INKORN Pty Ltd v Herbert
[2000] WASC 24
•11 FEBRUARY 2000
INKORN PTY LTD & ANOR -v- HERBERT & ANOR [2000] WASC 24
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2000] WASC 24 | |
| Case No: | CIV:2160/1998 | 4 FEBRUARY 2000 | |
| Coram: | MASTER SANDERSON | 11/02/00 | |
| 6 | Judgment Part: | 1 of 1 | |
| Result: | Paragraphs struck out | ||
| PDF Version |
| Parties: | INKORN PTY LTD (ACN 009 236 337) CIVILS AUSTRALIA PTY LTD (ACN 009 289 105) JEFFREY LAURENCE HERBERT ARTHUR ANDERSEN (A FIRM) |
Catchwords: | Practice and procedure Application to strike out parts of statement of claim Duty owed by Receiver to mortgagor Duty to act bona fide Not open to plead duty to obtain best price on sale |
Legislation: | Corporations Law, s 420A |
Case References: | Australia and New Zealand Banking Group Limited v Bangadilly Pastoral Co Pty Ltd (1977) 139 CLR 195 Bridgetown/Greenbushes Friends of the Forest Inc v Executive Director of the Department of Conservation and Land Management (1997) 18 WAR 126 Cachalot Nominees Pty Ltd v Prime Nominees Pty Ltd [1984] WAR 380 Clark v UDC Finance Limited [1985] 2 NZLR 636 Commercial and General Acceptance Limited v Nixon (1982) 152 CLR 491 Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 Cuckmere Brick Co Ltd v Mutual Finance Limited [1971] Ch 949 Davy v Nathan Securities Limited (1989) 4 NZCLC 65,321 Expo International Pty Ltd v Chant [1979] 2 NSWLR 820 Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676 Standard Chartered Bank Ltd v Walker [1982] 3 All ER 938 State Bank of Victoria v Parry (1989) 7 ACLC 226 Westpac Banking Corporation Ltd v Kingsland (1991) 26 NSWLR 700 Appleglen Pty Ltd v Mainzeal Corporation Pty Ltd (1988) 79 ALR 634 Australian Growth Resources Corp Pty Ltd v Van Reesema (1988) 6 ACLC 529 Cape v Redarb Pty Ltd (1992) 8 ACSR 67 Caruso Australia Pty Ltd v Portec (Aust) Pty Ltd (1984) 1 FCR 311 Department of Trade & Industry v St Christopher Motorists Association Ltd [1974] 1 WLR 99 Duke Group Ltd (In Liq) v Pilmer (1998) 27 ACSR 1 Fitzsimmons v R (1996) 23 ACSR 355 Forsyth v Blundell (1973) 129 CLR 477 Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621 Kimberly Downs Pty Limited v Western Australia, unreported; SCt of WA; Library No 6414; 25 August 1986 Marchesi v Barnes [1970] VR 434 Medforth v Blake [1999] 3 All ER 97 Medical Defence Union Ltd v Department of Trade [1980] Ch 82 Movitor Pty Ltd (In Liq) v Sims (1996) 64 FCR 380 Prudential Insurance Company v Inland Revenue Commissioners [1904] 2 KB 658 Re Harrington Motor Co Ltd; Ex parte Chaplin [1928] Ch 105 Re Silverstein; Evenage Pty Ltd v Sutherland, unreported; Federal Court; 13 March 1998 Re William Felton & Co Pty Ltd (1998) 28 ACSR 228 Sir Lindsay Parkinson & Co Ltd v Triplan Ltd [1973] 1 QB 609 UTSA Pty Ltd (In Liq) v Ultra Tune Australia Pty Ltd [1997] 1 VR 667 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- CIVILS AUSTRALIA PTY LTD (ACN 009 289 105)
Plaintiffs
AND
JEFFREY LAURENCE HERBERT
First Defendant
ARTHUR ANDERSEN (A FIRM)
Second Defendant
Catchwords:
Practice and procedure - Application to strike out parts of statement of claim - Duty owed by Receiver to mortgagor - Duty to act bona fide - Not open to plead duty to obtain best price on sale
Legislation:
Corporations Law, s 420A
Result:
Paragraphs struck out
(Page 2)
Representation:
Counsel:
Plaintiffs : Mr K L Christensen
First Defendant : Mr M S Ferguson
Second Defendant : Mr M S Ferguson
Solicitors:
Plaintiffs : Tottle Christensen
First Defendant : Minter Ellison
Second Defendant : Minter Ellison
Case(s) referred to in judgment(s):
Australia and New Zealand Banking Group Limited v Bangadilly Pastoral Co Pty Ltd (1977) 139 CLR 195
Bridgetown/Greenbushes Friends of the Forest Inc v Executive Director of the Department of Conservation and Land Management (1997) 18 WAR 126
Cachalot Nominees Pty Ltd v Prime Nominees Pty Ltd [1984] WAR 380
Clark v UDC Finance Limited [1985] 2 NZLR 636
Commercial and General Acceptance Limited v Nixon (1982) 152 CLR 491
Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594
Cuckmere Brick Co Ltd v Mutual Finance Limited [1971] Ch 949
Davy v Nathan Securities Limited (1989) 4 NZCLC 65,321
Expo International Pty Ltd v Chant [1979] 2 NSWLR 820
Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676
Standard Chartered Bank Ltd v Walker [1982] 3 All ER 938
State Bank of Victoria v Parry (1989) 7 ACLC 226
Westpac Banking Corporation Ltd v Kingsland (1991) 26 NSWLR 700
Case(s) also cited:
Appleglen Pty Ltd v Mainzeal Corporation Pty Ltd (1988) 79 ALR 634
Australian Growth Resources Corp Pty Ltd v Van Reesema (1988) 6 ACLC 529
Cape v Redarb Pty Ltd (1992) 8 ACSR 67
Caruso Australia Pty Ltd v Portec (Aust) Pty Ltd (1984) 1 FCR 311
(Page 3)
Department of Trade & Industry v St Christopher Motorists Association Ltd [1974] 1 WLR 99
Duke Group Ltd (In Liq) v Pilmer (1998) 27 ACSR 1
Fitzsimmons v R (1996) 23 ACSR 355
Forsyth v Blundell (1973) 129 CLR 477
Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621
Kimberly Downs Pty Limited v Western Australia, unreported; SCt of WA; Library No 6414; 25 August 1986
Marchesi v Barnes [1970] VR 434
Medforth v Blake [1999] 3 All ER 97
Medical Defence Union Ltd v Department of Trade [1980] Ch 82
Movitor Pty Ltd (In Liq) v Sims (1996) 64 FCR 380
Prudential Insurance Company v Inland Revenue Commissioners [1904] 2 KB 658
Re Harrington Motor Co Ltd; Ex parte Chaplin [1928] Ch 105
Re Silverstein; Evenage Pty Ltd v Sutherland, unreported; Federal Court; 13 March 1998
Re William Felton & Co Pty Ltd (1998) 28 ACSR 228
Sir Lindsay Parkinson & Co Ltd v Triplan Ltd [1973] 1 QB 609
UTSA Pty Ltd (In Liq) v Ultra Tune Australia Pty Ltd [1997] 1 VR 667
(Page 4)
1 MASTER SANDERSON: This is the defendants' application to strike out certain paragraphs of the plaintiffs' amended statement of claim. In particular, the defendants seek to strike out par 8 (a)(b)(c), par 8A (a)(b)(c), par 9 (a)(b)(c) and par 10(a).
2 For the purposes of this application it is unnecessary to go into any detail as to the nature of the plaintiffs' claim. It is sufficient to say that the first defendant was appointed a Receiver Manager over certain property of the plaintiffs pursuant to a mortgage. Exercising the power of sale contained in the mortgage, and in his capacity as Receiver Manager, he sold the property. In the paragraphs complained of the plaintiffs allege that the first defendant, in exercising his power of sale, had a duty to obtain a market value for the property; if the property did not have a market value to take reasonable care to obtain the highest price that could be obtained; and, in the alternative, to take reasonable care to obtain the highest price available for any property sold.
3 It is the first defendant's contention that he was not under any of the duties pleaded in the paragraphs complained of. It is said that there is clear High Court authority to the effect that a receiver is under a duty to a mortgagor to act in good faith and that is the end of the matter. It is said, therefore, that the pleading in its present form cannot stand and must be struck out. In support of his submissions, counsel for the first defendant referred to High Court decision in Pendlebury v Colonial Mutual Life Assurance Society Ltd (1912) 13 CLR 676.
4 In resisting the defendants' application counsel for the plaintiffs made two points. First, it was submitted that although the decision in Pendlebury correctly states the law at present, the question is not free from doubt. It is said that to strike out the plea at this stage would be to risk stultifying the development of the law. In support of this submission counsel for the plaintiffs referred to a number of English authorities, in particular, Cuckmere Brick Co Ltd v Mutual Finance Limited [1971] Ch 949 and Standard Chartered Bank Ltd v Walker [1982] 3 All ER 938. In both of these cases it was held that the duty of a mortgagee and, as the mortgagee's agent the receiver, is to act in good faith and to take reasonable care to obtain whatever the true market value of the mortgage property might be at the time of sale. This also appears to be the position in New Zealand: see Clark v UDC Finance Limited [1985] 2 NZLR 636; Davy v Nathan Securities Limited (1989) 4 NZCLC 65,321. It was further submitted that in a number of Australian cases the High Court had left open the question of whether or not a receiver's duty was more extensive than was said to be the case in Pendlebury: see Australia and
(Page 5)
- New Zealand Banking Group Limited v Bangadilly Pastoral Co Pty Ltd (1977) 139 CLR 195 per Aitken J at 222; Commercial and General Acceptance Limited v Nixon (1982) 152 CLR 491 per Mason J at 502, Wilson J at 517 and Brennan J at 522. It was submitted in the light of these comments by the High Court and in the light of the position adopted in both England and New Zealand the plea should be allowed to stand and the plaintiff should be permitted to argue its case at trial. To do otherwise would be to risk stifling the development of the law and in strike out applications care should be taken that this does not occur: see Bridgetown/Greenbushes Friends of the Forest Inc v Executive Director of the Department of Conservation and Land Management (1997) 18 WAR 126 per Templeman J at 188 - 189.
5 As against this, counsel for the defendants submitted that the decision in Pendlebury had frequently been followed in Australia and is clearly the law: see Expo International Pty Ltd v Chant [1979] 2 NSWLR 820; Cachalot Nominees Pty Ltd v Prime Nominees Pty Ltd [1984] WAR 380 per Smith J at 393; State Bank of Victoria v Parry (1989) 7 ACLC 226 per Malcolm J at 229. Further, counsel submitted that in other jurisdictions when a similar pleading had been raised it had been struck out as not being a proper plea: see Westpac Banking Corporation Ltd v Kingsland (1991) 26 NSWLR 700. Counsel for the defendants pointed to the fact that since the introduction of s 420A of the Corporations Law in 1992 a receiver had a duty to take reasonable care in line with what is pleaded. However, the cause of action in this case arose before s 420A of the Corporations Law became applicable. Given that there must now be few cases where the duty of a receiver falls to be determined under rules pre-dating the Corporations Law it is unlikely that there would be any revision of the applicable principles.
6 In my view, the plaintiffs' position is not arguable on the authorities and the paragraphs ought be struck out. To allow the pleading to stand would be to raise a false issue which, on the present state of the law, is not open to the plaintiff. If the plaintiff takes issue with the state of the law with respect to the liability of a receiver to a mortgagor then this issue can be pursued by challenging the decision on the strike out application. This is an approach which is adopted from time to time: see, for example, Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594. Given this avenue is open to the plaintiff to strike out the paragraphs complained of would not risk stultifying the law. It will, however, avoid the prospect of a false issue being raised at trial.
(Page 6)
7 The second argument put by the plaintiff was that the duty pleaded is in fact the duty owed at equity by a receiver to a mortgagor. The decision in Pendlebury was to the effect that a receiver owed the mortgagor a duty to act bona fide. It was submitted that the duty to act bona fide could include a duty to obtain a fair market price and to otherwise do all things as pleaded in the statement of claim. With respect, this submission in my view overstated the position. The receiver will be liable to the mortgagor if he acts in bad faith. As Salmon LJ said in Cuckmere Brick Co Ltd (at 966), the receiver's duty is not to cheat the mortgagor. Put another way, a receiver will be liable if he commits equitable fraud but not otherwise. It matters not whether the present plea is said to be a plea as to the duties owed in equity or at common law. What is pleaded goes beyond the scope of the law as it stands at present and the pleading cannot stand.
8 For these reasons I would strike out the paragraphs complained of. I will hear the parties as to the form of orders I should make and as to costs.
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