Beacon Funds Management Ltd v Kevan

[2000] WASC 274

BEACON FUNDS MANAGEMENT LTD -v- KEVAN & ANOR [2000] WASC 274

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2000] WASC 274
Case No:	CIV:1636/2000	Heard:	1 NOVEMBER 2000
Coram:	MASTER SANDERSON	Delivered:	10/11/00
No of pages:	10	Judgment Part:	1 of 1
Result:	Application refused
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Parties:	BEACON FUNDS MANAGEMENT LTD (ACN 058 305 525) RODNEY JAMES KEVAN COUNTRYWIDE CREDIT LTD (ACN 065 447 529)
Catchwords:	Practice and procedure Application to amend name of second defendant Whether application to amend name or to substitute another party Principle to be applied
Legislation:	Supreme Court Rules, O 21 r 5(2), (3) Trade Practices Act, s 82(1)
Case References:	Bridge Shipping Pty Ltd v Grand Shipping SA (1991) 173 CLR 231 Weldon v Neal (1887) 19 QBD 394 Australian Iron & Steel Ltd v Hoogland (1962) 108 CLR 471 Lloyd Steel Co (Aust) Pty Ltd & Anor v Jade Shipping SA (1985) 1 NSWLR 212 MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 140 ALR 313 Mitchell v Harris Engineering Co Ltd [1967] 2 QB 703 Rodgers v Commissioner of Taxation, unreported; Fed C of A (NSW); BC 9801716; 11 May 1998 Rodriguez [1967] 1 QB 116 Wardley Australia Ltd v Western Australia (1992) 175 CLR 514

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION : BEACON FUNDS MANAGEMENT LTD -v- KEVAN & ANOR [2000] WASC 274 CORAM : MASTER SANDERSON HEARD : 1 NOVEMBER 2000 DELIVERED : 10 NOVEMBER 2000 FILE NO/S : CIV 1636 of 2000 BETWEEN : BEACON FUNDS MANAGEMENT LTD (ACN 058 305 525)

Plaintiff

AND

RODNEY JAMES KEVAN
First Defendant

COUNTRYWIDE CREDIT LTD (ACN 065 447 529)
Second Defendant

Catchwords:

Practice and procedure - Application to amend name of second defendant - Whether application to amend name or to substitute another party - Principle to be applied

Legislation:

Supreme Court Rules, O 21 r 5(2), (3)

Trade Practices Act,s 82(1)

(Page 2)

Result:

Application refused

Representation:

Counsel:

Plaintiff : Mr A M Prime
First Defendant : Mr J G Kitto
Second Defendant : Mr D R Kilpatrick

Solicitors:

Plaintiff : McCallum Donovan Sweeney
First Defendant : Kitto & Kitto
Second Defendant : Williams & Hughes

Case(s) referred to in judgment(s):

Bridge Shipping Pty Ltd v Grand Shipping SA (1991) 173 CLR 231
Weldon v Neal (1887) 19 QBD 394

Case(s) also cited:

Australian Iron & Steel Ltd v Hoogland (1962) 108 CLR 471
Lloyd Steel Co (Aust) Pty Ltd & Anor v Jade Shipping SA (1985) 1 NSWLR 212
MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 140 ALR 313
Mitchell v Harris Engineering Co Ltd [1967] 2 QB 703
Rodgers v Commissioner of Taxation, unreported; Fed C of A (NSW); BC 9801716; 11 May 1998
Rodriguez [1967] 1 QB 116
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514

(Page 3)

1 MASTER SANDERSON: This application raises a short but difficult point of procedure. The plaintiff is seeking to amend the name of the second defendant from Countrywide Credit Ltd (ACN 065 447 529) to Countrywide Home Loans Ltd (ACN 065 997 551). The application is brought under O 21 r 5(2) and (3). These rules are in the following terms:

"(2) Where an application to the Court for leave to make the amendment mentioned in paragraph (3), (4) or (5) is made after any relevant period of limitation current at the date of issue of the writ has expired, the Court may nevertheless grant such leave in the circumstances mentioned in that paragraph if it thinks it just to do so.

(3) An amendment to correct the name of a party may be allowed under paragraph (2) notwithstanding that it is alleged that the effect of the amendment will be to substitute a new party if the Court is satisfied that the mistake sought to be corrected was a genuine mistake and was not misleading or such as to cause any reasonable doubt as to the identity of the party intending to sue or, as the case may be, intended to be sued."

2 The facts of this case can be summarised in the following way. The plaintiff is the trustee of the Corporate Investment Prime Mortgage Pool ("the Trust"). Until May 1997, Corporate Investment Australian Funds Management Ltd ("CIAFM") was trustee of the Trust. By an agreement in writing made in or about December 1995, the plaintiff alleges that CIAFM appointed Countrywide Home Loans Ltd, the proposed second defendant, as mortgage manager for CIAFM. The plaintiff says that in the latter part of 1995, the proposed second defendant recommended to CIAFM a number of investments in certain property, these investments being secured by mortgage. In line with the advice of the proposed second defendant, CIAFM on behalf of the Trust invested the sum of $269,500 which was secured by way of three first registered mortgages over certain real property. The settlement of this transaction took place on or about 27 December 1995. On 30 May 1996 the borrowers defaulted under the mortgages. Demand for repayment was made and eventually CIAFM exercised its powers of sale under the mortgages. The plaintiff says that as a consequence of this investment, the Trust has lost the sum of just over $168,000.

3 The plaintiff says that it has four causes of action against Countrywide Home Loans Ltd. It alleges breach of contract, negligence,

(Page 4)

breach of the Trade Practices Act and claims for negligent misstatement. The plaintiff issued a writ against Countrywide Credit Ltd on 30 May 2000. It is clear that the proper defendant in any proceedings is Countrywide Home Loans Ltd. Countrywide Credit Ltd is a dormant company that has never traded and has in no way been involved in dealings with the plaintiff or its predecessor as trustee of the Trust.

4 The reason why proceedings were issued against Countrywide Credit Ltd rather than Countrywide Home Loans Ltd is set out in the affidavit of Anthony Michael Prime sworn 6 October 2000 and filed in support of this application. Mr Prime is a solicitor in the employ of the plaintiff's present solicitors. Mr Prime says that he was advised by an officer of the Trust that the Trust engaged an entity described as "Countrywide Credit" to act as its mortgage manager in respect of the arrangement and management of various secured loans. At all material times the registered proprietor of the business name "Countrywide Credit" was Countrywide Home Loans Ltd. It is not in dispute between the parties that this was the case.

5 Mr Prime says that on 13 November 1997 he instructed his firm's outside clerk to conduct searches of Countrywide Home Loans Ltd and Countrywide Credit. He was in fact provided with two searches, one for Countrywide Home Loans Ltd and the other for Countrywide Credit Ltd, rather than Countrywide Credit. In what amounts to an oversight, when the writ was drafted, the second defendant was shown as Countrywide Credit Ltd rather than Countrywide Home Loans Ltd. Although it is not expressly stated, it would appear that Mr Prime simply became confused as to the proper defendant.

6 On 19 May 1998, the plaintiff's solicitors wrote to Countrywide Credit advising that proceedings would be commenced and inquiring whether or not solicitors would be appointed to accept service of those proceedings (annexure "AMP4"). That letter was addressed to Countrywide Credit and although the street number was incorrectly stated in the letter, it was directed to the address which was the registered office and the principal place of business of both Countrywide Home Loans Ltd and Countrywide Credit Ltd. On 2 June 1998, the plaintiff's solicitors received a letter from Countrywide Credit acknowledging receipt of the letter and advising that solicitors would be appointed to accept service of proceedings (annexure "AMP5"). By letter dated 11 June 1998, Messrs Jackson McDonald wrote to the plaintiff's solicitors advising that they would accept service of any proceedings issued against Countrywide Credit (annexure "AMP6"). Despite the threat of proceedings and the

(Page 5)

advice that Jackson McDonald would accept service on behalf of Countrywide Credit, no proceedings were issued until 30 May 2000.

7 On 12 June 2000, the plaintiff's solicitors wrote to Jackson McDonald asking if they were prepared to accept service of proceedings on behalf of Countrywide Credit Ltd (annexure "AMP9"). On 20 June 2000, Jackson McDonald replied that they were prepared to accept service "on behalf of Countrywide Credit Ltd" (annexure "AMP10"). On 29 June 2000, Jackson McDonald wrote again to the plaintiff's solicitors. They referred to their earlier correspondence and said: "We do not act for Countrywide Credit Ltd and do not have instructions to accept service of the writ issued by your client against Countrywide Credit Ltd" (annexure "AMP11"). Jackson McDonald are not the solicitors for the present second defendant.

8 It was the plaintiff's position that it had always been its intention to sue Countrywide Home Loans Ltd as the registered proprietor of the trading name Countrywide Credit. It was said that a genuine mistake had occurred and as a result, proceedings were issued against Countrywide Credit Ltd. It was submitted that amendment to correct the name of the second defendant ought be allowed under O 21 r 5(3) because a genuine mistake had occurred which was not misleading and which had not caused any reasonable doubt as to the identity of the second defendant.

9 Counsel for Countrywide Home Loans Ltd accepted that solicitors for the plaintiff had made a genuine mistake. He also accepted that on the evidence filed in support of the application, the mistake was not misleading and did not cause any reasonable doubt as to the identity of the party intending to be sued. Counsel made the point, however, that the plaintiff had sued Countrywide Credit Ltd. That was a different legal entity from Countrywide Home Loans Ltd. That is to say, it was not a simple matter of misdescribing a company. There were two separate legal entities and the plaintiff had sued one rather than the other.

10 This point made by counsel for Countrywide Home Loans Ltd is important and can be illustrated by an example. If the plaintiff had issued proceedings against a second defendant, who was styled on the writ as "Countrywide Home Loans (WA) Ltd", simply because a typist had inserted "(WA)" by mistake, it would be entirely clear that it was intended to sue Countrywide Home Loans Ltd. But in this case a separate legal entity, Countrywide Credit Ltd, was sued. It may well have been the case that it was intended to issue proceedings against the registered proprietor of the business name Countrywide Credit, but that does not alter the fact

(Page 6)

that proceedings were issued against a separate legal entity and it was not simply a matter of confusion or misdescription in the title of the party sued. This is a point of some importance in the context of this application.

11 Of course, little or no difficulty would arise in relation to this application were it not for the fact that Countrywide Home Loans Ltd takes the view that any limitation period in relation to a cause of action brought against it under the Trade Practices Act has expired. There is no question of any limitation issue with respect to the claims based in contract and tort. But in relation to the Trade Practices Act claim, the plaintiff refers to s 82(1) of the Trade Practices Act which requires that any action be commenced within three years. Countrywide Home Loans Ltd says that the cause of action arose at the latest in or about May 1997. It says that the action is not only time-barred now but was time-barred at the date the writ was issued. The plaintiff accepts that any claim would now be time-barred but says that this was not the case as at the date the writ was issued. Both parties accepted that in the context of this application it was not necessary or proper for me to determine whether or not any claim under the Trade Practices Act as against Countrywide Home Loans Ltd was time-barred as at the date of the issue of this writ.

12 The approach to be adopted to O 21 r 5(2) and (3) was considered by the High Court in Bridge Shipping Pty Ltd v Grand Shipping SA(1991) 173 CLR 231. This case was concerned with r 36.01 of the Rules of the Supreme Court of Victoria. The Victorian rule is in a slightly different form to O 21 r 5(3), but those differences are not significant. The facts of the case as taken from the headnote were as follows:

"Philip Morris Ltd engaged Bridge Shipping Pty Ltd ('Bridge') to arrange for the carriage of tobacco from Brazil to Melbourne. Bridge employed another company to arrange the carriage and was unaware of the identity of the selected carrier. In May 1986 the goods left Brazil on a vessel 'Green Sand'. The bills of lading did not name the carrier. On the ship's arrival in Melbourne some of the tobacco was missing and some was damaged. On 8 January 1987 Philip Morris Ltd sued Bridge in the Supreme Court of Victoria for damages. Bridge issued a third party notice against Grand Shipping SA ('Grand') which a search of the Lloyd's Register had revealed to be the registered owner of the vessel. Bridge later discovered that, by a bareboat charter agreement made in Tokyo in 1984, Grand had chartered the vessel to Rainbow Lines SA ('Rainbow') and that Rainbow

(Page 7)

had been the carrier of the goods. By then the time for suing Rainbow for indemnity or contribution had expired. Bridge applied under r 36.01 of the Supreme Court Rules to substitute Rainbow as a party for Grand."

13 The application was dismissed (by the Master at first instance, a single Judge on appeal and by the Full Court). Bridge appealed by special leave of the High Court from the judgment of the Full Court.

14 The High Court (Brennan, Deane, Dawson, Toohey and McHugh JJ) unanimously dismissed the appeal. In the course of his judgment, Dawson J set out the effect of amendments made to add or substitute a party (at 236):

"At one time it was thought that the substitution or addition of a defendant by amendment related back to the commencement of the proceedings so that, if the proceedings were commenced before the expiry of the limitation period, the amendment would defeat the limitation period even though the amendment was made after the expiry of that period. Upon that view, the reason for not allowing amendment was that it would deprive the defendant substituted or added of the benefit of the limitation period … The accepted view now is - particularly having regard to the present form of the relevant rule (r 9.11(3)) - that the substitution or addition of a defendant by amendment does not relate back to the commencement of proceedings but takes effect from the time of the amendment. That means that the amendment cannot prejudice any existing rights under a statute of limitations (or any other limitation period). Accordingly, leave to amend to substitute or add a defendant who has a good defence under a period of limitation will generally be refused as serving no useful purpose."

15 His Honour went on to contrast the position he had outlined in relation to amendment of parties with amendments which seek to raise a fresh cause of action. This is the so-called rule in Weldon v Neal (1887) 19 QBD 394. His Honour said that amendments to add a cause of action do relate back to the commencement of proceedings and went on to set out the celebrated passage in Weldon v Neal from Lord Esher (at 395).

16 In dealing with this application, considerations that apply when adding a cause of action can be put to one side. The amendment sought relates only to a change of the name of the defendant.

(Page 8)

17 In the course of their judgments, Dawson, Toohey and McHugh JJ each undertook an exhaustive examination of the authorities both in Australia and England with respect to rules equivalent to O 21 r 5(2) and (3). Dawson J concluded (at 245):

"It may sometimes be difficult to determine whether there is a mistake in name or a mistake in identity. When that is so and an amendment is sought under (the rule), the question can only be resolved by asking whether, in all the circumstances, it can reasonably be said that the party whose name is sought to be amended would remain the same in all but name or description if the amendment were allowed. If so, then there is a misnomer or misdescription and the rule applies notwithstanding that, as a matter of formality, the amendment results in the substitution of another entity. If not, the effect of the amendment would be, not to correct the name of the party, but to alter the identity of the party, then that rule does not apply."

18 All members of the Court dealt with the policy behind the rule. McHugh J put the position as follows (at 206 - 261):

"Rule 36.01(4) is a remedial rule and should be a beneficial interpretation. It is proper to give it the widest interpretation which its language will permit. It should be interpreted to cover not only cases of misnomer, clerical error and misdescription but also cases where the plaintiff, intending to sue a person he or she identifies by particular description, was mistaken as to the name of the person who answers that description."

19 In determining that the appeal should be dismissed, McHugh J said (at 262):

"The statement of claim in the present case does not indicate that Bridge sued Grand because it believed that Grand was the carrier but was mistaken as to the name of the carrier. To the contrary, the allegation in par 3 that Grand was 'the owner of the vessel' at all material times indicates that Bridge intended to sue Grand because it believed that Grand was the owner of the vessel. The correctness of that conclusion was confirmed by the affidavit of Bridge's solicitor who swore that he 'was concerned to preserve Bridge Shipping's rights against the Owner of such vessel'.

(Page 9)

Bridge made no mistake as to the description of the party which it wished to sue. It intended to sue the owner and it did so. Bridge's mistake was not one of misnomer, clerical error or misdescription. Nor was it one where, intending to sue a person whom it identified by a particular description, it was mistaken as to the name of the person who answered that description … The mistake which Bridge made was that it believed that it had rights against the owner of the vessel. But that was not a mistake 'in the name of a party'."

20 It is important, I think, when attempting to apply the reasoning in the Bridge Shipping decision to this case, to be entirely clear what was decided by the Court in the Bridge Shipping decision. This can perhaps be summed up by the concluding paragraph in the judgment of Toohey J. His Honour said (at 252):

"The application was not to correct a mistake in the name of a party by substituting another person as a party; it was an application to substitute a person who ought to have been joined as a third party in the first place."

21 The reason why the Court reached this conclusion is not difficult to see. When the writ was issued, it was thought that the proper party was Grand. It was intended, when the third party notice was issued, to sue Grand. It was later discovered that the proper party to be sued was Rainbow. Viewed in that light, it could not possibly be said that there was a genuine mistake as to the name of the party. There was a genuine mistake as to which company ought to have been sued.

22 In my view, the same reasoning applies in this case. The plaintiff intended to sue the entity who was the registered proprietor of the business name Countrywide Credit. By genuine mistake it sued Countrywide Credit Ltd. But it intended to sue Countrywide Credit Ltd. It did not misdescribe Countrywide Home Loans Ltd as Countrywide Credit Ltd. If it had done so, if there had been a misnomer or a clerical error, then amendment would have been permitted. But, as Toohey J said in the Bridge Shipping case, this is really an application to substitute a corporation who ought to have been joined as a defendant in the first place.

23 As both parties agree that the time limit has now expired, any amendment to add or substitute a party would only operate from the date of amendment and would not relate back to the issue of the writ (see

(Page 10)

Bridge Shipping per Dawson J (supra)). No useful purpose would be served by such an amendment and it is not appropriate that the amendment should be made.

24 In my view, the application must fail. However, as I have indicated, the writ can be amended so far as causes of action other than that brought under the Trade Practices Act is concerned. Given that this may cause some procedural difficulties, I will hear parties as to the appropriate form of the order and as to costs.