Glowatzky, Eric Josef v Insultech Group Pty Ltd

[1997] FCA 1035

FEDERAL COURT OF AUSTRALIA

PRACTICE AND PROCEDURE - Federal Court Rules O 15A r 6 - application for discovery from a prospective respondent - whether there is reasonable cause to believe the applicant may have a right to obtain relief - suspicion that sale of applicant’s shares took place at an undervalue - alleged breach of retainer by accountant - alleged misleading and deceptive conduct.

Trade Practices Act 1974 (Cth), s 52
Fair Trading Act 1987 (NSW), s 42, s 68
Federal Court Rules, O 15A r 6

Julius v Lord Bishop of Oxford (1880) 5 App Cas 214 cited.
Finance Facilities Pty Ltd v Federal Commissioner of Taxation (1971) 127 CLR 106 cited.
Paxus Services Ltd v People Bank Pty Ltd (1990) 99 ALR 728 followed.
Aiken v Neville Jeffress Pidler Pty Ltd (Gummow J, 20 Dec 1991, unreported)  cited.
Concrete Constructions Group Pty Ltd v Commonwealth of Australia (Sheppard J, 22 April 1996, unreported) cited.
Ricegrowers Co-operative Limited v ABC Containerline NV (Tamberlin J, 31 July 1996, unreported) cited.
Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 followed.

ERIC JOSEF GLOWATZKY v
INSULTECH GROUP PTY LIMITED & ANOR
NG 316 of 1997

BRANSON J
SYDNEY
2 OCTOBER 1997

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 316  of   1997

BETWEEN:

ERIC JOSEF GLOWATZKY
APPLICANT

AND:

INSULTECH GROUP PTY LIMITED (ACN 003 988 841)
FIRST RESPONDENT

MICHAEL CARL WATSON T/AS WATSON & PROUD
SECOND RESPONDENT

JUDGE:

BRANSON J

DATE OF ORDER:

2 OCTOBER 1997

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

The application be dismissed.

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

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 316 of 1997

BETWEEN:

ERIC JOSEF GLOWATZKY
APPLICANT

AND:

INSULTECH GROUP PTY LIMITED (ACN 003 988 841)
FIRST RESPONDENT

MICHAEL CARL WATSON T/AS WATSON & PROUD
SECOND RESPONDENT

JUDGE:	BRANSON J
DATE:	2 OCTOBER 1997
PLACE:	SYDNEY

REASONS FOR JUDGMENT

This is an application made pursuant to O 15A r 6 of the Federal Court Rules for discovery from a prospective respondent.

Order 15A r 6 provides as follows:

“Where -

(a)there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court from a person whose description has been ascertained;

(b)after making all reasonable inquiries, the applicant has not sufficient information to enable a decision to be made whether to commence a proceeding in the Court to obtain that relief; and

(c)there is reasonable cause to believe that that person has or is likely to have or has had or is likely to have had possession of any document relating to the question whether the applicant has the right to obtain the relief and that inspection of the document by the applicant would assist in making the decision -

the Court may order that that person shall make discovery to the applicant of any document of the kind described in paragraph (c).”

BACKGROUND FACTS
There is little dispute as to the facts against which this application is brought.  This recitation of such facts is taken largely from affidavits sworn by the applicant’s solicitors and the exhibits thereto.

In or about September 1990, the applicant, together with Oliviero Olivieri (“Mr Olivieri”) and a Mr Oddo incorporated the first respondent.  Each of the applicant and Messrs Olivieri and Oddo acquired shares in the first respondent, and the applicant and Mr Olivieri became directors of the first respondent.  The first respondent carries on business as an insulation contractor.

The applicant has never been involved in the day to day management or control of the first respondent.  However, during the period from in or about September 1990 to in or about March 1996, the applicant lent money to the first respondent.

It appears that the applicant made provision in his will for his interest in the first respondent to be transferred on his death as a donation to a German charitable trust.  This charitable trust enjoys tax exemption in the Federal Republic of Germany provided that its income, operation and spendings conform to certain regulations of the fiscal authorities of Baden-Württemberg, Germany.  To enable examination by such fiscal authorities of the anticipated acceptance by the trust of the donation of the applicant’s interest in the first respondent, an honorary director of the trust in September 1995 sought details concerning the first respondent, including “copies of annual reports, balance sheets and profit and loss statements duly audited since the company’s inception in 1991”.

The above request was conveyed to Mr Olivieri by the applicant’s solicitors by letter dated 12 October 1995.  Mr Olivieri’s response, provided by his solicitors by letter dated 8 November 1995, was that he did “not feel inclined to disclose to any would be beneficiary any confidential information concerning his company”.  The letter went on to note the applicant’s duties as a director and with respect to confidentiality.

Certain disharmony between the two directors of the first respondent developed following the above exchange.  During the second half of 1995 the applicant resolved to sell his shares in the first respondent.

On 31 January 1996, the applicant’s solicitors wrote to the second respondent concerning the first respondent in somewhat ambiguous terms.  On 13 February 1996, they sent him certain, apparently draft, financial records of the first respondent plus a list of “Matters for Attention”, which matters apparently concerned the accuracy of the first respondent’s draft financial statements as at 30 June 1995.  At a meeting held on 15 February 1996, at which the applicant, his legal advisers and the second respondent were present, the retainer of a valuer to value the first respondent was, amongst other things, discussed.

Shortly thereafter, a suggestion was made, it is not clear by whom, that the second respondent should value the first respondent.  Agreement was not reached on this suggestion, but Mr Olivieri’s solicitors advised that their client was “happy to have Mr Watson as Eric’s [ie the applicant’s] representative to investigate matters”.  Subsequently, on 26 February 1996, Mr Olivieri’s solicitors were advised by the applicant’s solicitors in the following terms:

“Our client has instructed Mr Watson to immediately examine the books and records of the company so that our client may receive advice in relation to approval of the company’s accounts for 1995.  In that regard, we should be grateful if you would confirm that your client will allow Mr Watson access to the company records at 9.00 am on Friday 1 March 1996.

As a separate matter, our client has instructed us to seek your client’s immediate undertaking that your client will not draw any cheques on the company’s account(s) for amounts over $5,000 without first obtaining the consent of our client.”

On the same day, a proposal was put forward, apparently by those advising Mr Olivieri, that a Mr Butler, a partner of the auditor of the first respondent, should value the first respondent at the applicant’s expense.  No such valuation ever took place.

On 27 February 1996, Mr Olivieri’s solicitors confirmed that the second respondent would be given access to the records of the first respondent on 1 March 1996, but the undertaking sought from Mr Olivieri was described by them as “unnecessary [sic] provocative at this stage of negotiations”.

On Monday 4 March 1996, the second respondent telephoned the solicitors of the applicant and confirmed that he had spent Friday 1 March 1996 with Mr Olivieri.  The solicitors’ file note of this conversation records, amongst other things -

“Michael saying it was a productive day, ending with Oliver [ie Mr Olivieri] fashioning an offer of sorts”.

The second respondent’s report (“the report”) consequent upon his visit to the premises of the first respondent on 1 March 1996 is dated 5 March 1996.  It is addressed to Mr Bill Wilson, Norton Smith & Co., Solicitors and Attorneys.  Mr Bill Wilson is acknowledged by the applicant to be a senior and experienced commercial solicitor who was acting at all relevant times on behalf of the applicant.  A “cc” notation at the end of the report suggests that a copy of it was provided to the applicant. 

In its opening paragraph, the report identifies the purpose of the second respondent’s visit as follows:

“My task was to examine the draft financial statements of the company at the 30th June 1995, particularly in the light of the adjustments sent to you by Mr Ross Chapman, the external auditor of Insultech, and which you passed on to me on the 13th February.”

The report goes on:

“Oliver was most co-operative and indeed spent the entire day with me.  All records that I requested were promptly made available.  Considering the changes to the draft financial statements proposed by Mr Chapman, I would pass the comment that those adjustments were prepared, in my opinion, with the same lack of accuracy as the draft financial statements.”

The report gives consideration to a number of items forming part of the financial statements and suggests possible adjustments.  However, nothing in the report suggests that the second respondent was in a position to form a considered view on the actual financial position of the first respondent as at 30 June 1995.

The final section of the report opens as follows:

“It became apparent to me during the course of Friday, that it was appropriate to explore the possibility of a resolution of this matter.  Oliver was quite approachable in that regard.  ...  I tried to negotiate a deal which will enable our mutual client, Mr Eric Glowatzky, to cease his association with the company as quickly as possible.”

This section of the report then sets out the details of the proposal: presumably the “offer of sorts” fashioned by Mr Olivieri, as the second respondent had described it on the telephone to the applicant’s solicitors.

The final paragraphs of the report read as follows:

“This is the best deal I could negotiate at this point.  Oliver has little money and I don’t see how he could lift this offer.  It is not an option that Eric would buy Oliver out.  With the outstanding issues, particularly of sales tax, I don’t believe that the business could be sold successfully, in the short term, as a going concern.  I do believe that Eric should distance himself from the company as soon as possible.  If the company was liquidated, I think that Eric would only recover his $800,000.

Yesterday Eric expressed the comment to me that Oliver should pay him back the $100,000 immediately and the other issues could await Eric’s return from overseas.  Oliver will not pay Eric the $100,000 before Saturday, and I don’t savour Oliver operating the company as a sole signatory during Eric’s absence.

I look forward to discussing the contents of this letter either this afternoon or tomorrow when we meet at 12.30.  I certainly believe that Eric should try to strike a deal before he goes overseas, even if it means deferring his trip for a short time.”

On 7 March 1996, heads of agreement between the applicant and the first respondent were drawn up, apparently by the second respondent, on working paper of his firm on which the client is noted as “Bill Watson - Insultech”.  The heads of agreement are annotated, and are signed by Mr Olivieri as follows:

“Agreed in principle subject to appropriate documentation.
[signed] OLIVER OLIVIERI.”

On 8 March 1996, a deed was entered into between the applicant, Mr Olivieri and the first respondent.  The recitals to the deed read as follows:

“AMr Olivieri and Mr Glowatzky are the only shareholders in the capital of the Company [ie the first respondent].

B.Mr Glowatzky has agreed to transfer his Shares in the Company to Mr Olivieri and Mr Olivieri has agreed to accept a transfer of the shares on the terms and conditions contained in this Agreement.”

Although the terms and conditions contained in the agreement follow the broad framework of the offer outlined in the report, there are significant differences of detail between the deed and the offer earlier outlined.

On 15 March 1996, the applicant’s signed transfer of his shares in the first respondent and his resignation as an office holder of the first respondent were exchanged for cheques drawn by Mr Olivieri in the applicant’s favour as required by the deed.  By that date, a variation of mortgage had been registered at the Land Titles Office to secure an additional loan made by the applicant to the first respondent pursuant to the terms of the deed.

In late 1986, the applicant asked his present solicitor, Mr D’Arcy Kelly of Holman Webb (“Mr Kelly”), to advise him on whether the purchase price paid by Mr Olivieri for the applicant’s shares in the first respondent was a fair and reasonable amount.

By letter dated 17 February 1997, Mr Kelly sought the comments of Alan Moffatt of Messrs Borough & Partners, Chartered Accountants (“Mr Moffatt”) on the following matters:

“A.What information and material should have been available to Erich Glowatzky to enable him to properly consider the disposition of his share holding in Insultech Group Pty Limited?

B.In what manner was the information and material which was made available to Erich Glowatzky, including material already held by him, misleading and deceptive?

C.As we understand it, Mr Glowatzky retained Michael Watson to advise him on the state of financial affairs of Insultech Group Pty Limited and also to provide an estimate of the value of Mr Glowatzky’s share holding in that company.  In what way did Mr Watson fail to carry out the terms of that retainer?”

I interpolate that it is now accepted by the applicant that par C of the above letter does not accurately reflect the terms of the second respondent’s retainer.

By letter dated 24 February 1997, addressed to Mr Kelly, Mr Moffatt identified a number of questions which would be required to be answered “in order to gain a better understanding as to the value of Mr Glowatzky’s shareholding in the Company and his need to retire as a director of the Company ...”.  It is not in dispute that the answers to these questions were not available to the second respondent as at the date of the report or at any time before the execution of the deed dated 8 March 1996.

The letter of 24 February 1997 also lists information and material which the author of the letter considers should have been available to the applicant, or his adviser, to consider properly the disposition of the applicant’s shareholding in the first respondent.  It is not in dispute that such information and material was not available to the applicant, Mr Wilson or the second respondent.  It is also not in dispute that such information and material is not presently available to the applicant or his advisers and that without it, or a substantial part of it, they are not in a position to instruct a third party to undertake an independent valuation of the shareholding of the applicant in the first respondent as at March 1996.

Mr Allsop SC, who with Ms Collins appeared for the applicant, frankly conceded that the applicant was not able to show that there was any matter raised by the second respondent in the final paragraphs of his report dealing with Mr Olivieri’s offer which was untrue or was a representation as to a future matter which the second respondent did not have reasonable grounds for making.  Indeed, Mr Allsop conceded that there was no evidence before me to suggest that the price at which Mr Glowatzky sold his shares was either unfair in the circumstances or failed to reflect the true value of such shares.  Mr Allsop, however, drew attention to the opinion expressed by Mr Moffatt that the second respondent had available to him inadequate information to reach a view as to the value of the shares.

Mr Allsop hypothesised a situation in which an accountant retained to advise on the sale of shares conducted only cursory examinations of some relevant papers before expressing an opinion as to the reasonableness of the offer price.  He went on:

“I mean he might have guessed right, in my hypothetical, he might have got absolutely spot on and to pay another valuer $75,000 to spend a week or two, or three there and bring out a valuation from Grant Samuel might light upon precisely the same amount of money, or indeed perhaps less.  But it does not gainsay the proposition, in my respectful submission, that if you find out that there has been, or there are, reasonable cause to believe that there has been a lack of attention to duty that you have reasonable cause to believe that you may have a cause of action.  Even if it is declaratory relief in this Court as to breach of section 52, that is a cause of action.”

ORDER 15A RULE 6
Order 15A r 6 of the Federal Court Rules gives the Court a discretion to order discovery from a prospective respondent where, and only where, each of the conditions specified in (a), (b) and (c) of r 6 is satisfied.  I see no reason to conclude that the words “the Court may order ...” are intended to give rise to an obligation, rather than a discretion, to order the discovery authorised by the rule where each of the conditions is satisfied (Julius v Lord Bishop of Oxford (1880) 5 App Cas 214; Finance Facilities Pty Ltd v Federal Commissioner of Taxation (1971) 127 CLR 106).

The condition principally in issue on the present application was the condition in par (a).  The reference in that paragraph to “a person whose description has been ascertained” distinguishes the circumstances in which r 6 has an application from those in which r 3 has an application.  Rule 3 is concerned with the circumstance in which “an applicant, having made reasonable inquiries, is unable to ascertain the description of a person sufficiently for the purpose of commencing a proceeding in the Court against that person ...”.  Debate before me concerning par (a) focussed on whether the applicant had demonstrated that “there is reasonable cause to believe that the applicant has or may have the right to obtain relief in the Court” from either or both of the respondents.

Paragraph (a) of r 6 postulates an objective test.  It is to be construed, like the rest of the rule, beneficially.  In Paxus Services Ltd v People Bank Pty Ltd (1990) 99 ALR 728 at 733 Burchett J said:

“It is no answer to the applicant’s application under r 6 to say that the proceeding is in the nature of a fishing expedition ...  Rule 6 is designed to enable the applicant, in a situation where his proof can rise no higher than the level the rule describes, to ascertain whether he has a case against the prospective respondent - that is, to ‘fish’ in the old sense ...

It would be unfortunate if a rule designed to amplify the court’s power to penetrate obscurities and uncertainties in the interests of justice were to be weakened by restrictive and unnecessary glosses.  I think that the rule is of a beneficial kind within the meaning of the well known principle of interpretation, and should be given the fullest scope its language will reasonably allow.  The proper brake on any excesses in its use is the discretion of the court, which is required to be exercised in the particular circumstances of each case.”  (citations omitted)

His Honour’s above approach has received general acceptance in the Court (see, for example, Aiken v Neville Jeffress Pidler Pty Ltd (Gummow J, 20 Dec 1991, unreported); Concrete Constructions Group Pty Ltd v Commonwealth of Australia (Sheppard J, 22 April 1996, unreported); Ricegrowers Co-operative Limited v ABC Containerline NV (Tamberlin J, 31 July 1996, unreported)).

SUBMISSIONS AND CONSIDERATION
The relief that the applicant is concerned to obtain in the Court, should he have a right to do so, is relief in respect of the sale of his shares in the first respondent to Mr Olivieri; a sale which he suspects may have taken place at an undervalue.

The applicant put his claim for discovery from the first respondent on the basis that he may have the right to obtain relief in the Court from the first respondent pursuant to s 52 of the Trade Practices Act 1974 (Cth) (“the TPA”).  Against the second respondent, the applicant put his claim on the basis that he may have the right to obtain relief in the Court from the second respondent -

(a)in contract for breach of his retainer or in negligence in the fulfilment of his retainer; or

(b)pursuant to s 42 of the Fair Trading Act 1987 (NSW) (“the FTA”). 

There was no contest between the parties with respect to condition (c) of r 6; it was accepted that if conditions (a) and (b) were satisfied, condition (c) would also be satisfied.  It was faintly suggested by counsel for the second respondent that condition (b) was not satisfied, in that the applicant had already made a decision to commence proceedings in the Court against the respondents.  Although I accept that the applicant wishes to commence proceedings against the respondents,  I am satisfied that he has not made a decision to do so.  If condition (a) is satisfied, I accept that condition (b) will also be satisfied.

I turn to consider condition (a).  The applicant does not contend that the evidence is such as to found a reasonable belief that the applicant has the right to obtain relief in the Court from either the first or the second respondent in respect of the sale of his shares.  The applicant’s case is put forward solely on the basis that he may have a right to obtain such relief in the Court from each of the respondents.

The possibility of a cause of action against the second respondent is said by the applicant to arise from the following:

(a)the report does not reflect the financial position of the first respondent;

(b)significant further financial information is required to assess the reliability of the report;

(c)there are reasonable grounds for believing that the second respondent did not obtain all of the information that he should have in undertaking his review;

(d)the second respondent appeared to depart from his retainer in negotiating a “deal which will enable our mutual client, Mr Eric Glowatzky, to cease his association with the company as quickly as possible”; and

(e)there are reasonable grounds for believing that the second respondent did not have available to him all of the information and material necessary to enable him properly to consider the disposition of the applicant’s shareholding in the first respondent.

The applicant puts his case against the first respondent under par (a) of r 6 as follows:

“In circumstances where the director of the first respondent who was in effect the managing director had in late 1995 been reluctant to provide information about the financial affairs of the respondent to the applicant, where by March 1996 the 1995 accounts of the first respondent had apparently not been passed, where the accounting records of the first respondent were less than satisfactory, where the draft financial material provided by the first respondent and the second respondent contained errors, where the first respondent undertook to provide access to its records to the second respondent and where there are reasonable grounds to believe that the second respondent may have failed to have before him all relevant information, the Applicant says that he has reasonable grounds to believe that he may have an action against the first respondent for failing to provide to the second respondent complete and accurate information.”

As to the matters which are said to give rise to the possibility of a cause of action against the second respondent, it is to be noted that the report does not purport to reflect accurately the financial position of the first respondent or to give an estimate of the value of Mr Glowatzky’s shareholding in the first respondent.  The report makes it plain that the author did not have available to him all of the information necessary to enable him to reach a concluded opinion as to the appropriateness of all items appearing in the draft financial statements of the first respondent as at 30 June 1995.

Moreover, the terms of the report make it plain that the second respondent did not, in fact, negotiate any concluded deal on behalf of the applicant.  What the report shows that he did was “to explore the possibility of a resolution” of the dispute between the applicant and Mr Olivieri and pass on, with certain comments thereon, an offer from Mr Olivieri that he described as “the best deal that I could negotiate at this point”.  Although the report expresses views relevant to an assessment of the offer, and tending to suggest in favour of its acceptance, it does not in terms advocate acceptance of the offer, which, it is to be remembered, the second respondent described over the telephone to the applicant’s solicitors as “an offer of sorts” fashioned by Mr Olivieri.

Although the report contains an expression of opinion as to the applicant’s likely recovery if the first respondent were liquidated, no suggestion is contained in the report that the second respondent had available to him all of the information and material necessary to enable him to express an expert view as to the value of the applicant’s shareholding in the first respondent.  The view expressed in the final sentence of the report was plainly offered, having regard to its context, on pragmatic and not valuation grounds.

Even if it could be established that the second respondent was initially retained to ascertain the actual financial position of the first respondent as at 30 June 1995, the history of events outlined above shows that the decision of the applicant to sell his shares in the first respondent to Mr Olivieri occurred at a time when, as the report made plain, the second respondent had not established the first respondent’s financial position.  Understandably he was not thereafter requested to do so.

Against this background, I turn to consider the causes of action which it is contended that the applicant may have against the second respondent.  The applicant has first identified causes of action in contract and negligence.  For the reasons expressed above I am not satisfied that there is reasonable cause to believe that the applicant has or may have the right to obtain relief from the second respondent on the basis that the second respondent breached a retainer to ascertain the actual financial position of the first respondent as at 30 June 1995, or on the basis that he fulfilled such retainer negligently.

As to the allegation of misleading or deceptive conduct, section 42(1) of the FTA provides as follows:

“A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

The issue of whether particular conduct is misleading or deceptive or likely to mislead or deceive is a question of fact.  As was pointed out by Deane and Fitzgerald JJ in Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202, such question is to be answered “by considering what is said and done against the background of all surrounding circumstances”.  Important circumstances surrounding the concluding portion of the report include the fact that the opening portion of the report makes it plain that its author does not have available to him sufficient information to place a value on the applicant’s shares in the first respondent, that the report does not purport to place a value on either the first respondent or the applicant’s shares in it, and that the second respondent directed the report, not to the applicant, but to an experienced commercial solicitor who was acting on the applicant’s behalf.   In my view, it is also a relevant circumstance that the applicant, presumably with the benefit of advice from his then solicitor, negotiated changes to the offer set out in the report;  he did not simply accept it unquestioningly.

This is not to say that the applicant may not be able to establish that some aspect or aspects of the concluding portion of the report was or were misleading or deceptive. However, on the evidence before me, I conclude that the case of the applicant in this regard is not strong. Moreover, to obtain relief under s 68 of the FTA in respect of such conduct, the applicant would have to establish that some loss or damage suffered by him was “by” such aspect or aspects of the report.  The only evidence of the applicant in this regard is that he relied on the accuracy of the report, and accepted its recommendation, when he instructed his solicitors concerning the sale of his shares in the first respondent.  This evidence is, in the circumstances, remarkable for its generality - what aspect of the report he relied upon is not identified and the recommendation to which it refers is not identified.

Further, as is noted above, the evidence before me does not establish that the applicant has any cause for dissatisfaction with the price received by him for his shares in the first respondent. If the applicant did not sell his shares at an undervalue, he will have no claim pursuant to s 68 of the FTA, and it may be doubted that the Court would be persuaded to grant him a declaration pursuant to s 42 of the FTA.

There is, I consider, strength in the submission of Mr Whitford, counsel for the second respondent, that, the applicant having taken, with the benefit of legal advice, a conscious decision to sell his shares in the first respondent without obtaining a valuation of them, is seeking to use O 15A r 6 to enable him now to obtain such a valuation.

In all of the circumstances, I have concluded that the evidence before me is insufficient to establish that there is reasonable cause to believe that the applicant may have the right to obtain relief in the Court from the second respondent in respect of the sale of his shares in the first respondent.  Although I accept that full disclosure of all evidence relating to the sale of the applicant’s shares in the first respondent, their then value, the information conveyed to the second respondent by Mr Olivieri, and the basis upon which the second respondent made certain representations in the report as to future matters, might reveal a cause of action in the applicant against the second respondent, I consider that the uncertainty which exists as to a number of the elements of the envisaged cause of action in this case compounds for the purposes of O 15A r 6.  In other words, whilst uncertainty as to only one element of a cause of action might be compatible with the “reasonable cause to believe” required by the paragraph, uncertainty as to a number of such elements may be sufficient to undermine the reasonableness of the cause to believe. In the circumstances of this case, I conclude that the combined effect of the levels of uncertainty affecting the elements of the suggested cause of action pursuant to the FTA is such that I cannot be satisfied that there is reasonable cause to believe that the applicant may have the right to obtain relief in the Court from the second respondent.

If I am wrong in my approach to O 15A r 6(a), I would, in any event, in the exercise of my discretion, refuse the applicant relief under O 15A r 6 in the particular circumstances of this case.  Assuming that there is reasonable cause to believe that the applicant may have the right to obtain relief in the Court from the respondents, the possibility has not, in my view, been shown to be sufficiently strong to justify an order pursuant to O 15A r 6.

It was, it seemed to me, accepted that the claim against the first respondent could not rise higher than that against the second respondent.  Even if it were not so accepted, I am of the view that such claim must also fail.  The cause of action which it is suggested that there is reasonable cause to believe that the applicant may have against the first respondent is even more tenuous than that which it is suggested he may have against the second respondent.   That is, in the circumstances, I am not satisfied that there is reasonable cause to believe that the applicant may have the right to obtain relief in the Court from the first respondent.

The application will be dismissed.

I certify that this and the preceding thirteen (13) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson

Associate:
Dated:             

Counsel for the Applicant:	Mr J.L.B. Allsop SC with Ms E.A. Collins
Solicitor for the Applicant:	Holman Webb
Counsel for the first Respondent:	Mr I. Roche
Solicitors for the second Respondent:	Christopher Lee & Associates
Counsel for the second Respondent:	Mr P. Whitford
Solicitors for the second Respondent:	Corrs Chambers Westgarth

Date of hearing:  15 August 1997
Date of judgment:  2 October 1997