B.W. and B.E. Gleeson Management Consultants Pty Ltd v Custom Credit Corporation Ltd

[1992] FCA 438

433 J 92

JUDGMENT No. ..... ,.. .,. ,,,-,,,

IN THE FEDERAL COURT OF AUSTRALIA	)
QUEENSLAND DISTRICT REGISTRY	) No. QG 42 of 1992
GENERAL DIVISION	1

BETWEEN: B. W. & B. E. GLEESON MANAGEMENT CONSULTANTS PTY

LTD as Trustee for the Gleeson Family Trust

First Applicant

AND: BARRY WILLIAM GLEESON and BERNADETTE EILEEN

GLEESON

Second Applicant

AND: CUSTOM CREDIT CORPORATION LIMITED

First Respondent

AND: NATIONAL AUSTRALIA BANK LIMITED

Second Respondent

MINUTES OF ORDER

JUDGE MAKING ORDER:	Spender J.
DATE OF ORDER:	12 June 1992
WHERE MADE:	Brisbane
THE COURT ORDERS THAT:

1.    The proceedings by the applicants against the second respondent, National Australia Bank Limited, be dismissed.

2.    The applicants in the principal proceedings to pay the costs of the second respondent of the motion and of the proceedings.

NOTE:	Settlement and entry of orders is dealt with in Order
36 of the Federal Court Rules.
IN THE F E D E W COURT OF AUSTRALIA	1
QUEENSLAND DISTRICT REGISTRY	)  No. QG 42 of 1992
GENERAL DIVISION	)

BETWEEN: B. W. & B. E. GLEESON MANAGEmNT CONSULTANTS

PTY LTD as Trustee for the Gleeson Familv Trust

First Applicant

AND:  BARRY WILLIAM GLEESON and BERNADETTE EILEEN
GLEESON

Second Applicant

AND: CUSTOM CREDIT CORPORATION LIMITED

First Respondent

AND: NATIONAL AUSTRALIA BANK LIMITED

Second Respondent

LRAM : Spender J.

m: Brisbane

12 June 1992

EX TEMPORE REASONS FOR JUDGMENT

This is a notice of motion filed on 21 May 1992 by
National Australia Bank Limited, the second respondent in the

principal proceedings, seeking that the proceedings against it

be stayed or dismissed.

On 20 March 1992, B.W. and B.E. Gleeson Management Consultants Pty Ltd as trustee for the Gleeson Family Trust as first applicant, and Barry William Gleeson and Bernadette Eileen Gleeson as second applicants, filed an application seeking a declaration that conduct identified in the statement of claim constituted conduct of "the respondents" in trade or commerce which was misleading or deceptive in contravention of S . 52 of the Trade Practices Act 1974 ('the Act'), and that further

L

conduct, particularised in the statement of claim, constituted conduct "by the responden ts" in trade or commerce in contravention of S. 5 3 ( g ) of the Trade Practices Act.

The first respondent is Custom Credit Corporation Limited and the second respondent is National Australia Bank Limited. The application seeks orders pursuant to s. 87 of the Act that agreements identified in the statement of claim be declared void ab i n i t i o , or alternatively that they be set aside, or further other declarations be made in respect of those agreements.

There is a claim for $54,814 .OO damages pursuant to S. 82 of the Trade Practices Act, and also a statement in the application that:

"

The f irst responden t by i t s e l f and a s agent

f o r the second responden t i s es topped from making e a r l y demand f o r the repayment o f the p r o p e r t y l o a n and from e x e r c i s i n g i t s r i g h t s

pursuant t o the mortgage o v e r the

p r o p e r t i e s . "

The notice of motion is based on the provisions of

0. 11 r. 16 and 0. 20 r. 2 of the Federal Court Rules.	So far
as it is presently relevant 0. 20 r. 2(1) provides that:

"	Where i n a n y proceed ing i t appears t o the Court t h a t i n r e l a t i o n t o the proceeding
g e n e r a l l y o r i n r e l a t i o n t o a n y c l a i m f o r
rel ie f i n the proceed ing -
( a ) n o reasonable cause of a c t i o n i s

d i s c 1 osed;

...

the Court may order that the proceeding be stayed or dismissed generally or in relation

to any claim for relief in the proceeding. "

Importantly, 0. 20 r. 2(2) provides:

" The Court may receive evidence on the hearing of an application for an order under

sub-rule (1). "

The applicants assert in their statement of claim that the natural applicants carry on business at Tingalpa under the name of "Gleeson Motors" and trade in motor vehicles.

The evidence establishes that the first respondent is a wholly owned subsidiary of the second respondent, both incorporated in New South Wales but having Brisbane offices.

The statement of claim pleads, in paragraph 8, that on or about 22 June 1990, the first and second applicants entered into a series of written agreements with the first respondent in respect of a loan facility agreement for $150,000.00 ('the floor

plan'), a loan facility agreement for the sum of $315,000.00 as	an "interest-only" loan for a period of two years ( 'the property
loan'), a bill of mortgage no. J924255B over a house described as lot 37 on registered plan no. 32985 and bill of mortgage no. J915259H over the business conducted at lot 1 on registered plan no. 76438.

There is also a mortgage debenture, a deed of covenant

and an indemnity.

The statement of claim says that prior to entering into those agreements, representations were made to the second applicants by Mr Russell Thompson, Mr Harvey Bernoth and Mr Barry Garrett . The uncontroverted evidence is that these persons were, at material times, employees of the first respondent.

. Notwithstanding that, the statement of claim asserts that they

acted on behalf of the first respondent:

... and as agents on behalf of the second

respondent . "

The short point on this motion is whether there is a reasonable case that might be argued to suggest that they were acting as agents of National Australia Bank Limited. All the agreements that are referred to in the statement of claim were entered into between the applicants and the first respondent.

It is said that, as a result of having to pay out the
floor plan, the applicants were unable to meet a demand made by

the first respondent pursuant to the security documents. It is

obliged to sell motor vehicles at less than their real value and	said that in order to pay out the floor plan, the applicants were
have suffered loss and damage as a result amounting to $54,814.00.
The second respondent sought further and better particulars of the facts, matters and circumstances relied on to support the allegation that Mr Russell Thompson, Mr Harvey Bernoth and Mr Barry Garrett acted as agents on behalf of the second respondent in relation to the negotiations alleged.
This request succeeded a letter dated 2 April 1992, which suggested that the applicants might reconsider their decision to join National Australia Bank Limited as a respondent in the proceedings, for the reasons set out in that letter, including that:

" 1 . Custom C r e d i t C o r p o r a t i o n L i m i t e d i s

m e r e l y a s u b s i d i a r y o f o u r client and

t h a t f a c t	a l o n e w i l l not	g i v e rise t o a n y
agency;

2. Messrs Thompson, B e r n o t h and G a z r e t t were

not employees o f o u r c l ient d u r i n g the

p e r i o d i n question, nor d i d they h a v e a n y

a u t h o r i t y ( o s t e n s i b l e or o t h e r w i s e ) t o

make a n y r e p r e s e n t a t i o n s on b e h a l f o f o u r

client nor,	we assume from	the p l e a d i n g s
d i d they p u r p o r t	t o d o so.	"

And it was suggested in that letter that:

" 3. An e a r l y d e c i s i o n t o d i s c o n t i n u e a g a i n s t

o u r c l ient w i l l ,	we	s u g g e s t	w i t h r e s p e c t ,
r e d u c e the costs	which y o u r	client	w i l l

e v e n t u a l l y be r e q u i r e d t o p a y t o o u r

c l ient . "

An affidavit establishes that none of the three named men were employees of the second respondent at any material time.

In response to that request for further and better particulars, the applicants assert that Mr Russell Thompson told Mr Gleeson early in 1990 that the first respondent was wholly owned by the second respondent in Sydney, and that Mr Thompson would have to have any loan agreement between the first and second applicants and the first respondent approved by Sydney. Mr. Gleeson says:

"

The male Second A p p l i c a n t understood t h i s t o

be approval by the Second Respondent . "

The further and better particulars further say that the first respondent is a 100 per cent wholly owned subsidiary of the second respondent, but:

"	( t ) h e	A p p l i c a n t s	cannot	prov ide	f u r t h e r
p a r t i c u l a r s	o f	the	a l l e g e d	agency u n t i l	t h e

Discovery p roces s i s completed . "

The further and better particulars also say that:

" Mr Harvey Bernoth i n o r about August 1991

apo log i sed	t o Gleeson	f o r	demanding	t h e
repayment	o f	t h e p r i n c i p a l	o f	t h e p roper t y
l o a n	( ' repayment ' )	and	added	t h a t t h e F i r s t

Respondent had l o s t a l l d i s c r e t i o n a r y powers

a s regards t h e repayment s l n c e a d i r e c t i o n had come from Sydney from t h e Second Respondent t h a t t h e repayment was r e q u i r e d . "

Finally in respect of the evidence on the question of
agency, M r Gleeson deposes to the receipt of a letter and a

circular in or about November 1991, well after the events

Credit Corporation Limited, says, inter alia:	narrated in the statement of claim. The letter from Custom	"	You may or may not be aware t h a t r e c e n t l y , we made the d e c i s i o n t o withdraw from t h e
consumer  f i n a n c e par t o f o u r opera t i on .
U 1 t i m a t e l y t h i s means  we w i l l , i n t h e cour se
o f  t i m e , be c l o s i n g down a l l o u r consumer
produc t s  and Customcard i s one o f t h e s e . "

The circular associated with that letter is under the head of National Australia Bank Limited, and commences:

' The enclosed literature explains the decision to discontinue the consumer finance operations of Custom Credit Corporation Limited.

As you are a valued customer of the National Australia Bank Group, which includes Custom Credit Corporation, I am pleased to invite you to replace your Customcard with your choice of a National Credit Card. "

It seems clear that all relief is claimed against the first respondent and that should the matter go to trial with the second respondent as a party, at the best for the applicants there would be orders made against both the first and second respondents. There is no relief possible, in my opinion, which the second respondent would be solely obliged to provide.

There is no suggestion that the alleged agent, Custom Credit Corporation Limited, might be incapable of meeting any aspects of the relief sought in the application. There seems to be little commercial sense in the joinder of the second respondent. Should the applicants be successful, there is no risk that they will not in fact receive the relief the court

holds them entitled to receive, but should they fail they will

be exposed to perhaps double costs for no real purpose.

However, how litigation is to be conducted is a matter for litigants, at least in the first instance. The question with which I am concerned is whether on the material presently available to me, there is a reasonable cause of action disclosed. That in turn means whether in the circumstances of this case there is disclosed a reasonable case that in making the

representations alleged in the statement of claim the named persons were acting as agents for National Australia Bank Limited, or that the first respondent was acting as agent for the second respondent.

The court, of course, is conscious of the caution which should attend any application that proceedings be dismissed, pursuant to either 0. 11 or 0. 20, but is also conscious of the need in an appropriate case to promote the efficient discharge of litigation and to save unnecessary costs. I am satisfied here that this is a case in which I ought to make the orders sought in the notice of motion pursuant to 0. 20 r. 2 and strike out the proceedings as against National Australia Bank Limited.

Mr Lenz of counsel who appeared for the applicants carefully assessed the nature of the case which the applicants sought to make against National Australia Bank Limited, and I think implicit in those submissions was the recognition that on the material presently available, there was at best a tenuous

case or one which had only a faint glimmer of success.

My view is somewhat f inner than that, and I think that the case of agency alleged is one of assertion only. On the material I am satisfied that no reasonable cause of action based on agency against National Australia Bank Limited is disclosed.

I dismiss the proceedings by the applicants against National Australia Bank Limited. That is not to say that an application for joinder might not be made in the event that

evidence is obtained suggesting that there is a cause of action

against that entity.

As far as the order for costs is concerned, the

applicants in the principal proceedings should pay the costs of

.the second respondent of the motion and of the proceedings.

I should make plain, lest there be any misapprehension, that the orders that I have made in respect of the second respondent provide no basis for speculation as to the merits of the principal litigation. These orders have been concerned with the sufficiency of the evidence in respect of the joinder of the second respondent and do not amount to any pre-judgment in respect of the issues between the applicants and the first respondent.

I certify that this and the preceding eight (8) pages are a true copy of the reasons for judgment herein of the Honourable Mr Justice Spender.

Date: 12 ~und1992 I/

Counsel for the applicants	MrC. G. Lenz
instructed by	Jonathan C. Whiting
Counsel for the second respondent:	Mr P. Favell

instructed by	:	Flower & Hart
Date of Hearing	12 June 1992