ACN 098 676 852 Pty Ltd v Edison Corporation Pty Ltd
[2006] FCA 311
•30 MARCH 2006
FEDERAL COURT OF AUSTRALIA
ACN 098 676 852 Pty Ltd v Edison Corporation Pty Ltd [2006] FCA 311
PRACTICE AND PROCEDURE – application to amend statement of claim – whether proposed statement of claim lacked particularity – application allowed.
Trade Practices Act 1974 (Cth), ss 52, 53
Fair Trading Act 1987 (SA)ACN 098 676 852 PTY LTD v EDISON CORPORATION PTY LTD (ACN 082 288 604) & ORS
SAD 57 of 2005
LANDER J
30 MARCH 2006
ADELAIDE
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
SAD 57 OF 2005
BETWEEN:
ACN 098 676 852 PTY LTD
APPLICANTAND:
EDISON CORPORATION PTY LTD
ACN 082 288 604
FIRST RESPONDENTBRIAN WILFRED PELHAM
ACN 082 288 604
SECOND RESPONDENTGUY D’ARRIGO ASSOCIATES PTY LTD
ACN 060 428 748
THIRD RESPONDENTGUY PETER D’ARRIGO
FOURTH RESPONDENTJUDGE:
LANDER J
DATE OF ORDER:
30 MARCH 2006
WHERE MADE:
ADELAIDE
THE COURT ORDERS THAT:
1.Leave to the applicant to amend its statement of claim in accordance with the draft statement of claim exhibited to the affidavit of Samara Jane Bell sworn on 3 March 2006.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
SAD 57 OF 2005
BETWEEN:
ACN 098 676 852 PTY LTD
APPLICANTAND:
EDISON CORPORATION PTY LTD
ACN 082 288 604
FIRST RESPONDENTBRIAN WILFRED PELHAM
ACN 082 288 604
SECOND RESPONDENTGUY D’ARRIGO ASSOCIATES PTY LTD
ACN 060 428 748
THIRD RESPONDENTGUY PETER D’ARRIGO
FOURTH RESPONDENT
JUDGE:
LANDER J
DATE:
30 MARCH 2006
PLACE:
ADELAIDE
REASONS FOR JUDGMENT
This is an application by the applicant to amend its statement of claim.
The application is not opposed by the first and second respondents but is opposed in part by the third and fourth respondents.
The applicant is a financier which provided finance to its clients by way of invoice, purchase and debt factoring. The second respondent was an executive director and shareholder of the first respondent and had the responsibility of the preparation, drafting and submission of a finance application on behalf of Gartner Wines Marketing (SA) Pty Ltd (GWM).
It is pleaded that GWM was ‘financially dependent on the worth of the Gartner Group’ and ‘was dependent on the liquidity of the associated companies’. Mr Michael Gartner is pleaded to be the ‘controlling mind’ of GWM. He was also a partner in M & AW Gartner. The associated companies are identified in the statement of claim and are said collectively to comprise the Gartner Group.
The fourth respondent was the sole director and shareholder of the third respondent, and is alleged to have been the person responsible for the preparation of financial accounts (including the financial documents) for the associated companies, the Gartner Group, GWM, M J & A W Gartner and Gartner Wines Pty Ltd. He was also the company secretary of GWM.
The applicant claims that in about February 2002 the second respondent provided financial information relating to GWM and the Gartner Group to the applicant for the purpose of obtaining finance ‘for the GWM business’.
It is claimed that in March 2002 the first respondent, at the instigation of the second respondent, submitted a business referrer application to the applicant which had been executed by the second respondent. It is pleaded that it was a condition of that agreement that the first respondent indemnify the applicant against any loss or damage that the applicant might suffer arising directly or indirectly out of any breach by the first respondent of its obligations as a result of any statement or information concerning a customer provided to the applicant being false or misleading.
It is pleaded that certain representations were made by the first and second respondents to the applicant which were false and that thereby the first and second respondents contravened ss 52 and 53 of the Trade Practices Act 1974 (Cth) and the corresponding sections of the Fair Trading Act 1987 (SA).
The claim against the third and fourth respondents is in tort. In paragraph 48 of the statement of claim it is pleaded that the third and fourth respondents owed the applicant a duty to take reasonable care ‘in the production of the financial statements of GWM and the Gartner Group’.
The applicant has provided particulars of the facts and circumstances which the applicant claims gives rise to the duty of care:
‘48.1they knew the financial documents and in particular the financial statements were to be provided to a financier of a class of persons including CCH in support of the facility sought by GWM;
48.2they knew that CCH would rely on the financial documents, including the financial statement, that GWM or the Gartner Group had:
48.2.1surplus assets over liabilities of $49,325,000.00 as at March 2002;
48.2.2a loan book with a value of at least $6.9 million;
48.3it was foreseeable that if the financial statement was incorrect because:
48.3.1GWM and/or the Gartner Group did not have surplus assets over liabilities of $49,325,000.00;
48.3.2GWM was insolvent without the support of the Gartner Group Further Particulars of the Insolvency of GWM and the Gartner Group will be provided on receipt of a report from an expert accountant; and
48.3.3the loan book of SE Vineyard Finance Pty Ltd was worth significantly less than $6.9 million and no more than $1,850,000.00;
the financier (including a person such as CCH) would suffer economic loss of the type suffered by CCH.’
The particulars show that the applicant’s case is that GWM and the Gartner Group did not have the surplus of assets referred to; that GWM was insolvent without the support of the Gartner Group; and that the loan book of SE Vineyard Finance Pty Ltd was worth not more than $1,850,000.
The third and fourth respondents did not take any issue about the particulars which are given in that paragraph.
In paragraph 49 it is pleaded:
‘49.In breach of their duty to take reasonable care GDA and D’Arrigo produced the financial statements which was not true and correct. CCH (the applicant) repeats the particulars set out under paragraphs 25.6 above.’
In paragraph 25.6 it is pleaded:
‘25.6The financial statement did not provide a true and correct view of GWM or the Gartner Group as at March 2002.
Particulars
25.6.1The Gartner Group did not have surplus assets over liabilities as at March 2002 of $49,325,000. Further particulars will be provided on receipt of a report from an expert accountant.
25.6.2GWM was insolvent without the support of the Gartner Group. The further particulars of the insolvency of GWM and the Gartner Group will be provided on receipt of a report from an expert accountant.
25.6.3The money was not used for the purpose for which it was provided. CCH repeats the particulars set out in paragraph 25.2 above.
25.6.4The loan book of SC Vineyard Finance Ltd was worth significantly less than $6.9 million and no more than $1,850,000. Further particulars will be provided on receipt of a report from an expert accountant.’
Those particulars are the same particulars which are said to give rise to the duty of care.
The financial statement which is referred to in paragraph 25.6 is defined in paragraph 9.5 as a document: ‘Statement of financial position for M J & A W Gartner dated 6 March 2002’. The financial statement is exhibited to an affidavit of the applicant’s solicitors sworn on 25 August 2005. That document sets out various assets which are said to be owned by M J & A W Gartner and ascribes a value to each of those assets.
The assets include land holdings totalling $19,658,000; other assets including livestock of $5,600,000; and investments including investments in associated companies totalling $31,567,000. The assets total $56,825,000. Liabilities are disclosed in the statement of financial position at $7,500,000. The net asset position is represented to be $49,325,000.
The investments, as I have said, include shares in associated companies. The document includes a schedule of the assets of those associated companies, no doubt for the purpose of establishing the value of the shareholding in those associated companies.
The third and fourth respondents complain that the proposed pleading in paragraph 49 fails to identify with sufficient particularity why it is said that the financial statements are not true and correct. All of the particulars, say the third and fourth respondents, are contained in paragraph 25.6.1 and paragraph 25.6.2. Because of that lack of particularity, it is submitted, the Court should refuse the applicant leave to amend the statement of claim.
The third and fourth respondents’ argument is superficially attractive. The only particularity which is given by the applicant is that the Gartner Group did not have surplus assets of $49,325,000 and that GWM was insolvent without the support of the Gartner Group.
As I understand the pleadings, the applicant’s case is that the GWM was balance sheet insolvent. The GWM could not have been balance sheet insolvent unless its liabilities exceeded its assets.
It follows, therefore, that if the applicant is to make out its plea either the assets disclosed in the financial statement did not have the value represented in the financial statement or there were other liabilities not disclosed in that document.
Because the applicant has pleaded that GWM was insolvent, it must be necessary to ascertain the value of each of the assets within the Gartner Group at the relevant time.
In my opinion, the statement of claim does give the third and fourth respondents sufficient particularity of the claim made against them.
No doubt in an evidential sense, the applicant will provide better particulars when it provides its expert report.
However, insofar as a pleading must state the material facts upon which the claim is based, in my opinion, this pleading is adequate.
In those circumstances, I give leave to the applicant to amend its statement of claim in accordance with the draft statement of claim exhibited to the affidavit of Samara Jane Bell sworn on 3 March 2006.
I certify that the preceding twenty seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander. Associate:
Dated: 30 March 2006
Counsel for the Applicant: Mr I Robertson Solicitor for the Applicant: Griffin Hilditch Lawyers Counsel for the First and Second Respondents: Mr G Feary Solicitor for the First and Second Respondents: Iles Selley Lawyers Counsel for the Third and Fourth Respondents: Mr C Goodall Solicitor for the Third and Fourth Respondents: Lawson Smith Lawyers Date of Hearing: 7 March 2006 Date of Judgment: 30 March 2006
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