Crypta Fuels Pty Ltd & Anor v Svelte Corp Pty Ltd & Ors Zaknic Pty Ltd v Svelte Corp Pty Ltd
[1996] FCA 294
•27 MARCH 1996
CATCHWORDS
Practice and procedure - amendment of statement of claim to change respondent - respondent not in existence at relevant times - whether a case of misnomer or of mistake in the name or identity of a party - whether amendment allowable notwithstanding effect of joining or substituting a person as a party who was previously not a party - delay in seeking amendment - possible prejudice - adding a new party would substantially prolong proceedings
Practice and procedure - motion seeking separation of linked cases - consideration of possible prejudice and advantages - motion lacking a proponent prepared to support it unconditionally
Practice and procedure - motion seeking judgment in favour of respondent - respondent not in existence at relevant times set out in statement of claim
Federal Court Rules O 13 r 2, O 13 r 24
Robertson (J) & Co Ltd v Ferguson Transformers Pty Ltd (1970) 44 ALJR 441 considered
Londish v Gulf Pacific Pty Ltd (1993) 45 FCR 128 considered
CRYPTA FUELS PTY LIMITED & ANOR v SVELTE CORPORATION PTY LIMITED & ORS.
NG 975 of 1993
ZAKNIC PTY LIMITED v SVELTE CORPORATION PTY LIMITED & ORS.
NG 216 of 1994
CORAM:Lehane J
PLACE:Sydney
DATE:27 March 1996
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) Nos. NG 975 of 1993
GENERAL DIVISION ) NG 216 of 1994
MATTER NO. NG 975 OF 1993
BETWEEN:CRYPTA FUELS PTY LIMITED
(A.C.N. 010 036 512) First Applicant
ROBERT JOSEPH HAGAN Second Applicant
AND:SVELTE CORPORATION PTY LIMITED
(A.C.N. 056 922 887) First Respondent
HARRY SIALEPIS Second Respondent
JAMES JOHN ("JIM") SMILES Third Respondent
SMILES, POULOS SERVICES PTY LIMITED
(A.C.N. 057 527 634) trading as
SMILES, POULOS & ASSOCIATES,
Chartered Accountants Fourth Respondent
DANNY NAKOLIC
(aka DRAGON NIKOLIC) Fifth Respondent
MATTER NO. NG 216 OF 1994
BETWEEN:ZAKNIC PTY LIMITED
(A.C.N. 003 803 496) Applicant
AND:SVELTE CORPORATION PTY LIMITED
(A.C.N. 056 992 877) First Respondent
HARRY SIALEPIS Second Respondent
CRYPTA FUELS PTY LIMITED
(A.C.N. 010 036 512) Third Respondent
ROBERT JOSEPH HAGAN Fourth Respondent
HARRY SIALEPIS First Cross Claimant
SVELTE CORPORATION PTY LIMITED
(A.C.N. 056 992 877) Second Cross Claimant
CRYPTA FUELS PTY LIMITED
(A.C.N. 010 036 512) First Cross Respondent
ROBERT JOSEPH HAGAN Second Cross Respondent
DES MITCHELL Third Cross Respondent
CORAM:Lehane J
PLACE:Sydney
DATE:27 March 1996
MINUTE OF ORDERS
THE COURT MAKES ORDERS AS FOLLOWS:
1. Order that, after 28 March 1996, proceedings NG 216 of 1994 and NG 975 of 1993 be heard separately so that:
(a)proceedings NG 216 of 1994 are heard and determined before proceedings NG 975 of 1993;
(b)evidence given in either proceedings, on or before 28 March 1996, be evidence in the other; and
(c)any evidence given after 28 March 1996 by James John Smiles in proceedings NG 216 of 1994 be available as evidence, subject to all proper objections and exceptions, in proceedings NG 975 of 1993.
2. Note the statement of the solicitor for the applicant in proceedings NG 975 of 1993 and the third and fourth respondents in proceedings NG 216 of 1994 that no further evidence is to be called by those parties in chief in proceedings NG 216 of 1994.
3. Adjourn proceedings NG 216 of 1994 to a date to be fixed.
4. On the motion of the applicant in proceedings NG 975 of 1993, order pursuant to Order 13 rule 24 of the Federal Court Rules that Taxcare Pty Limited (A.C.N. 001 793 479) be substituted for Smiles Poulos Services Pty Limited, (A.C.N. 057 527 634) as the fourth respondent.
5. Judgment for the fourth respondent in proceedings NG 975 of 1993.
6. Adjourn proceedings NG 975 of 1993 for directions to a date to be fixed.
7. Order that costs (including those of the fourth respondent in proceedings NG 975 of 1993) be reserved.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) Nos. NG 975 of 1993
GENERAL DIVISION ) NG 216 of 1994
MATTER NO. NG 975 OF 1993
BETWEEN:CRYPTA FUELS PTY LIMITED
(A.C.N. 010 036 512) First Applicant
ROBERT JOSEPH HAGAN Second Applicant
AND:SVELTE CORPORATION PTY LIMITED
(A.C.N. 056 922 887) First Respondent
HARRY SIALEPIS Second Respondent
JAMES JOHN ("JIM") SMILES Third Respondent
SMILES, POULOS SERVICES PTY LIMITED
(A.C.N. 057 527 634) trading as
SMILES, POULOS & ASSOCIATES,
Chartered Accountants Fourth Respondent
DANNY NAKOLIC
(aka DRAGON NIKOLIC) Fifth Respondent
MATTER NO. NG 216 OF 1994
BETWEEN:ZAKNIC PTY LIMITED
(A.C.N. 003 803 496) Applicant
AND:SVELTE CORPORATION PTY LIMITED
(A.C.N. 056 992 877) First Respondent
HARRY SIALEPIS Second Respondent
CRYPTA FUELS PTY LIMITED
(A.C.N. 010 036 512) Third Respondent
ROBERT JOSEPH HAGAN Fourth Respondent
HARRY SIALEPIS First Cross Claimant
SVELTE CORPORATION PTY LIMITED
(A.C.N. 056 992 877) Second Cross Claimant
CRYPTA FUELS PTY LIMITED
(A.C.N. 010 036 512) First Cross Respondent
ROBERT JOSEPH HAGAN Second Cross Respondent
DES MITCHELL Third Cross Respondent
CORAM:Lehane J
PLACE:Sydney
DATE:27 March 1996
EXTEMPORE REASONS FOR JUDGMENT
LEHANE J: I have to deal this afternoon with three separate motions. The first is a motion in proceedings number NG 975 of 1993, to which I will refer as the Crypta
proceedings, seeking judgment in those proceedings in favour of the fourth respondent. The second is a notice of motion filed on 25 March 1996 by the applicants in the Crypta proceedings in which they seek an order, pursuant to Order 13 rule 24 of the Federal Court Rules, that Taxcare Pty Limited (A.C.N. 001 793 479) be substituted for Smiles Poulos Services Pty Limited (A.C.N. 057 527 634) as the fourth respondent. The third motion is, or at least started life as, that of the applicant in proceedings number NG 216 of 1994, to which I shall refer as the Zaknic proceedings, seeking an order that the Zaknic proceedings be determined separately from and in advance of the determination of the Crypta proceedings.
In a sense, it might be suggested that the fate of any of these motions might depend to an extent on the order in which they are dealt with, and the reasons I am about to give will perhaps in some respects confirm that impression. That, however, is I fear unavoidable and I should say at the outset that I have formed, overall, a clear view of the way in which, in the circumstances as they have developed, these two proceedings can most conveniently be disposed of.
I propose to deal first with the motion to which I referred last, that is the motion originally that of the applicant in the Zaknic proceedings (to which I shall refer as the Zaknic applicant). Counsel for the Zaknic applicant informed me this morning that his client's attitude continued as it had been put to me yesterday: that is, that the applicant did not wish to proceed with the motion and would not support it. However, the solicitor for the applicants in the Crypta proceedings (to whom I shall
refer as the Crypta applicants) sought leave in effect to take over that motion as its proponent. The leave was not opposed and, in the circumstances, should be granted.
Counsel for the Zaknic applicant proceeded to oppose the motion, now that of the Crypta applicants, but I think it is not unfair to say that it became clear during the course of argument that it is difficult to point to any positive prejudice which the Zaknic applicant might suffer arising from an order for a separate hearing. I think it is also fair to say there was no suggestion that any such prejudice could be identified, other, perhaps, than a rather general fear of what might happen on an appeal from any decision I might make.
It also became clear, in my view, that at least in some readily conceivable circumstances an order for separate hearing might be advantageous to the Zaknic applicant, at least if, as the motion seeks, the order were that the Zaknic proceedings be heard and determined in advance of the Crypta proceedings. The Crypta applicants, as the present proponents of the motion, put it to me that their support of the motion was conditional on success on their own motion in the Crypta proceedings, to which of course I shall have to return.
Counsel for the other respondents in each proceeding did not in the end oppose a separate hearing; indeed, at least in the case of counsel for the third and fourth respondents in the Crypta proceedings, I think it is fair to say that he saw some positive advantages in having the Zaknic proceedings heard and determined
separately and first. Although, therefore, the motion appears to lack a proponent who is prepared to support it unconditionally, it is before me and it must be dealt with regardless, I think, of any suggested conditions relating to the outcome of other motions and with a view to determining the way in which, in the circumstances as they have developed, these cases may now most conveniently proceed.
The proceedings have already consumed 21 days, 11 more than the original estimate. Yet more court time will have to be found in order to complete them; yet more time and expense will have to be devoted to them by the parties. The solicitor for the Crypta applicants has indicated that, subject of course to matters in reply, he will not seek to lead further evidence in the Zaknic proceedings. The cross-examination of Mr Smiles is incomplete. He has been excused on medical grounds from giving evidence during this week. It has been indicated that, if his cross‑examination resumes, it will be shorter if directed only to issues in the Zaknic proceedings than it would be otherwise.
To hear and decide the Zaknic proceedings first is likely I believe to have at least the following two advantages. First, the Zaknic applicant, who is not a party to the Crypta proceedings, will be spared the additional time and cost which it would undoubtedly incur if the proceedings were to continue to be heard together. Secondly, and I believe this is generally accepted by the parties, a decision on the issues in the Zaknic proceedings may very well substantially shorten the further hearing of the Crypta proceedings.
On the other hand, it is very difficult to see that any prejudice to any party is likely to result from separation and, as I have said, no party now suggests the contrary. I think therefore that an order for separate hearing should be made.
I turn then to the other two motions, those of the Crypta applicants and the fourth respondent in the Crypta proceedings, and I propose to deal with them together. These motions, I confess, have caused me some difficulty. The issues which they raise result from the following circumstances.
In paragraph 6 of the statement of claim in the Crypta proceedings the Crypta applicants allege that at all material times the fourth respondent carried on the business of chartered accountants. The statement of claim, in summary, then proceeds to allege that in the course of carrying on that business the fourth respondent became liable in respect of certain representations said to have been made on its behalf.
In the defence initially filed on behalf of the respondents the allegation in paragraph 6 of the statement of claim was admitted. Then, on 20 October 1995, the fourth respondent filed in Court, with the consent of the Crypta applicants, an amended defence which incorporated a crucial change. The change was that paragraph 6 was admitted from 22 September 1993 but otherwise denied.
To fill in somewhat more of the picture, there are in evidence an ASC search and a business name search which together indicate that the fourth respondent, the company now known as Smiles Poulos Services Pty Limited, was incorporated only on 5 November 1992 and that it became the proprietor of the business name Smiles Poulos & Associates at a time later than the events giving rise to the claims made against it occurred.
In addition, Mr Poulos gave evidence to the effect that the fourth respondent did not carry on the accounting practice at any time relevant to the Crypta proceedings. The fourth respondent, therefore, seeks judgment in its favour on the simple ground that, if a claim is made against it on the footing of representations said to have been made by it in the course of the accounting practice at a time before its incorporation (or at least before it commenced carrying on the practice), the claim must fail.
The Crypta applicants retort by seeking to amend the statement of claim by substituting for the present fourth respondent a company called Taxcare Pty Limited, apparently the company which in fact carried on the accounting practice known as Smiles Poulos & Associates at the relevant times.
The Crypta applicants say that the amendment which they seek is one which is open to me to allow under Order 13, rule 2, of the Federal Court Rules. In particular they say that this is a case of misnomer, or of mistake in the name or identity of a party, a case in which the rule allows an amendment to be made to correct the name
notwithstanding that the effect of the amendment is to substitute another person as a party.
I was referred to Robertson (J) & Co Ltd v Ferguson Transformers Pty Ltd (1970) 44 ALJR 441 in which, in reasonably comparable circumstances, an amendment was allowed, although apparently without the benefit of an explicit rule permitting correction of a misnomer, even where the result of doing so was to substitute a person as a party or to join as a party a person previously not a party. There is a decision of the Full Court of this Court in which a similar step was taken: see Londish v Gulf Pacific Pty Ltd (1993) 45 FCR 128.
The first, third and fourth respondents to the Crypta proceedings oppose the amendment on grounds to which I shall refer. The Zaknic applicant also opposed the amendment on grounds of prejudice to it but, of course, as was conceded, that prejudice disappears if the Zaknic proceedings are heard and determined separately and before the Crypta proceedings.
On behalf of the first, third and fourth respondents, it was said first that a party seeking such an amendment at this late stage in proceedings bears a heavy onus in justifying that course. That is undoubtedly correct. Secondly, it was said that the Crypta applicants should have become aware of the situation when, with their consent, the marked up amended defence was filed or at the latest when there was tendered, during the hearing of these proceedings in December, an ASC search of the
fourth respondent: the search is exhibit B20. It is, say the first, third and fourth respondents, too late to seek the amendment now. Thirdly, those respondents say that severe prejudice will necessarily follow if the amendment is allowed. That will be so principally because Taxcare Pty Limited held insurance which might be available to indemnify it against any liability to the Crypta applicants arising from the Crypta proceedings. It could be expected that Taxcare Pty Limited would make a claim against the insurer. The insurer could be expected and would be entitled to take a close interest in Taxcare's conduct of the proceedings. Indeed the insurer might be entitled to take over the conduct of the proceedings. If the insurer denied liability, it might be necessary to join it as a cross‑respondent. In either event, it could be expected that the Crypta proceedings would be substantially prolonged. Among other things, it might be necessary to recall witnesses who have already given evidence.
On the other hand, the Crypta applicants point to the lateness of the amendment of the defence (a point of little significance, I think) and inaction on the part of the fourth respondent (beyond filing the amended defence and tendering the search) until it filed its amended notice of motion in court on 14 March 1996 without, it was said (and truly), supporting affidavits.
It should also be said that the amendment of the defence gave rise to a new issue in the Crypta proceedings, in relation to which discovery should have been but was not given. It is perhaps not unfair to observe that while it is surprising that the Crypta applicants did not take the hint offered in the marked up amended defence, the
Crypta applicants could hardly have failed to see what had happened if discovery had occurred. In the end, however, the question is, I think, one of the degree of prejudice which would result from the amendment - on the footing, no doubt, that relatively slight prejudice would dispose a court to refuse an amendment sought so late in lengthy proceedings - and, also, one of finding the way in which the issues arising in this litigation are to be most conveniently disposed of.
It is, I gather, undisputed that it would be open to the Crypta applicants to commence new proceedings against Taxcare, to which there seems no doubt that the other respondents, except of course the present fourth respondent, would be parties. In due course a question might well arise as to whether, if such proceedings were commenced, they should be heard concurrently with the Crypta proceedings; but whether they were or were not heard concurrently, and given that the Crypta proceedings are to be heard after the Zaknic proceedings are heard and decided, I find it difficult to see how any party will be significantly prejudiced by Taxcare becoming a party to the Crypta proceedings now.
It seems to me that I must take it as likely that the matter as a whole will take a substantially similar course whether separate proceedings are commenced against Taxcare or Taxcare is joined as a respondent to the Crypta proceedings. Indeed, though it is difficult to make confident predictions about these things, my impression is that if one makes the assumption (as I think one must for these purposes) that there will be proceedings against Taxcare, they are likely more conveniently to be
dealt with in the interests of all parties as part of the Crypta proceedings than as separate proceedings.
I therefore propose to make the order sought in the Crypta applicants' motion. Counsel for the fourth respondent submitted, and the submission was not opposed by the solicitor for the Crypta applicants, that it follows that, on the motion of the fourth respondent, there should be judgment in favour of the fourth respondent in the Crypta proceedings. Accordingly, I propose to make the following orders:
1. Order that, after 28 March 1996, proceedings NG 216 of 1994 and NG 975 of 1993 be heard separately so that:
(a)proceedings NG 216 of 1994 are heard and determined before proceedings NG 975 of 1993;
(b)evidence given in either proceedings, on or before 28 March 1996, be evidence in the other; and
(c)any evidence given after 28 March 1996 by James John Smiles in proceedings NG 216 of 1994 be available as evidence, subject to all proper objections and exceptions, in proceedings NG 975 of 1993.
2. Note the statement of the solicitor for the applicant in proceedings NG 975 of 1993 and the third and fourth respondents in proceedings NG 216 of 1994 that no further evidence is to be called by those parties in chief in proceedings NG 216 of 1994.
3. Adjourn proceedings NG 216 of 1994 to a date to be fixed.
4. On the motion of the applicant in proceedings NG 975 of 1993, order pursuant to Order 13 rule 24 of the Federal Court Rules that Taxcare Pty Limited (A.C.N. 001 793 479) be substituted for Smiles Poulos Services Pty Limited, (A.C.N. 057 527 634) as the fourth respondent.
5. Judgment for the fourth respondent in proceedings NG 975 of 1993.
6. Adjourn proceedings NG 975 of 1993 for directions to a date to be fixed.
7. Order that costs (including those of the fourth respondent in proceedings NG 975 of 1993) be reserved.
I certify that this and the preceding 10 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lehane.
Associate:
Dated: 15 April 1996
Heard: 27 March 1996
Place: Sydney
Decision: 27 March 1996
Appearances: Stewart Levitt & Company appeared for the applicants in proceedings NG 975 of 1993 and for the third and fourth respondents and first and second cross respondents in proceedings NG 216 of 1994.
Mr C M Harris of counsel instructed by Robert A Harper & Co. appeared for the applicant in proceedings NG 216 of 1994.
Mr C J Hockey of counsel instructed by Galloways Solicitors appeared for the first respondent in proceedings NG 975 of 1993 and for the first respondent and second cross claimant in proceedings NG 216 of 1994.
Mr G A Moore of counsel instructed by G J Mavrakis & Associates appeared for the third and fourth respondents in proceedings NG 975 of 1993.
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