Gerring Pty Ltd v Mostert, Louis Lindes

[1998] FCA 805

FEDERAL COURT OF AUSTRALIA

PROCEDURE - leave to amend pleading - further re-amended cross-claim - whether leave should be granted.

Federal Court Rules, O 13 r2

GERRING PTY LTD (ACN 009 105 926) v LOUIS LINDES MOSTERT & SUSANNA MARIA MOSTERT

R D NICHOLSON J
PERTH

10 JULY 1998

LIMITED DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

WAG 3059 of   1995

BETWEEN:

GERRING PTY LTD (ACN 009 105 926)
Applicant

AND:

LOUIS LINDES MOSTERT
First Respondent

SUSANNA MARIA MOSTERT
Second Respondent

BY CROSS‑CLAIM:

LOUIS LINDES MOSTERT
Cross Claimant

AND:

SUSANNA MARIA MOSTERT
Second Cross-Claimant

AND:

PETER ARTHUR KYLE
First Cross-Respondent

GERRING PTY LTD (ACN 009 105 926)
Second Cross-Respondent

JUDGE:	R D NICHOLSON J
DATE OF ORDER:	10 JULY 1998
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1. The cross-claimants have leave to file the further re-amended cross-claim as further amended by concessions made at the hearing on 16 June 1998.

1. The cross-claimants and the first cross-respondent be heard as to costs.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

LIMITED DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAG 3059 of   1995

BETWEEN:

GERRING PTY LTD (ACN 009 105 926)
Applicant

AND:

LOUIS LINDES MOSTERT
First Respondent

SUSANNA MARIA MOSTERT
Second Respondent

BY CROSS‑CLAIM:

LOUIS LINDES MOSTERT
Cross Claimant

AND:

SUSANNA MARIA MOSTERT
Second Cross-Claimant

AND:

PETER ARTHUR KYLE
First Cross-Respondent

GERRING PTY LTD (ACN 009 105 926)
Second Cross-Respondent

JUDGE:	R D NICHOLSON J
DATE:	10 JULY 1998
PLACE:	PERTH

REASONS FOR JUDGMENT

HIS HONOUR:  This is an application pursuant to O 13 r 2 of the Federal Court Rules for leave to amend the cross‑claimant’s cross‑claim.  On 10 November 1997 I delivered reasons in response to submissions on behalf of the first‑cross respondent (“Mr Kyle”) seeking to have the cross‑claim dismissed or stayed.  In those reasons I concluded:

“No argument is advanced here for the cross-claimants that in their personal capacity as shareholders they can seek to recover the losses of Japie.  Therefore, so far as the pleading seeks to recover for Mr and Mrs Mostert a loss of Japie it cannot be allowed to stand.  This is because the liability of Mr and Mrs Mostert to the applicant under s 592 of the Corporations Law is a liability as a director and not in their personal capacity.  There is no pleading Mr Kyle had any fiduciary duty to them as directors or as agents of Japie.

Given the portion of the pleading relating to personal loss discloses a reasonable cause of action, I consider, consistently with the due caution appropriate to strike out applications, the cross‑claimants should be heard on whether they should have the opportunity to amend their pleadings to plead a fiduciary duty owed by Mr Kyle to them as agents of Japie.  On the face of it, such a pleading could only be supported by reference to Japie’s losses.  If that is not a case sought to be pleaded, the pleading would be subject to strike out in regard to the non‑personal claims in a manner to be determined by the Court.”

This view was reached by application of Gould v Vaggelas (1985) 157 CLR 215 at 219‑220, 253 and 269 particularly at 219 per Gibbs CJ; that is the effect of the pleading was that the first cross‑claimants (“Mr and Mrs Mostert”) were in large part seeking to bring a cause of action to recover the losses of Japie Pty Ltd (“Japie”).

Mr and Mrs Mostert accepted the opportunity to file a further re‑amended cross‑claim and did so on 5 February 1998 pursuant to leave granted on 11 December 1997.  On seeking the leave of the Court to the amendments in that document the cross‑claimants have again been called on to answer objections on behalf of Mr Kyle to the grant of leave.  For Mr Kyle it is submitted the further re-amended cross-claim suffers from the same deficiencies as the former.

In the reasons of 10 November 1997 I set out the nature of the claim and the cross‑claim.  The claim has since been settled.  The following are the relevant changes to the nature of the cross‑claim made in the further re‑amended version:

• Paragraph 6 would be amended to read:

“ 6.   From October 1989 to June 1990, Mr. Mostert negotiated with Cedar Developments and Gerring (the ‘Reynolds Parties’), for the development for profit of land in the State of Queensland utilising the Private Estates Concept (the ‘Queensland Development Project’), such negotiations being -

(a)for his own behalf from 17 October 1989 until 12 December 1989; and

(b)thereafter on behalf of Japie and on behalf of Mr. and Mrs. Mostert (together ‘the Mostert Parties’).”

• Paragraph 9 would be amended by the addition of the following paragraph which is preceded by the words “commencing October 1989 and ending approximately late 1991, Mr Kyle also”:

“(b)knew from October 1989, as was the case, that any funding to be advanced in relation to the business dealings referred to in sub‑paragraph (a) would be advanced by Mr and/or Mrs. Mostert and further that from December 1989 any such funds to be advanced by Japie and/or Bardot would first be advanced to or on behalf of Japie and/or Bardot by Mr. and/or Mrs. Mostert such that if Japie and/or Bardot was not repaid such funds from the business dealings, that the Mosterts, in turn, would not and could not be repaid the advances they made either directly to or on behalf of Japie and/or Bardot.”

• The pleading in par 10 of fiduciary duties owed by Mr Kyle would be amended to read “by reason of the solicitor and client relation between them, Mr Kyle owed to the Mostert Party and each of them, fiduciary duties of loyalty and fidelity...”.  The definition of “Mostert Parties” appears in the proposed re‑cast cl 6.

• In par 10A it would now be pleaded that when Mr Kyle allegedly did not disclose his personal interest or recommend the Mostert Parties take independent advice he acted “in breach of his fiduciary duty to the Mostert Parties pleaded in par 10 above”.

• Paragraph 33 would be amended to plead that Mr and Mrs Mostert have suffered loss and damage by making payments of the character pleaded in par 9(b) and incurring other loss by virtue of involvement in the so-called Queensland Development Project.

For Mr and Mrs Mostert it is submitted the combined effect of these amendments is that it is alleged Mr Kyle owed a fiduciary duty to all the Mostert Parties (including Mr and Mrs Mostert) and as a result of breaching his duty to all the Mostert Parties, Mr and Mrs Mostert have personally suffered loss and damage.  In short it is said the effect of the pleadings with these amendments is that there is no claim by Mr and Mrs Mostert for Japie’s losses.  Rather, the claim is for money lost as a result of the Mostert’s putting money into Japie in the circumstances set out in par 9(b).  Furthermore it is said the claim as now cast is not reliant upon any allegation that Japie was an agent or that the fiduciary duty was owed to Mr and Mrs Mostert as directors or agents of Japie.

It is also submitted for Mr and Mrs Mostert that as the claim is now based on the fiduciary duty there is no need for any analysis at this stage of whether there was any break in some chain of causation or whether the loss from the other transactions was too remote or if the subsequent breaches compounded or affected the loss in any way.  Indeed it is submitted that on the law such issues may well not arise in any event because of the concept of strict liability:  Unioil International Pty Ltd and Ors v Deloitte Touche Tohmatsu & Ors, unreported, Supreme Court of Western Australia, Ipp J, Library No 970352, 18 July 1997 at 95 citing Heytesbury Pty Ltd v Kelly; (unreported, Supreme Court of Western Australia, Ipp J, Library No 970161, 15 April 1997); Permanent Building Society v Wheeler (1994) 11 WAR 187 at 245‑247; and Target Holdings Ltd v Redferns (A Firm) [1995] 3 WLR 352 at 360. The issue is dealt with by the High Court in Maguire v Makaronis (1997) 71 ALJR 781. The case which it is sought to advance for Mr and Mrs Mostert, and which it is claimed the pleading allows, is that the entry into what is known as the First Kyle Agreement triggered the fiduciary duty and that the duty continued although after that agreement Japie became the contracting party.

In support of Mr Kyle it is submitted that the essence of the pleading has not changed from that found to contravene the Gould v Vaggelas point, it is submitted it is necessary to look at the First Kyle Agreement to see if there is anything in it which has given rise to the losses said to have been suffered by Japie in consequence of it having entered subsequently into other agreements in relation to the Queensland Development Project.  It is said examination of that agreement shows nothing flows from it.  However I accept the submission made for Mr and Mrs Mostert that it is of no assistance to refer to the First Kyle Agreement to determine whether there is a cut-off point in relation either to the relationships between the parties or the damage which was suffered.  It is open on the pleading to contention that when a different corporate vehicle (Japie) is brought in for subsequent agreements, the fiduciary relationship which was triggered on the first agreement subsists in the manner contended for in proposed par 9(b).

The plea of fiduciary duty being open, it follows it is not to the point it is not pleaded Japie and Bardot were not repaid the funds and that in consequence Mr and Mrs Mostert were not repaid or that the basis of non-recovery is not set out in the pleading.

Furthermore it is not the losses of Japie which are being claimed either expressly or impliedly.  Rather, it is the losses of Mr and Mrs Mostert from the alleged breach of fiduciary duty, albeit that those losses came as a consequence of advances to Japie.

I am accordingly unpersuaded by the principal submissions for Mr Kyle that leave should not be given for the amendments in the further re-amended cross-claim.

I am also unpersuaded by the submissions for Mr Kyle in respect of the so-called “additional deficiencies” as the contentions are set out in pars 12 to 39 of the written submissions on his behalf, save so far as concessions were made on behalf of Mr and Mrs Mostert in respect of pars 15, 17, 23, 34 and 39 of those submissions.  There is a further concession in respect of par 7 of the submissions for Mr Kyle.

Accordingly, for the above reasons the cross-claimants should be given leave to file the further re-amended cross-claim, as further amended by concessions made at the hearing.  I will hear counsel as to the question of costs of the application for leave to amend.

I certify that this and the preceding four(4) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice R D Nicholson

Associate:

Dated:            10 July 1998

Counsel for the Applicant:	N W McKerracher QC with N J Rohr
Solicitor for the Applicant:	Clayton Utz
Counsel for the Respondent:	G I Macnish
Solicitor for the Respondent:	Cocks Macnish
Date of Hearing:	16 June 1998
Date of Judgment:	10 July 1998