Century Insurance Ltd (in provisional liq) v The New Zealand Guardian Trust Ltd
[1997] FCA 1485
•26 FEBRUARY 1997
FEDERAL COURT OF AUSTRALIA
PRACTICE AND PROCEDURE - application to set aside order granting leave to serve cross-claim outside of Australia - whether it is clearly arguable on material presented that there will be facts proven in the case, capable of supporting a proceeding of the character described in O 8 r 1 of the Federal Court Rules.
Federal Court Rules, O 9 r 7, O 8 rr 1a, 1(ac), 1(d), 2(2)
Fair Trading Act 1987 (NSW), s 42
Century Insurance Limited (In Provisional Liquidation) v New Zealand Guardian Trust Limited (Federal Court Of Australia, Lee J, 16 May 1996, unreported) cited
Voth v Manildra Flour Mills Proprietary Limited (1990) 171 CLR 538 applied
Vitkovice Horni A Hutni Tezirstvo v Korner [1951] AC 869 applied
Diamond v Bank Of London and Montreal Limited [1979] 1 QB 333 applied
State Of Western Australia v Bond Corporation Holdings Limited (Federal Court Of Australia, French J, 19 June 1992, unreported) applied
Tycoon Holdings Ltd v Trencor Jetco Inc (1992) 34 FCR 31 applied
CENTURY INSURANCE LIMITED (IN PROVISIONAL LIQUIDATION) AND ANOR v THE NEW ZEALAND GUARDIAN TRUST LIMITED AND ORS
WAG 81 of 1995
LEE J
PERTH
26 FEBRUARY 1997
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAG 81 of 1995
BETWEEN:
CENTURY INSURANCE LIMITED (IN PROVISIONAL LIQUIDATION)
First ApplicantEDWARD JOHN BEBBINGTON AND DELORES EDNA BEBBINGTON
Second ApplicantsAND:
THE NEW ZEALAND GUARDIAN TRUST LIMITED
First RespondentNZI INTERNATIONAL TRUSTEE COMPANY LIMITED
Second RespondentDONALD ANDREW DAVIS
Third RespondentTHE NEW ZEALAND GUARDIAN TRUST LIMITED
First Cross-ClaimantNZI INTERNATIONAL TRUSTEE COMPANY LIMITED
Second Cross-ClaimantDAVID GUNSON
Cross-RespondentJUDGE:
LEE J
DATE OF ORDER:
26 FEBRUARY 1997
WHERE MADE:
PERTH
THE COURT ORDERS THAT:
The cross-claim served on the cross-respondent outside the Commonwealth be amended by deleting pars 30, 31 and 32.
Otherwise the application to set aside service of the cross-claim be dismissed.
The cross-respondent file and serve its defence to the cross-claim by 14 March 1997.
The cross-claimant file and serve any reply by 21 March 1997.
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
WAG 81 of 1995
BETWEEN:
CENTURY INSURANCE LIMITED (IN PROVISIONAL LIQUIDATION)
First ApplicantEDWARD JOHN BEBBINGTON AND DELORES EDNA BEBBINGTON
Second ApplicantsAND:
THE NEW ZELAND GUARDIAN TRUST LIMITED
First RespondentNZI INTERNATIONAL TRUSTEE COMPANY LIMITED
Second RespondentDONALD ANDREW DAVIES
Third RespondentTHE NEW ZEALAND GUARDIAN TRUST LIMITED
First Cross-ClaimantNZI INTERNATIONAL TRUSTEE COMPANY LIMITED
Second Cross-ClaimantDAVID GUNSON
Cross-Respondent
JUDGE:
LEE J
DATE:
26 FEBRUARY 1997
PLACE:
PERTH
EX TEMPORE REASONS FOR JUDGMENT
This is a motion under O 9 r 7 of the Federal Court Rules ("the Rules") brought by the cross-respondent (“Gunson”) for an order setting aside an order made by this Court on 31 October 1996, granting the cross-claimant ("NZGT") and the second cross-claimant ("NZIIT") leave to serve a cross-claim on Gunson, outside the Commonwealth of Australia.
NZGT and NZIIT obtained leave to serve Gunson in the Colony of Hong Kong pursuant to O 8 r 2(2) of the Rules, by a motion heard ex parte. After service had been effected, Gunson filed a conditional appearance and instituted this motion within the time prescribed by O 9 r 7(2).
The central contention of the motion, is that service of the cross-claim outside the Commonwealth was invalid in that the proceeding instituted by the cross-claim was not a proceeding to which O 8 r 1 of the Rules applied.
The relevant facts in this matter are outlined in earlier reasons for judgment delivered by me in dealing with a similar motion brought by NZGT and NZIIT as respondents in the primary proceeding served outside the Commonwealth. It is not necessary to repeat the facts recited in those reasons. (See: Century Insurance Limited (In Provisional Liquidation) v New Zealand Guardian Trust Limited (Federal Court of Australia, Lee J, 16 May 1996, unreported) at 8-17.)
As a matter of law, the onus of establishing a right to continue the proceeding against Gunson rests on NZGT and NZIIT by showing that the order granting leave to serve the originating process on Gunson was properly made. (See: Voth v Manildra Flour Mills Proprietary Limited (1990) 171 CLR 538 per Mason CJ, Deane, Dawson, Gaudron JJ at 564.)
The direction in O 8 r 2(b) that the Court be satisfied that the proceeding is one to which O 8 r 1 applies is not to be read as a requirement that the applicant prove the issue as at trial. What is required to be shown is that it is clearly arguable on material presented that there will be facts proven in the case, capable of supporting a proceeding of the character described in O 8 r 1. (See: Vitkovice Horni A Hutni Tezirstvo v Korner [1951] AC 869 per Lord Simonds at 879; Century Insurance Limited (In Provisional Liquidation) v New Zealand Guardian Trust Limited at 5)
Substantively, the cross-claim raises three matters: negligent misrepresentation, breach of warranty of authority, and a breach of s 42 of the Fair Trading Act 1987 (NSW) (“Fair Trading Act”).
It is also part of the cross-claim that Gunson owed a duty of care as legal adviser to an applicant in the primary proceeding and that this duty of care was breached by Gunson with the result that the loss or damage claimed by the applicants against NZGT and NZIIT was at least partly, if not wholly, attributable to Gunson’s negligence. Accordingly, NZGT and NZIIT claim a right of indemnity or contribution against Gunson.
Dealing first with the issue of negligent misrepresentation, it is alleged by NZGT and NZIIT that insofar as they may be found to be liable in negligence to the applicants in the primary proceeding in failing to put in place safeguards against fraudulent conduct by others in circumstances where it was foreseeable that such may occur, they were induced by the negligent misrepresentations of Gunson to act in that manner.
I have previously found, in respect of the applicants’ claim in negligence against NZGT and NZIIT as respondents in the primary proceedings, that there was a sufficient connection with Australia, by way of the disbursement of the funds from the Sydney bank accounts of NZGT and NZIIT, to show that the pleading of negligence was the pleading of a tort committed in the Commonwealth, within the meaning of O 8 r 1(ac): Century Insurance Limited (In Provisional Liquidation) v New Zealand Guardian Trust Limited at 22. The consequence of the tort alleged against Gunson in the cross-claim is to the same effect, namely, by reason of the negligent misrepresentation of Gunson the funds held in Australia by NGZT and NZIIT were dealt with in a manner that caused loss, or liability for loss. To that extent I am satisfied that it can be said that there is a tort which has occurred in the Commonwealth. I accept the principle set out in Diamond v Bank of London and Montreal Limited [1979] 1 QB 333 per Lord Denning MR at 346 and per Stephenson LJ at 349, that the tort of negligent misrepresentation is completed and therefore committed, at the place where the representation is acted upon. The representations of Gunson were acted upon by NZGT and NZIIT by the disbursement of funds from the bank accounts of NZGT and NZIIT in Sydney. Therefore, O 8 r 1(ac) applies to pars 20 to 26 of the cross-claim in that the cross-claim proceeding is one founded on a tort committed in the Commonwealth.
With regard to the claim of breach of warranty of authority, I accept that it is arguable that such a claim may be treated as a tort. Accordingly it follows, for the foregoing reasons, that the completion of that tort also was the disbursement of funds in New South Wales, as previously outlined. Therefore O 8 r 1(ac) applies to pars 27 to 29 of the cross-claim.
With regard to the issues of indemnity and contribution, pleaded in pars 34 to 35 of the cross-claim, I am satisfied that O 8 r 1(d) permits a party who is sought to be made liable in a proceeding in this Court, being a party who has a credible claim of a right of indemnity or a right to contribution, to bring the alleged indemnifier or co-contributor into the jurisdiction to be dealt with by way of a cross-claim. (See: State of Western Australia v Bond Corporation Holdings Limited (Federal Court of Australia, French J, 19 June 1992, unreported.))
With regard to the alleged breach of the Fair Trading Act, pleaded in pars 30 to 32 of the cross-claim if, as suggested in Tycoon Holdings Ltd v Trencor Jetco Inc (1992) 34 FCR 31 at 34-35, the requirements of O 8 rr 1 and 2 must be applied to each cause of action to be relied upon in the proceeding sought to be served outside the Commonwealth, I am not satisfied that the breach of the Fair Trading Act as pleaded attracts the exorbitant jurisdiction provided by O 8.
The conduct alleged to be in breach of the Fair Trading Act, is the giving of instructions by Gunson in Hong Kong to NZGT and NZIIT, in relation to the disbursement of funds held in the bank accounts of NZGT and NZIIT in Sydney. It is submitted by the cross-claimants that the principles of tort as previously discussed in relation to negligent misrepresentation, are applicable by analogy. That is to say, if acts in reliance on the conduct occur in New South Wales, the conduct itself should be considered to be conduct to be trade and commerce in New South Wales within the meaning of the Fair Trading Act thereby attracting O 8 r 1(a) of the Rules.
I am not satisfied that the concepts of the tort of negligent misstatement subsumed in the meaning of the word “conduct” as used in the Fair Trading Act. The provision of the Fair Trading Act creates a separate statutory liability defined by the ordinary meaning of the words used. According to that meaning, conduct which occurs outside the Commonwealth causing others to act in reliance upon it within the Commonwealth is not conduct within the Commonwealth. There is no reason based on principle to resort to hallmarks of the tort of negligence to find a meaning other than the ordinary meaning of the word conduct. Therefore, I have concluded that leave should not be given for the cross-claim to continue on the cause of action arising under the Fair Trading Act.
It follows that the application to set aside the service of the cross-claim effected on Gunson outside the Commonwealth succeeds to the extent that the pleading of a breach of the Fair Trading Act is to be deleted from the cross-claim so served.
I certify that the preceding four (4) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Lee
Associate:
Dated: 26 February 1997
Counsel for the First and Second Cross-Claimant: E E M Corboy Solicitor for the First and Second Cross-Claimant: Mallesons Stephen Jaques Counsel for the Cross-Respondent: R I Viner QC Solicitor for the Cross-Respondent: E W Nielsen Date of Hearing: 26 February 1997 Date of Judgment: 26 February 1997
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