Beta Act Pty Ltd as Trustee for the Brendas Family Trust v FTI Consulting Pty Ltd
[2021] ACTSC 293
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Beta ACT Pty Ltd as Trustee for the Brendas Family Trust v FTI Consulting Pty Ltd |
Citation: | [2021] ACTSC 293 |
Hearing Date(s): | 2 September 2021 |
Submissions Last Received: | 7 October 2021 (Applicants); 22 October 2021 (Respondents) |
DecisionDate: | 19 November 2021 |
Before: | Crowe AJ |
Decision: | [87] |
Catchwords: | CIVIL LAW – JURISDICTION, PRACTICE AND PROCEDURE – application – amendments to pleadings – whether the respondent is the correct party to the proceedings – whether parties other than the respondent should be joined to the proceedings – whether the originating process can be amended after the expiry of the limitation period – the applicable limitation period for claims under s 111A of the Conveyancing Act 1919 (NSW) and s 420A of the Corporations Act 2001 (Cth) – ss 14 and 23 of the Limitation Act 1969 (NSW) – whether r 220 or r 503 of the Court Procedures Rules 2006 (ACT) applies – whether s 65 of the Civil Procedure Act 2005 (NSW) applies – application dismissed. |
Legislation Cited: | Civil Procedure Act 2005 (NSW) s 65 Conveyancing Act 1919 (NSW) s 111A Property Law Act 1974 (Qld) s 85 |
Cases Cited: | Almona Pty Ltd v Parklea Corporation Pty Ltd [2021] NSWCA 171 Althaus v Australia Meat Holdings Pty Ltd [2007] 1 Qd R 493 Windsurf Holdings Pty Ltd and Ors v Leonard [2009] NSWCA 6 |
Parties: | Beta ACT Pty Ltd as Trustee for the Brendas Family Trust ( First Applicant) Spiros Brendas (Second Applicant) Beverley Brendas (Third Applicant) FTI Consulting (Australia) Pty Ltd ( Respondent) Nathan Vane Landrey (Proposed Defendant) Matt John Adams (Proposed Defendant) |
Representation: | Counsel P Bevan ( Applicants) F Roughley, H Lenigas ( Respondents) |
| Solicitors Bevan & Co Lawyers ( Applicants) Norton Rose Fulbright ( Respondents) | |
File Number(s): | SC 580 of 2019 |
Crowe AJ
Application
The plaintiffs (who I will hereafter refer to as the Applicants) by application in proceeding dated 9 July 2021 seek orders in the following terms:
1.That Nathan Vane Landrey and Matt John Adams be joined as defendants in these proceedings;
2.Any other Order that the Court considers appropriate.
Under the heading “Grounds of Application” the Applicants state:
1.Nathan Vane Landrey and Matt John Adams ought to have been included as parties.
2.It is necessary to join Nathan Vane Landrey and Matt John Adams as parties so as to enable the Court to properly determine the issues in dispute.
3.The third defendant was incorrectly named as a party because it was the employer of Nathan Vane Landrey and Matt John Adams whereas the plaintiffs claim for damages arises directly from the actions of Nathan Vane Landrey and Matt Johns Adams.
The questions of law to be raised are as follows:
1.Amendments of pleadings.
2.Whether a party ought to have to have been included as a party and should now be included as a party.
3. Whether originating process can be amended after expiry of limitation period.
The matter came before me on 2 September 2021. Mr Bevan appeared for the Applicants, and Ms Roughley with Ms Lenigas appeared for the defendant, and also Messrs Landrey and Adams as the proposed additional defendants. I will refer to these three parties collectively as the Respondents.
The evidence relied upon consisted of:
(1)The Applicants:
(a)Affidavit of Beverly Brendas dated 9 July 2021;
(b)Affidavit of Sarah-Jane Kelly dated 9 July 2021.
(2)The Respondents:
(a)Affidavit of David Benjamin Goldman dated 26 July 2021 (incorporating the documents exhibited to the affidavit as Exhibit “DBG1”);
(b)Advice of C Erskine SC (undated), which was marked as Exhibit “R1”.
Factual background
The first applicant is the successor trustee of the Brendas Family Trust following the prior trustee, Kenoss Pty Limited (Kenoss), suffering financial difficulties in 2013 and 2014. Kenoss was wound up and a liquidator was appointed on 28 May 2015. Mr and Mrs Brendas sue as beneficiaries of the trust.
At the time of the financial difficulties, Kenoss owned a number of real properties in the Australian Capital Territory (ACT) and in New South Wales (NSW). One of these (referred to in the pleadings as the “Kings Highway property”) consisted of a number of lots aggregating to a little under 134 hectares near to Bungendore in NSW. Kenoss is also said to have owned about 30 items of plant and equipment from which it generated income.
During 2013, for reasons which are not relevant here, Kenoss started to suffer a fall in cash flow. At that time, it had significant loan liabilities to various banks, including the Bank of Western Australia Ltd (Bankwest). Bankwest held a number of mortgage securities, including a registered mortgage over the title of the Kings Highway property. It also held a fixed and floating charge over the assets of Kenoss.
On 18 November 2013, Bankwest appointed receivers and managers of various real properties owned by Kenoss, which included the Kings Highway property, and also of all of the assets the subject of the charges.
The instrument of appointment identified the appointees in the following terms:
Nathan Vance Landrey and Matt John Adams of FTI Consulting, Level 15, 50 Pitt Street, Sydney NSW 2000 jointly and severally”.
On 24 March 2014, in the exercise of their powers as receivers Messrs Landrey and Adams caused the Kings Highway property to be sold. An advertising pamphlet published by the selling agent some time before 13 March 2014 stated that the property was to be sold on behalf of “Matt Adams & Nathan Landrey Receivers and Managers of Kenoss Pty Ltd (Administrators Appointed)”.
By early 2015, as a result of the sale of various properties owned by Kenoss, the receivers received sufficient funds to discharge the liabilities owed to Bankwest. Indeed, the receivers by that time are said to have held a surplus. However, disputes had, by that time, arisen in relation to the plant and equipment the subject of the receivership. This led to the sum of $150,000 being withheld from the monies held by the receivers to cover future debts owed by the Brendas Family Trust which might arise as the result of litigation in relation to the receivership.
On 19 March 2015, Mr Bevan, who was then acting for Mr and Mrs Brendas, wrote to the solicitors for the receivers in relation to a difficulty in obtaining possession of certain items of the plant and equipment. In that letter, Mr Bevan referred to the receivers as “Matt Adams and Nathan Landrey of FTI Consulting”.
In a subsequent email to those solicitors on 23 September 2015, Mr Bevan again identified the receivers as “Nathan Landrey and Matt Adams”.
In the meantime, it appears that Mr and Mrs Brendas were also consulting Mr C Giles, solicitor, about possible causes of action arising from the administration and receivership of Kenoss. Mr Giles is said to have obtained the advice of Mr Erskine SC. I infer that the advice was obtained some time in 2015. In that advice, Mr Erskine concluded that there were arguable claims available against a number of parties, including the receivers.
Mr and Mrs Brendas fell into dispute with Mr Giles and thereafter nothing further was done to progress any of the claims discussed in Mr Erskine’s advice until late 2019 when Mr and Mrs Brendas discovered that the files of Mr Giles relating to the potential claims had been transferred to Legal on London. Indeed, that firm issued an Originating Claim and Statement of Claim in this Court on 15 November 2019. The Applicants were the plaintiffs. There were five defendants to the claim including FTI Consulting Pty Limited (FTI) which was joined as the third defendant. Neither of Messrs Landrey nor Adams was named as a defendant.
The pleading of the Statement of Claim against the third defendant was curious, to say the least. I was referred to the following extracts:
8. The third defendant is a corporation capable of suing and being sued in its corporate name and style.
9. At all material times the third defendant was engaged to act as receiver in respect of certain assets of Kenoss.
…
46. On Monday 18 November 2013 Bankwest appointed the fourth [sic] defendant as receivers to Kenoss. Mr. Nathan Vance Landrey (“Landrey”) and Mr Matt John Adams (“Adams”), both of FTI, were jointly and severally appointed as receivers and managers of certain property of Kenoss and the second and third plaintiffs, being:
(a) Kings Highway;
…
56. In about 2014 the third defendant sold the Kings Highway property for $1.458 million.
…
85. The plaintiffs allege that the third defendant engaged in conduct:
(a)exercising a power of sale in respect of property of a corporation; and
(b)did not take all reasonable care to sell the property for not less than market value and/or for the best price obtainable in the circumstances
within the meaning of s 420A of the Corporations Act.
Particulars
(a)Failure to take all reasonable care to sell the Kings Highway property for market value;
(b)Failure to consider the previous valuations of the Kings Highway development.
(c)Failure to represent and market to potential buyers that the Kings Highway development had significant development potential;
(d)Failure to market the Kings Highway property outside Bungendore;
(e)Failure to investigate and act on existing offers for the Kings Highway property that were higher that [sic] the eventual sale price of the property;
…
86. By reason of the third defendant’s breaches pleaded above in paragraph 85 the Brendas Family Trust has suffered losses and accordingly the second and third plaintiffs as beneficiaries of the trust have suffered loss and damage.
Thereafter, the Originating Claim and attached pleading were not served. It appears from the affidavit of Mrs Brendas that the reason for this related to an attempt by Legal on London to secure litigation funding.
Eventually, Mr Bevan replaced Legal on London as the solicitor for the Applicants. Pursuant to orders made in this Court on 9 November 2020, the Applicants were granted leave to amend the Originating Claim and the Statement of Claim. The amended pleading was filed on 13 November 2020.
The claims pleaded against defendants other than FTI were dropped. That company remained as the only defendant. The Amended Statement of Claim (ASOC), relevantly, contained the following allegations:
6. The third defendant (‘the Defendant’) is a corporation capable of suing and being sued in its corporate name and style.
7. At all material times Nathan Vance Landrey (‘Landrey’) and Matt John Adams (‘Adams’) were principals and/or employees of the Defendant.
…
18.On 18 November 2013 BankWest appointed Landrey and Adams as receivers and managers of certain assets of Kenoss, including the Property.
19. Upon appointment as receivers and managers, Landrey and Adams were the agents of the Defendant and the Defendant was vicariously liable for their conduct.
20. Around February 2014 the Defendant, pursuant to the power of the sale conferred by section 58(1) of the Real Property Act 1900, (NSW) engaged CBRE as it [sic] agent to sell the Property and the Property was listed for sale by way of ‘Expression of interest’.
Particulars
Brochure titled “4610 Kings Highway Bungendore NSW 2621”
21. On 24 March 2014 the Defendant sold the Property for $1,458,000.
…
Plaintiff’s claim under the Conveyancing Act
29. Subsequent to its appointment by BankWest on 18 November 2013 as receiver and manager of Kenoss, the Defendant acted as BankWest’s agent and its sale of the Property on 24 March 2014 was as agent appointed by BankWest within the meaning of section 111A(2) of the Conveyancing Act 1919 (NSW) (the Conveyancing Act).
…
32. The Defendant did not exercise or take reasonable care to ensure that the Property was sold for a price that was equal to or greater than its market value and/or for the best price obtainable in the circumstances.
(particulars omitted)
Plaintiff’s claim under the Corporations Act
33. The plaintiffs allege that the Defendant exercised a power of sale in respect to the property of a corporation and did not take all reasonable care to sell the property for not less than market value and/or for the best price obtainable in the circumstances within the meaning of S420A of the Corporations Act 2001 (Cth) (the Corporations Act).
…
Damages
34. Due to the Defendants breaches of duty as pleaded the Brendas Family Trust has suffered financial loss and accordingly the second and third plaintiffs as beneficiaries of the trust have suffered loss and damage.
(particulars omitted)
35. Due to the Defendants breaches of duty as pleaded the second and third defendants [sic] have suffered financial loss as guarantors due to the deficit between the amount owed under the Mortgage and the proceeds obtained following the sale of the Property.
The Amended Originating Application and ASOC were served on FTI on 4 February 2021
By its defence filed on 27 April 2021, FTI admitted that Messrs Landrey and Adams were employees of FTI (the latter to December 2014). It also admitted paragraph 18 of the ASOC and further pleaded that Messrs Landrey and Adams were appointed as receivers in their personal capacity. The defence thereafter pleads that FTI did not carry out any of the actions alleged against it. It pleads that the actions leading to the sale of the Kings Highway property were carried out by Messrs Landrey and Adams as receivers.
There was some correspondence between the solicitors for the parties in relation to the assertions in the defence. On 26 May 2021, Mr Bevan wrote to the solicitor for FTI. The letter included the following:
We agree there are disputed legal issues concerning the role of Mr Landrey and Mr Adams as trustees and the liability of your clients for their conduct. As the trustees ought to have been included as parties in the proceedings so the Court could properly determine all issues in dispute, it is in the interests of justice that the Statement of Claim is amended to join them as defendants and an application will be made.
Having regard to the context, it seems likely that the reference to “trustees” was intended to be a reference to “receivers”.
In any event, FTI’s solicitor responded by letter on 18 June 2021. That letter specifically referred to the decision of the High Court in Bridge Shipping Pty Ltd v Grand Shipping SA (1991) 173 CLR 231 (Bridge Shipping). It stated:
As we have also previously informed you there has been no “mistake in the name or identity of the party” that would permit your client to join the receivers in their personal capacity after the expiration of the limitation period.
There was no issue as to when the six-year limitation period expired here (if it applied, as to which see the further submissions made by the parties as summarised below). Mr Bevan accepted that it had expired no later than by 24 March 2020, the sixth anniversary of the sale of the Kings Highway property.
In response to the 18 June 2021 letter, Mr Bevan wrote on 24 June 2021:
It appears you may have misunderstood the nature of the proposed application alluded to in our letter of 26 May 2021. The basis of an application would not be that there was a “mistake in the name or identity of a party” but that Mr Landrey and Mr Adams (“the receivers”) should be included as parties in the proceedings. In determining this issue the relevant considerations for the Court are whether the receivers ought to have been included as parties in the proceedings, and/or whether their inclusion as parties is necessary to enable it to properly determine the issues in dispute. Additionally, there would also need to be an application under the Limitation Act.
After service of the application in proceeding, on 22 July 2021, the solicitor for FTI wrote to Mr Bevan seeking confirmation that the Applicants intended to discontinue the claim against FTI. In his reply dated 23 July 2021 Mr Bevan said:
The current Statement of Claim pleads that FTI is vicariously liable for the actions of its employees, and FTI, in its defence, denies any legal liability. The plaintiffs accept that the receivers should have been parties to the original proceedings and the Application seeks leave to join them. However, seeking leave to join the receivers is not acknowledgement of lack of merit in the claim that FTI is vicariously liable and it is only if the receivers were joined that there would be no need to continue against FTI.
Rules / legislation relied on
There was an issue as to whether the Applicants’ application engaged r 220 or r 503 of the Court Procedures Rules 2006 (ACT) (CPR), or s 65(2) of the Civil Procedure Act 2005 (NSW) (CPA(NSW)). For completeness, I will set out the provisions which appear to be engaged:
Court Procedures Rules 2006 (ACT)
220Court may include party if appropriate or necessary
(1) The court may order that a person be included as a party to a proceeding if—
(a) the person ought to have been included as a party; or
(b) including the person as a party is necessary to enable the court to adjudicate effectively and completely on all issues in dispute in the proceeding.
(2) The court may make an order under this rule–
(a) at any stage of the proceeding; and
(b) on application by the person or a party to the proceeding or on its own initiative; and
(c) whether the person to be included should be a plaintiff or defendant.
Note 1Pt 6.2 (Applications in proceedings) applies to an application for an order under this rule.
Note 2Rule 6901 (Orders may be made on conditions) provides that the court may make an order under these rules on any conditions it considers appropriate.
242Included or substituted parties—date proceeding taken to start
(1) This rule applies if the court orders that a person be included or substituted as a party in the proceeding.
(2) The date the proceeding starts in relation to the person is taken to be—
(a) the date when the order is made; or
(b) if another date is stated in the order—that date.
(3) However, an earlier date must not be stated in the order if the inclusion or substitution of the person on that date would bring the start of the proceeding within a limitation period applying to the person.
…
501Amendment—when must be made
All necessary amendments of a document must be made for the purpose of—
(a) deciding the real issues in the proceeding; or
(b) correcting any defect or error in the proceeding; or
(c) avoiding multiple proceedings.
502 Amendment—of documents
(1) At any stage of a proceeding, the court may give leave for a party to amend, or direct a party to amend, an originating process, anything written on an originating process, a pleading, an application or any other document filed in the court in a proceeding in the way it considers appropriate.
(2) The court may give leave, or give a direction, on application by the party or on its own initiative.
Note 1Pt 6.2 (Applications in proceedings) applies to an application for leave or a direction under this rule.
Note 2Rule 6902 (Leave may be given on conditions) provides that, if the court gives leave under these rules, it may give the leave on the conditions it considers appropriate.
(3) The court may give leave to make an amendment even if the effect of the amendment would be to include a cause of action arising after the proceeding was started.
(4) If there is a mistake in the name or identity of a party, the court must give leave for, or direct the making of, amendments necessary to correct the mistake, even if the effect of the amendments is to substitute another person as a party.
(5) This rule does not apply in relation to an amendment of an order.
NoteSee r 6906 (Mistakes in orders or court certificates) for amendment of orders.
(6) This rule is subject to rule 503 (Amendment—after limitation period).This rule is subject to rule 503 (Amendment–after limitation period).
503Amendment—after limitation period
(1) This rule applies in relation to an application for leave in a proceeding to make an amendment mentioned in this rule if a relevant period of limitation, current at the date the proceeding was started, has ended.
NotePt 6.2 (Applications in proceedings) applies to an application for leave under this rule.
(2) The court may give leave to make an amendment correcting a mistake in the name or identity of a party, even if the effect of the amendment is to substitute a new party, only if—
(a) the court considers it appropriate; and
(b) the court is satisfied that the mistake sought to be corrected—
(i)was a genuine mistake; and
(ii)was not misleading or likely to cause any reasonable doubt about the identity of the person intending to sue or intended to be sued.
(3) The court may give leave to make an amendment changing the capacity in which a party sues, whether as plaintiff or counter-claiming defendant, only if—
(a) the court considers it appropriate; and
(b) the changed capacity in which the party would then sue is a capacity in which the party might have sued on the day the proceeding was started by the party.
(4) The court may give leave to make an amendment to include a new cause of action only if—
(a) the court considers it appropriate; and
(b) the new cause of action arises out of the same facts or substantially the same facts as a cause of action for which relief has already been claimed in the proceeding by the party applying for leave to make the amendment.
504Amendment—of originating process
(1) An originating process may be amended only with the court’s leave.
Note 1Pt 6.2 (Applications in proceedings) applies to an application for leave under this rule.
Note 2The registrar may make an order amending the originating process if the parties affected by the order consent to it and the registrar considers it appropriate (see r 1611 (Orders—by consent)).
(2) This rule does not apply to a pleading or particular included in an originating process.
Civil Procedure Act 2005 (NSW)
65Amendment of originating process after expiry of limitation period
(1) This section applies to any proceedings commenced before the expiration of any relevant limitation period for the commencement of the proceedings.
(2) At any time after the expiration of the relevant limitation period, the plaintiff in any such proceedings may, with the leave of the court under section 64 (1) (b), amend the originating process so as—
(b) to correct a mistake in the name of a party to the proceedings, whether or not the effect of the amendment is to substitute a new party, being a mistake that, in the court’s opinion, is neither misleading nor such as to cause reasonable doubt as to the identity of the person intended to be made a party, or
(3) Unless the court otherwise orders, an amendment made under this section is taken to have had effect as from the date on which the proceedings were commenced does not limit the powers of the court under section 64.
…
(5) This section has effect despite anything to the contrary in the Limitation Act 1969.
The relevant limitation periods are said to be governed by the Limitation Act 1969 (NSW). The relevant sections are:
14General
(1) An action on any of the following causes of action is not maintainable if brought after the expiration of a limitation period of six years running from the date on which the cause of action first accrues to the plaintiff or to a person through whom the plaintiff claims—
…
(b) a cause of action founded on tort, including a cause of action for damages for breach of statutory duty,
23Equitable relief
Sections 14, 16, 17, 18, 20 and 21 do not apply, except so far as they may be applied by analogy, to a cause of action for specific performance of a contract or for an injunction or for other equitable relief.
It is also helpful to advert to the statutory provisions under which the Applicants claim for relief in the substantive claim:
Conveyancing Act1919 (NSW)
111ADuties of mortgagees and charges in respect of sale price of land
(1) A mortgagee or chargee, in exercising a power of sale in respect of mortgaged or charged land, must take reasonable care to ensure that the land is sold for—
(a)if the land has an ascertainable market value when it is sold—not less than its market value, or
(b)in any other case—the best price that may reasonably be obtained in the circumstances.
(2) Subsection (1) applies to an agent appointed by a mortgagee or chargee to sell the mortgaged or charged land in the same way as it applies to a mortgagee or chargee exercising a power of sale in respect of mortgaged or charged land.
(3) Nothing in section 112(7) or 115(2) of this Act, or in section 58(1) of the Real Property Act 1900, affects the duty imposed by this section.
(4) The title of the purchaser cannot be challenged on the ground that the mortgagee or chargee has committed a breach of any duty imposed by this section, but a person who suffers loss or damage as a result of the breach of the duty has a remedy in damages against the mortgagee or chargee exercising the power of sale or selling the land.
(5) This section has effect despite any stipulation to the contrary.
(6) Nothing in this section affects the operation of any rule of law relating to the duty of the mortgagee or chargee to account to the mortgagor or chargor.
(7) This section applies to mortgages and charges whether made before or after the commencement of this section but only in relation to a sale arising as a consequence of a default occurring after the commencement of this section.
(8) This section extends to mortgages and charges under the Real Property Act 1900.
Corporations Act 2001 (Cth)
420AController’s duty of care in exercising power of sale
(1)In exercising a power of sale in respect of property of a corporation, a controller must take all reasonable care to sell the property for:
(a) if, when it is sold, it has a market value—not less than that market value; or
(b) otherwise—the best price that is reasonably obtainable, having regard to the circumstances existing when the property is sold.
(2) Nothing in subsection (1) limits the generality of anything in section 180, 181, 182, 183, and 184.
Submissions of the Applicants
Mr Bevan provided a written outline of submissions and also made oral submissions at the hearing of the application in proceeding.
Mr Bevan acknowledged that the expiry of the limitation period meant that r 220 of the CPR was of no help to the Applicants (as to which, see: r 242(3)). The application was thus, in substance, one for an amendment pursuant to r 503 of the CPR, or perhaps s 65(2) of the CPA(NSW).
The Applicants referred to and relied on the decision of Mossop AsJ (as his Honour then was) in Cooke v Rixon [2016] ACTSC 236 in which his Honour had analysed r 503 in the light of the Bridge Shipping decision. Mr Bevan also relied on the decision of the NSW Court of Appeal in Greenwood v Papademetri [2007] NSWCA 221 in which Campbell JA (Tobias JA agreeing) had carried out a similar analysis of the operation s 65(2).
In reliance on these decisions, Mr Bevan submitted that it was clear that the Applicants had intended to sue the receivers and managers of Kenoss and that there was no mistake in the identification of the class of the defendant. Rather, it was put in the written outline as follows:
14.… [FTI] was the Consultant engaged by BankWest to investigate Kenoss’ financial position and its employees were subsequently appointed as receivers and managers. Although (FTI) was mistakenly named as defendant the factual pleadings referred to the involvement of the employees. It was a mistake in the name of a party to the proceedings and it was not a mistake that was misleading.
15.… [FTI] was mistakenly named as a party instead of the employees and there was nothing misleading about this mistake and it did not cause any doubt as to the identity of the person intended to be made a party. Simply, [FTI] was mistakenly identified as the receiver and manager whereas the employees were the receivers and managers.
Mr Bevan submitted that the character of the mistake made by those acting for the Applicants was apparent from the pleadings.
He further submitted that there was unlikely to be any prejudice suffered by the Respondents because of the remaining monies which were retained from the time of the receivership.
Submissions of the Respondents
The Respondents also provided a written outline of submissions. Ms Roughley also made oral submissions providing detailed reference to the pleadings and the evidence. The Respondents put three broad arguments. These were:
(1)The true character of the application in proceeding has always been that of an application for joinder under r 220 of the CPR. The Applicants, having conceded that such an application must fail should not be permitted to alter their application so as to turn it into one under r 503 of the CPR or s 65(2) of the CPA(NSW).
(2)If the Applicants are permitted to alter their application, it should fail in any event. This is because the mistake which was made here was a mistake of law in believing that FTI could be sued as vicariously liable for the actions or omissions of its employees, Messrs Landrey and Adams, while they were carrying out their functions as receivers of Kenoss. In other words, it was not a mistake as to the “name or identity” of a party. Moreover, it was submitted, the Applicants failed to demonstrate that the mistake was genuine, or that it was not “misleading or likely to cause any reasonable doubt about the identity of the person... intended to be sued” (r 503 CPR)) or not “misleading nor such as to cause reasonable doubt as to the identity of the person intended to be made a party” (s 65(2)(b), CPA(NSW)).
(3)Finally, even if the Court was persuaded that the ground for enlivening the discretion to amend was made out, that discretion should not be exercised in this case having regard to the prejudice which would be suffered by Messrs Landrey and Adams by being joined after the expiry of the limitation period, and in circumstances where there were real doubts as to the recovery of costs against the Applicants should their substantive claim fail.
Having made the above general points, the primary focus of the Respondents’ submissions was the issue of whether the character of the mistake here was one which engaged the amendment power conferred by either r 503 of the CPR or s 65(2) of the CPA(NSW). The Respondents referred to the judgment of McHugh J (Brennan and Deane JJ agreeing) in Bridge Shipping, pointing out that his Honour had, by reference to the terms of the Statement of Claim and the evidence of the solicitor who had carriage of the matter for the plaintiff in that case, concluded that Bridge Shipping had at all material times intended to sue the owner of the vessel in question. The error in not suing the carrier (which was the party potentially liable) was not a mistake of the character referred to in the relevant Victorian analogue of r 503 of the CPR and s 65(2) of the CPA(NSW): see r 36.01 of the General Rules of Procedure in Civil Proceedings 1986 (Vic).
In this case, the terms of both the initial Statement of Claim and the ASOC, together with the contents of the affidavit evidence and the correspondence from the Applicants’ solicitor, clearly demonstrated that at all material times the Applicants had intended to sue FTI as the employer of Messrs Landrey and Adams. Contrary to the submission of the Applicants, there was no evidence to suggest that the Applicants or those acting for them intended to sue the receivers personally. In that sense, the circumstances here were indistinguishable from those in Bridge Shipping, where ultimately the plaintiff failed in the attempt to amend the claim to join the carrier.
Ms Roughley also submitted that the evidence failed to establish that there was a genuine mistake of the character required to enliven the discretion. Moreover, if the intent was to sue the receivers personally any reasonable person receiving the pleadings would have been misled. Such an intention could not be discerned. Indeed, the only intention which could be discerned from the pleadings was that the Applicants intended to sue FTI on the basis of its vicarious liability for Messrs Landrey and Adams.
The need for further submissions
In the course of considering the parties’ competing submissions, it occurred to me that the Applicants’ concession as to the expiry of the limitation period might not have been correct. Accordingly, on 6 September 2021, my Associate emailed the parties in the following terms:
I refer to the abovementioned matter.
The parties addressed the Court on 2 September 2021 on the common assumption that the relevant limitation period in relation to the claims made by the plaintiffs had expired. The Court, in the course of considering the submissions made by the parties, has formed a doubt as to whether the assumption is entirely correct.
The plaintiffs, in the Amended Statement of Claim, allege breaches of duty by reference to section 111A of the Conveyancing Act 1919 (NSW) and section 420A of the Corporations Act 2001 (Cth). The section 111A claim would appear to be a conventional claim for damages for breach of statutory duty, and thus governed by section 14(1)(b) of the Limitation Act 1969 (NSW). However, section 420A does not, in terms, refer to a right to recover damages. There is authority to suggest that the section does not itself give rise to a cause of action (see Condon v Australia and New Zealand Banking Group Ltd [2020] FCA 1674 at [69]).
It appears to be reasonably arguable that section 420A modifies the nature of the duty owed by the controller of a Corporation exercising a power of sale. The right of action and remedies available would thus remain essentially equitable. This distinction does not appear to have been appreciated by the pleader(s) of the original or amended statement of claim. Nevertheless, in assessing the substance of the matters, it may be necessary for the Court to consider the possibility that insofar as the applicants seek relief under rule 504 in relation to the cause of action picking up section 420A, the application is misconceived. That is because there may be no ‘relevant period of limitation’ in relation to that cause of action: cf Althaus v Australia Meat Holdings Pty Ltd [2007] 1 Qd R 493.
In the circumstances, the Court would be assisted by further submissions from the parties. The Court proposes to list the matter for mention and possible directions at 9.30 am on Thursday, 9 September 2021. Please advise as soon as possible if the suggested time/date is unsuitable.
On 9 September 2021, after hearing from the parties, I set a timetable for further written submissions as to the issues raised in the 6 September 2021 email. The Applicants filed and served submissions on 7 October 2021. The Respondents filed and served their response on 22 October 2021. The Applicants did not exercise their entitlement to file and serve submissions in reply.
The Applicants’ further submissions
The Applicants’ further submissions were made by Mr M Southwick of counsel. In those submissions, the Applicants adopted the proposition that s 420A did not create an independent cause of action, but rather, that it “enhanced and strengthened” the existing entitlement to equitable remedies. In that connection, reference was made to James v Australia and New Zealand Banking Group [2018] NSWCA 41; 331 FLR 231 (James v ANZ); Investec Bank (Australia) Ltd v Glodale Pty Ltd [2009] VSCA 97; 24 VR 617 (Investec) at [96]; Condon v Australia and New Zealand Banking Group Ltd [2020] FCA 1674 at [69]; and Florgale Uniforms Pty Ltd v Orders [2004] VSC 65; 11 VR 54 at [339]-[342].
However, the Applicants went further. It was submitted that s 111A of the Conveyancing Act (NSW) was in substance indistinguishable from s 420A of the Corporations Act. Section 111A should also be understood as a statutory provision expanding equitable rights, not as one creating a statutory cause of action.
In support of that argument, the Applicants referred to comments in Fortson Pty Ltd v Commonwealth Bank of Australia [2008] SASC 49; 100 SASR 162 and Investec equating the duty under s 420A with provisions in other States similar in terms to s 111A.
The Applicants also referred to comments in the dissenting judgment of White JA in AlmonaPty Ltd v Parklea Corporation Pty Ltd [2021] NSWCA 171 (Almona) in which her Honour, in deciding that she would have allowed the appeal against the dismissal of its claim by the appellant mortgagor, said at [380]:
380.In Commonwealth Bank of Australia v Hadfield (2001) 53 NSWLR 614; [2001] NSWCA 440, this court held that an account is the appropriate form of relief where a mortgagee is alleged to have sold the mortgaged property at an undervalue or otherwise in breach of its duty (at [41]). Whether the claim be properly characterised as one for equitable compensation or damages need not be determined now (Commonwealth Bank of Australia v Hadfield at [36]-[40], [45]-[46], [63]-[64]). On the inquiry on the taking of accounts it will be open to Almona to investigate the circumstances in which Wesco reduced its offer and to investigate whether $85.35 million was a true market price. It may be open to Almona to argue that even if $85.35 million were a fair market price, that did not represent the real value of the land (Potts v Miller (1940) 64 CLR 282 at 299-300) or the value of the land to it. Whether it would be entitled to compensation for any such additional value over the market price, where SAP was entitled to sell as mortgagee, could depend on whether Almona could have redeemed the mortgage if SAP had not been determined to sell to an associate. These are issues that could only be determined on an inquiry.
Noting that the decision in Almona is the subject of an application for special leave to appeal in the High Court of Australia, the Applicants draw support for their argument from the absence of any suggestion in the authorities that s 111A operated to restrict or qualify the equitable remedies otherwise available. It is also suggested, as I understand the argument, that because the measure of the damages or compensation available to a plaintiff under ss 111A and 420A is the same, both provisions should be seen as simply enhancing equitable rights.
The Applicants acknowledge that they will need to further amend the Statement of Claim to claim the appropriate equitable relief. They also say that they may need to “amend the claim with respect to s 111A subject to (the) court’s decision.”
The Respondents’ further submissions
The Respondents note that the further submissions made by the Applicants seek to advance claims in equity which are not articulated in the existing pleadings, nor in the proposed Further Amended Statement of Claim (FASOC) which is Annexure A to the affidavit of Ms Kelly. The current Amended Originating Claim states that the Applicants claim damages for “professional negligence” and “breach of statutory duty”. Moreover, the ASOC in terms pleads causes of action asserting two distinct breaches of statutory duty, being breaches of the duties arising under s 111A Conveyancing Act and s 420A Corporations Act respectively. The pleading does not refer to equitable duties in any part. Indeed, the relief claimed is damages. Again, there is no reference to equitable compensation or the taking of accounts. The same comments apply to the proposed FASOC.
Issue is taken with the proposition that s 111A enhances equitable rights, rather than confers a statutory cause of action. It is submitted that none of the authorities relied on by the Applicants support that argument.
The point is made that the Applicants have not sought to amend their application in proceeding to advance a new proposed FASOC which articulates the equitable cause of action relied upon, and the equitable relief sought. It is said that that failure should be fatal to the application.
It is also submitted that the Court lacks the power to make the order sought. That is because:
(a)the application to join the receivers (to make a claim in equity against them) is in substance a claim to include parties under r 220, not r 503 of the CPR; and
(b)in any event, even if the application was allowed it would be futile (having regard to r 242(3)) because of the limitation period by reference to s 23 of the Limitation Act 1969 (NSW) (LA(NSW)).
In relation to the latter submission, the Respondents say that the decisions in James v ANZ, Investec and Ultimate Property GroupPty Ltd v Lord [2004] NSWSC 114; 60 NSWLR 646 make it clear that the claim for breach of statutory duty (under s 111A) and the claim in equity (as modified by s 420A) are closely analogous. Section 14(1)(b) of the Limitation Act 1969 (NSW) applies a six-year limitation period to the breach of statutory duty claim. Section 23 requires the application of that six-year limitation period to the equitable claim by analogy, unless there is some ground raised to suggest that it would be unconscionable to do so. The Respondents rely on the decision in Gerace v Auzhair Supplies Pty Ltd [2014] NSWCA 181 (Gerace) in that regard.
There being no such grounds raised here, it is submitted that the application in proceeding must be dismissed.
Consideration
The parties accept that the substantive law to be applied in relation to the causes of action pleaded is that of NSW. That law includes the limitation law: see, s 57 Limitation Act 1965 (ACT) and see also, John Pfeiffer Pty Ltd v Rogerson [2000] HCA 36; 203 CLR 503 (Pfeiffer v Rogerson) and Windsurf Holdings Pty Ltd and Ors v Leonard [2009] NSWCA 6. However, the procedural rules applying to this matter are those of this Court, not those which would apply in the NSW Supreme Court: Pfeiffer v Rogerson at [99]. Even though the amendment power in a case such as this is contained in an Act in NSW, it seems to me that, in substance, the provision regulates a matter of practice and procedure. Accordingly, I conclude that the provisions governing the application before me are those under the CPR.
Rules 220 and 242
The combined effect of rr 220 and 242 of the CPR is that, in general, the joinder, or inclusion, of additional defendants can only operate from a date after the expiry of the limitation period(s) applicable to the claim(s) against those defendants. It is thus necessary to determine at the outset what limitation period, if any, applies in relation to the two causes of action which the Applicants seek to bring against Messrs Landrey and Adams.
In that regard, I should say that I do not accept the argument put on behalf of the Applicants in their further submissions that s 111A operates to merely modify and enhance the equitable duty owed by receivers under the general law. Bryson J in GE Capital Australia v Davis & Ors [2002] NSWSC 1146; 180 FLR 250 analysed the operation of s 420A in comparison with provisions such as s 111A (his Honour specifically referred to s 85 of the Property Law Act 1974 (Qld) at [42]-[56]). The key distinction which his Honour drew was the existence within s 85 of a provision expressly conferring a right to recover damages for the breach of the duty imposed under the section. Thus, s 85(3) provided:
85Duty of mortgagee or receiver as to sale price
…
(3) The title of the purchaser is not impeachable on the ground that the mortgagee has committed a breach of any duty imposed by this section, but a person damnified by the breach of duty has a remedy in damages against the mortgagee exercising the power of sale.
Bryson J explained at [47]:
…By providing for this remedy s.85 indicates the legislative intention as to the persons to whom the duty of a mortgagee created by subs.85(1) is owed. Section 420A contrasts strongly as it contains no express statement of remedies intended to be created, and no indication of the persons for whose benefit the controller must act as required, apart from the reference to the corporation property of which is sold. It contains no express indication whether or not a wider class of persons such as guarantors who have involved themselves contractually in the outcome without having any interest in the property of the corporation are intended to be given any protection or remedy.
It was this lack of a specific remedy in s 420A, or indeed the Corporations Act itself, which led Bryson J to conclude:
53 My view is that the requirement imposed on the controller by subs.420A(1) takes the place of, or it may be operates cumulatively to the obligation otherwise existing with the general law of a controller exercising power of sale in respect of property of a corporation. In so doing the section enhances the duty of the controller and the protection afforded to the corporation. This is achieved, and the apparent legislative intention is fulfilled without altering the remedies available to the corporation for breach of obligation in exercising the power of sale, and without altering the means available for obtaining remedies. Where real property subject to a mortgage has been sold and the mortgagor succeeds in establishing that there has been a sacrifice of the mortgagor’s interest in the exercise of the power of sale the mortgagor’s remedy is to be credited compensation when accounts are taken of the mortgage debt. Subsection 420A(1) alters this scheme by inserting a more stringent rule, but does not otherwise change the scheme.
I do not see the authorities referred to by Mr Southwick as supporting a conclusion different from that reached by Bryson J. Rather, it seems to me, the statements in those cases merely emphasise the practical similarity of the calculation of damages following proof of a breach of a statutory duty (such as s 85 in Queensland, or 111A in NSW) to the calculation of equitable compensation, which might be ordered after a breach of a controller’s breach of the equitable duty as modified by s 420A.
In my view, the analysis of Bryson J is compelling. It is supported by subsequent authority, including at appellate level: see James v ANZ per Leeming and Sackville JJA at [67]. I therefore accept that the cause of action which the Applicants wish to pursue against Messrs Landrey and Adams under s 111A of the Conveyancing Act is in the nature of a claim for breach of statutory duty. It follows that s 14(1)(b) of the Limitation Act 1969 (NSW) applies to impose a limitation period of six years in relation to that claim.
In relation to the potential equitable claim (referring to s 420A), I would not be minded to dismiss the Applicants’ application simply on the basis that the claim was not clearly pleaded as an equitable one, nor that the relief was not correctly identified. In order to achieve a just and efficient resolution of the dispute between the parties (as required by s 5A Court Procedures Act 2004 (ACT)), it is necessary, in my view, to analyse the substantive merits of the Applicants’ claim.
While it is true that there is no specific time limitation placed upon the equitable claim which the Applicants now propose to bring against Messrs Landrey and Adams, as the Respondents submit, the effect of s 23 of the Limitation Act 1969 (NSW) is to impose a limitation by analogy. In that regard, it seems to me that the words “limitation period applying to a person” in r 242(3) of the CPR should not be read strictly to comprehend only the situation where express provision is made for a particular cause of action – as is the case with the s 111A claim. The purpose of r 242(3) is plainly to prevent the injustice of a relevant limitation law being undermined by use of the joinder rule.
I conclude, therefore, that a limitation period applicable by analogy pursuant to s 23 Limitation Act 1969 (NSW) in relation to the proposed claim for equitable relief is, subject to what follows, a “limitation period applying” to each of Messrs Landrey and Adams.
This raises the question of whether there remains a discretion to suspend or extend the time bar, given that the cause of action here is truly one in equity. The issue was the subject of a detailed discussion in the judgment of Meagher JA (with whom Beazley P and Emmett JA agreed) in Gerace. In that matter, Brereton J at first instance was required to determine a claim by a company (through its liquidator) against former directors asserting breaches of the duties they owed to the company. The claim was brought both pursuant to the statutory provisions and under the general law by reference to the directors’ equitable duties to the company.
Section 1317K of the Corporations Act imposes a six-year limitation period from contravention in relation to the action for breach of the statutory duties. Brereton J declined to apply the same limitation period by analogy to the claimed breach of the directors’ equitable duties, notwithstanding that the content of those duties was essentially the same as those under the statute. His Honour held that much of the delay in the bringing of the claim was caused by the directors having caused it to be deregistered. By reference to the principles of laches, Brereton J formed the view that it would be “inequitable” to impose the time bar by analogy. It is important to note that it was not alleged that the directors had acted fraudulently or dishonestly in that case.
The appeal of the directors was successful. After a thorough review of the authorities, Meagher JA concluded:
[70]The authorities referred to above, and in particular R v McNeil, show that in purely equitable proceedings, where there is a corresponding remedy at law in respect of the same matter and that remedy is the subject of a statutory bar, equity will apply the bar by analogy unless there exists a ground which justifies its not doing so because reliance by the defendant on the statute would in the circumstances be unconscionable. They do not support the proposition that equity retains any broader discretion whether to apply the bar. The description of such a ground, or the conduct giving rise to or constituting it, as unconscionable or unconscientious leaves to be identified the principles according to which equity justifies that conclusion: Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd [2001] HCA 63; 208 CLR 199 at [45] (Gleeson CJ) and Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd [2003] HCA 18; 214 CLR 51 at [41]-[42] (Gummow and Hayne JJ).
[71] In applying the statute by analogy, equity gives effect to the maxim that it follows the law and acts on the basis that “laches is presumable in cases where it is positively declared at law”: Story’s Commentaries on Equity Jurisprudence, First English Edition, 1884, at [64a]. In doing so, it must be taken also to be giving effect to the legislature’s judgment in fixing the relevant limitation period and in allowing for any exceptions to its application. The considerations likely to inform that judgment are referred to by McHugh J in Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 552-4.
His Honour distinguished the doctrine of laches in the following paragraph:
[73]The doctrine of laches is directed to a broader and different question. That question is whether, as between the parties, it would be practically unjust to give relief which otherwise would be just. In answering that question, account is taken of the length of any delay, the nature of acts done during the period of that delay, whether the plaintiff had sufficient knowledge to justify the commencement of proceedings, whether there has been prejudice to the defendant or others and the nature of the relief claimed: see Lindsay Petroleum v Hurd at 239–40. That doctrine does not focus on circumstances that would justify not permitting the statute to be relied on because there has been fraud or mistake or misrepresentation or other conduct or circumstances against the consequences of which equity relieves.
Meagher JA found that in the absence of a suggestion of unconscionable conduct on the part of the directors, there was no basis for the exercise of the residual discretion to permit the equitable claim to proceed notwithstanding the time bar.
Application for special leave to appeal to the High Court was refused in Gerace. I also note the endorsement of the decision in Sze Tu v Lowe [2014] NSWCA 462; 89 NSWLR 317 (per Gleeson JA at [363]-[370], Meagher and Barrett JJA agreeing). I accept that the decision in Gerace governs the circumstances of this case.
While this Court might have a residual discretion to allow the equitable claim (as modified by s 420A) to proceed, as demonstrated in Gerace, that discretion is not at large. Indeed, it would be necessary for the Applicants here to at least assert facts suggesting unconscionable conduct on the part of Messrs Landrey and Adams which, for example, concealed from the Applicants the wrongdoing which they now wish to litigate. In such a case, it may well be enough for such facts to be pleaded so as to raise the issue: see Hewitt v Henderson [2006] WASCA 233 where Buss JA (Steytler P and Pullin JA agreeing) discussed the undesirability of attempting to determine, at an interlocutory stage, such matters as the date at which a limitation period in a claim for an accounting expired. His Honour said at [29]-[30]:
29.In Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514, Mason CJ, Dawson, Gaudron and McHugh JJ said emphatically, at 533:
“We should, however, state in the plainest of terms that we regard it as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question.”
That statement was referred to by Burchett AJ in Young v Waterways Authority of New South Wales [2002] NSWSC 612, in the context of a successful appeal against the decision of a Master who had struck out parts of a statement of claim on the ground that those parts pleaded a barred cause of action. After referring to Graf v Hope Building Corporation (1930) 171 NE 884 at 887, Williams and The Crown v McNeil (1922) 31 CLR 76 at 100, his Honour said, at [27]:
“These principles have only to be stated for it to be clear that their implementation involves the very kind of concern with the whole of the evidence which underlies the admonition delivered by the High Court in Wardley Australia Limited v Western Australia. An application of the statute by analogy could very rarely indeed lead to a summary dismissal of an action.
I agree, with respect, with those observations. An application which is or is analogous to a strike-out application will rarely be a satisfactory process for determining whether equity should apply a statutory limitation period by analogy.”
30.In the present case, the respondents have pleaded, relevantly, causes of action for breach of fiduciary duty and an account. The appellant's allegation that a limitation period should be applied by analogy would, in the ordinary course, be specifically pleaded in his defence. See O 20 r 9(1) of the Rules of the Supreme Court 1971 (WA). The respondents would then plead to that allegation in a reply. The plea in reply would include any facts which, on the respondents' contention, make it unconscionable for the appellant to invoke the limitation defence. The appellant has not (yet) sought to amend its defence to raise limitation issues. In my opinion, the application before the learned Judge was not a satisfactory process for determining, on a summary basis, whether the respondents' pleaded causes of action for breach of fiduciary duty and an account were hopelessly barred. That issue should be determined at trial on the pleadings and after all material facts have been found.
There is considerable force in his Honour’s admonition. However, the circumstances here are distinguishable. The simple fact is that the Applicants have not raised any issue of unconscionability which would engage the residual discretion as discussed in Gerace. This must have the result that, having regard to the close analogy between the cause of action under s 111A and that at equity (modified by s 420A), the six-year limitation applicable to the former under s 14 of the Limitation Act 1969 (NSW) should be applied to the latter for the purposes of rr 220 and 242(3) of the CPR. Having regard to the position adopted by the Respondents, it would clearly be futile to order the inclusion of Messrs Landrey and Adams as defendants: see Philip Morris Ltd v Bridge Shipping Pty Ltd [1994] 2 VR 1 at 9. Such an order would lead to the pleading of the limitation defence and the inevitable application for summary judgment.
It follows from the above analysis that unless r 503 provides an alternative means for achieving that which cannot be achieved under r 220, the application in proceeding must fail. In that regard, I accept that r 503 does provide a supplementary means for the inclusion of a party, even though such an outcome is not open under rr 220 and 242. That was the view taken by Higgins J (as he then was) in Klobucar v Neocoat Pty Limited [1999] ACTSC 96 at [43]-[46] and [56] in relation to the equivalent rules then applying in this Court: see also per McHugh J in Bridge Shipping in relation to the Victorian equivalent to r 503(2) at 260-261. It is therefore necessary to consider the arguments raised in relation to the relevant amendment rule. Having regard to my conclusion as to the limitation period applying the claims advanced by the Applicants that is r 503(2) rather than r 502: see r 502(6). I should say that in order to succeed under that rule, the Applicants would have to establish the necessary criteria for correcting the name of the defendant, as discussed below. That would, if successful, result in the substitution of Messrs Landrey and Adams for FTI.
Rule 503(2)
I reject the submission of the Respondents that the Applicants should not be permitted to shift their ground to turn what was a r 220 application into a r 503 application. While it is true that the application in proceeding, and the correspondence from Mr Bevan, does strongly suggest that the Applicants were approaching the application as one under r 220, it would be a triumph of form over substance to hold the Applicants to that view. It would almost certainly result in the Applicants bringing another application in proceeding and the Court having to determine the r 503 issue in any event. Having regard to s 5A of the Court Procedures Act 2004, it seems to me that the preferable approach here is to determine the r 503 question in the current application.
It is fair to say that the distinction between the type of mistake which enlivens the power given by a provision such as r 503 and one which does not suffice to enliven that power can be difficult to elucidate. The leading case is Bridge Shipping, and in particular the judgment of McHugh J. In Cooke v Rixon [2016] ACTSC 236, Mossop AsJ provides a useful summary of the factual background of Bridge Shipping. In relation to the former, I gratefully adopt his Honour’s summary which is in the following terms:
16.In order to resolve these submissions it is necessary to consider the decision in Bridge. In that case the plaintiff, a cigarette company, had engaged Bridge Shipping Proprietary Limited (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 selected carrier. The goods were transported on a vessel named “Green Sand”. The bills of lading did not name the carrier. Some of the tobacco went missing and some was damaged during transit. The tobacco company sued Bridge in the Supreme Court of Victoria. Bridge issued a third-party notice against Grand Shipping SA (Grand). That was the company identified on the Lloyd’s Register as the registered owner of the vessel that carried the tobacco. After the expiry of the limitation period, Bridge discovered that Grand had chartered the vessel to Rainbow Lines SA (Rainbow) and that Rainbow had been the carrier of the goods rather than Grand. Bridge applied under the relevant court rule to substitute Rainbow as a party for Grand. The relevant rules permitted a “mistake in the name of the party” to be corrected even if the effect was to substitute another person as a party. Where an order to correct a mistake was made, the proceeding was taken to have been commenced against that person on the day when the proceedings were commenced. As a consequence, an order made under the rule would have had the effect of avoiding the limitation problem facing Bridge which would have arisen if a joinder of Rainbow only took effect on the date of the order.
After explaining (in paragraphs [17]-[22]) why the decision in Bridge Shipping remains binding in relation to the operation of r 503 notwithstanding the slight differences in language of that rule compared with the Victorian rule in question before the High Court, Mossop AsJ went on to say:
23.Adopting the approach of McHugh J in Bridge, a person may make a mistake “in the name of a party” when either:
(a)the plaintiff can identify the person but, mistakenly believes that the person so identified bears a certain name; or
(b)when the plaintiff knows a person by a particular description, for example, the driver of a certain car, but the plaintiff is mistaken as to the name of the person who answers that description.
24.In each case the plaintiff knows the person intended to be sued by reference to some property or properties which is or are peculiar to that person, but is mistaken as to the name of the person. Those properties may be personal characteristics (the first category above) or the essence of the description of that person (the second category above).
25. In Bridge McHugh J said (at 260) that the rule covered identification by “inherent properties” as well as “certain properties which are true of it and no one else”. In both cases a mistake may arise because the person sued does not have or is not identified by some property or properties which are peculiar to the person intended to be sued and to no one else.
26. Having stated these propositions, McHugh J then analysed the particular intention of the defendant in that case and concluded that the defendant had intended to sue the owner of the vessel rather than the carrier of the goods. It had therefore sued the party that it intended to sue even though that involved the mistaken assumption that the owner was, in fact, the carrier. The mistake his Honour concluded was that the defendant believed that it had rights against the owner of the vessel, but that was not a mistake “in the name of a party”.
27. As demonstrated by McHugh J’s comment in Bridge at 261 as to his change of mind on the issue, it is in the application of the general principles to the evidence in the particular case that the real difficulties lie. Whether there has been a mistake in the name or identity of a party will depend upon the evidence as to precisely who was intended to be sued.
In my view, his Honour was correct to focus on the factual issue underpinning the mistake made by the party intending to commence the relevant court proceedings. That this is so is apparent from the analysis carried out by McHugh J in arriving in his ultimate conclusion in Bridge Shipping.
In Bridge Shipping under the heading “Did Bridge intend to sue the carrier?”, McHugh J said at 261-262:
Paragraph 3 of the statement of claim, which Bridge served with the third party notice, alleged that “Grand Shipping is and at all times material was the owner of the vessel ‘Green Sand’“. Paragraph 5 alleged that the bill of lading, issued in respect of the 32 containers of tobacco, “was issued on behalf of the authority of the Master of the said ship”. Paragraph 6 alleged that Grand owed to Bridge “in relation to the voyage in respect of which the bill was issued a duty” to make the ship seaworthy, to properly man and equip it and to make those parts of the ship carrying the cargo fit and safe for the “reception, carriage and preservation thereof”. Paragraph 7 alleged a further or alternative duty “to keep and care for the cargo and containers”.
My initial reaction to this statement of claim was that, despite its form, Bridge had impliedly intended to sue the carrier of the tobacco but was mistaken as to its name. But further thinking on the matter has caused me to change my mind. The conclusion that Bridge impliedly intended to sue the carrier is inconsistent with the terms of the statement of claim, with the inferences to be drawn from that document, and with the affidavit evidence of Bridge's solicitor seeking to explain the mistake.
If Bridge had intended to sue the carrier and had mistakenly believed that the name of the carrier was Grand, it would follow that Bridge had made a mistake “in the name of a party”. In The “Al Tawwab” (75), Lloyd LJ said:
“In one sense a plaintiff always intends to sue the person who is liable for the wrong which he has suffered. But the test cannot be as wide as that. Otherwise there could never be any doubt as to the person intended to be sued, and leave to amend would always be given. So there must be some narrower test. In Mitchell v Harris Engineering the identity of the person intended to be sued was the plaintiff's employers. In Evans v Charrington it was the current landlord. In Thistle Hotels v McAlpine (Court of Appeal, 6 April 1989, unreported) the identity of the person intending to sue was the proprietor of the hotel. In The “Joanna Borchard” [1988] 2 Lloyd's Rep 274 it was the cargo-owner or consignee. In all these cases it was possible to identify the intending plaintiff or intended defendant by reference to a description which was more or less specific to the particular case. Thus if, in the case of an intended defendant, the plaintiff gets the right description but the wrong name, there is unlikely to be any doubt as to the identity of the person intended to be sued. But if he gets the wrong description, it will be otherwise.”
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 is 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".
Bridge made no mistake as to description of the party which it wished to sue. It intended to sue the owner and 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 present case is different, therefore, from Lloyd Steel where Clarke J accepted that the plaintiff's solicitor had “instituted the proceedings because he believed, as a result of his searches of the [Lloyd's] Register, that the first named defendant in each case was the carrier”: (1985) 1 NSWLR at 217. 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”.
The high point of the Applicants’ claim for relief under r 503 arises from paragraph 9 of the original Statement of Claim, where it was pleaded that FTI was “engaged to act as receiver” in relation to Kenoss. If there was no other pleading, or evidence, that pleading would strongly suggest that the Applicants intended to sue the receiver but made a mistake as to the name of the party (or parties) having that description. If that was correct, the amendment power under r 503(2) would be engaged.
However, as Ms Roughley pointed out, the pleadings taken as a whole, and the content of the affidavit evidence and the relevant correspondence, point to a different conclusion as to the intention of the Applicants. Thus, the pleading at paragraph 46 of the original Statement of Claim makes it apparent that those drafting the claim were well aware of the reality that Messrs Landrey and Adams had been appointed, jointly and severally, as the receivers of Kenoss in relation to the Kings Highway property. Although the Statement of Claim does not specifically plead that FTI is sued on the basis that it was vicariously liable for the acts and omissions of Messrs Landrey and Adams, it is difficult to see any other basis on which, having knowledge of the matters pleaded in paragraph 46, the pleader would assert that FTI was legally responsible for breaches of duty as pleaded.
That the Applicants intended to sue FTI on the basis of vicarious liability was, it seems to me, put beyond doubt by the amendments made to the Statement of Claim in November 2020. The pleading that at all material times Messrs Landrey and Adams were “principals and/or employees” of FTI can only have been designed, in all of the circumstances, to found a claim based upon vicarious liability. This was confirmed in the affidavit of Ms Kelly. Ms Kelly is a solicitor at Bevan & Co who had particular knowledge of these proceedings. At paragraph 4 and 5 in the course of explaining the background to the November 2020 amendments, she stated:
4. Mr and Mrs Brendas agreed to amending the Claim and on 13 November 2020 Bevan&Co filed a Notice of Acting together with an emended claim. The amendments removed the first, second, fourth and fifth defendant and only left the third defendant. Apart from removing four defendants and the inclusion of an additional claim under s111A(2) of the Conveyancing Act 1919 (NSW) there was little alteration to the original Claim. The plaintiffs relied upon the original pleadings that asserted Mr Adams and Mr Landrey, carried out their duties as Receivers and Managers while employed by the third defendant and the third defendant was vicariously liable for the actions of its employees,
5.The current Claim alleges Mr Adams and Mr Landrey sold the Bungendore property undervalue and as they were employees of the third defendant it is vicariously liable.
I am satisfied that at all material times those acting on behalf of the Applicants did intend to commence proceedings against FTI on the basis that it was vicariously liable for the actions and/or omissions of Messrs Landrey and Adams in the course of the Kenoss receivership. The defence asserts that Messrs Landrey and Adams were appointed personally and denies that FTI was liable. It is implicit in the defence that the FTI’s case is that it denies that it could have been vicariously liable given that the receivers were appointed, and acted, as receivers in their personal capacities. If FTI is successful in its defence the mistake made by the Applicants will have been, as in Bridge Shipping, a mistaken belief that they had rights against FTI as the employer, or perhaps principal, of the individuals who were appointed as receivers. As the Respondents submitted, such a mistake would be one of law as to the liability of FTI, not a mistake as to the name or identity of a party.
Having regard to that conclusion, the application must fail. I should say, for completeness, that I am not satisfied that there was a genuine mistake of the relevant kind made here. That is not to suggest that those responsible for the pleading of the Applicants’ claim were not genuine in their belief that FTI was potentially liable as a matter law. It seems to me that the reference to “genuine mistake” in r 503(2)(b)(i) is a reference to a real and honest mistake as to the name or identity of a party. It follows from my conclusion at [82] that I could not be satisfied as to r 503(2)(b)(i).
Similarly, in relation to r 503(2)(b)(ii), I accept the submission of the Respondents that if indeed the Applicants sought to sue the receivers as individuals both the original and amended Statement of Claims were misleading, and likely to cause reasonable doubt about the person intended to be sued. Both pleadings suggested that the Applicants intended to sue FTI as the party legally responsible for any relevant breaches of duty in the receivership.
Having reached the above conclusions, the occasion does not arise to consider the discretionary issues which would have to be addressed had I found that there was a mistake in the name or identity of a party which satisfied the requirements of r 503(2)(b).
Conclusion
The Applicants have failed to establish the basis for an order under either r 220 or 503(2) of the CPR. As a consequence, the application in proceeding must be dismissed.
Orders
The orders of the Court are:
(1) The application in proceeding dated 9 July 2021 is dismissed.
(2) Subject to order (3), the Applicants pay the Respondents’ costs of the application.
(3) If any party notifies my Associate in writing on or before 5:00 pm on 26 November 2021 that the party seeks an order different from order (2), that order will be suspended until further order.
| I certify that the preceding eighty-seven [87] numbered paragraphs are a true copy of the Reasons Judgment of his Honour Acting Justice Crowe. Associate: A Arnott Date: |
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