Guglielman v Trescowthick

Case [2004] FCA 326

FEDERAL COURT OF AUSTRALIA

Guglielman v Trescowthick [2004] FCA 326

PRACTICE & PROCEDURE – pleadings – application to strike out statement of claim – whether the statement of claim discloses no reasonable cause of action, has a tendency to cause prejudice, embarrassment or delay and is an abuse of process of the Court – whether the requirements to sustain a cause of action under s 52 Trade Practices Act 1974 (Cth) (TPA) and s 56 Fair Trading Act 1987 (SA) (FTA) are made out in the statement of claim – whether the statement of claim alleges conduct which involved the use of postal, telegraphic or telephonic services to bring it within the extended operation of s 52 TPA – whether the statement of claim pleads the material facts enlivening liability under s 52 TPA and s 12DA Australian Securities and Investment Commission Act 1989 (Cth) (ASICA) – whether the conduct alleged in the statement of claim could arguably fall within the description of being ‘in relation to financial services’ – whether the statement of claim pleads any material fact which, if proven, would establish that the respondents made any of the communications – whether the pleading in relation to s 999 Corporations Law (Cth) is so broad that it is embarrassing and meaningless – whether the statement of claim contains allegations relating to the elements of causation and loss in the causes of action based upon s 52 TPA, s 56 FTA and s 12DA ASICA – whether the statement of claim is embarrassing because it does not identify the source of the alleged statutory duty

Australian Securities and Investment Commission Act 1989 (Cth) ss 12AA(3), 12AE, 12BA, 12DA, 12GF, 12GH(4)
Corporations Act 2001 (Cth) s 1400
Corporate Law Economic Reform Program Act 1999 (Cth)
Corporate Law Reform Act 1994 (Cth)
Corporate Law Reform Bill 1993 (Cth)
Corporations Law (Cth) ss 79, 670A, 728, 729, 731, 733, 765, 995, 995A, 999, 1005; up to 30 June 1998: ss 295A, 295B, 302, 303, 305; after 1 July 1998: ss 292, 295, 298, 302; up to 13 March 2000: s 232; after 13 March 2000: ss 180, 185, 1317H
Fair Trading Act 1987 (SA) ss 54, 56, 84
Federal Court of Australia Act 1976 (Cth)
Federal Court Rules (Cth) O 11 r 16
Financial Sector Reform (Consequential Amendments) Act 1998 (Cth)
Trade Practices Act 1974 (Cth) ss 6(3), 51N, 51A, 52, 75B, 82, 84(4)

Dey v Victorian Railway Commissioners (1949) 78 CLR 62 cited
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 cited
Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 applied
McKellar v Container Terminal Management Services Ltd (1999) 165 ALR 409; [1999] FCA 1101 applied
Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 cited
Australian Ocean Line Pty Ltd v West Australian Newspapers (1983) 66 FLR 453 cited
Universal Telecasters (Qld) Ltd v Guthrie (1978) 32 FLR 360 cited
Gardam v George Wills &…

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AGLC
Guglielman v Trescowthick [2004] FCA 326
Case
[2004] FCA 326
Decision Date

CaseChat Overview and Summary

In the case of Guglielman v Trescowthick, the plaintiff, Guglielman, brought a proceeding against Trescowthick and others, asserting that they had engaged in misleading or deceptive conduct and had contravened certain provisions of the Trade Practices Act 1974 (Cth) (TPA) and the Australian Securities and Investments Commission Act 2001 (Cth) (ASICA). The court had to determine if the Statement of Claim (SOC) was sufficient to plead a case against the respondents and if it identified the necessary conduct and facts to support the claims under the TPA and ASICA. The respondents argued that the SOC did not adequately plead the required facts to establish their liability under the statutes.

The central legal issues before the court were whether the SOC adequately pleaded the respondents' conduct and facts that would enliven the statutory provisions of the TPA and ASICA. Specifically, the court needed to assess if the SOC sufficiently identified the conduct of the respondents and if it provided enough detail to meet the requirements of the legislation. The court also had to determine if the pleadings were sufficient to argue that the statutory provisions applied to the respondents, given their roles and the use of postal and telephonic services by an agent.

The court concluded that the SOC did plead conduct on the part of the respondents, which met the requirements of proper pleading. It identified with sufficient precision the nature of the conduct alleged. Furthermore, the court found that the SOC sufficiently pleaded facts to enliven the relevant statutory provisions, including the use of postal, telegraphic, or telephonic services by an agent acting on behalf of the respondents. The court held that the pleadings were sufficient to maintain an arguable case against the respondents under the TPA and ASICA.

In light of the findings, the court indicated that it would give the parties an opportunity to consider the reasons for the decision before making the proposed orders. The court emphasized that it had not formed any views on the merits of the case or the likelihood of the applicant proving the pleaded facts. The next steps in the proceeding would involve the filing of defences and addressing a motion to dismiss the application as a representative proceeding.

Orders

Orders of the court

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Background

Background to the litigation

It is not necessary to address the difference in their Honours’ views. For present purposes, the question is whether the SOC presents an arguable case for relief in terms which satisfy the requirements of a proper pleading. I have concluded that it does plead conduct on the part of the respondents, to which then the other elements of the relevant statutory cause of action should be applied. I have also concluded that it identifies with sufficient precision the nature of the conduct in which the respondents are said to have engaged.(b) Does the SOC plead facts to enliven s 52 of the TPA? The respondents contend there is a further fundamental flaw in the SOC because it fails to plead material facts which enliven the claimed liability under s 52 of the TPA (and s 12DA of the ASICA). Even if the SOC pleads that the respondents engaged in conduct as alleged, because their asserted liability is as principal contraveners, and is not accessorial, s 52 of the TPA can only apply in the limited circumstances to which s 6(3) of the TPA refers. The SOC recognises that it is necessary, for that purpose, to plead facts which enliven the extended operation of s 52 by s 6(3) of the TPA (and s 12DA of the ASICA by s 12AA(3) of the ASICA). The SOC, in respect of each communication, pleads that the publication involved the use of postal, telegraphic or telephonic services so as to attract the operation of those provisions. Each of the publications is alleged to have been communicated by Mr Hodgson either by post or by facsimile. The respondents are not themselves alleged to have physically posted or sent by facsimile the communications. Synman v Cooper (1989) 91 ALR 209 at 217 supports the view that s 6(3) of the TPA should be given a broad construction. I do not consider that feature of the SOC means the claims under the TPA (or under the ASICA) are clearly unsustainable. Section 6(3) of the TPA (and s 12AA(3) of the ASICA) provide that s 52 of the TPA (and s 12DA of the ASICA) apply as if they were expressly confined to engaging in conduct to the extent to which the conduct ‘involves the use of’ postal, telegraphic or telephonic services. If the conduct involves the use of such services, s 52 of the TPA (and s 12DA of the ASICA) apply to the respondents as individuals. The SOC alleges the respondents engaged in the conduct of making the representations. That conduct is asserted to include Mr Hodgson for the respondents using postal and telegraphic services. By reason of s 84(4) of the TPA (and s 12GH(4) of the ASICA), it is arguable that his use of those services was use of those services by the respondents. Those provisions provide that conduct engaged in by one person as agent for another person is conduct of that other person. In addition, in my view, it is arguable that the pleading that the respondents had Mr Hodgson publish the representations, and that he did so by use of postal and telegraphic services, is sufficient to attract the extended operation of s 52 of the TPA (and s 12DA of the ASICA) because then their conduct involved the use of those services. Once the step is taken (as I have done) of accepting that the conduct alleged against the respondents arguably may amount to conduct of the respondents which involved the publication of the representations, the allegations in the SOC are sufficient to maintain an arguable case that the conduct involved the use of postal or telegraphic services.(2) The alternative claims

Evidence

Evidence Before The Court

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Decision

Reasons for decision

MANSFIELD J
For the reasons given at [96] above, if at the end of the hearing, certain group members may be entitled to relief in respect of the 19 May 2000 prospectus, the absence of reference to s 729 or to ss 731 or 733 of the Corporations Law in the SOC will not be fatal to their entitlement, provided the respondents have had a fair opportunity to know the case they must meet, and to meet it.CONCLUSION I will give the parties the opportunity to consider these reasons for decision before making the orders proposed. I direct the applicant in the first place to prepare minutes of order to reflect these reasons for consideration by the other parties before submitting them to the Court. It is apparent, in an application such as the present, the Court is not called upon to finally resolve any complex questions of law or fact. Its role is a more confined one. I am not to be taken as having formed any views as to the prospects of the applicant establishing any of the facts which have been pleaded in the SOC. In particular, the SOC alleges that the respondents variously were negligent and in breach of their statutory duty in causing the publication of the various pleaded communications. There is a very considerable step between attributing to a non-executive director responsibility for the contents of a communication (if that were to be proven) and attributing to that director a lack of reasonable care in expressing the contents of the communication. Non-executive directors are not agents of the corporation. Generally speaking, there is an obvious need for a non-executive director to be informed by the senior employees of a corporation about its affairs, and to be in a position to make decisions on the basis of such information. Section 180(1)(a) and (b) of the Corporations Law appear to recognise that circumstance. However, as I have elsewhere noted, such matters are to be decided upon the whole of the evidence. The next step in the proceeding, apart from the filing of defences, would appear to be addressing the motion of the second to fifth respondents to dismiss the application to the extent that it is a representative proceeding. As to that, see the discussion by Sackville J in Philip Morris (Australia) Ltd v Nixon (2000) 170 ALR 487 at 514-517; [123]-[137].

Ratio Decidendi

Legal Principle Established

Established by: MANSFIELD J

A clear legislative intent is that, whether the conduct be a financial service, or whether it be a dealing in securities, provided conduct attracted the operation of s 52 of the TPA and s 56 of the FTA, it would be actionable, but progressively by refinement of the operation of those sections, such conduct in relation to financial services would be actionable under s 12DA of the ASICA rather than under the TPA, and at a later point, in respect of financial services involving dealings in securities, under s 999 of the Corporations Law only. It is not necessary to refer further to s 995(2) of the Corporations Law as the SOC relies only upon alleged contraventions of s 999.CONSIDERATION OF CONTENTIONS Before addressing the various causes of action alleged, it should be noted that the SOC does not allege accessorial liability on the part of any of the respondents. Sections 12GF of the ASICA and s 75B of the TPA respectively specify circumstances in which personal accessorial liability for the contravention of s 12DA of the ASICA and s 52 of the TPA by a corporation may arise. Section 79 of the Corporations Law performs the same function in relation to contraventions of the Corporations Law. The allegations in the SOC against each of the respondents are that they are each liable as principals for the causes of action pleaded.(1) The FTA and the TPA It is convenient to address the allegations concerning contravention of s 56 of the FTA first. It applied in respect of all the identified periods, except that after 13 March 2000 it did not apply in relation to dealings in securities. To sustain a cause of action under s 56 of the FTA against each of the respondents, in respect of the periods that each was a director of Holdings, it is necessary that the SOC plead material facts which could show:(1)conduct engaged in by each of the respondents personally;(2)in trade or commerce;(3)which was misleading or deceptive or was likely to mislead or deceive;and that(4)the applicant relied on the conduct of respondents; and(5)the applicant thereby suffered loss or damage; and(6)from 13 March 2000, the conduct was not in relation to dealings in securities.For the cause of action under s 52 of the TPA, it is also necessary to plead facts to establish that the conduct involved the use of postal, telegraphic or telephonic services. I note that there was no contention put on behalf of any of the respondents that the conduct alleged (which they accepted as being conduct of Holdings) was not arguably in trade or commerce, or that it was not alleged to be misleading or deceptive or likely to mislead or deceive. The respondents’ contentions concerned the pleading of conduct engaged in by the respondents. It was further contended on behalf of the respondents that the SOC does not plead facts which may demonstrate a causal connection between the impugned conduct and the loss said to have been suffered by the applicant and by each group member. Finally, in relation to the cause of action under s 56 of the TPA, it was contended that the SOC does not plead that the conduct was engaged in in South Australia. Section 55 of the FTA limits the operation of the FTA to transactions that take place wholly or in part in South Australia, or to conduct that occurs and representations that are made wholly or partly in South Australia.