Duka, A v Bains Harding Ltd
[1995] FCA 582
•14 Jul 1995
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No NG3290 of 1993
)
GENERAL DIVISION )
BETWEEN:ANTE DUKA (also known as Anthony Duka)
Applicant
AND:BAINS HARDING LIMITED
First Respondent
OIL TOOLS AUSTRALIA PTY LIMITED
Second Respondent
CORAM: HILL J
PLACE: SYDNEY
DATED: 14 JULY 1995
REASONS FOR JUDGMENT
On 11 February 1994, Sheppard J made, by consent, the following orders:
A declaration that the applicant is still the legal and beneficial owner of 100,000 shares in the first respondent.
An order that the first respondent rectify its share register by expunging the entry thereon in the name of the second respondent.
An order that the applicant's name be entered on the share register of the first respondent as the holder of 100,000 shares.
The respondents to pay the applicant's costs of the action to be taxed.
These orders were incorporated in a minute which had been signed by the solicitors for the parties. The signature on behalf of Bains Harding Limited and Oil Tools Australia Pty Limited was the signature of Mr Keel, a partner in the firm of Clayton Utz and Co. The matter in dispute before me today is the effect of those orders. To appreciate the issues, it is necessary to go back in time.
The present proceedings were commenced in this Court by application and statement of claim filed on 11 October 1993. The application as filed named only Bains Harding Limited as respondent. It sought, in addition to a declaration concerning whether certain share transfers were forged, declarations that Bains Harding Limited was negligent and orders that that company pay damages. Also sought was an order for rectification of the register of that company.
The circumstances which gave rise to the proceedings can shortly be stated. They are not in dispute. The applicant had been a shareholder in Bains Harding Limited and on the register of that company as the owner of 100,000 shares. It seems that while he was overseas, and as a result of transfers alleged to be forgeries, those shares were transferred to Oil Tools Australia Pty Limited and the register of Bains Harding Limited was amended accordingly.
The matter came before a Registrar of this Court on two occasions, the last being 19 November 1993 when orders were made for the filing and serving of an amended statement of claim and other consequential orders were made. On that day, the matter was adjourned for further directions until 11 February 1993.
On 29 November 1993 Messrs Clayton Utz, acting for Bains Harding Limited, reminded the solicitors for the applicant that an amended statement of claim had not yet been served. This apparently prompted activity on the part of the applicant's solicitors who prepared an amended application and amended statement of claim and attempted to file these documents in the Registry of this Court. That attempt was unsuccessful. Presumably part of the problem was that the amended application showed Oil Tools Australia Pty Limited as a second respondent. There appears no order permitting that course to be adopted.
The amended application sought only, in essence, the relief that was ultimately the subject of the short minutes of order. In particular, it did not seek damages for any negligence on the part of Bains Harding Limited. Likewise, negligence was not pleaded in the amended statement of claim. There was a conversation between Mr Attia, the solicitor for the applicant, and Ms Cosenza, who had the conduct of the matter for Bains Harding Limited, about the filing of the amended statement of claim, but nothing turns particularly on that conversation.
Both parties agree that I should proceed on the basis that the amended application and amended statement of claim were operative as between the parties, albeit not filed. In part, this appears clearly the course that the parties adopted because the consent orders named Oil Tools Australia Pty Limited as parties to them, notwithstanding that the pleadings had not been amended at that time. The amended pleadings were forwarded with a letter of 1 December 1993, which advised that the applicant's solicitors would not be able to have the documents sealed by the Court "until after 11 February 1994". It was indicated that a sealed copy would be served after that date.
Thereafter, and on the basis that the pleadings had been amended, on 21 January 1994 Messrs Clayton Utz served a notice of appearance indicating that they acted also for the second respondent.
The matter of settlement was presumably addressed at some time prior to 21 January 1994 because, by a letter of 21 January 1994, Messrs Clayton Utz forwarded to the solicitors for the applicant "consent orders for your execution". Those consent orders, in draft, were in the same form as the orders ultimately made by Sheppard J.
By 28 January 1994, the consent orders had still not been signed and by a letter of that date Clayton Utz sought the return of them signed so that they could be filed. There is no evidence of any oral communications leading up to these documents. The first conversations recorded in evidence being a conversation on 2 February 1994 between Ms Cosenza and Mr Attia.
In that conversation Ms Cosenza indicated that she was chasing up the return of the consent orders. Mr Attia replied that he was awaiting instructions from his client who was dissatisfied with them. He said that counsel had advised that the order should be rejected because they did not allow for dividends paid on the shares in the meantime. To this Ms Cosenza replied:
"You didn't ask for dividends in your application, and it's not fair that you now seek to obtain that order."
Mr Attia said, according to Ms Cosenza:
"I'll get back to you Friday or Monday, with counsel's advice."
Ms Cosenza requested that an answer be given soon as the matter was in Court the next week and she had to seek instructions from her client in Perth. Mr Attia could not recall the substance of that conversation. Ms Cosenza made a contemporaneous note of it and I have no reason to doubt her evidence of this, or indeed the other conversations which follow. Subsequently, on 8 February 1994 Ms Cosenza had a further conversation with Mr Attia. She reminded him that he was to get back to her, to this he replied that he had not yet received counsel's advice but it was a remote possibility that the consent orders would be signed.
The conversation ended with a promise on Mr Attia's part to respond by 6 pm on Thursday. On 9 February 1994 Ms Cosenza sent by facsimile a message to Mr Attia confirming these telephone conversations and, in particular, confirming that Mr Attia had advised that a claim for loss of dividends could be made. The letter says, inter alia:
"We [ie Clayton Utz]) stated that a claim for loss of dividends had not been sought by your client in either its application or amended application and that accordingly it was unfair for your client to now seek such an order."
The letter confirmed the request that an answer be given prior to the directions hearing on Friday 11 February. I should perhaps interpolate here that in the conversations and letter Ms Cosenza was clearly right so far as she referred to the amended application and statement of claim although the original application did make a claim for damages in negligence which could comprehend the claim for dividends. On 10 February 1994 Ms Cosenza again rang Mr Attia, he was not, however, there.
On the morning of 11 February 1994 at 8.53 a fax dictated by Mr Attia it would seem the preceding day, but not sent until the morning, was forwarded to Messrs Clayton Utz. In that fax Mr Attia said:
"Since the issue of the application we have ascertained that the Company paid dividends to the second respondent and if the share register is rectified are we to presume that such dividends are to be then paid to our client. We have also now ascertained that a rights issue was announced on 9 November 1993. Our client would have taken up his entitlement to shares but of course received no notice and was not offered such shares. Would the first respondent now issue such shares to him? If not we will need to consider amending our application to claim damages."
It does not appear that that letter was actually read by Ms Cosenza until she returned from court. Both Ms Cosenza and Mr Attia met outside the Registrar's court prior to the directions hearing. Ms Cosenza said to Mr Attia: "I have the consent orders". Mr Attia said:
"I will sign the Consent Orders but my client will be bringing separate proceedings in the District Court for damages."
Ms Cosenza then rang Mr Keel presumably to discuss what Mr Attia had said. Mr Keel apparently said to her, words to the effect: "Well, we can't stop them doing that". Mr Attia then asked Ms Cosenza whether she would mention the matter on his behalf and she agreed. At the hearing before the Registrar the matter was referred to Sheppard J so that orders in accordance with the short minutes could be made. The orders were subsequently drawn up and entered. No one asked Sheppard J to make an order amending the pleadings and it appears that this was overlooked by the solicitors for both parties. Curiously, Clayton Utz filed on 21 January 1995 its notice of appearance for Oil Tools Australia Pty Limited.
On 29 March 1995 the applicant filed in the Registry an amended statement of claim raising in the amendment a claim for dividends of $14,000 and damages in respect of a rights issue which the applicant claimed he had been entitled to apply for. On 12 April a motion was filed for leave to amend the statement of claim in that manner. It should be noted that the amended statement of claim referred to is not the same as the unsealed amended statement of claim which the parties had before them at the time of the short minutes of order.
Subsequently, the applicants filed a motion requesting that the calculation of damages be referred to the Registrar under O38 of the Federal Court Rules; that motion is presently before the Court and was directed to be returnable today. When the matter was called the respondents sought leave to file in Court, returnable instanter, another motion seeking a separate trial of the following two issues:
(1)Whether there was an agreement between the parties to compromise the proceedings made on or about 11 February 1994; and
(2)if so whether the applicant's claim for damages in the proceedings merged into the said agreement.
In written submissions counsel for the respondent accepted that the respondents had proceeded to negotiate a settlement on the basis that the amended application had been filed. However, it was submitted that the applicant's right to claim damages against the first respondent in the proceedings merged into the parties' contract of compromise. It was said that the respondents had agreed to the relief recorded in the consent orders in consideration of the applicant forbearing with an action for damages against the first respondent in the proceedings.
It is said that the contract of compromise is contained in or evidenced by or to be inferred from the following:
(1)The short minutes of order not containing any reference to damages.
(2)The fact that a claim for damages had originally been made but that the amended application subsequently did not incorporate such a claim.
(3)Section 212 of the Corporations Law empowered the Court both to order rectification and payment of damages.
(4)The correspondence and conversations which I have already recorded.
The applicant's conduct after 11 February which is said to include the facsimile letter of 10 February 1994 and the fact that a considerable time elapsed before application was made for leave to amend the statement of claim in April of this year.
Ultimately the question has to be determined by reference to what the agreement between the parties was. That agreement was partly in writing incorporating as it did the short minutes of order and partly oral, that is to say, in the conversations between Ms Cosenza and Mr Attia. Those conversations make it abundantly clear that the offer to compromise so far as it could be said to have been an offer made by Mr Attia was an offer to compromise the proceedings as both parties then saw them, that is to say, proceedings for rectification of the register. It is in this context that Mr Attia made it clear, inter alia, to Ms Cosenza and Ms Cosenza accepted that a claim for damages for dividends remained available to be made by the applicant in due course.
The parties both understood that such an application was likely to be made although they also understood that it was unlikely that it would be made in this Court but rather that it would be made in the District Court. In these circumstances it cannot be suggested that the claim for damages in any way merged in the compromise.
Had the proceedings initially been merely for a declaration and rectification of the register without a claim for damages the suggestion could hardly have been made. That is the way both parties proceeded at the time of the compromise on 11 February.
It follows that I would answer the separate questions raised in the following way:
(a)Whether there was an agreement between the parties to compromise the proceedings made on or about 11 February 1994?
Answer:Yes, that agreement was to compromise the proceedings for rectification by the making of the orders in the agreed short minutes but not to compromise any claim for damages arising therefrom.
(b)Did the applicant's claim for damages in the proceedings merge into the said agreement?
Answer:No.
I shall, after hearing counsel, make consequential orders.
I certify that this and the
preceding eleven (11) pages
are a true copy of the Reasons
for Judgment herein of his Honour
Justice Hill.
Associate:
Date:
Counsel and Solicitors B Slowgrove instructed by
for Applicant: Dennis & Co
Counsel and Solicitors DG Charles instructed by
for Respondents: Clayton Utz
Date of Hearing: 14 July 1995
Date Judgment Delivered: 14 July 1995
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