Allied Insurance Agencies Pty Ltd & Anor v Willmaine Pty Ltd & Ors (In Liquidation)

Practice and Procedure

- claim under Trade Practices Act and

accrued jurisdiction arising out of sale of business - matter subject of prior proceedings in State Supreme Court - application

for injunction to restrain prosecution of Supreme Court action

need

for

federal

claims

to be genuine and to

constitute a

significant part of the Controversy between the parties.

Federal Court of Australia Act 1976 s.23

ALLIED INSURANCE AGENCIES PTY LTD and ALLIED INSURANCE

BROKERS PTY

LTD v WILLMAINE

PTY LTD (IN LIOUIDATION)

and J O H N PAT WILLIAMS and

RONALD JOSEPH CRANE

NO. WAG 73 of 1986

-CH	J.
PERTH

2 December 1986

I N THE

FEDERAL

COURT

O F	A U S T R A L I A

WESTERN

AUSTRALIA

No. WAG 73 of 1986

D I S T R I C T	R E G I S T R Y
G E N E R A L	D I V I S I O N

B E T W E E N :

ALLIED

INSURANCE

AGENCIES

PTY

LTD

F i r s t A p p l i c a n t

and

ALLIED

INSURANCE

BROKERS

PTY

LTD

Second

A p p l i c a n t

WILLMAINE PTY

LTD

( I n L i q u i d a t i o n )

F i r s t

R e s p o n d e n t

and

JOHN PAT WILLIAMS

Second

R e s p o n d e n t

and

RONALD JOSEPH

CRANE

T h i r d

R e s p o n d e n t

MINUTE

ORDER

JUDGE

MAKING

ORDER:

FRENCH J .

DATE OF

ORDER

D e c e m b e r

1986

WHERE MADE :

PERTH

THE

COURT

ORDERS

THAT

T h e

F i r s t

R e s p o n d e n t

restrained

u n t i l

f u r t h e r

order

from

f u r t h e r p rosecut ing Action

No.

1178 of

1986 i n t h e

2 .

Supreme Court of Western Australia commenced by writ dated

14 February 1986.

2 . There be liberty to the First Respondent to apply to vary or discharge Order 1 on 48 hours notice to the Applicant.

3 . The costs of the Applicatlon be in the cause.

Note : Settlement and entry of orders is dealt with in Order 36 of

the Federal Court

Rules.

IN THE FEDERAL COURT

)

OF AUSTRALIA

)

WESTEIW AUSTRALIA

1	No. WAG 73 of 1986

DISTRICT REGISTRY

)

GENERAL DIVISION

)

B E T W E E N :

ALLIED INSURANCE AGENCIES

PTY LTD

First Applicant

and

ALLIED INSURANCE BROKERS

PTY LTD

Second Applicant

WILLMAINE PTY

LTD (In Liquidation)

First

Respondent

and

JOHN PAT WILLIAMS

Second Respondent

and

RONALD JOSEPH CRANE

Respondent

Third

CORAM: FRENCH J.

2nd December 1986

REASONS FOR JUDGMENT

On 23 July

1986 the Applicants instituted proceedings

against the Respondents arising out of

the sale of an insurance

2 .

agency and brokerage business in September

1984.

It is alleged in

the Statement

of Claim that the Applicants and the

First and

Second Respondents entered into a written agreement dated

September 1984 under which the First Applicant agreed

to purchase

and the First Respondent agreed to sell the business which was

said to comprise "a portfolio of clients for various types of

insurance effected by the First Respondent together with certain

items of computer hardware and software".

The statement of claim pleaded certain terms

the

agreement relating to the calculation

the purchase price

according to

a somewhat complicated formula and the payment

instalments thereon.

The agreement was also said to contain

a covenant on the

part of the Second Respondent that he would provide

his services

for a period of 6 months after the date

of sale for the purpose of

permitting an orderly transition of the ownership

of the business.

The Third Respondent although not a party to the agreement was to enter into a contract of employment with the First Applicant and

assist with the transition in the ownership

of the business.

The Second Applicant was evidently

a party for the

purpose of guaranteeing the First Applicant's obligations under

the agreement.

3 .

According to the Applicants they were induced to

enter

into the agreement

by representations made by the Second and Third

Respondents as agents for the First Respondent.

These representations

related to

the

accuracy

of a

computer print-out produced by the computer hardware and software being sold as part of the business and various other attributes of the business.

The

Applicants say that

after

entering

into

the

agreement the First Applicant commenced operating the business and

paid to the First Respondent

$234,764.00 by way

of deposit and

first instalment of the purchase price.

The representations relied upon are

now said to be false

in various respects which	it is not necessary to set out in detail
for present purposes.

The Applicants

plead

that the conduct

the First

Respondent

and

its

agents

constitutes

conduct

by the

First

Respondent which was misleading or deceptive

or likely to mislead

or deceive contrary to

3 . 5 2 of the Trade Practices Act 1974 and

that the Applicants have thereby each

suffered damage.

It is further alleged that by reason of the matters

pleaded the First Respondent	have contravened para.53(a) or (c) of
the Act.

4 .

The

representations

are

also

said

have

been

incorporated as terms

of the agreement and alternatively embodied

in a

collateral

contract

between

the

Applicants

and

the

Respondents.

Relying upon their falsity the Applicants say that

the

terms of the	agreement andfor the collateral contract	have been
breached.

An alternative plea in negligence is raised and certain

other breaches of provisions of the agreement are pleaded.	The
Applicants claim to have suffered damages including:-

(a) the difference in the value between the amount

paid

by the Applicants for the business and	its	true
worth;

(b) The cost of reorganizing the business so that it operated efficiently and in accordance with lawful and normal insurance industry practices;

as a consequence

a breach of the agreement.

Damages

are

claimed

pursuant

the

provisions

s.02 of the Trade Practices Act

or at common law.

February 1986 the First Respondent instituted

proceedings in the Supreme

Court of Western Australia, being

Action No. 1178 of 1986, against the First Applicant under its former name Faringdon Pty Ltd. The claim was for the sum of $243.460.00 together with interest at the rate of 16% being money said to be due and payable under the agreement less the sum of

$60,865.00 paid into an account and to

be held

on trust by

the

First Applicant for the First Respondent

in or about March 1985

together with interest thereon. In respect of that amount the

First Respondent sought a

declaration that it represented moneys

due and payable by	the First Applicant to	it under the terms	of
the agreement.

A Statement of Claim was not filed in those proceedings

until 7 July

1986.

By a Notice of Motion filed in the Federal Court on

July 1986 the Applicants sought orders

that:-

1. They be given leave pursuant to sub-s.401(2) of the Companies (Western Australia) Code to commence an

action against the First Respondent by way of

the

application filed in the proceedings and in respect

of those matters disclosed

in the statement

claim.

2. That

First

Respondent

be restrained until

6 .

further order from prosecuting Action

No.1178

1986 in the Supreme Court

Western Australia

commenced by it by a writ dated 14 February 1986.

The motion came on for hearing before

Burchett J.

20 August 1986. It

was adjourned to enable the First and Second

Applicants to apply to the Supreme Court of Western Australia	in
order to seek the leave required under S . 401(2) of the Code.

On 5 November

1986

Olney

J. in the

Supreme Court

granted leave to the Applicants to commence proceedings against

the Defendant in this Court.

The adjourned motion has now been

relisted in order to

enable the Applicants to pursue its second limb namely, an

order

restraining

the

First

Respondent

until

further

order

from

prosecuting Action No. 1178 of 1986 in the Supreme Court	of
Western Australia.

The Second

and Third Respondents have not

yet

been

served with the

substantive application or the statement of claim.

There

some

evidence to suggest

that

the

Second

Respondent may now be residing in

E gland.

Five attempts to serve

papers

on the Third

Respondent

have been

unsuccessful.

As the substantive application relies upon a cause

action arising under

9 . 8 2 of the Trade Practices Act, the Court

has by reason of	3.86, exclusive jurisdiction to adjudicate upon
it.

The controversy thus brought into this Court embodies

the claims in contract and tort which the Court may adjudicate in

the exercise of its accrued jurisdiction

- Fencott v Muller

(1983)

152 CLR

5 7 0 .

The claim upon which the Supreme Court proceedings are

based being for

moneys due and payable under the agreement

for

sale form part of the same controversy and are for that reason

within the accrued jurisdiction

of this Court.

This Court having jurisdiction, has power under

3 . 2 3

the Federal Court of Australia Act

1976 to restrain the First

Respondent from proceeding further in the Supreme Court until the

litigation before it has been finalised.

- St. Justins Properties

ptv Ltd v Rule Holdinss Ptv Ltd (1980)	40 FLR 282 at 285 per
Toohey J.

If it

were the case that the claim brought in the

Supreme Court could not be dealt with in the jurisdiction

of the

Federal Court (accrued

or associated) then

it seems the Federal

Court would have

no power to impose such

restraint. This

8 .

subject

the

possibility

that

power

may

exist

where

the

continuance of the proceedings in the Supreme Court would render

nugatory any substantive relief within the power of the Federal

Court. - Friendship Corporation Ptv Ltd v Adamad Ptv Ltd	(1984) 57
ALR 81 at 84 per Beaumont J.

The general approach to

be taken to the exercise

of the

Court‘s discretion in cases of this kind

set out

the

judgment of the Hiqh Court in Stack v Coast Securities	(No.9) Ptv
w ( 1 9 8 3 ) 154 CLR 261.

Before the Court

in that case was the question, inter

alia, whether certain proceedings then pending in the Supreme

Court of Queensland should be stayed until the determination of a

application in the

Federal

Court.

Gibbs

CJ, having

decided that two actions in which judgments had been given in the

Supreme Court should remain on foot went on to say at

285:-

“In the case of the other action (No. 349) commenced by Coast Securities I consider that the proceedings in the Supreme Court should be stayed until the Federal Court

decides

whether

will

proceed

deal

with

the

application (GB) before it.

I take this course with

some

reluctance,

since

the

proceedings

were

first

instituted in the Supreme Court and that is an important

consideration. However, the Federal Court is the only

court which is fully invested with jurisdiction to

decide all the questions that arise as between the

parties to the contract

of sale, since the

Supreme Court

has no jurisdiction

give relief under

Pt.

VI if a

contravention

s . 5 2

established,

and

it seems

better that all the questions should be decided

in the

Federal Court rather than that they should be decided piecemeal. Of course, if the Federal Court should reach

the

conclusion

that

there

substance

the

questions raised under the Trade Practices Act, or that

the

questions

raised

under

that

statute

are

insubstantial or severable

part

the

entire

proceedings, or that for some other reason it would be

more convenient for the matter to proceed in the Supreme

Court,

that

Court

should

then

order

astay

proceedings to enable the action

In the Supreme Court to

proceed.

Mason, Brennan and Deane

JJ. at 298 said:-

"The first and paramount

consideration in the

exercise

of this discretion

is to do what

best in the

interests of the litigants. In this respect the Federal

Court can resolve the entire controversy; the Supreme

Court cannot do so because the second

limb of s.86

the Act stands in its way. The court which can resolve

the

ntire

controversy

has

an obvious

advantage.

Generally speaking, its determination of all

the issues

will be made more effectively and more expeditiously and

at less expense than the resolution of the controversy

which depends on determinations made by two courts in

separate proceedings in which the issues are necessarily

fragmented.

To offset this advantage offered by the Federal Court

powerful countervailing reasons need to be shown.

For

example, it may appear that the federal issue is raised

at such a late stage in the Supreme Court proceedings

that it would be a waste of

time and lead to needless

expense and inconvenience not to proceed to

a hearing in

that Court.

Or it may appear that the federal issue is

so insubstantial or removed from the non-federal issues

that the

Supreme

Court

should

proceed

with

the

determination of those issues. It may even appear that the federal issue is but one of many issues making up

the entire controversy and that

it is indistinguishable

from one of the non-federal issues in the sense that the

resolution of one necessarily leads to a resolution of

the other. In such a case there will be stronger ground

for allowing the action to proceed in the Supreme

Court.

The same basic considerations arise in the case in which

the Court is asked to order a stay of proceedings in

its

own

jurisdiction pending the outcome of proceedings in a State Court.

10.

Indeed the general proposition embodied in the joint

judgment cited above, was relied upon by Spender J. in a recent

case involving an

application for a stay of proceedings in the

Federal Court pending the outcome

of litigation in the

Queensland

Supreme Court. Pillifeant v Colemma Pty Ltd E19853	ATPR 40-508 at
46,065.

mile conscious of these principles his Honour

also said

that the justice of any particular application had to be dealt

with in the circumstances at the time

of the application.

There, an

action in the Queensland Supreme Court had

been instituted in May 1983, and in July

1984 had been entered for

trial and was awaiting appointment to the callover and allocation

of a trial date.

The substance of

the application in the Federal Court

had not been instituted until September 1984. His Honour observed that when one had regard to the extent to which proceedings had

gone in the Supreme Court it would

have

been a disgraceful

duplication and waste

costs if the application in the Federal

Court were to go ahead.

There was in that case evidence

of unconscionable delay

on the part of the applicants and quite a substantial identity

factual issues which it was said

if determined in the Supreme

11.

Court, would go

a long way to resolving the issues in the Federal

Court proceedings.

In the circumstances

stay of proceedings In the

Federal Court was ordered.

Particular circumstances in St. Justins Properties

Pty

Ltd v Rule Holdinss

Ptv Ltd led Toohey J. to decline to restrain

the respondent in that

case

from continuing proceedings in the

Supreme Court of Western Australia.

As in Pillifeant

v Colemma Ptv Ltd the Supreme Court

action had reached the stage that it was ready	for trial and was
to be entered in the callover.

It has been said that before the power to restrain a

party from proceeding in a State Supreme

Court is to be exercised,

this Court should be satisfied that the claims made in the Federal aspect of the controversy between the parties.

Wether or not that formulation is meant to place

some

kind of onus on applicants in Federal Court proceedings, it does

not require that there should be evidence of the merits of the

federal claim - Denpro Ptv Ltd v Centrepoint Freeholds Ptv Ltd

(1983) 48

ALR 39 at 43 per Northrop J.

12.

In Francis C. Mason Ptv

Ltd v Citicorp Australia Ltd

(1984) 57 ALR 130

Northrop J. refused an application to restrain

the respondent from proceedings which were underway in the State

Supreme Court, The substantive Federal Court application there

was instituted long after the sale of the land to which

It related

and some months after the institution of the proceedings by the

respondent in the Supreme Court of Victoria. Further his Honour

concluded that by reason of inconsistencies between affidavit

evidence on behalf of the applicant and certain contemporaneous

documents he was not satisfied that the federal claims were

genuine.

In the

present

case

challenge

is made to the

genuineness

the

federal

claims.

There

1s nothing

the

materials before me to suggest that they are made other than in

good faith.

The statement of claim

filed

the

Court

comprehensive and appears to reflect

a genuine controversy of

which the federal claims are a significant part.

There was

a substantial delay between the institution of

proceedings in the Supreme Court and those

in this Court, a period

of just over 5 months. However no statement of claim was

filed in

the Supreme Court action until

7 July 1986 and the application in

this Court was lodged about

2 weeks later.

v .

The claim for the recovery of unpaid purchase price in the Supreme Court is part of the one controversy and within	the
accrued jurisdiction of this Court.

There is therefore no factor that at present displaces

the application of

the general principle enunciated by the High

Court in Stack v Coast Securities (No. 9) Ptv Ltd.

For these reasons

I am prepared to make the order

sought.

One matter of concern arises from the inability of

the

Applicants so	far to effect service on the Second and	Third
Respondents.

If service is not able to be effected upon them within

reasonable time and the progress

of the substantive application

were to

be delayed, then it would be unfair to continue to prevent

the First Respondent from proceeding

the Supreme Court.

There must therefore be liberty to apply to vary or

discharge the injunction accordingly.

In the circumstances I propose to make orders in the

following terms:-

14.

The

First Respondent be

restrained

until

further

order from further prosecuting Action No. 1178 of

1986

in the Supreme

Court of Western Australia commenced

writ dated 14 February 1986.

There be liberty to the First Respondent

to apply to

vary or discharge Order 1 on 48 hours notice to the

Applicant.

The costs of the Application be in the

cause.

c e r t i f y t l l a t

t h i b and

the

preceding

t h i r t e e n

( 1 3 )

pages

a r e a

t r u e

copy

of the Reasons for Judgment o f hi6 Honour

Mr	Just ice French

Associate A’ G.

Date :

2 December 1986

[1986] FCA 590

2 Dec 1986