Century Insurance Ltd (in provisional liq) & Ors v The New Zealand Guardian Trust Ltd & Ors The New Zealand Guardian Trust Ltd & Anor v Gunson, David
[1998] FCA 623
•3 JUNE 1998
FEDERAL COURT OF AUSTRALIA
PRACTICE AND PROCEDURE - cross-claim - settlement of principal proceedings - amendment of cross-claim to reflect settlement - global settlement involving a related claim - whether new cross-claim requiring specific leave under Order 8 - jurisdiction - limitations - pleadings points - previously addressed - utility of interlocutory applications.
CENTURY INSURANCE LIMITED (IN PROVISIONAL LIQUIDATION), EDWARD JOHN BEBBINGTON AND DELORES EDNA BEBBINGTON v THE NEW ZEALAND GUARDIAN TRUST LIMITED, NZI INTERNATIONAL TRUSTEE COMPANY LIMITED and DONALD ANDREW DAVIES
THE NEW ZEALAND GUARDIAN TRUST LIMITED, NZI INTERNATIONAL TRUSTEE COMPANY LIMITED v DAVID GUNSON
WAG No. 81 of 1995
FRENCH J
PERTH
3 JUNE 1998
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
WAG 81 of 1995
BETWEEN:
CENTURY INSURANCE LIMITED (IN PROVISIONAL LIQUIDATION)
FIRST APPLICANT
EDWARD JOHN BEBBINGTON AND DELORES EDNA BEBBINGTON
SECOND APPLICANTS
AND:
THE NEW ZEALAND GUARDIAN TRUST LIMITED
FIRST RESPONDENT
NZI INTERNATIONAL TRUSTEE COMPANY LIMITED
SECOND RESPONDENT
DONALD ANDREW DAVIES
THIRD RESPONDENT
THE NEW ZEALAND GUARDIAN TRUST LIMITED
FIRST CROSS-CLAIMANT
NZI INTERNATIONAL TRUSTEE COMPANY LIMITED
SECOND CROSS CLAIMANT
DAVID GUNSON
CROSS RESPONDENT
JUDGE:
FRENCH J
DATE OF ORDER:
3 JUNE 1998
WHERE MADE:
PERTH
THE COURT ORDERS THAT:
The Cross Respondent’s motion filed 7 May 1998 is dismissed.
The Cross Respondent to pay the Cross-Claimants’ costs of the motion.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
WAG 81 of 1995
BETWEEN:
CENTURY INSURANCE LIMITED (IN PROVISIONAL LIQUIDATION)
FIRST APPLICANT
EDWARD JOHN BEBBINGTON AND DELORES EDNA BEBBINGTON
SECOND APPLICANTS
AND:
THE NEW ZEALAND GUARDIAN TRUST LIMITED
FIRST RESPONDENT
NZI INTERNATIONAL TRUSTEE COMPANY LIMITED
SECOND RESPONDENT
DONALD ANDREW DAVIES
THIRD RESPONDENT
THE NEW ZEALAND GUARDIAN TRUST LIMITED
FIRST CROSS CLAIMANT
NZI INTERNATIONAL TRUSTEE COMPANY LIMITED
SECOND CROSS CLAIMANT
DAVID GUNSON
CROSS RESPONDENT
JUDGE:
FRENCH J
DATE:
3 JUNE 1998
PLACE:
PERTH
REASONS FOR JUDGMENT ON FURTHER MOTION TO DISMISS
FURTHER AMENDED CROSS CLAIM
This action arises out of the payment of monies by investors purchasing bonds called “Century Insurance Bonds”. The monies in question were paid to New Zealand Guardian Trust Limited (NZGT) and NZI International Trustee Company Limited (NZIIT) by Century Insurance Limited (Century) through its agent, Quenward Pty Ltd (Quenward). The principal action was brought by Century and certain investors. Payments of monies to third parties by NZGT at the direction of NZIIT were said to have constituted breaches of trust by NZGT in which NZIIT participated. NZGT was also said to have acted negligently in making the payments without adequate inquiry. Donald Davies, an officer of Century, was said to have breached his fiduciary obligations to that company by causing NZGT to pay monies subscribed to Century out of its account to third parties. NZGT is said to have participated in those breaches.
Premium monies were also said to have been paid direct to NZIIT by Quenward to hold for Century. Payment out of such monies at the direction of Davies and Mr David Gunson, the Cross Respondent, were said to have been made negligently on the part of Davies and NZIIT and to have constituted a breach of fiduciary duty by Davies in which NZIIT participated.
The relief claimed in the principal proceedings was equitable compensation and damages for breach of contract and negligence.
NZGT and NZIIT cross claimed against Gunson saying that if either of them were to be held liable to Century and/or the other applicants they would claim as against Gunson to be entitled to damages for negligent representation and/or breach of warranty of authority and an indemnity or contribution against the claims of the applicants.
In the event the principal proceedings were discontinued pursuant to a settlement which also involved two related actions by other bondholders.
On 14 August 1997, Gunson filed a motion seeking to dismiss the cross-claim against him by NZGT and NZIIT. His attack upon the cross-claim was largely based upon the proposition that, with the discontinuance of the principal application upon its settlement, there was no liability enforceable against NZGT and NZIIT which would bring their cross-claims within the jurisdiction of the court under O 8 r 1(1)(d).
It was also submitted that the Court had become an inappropriate forum for the resolution of the cross-claim on the basis that all parties to it were residing outside the jurisdiction of the Court and did so at all material times.
These submissions were rejected and the motion dismissed on 2 October 1997. In dismissing the motion I observed that the statement of cross-claim, as then pleaded, could not stand because it had been overtaken by the settlement of the principal claims.
NZGT and NZIIT were given leave to amend the cross-claim on 16 October 1997. A further reamended cross-claim was filed on that day.
On 3 March 1998, at a directions hearing, I ordered, inter alia, that each party provide a list of topics for consideration at a case management conference on or before 13 April 1998.
This elicited from Gunson a list of “Preliminary Issues to be Determined” which was filed on 9 April. No order for the separate hearing of any aspect of the case as a preliminary issue had been made. Nevertheless, at the case management conference it was ordered that Gunson file and serve any motion to dismiss the cross-claim or strike out any part of the pleadings or both on or before 29 April 1998 together with written submissions in support of the motion. Consequential directions were made for the filing of submissions by NZGT and NZIIT, further amendments of the cross-claim and the filing of any consequentially amended defence. The ruling on the motion was to be delivered on 2 June 1998 at 2.15pm but the time for that ruling was altered to 3 June 1998 at 10.15am.
The motion to dismiss the cross-claim was filed on 7 May 1998. The grounds for dismissal were expressed to be lack of jurisdiction and abuse of process by reason of the Court being an inappropriate forum. Orders for the striking out of the pleadings were also sought on the basis that no reasonable cause of action was disclosed and that the pleadings tended to cause prejudice and embarrassment.
The statement of claim as further amended refers to the primary proceedings as the First Action and to the related claims against NZGT and NZIIT as the Second and Third Actions respectively. It is said the three actions were settled together for a net settlement sum of $1,875,000. The applicants in the three claims released NZGT and NZIIT from all their claims and discontinued the actions with no orders as to costs. Another party, Errichetti Holdings Pty Ltd, which is alleged to have been entitled to be joined as an applicant in the Third Action, also gave a release.
NZGT and NZIIT now say that the applicants would have been successful in the three actions if they had gone to trial. In particular, they say that to succeed in their defence to the applicants’ claims they would have had to show that they acted on instructions of Gunson and Davies and were entitled to do so. It is then said in the further amended cross-claim that the Court would have concluded that:
(i)at some point in their course of dealings with Gunson and Davies and no later than 30 June 1990 NZGT and NZIIT were under an obligation to make reasonable inquiries as to Gunson’s and Davies’ authority;
(ii)at the point that NZGT and NZIIT were put on inquiry they should have refused to make the payments requested by Gunson and Davies out of the bank accounts referred to in the applicants’ statements of claim (the “first account” and the “second account”);
(iii)payments made from the first account and the second account after 30 June 1990 totalled $1.25 million;
(iv)if the payments had not been made the applicants would have recovered the funds standing in the accounts; and
(v)the applicants were entitled to damages in the form of compound interest on the funds wrongfully paid from the first account and the second account, or alternatively, interest under the Federal Court Act.
It is further pleaded that the actions of NZGT and NZIIT in settling the applicants’ claims in the three actions for the settlement sum were reasonable having regard to what the Court would have concluded, the aggregate of the claims inclusive of interest, being approximately $3.623 million, and the claim of Errichetti Holdings Pty Ltd which would have amounted to $372,000 if that company had been joined in the Third Action.
NZGT and NZIIT claim against Gunson an indemnity for or a contribution towards the amount of the settlement sum in respect of the claims of the applicants in the main actions and the costs of NZGT and NZIIT in defending the actions and the costs of this cross-claim.
The pleadings to which I have just referred relating to the settlement of the three actions, the likely success of the applicants, had the cases proceeded to trial, and the reasonableness of the settlement are the substantial changes to the cross-claim wrought by the authorised amendments.
Having read the strike out motion and associated submissions I am of the view that no further time or energy should be wasted on interlocutory skirmishes and that the matter should proceed to trial.
Gunson’s attack upon the further re-amended statement of cross-claim is based upon certain broad propositions elaborated at greater length in the written submissions.
First, it is submitted that the amendments in effect have introduced new cross-claims by pleading reliance upon the settlement of the Second and Third Actions as well as the First. There was, it was said, never any application made under O 8 of the Federal Court Rules for leave to serve a cross-claim out of the jurisdiction in or in respect of the Second or Third Action. In truth it is said the amended cross-claim is a new action altogether and should have been initiated as such.
In my opinion, however, the amended cross-claim in substance deals with the same controversy as its predecessor albeit it is widened in scope to pick up the liability of NZGT and NZIIT to the various bond holders who brought the Second and Third Actions. Once the original cross-claim is properly before the Court and subject, as I have already found, to amendment to take into account the settlement of the First Action, the pleaded reliance upon the global settlement of all the actions does not require a further order under O 8 of the Federal Court Rules. The distinctions sought to be drawn in this respect by Gunson would import a degree of artificiality and inefficiency into the management of these proceedings in the Court.
The second point taken by Gunson goes to jurisdiction. There is, it is said, no federal matter in issue between NZGT, NZIIT and Gunson and with the place of the torts alleged against Gunson being, he submits, in Hong Kong or New Zealand, there is no matter of state law arising under the common law or statute over which the Federal Court could have jurisdiction by cross vesting. On this basis it is said that the Federal Court does not have jurisdiction to entertain the amended cross-claim. However as counsel for NZGT and NZIIT has submitted, the Court has on two occasions now held it has jurisdiction over the cross-claim and that there is nothing in the amended cross-claim which requires the Court to reconsider that question. As was submitted for NZGT and NZIIT, if reference to the Second and Third Actions introduces new causes of action they are identical to those pleaded in the cross-claim in respect of the first action and there is nothing in the amendments which requires the Court to reconsider the issue of jurisdiction. Moreover, it would appear that on the face of the further amended cross-claim the relevant loss or damage claimed was incurred, by reason of the settlement of the First, Second and Third Actions, within the Commonwealth.
The third point taken by Gunson is that the fullness of the amended cross-claim and the particulars accompanying it demonstrate the Federal Court to be clearly an inappropriate forum. He submits that the law to be applied is the law of the place where the wrong was committed, that is where the cause of action arose which is Hong Kong or New Zealand law. NZGT and NZIIT, it is said, have no legitimate personal or juridical advantage in proceeding in the Federal Court rather than in the Hong Kong or New Zealand courts.
This submission revisits earlier contentions before me as to the inappropriateness of the Court. As I said in my ruling on 2 October 1997 that matter has already been dealt with by Lee J and should not now be revisited because of the settlement of the principal proceedings.
Gunson goes on to raise questions of limitation in respect of some aspects of the cross-claim. In my opinion, the limitation issues, if they arise, can be dealt with when all the evidence is in and the relevant facts ascertained. There is no advantage in dealing with those issues in the way that they are said to arise at this time.
The balance of the points taken by Gunson are pleading points. It is submitted that the cross-claim as amended “is now in no state to clearly identify the issues to be tried”. Reliance is placed inter alia upon the “preliminary issues to be determined” which were filed on 9 April 1998.
First it is said no reasonable cause of action is shown in respect of the inclusion of the reference to Errichetti Holdings Pty Ltd. In my opinion, however, the position is clear enough. As the submissions for NZGT and NZIIT put it the reference in the cross-claim to Errichetti Holdings Pty Ltd is merely an additional matter relevant to the reasonableness of the settlement of the First, Second and Third Actions. No new cause of action is sought to be created by that reference.
Gunson further submits there are now eight different dates with which he has been provided in particulars, when it is said that NZGT and NZIIT admit circumstances gave rise to an obligation to inquire and that they should have inquired into requests made by Gunson for payments out of the accounts. These admissions, it is said, are presently the basis for the pleaded settlement, $1.25 million being said to have been wrongfully paid out after 30 June 1990. However it is submitted that on the admissions made by NZGT and NZIIT wrongful payments were made at least after 31 May 1990 and possibly from the very first payment on 9 April 1990 onwards. Payments out of the Second Account are admitted, it is said, to have been wrongly made on NZGT and NZIIT’s own wrong doing and not on any wrong doing by the cross respondent. These matters and the other matters complained of in the balance of the motion do not, in my opinion, justify the strike out of the pleadings. The fact is that for the most part they have been pleaded well prior to the amended cross-claim now complained of and remain substantially unamended in that document. These arguments can be addressed in the light of the evidence at trial.
I should note that the assertion is made that there are references to fraud and fraudulent misappropriation in the particulars in paragraphs 21(c) and 25(b)(i) which insinuate dishonest conduct by unnamed persons. The particulars in question are in fact asserting duties owed by NZGT and NZIIT. No cause of action in fraud is raised. I do not think there is any basis for asserting that there is an insinuation. It may be that in certain respects the particulars are superfluous but I do not propose to embark upon any paste and cut exercise on that basis.
As I have said in my opinion this matter should now move to trial.
I certify that this and the preceding seven (7) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice French
Associate:
Dated: 3 June 1998
Counsel for the First and Second Cross Claimant: Mr R. Ainslie and Mr Duncan Solicitor for the First and Second Cross Claimant: Mallesons Stephen Jaques Counsel for the Cross Respondent: Mr R. I. Viner QC and Mr E. Nielsen Solicitor for the Cross Respondent: Nielsen & Co Dates of Submissions: 30 April, 15 May, 21 May 1998 Date of Judgment: 3 June 1998
0
0
0