Gelencser v Sims - [2002] WADC 41

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: GELENCSER & ORS -v- SIMS & ORS [2002] WADC 41

CORAM: REGISTRAR KINGSLEY

HEARD: 18 DECEMBER 2001

DELIVERED : 6 MARCH 2002

FILE NO/S: CIV 420 of 1998

BETWEEN: PETER GELENCSER
GUILIANA GELENCSER
First Plaintiffs
SHIRLEY WEAVER
Second Plaintiff
ALAN CLARKE
ROBIN HOLMES CLARKE
Third Plaintiffs
ELIZABETH ANNE WETHERAL
Fourth Plaintiff
AND
PAULA SIMS
First Defendant
LAWRENCE JOHN SCANLON
JEFFREY MALCOLM INNES
BARRY DANIEL O'ROURKE
Second Defendants
OLIVER GEORGE DOUGLAS
Third Defendant
GEOFFREY LEONARD WILLOT VICKERIDGE
Fourth Defendant

Catchwords:

Practice - Plaintiff's application to amend statement of claim - Corporations Law - Solicitor involved in a contravention

Legislation:

Corporations Law

Result:

Application refused

Representation:

Counsel:

First Plaintiffs               :     Mr I K Bellamy
Second Plaintiff            :     Mr I K Bellamy
Third Plaintiffs             :     Mr I K Bellamy
Fourth Plaintiff             :     Mr I K Bellamy
First Defendant             :     No Appearance
Second Defendants       :     No Appearance
Third Defendant           :     No Appearance
Fourth Defendant          :     Mr D W Newnes

Solicitors:

First Plaintiffs               :     Solomon Brothers
Second Plaintiff            :     Solomon Brothers
Third Plaintiffs             :     Solomon Brothers
Fourth Plaintiff             :     Solomon Brothers
First Defendant             :     In Person
Second Defendants       :     Tottle Christensen
Third Defendant           :     Butcher Paull & Calder
Fourth Defendant          :     Blake Dawson Waldron

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Edwards v R (1992) 173 CLR 653
Yorke v Lucas (1985) 158 CLR 661

REGISTRAR KINGSLEY: The plaintiffs plead an action against:
(a)the first defendant as financial advisor. It is alleged the first defendant made various representations to the plaintiff to induce them to invest money in a Trust by way of purchasing priority units in the Trust. The representations are alleged to have been false and misleading. The first defendant is alleged to have provided a written document containing the offer to apply for priority units ("the offer").
(b)the second defendants as Directors of Redtail Investments Pty Ltd ("Redtail"). Redtail was the trustee of the Trust. The offer made by the first defendant is pleaded as an offer to subscribe for a prescribed interest under the Corporations Law. However at the time the offers were made Redtail was not a public corporation, there was no approved Deed in place, and no prospectus. Thus it is pleaded there have been contraventions of the Corporations Law and the Directors were knowingly concerned with the contraventions.
(c)the third defendant on the basis he was, pursuant to the Corporations Law, a Director of Redtail or was a promoter of Redtail, and was involved or knowingly concerned with contraventions of the Corporations Law.
(d)the fourth defendant on the basis he was a certificated legal practitioner and by describing himself in the offer as solicitor to the investment has thereby become involved in a contravention of the Corporations Law.
The plaintiffs have brought a further application seeking leave to file and serve an amended statement of claim. The fourth defendant opposes the application for leave.
As against the first and second defendants the essence of the cause of action is misleading and deceptive conduct, breach of contract, and negligence. The material facts and particulars to support the causes are pleaded in par 5 to par 22.
The cause against the third defendant begins at par 23 and pleads the involvement of Redtail. At par 36 the pleading raises a cause against the Directors and at par 39 specific pleas are made against the third defendant. Broadly those pleas are crafted to catch the third defendant as being involved or knowingly concerned in a contravention of the Corporations Law.
At par 24 the plaintiffs plead Redtail contravened the Corporations Law by making offers where:
(a)Redtail was not a public corporation – contravening s 1064(1) Corporations Law
(b)there was no approved Deed in force – contravening s 1065(1) Corporations Law
(c)there was no prospectus lodged and the Offers were not attached to the prospectus - contravening s 1019(1) and s 1020 Corporations Law.
The plaintiffs then plead at par 25 that but for the breaches of the Corporations Law the plaintiffs would not have invested in the Trust because, if there had been an approved Deed and prospectus the matters pleaded in par 9 to par 12 would not have occurred because no public corporation or trustee would have engaged in that conduct. Alternatively no offer would have been made because no public corporation or trustee would have participated.
As against the fourth defendant the plaintiffs plead the fourth defendant was involved in contraventions of the Corporations Law as stated in par 6 above. The particulars of that plea are that the fourth defendant advised Redtail the offers were an excluded issue and but for that advice the plaintiffs would not have invested in the Trust by reason of the matters stated in par 7 above.
The fourth defendant's counsel submits that the particulars are not sufficient, at law, to establish that the fourth defendant was involved in an alleged contravention. Paragraph 44.1 merely states the fourth defendant advised Redtail that the offers were an excluded issue. In my opinion par 44 is sufficient to raise a cause of action against the fourth defendant.
The pleading against the fourth defendant does not however specify under what section of the Corporations Law the fourth defendant falls. Some guidance is given in the prayer for relief which mentions s 1005 Corporations Law. In s 1006(2) the reference in s 1005(1) to a person involved includes reference to a person named in the prospectus, with their consent, as solicitor of the corporation.
There is no plea in par 44 that the fourth defendant was named, with their consent, in the prospectus. In my opinion the issue of consent is a material fact going to the right to sue and its omission is fatal to the cause.
The fourth defendant's counsel submits there is no authority to support the plaintiffs' contention that if a solicitor were to wrongly advise an offer constituted an offer of a prescribed interest that, by that fact, the solicitor would be knowingly involved in a contravention of the Corporations Law.
The fact there is no authority does not in itself detract from the plea. It is a matter for the Judge after hearing the evidence to determine if, after giving wrong advice and lending their name to the prospectus, that a solicitor was knowingly involved in a contravention. That is a matter of evidence, not an issue on the pleading of fact.
Fourth defendant's counsel submits that the advice as pleaded in par 44.1 is subject to a claim of legal professional privilege. That question of privilege has not been resolved and thus the plea ought not be raised. Fourth defendant's counsel also submits that until the question of privilege is resolved the plaintiffs would not be able to give any particulars of the pleadings.
This again comes down to a question of evidence. The pleading states the fact but it may well be that there is no admissible evidence to support that fact. The plaintiffs' claim against the fourth defendant would fail on that point. But that is an issue at trial and not on the pleading. It may well be the plaintiffs may not be able to particularise the plea but that in itself is not fatal to the plea. Further, it is the content of the advice that goes to the question of privilege, whilst the plea the advice was given is a matter of fact.
The fourth defendant's counsel submits there is no nexus between the alleged contravention and loss suffered. Up to par 22 of the Minute the pleading states that the offer contained an offer to apply for priority writs and that by reason of a number of representations made by the first defendant as to the value of the investment and the credit worthiness of the second defendant the plaintiffs accepted the offer. Alternatively there is a plea in negligence relating to the quality of the advice.
In the context of the pleading thus far the offer provides a vehicle only for the plaintiffs to enter into a contract, induced as they allege by representations and negligence.
The nexus for the plea that the fourth defendant was involved in a contravention lies in par 24 and par 25 of the Minute. The fourth defendant's counsel argues that no loss is alleged to arise out of the fact that Redtail was not a public corporation. However at par 25.1 the plaintiffs plead that the plaintiffs would not have invested in the Trust because had there been a prospectus the contraventions would not have occurred because no public corporation would have engaged in the conduct. Alternatively, at par 25.2 the plea is no offer would have been made.
In my opinion the plea in par 25.1 and par 25.2 provide a sufficient basis and particularisation of the plea at par 44. The essence, and sequence, of the plea is that but for the advice given by the fourth defendant, Redtail would not have made the offer and therefore the plaintiffs would not have invested in the Trust. That plea is a sustainable plea and I can find no objection to it.
Finally, fourth defendant's counsel submits that there is no pleading of a representation to investors that an Approved Deed was in force. In my opinion that objection misses the point of the pleading. The pleading is, had Redtail been a public corporation there would have been no misrepresentations or, alternatively, had there been an Approved Deed no public corporation would have engaged in the conduct. There is no issue about representation of an Approved Deed being in force.
I am of the opinion that the Minute of Further Amended Statement of Claim does not adequately set out the material facts to ground a cause of action against the fourth defendant on the basis that the cause is grounded on s 1005(1) Corporations Law and the material facts within that section have not been pleaded.
I will hear counsel as to the orders sought and on costs.