Empire Shipping Co Inc v Navix Line Inc
[1996] FCA 333
•9 MAY 1996
CATCHWORDS
ADMIRALTY - proceedings for damages arising from breach of joint venture agreement - application to amend defence and cross-claim.
PRACTICE and PROCEDURE - application to amend defence and cross-claim - whether evidence of actual prejudice - whether delay - whether amendments raise a real issue for determination - in the interests of justice to allow proper ventilation of issues at hearing - s22 Federal Court Act 1976 - court as far as possible to completely and finally determine all matters of controversy - necessity to determine all issues.
Limitation Act 1969 (NSW) s14
Admiralty Act 1988 (Cth) ss37, 12
Federal Court Act 1976 (Cth) s22
Federal Court Rules, O13 r2
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, applied
EMPIRE SHIPPING COMPANY INC v
NAVIX LINE INC.
No NG 290 of 1989
Tamberlin J
Sydney
9 May 1996
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 290 of 1989
GENERAL DIVISION IN ADMIRALTY )
BETWEEN: EMPIRE SHIPPING COMPANY INC.
Plaintiff
AND: NAVIX LINE INC.
Defendant
CORAM: TAMBERLIN J
PLACE: SYDNEY
DATED: 9 May 1996
MINUTE OF ORDERS
THE COURT ORDERS THAT:
Leave be granted to the defendant to amend its defence and cross-claim as set out in the Draft Amended Defence and Cross-Claim
Defendant pay the plaintiff's costs in relation to the application to amend.
NOTE: Settlement and entry of orders is dealt with in accordance with Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 290 of 1989
GENERAL DIVISION IN ADMIRALTY )
BETWEEN: EMPIRE SHIPPING COMPANY INC.
Plaintiff
AND: NAVIX LINE INC.
Defendant
CORAM: TAMBERLIN J
PLACE: SYDNEY
DATED: 9 May 1996
REASONS FOR JUDGMENT
TAMBERLIN J:
This is an application to amend the defence and cross-claim.
By writ filed 2 May 1989, the plaintiff brought proceedings claiming damages for breach of a joint venture agreement.
On 28 October 1991, Gummow J held that a claim described as "loss of profit on management" set out in para 15(2) of the Amended Statement of Claim, prepared for the purposes of considering the jurisdiction of the Court in Admiralty, was unsustainable, as the profits, if any, belonged to United Shipping Co (Bermuda) Ltd and not to the plaintiff.
On 8 January 1994 in proceedings G292 of 1989 brought by United Shipping Co (Bermuda) Ltd against the defendant, the claim referred to above was settled and the plaintiff discontinued the proceedings.
On 9 November 1994, the High Court declared that there was jurisdiction in rem in respect of the plaintiff's claim.
Consequent on the High Court decision pleadings were filed with respect to the hearing on the merits.
On 20 January 1995 the defence and cross-claim were filed. A reply and defence to the cross-claim was filed on 17 February 1995 which pleaded the Limitation Act 1969 (NSW) s14 and the Admiralty Act 1988 (Cth) s37.
On 19 December 1995, the defendant gave notice of proposed amendments to the cross-claim, including a claim for damages based on breach of duty by the plaintiff/cross-defendant as agent of the defendant to account in respect of benefits obtained by it as agent and benefits obtained in breach of an implied term of the joint venture agreement that secret profits over and above any agreed agency fee would be disclosed.
The Defence
Paragraphs 1 through 28 of the draft Amended Defence are identical with the Defence filed on 20 January 1995.
Paragraph 29 of the draft Amended Defence is new and is in these terms:
"29. The defendant pleads set-off in respect of all monies due and owing by the Plaintiff to it upon a balance of accounts and otherwise and in particular having regard to the matters raised in the Amended Cross-Claim filed herein."
The Cross-Claim filed on 20 January 1995, repeated paragraphs 1 though 28 of the defence. In paragraph 2 it simply alleges that the cross-claimant/defendant is ready, willing and able to perform the agreement set forth in paragraph 19 of the Defence, without admission that it has not been performed or completed to the extent necessary.
The Cross-Claim seeks, inter alia, a declaration that on a balance of account there are no moneys due and owing by the defendant to the plaintiff, damages for breach of contract; and orders pursuant to the Admiralty Act 1988 (Cth), interest and costs.
Draft Amended Cross Claim
The draft Amended Cross-Claim repeats paragraphs 1 and 2 of the original cross claim, and adds the following further paragraphs:
"3.Further, and in the event that the Cross-Respondent is entitled to claim from the Cross-Claimant loss of profit on management as alleged in the Amended Statement of Claim (which is denied), then between July 1976 and April 1984 the Cross-Respondent earned secret commissions and/or profits in respect of the management services it provided pursuant to the JVA.
PARTICULARS
(i)The Cross-Respondent has claimed that it earned or would have earned secret commissions and/or profits in the sum of US$25,000.00 per month which is described falsely in the annual budgets presented to the Cross-Claimant as operating costs of the vessel.
(ii)The Cross-Respondent has failed to account to the Cross-Claimant for such secret commissions and/or profits.
4.It was an implied term of the JVA and/or the ship management agreement dated 16 December 1975 between the Cross-Claimant and United Shipping Co (Bermuda) Ltd ("USC") that the Cross-Respondent and/or USC would disclose in the management accounts or the accounts of the joint venture company or to the Cross-Claimant any and all secret commissions and/or profits and would not, without the full knowledge and consent of the Cross-Claimant, profit by and from the joint venture and/or management of the vessel.
5.In breach of contract the Cross-Respondent has earned secret commissions and/or profits and has failed to account to the Cross-Claimant for the said secret commissions and/or profits.
6.Further or alternatively, the Cross-Respondent by reason of the matters alleged in paragraph 3 herein, became constructive trustee of the said secret commissions and/or profits it earned from the joint venture and/or management of the vessel between July 1976 and April 1984 and holds same for the benefit of or to the account of the Cross-Claimant."
The relief claimed is identical with that in the cross-claim, except for order (d) in which alternatively to damages for breach of contract, there is a claim for US$2,300,000 for breach of trust and/or of contract.
The matter is set down for hearing before me for a period of two weeks commencing on 3 June next.
The proposed amendments are resisted.
The plaintiff's grounds of objection to the draft amendments are set out in the letter dated 14 February 1996 from Norton Smith & Co to Middletons Moore and Bevins sent in accordance with a suggestion by Sheppard J that all the grounds of objection be set out. It relevantly reads:
"We refer to your client's application for leave to amend its Cross-Claim and Defence and set out the grounds of our client's objections to that application.
First, that the alleged contractual cause of action is statute barred under sections 14 and/or 15 of the Limitation Act 1969 and/or section 37 of the Admiralty Act 1988. Further, the alleged cause of action for equitable relief is by analogy statute barred pursuant to section 23 of the Limitation Act 1969 and/or section 37 of the Admiralty Act 1988. Further, management fees were referred to in the original Statement of Claim and the failure to raise the alleged Cross-Claim occasions actual prejudice. No demand or dispute has ever been earlier raised relating to these new contentions and they are not part of the controversy the subject of the present proceedings. The only issue ever previously raised directly between the parties on 9/10 June 1987 was the quantum of the management fees and on the pleadings the issues of breach and causation. Nor can these new allegations be said to be part of any takings of accounts. The conduct of the case to date so far as concerns interrogatories has been founded on the issues pleaded. Further, in relation to the departure of Mr Magoshi no statement was obtained to support any allegation of secret commission and/or profit. Further, the new matter is not within section 12 of the Admiralty Act 1988. It follows from the above that the proposed amendments to your client's Defence should, for the same reasons, be disallowed."
The defendant points out there is no reference to "delay" in this letter.
The plaintiff has not filed any evidence to support the suggestion in the letter of actual prejudice.
The defendant points out that the plaintiff has, in its Defence to the existing cross-claim, raised limitation defences and also the defence that the cause action was not within s12 of the Admiralty Act.
I have had the benefit of argument from Counsel as to the background circumstances and to the provisions of the Admiralty Act 1988 (Cth) and the Limitation Act 1969 (NSW). Further, I have heard submissions as to delay. The absence of any evidence as to prejudice is an important consideration in the amended application.
Having heard the arguments of Counsel, I am satisfied that the amendments raise a real issue for trial in relation to the application of the statutory provisions and that it is in the interests of justice to permit the amendments to the defence and cross-claim so they can be properly ventilated at the hearing. The defendant foreshadows an argument as to concealment in relation to the limitation argument.
The observations of the High Court in Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 533 are pertinent. The Court there said:
"We should, however, state in the plainest of terms that we regard it as undesirable that limitation questions of the kind under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases. Generally speaking, in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question".
Section 22 of Federal Court Act 1976 requires the Court, on such terms and conditions as it thinks just, to grant all remedies, to which the parties appear to be entitled, so that as far as possible, all matters in controversy between the parties may be completely and finally determined.
Order 13, rule 2, empowers the court at any stage to grant leave to amend for the purpose of determining real questions otherwise depending on the proceeding. There is clearly a live issue as between the parties in relation to the question as whether the limitation defences and s12 of the Admiralty Act 1988 (Cth) apply.
The plaintiff submits that its primary defence is accord and satisfaction arising out of an alleged agreement between the plaintiff and defendant on 10 June 1987. The further defence is that on a balance of account at the end of the joint venture period in July 1991, the result would favour the defendant and that the plaintiff profited from the venture.
The defendant submits that the affidavits of Mr Lieu, filed by the plaintiff in 1995, have made it clear that profits were earned out of being a Manager of the ship which were not disclosed to the defendant during the time that the plaintiff was the manager and it is said, that this was a fiduciary duty as agent and that the excessive fees must be taken into account on the settling of accounts.
In view of: (i) the absence of evidence as to prejudice; (ii) that the proposed amendment raises a real issue for trial and (iii) the need to have all real issues determined, I propose to grant leave to make the amendments as set out in the Draft Amended Defence and Cross-Claim.
As to costs, I consider the normal rule should apply and that the defendant should pay the plaintiff's cost of to the application to amend.
I make the following orders:
That leave be granted to the defendant to amend its defence and cross-claim as set out in the Draft Amended Defence and Cross-Claim and to file and serve those pleadings.
The defendant pay the plaintiff's costs of this application.
I certify that this and
the preceding eight (8)
pages are a true copy of the
Reasons for Judgment herein of
his Honour Justice Tamberlin.
Associate:
Date: 9 May 1996
Counsel for Plaintiff: Mr A W Street
Ms M S C York
Solicitor for Plaintiff: Norton Smith & Co
Counsel for Defendant: Mr P King
Mr Hollo
Solicitor for Defendant: Middletons Moore & Bevins
Date of Hearing: 26 April 1996
Date Judgment Delivered: 9 May 1996
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