in paragraph 83 that the applicants are ready, willing and able to perform the agreement, the language of a claim for specific performance. This allegation seems to go nowhere. Nothing appears to depend upon it. It is, so far as I can see, an irrelevant allegation.
Paragraph 84 alleges a breach of an agreement; but it is impossible to tell from the various agreements pleaded from paragraph 74 to paragraph 78 which agreement is said to be breached. However, paragraph 84 itself contains a reference to an agreement reached on or about 26 June 1992 which refers back to a particular of the representation pleaded in paragraph 79. Again this shows the obscurity of and difficulty created by this pleading.
Paragraph 87 seeks to establish a claim against Mr Murphy and Mr Allen, but it arises from nowhere and proceeds nowhere. It asserts that those gentlemen in their dealings with Mr Robert Oayda aided and abetted the breaches of Burns Philp and Mercantile Mutual "referred to above". It does not identify any material facts creating knowledge of the breaches or involvement in them such as to constitute the "aiding and abetting" alleged.
Paragraph 88 makes assertions which stand entirely on their own. They too arise from nowhere and proceed nowhere.
Paragraph 89 refers to the introductory phrase used throughout this document "In the premises". But it is impossible to identify which of the many premises might be said to be relied upon. The same paragraph refers to "contractual obligations" without describing or identifying them; also it has nothing whatever to do with the pleaded "compromise" which is the genesis of this part of the statement of claim.
Paragraph 91 asserts that "the purported assignment" was invalid and ineffective, but it alleges nowhere any basis for the assertion. It also refers to "an assignment of future conduct", which so far as I can see is meaningless.
Paragraphs 93, 94 and 95 make somewhat bland assertions about invalidity of deeds of assignment, Mercantile Mutual having no right, title or interest in certain documents, the invalidity of appointment of Mr Madden and Mr Robertson as receivers and managers of the assets of Continental Shirts Holdings and Continental Shirts Manufacturing; but no material facts are disclosed on which those assertions are based. They were described by counsel for Mercantile Mutual, correctly in my view, as being "a wish list of what one might wish to say about these documents without disclosing any basis for the allegations that they make".
Counsel reminded me of what I said in Trade Practices Commission v Australian Iron and Steel (1990) 22 FCR 305 at 323:

"... it (the statement of claim) fails to plead material facts, it contains confusing and irrelevant material, it uses ambiguous terms, pleads particulars rather than material facts and asserts conclusions or opinions. ... the defective parts are so inextricably intertwined with offending material that an oppressive burden is cast upon the respondents to spell out the alleged cause or causes of action. The whole pleading must be struck out."

In my view this passage is apposite to the present pleading.

I propose to strike out the statement of claim as against Mercantile Mutual, Mr Madden and Mr Robertson, on the motion of those parties. I also propose to strike it out as against Burns Philp, Estate Mortgage Managers and Estate Mortgage Financial Services on the Court's own motion. The statement of claim in its present form sustains no cause of action that I can discern against any of the respondents. As mentioned earlier, Burns Philp is in liquidation and has not appeared, it has played no role in the proceeding. Estate Mortgage Managers and Estate Mortgage Financial Services, though still parties to the proceeding, are not mentioned as respondents to the statement of claim or the further amended application. Nor does it disclose any cause of action against the prospective respondents, Mr Murphy and Mr Allen. The statement of claim must be struck out in whole.

The motion for security for costs
70. Continental Shirts Manufacturing is in liquidation and is not prosecuting the proceeding. Continental Shirts Holdings is in receivership. The proceeding appears to have been brought, in the name of Continental Shirts Holdings, not by the receivers and managers, but by the directors on the assumption of a residual capacity of directors to sue in the company's name. His assets are being administered under Part X of the Bankruptcy Act 1966. Mr Robert Oayda has filed a statement of affairs as at 23 May 1994 showing a deficiency of $4.89m, excluding a claim against him by Mercantile Mutual which is in dispute and is classed as a contingent liability in the sum of $194m. The proceeding is being funded by an undisclosed third party.

Mr Allen Oayda is the sixth applicant, but the statement of claim and the further amended application appear to have dropped him as an applicant, notwithstanding that technically he remains an applicant. The Shirt Factory remains an applicant, though it too has been dropped from the further amended application and the statement of claim. Mr Robert Oayda was a director of the Shirt Factory, but that company has now been deregistered. Mr Robert Oayda is also a director of A and S Oayda Investments.
The principle is correct that generally a respondent should not be entitled to rely upon its alleged misconduct to deny an applicant the right of pursuing its claims against it. To do so would prevent a hearing from taking place which is designed to recover the very losses which have caused the impecuniosity of an applicant: Lucas v York (1983) 50 ALR 228. But I am not persuaded that this is such a case. Nor does the conduct the subject of the complaints by the applicants appear to have brought about the difficulty which the applicants say they have of being able to provide security for costs.
Also relevant are the circumstances surrounding the conduct of this litigation. Much of the case has been characterized by the appearance and disappearance of parties without formal orders of the Court. There have been many directions hearings before various judges and directions have been given on a number of occasions for the filing of the statement of claim and it was only with the threat of the proceeding being dismissed for want of prosecution that the statement of claim was finally put on file. This is a strong case for the provision of security for costs of the respondents who seek it, namely, Mercantile Mutual, Mr Madden and Mr Robertson. Mr Murphy and Mr Allen, through their counsel, have also made it clear that they too would support an order for security for costs if they should be added as respondents. Leave should also be reserved to Burns Philp to seek security for costs if it wishes.
The more difficult question is against whom should the security for costs be ordered? A and S Oayda plainly is a party against whom the order should be made. The Shirt Factory is still an applicant. But I propose to order that it cease to be an applicant; it has played no role in the proceeding except to appear as an applicant in the initiating process and it is not a party appearing on the face of the further amended application or the statement of claim. Also, it is a company that has now been deregistered. There is no point ordering security against it.
Continental Shirts Holdings is in receivership. Indeed, its receivers and managers are Mr Madden and Mr Robertson. The directors, who include Mr Robert Oayda, are continuing the proceeding in its name. Their authority to do so is not clear (that point was not fully argued before me), but it is possible that there still remains vested in the directors of that company the authority to institute and conduct proceedings on its behalf. As long as Continental Shirts Holdings remains an applicant it too should be ordered to pay security for costs, but not so as to impinge upon the interests of the secured creditor or creditors who appointed Mr Madden and Mr Robertson as receivers and managers.
Continental Shirts Manufacturing is both under receivership and management and in liquidation. I propose to order that it cease to be an applicant, as it is plain that the proceeding is continuing in its name without the consent of the liquidator.
Mr Robert Oayda is a party against whom security for costs should be ordered. Mr Allen Oayda is still on the record as a party, although he has disappeared from the description of parties in the further amended application and the statement of claim. I propose to order that he cease to be an applicant. He has played no role in the proceeding except to have his name placed on the initiating process.
The only applicants who appear to retain any interest in the case are A and S Oayda, Mr Robert Oayda and Continental Shirts Holdings to the extent that the proceedings have been properly brought and continued by that lastmentioned company. The security for costs should be provided in a sum and in a form to be approved by the Registrar. Until the security is provided the proceeding shall be stayed.

Remaining matters
79. As I indicated above, I propose to order, pursuant to O 6 r 9, that the Shirt Factory, Continental Shirts Manufacturing and Mr Allen Oayda cease to be applicants. I do so on the Court's own motion. I propose to make no order as to the costs of those applicants of the proceeding. I shall reserve liberty to any respondent to apply on the question whether any of those three applicants should be ordered to pay the costs of the proceeding of any of the respondents. I also reserve the question whether the solicitors on the record for the Shirt Factory or Continental Shirts Manufacturing should be ordered to pay personally on an indemnity or other basis the costs of any of the respondents to the proceeding. A solicitor who commences proceedings on behalf of a party without a retainer to do so may be personally liable for the cost of the proceeding: see Harry S Bagg's Liquidation Warehouse Pty Ltd and Ors v Whittaker and Ors, Powell J (30 July 1982), unreported. See also Simmons v Liberal Opinion Limited (1911) 1 KB 966 and Omega Estates v Gankey (1963) 80 WN (NSW) 1218.

Estate Mortgage Managers and Estate Mortgage Financial Services are still respondents to the proceeding, but have played no active role in it at least since the filing of the further amended application and the statement of claim, because those documents are filed by the solicitors on the record purporting to do so only on behalf of A and S Oayda, Continental Shirt Manufacturing and Mr Robert Oayda. They too should be removed as respondents and I propose to do so on the Court's own motion.
The further amended application and the statement of claim join Mr Murphy and Mr Allen as respondents without the leave of the Court having been obtained. I propose to order that they be removed as respondents.
Provided security for costs is given, it is appropriate that leave be given to continue the proceeding against Burns Philp on the usual terms that are applied in the making of orders of this kind in relation to companies in liquidation. The customary condition is that there be no proof of any debt or claim against Burns Philp arising from this proceeding without further leave of the Court.
It is appropriate also that security for costs be provided for Mr Murphy and Mr Allen if they are added as respondents, after the stay expires.
I decline the motion of A and S Oayda, Continental Shirts Manufacturing and Mr Robert Oayda to allow Continental Shirts Manufacturing to remain as an applicant in the proceeding and to authorize Mr Robert Oayda to use that company's name as a co-applicant with the remaining applicants. Any order for costs which may be made against Continental Shirts Manufacturing in the future would deplete the assets that are available to that company and in particular to the secured creditor. Thus the litigation may jeopardise the assets available to the secured creditor. This is a difficulty which would need to be overcome by Mr Oayda in any further pursuit of his motion to continue the proceedings in the name of Continental Shirts Manufacturing.
Nor am I persuaded that this is an appropriate case to make an order at this stage of the kind sought by certain of the applicants along the lines of the order made by McLelland J in Aliprandi v Griffith Vintners Pty Limited (In Liquidation) (1991) 6 ACSR 250. Once security for costs has been provided, the Court can review the position. I decline the alternative motion that the liquidator of Continental Shirts Manufacturing be given leave to enter a submitting appearance on behalf of that company. If the liquidator makes such an application to the Court it can be considered on its merits, but he is not a moving party at the present time.
As to the costs of the motions presently before the Court, the costs of the motions of Mercantile Mutual, Mr Madden and Mr Robertson should be paid by A and S Oayda and Mr Robert Oayda. They are two of the three parties on whose behalf the solicitors on the record for the applicants have purported to file the further amended application and the statement of claim. The authority of the directors of Continental Shirts Holdings to commence and continue this proceeding against the respondents is not clear; so I propose to reserve liberty to any of the respondents to restore the matter to the list to argue any questions as to the liability for costs of Continental Shirts Holdings, and to include in any such motion any orders for costs against the solicitors on the record personally in the event that the name of Continental Shirts Holdings has been used in the statement of claim and further amended application without proper authority.
There should be no order as to the costs of any of the applicants of the two motions brought by them.
It should be noted for the benefit of the taxing officer that the time taken on the hearing of the motions was approximately three-quarters on the question of striking out the statement of claim. Very little time was occupied on the hearing of the other questions.
I do not propose to make any formal orders today; but shall adjourn the matter to a date to be fixed and then hear brief argument with respect to the form of orders to give effect to my reasons for judgment. I direct Mercantile Mutual to bring in short minutes on that occasion to give effect to my reasons.
I should add that, although Mr Murphy and Mr Allen are not technically respondents to the proceeding, they have been joined as such, though without the Court's leave. For the purposes of costs of the motions, they are entitled to costs on the same basis as Mercantile Mutual, Mr Madden and Mr Robertson. I reject the argument of counsel for certain of the applicants that separate orders for costs should not be made in favour of Mercantile Mutual on the one hand and Mr Madden and Mr Robertson on the other on the ground that they were said to be in the same interests. They are not in the same interests, although their interests overlap. In my view they were entitled to be represented by separate counsel.
Once security for costs has been provided, it would be appropriate for leave to be given to the relevant applicants to file an amended statement of claim. I do not propose to grant that leave now. The Court will await the result of the security for costs order and then give further directions with respect to the future conduct of this matter. Leave to file any further amended statement of claim should not be granted except on terms that the proposed amendments be verified by affidavit, which should satisfy the Court that there really are facts which can probably be proved and which, if proved, would support the statements made in the statement of claim: Trade Practices Commission v Australian Iron and Steel Pty Limited (1990) 22 FCR 305 at 323.
The proceeding is stood over to a date to be fixed.

[1994] FCA 935

25 NOVEMBER 1994