Compaq Computer Pty Ltd v Merry, H

IN THE FEDERAL COURT OF AUSTRALIA )
  )
VICTORIA DISTRICT REGISTRY       )       No. NG 520 of 1995
  )
GENERAL DIVISION                 )

B E T W E E N:

COMPAQ COMPUTER PTY LIMITED
Applicant
- and -

HOWARD MERRY and OTHERS
Respondents

JUDGE: Heerey J

DATE: 7 February 1995

PLACE: Melbourne

REASONS FOR JUDGMENT

I am not satisfied that I should take the exceptional step of striking out the claim against the fifth respondent at this stage. Each case has to be considered in the light of its own circumstances, and the relevant circumstance here is that the fifth respondent, along with other respondents, was a director of the Hisoft company. As such, he had an obligation to exercise reasonable diligence in the management of the affairs of the company. The applicant's claim concerns an agreement that Hisoft entered into with the applicant. For present purposes I think one can infer that a formal agreement of this nature, whether or not under seal, was of major importance to the business of Hisoft, and accordingly something of which one might expect all directors to be aware. Hisoft has gone into receivership and the internal documents of the company are not within the possession of the respondents, but in the possession of the receiver. Still less are they presently available to the applicant.

Therefore this is not a case where an applicant launches a claim against a respondent on a purely speculative basis or to obtain some improper advantage or to exert collateral pressure. Rather, it is a case where, for the sort of reasons that I have mentioned, it is understandable that the applicant might have little in the way of concrete evidence at the moment. Perhaps the position may remain the same at the end of the trial, in which case the applicant will fail. But I do not think the issue of the proceedings in the circumstances was an abuse of process or otherwise warrant the order sought.

However, there should be an order for particulars, but I think those should be directed at a time after the return of the subpoena which is 24 March 1995.

I will order that by 7 April the applicant provide to the fifth respondent the particulars requested in the letter of 26 September 1994 from the fifth respondent's solicitors. Otherwise, the notice of motion dated 8 November 1994 and the notice of motion dated 30 January 1995 are dismissed.
The particulars sought in paragraphs 1 and 2 of the notice of motion of 8 November 1994 to be provided by 7 April.

I will order the fifth respondent pay the applicant's costs of the notices of motion.

I certify that this and the preceding two (2) pages are a true copy of the reasons for judgment of his Honour Mr Justice Heerey.

Dated:

Associate

Appearances

Counsel for the applicant: Mr R McGarvie

Solicitor for the applicant: Messrs Ebsworth & Ebsworth

Counsel for the fifth

respondent:Mr M Bicker

Solicitor for the fifth

respondent:N Bassat

Date of hearing: 7 February 1995

The case of Compaq Computer Pty Ltd v Merry involved the applicant, Compaq Computer Pty Ltd, pursuing a claim against the respondents, including Howard Merry, for issues arising from an agreement entered into with Hisoft, a company of which Merry was a director. The dispute was heard in the Federal Court of Australia, Victoria District Registry. The primary issue before the court was whether to strike out the claim against the fifth respondent, Merry, on the grounds that the proceedings were an abuse of process or otherwise unwarranted. This decision came amidst the backdrop of Hisoft's receivership, complicating the availability of relevant documents and evidence.

The court considered the obligations of directors in managing company affairs, especially concerning significant agreements. It recognised that directors should exercise reasonable diligence and be aware of major business undertakings. The applicant's claim, while based on speculative grounds, was deemed reasonable given the circumstances, including the lack of available evidence due to Hisoft's receivership. The court determined that the claim was not an abuse of process but acknowledged the need for more specific evidence to proceed. Consequently, the court dismissed the motions to strike out the claim but mandated the provision of particulars by a specified date.

In its reasoning, the court emphasised the necessity of considering each case on its merits. It concluded that while the proceedings might still fail at trial, they were not an improper use of the legal system. The court ordered that the applicant provide particulars by a set date, contingent on the return of a subpoena. Additionally, the court directed that the costs of the notices of motion be borne by the fifth respondent. The judgment underscored the importance of reasonable diligence by directors and the procedural requirements in such claims.

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Legal Principle Established