Australian Securities Commission v Bell, Noel Andrew

[1995] FCA 1042

CATCHWORDS

PROCEDURE - entry of judgments and orders - whether agreement supporting such entry - whether defence filed out of time an abuse of process or an embarrassment - whether injunctions or declarations should be granted

Corporations Law, ss1323, 1324 and 1325

Rules of Federal Court of Australia, O11 rr13(3) 15(1), 16, 18 and 23, O13 r3, O18 r4

Fraser v Elgen Tavern Pty Ltd,  [1982] VR 398
Odin Central Service Pty Ltd v Interstruct (1992) 7 WAR 57
Paynter v Willems [1983] 2 VR 377
Remmington & ors v Scoles [1895-9] All ER Rep 1095
Roberts v Gippsland Agricultural and Earth Moving Contracting Co Pty Ltd [1956] VLR 555.
Tomlin v Standard Telephones and Cables Ltd [1969] 1 WLR 1378

AUSTRALIAN SECURITIES COMMISSION v NOEL ANDREW BELL and STEVEN ANTONIO LA ROSA and CRAIG ALLAN HUGHES and DARRELL KEANE BYRNE and PARATOO PTY LTD (ACN 009 455 387) and LAMEEKA PTY LTD (ACN 009 198 618) QUINARY HOLDINGS PTY LTD (ACN 062 602 484)
NO. WAG 3008 OF 1995

JUSTICE R D NICHOLSON
PERTH
21 DECEMBER 1995

IN THE FEDERAL COURT OF AUSTRALIA     )

WESTERN AUSTRALIA DISTRICT REGISTRY   )

GENERAL DIVISION  )    NO. WAG 3008 OF 1995

B E T W E E N:              AUSTRALIAN SECURITIES COMMISSION

Applicant

and

NOEL ANDREW BELL        

First Respondent

and

STEVEN ANTONIO LA ROSA

Second Respondent

and

CRAIG ALLAN HUGHES

Third Respondent

and

DARREL KEANE BYRNE

Fourth Respondent

and

PARATOO PTY LTD

(ACN 009 455 387)

Fifth Respondent

and

LAMEEKA PTY LTD

(ACN 009 198 618)

Sixth Respondent

and

QUINARY HOLDINGS PTY LTD

(ACN 062 602 484)

Seventh Respondent

MINUTE OF ORDER

JUDGE MAKING ORDER:     JUSTICE R D NICHOLSON

DATE OF ORDER:          21 DECEMBER 1995

WHERE MADE:            PERTH

THE COURT ORDERS THAT:

(1)The applicant's motion dated 4 October 1995 be refused.

(2)The time for filing of the respondents' defence dated 13 October 1995 be extended to and including 13 October 1995.

(3)Costs be reserved pending written submissions.

(4)The matter be listed for a directions hearing on 16 February 1996 at 4.00 pm.

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

IN THE FEDERAL COURT OF AUSTRALIA     )

WESTERN AUSTRALIA DISTRICT REGISTRY   )

GENERAL DIVISION  )    NO. WAG 3008 of 1995

B E T W E E N:              AUSTRALIAN SECURITIES COMMISSION

Applicant

and

NOEL ANDREW BELL        

First Respondent

and

STEVEN ANTONIO LA ROSA

Second Respondent

and

CRAIG ALLAN HUGHES

Third Respondent

and

DARREL KEANE BYRNE

Fourth Respondent

and

PARATOO PTY LTD

(ACN 009 455 387)

Fifth Respondent

and

LAMEEKA PTY LTD

(ACN 009 198 618)

Sixth Respondent

and

QUINARY HOLDINGS PTY LTD

(ACN 062 602 484)

Seventh Respondent

CORAM:JUSTICE R D NICHOLSON

DATE:21 DECEMBER 1995

PLACE:PERTH

REASONS FOR JUDGMENT

R D NICHOLSON J:

The applicant moves for judgment to be entered against the first, third, fifth and sixth respondents in terms of the amended application which seeks various declarations and injunctions in respect of conduct by the respondents said to contravene ss780, 1064(1) and 1065(1) of the Corporations Law.

The applicant brings the amended application pursuant to s1324 of the Corporations Law which provides for the grant of an injunction restraining persons from engaging in certain conduct. Section 1324(9) provides that in proceedings under s1324, the Court may make an order under s1323. The matters to which that section relates do not include the making of a declaration.

The circumstances in which the motion arises are as follows:

The application was lodged on 22 February 1995.  On 1 March 1995 the first, third, fifth and sixth respondents ("the respondents") filed undertakings "until further order" not to engage in the conduct said to constitute the contraventions.

In a letter dated 14 June 1995 from the applicant to the solicitor for the respondents, the applicant advised it would put a settlement proposal to them after filing its statement of claim.  The statement of claim was filed on 16 June 1995 and served on 19 June 1995.  In a letter dated 16 June, the applicant sent to the solicitor for the respondents a minute of proposed consent orders ("the Minute").  The orders proposed in the Minute differed from the orders sought in the application and were drafted to reflect the statement of claim.  It was the intention of the solicitor for the applicant to amend the application to accord substantially with the form of the Minute.
On 13 July 1995 the respondents were ordered to file their defence by 11 August 1995.  On 25 August 1995 a further order substituted 1 September 1995 as the date for such filing. 

On 22 August 1995 the solicitor for the respondents wrote to the solicitor for the applicant concerning his clients' prime concern to resolve the dispute and made submissions concerning the appropriate form of orders.  In the course of those submissions he said that his clients consented to injunctions being made against them generally upon the terms set out in the draft consent orders under cover of the applicant's letter of 16 June 1995.  However, he contested the necessity for declarations. 

On 25 August 1995 the solicitor for the applicant had a telephone conversation with the solicitor for the respondents concerning the letter dated 22 August 1995.  In that conversation the former was told by the latter that (1) the respondents did not take issue with the matters alleged against them in the statement of claim; (2) the only questions between the parties was the form of final orders that should be made; (3) the respondents would not file a defence; and (4) the applicant should not incur any further costs in getting up the case against the respondents.

There was a further telephone conversation between the same solicitors on 4 September 1995.  The evidence of the solicitor for the applicant as to the content of the conversation, which is uncontroverted by evidence of the solicitor for the respondents, reads as follows:

"In this conversation:

(1)Mr Robinson told me in substance that the respondents would:

(a)concede the facts in the statement of claim;

(b)not file a defence;

(c)consent to injunctions in the form of the Minute; and

(d)pay the ASC's costs of the proceedings.

(2)I told Mr Robinson in substance that, in light of Mr Robinson's statements referred to in paragraph 13(1) of this my affidavit, the ASC would move for orders substantially in terms of the Minute insofar as those orders related to injunctions concerning the respondents and costs.

(3)I also told Mr Robinson in substance that the ASC would nevertheless wish declarations to be made against the respondents substantially in terms of the minute, except that the ASC would not seek a declaratory order in terms of order number 9 in the Minute (similar to order 12 in the application filed herein).  Draft order 9 sought a declaration that all contracts, agreements, arrangements or understandings between any or all of the respondents and any Prospective Investor or any Associated company entered into as a result of or pursuant to that Prospective Investor being informed by any of the respondents of certain matters are voidable at the option of the Prospective Investor pursuant to s1073(2) of the Corporations Law.

(4)Mr Robinson then said in substance that the only real question was whether declarations should be made against the respondents in terms of the Minute and that that question should be argued before this Honourable Court."

By letter dated 6 September 1995, the solicitors for the respondents wrote to the applicant saying in part:

"We confirm our clients will consent to the injunction sought and also agree to pay the costs incurred by the [applicant] as agreed and failing agreement as taxed.  We do not agree the declarations are necessary and therefore since we disagree on this point, repeat our proposal that the matter be referred to the judge so that he may hear submissions and then make the appropriate orders"

In the same letter it was stated that, at a directions hearing set down for 30 October 1995 and unless otherwise agreed, the
parties should make submissions concerning the appropriate orders to be made, given that it was not the intent of the respondents to file a defence.

On 22 September 1995 the amended application was filed, the terms of the orders sought in it accord with those in the Minute except as to the matter dealt with in relation to order 9 in the telephone conversation of 4 September 1995.  On 22 September 1995 the solicitor for the applicant also wrote to the solicitor for the respondents forwarding a copy of the amended application and advising the intention to file a motion for judgment.  By letter dated 27 September 1995 the solicitors for the respondents concurred with the comments in that letter and anticipated the receipt of the motion.

On 13 October 1995 the solicitor for the applicant was advised by the solicitor for the respondents that he would be filing a holding defence to preserve his client's position in relation to the making of declarations.  He was advised of that by the same solicitor in a letter of that date in which it was said that, having reviewed the matter, the clients had resolved to defend the application.  It was also stated that the respondents did not resile from "the agreement to consent to injunctions to restrain them from conducting themselves in the manner alleged in the statement of claim" and that "the issues are the accompanying declarations and the costs of the action".  It was said that there was no problem with the injunctions because the respondents would agree not to conduct themselves in the alleged manner.  However, there was a denial that there was any admission of having breached the Corporations Law; rather it was said there had only been an admission that there was no problem or concern in being required to comply with that law.  A defence was filed on behalf of the respondents on 13 October 1995.

The other relevant circumstance is that, as at the date of the hearing of the motion, the applicant has not received any written request pursuant to s1325(3) of the Corporations Law.

From the affidavit filed on behalf of the first respondent it appears that at all times the respondents have not admitted to breaching the Corporations Law (a matter put in issue by the case for the applicant) and that the respondents have fully complied with the undertakings (not disputed).  Further, there is evidence that the respondents instructed their solicitor not to file a defence because of their desire to settle the action and avoid incurring further costs.  The respondents are prepared for the undertakings already given to continue indefinitely and, at the hearing, it was made clear that fresh undertakings could be given which were not subject to "further order". 

Defence

So far as it may be required by the Court, application is now made orally on behalf of the respondents for extension of time or such leave as may be necessary to enable the defence to be properly filed, with an undertaking to file a motion to support the application.  The applicant contests the grant of such leave on the grounds that the pleadings in the proceeding closed on a date prior to the purported filing of the defence (Federal Court Rules ("FCR") O11 r15(1)) and on the further grounds that there was a binding agreement not to file a defence, that it was filed for a collateral purpose and is an abuse of process and further is embarrassing. 

The applicant's case is brought pursuant to FCR O11 r23 and O18 r4.

Agreement

For the applicant it is contended that, from the evidence of the solicitor for the applicant in relation to the telephone conversations of 25 August 1995 and 4 September 1995, it should be inferred that he reached an agreement with the solicitor for the respondents to concede the facts in the statement of claim, not to file a defence, to consent to injunctions in terms of the amended application, to pay the applicant's costs, leaving the only outstanding issue the question whether declarations should be made.  The consideration for the agreement is said to be the applicant abandoning obtaining an order in terms of par9 in the Minute and the application to this Court for declarations. 

It is not disputed that a binding agreement following settlement negotiations may relate to some only of the matters at issue between the parties: Tomlin v Standard Telephones and Cables Ltd [1969] 1 WLR 1378 at 1386.

For the respondents it is contended that if the applicant asserts an agreement binding on them, it should be pleaded in the form of a statement of claim.  It is troubling that an agreement is contended for on evidence which is hearsay in nature, abbreviated in character and un-cross-examined.  To decide an issue of such significance to the parties upon that evidence would not be the proper course for the Court to follow.  However, it is the case that there is authority supporting determination of the matter by way of motion supported by affidavit: Paynter v Willems [1983] 2 VR 377; Fraser v Elgen Tavern Pty Ltd, [1982] VR 398;  Roberts v Gippsland Agricultural and Earth Moving Contracting Co Pty Ltd [1956] VLR 555.

In any event, although there is no answering affidavit from the solicitor for the respondent, so that the Court may act on the evidence of the solicitor for the applicant concerning the effect of the telephone conversations between them on those dates, I do not consider that the evidence relied upon by the applicant leads to an inevitable inference that an agreement was concluded to the effect contended.  No agreement flows from the evidence of the conversation on 25 August 1995.  The evidence of the conversation on 4 September utilises the word "would" in the first paragraph and that word is capable of a conditional interpretation.  Arguably, the foregoing of draft Order 9 appears to have been volunteered by the applicant and, although acted on by it, not to have been in consideration of the respondents alleged agreement.  Reading the evidence in the context of the long correspondence between the parties, there appears to be more than an arguable case for the respondents that what was said and written, as disclosed by the evidence presently before me, could give rise to an agreement on the part of the respondents in the terms now sought by the applicant conditional upon the resolution of all of the matters under discussion between the parties.  That argument cannot properly be precluded by a premature drawing of an inference upon a limited evidentiary foundation.  It is also the case that there is evidence before me from the first respondent that at all times the respondents have not admitted to breaching the Corporations Law.

In my opinion, the inferences which the case for the applicant invites cannot be drawn and ought not to be drawn from that evidentiary foundation.  This is not a case where the affidavit evidence either justifies or supports such a conclusive course.

Abuse of process

It is submitted for the applicant that the defence is filed only to preserve the respondents' position in relation to the making of declarations.  The evidence supports that submission and I so find.  It is further the case that the position which the respondents seek to maintain is that they have not breached the law as alleged but are prepared to give undertakings or be the subject of injunctions to observe the law in the relevant respects.  In that sense they do not wish to take issue with the statement of claim because of their desire to conclude the proceeding against them.

The case for the applicant is that "where there is no dispute as to the facts" the filing of a defence is an abuse of process - (Remmington & ors v Scoles [1895-9] All ER Rep 1095 at 1097-8) and should be discouraged (Odin Central Service Pty Ltd v Interstruct (1992) 7 WAR 57 at 60). Absent proof of an agreement, I do not consider there is any ground for finding that there is no dispute concerning the facts.

Embarrassing

General denial of allegations made in a statement of claim is not permitted: FCR O11 r13(3) and (18).  Paragraphs 2 to 5 inclusive and 6(a),(c),(d) and (e) are general denials.  The Court is empowered therefore to strike out the whole or any part of the pleading whether or not a motion for striking out is before it: FCR, O11 r16.  Whether the defence should be struck out in whole or in part was not the subject of submissions.  Absent proof of an agreement that the respondents did not dispute the statement of claim, the only proper basis upon which it would seem the whole of the defence could be struck out is that a series of discrete amendments would not solve the problem: CCH Australian High Court and Federal Court Practice v2 24-480, p60712-21.  That position is an arguable one but, even if successful, may only lead to leave being granted to file and serve a fresh defence.

The case for the applicant contends that the respondents should not be given leave to file the defence or any defence.  Given that I do not accept there is an agreement proved in which the respondents agree they have no response to the statement of claim, there is no appropriate foundation for foreclosing the respondents from arguing their case by refusing leave to file any defence.  The question then is whether leave is necessary and should be granted in respect of the defence already lodged.

The contention for the applicant that the pleadings closed prior to the filing of the defence on 13 October and the provisions of FCR O11 r15 support on first consideration a conclusion that the pleadings closed on 1 September, the last date upon which the respondents were ordered to file their defence.  That conclusion has to be further considered, however, in the light of the filing by the applicant of the amended application on 26 September 1995.  Such amendment was made pursuant to the authority to do so in FCR O13 r3, the application of which, whether as of right on one occasion or by consent, is dependent upon the pleadings not being closed.  Either both the defence and the amended application are filed out of time or, as appears the more proper course, the close of pleadings occurred on the date upon which the amended application ("another pleading" for the purposes of FCR O11 r15) was filed. 

The question whether leave should be granted for the filing of the defence therefore falls to be considered on the basis that it was filed just over two weeks after the close of pleadings.  It is the case that the respondents had failed to act in accord with two previous orders to file a defence.  That is explained by the negotiations in which the respondents were involved and the hope they held that the proceeding would be settled.  In my opinion, the balance of factors weighs in favour of the grant of leave to enable the respondents to dispute that they have breached the law.

Remedies

Given that I do not consider the defence fails, there is no appropriate basis upon which injunctive or declaratory remedies can presently be made.  It remains the case that the respondents offer to give permanent undertakings or to be made subject to injunctions, a factor which would be relevant to the utility of granting either of those equitable remedies if the case for doing so was established.

In my opinion no agreement binding the respondents has been established.  The settlement negotiations have failed.  The proceeding remains on foot.  Leave should be granted to the respondents to file their defence.  Amendments to that defence, if considered appropriate by the respondents, should be the subject of prompt further application.

I certify that this and the preceding 10 pages are a true copy of the Reasons for Judgment of his Honour Justice R D Nicholson.

Associate:

Date:

APPEARANCES

Counsel for the Applicant:        Mr M J Buss QC

and Mr D J Williams

Solicitors for the Applicant:     Australian Securities Commission

Counsel for the first, third,

fifth and sixth Respondent:       Mr H Robinson

Solicitors for the Respondent:     Hadyn Robinson

Counsel for the fourth

Respondent:  Miss C Cruise

Solicitors for the fourth

Respondent:  Godfrey Virtue & Co

Date of Hearing:                 7 December 1995

Date of Judgment:                21 December 1995