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

[1997] FCA 925

C A T C H W O R D S
PRACTICE AND PROCEDURE - pleadings - claims for negligent misrepresentation - claims for breach of warranty of authority - latter claims merely negligent misrepresentation claims in different language - false separate issue - pleading embarrassing - pleading part struck out with leave to amend - no question of principal.

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 and NZI INTERNATIONAL TRUSTEE COMPANY LIMITED v. DAVID GUNSON
WAG 81 OF 1995

FRENCH J.
PERTH
13 JUNE 1997

IN THE FEDERAL COURT       )
OF AUSTRALIA  )
WESTERN AUSTRALIA           )
DISTRICT REGISTRY               )
GENERAL DIVISION               )  No. WAG 81 of 1995

B E T W E E N:  CENTURY INSURANCE LIMITED
  (IN PROVISIONAL LIQUIDATION)

First Applicant

EDWARD JOHN BEBBINGTON and
  DELORES EDNA BEBBINGTON

Second Applicants

THE NEW ZEALAND GUARDIAN
  TRUST LIMITED

First Respondent

NZI INTERNATIONAL TRUSTEE
  COMPANY LIMITED

Second Respondent

DONALD ANDREW DAVIES

Third Respondent

and

THE NEW ZEALAND GUARDIAN
  TRUST LIMITED

First Cross Claimant

and

NZI INTERNATIONAL TRUSTEE
  COMPANY LIMITED

Second Cross Claimant

and

DAVID GUNSON

Cross Respondent

MINUTE OF ORDER

JUDGE MAKING ORDER:      FRENCH J.
DATE OF ORDER:  13 JUNE 1997
WHERE MADE:  PERTH

THE COURT ORDERS THAT:

1. Paragraphs 27 to 29A of the Statement of Cross Claim are struck out.

2. Leave to the Cross Claimants to amend their Statement of Cross Claim consequentially and in relation to the claim for indemnity and contribution.

3. Submissions on the question of costs at the next directons hearing.

   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               )
GENERAL DIVISION               )  No. WAG 81 of 1995

B E T W E E N:  CENTURY INSURANCE LIMITED
  (IN PROVISIONAL LIQUIDATION)

First Applicant

EDWARD JOHN BEBBINGTON and
  DELORES EDNA BEBBINGTON

Second Applicants

THE NEW ZEALAND GUARDIAN
  TRUST LIMITED

First Respondent

NZI INTERNATIONAL TRUSTEE
  COMPANY LIMITED

Second Respondent

DONALD ANDREW DAVIES

Third Respondent

and

THE NEW ZEALAND GUARDIAN
  TRUST LIMITED

First Cross Claimant

and

NZI INTERNATIONAL TRUSTEE
  COMPANY LIMITED

Second Cross Claimant

and

DAVID GUNSON

Cross Respondent

CORAM:   FRENCH J.
DATE:    13 June 1997
PLACE:   PERTH       

REASONS FOR JUDGMENT ON MOTION TO STRIKE OUT CROSS CLAIM

The nature of these proceedings and the allegations raised by the Applicants have already been set out by Lee J in his judgment of 16 May 1996 dismissing a motion to set aside an order for leave to serve originating process outside Australia.  It is unnecessary to repeat the detail of his Honour's summary here.

The primary claim concerns moneys paid to the First and Second Respondents by the First Applicant through its agent, Quenward Pty Ltd.  The moneys in question were "premium moneys" paid by investors in bonds designated "Century Insurance Bonds".  Alleged payments of those moneys to third parties by the First Respondent at the direction of the Second Respondent are said to have constituted breaches of trust by the First Respondent in which the Second Respondent participated.  The First Respondent is also said to have acted negligently in making the payments without adequate inquiry.

The Third Respondent, an officer of the First Applicant, is said to have breached his fiduciary obligations to the First Applicant by causing the First Respondent to pay moneys subscribed to the First Applicant out of its account to third parties.  These are breaches in which the First Respondent is said to have participated. 

Premium moneys are also said to have been paid directly to the Second Respondent by Quenward to hold for the First Applicant.  Payments out of such moneys at the direction of the Third Respondent and Mr David Gunson, the Cross Respondent, are said to have been made negligently on the part of Davies and the Second Respondent and to have constituted a breach of fiduciary duty by Davies in which the Second Respondent participated.

The relief claimed is by way of equitable compensation and damages for breach of contract and negligence.

By their amended cross claim, the First and Second Respondents say that if either of them is held to be liable to the First Applicant and/or the Second Applicants then they claim as against the Cross Respondent to be entitled to damages for negligent misrepresentations and/or breach of warranty of authority and an indemnity or contribution against the claims of the Applicants. 

The cross claim alleges that the Cross Respondent was at all material times the legal advisor to and representative of the First Applicant.  In the course of negotiations about the custody arrangements in relation to the moneys subscribed to the First Applicant, the Cross Respondent is said to have made a number of representations which are set out in paragraph 20 of the cross claim.  These are said to have been made expressly and, in the alternative, impliedly.  They include representations that:

"(b)the First Cross-claimant's Instructions, the Second Cross-claimant's Instructions and the Third Respondent's Instructions were the instructions of the first applicant on paying money out of the First Account and the Second Account;

(c)he was authorised to give the First Cross- claimant's Instructions and the Second Cross-claimant's Instructions  on behalf of the first applicant;

(d)the third respondent was the beneficial owner and directing mind of the first applicant;"

The Cross Claimants are said to have acted upon the Cross Respondent's representations which, it is said, were false in various respects which are pleaded in paragraph 24.  These include:

"(b)the cross-respondent was not authorised to give the First cross-claimant's Instructions and the Second Cross-claimant's Instructions on behalf of the First applicant;

(c)the third respondent was not authorised to give the Third Respondent's Instructions on behalf of the first applicant;

(d)the third respondent was not authorised to give instructions on behalf of the first applicant to the cross-respondent regarding the First Cross-claimant's Instructions and the Second Cross-claimant's instructions;"

The representations are said in paragraphs 25 and 26 to have been made negligently in breach of a duty of care owed by the Cross Respondent to the First and Second Cross Claimants to ensure that the representations were true.

Paragraph 27 then sets  up a plea in the alternative to paragraphs 25 and 26 asserting that by making the pleaded representations, the Cross Respondent impliedly warranted:

"(a)he was authorised to give the First Cross-claimant's Instructions and the Second Cross-claimant's Instructions on behalf of the first applicant;

(b)the third respondent was authorised to give the Third Respondent's Instructions on behalf of the first applicant;

(c)the payments to be made out of the First Account and the Second Account accordingly (sic) to the directions contained in the First Cross-claimant's Instructions, the Second Cross-claimant's Instructions and the Third Respondent's instructions were for bona fide purposes connected with the first applicant's business;

(d)the First Cross-claimant's Instructions, the Second Cross-claimant's Instructions and the Third Respondent's Instructions were the first applicant's instructions on the payment of money out of the First Account and the Second Account."

Paragraph 27A then pleads that the Cross Respondent owed the First and Second Cross Claimants a duty to exercise care to ensure that the warranties given by him and pleaded in paragraph 27 were true.  The warranties are said to have been false and in paragraph 29A it is said the Cross Respondent was negligent in failing to make sufficient and appropriate inquiries to ensure that the warranties were true.

As can be seen the plea which relates to so called "breach of warranty of authority" is in truth a plea of negligent misrepresentation which raises virtually the same issues as those raised in paragraphs 25 and 26.  In my opinion this part of the plea should be struck out as embarrassing because it creates the impression of a separate issue when in fact it is a plea of implied representations in much the same or substantially the same form as those relied upon to support the claim of negligent misrepresentation in paragraphs 25 and 26.  If there is any aspect of the implied representations which is not covered in paragraph 20 as presently pleaded, then there can be leave to amend that paragraph to pick it up.  In my view however, paragraphs 27 to 29A should be struck out as embarrassing.

In relation to the claim for damages, the claim for damages for breach of warranty of authority is in truth an element of the claim for damages for negligent misrepresentation and should not stand as a separate head of relief. 

In relation to the claim for indemnity or contribution, counsel for the Cross Claimants accepted that it is necessary to indicate that the claim is made on the basis that the Cross Respondent is a joint tort-feasor with the Cross Claimants, a contention which must rest upon the contingency that they are shown to be liable in negligence.  I will not, at this stage, strike out any aspect of the relief claimed or the statement of claim on that point but give leave to counsel to amend to clarify the basis upon which the contribution and indemnity is claimed.

As to the other complaints made of the cross claim, I am not satisfied that they merit any further intervention from the Court.  My orders will therefore be confined to the issues raised in relation to the claim for breach of warranty of authority and the relief claimed by way of indemnity and contribution on the basis of the Cross Respondent's alleged status as joint tort-feasor with the Cross Claimants.

I certify that this and the preceding
  five (5) pages are a true copy of the
  Reasons for Judgment of his Honour
  Justice French:

Associate:
  Date:

Counsel for the Cross Respondent: Mr I. Viner QC with Mr E. Nielson
Solicitors for the Cross Respondent: Nielson & Co.

Counsel for the Cross Claimants: Mr M. Corboy
Solicitors for the Cross Claimants: Mallesons Stephen Jaques

Date of Hearing: 6 June 1997
Date of Judgment: 13 June 1997