Gialouris, G. v Petlee P/L

[1994] FCA 748

JUDGMENT No. .....- 7+% J ~ Y ........ .. .w.r

IN THE FEDERAL COURT OF AUSTRALIA 1

lsEW SO- WALES DISTRICT REGISTRY ) No. G 318 of 1993

GENERAL DIVISION )

GEORGB GIALOURIS

4 RUCCI PTY LIMITED (ACN 003 564

674)

Applicants

AND :

PETLEE PTY LIMITED (Receiver & Manager Appointed) (ACN 000 043 096)

~irst Respondent

4 RUCCI AUSTRALIA PTY LIMITED

(In Liquidation) (ACN 057 068
747)

Second Respondent

ALAN PETTERSON

Fourth Respondent

RECEIVED	ROBERT FREDERICK PE'lTERSON
FEDERAL W R T OF	Fifth Respondent

PRINCIPAL	JOHN HAROLD PETTERSON Sixth Respondent
BRUCE CHARLES HIBBARD Seventh Respondent

19 August, 1994 when the proceedings were stood over to 2
C O W :	LINDGREN J
PLACE :	SYDNEY
DATE :	9 SEPTEMBER 1994

RESONS FOR JUDGMEm

There is before me today a motion brought by the first, fourth, fifth, sixth and seventh respondents by notice of motion filed on 4 August, 1994 for orders that paragraphs 20A and 20B of the Further Amended Statement of Claim filed on 22

July, 1994 be struck out. The return date of the motion was

September, 1994. On that date, without any concession, the applicants supplied to the respondents a second document headed "Further Amended Statement of Claim".

Today it has been argued by the moving respondents that this further pleading is also defective. The defect is said to arise out of paragraph 28. The respondents had indicated by letters dated 15 June 1994 and 11 July 1994 to the applicants that they were not content with that paragraph and would wish to apply for an order that it be struck out. I indicated in the course of argument that I was disposed not to make an order striking out the paragraph. Nothing has been put to dissuade me from the tentative view which I formed that it should not be ordered to be struck out.

The parties have agreed on other directions to be made today but not on the question of costs on the notice of motion or in relation to the hearing today and it is to the question of costs that this present judgment relates.

The applicants and the first respondent were joint venturers. The second respondent was their joint venture vehicle. The fourth, fifth, sixth and seventh respondents were directors of the first respondent. (The applicants discontinued against the third respondent on 25 June 1993. ) The second respondent

borrowed from the ANZ Bank ("the Bank") for the purposes of	the joint venture. The second respondent and the joint
applicants lost money invested.
Paragraph 20A of the earlier Further Amended Statement of Claim filed on 22 July 1994 pleaded in the terms of S. 75B of the m d e Practices Acf 1974 ("the Act") that the fourth, fifth, sixth and seventh respondents, they being directors of the first respondent, were involved in a contravention of S.
52 of the Act by the first respondent in that theyr

venture generally failed, in consequence of which the

" ( a ) a ided , a b e t t e d , counsel led and procured the F i r s t

Respondent's contravent ion o f S . 52 of the Act; or

(b) were d i r e c t l y or i n d i r e c t l y concerned i n o r p a r t y to

the	F i r s t	Respondent's	s a i d	contravent ion	o f	t h e
A c t " .

The contravention of S. 52 by the first respondent which had been pleaded was, briefly, that the first respondent represented to the Bank that a certain mqrtgage debenture and a certain guarantee given to it by the second respondent were duly given and had been duly authorised, whereas this was not the case. The reason why this was said npt to be the case is that the applicants, who, it will recalled, were the CO-joint venturers with the first respondent, had known nothing about it.

Paragraph 20B pleaded that the Bank was induced by that misleading and deceptive conduct to enter into the mortgage debenture and guarantee with the second respondent. The same paragraph pleaded that upon default of the first respondent, the Bank, in exercise of its powers under the mortgage debenture and guarantee, appointed a receiver and manager to the second respondent:

" . . . thereby causing l o s s and damage t o the app l i can t s

and each o f them."

deceptive conduct, breaches of fiduciary duty and/or breaches	Paragraph 28 pleaded that by reason of the misleading and
of the joint venture agreement, the applicants and each of them suffered loss and damage in that they would be unable to recover assets and other property which they contributed to the joint venture in good faith. As well, that paragraph pleaded other losses.
It will be noted that paragraph 20A did not plead facts constituting the aiding, abetting, counselling and procuring or constituting the "being concerned in or party to" the contravention by the first respondent of the Act. Mr Harvey of counsel for the applicants, submits that it is plain that the facts relied upon were that the fourth, fifth, sixth and seventh respondents were directors of the first respondent. The directorships had indeed been pleaded in paragraph 4 of the original Further Amended Statement of Claim.
If this submission were correct it would mean, for example, that it is a sufficient fact in any case where S. 75B is relied upon that the respondent in question happened to be a director of the financial or trading cowration against which contravention is alleged. It would mean, for example, that in any case where "statutory damages" were sought under E. 82 of the Act against a large public company, each director would also be liable by reason of nothing more than the fact of the directorship. This is not correct: see, for example, Xorke v Bpes Lucae Ptv Lt4 (1983) 68 FLR 268 (FCA/Fisher J) at 272, affirmed by the High Court at (1985) 158 CLR 661 (see esp at 666-670); S 61 U Constructions Ptv Lt4 v Westworld Pro~erty
Holdinas Ptv Ltd (1988) ATPR 40-854; Crocodile Market- v

th Vintners Ptv Ltd (1990) ATPR 41-000.

Even if it were correct (which it is not) that the mere fact of directorship supported the pleading in sub-paragraphs (a)

make it plain that it was the fact of directorship without	and (b) of paragraph 20A quoted earlier, paragraph 20A did not
more that was being relied upon. I think therefore that the objection taken by the moving respondents to paragraph 20A was well founded and that their motion would have succeeded in that respect.
I now turn to paragraph 20B. That paragraph seeks to plead a chain of causation of loss. However, while it does plead a chain of causation of loss in terms of loss suffered by the second respondent, it does not plead a chain of causation of loes suffered by the applicants. This is not, in my view, overcome by paragraph 28. I therefore think that the
objection to paragraph 20B was also well founded and that if I had had to determine the motion, it would have succeeded in relation to paragraph 20B also.
It follows that in my view the first, fourth, fifth, sixth and seventh respondents are entitled to an order that the applicants pay their costs of the motion brought by notice of motion filed 4 August 1994 returnable on 19 August 1994. Mr Harvey has made a point in relation to two of the appearances associated with that motion. It may well be that the taxing officer will not allow certain costs of the appearances on behalf of the first, fourth, fifth, sixth and seventh respondents. This is not a matter for me this morning.
Coming to the second Further Amended Statement of Claim, it has been argued today by Mr Houghton, for the respondents, that paragraph 28 of this document is defective in that the pleading of loss in it cannot stand with the pleading of acceptance of repudiation of contract contained in paragraph 23. Shortly, paragraph 23 pleads that by reason of breaches of the joint venture deed, the first respondent evinced an intention no longer to be bound by it and repudiated it, which repudiation was accepted by the second applicant by letter dated 27 April 1993. According to paragraph 23, the contract
Mr Houghton's point is that when paragraph 28 pleads that the date. constituted by the joint venture deed came to an end on that
loss suffered by the applicants arose from the appointment of a receiver to the second respondent in June 1993, this cannot possibly have caused the loss pleaded to the applicants for the reason that the joint venture agreement had, according to paragraph 23, already come to an end. However, as I indicated in the course of argument, I think that Mr Harvey is correct when he says that what paragraph 28 pleads is that the rights of the applicants under the joint venture deed were detrimentally affected at the very time of the giving of the mortgage debenture and instrument of guarantee by the second respondent on 11 February 1993, that clearly being a date which preceded the acceptance of repudiation of contract. I would therefore not hold that paragraph 28 is demurrable.
The relevant respondents had indicated their intention to proceed to seek an order that paragraph 28 of the second "further amended statement of claim" be struck out. I think that the applicants were entitled to believe that this meant that today before me this would be the matter for contest. I therefore think that there should be an order that the first, fourth, fifth, sixth and seventh respondents pay the costs of the applicants of the hearing today.
It follows that the formal orders of the Court will be as
f ollows r
(1) The motion brought by the f irst, fourth, fifth, sixth and seventh respondents by notice of motion filed 4 August, 1994 returnable 19 August, 1994 be dismissed;
(2) The applicants are ordered to pay the costs of the first, fourth, fifth, sixth and seventh respondents of that motion except for any costs of the hearing today;
(3) The first, fourth, fifth, sixth and seventh respondents

are ordered to pay the applicants' costs of the hearing

today.

Z certify that this and the preceding 5

pages are a true copy of the Reaeons for Judgment of the Honourable Justice Lindgren

Associate r d d - d y

Dated r 13 0ctodr 1994

-8	9 September 1994
EIAGe:	Sydney
:	m	-	9 September 1994
ADDOBT(II1CBBz	Mr I Harvey of counsel instructed by
Stewart Levitt h Company appeared for the applicants.
Mr E Houghton of Sly h Weigall appeared
for the first, fourth, fifth, sixth and seventh respondents.