Bernardus Hubertus Van Stokkum and the People Named in Schedule A v The Finance Brokers Supervisory Board

[2003] WASC 204

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   BERNARDUS HUBERTUS VAN STOKKUM AND THE PEOPLE NAMED IN SCHEDULE A & ORS -v- THE FINANCE BROKERS SUPERVISORY BOARD [2003] WASC 204

CORAM:   MASTER SANDERSON

HEARD:   23 SEPTEMBER 2003

DELIVERED          :   30 OCTOBER 2003

FILE NO/S:   CIV 1197 of 2002

BETWEEN:   BERNARDUS HUBERTUS VAN STOKKUM AND THE PEOPLE NAMED IN SCHEDULE A

First Plaintiffs

JOHN HENRY CARTLEDGE AND THE PEOPLE NAMED IN SCHEDULE B
Second Plaintiffs

GEOFFREY HAROLD PALMER AND THE PEOPLE NAMED IN SCHEDULE C
Third Plaintiffs

JOHN ROBERT LYNN AND THE PEOPLE NAMED IN SCHEDULE D
Fourth Plaintiffs

MARTIN LEACH AND THE PEOPLE NAMED IN SCHEDULE E
Fifth Plaintiffs

ARNOLD DOUGLAS FROST AND THE PEOPLE NAMED IN SCHEDULE F
Sixth Plaintiffs

NEVILLE THOMAS HORN AND THE PEOPLE NAMED IN SCHEDULE G
Seventh Plaintiffs

BRIAN PATRICK DEVERALL AND THE PEOPLE NAMED IN SCHEDULE H
Eighth Plaintiffs

DONALD GEORGE FORBES AND THE PEOPLE NAMED IN SCHEDULE I
Ninth Plaintiffs

ADELE EDNA MCNALLY AND THE PEOPLE NAMED IN SCHEDULE J
Tenth Plaintiffs

SECILE MILLIE BOLTON AND THE PEOPLE NAMED IN SCHEDULE K
Eleventh Plaintiffs

CLARENCE ROBERT BENNIER AND THE PEOPLE NAMED IN SCHEDULE L
Twelfth Plaintiffs

BRIAN HANLEY AND THE PEOPLE NAMED IN SCHEDULE M
Thirteenth Plaintiffs

MALCOLM CARLYLE CROSBY AND THE PEOPLE NAMED IN SCHEDULE N
Fourteenth Plaintiffs

AND

THE FINANCE BROKERS SUPERVISORY BOARD
Defendant

Catchwords:

Practice and procedure - Application to strike out paragraphs of statement of claim - Application for leave to amend defence - Turns on own facts

Legislation:

Finance Brokers Control Act 1975, s 82, s 83, s 87

Result:

Paragraphs of defence struck out
Leave to amend refused

Category:    B

Representation:

Counsel:

First Plaintiffs               :     Mr D H Solomon & Mr J C Giles

Second Plaintiffs           :     Mr D H Solomon & Mr J C Giles

Third Plaintiffs             :     Mr D H Solomon & Mr J C Giles

Fourth Plaintiffs            :     Mr D H Solomon & Mr J C Giles

Fifth Plaintiffs              :     Mr D H Solomon & Mr J C Giles

Sixth Plaintiffs              :     Mr D H Solomon & Mr J C Giles

Seventh Plaintiffs          :     Mr D H Solomon & Mr J C Giles

Eighth Plaintiffs            :     Mr D H Solomon & Mr J C Giles

Ninth Plaintiffs             :     Mr D H Solomon & Mr J C Giles

Tenth Plaintiffs             :     Mr D H Solomon & Mr J C Giles

Eleventh Plaintiffs        :     Mr D H Solomon & Mr J C Giles

Twelfth Plaintiffs          :     Mr D H Solomon & Mr J C Giles

Thirteenth Plaintiffs      :     Mr D H Solomon & Mr J C Giles

Fourteenth Plaintiffs     :     Mr D H Solomon & Mr J C Giles

Defendant:     Ms J C Pritchard

Solicitors:

First Plaintiffs               :     Solomon Brothers

Second Plaintiffs           :     Solomon Brothers

Third Plaintiffs             :     Solomon Brothers

Fourth Plaintiffs            :     Solomon Brothers

Fifth Plaintiffs              :     Solomon Brothers

Sixth Plaintiffs              :     Solomon Brothers

Seventh Plaintiffs          :     Solomon Brothers

Eighth Plaintiffs            :     Solomon Brothers

Ninth Plaintiffs             :     Solomon Brothers

Tenth Plaintiffs             :     Solomon Brothers

Eleventh Plaintiffs        :     Solomon Brothers

Twelfth Plaintiffs          :     Solomon Brothers

Thirteenth Plaintiffs      :     Solomon Brothers

Fourteenth Plaintiffs     :     Solomon Brothers

Defendant:     State Crown Solicitor

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

Cowell v Corrective Services Commission of NSW (1988) 13 NSWLR 714

Darling Island Stevedoring and Lightage Co Ltd v Long (1957) 97 CLR 36

de Bruyn v South Australia (1990) 54 SASR 231

Case(s) also cited:

Astley v Austrust Ltd (1999) 197 CLR 1

ASC v Kippe (1996) 67 FCR 499

ASIC v Rich [No 3] (2003) 45 ACSR 305

Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321

Australian National Airlines Commission v Newman (1987) 162 CLR 466

Beck v Mercantile Mutual Insurance Co & Anor [1961] SASR 311

Bell v State of Western Australia [2003] WADC 18

Bennett v Minister of Community Welfare (1992) 176 CLR 408

Board of Fire Commissioners of New South Wales v Ardouin (1961) 109 CLR 105

Breen v Williams (1995) 186 CLR 71

British American Tobacco Ltd v Western Australia [2003] HCA 47

Brodie v Singleton Shire Council (2001) 206 CLR 512

Broom v Morgan [1953] 1 QB 597

Burnie Port Authority v General Jones Pty Ltd (1992) 179 CLR 520

Caffrey v Darby (1801) 6 Ves Jun 496

Canadian Pacific Tobacco Co Ltd v Stapleton (1952) 86 CLR 1

Canterbury Municipal Council v Taylor [2002] NSWCA 24

Casley v The Commonwealth [1981] WAR 85

Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd [2003] HCA 49

Chikonga v Minister for Immigration and Multicultural Affairs (1997) 47 ALD 49

CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384

Clyne v New South Wales Bar Association (1960) 104 CLR 186

Commercial Radio Coffs Harbour Ltd v Fuller (1986) 66 ALR 217

Commissioner of Railways v Ruprecht (1979) 142 CLR 563

Commissioner of Stamps v Telegraph Investment Co Pty Ltd (1995) 133 ALR 130

Commonwealth Trading Bank v Sydney Wide Stores Pty Ltd (1981) 148 CLR 304

Connelly v Director of Public Prosecutions [1964] AC 1254

Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297

Coulthard v Henneker [2003] WASCA 187

Dalgety Australia Ltd v Rubin, unreported; FCt SCt of WA; Library No 5485; 24 August 1984

Daniels Corporation International Pty Ltd v Australian Competition & Consumer Commission (2002) 192 ALR 561

Dare v Pulham (1982) 148 CLR 658

Dietrich v R (1992) 177 CLR 292

Eastman v Director of Public Prosecution (ACT) (2003) 198 ALR 1

Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1995) 188 CLR 241

Everett v Western Australia [2001] WADC 18

General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125

Giorgianni v R (1984) 156 CLR 473

Great China Metal Industries Co Ltd v Malaysian International Shipping Corporation Berhad (1998) 196 CLR 161

Grljusich v Andrews [2003] WASCA 206

Groves v The Commonwealth (1982) 150 CLR 113

Hackshaw v Shaw (1984) 155 CLR 614

Henville v Walker (2001) 206 CLR 459

Hospitals Contribution Fund of Australia v Hunt (1983) 44 ALR 365

Hughes & Vale Pty Ltd v State of New South Wales (No 2) (1955) 93 CLR 127

I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 192 ALR 1

Imperial Chemical Industries Ltd v Shatwell [1965] AC 656

Inglis v Moore (1979) 24 ALR 411

Insurance Commissioner v Joyce (1948) 77 CLR 39

Jefferies v Fisher [1985] WAR 250

Jingellic Minerals NL v Abigroup Ltd (1992) 7 WAR 566

Joslyn v Berryman (2003) 198 ALR 137

Kimberley Downs Pty Ltd v The State of Western Australia, unreported; SCt of WA; Library No 6414; 25 August 1986

L Shaddock & Associates Pty Ltd v The Council of the City of Parramatta [No 1] (1981) 150 CLR 225

March v Stramare (E & M) Pty Ltd (1991) 171 CLR 506

Miller v McKeon (1905) 3 CLR 50

Minister for Immigration & Multicultural & Indigenous Affairs v Al Masri (2003) 197 ALR 241

Muddle v Stride (1840) 9 Car & P 380

Munnich v Godstone Rural District Council (1966) 1 All ER 930

New South Wales Bar Association v Evatt (1968) 117 CLR 177

New South Wales v Lepore; Samin and Rich v Queensland (2003) 195 ALR 412

No 20 Cannon St Ltd v Singer and Friedlander Ltd [1974] 1 Ch 229

Northern Sandblasting Pty Ltd v Harris (1996) 188 CLR 313

Pancontinental Mining Ltd v Posgold Investments Pty Ltd (1994) 121 ALR 405

Parker v The Commonwealth (1965) 112 CLR 295

Petracaro v Commissioner of Consumer Affairs (1994) 62 SASR 387

Plaintiff S157/2002 v Commonwealth (2003) 195 ALR 24

Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355

Puntoriero v Water Administration & Ministerial Corporation (1999) 199 CLR 575

Purcell v Electricity Commission of New South Wales (1985) 60 ALR 652

Pyrenees Shire Council v Day (1998) 192 CLR 330

Ramsay v Pigram (1968) 118 CLR 271

Re Real Estate and Business Agents Supervisory Board; Ex parte Cohen (1999) 21 WAR 158

Refrigerated Express Lines (A'Asia) Pty Ltd v Australian Meat and Livestock Corp (1980) 29 ALR 333

Registrar, Real Estate and Business Agents Supervisory Board v Barnett, unreported; FCt SCt of WA; Library No 970426; 26 August 1997

Reseck v FCT (1975) 133 CLR 45

Ringelstein v Redford Cattle Co Pty Ltd [1995] 1 Qd R 433

Rogers v Whitaker (1992) 175 CLR 479

Roggenkamp v Bennett (1950) 80 CLR 292

Ross v R (1979) 25 ALR 137

Smith v R (1994) 125 ALR 385

Sobey v Commercial Agents Board (1979) 22 SASR 70

Societe Generale v Metropolitan Bank (1873) LT (NS) 849

Stoneman v Lyons (1975) 133 CLR 550

Tavelli v Johnson, unreported; SCt of WA; Library No 960693; 25 November 1996

Taylor v Public Service Board (1976) 10 ALR 211

Theophanous v Herald & Weekly Times Ltd (1993) 182 CLR 104

Treacy & Ors v Rylestone Pty Ltd & Ors [2002] WASC 178

Watson v George (1953) 89 CLR 409

White v Mason [1958] VR 79

Zeims v The Prothonotary of the Supreme Court (NSW) (1957) 97 CLR 279

1. MASTER SANDERSON:  This is an application by the plaintiffs to strike out certain paragraphs of the defendant's statement of claim.  The claim is brought by literally thousands of plaintiffs against the defendant.  It relates to what is generally referred to as the "Finance Brokers scandal".  In general terms, many thousands of investors placed money through various licensed finance brokers in what is referred to as "pooled mortgages".  In many cases the security for these mortgages proved to be inadequate and the investors sustained significant losses.  That has given rise to a variety of claims against different parties.  By this action the plaintiffs allege the Finance Brokers Supervisory Board, a statutory authority established with certain powers relating to the licensing of finance brokers, failed to act, as it should have done.  As a consequence, it is said that the plaintiffs have sustained loss and that the defendant is liable for those losses.  That is a very brief summary of what is a complicated claim.  The present minute of amended statement of claim runs to 202 pages.  The defence runs to 257 pages.  This application deals with a very limited number of paragraphs which, the plaintiffs say, are unsustainable and ought therefore be struck out. 

2. The paragraphs of the defence the plaintiffs sought to strike out in their chamber summons were par 41, 42, 52(h), 59, 266(c) and 269 to 272.  During the course of argument it became apparent that par 41, 42, 52(h) and 59, in any circumstances, required amendment.  There were difficulties of form which made the pleading confusing.  It was not the form of these paragraphs that the plaintiffs attacked; it was the substance.  However, at the conclusion of the hearing counsel for the defendant quite properly suggested that some amendment should be made to these four paragraphs to eliminate the problems of form.  That has now been done.  Each of the paragraphs has been amended so as to remove the parts to which the plaintiffs objected.  The defendant now proposes to insert a new par 265A.  The plaintiffs object to that new paragraph being inserted.  As the matter has developed then, this part of the application is to be treated as an application by the defendant for leave to amend par 41, 42, 52(h) and 59 in terms of a minute dated 30 September 2003 and for leave to add the proposed par 265A.  The plaintiffs do not object to the amendment to par 41, 42, 52(h) and 59.  They object to the proposed par 265A and say leave to amend ought be refused.  The objection to par 266(c) remains.  The defendant has applied to delete par 271 and 272.  That leaves the objection taken by the plaintiffs to par 269 and 270.  Accordingly, I will allow the amendment to the defence to delete par 271 and 272, thus removing one of the issues between the parties.

3. By par 30 of the statement of claim the plaintiffs allege that by the end of 1995 the defendant knew or ought reasonably to have known that certain licensed finance brokers were unlawfully broking pooled mortgages.  Paragraph 30 has to it 189 subparagraphs and numerous sub‑subparagraphs.  It deals in detail with how it is said the Board knew that the finance brokers were unlawfully broking pooled mortgages.  For present purposes, these details can be set to one side.  In the present context it is par 32.3 which is of relevance.  It reads as follows:

   "32.During the period 1990 - 1999, the Board:

   32.1…

   32.2…

   32.3refused or failed to hold, or cause application to be made by the Registrar or Inspectors to hold, sufficient and proper inquiries into the conduct of finance brokers under section 82 FBCA (Finance Brokers Control Act), and in particular failed to take action under section 83(2)(b) FBCA to stop licensed finance brokers offering prescribed interests (and after 1 July 1998 interests in managed investment schemes) in contravention of the Corporations Law;"

4. It is in response to that plea that the defendant now seeks to insert a new par 265A.  The proposed paragraph is in the following form:

   "265AAs to the allegations in the Statement of Claim that the Board, its members or deputy members, Registrar or inspectors were aware of, but did not take disciplinary action under s 83 of the Act in relation to, conduct by finance brokers inconsistent with the pooled mortgage and prescribed interest provisions of the Corporations Law, ('the alleged conduct'), the Defendant says:

   (a)the Board had jurisdiction under section 82 of the Act to hold an inquiry into whether there had been alleged conduct by a finance broker, only if, and to the extent that, any such inquiry was solely for the purpose of determining whether the finance broker had, by the alleged conduct, acted in conformity with the special conditions, if any, of the finance broker's licence and business certificate and with the Code of Conduct and the requirements of the Act in force at the time the alleged conduct occurred (together called 'the regulatory requirements');

   (b)further or in the alternative to sub‑paragraph (a), the Board had power in the course of an inquiry under section 82 to examine the alleged conduct only for the purpose of determining whether such conduct was in conformity with the regulatory requirements;

   (c)the Board could be satisfied for the purposes of section 83 of the Act that proper cause existed for disciplinary action against a finance broker in respect of the alleged conduct only if:

   (i)a valid inquiry under section 82 had been held by the Board; and

   (ii)the finance broker -

   (A)had been convicted under the Corporations Law for the alleged conduct and that conduct was such as, within the meaning of section 83(2)(b) of the Act, would or might prejudice any rights or interests of the borrower or lender or prospective borrower or lender, or

   (B)had by the alleged conduct breached the regulatory requirements, or

   (C)was, by reason of the alleged conduct, unfit, within the meaning of section 83(2)(d) of the Act, to hold a licence;

   (d)the alleged conduct -

   (i)was not the subject of a conviction of a finance broker for a breach of the Corporations Law;

   (ii)was not such as to prejudice or potentially prejudice any rights or interests of the borrower or lender or prospective borrower or lender within the meaning of section 83(2)(b) of the Act;

   (iii)was not capable of breaching, and did not breach, the regulatory requirements;

   (iv)did not render the finance broker unfit to hold a licence, within the meaning of section 83(2)(d) of the Act;

   (e)in the premises -

   (i)the Board had no jurisdiction under section 82 of the Act to inquire into the alleged conduct; and

   (ii)the Board had no jurisdiction or power to take disciplinary action against a finance broker under section 83 of the Act in relation to the alleged conduct."

5. As I understand par 265A, it offers three alternative responses to the plaintiffs' plea in par 30 and 32.3.  The first is found in par 265A(a).  If it is found that par 265A(a) does not provide an answer to the plaintiffs' claim, then the defendants say that an answer is provided by a combination of par 265A(a) through to (e), or a combination of 265A(b) through to (e).  So far as the plaintiffs are concerned, they say that no matter which of these three options is adopted, the plea is untenable and the amendment should not be permitted.

6. It is convenient at this point to set out par 82 and 83 of the Finance Brokers Control Act 1975.  They are in the following terms:

   "82.   Inquiries into conduct of finance brokers

   (1)The Board may on the application of the Registrar, an inspector, or any other person, or of its own motion hold an inquiry into the conduct of any finance broker for the purpose of determining whether or not the finance broker is acting in conformity with the special conditions, if any, of his licence and business certificate and with the finance brokers code of conduct and is complying with the requirements of this Act.

   (2)An application under subsection (1) shall be made in writing and in a manner and form determined by the Board in respect of such an application and shall contain such information as is required by the Board in respect of such an application.

   (3)The information contained in the application shall be verified by statutory declaration of the applicant.

   (4)In respect of any particular application the applicant shall furnish the Board with such further information as the Board determines, verified if the Board so requires by statutory declaration.

   (5)An applicant, if any, and the finance broker are parties to an inquiry held under subsection (1).

   83.Powers on inquiry

   (1)If after conducting an inquiry under section 82(1) the Board is satisfied that proper cause exists for disciplinary action, the Board may do any one or more of the following things -

   (a)reprimand or caution the finance broker;

   (b)impose a fine not exceeding $1 000 on him; and

   (c)suspend or cancel his licence and any business certificate in respect thereof and, in addition, disqualify him either temporarily or permanently, or until the fulfilment of any condition which may be imposed by the Board, or until the further order of the Board, from holding a licence or business certificate, or both.

   (2)There shall be proper cause for disciplinary action if -

   (a)the finance broker improperly obtained a licence or business certificate;

   (b)the finance broker, or any person acting with the authority or upon the instructions of the finance broker, has, in the course of any dealings with a borrower or a lender or a prospective borrower or lender, been guilty of conduct that constitutes a breach of any law other than this Act and that prejudices or may prejudice any rights or interests of the borrower or lender or prospective borrower or lender;

   (c)the finance broker is acting or has acted in breach of -

   (i)a special condition of his licence or business certificate;

   (ii)the requirements of this Act; or

   (iii)the finance brokers code of conduct;

   or

   (d)any other cause exists that, in the opinion of the Board, renders the finance broker unfit to hold a licence.

   (3)Where the Board suspends or cancels a licence or a business certificate, or both, the suspension or cancellation shall take effect immediately, and shall not be deferred by reason of any proposed or pending appeal to the District Court under this Act unless the District Court otherwise orders, which it may do if it thinks fit subject to such conditions as it may impose to protect clients and potential clients of the finance broker and the public generally."

7. It is not necessary for present purposes to say too much about the Finance Brokers Supervisory Board. In broad terms, the purpose of the Board is to provide for the licensing, regulation and supervision of finance brokers. The Board is constituted by members appointed from time to time and is supported by a Registrar and other officers of the Board. Part IV of the Act deals with "Controls". Division 3 of Pt IV - which contains s 81 to s 83 - deals with "Discipline". Section 82 is titled "Inquiries into Conduct of Finance Brokers" and s 83 is titled "Powers on Inquiry". It was not submitted that the position of the sections in the Act or their titles was in any way relevant to the application. I mention these matters to put the sections in context.

1. Before dealing with the defence the defendants seek to raise by the proposed s 265A, it is worth examining both s 82 and s 83 to understand precisely what it is they authorise the Board to do. Section 82(1) authorises the Board to hold an inquiry into the conduct of a finance broker to determine whether or not the finance broker (a) is acting in conformity with the special conditions of licence; (b) is complying with his business certificate; (c) is complying with the finance brokers code of conduct; or (d) is complying with the requirements of the Act. The subsection uses the word "and" between each of the different matters which may warrant investigation but in my view, it is a disjunctive "and" with the result that the Board may hold an inquiry in respect of any one of these four matters.

2. It must be remembered that what is alleged in par 30 of the statement of claim is that the finance brokers were unlawfully broking pooled mortgages and that they were engaged in "Predatory Conduct" (as defined in par 47 of the statement of claim). It is difficult to see that either of these two courses of conduct fit neatly within matters which might be examined by the Board under s 82(1). Put more precisely, it is not pleaded that conduct of the type referred to in the subsection was engaged in by the finance brokers. If that was the end of the matter, then par 265A of the defendants' proposed amended defence would be a good plea and, it must be said, would have strong chances of success at trial. The complication arises when s 82(1) is read with s 83.

3. Section 83(1) anticipates an inquiry under s 82(1) and a finding by the Board that proper cause exists for disciplinary action. The subsection then specifies what penalties the Board can impose. Section 83(2) sets out the circumstances when there can be proper cause for disciplinary action. For present purposes it is subs (2)(b) and (d) which are relevant. The difficulty can be illustrated by reference to subpar (2)(d). Suppose, for instance, that it came to the attention of the Board that a licensed broker had become mentally unstable with the result that unquestionably, he or she was not in a position to continue to operate as a broker. It seems clear that the Board could take action under s 83(2)(d). But it could only take that step after holding an inquiry. Yet on the face of it, such an inquiry - that is, an inquiry which focussed upon the mental capacity of the broker - could not be held. That would be a strange situation indeed.

4. In my view it is untenable to plead as the defendants seek to do in the proposed par 265A(a) that in the circumstances pleaded in par 30(a) and (b) of the statement of claim, an inquiry could not be held under s 82(1). Although apparently restrictive in its terms, I think it is clear both on a reading of s 83 and the Act as a whole, the Board was to have wide powers of inquiry. To apply the narrow interpretation contended for by the defendant would render the powers of the Board to conduct an inquiry so limited as to be meaningless. I am not satisfied that is the proper interpretation of the legislation.

5. Turning then to the alternative plea that without a conviction no action could be taken under s 83(2) by the Board, I am satisfied that that too must fail.  I have reached that conclusion for two reasons.  First, s 83(2)(d) appears to give the Board wide powers to determine whether or not a finance broker is unfit to hold a licence.  I see no reason why the Board could not conduct an inquiry and, in the absence of any conviction for breach of the Corporations Law relating to pooled mortgages, nonetheless determine that the conduct of the brokers was contrary to the provisions of the Corporations Law.  In my view the discretion given to the Board to Act under subpar (2)(d) is wide and unfettered and there is no warrant at all for limiting its scope as the defendant would have it in the proposed par 265A.

6. Secondly, I am not satisfied that by its terms, s 83(2)(b) limits the Board to acting only in circumstances where a broker has been convicted of a breach of any law - in this case, on the plaintiffs' plea, a breach of the Corporations Law.  In framing par 265A, the defendant is placing emphasis on the use of the phrase "guilty of conduct that constitutes a breach of any law" to be found in subpar (2)(b).  In essence it is said that this requires a conviction before any action can be taken.  With respect, in my view, that is a misreading of what is intended by the subsection.

7. Paragraph 266 of the defence responds to par 68 and 68A of the statement of claim.  For present purposes it is par 68.2.1 which is relevant.  In essence, it is pleaded by the plaintiffs that if the defendant had held an inquiry, the nature of what the plaintiffs refer to as "Predatory Conduct" by the finance brokers would have come to light and "would have been widely publicised and become known to the plaintiffs and to all licensed finance brokers".  To this the defendants plead that:

   "(c)… pursuant to section 88 of the Act, a member of the Board, the deputy of a member and officers of the Board, including the Registrar and inspectors, were prohibited, except in the performance of a duty under or in connection with the Act, from divulging or communicating to any person any information concerning the affairs of any other person acquired while carrying out their functions as members, deputy members or officers under or for the purposes of the Act."

8. It is unnecessary for me to quote s 88 of the Act.  Its terms are accurately pleaded by the defendant in par 266(c).  It is also not difficult to understand the conduct prohibited by the section.  From time to time information would come into the hands of members of the Board, their deputies or other officers of the Board solely as a consequence of their membership of or employment by the Board.  It is only right and proper that this information should not be passed on to third parties.  Section 88 ensures that this unacceptable conduct does not occur.

9. But that says nothing about the claim as formulated by the plaintiffs.  They say that if the Board had held a hearing, the brokers, or one or more of them, would have been found guilty of engaging in predatory conduct.  That finding, they say, would have been publicised and would have become known to the plaintiffs and other licensed finance brokers.  As a matter of fact, that may or may not be correct.  But the plea presently made in response to the claim does not answer the material fact as pleaded.  The plaintiffs are not saying that, independent of the inquiry powers in the Act, information which came into the hands of Board members or others associated with the Board should have been made public so as to warn investors of the potential dangers.  That would be a plea that the Board members should have engaged in illegal conduct and clearly such a plea is untenable.  A plea which is not put is answered by par 266(c).  Furthermore, that paragraph raises matters which are irrelevant to the plea that is made.  It cannot stand and it must be struck out.

10. Further objection is taken to par 269 and 270.  These two paragraphs raise what might be said to be a statutory defence to the claim.  It is worth quoting each of the two paragraphs in full:

    "269.At all material times each of the members of the Board, the deputies of members, and officers of the Board, including the Registrar and inspectors, conducted themselves in good faith and in the exercise or purported exercise of the powers or functions under the Act or, as the case may be, in the discharge or purported discharge of their duties under the Act.

    270.By reason of section 87 of the Act and the matters pleaded in paragraph 269 above:

    (a)no liability can in any event attach to any members of the Board, to any deputies of members or to any officers of the Board, including the Registrar and inspectors, for any misfeasances and breaches of duty as pleaded respectively in paragraphs 31 to 39 and 58 to 67 of the Statement of Claim; and

    (b)in the absence of any such liability, the Board is in any event not liable for any misfeasances or breaches of duty as pleaded respectively in paragraphs 31 to 39 and 58 to 67 of the Statement of Claim."

11. Section 87 of the Act is in the following terms:

    "87.   Immunity of Board and officers

    No liability shall attach to a member or the deputy of a member, or the Registrar, an inspector, or any other officer, of the Board for any act or omission by him, or by the Board, in good faith and in the exercise or purported exercise of his or its powers or functions, or in the discharge or purported discharge of his or its duties under this Act."

12. It is important to clarify just what is put against the plaintiffs by par 269 and 270. It is said that s 87 confers on the members of the Board the deputies of members and the officers of the Board, immunity from suit provided the exercise of their powers and functions is carried out in good faith. Undoubtedly that is the effect of s 87. There was no dispute between the parties on that question. The defendants then say that if the members and officers of the Board have immunity from suit, the Board itself has immunity from suit. On that basis the defendants say the plaintiffs' claim must fail. It is important to note that it is not pleaded that pursuant to s 87, the Board itself has immunity. During the course of her submissions I took this point up with counsel for the defendants: see pages 296 ‑297 of the transcript. Counsel did not concede that par 269 and 270 do not raise the immunity of the Board directly. But the fact is they do not. I invited counsel to amend the pleading if it was thought that s 87 of the Act provided a direct defence to the defendant. That has not been done. It should be clearly understood then that it is not put against the plaintiffs that the Board itself has direct immunity based upon s 87. Rather, it is said that the immunity is derivative - the Board members and officers are immune and therefore the Board is immune.

13. It was submitted on behalf of the plaintiffs that immunity from suit of Board members and officers does not provide immunity to a party who would otherwise be vicariously liable for the acts and omissions of the Board members and officers, in this case the Board itself.  In making this submission, counsel for the plaintiffs relied upon the High Court decision of Darling Island Stevedoring and Lightage Co Ltd v Long (1957) 97 CLR 36. In particular, counsel relied upon the judgment of Kitto J and his Honour's exposition of the principles of vicarious liability found at pages 60 to 65. In response, counsel for the defendants submitted that what Kitto J had to say was obiter and that there were a number of decisions which supported the defendants' position. Counsel submitted that the plea was fairly arguable and the paragraphs ought not be struck out.

14. In my view, there is no doubt that if the position is as set out by Kitto J in the Darling Island case, then the defendants' plea cannot stand.  I also accept that there are a number of cases which have adopted Kitto J's statement of principle.  Counsel for the plaintiffs canvassed these authorities in some detail.  But it is also the case that there are two judgments of intermediate appellate courts which take a different view.  They are Cowell v Corrective Services Commission of NSW (1988) 13 NSWLR 714 and de Bruyn v South Australia (1990) 54 SASR 231. It is not possible to reconcile these two lines of authorities. They are at odds and that is really all that can be said on the matter.

15. There is nothing to be gained by a Master sitting at first instance attempting a detailed analysis of the different jurisprudential theories which have led to opposing conclusions.  I have simply to follow one line of authority or the other.  That being the case, I would follow the Darling Island line of authority.  I find the reasoning of Kitto J utterly compelling.  On that basis then, the pleas in par 269 and 270 cannot stand and they should be struck out. 

16. In the ordinary course I would not be inclined to deal with the strike‑out application of par 269 and 270 on an interlocutory basis.  Neither paragraph will require any evidence.  In a trial that was to run for a few days it would be proper to leave the issues raised by these paragraphs of the defence to the trial Judge who could deal with the issue in the course of his or her reasons.  That would avoid the necessity for the defendants to run an interlocutory appeal.  But this is no ordinary case.  What the plaintiffs' solicitors have done is choose three issues which they say can be resolved on the pleadings.  None of these issues, either alone or taken together, will, when resolved in the plaintiffs' favour, result in a knock‑out blow to the defendants.  But in lengthy and complex litigation such as this, there is much to be gained, in my view, from attempting to remove as issues as many matters as possible.  In other words, I am of the view that the approach adopted by the plaintiffs in this case is entirely appropriate given the nature of the claim.  It is for that reason that I think, having reached the conclusion I have, it is proper that I strike out paragraphs which I see as offensive.

17. I will hear the parties as to the precise form of orders and as to costs.