Jovanovic v Woods
[2000] TASSC 149
•24 October 2000
[2000] TASSC 149
CITATION: Jovanovic & Ors v Woods & Ors [2000] TASSC 149
PARTIES: JOVANOVIC, Jon
TAPPING, Ian Maxwell
v
WOODS, John William
PURDON, Scott Robert
AUSTRALIAN SECURITIES
AND INVESTMENTS COMMISSION
CARRIGG, David
DAVIES BROTHERS LTD ACN 009 475 754
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: 94/1999
DELIVERED ON: 24 October 2000
DELIVERED AT: Hobart
HEARING DATES: 12 October 2000
JUDGMENT OF: Master Holt
CATCHWORDS:
Procedure - Supreme Court - Tasmania - Practice under the Rules of Court - Amendments - Statement of claim - Whether reasonable cause of action disclosed - Function of particulars.
Supreme Court Rules (Tas), rr227, 258 and 259.
Banque Commerciale SA (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279; Thorp v Holdsworth (1876) 3 Ch D 637; Bruce v Odhams Press Ld [1936] 1 KB 697; Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd & Ors (1987) 14 FCR 215, referred to.
Aust Dig Procedure [95]
Defamation - Publication - Republication.
Parkes v Prescott [1869] LR 4 Ex 169; Speight v Gosnay (1891) 60 LJQB 231, referred to.
Aust Dig Defamation [30]
REPRESENTATION:
Counsel:
Plaintiffs: J Jovanovic
First named Defendant: G L Sealy
Second & Third named Defendants: P A Bowen
Fourth & Fifth named Defendants: N J Cooper
Solicitors:
Plaintiffs: J Jovanovic & Associates
First named Defendant: Piggott Wood & Baker
Second & Third named Defendants: Australian Government Solicitor
Fourth & Fifth named Defendants: Butler McIntyre & Butler
Judgment Number: [2000] TASSC 149
Number of Paragraphs: 19
Serial No 149/2000
File No 94/1999
JON JOVANOVIC and IAN MAXWELL TAPPING v JOHN WILLIAM WOODS, SCOTT ROBERT PURDON, AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION, DAVID CARRIGG and DAVIS BROTHERS LTD ACN 009 475 754
REASONS FOR JUDGMENT THE MASTER
24 October 2000
The plaintiffs have applied for leave to deliver an amended statement of claim. According to the proposed statement of claim:
1 The plaintiffs, Mr Jovanovic and Mr Tapping, were directors of the company, D W & I M Tapping Pty Ltd ("the company"). The second named plaintiff is a shareholder of the company. The company operated a mortgage investment fund.
2 The first defendant, Mr Woods, is an accountant.
3 The second defendant, Mr Purdon, is an officer of the third defendant, the Australian Securities and Investments Commission ("ASIC").
4 Mr Woods was commissioned by ASIC to investigate and report on the affairs of the company.
5 Mr Woods produced a report under the supervision of Mr Purdon, in which he said, amongst other things, that the company was insolvent and that a liquidator should be appointed ("the Woods report").
6 As a result of a lack of care in the preparation of the report, a debt owed to the company was double counted, leading to the conclusions in the Woods report that the company was insolvent and a liquidator should be appointed.
7 The company is in the process of being wound up and, as a result, Mr Jovanovic and Mr Tapping are unable to collect director's fees and the value of Mr Tapping's shareholding had diminished.
8 The fourth defendant, Mr Carrigg, wrote an article which was published on 18 January 1999 in the Mercury newspaper, by the fifth defendant, Davies Brothers Ltd.
9 The publication was in the following terms:
"Investors may face long wait
By DAVID CARRIGG
Business Reporter
ABOUT 20 investors in Hobart's troubled $2 million D W and I M Tapping Pty Ltd mortgage fund could wait years before getting their money back.
And provisional liquidator John Woods, of accounting firm Moore Robsons, said that 'on the bare facts' it was unlikely all their money would be returned.
Mr Woods was appointed by the Federal Court on December 1 last year after an Australian Securities and Investments Commission application to the court.
Mr Woods said the pooled fund had been taken out of the control of company directors and that investors were not receiving interest.
He said a wide range of about 20 investors had invested about $2 million in the fund.
'Some of those investors haven't received interest for some time before my appointment anyway' Mr Woods said. 'How quickly investors get their money back depends on whether the loans can be repaid or refinanced easily.
'With the Tasmanian real estate market the way it is, that could take years. It will probably take a longer time rather than shorter, though if a liquidator is appointed they would be looking to recover money as quickly as possible.'
At the time of Mr Woods' appointment, Federal Court Justice Shane Marshall, in his reasons for judgment, said 'the likelihood of the creditors not receiving capital and interest owing to them from the respondent (D W and I M Tapping Pty Ltd) principally arises due to a loan made by the respondent … to a related company'.
Mr Woods said that loan, of about $500,000, was made by the Tapping fund to related company G W Stanton and Associates Pty Ltd.
He said he did not know what that money had been used to fund.
Documents obtained by The Mercury from the Australian Securities and Investments Commission, dated January 5 this year, show D W and I M Tapping Pty Ltd and G W Stanton and Associates Pty Ltd had common directors, Ian Maxwell Tapping and Jon Jovanovic.
The two companies also shared a registered office in Chapel St, Glenorchy.
Justice Marshall said in his reasons for judgement (sic): 'The applicant (ASIC) has completed some investigative work in respect of the respondent and has put in evidence a report concerning the company for Mr Woods. In that report Mr Woods concludes that the company is insolvent.
'That view is further re-inforced by unchallenged evidence in Mr Woods' most recent affidavit that there is an egregious shortfall of funds in the company.
There is sufficient evidence before me to raise concerns about the conduct of the directors of the respondent.'
A winding-up hearing would be held in the Federal Court on February 12.
ASIC Tasmanian regional office spokesman Kon Tsiakis said Mr Woods would provide a report to the ASIC containing a summary of the administration to date.
Mr Tsiakis said that report could be used by the court to decide whether a winding-up order was appropriate."
("the Mercury publication").
Firstly, in the proposed amended statement of claim, the plaintiffs allege that they have been defamed by the Mercury publication and:
(1)set out the Mercury publication in full as the matter complained of;
(2)allege the fact of publication;
(3)allege that the Mercury publication was of and concerning the plaintiffs;
(4)allege that the Mercury publication contained certain specified defamatory imputations;
(5)claim damages for defamation against Mr Woods, ASIC, Mr Carrigg and Davies Brothers Ltd in respect of the Mercury publication.
Secondly, in the proposed amended statement of claim, the plaintiffs claim damages against Mr Woods, Mr Purdon and ASIC for negligence in the preparation and publication of the Woods report and claim damages against Mr Woods and ASIC for negligence in the implementation of the Woods report; in the appointment of a liquidator and in the winding up of the company. In the prayer for relief, Mr Jovanovic claims lost director's fees and Mr Tapping claims lost director's fees and diminished value of his shareholding in the company as a result of the company being wound up.
Counsel representing Mr Carrigg and Davies Brothers Ltd (who are only involved in the defamation part of the proceedings), did not oppose the grant of leave to the plaintiff to deliver the proposed amended statement of claim. Leave to deliver the document, however, was opposed by the other defendants. Of the other defendants, only Mr Woods and ASIC are involved in the defamation proceedings. In essence, they complain that the proposed pleading does not set out the material facts necessary to render them liable for the Mercury publication.
Mr Woods and ASIC may be liable for the Mercury publication if it is a republication of defamatory matter which they have published and the republication occurred at their request, or on their authority, or if the republication was the intended or natural and probable consequence of the original publication, or if the republisher had a duty to republish. In Parkes v Prescott [1869] LR 4 Ex 169, Montague Smith J said, at 179:
"On principle it is correct to hold that where a man makes a request to another to publish defamatory matter, of which, for the purpose he gives him a statement, whether in full or in outline, and the agent publishers that matter adhering to the sense and substance of it, although the language be to some extent his own, the man making the request is a liable to an action as the publisher. If the law were otherwise, it would in many cases throw a shield over those who were the real authors of libel, and who seek to defame others under what would then be safe shelter of intermediate agents."
In Speight v Gosnay (1891) 60 LJQB 231, the defendant had started a rumour that the plaintiff, an unmarried woman, was unchaste. The rumour was reported to the young woman's fiancé, who responded by refusing to proceed with the proposed marriage. The woman sued the person who started the rumour for damages for the lost promise of marriage. At the time, slander of the kind uttered was not actionable without proof of special damage in England. Accordingly, in order to succeed, the plaintiff had to show that the defendant was responsible for the republication that had caused the damage. Lopes LJ said:
"The plaintiff was bound to make out that by reason of the words uttered by the defendant she had lost the marriage. If she had lost the marriage, her loss was caused, not by the uttering of the slander but by its repetition. If the defendant at the time he uttered the slanderous words had authorised the mother to repeat them to Galloway (the fiancé) an action might have been maintained. But there was no evidence of that. So, also, if the defendant had intended the words to be communicated to Galloway; or again if the repetition of the words were the natural consequence of the defendant's uttering them, that would be sufficient to support an action. Lastly, there was authority for the proposition that if it could be made out that there was moral responsibility on the mother to communicate the slander to the daughter and on the daughter to communicate it to Galloway, that might be sufficient … the slander was untrue, and was known by the mother to be untrue, and there could be no obligation to repeat the slander to Galloway."
The only allegation which touches upon the matter, but which is entirely unhelpful, is contained in par3 of the proposed pleading which is as follows:
"In the said edition of the said newspaper the third defendant by itself, its servant and agent the first defendant and the first defendant unlawfully published or caused to be published of and concerning the plaintiffs the words attributed to the first defendant in the said article marked 'A'."
Neither the original publication alleged to be made by Mr Woods and ASIC, nor the circumstances by which it is alleged that they are responsible for the republication in the Mercury, are pleaded. Accordingly the proposed pleading does not disclose a reasonable cause of action in defamation against Mr Woods and ASIC for the Mercury publication.
Counsel for the plaintiffs, Mrs Jovanovic, submitted that if further information is required, the defendants should request particulars.
The Rules relating to pleading are contained in the Supreme Court Rules, Pt7, Div17. Rule 227 provides, in part:
"227 ¾ (1) A pleading is to contain in summary form a statement of all the material facts on which the party relies but not the evidence by which those facts are to be proved.
(2) …
(3) Every pleading is to be expressed so as to give reasonably explicit notice to any other party of all grounds of action … on which the party pleading intends to rely at the trial.
(4) …"
Rule 258(1) provides, in part:
"258 ¾ (1) The Court or a judge may order to be struck out or amended in any endorsement or pleading any matter that ¾
(a) …
(b) may tend to prejudice or delay the fair trial of the proceeding."
Rule 259 provides, in part:
"259 If a pleading does not disclose a reasonable cause of action … or shows that the cause of action … is frivolous or vexatious, the Court or a judge may order ¾
(a) … the pleading be struck out …"
Brennan J (as he then was) in Banque Commerciale SA (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279 at 287 - 288, approved the following statement of Jessel MR in Thorp v Holdsworth (1876) 3 Ch D 637 at 639:
"The whole object of pleadings is to bring the parties to an issue, and the meaning of the rules of Order XIX. was to prevent the issue being enlarged, which would prevent either party from knowing when the cause came on for trial, what the real point to be discussed and decided was. In fact, the whole meaning of the system is to narrow the parties to definite issues, and thereby to diminish expense and delay, especially as regards the amount of testimony required on either side at the hearing."
The difference between the requirements for pleading and the role of particulars was explained in Bruce v Odhams Press Ld [1936] 1 KB 697 by Scott LJ at 712 - 713 as follows:
"But the Rules of the Supreme Court, as Greer LJ has pointed out, now constitute, within the framework of the Judicature Acts, a complete Code of pleading, and I think the present case can and should be decided upon the phraseology of the Code, referring to the earlier position and decisions only if and so far as necessary to elucidate some point of ambiguity in the language of its provisions.
The cardinal provision in r 4 is that the statement of claim must state the material facts. The word 'material' means necessary for the purpose of formulating a complete cause of action; and if any one 'material' fact is omitted, the statement of claim is bad; it is 'demurrable' in the old phraseology, and in the new is liable to be 'struck out' under Order XXV, r4; see Philipps v Philipps 4 QBD 127; or 'a further and better statement of claim' may be ordered under Order XIX, r7.
The function of 'particulars' under r 6 is quite different. They are not to be used in order to fill material gaps in a demurrable statement of claim ¾ gaps which ought to have been filled by appropriate statements of the various material facts which together constitute the plaintiff's cause of action. The use of particulars is intended to meet a further and quite separate requirement of pleading, imposed in fairness and justice to the defendant. Their function is to fill in the picture of the plaintiff's cause of action with information sufficiently detailed to put the defendant on his guard as to the case he has to meet and to enable him to prepare for trial. Consequently in strictness particulars cannot cure a bad statement of claim. But in practice it is often difficult to distinguish between a 'material fact' and a 'particular' piece of information which it is reasonable to give the defendant in order to tell him the case he has to meet; hence in the nature of things there is often overlapping. And the practice of sometimes putting particulars into the statement of claim and sometimes delivering them afterwards either voluntarily, or upon request or order, without any reflection as to the true legal ground upon which they are to be given has become so common that it has tended to obscure the very real distinction between them.
In a case where there is no omission of material facts under r 4, whether particulars should be ordered is very often a matter of pure discretion ¾ because it depends on a view of fairness or convenience which is essentially a matter of degree. But where particulars are asked because the statement of claim is defective in that it omits some essential averment ¾ ie, some 'material fact,' the question is not one of discretion, and the adoption by the defendant of the lenient remedy of an application for particulars instead of the more stringent remedy of striking out does not turn an issue of right into an issue of discretion. As Philipps v Phillips (supra) is an illustration of the more stringent remedy, so Palmer v Palmer [1892] 1 QB 319 is an illustration of the more lenient remedy; but if in the latter case the defendant had so chosen I think he would have been entitled to the more drastic remedy."
If the statement of claim does not contain such material facts as disclose a reasonable cause of action, the pleading is bad and liable to be struck out. The defendants cannot be obliged by the plaintiffs to content themselves with the provision of particulars. Insofar as it concerns Mr Woods and ASIC, the proposed defamation pleading will not be allowed.
I now turn to consider the negligence allegations. Paragraphs 9, 10, 11 and 12 of the proposed pleading are as follows:
"9The third defendant by itself, its servant and agent the first defendant and the first defendant were so negligent in and about the preparation and implementation of the said report and in about the appointment of a liquidator for Tapping and in and about the winding up of the said company that the plaintiffs suffered loss and actual damage.
10The said loss and actual damage referred to in par9 above was as aforesaid occasioned to the plaintiffs by the negligence and breach of duty of the first and third defendants."
(Particulars are then set out)
"11Further and in the alternative the plaintiffs claim against the second defendant for that at the said times the second defendant was the servant and agent of the third defendant and supervised the preparation and publishing of the above said report prepared by the first defendant on his own behalf and on behalf of the third defendant.
12Whereupon due to the matters referred to in par11 above the second defendant was so negligent in and about the said supervision that he failed to observe and correct the errors in the said report.
(Particulars are then set out) "
Paragraph 10 alleges "negligence and breach of duty". Counsel submitted that if the reference to "breach of duty" related to a cause of action other than in negligence, the pleading is defective because the duty is not identified. Counsel for the plaintiffs, Mrs Jovanovic, said that the claim was based solely in the tort of negligence. That being so, the words "and breach of duty" are superfluous and can be omitted from the proposed pleading if leave is given to deliver it.
Next it was submitted that no facts had been pleaded which, if proved, might establish a causal link between the alleged negligence and any damage suffered by the plaintiffs.
The prayer for relief includes the following:
"Particulars of actual damage
(i)The first plaintiff lost the amount of his director's fees when Tapping was wound up.
(ii)The second plaintiff lost the value of his shares and director's fees when Tapping was wound up."
The facts necessary to establish the causal link must be pleaded. For example, in Bond Corporation Pty Ltd v Thiess Contractors Pty Ltd & Ors (1987) 14 FCR 215, the applicant alleged that he had engaged the second named respondents to provide engineering services in relation to a residential subdivision near Perth. It was alleged that the engagement was induced by the second respondents misrepresenting their experience and expertise. The subdivision works ended up costing considerably more than the anticipated cost. At 220 and following, French J said:
"Paragraph 50 pleads resulting loss and damage in the following terms:
'By reason of such conduct Bond has suffered loss and damage.
particulars
(1) Bond repeats the particulars in paragraph 16.
(2) Whereas on 28 February 1985 Ove Arup advised Bond, and Bond relied on the advice, that the total cost of all works necessary for the redevelopment of the sub-division, (namely works for water supply, roads, stormwater and engineering fees and service) would total $10,091,700. The actual cost which Bond has and/or is likely to be obliged to pay for the work is at least $15,561,000 and Bond claims against Ove Arup the difference and interest thereon, namely the sum of at least $5,469.300.
…
Turning to par 50(2) this seems to be an attempt to plead material facts in the particulars.
Facts constituting a causal relationship between the conduct alleged and the loss suffered are included in this particular.
The cause of action upon which the applicant relies in pars 46 to 50 is created by s 82 of the Trade Practices Act.
That section provides in subs (1):
'A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV or V may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.'
Loss or damage as a consequence of the contravention is an element of the cause of action: Fenech v Sterling (1983) 51 ALR 205 at 221; ATPR 40 413 at 44,812; Arcadi v Colonial Mutual Life Assurance Society Ltd (1984) ATPR 40 473 at 45,454; James v ANZ Banking Group Ltd (1985) ATPR 40 523 at 46,233.
The material facts establishing the necessary causal link should be pleaded. In cases of contravention of s 52 said to be constituted by misrepresentation this will generally require more than appears in the opening words of par 50: 'by reason of such conduct …'.
Some guidance to the proper approach may be derived from the ordinary rule of pleading applicable in cases of fraud of which Lord Watson said in Dow Hager Lawrance v Lord Norreys (1890) 15 App Cas 210 at 221:
'… the ordinary rule of pleading applicable to cases of fraud, … was thus expressed by Earle Selborne in Wallingford v Mutual Society (1880) App Cas 685 at 697; "general allegations, however strong may be the words in which they are stated, are insufficient to amount to an averment of fraud of which any court ought to take notice." It is not a sufficient compliance with the rule to state facts and circumstances which merely imply that the defendant, or someone for shoe action he is responsible, did commit a fraud of some kind. There must be a probable, if not necessary, connection between the fraud averred and the injurious consequences which the plaintiff attributes to it; and if that connection is not sufficiently apparent from the particulars stated, it cannot be supplied by general averments. Facts and circumstances must in that case be set forth, and in every genuine claim are capable of being stated, leading to a reasonable inference that the fraud and the injuries complained of stood to each other in the relation of cause and effect.'
A perusal of the relevant precedents in E Bullen, S M Leake, I H Jacob, Precedents of Pleadings in the Queen's Bench Division of the High Court of Justice (12th ed, 1975), pp 702-707, supports the view that the approach enunciated by Lord Watson is equally applicable to actions for negligent misstatement..
While the same point did not arise squarely in James v ANZ Banking Group Ltd (1985) ATPR 40 504, Toohey J in striking out particulars of loss and damage there pleaded said at 46,035:
'While the bank is not required to plead specifically to particulars of damages, it is entitled to know with some certainty what is being claimed and the basis of the claim'.
…
To the extent that par 50(2) contains the relevant allegation as a particular, it does not cure the defect in the pleading.
In H 1976 Nominees Pty Ltd v Galli (1979) 40 FLR 242, Northrop J speaking of the function of particulars said (at 246):
'In order to disclose a reasonable cause of action the statement of claim must contain statements of material facts which support the claims made. Particulars are not statements of material facts; particulars perform a different purpose.'
Quoting from the judgment of Scott LJ in Bruce v Odhams Press Ltd [1936] 1 KB 697, his Honour made the point that particulars cannot be used to fill gaps in the statement of claim which ought to have been filled by the appropriate statements of the various material facts together constituting the cause of action.
In my opinion the particulars given in par 50 cannot supply the deficiency in the pleadings.
I therefore find that as pleaded parts 46 to 50 of the statement of claim do not disclose a reasonable cause of action."
The necessary facts to establish the causal link between the Woods report and the loss claimed do not appear in the pleading and so the pleading does not disclose a reasonable cause of action in negligence. The defect cannot be cured by Mrs Jovanovic's offer of further particulars.
Counsel for Mr Purdon and ASIC also submitted that insufficient facts had been pleaded to support the allegation that ASIC was vicariously liable for the alleged negligence of Mr Woods and that insufficient facts had been pleaded to show any basis upon which a duty of care in connection with the Woods report was owed to directors and shareholders of the company. As to vicarious liability, the pleadings include an allegation that Mr Woods was engaged by ASIC for the purposes of the report and, in carrying out his duties, he acted under the supervision of Mr Purdon, an officer of ASIC. Whether or not ASIC is vicariously liable will depend upon the nature and extent of the supervision. This is a matter to be dealt with at the trial. Sufficient facts have been pleaded to support the claim, although, no doubt, far greater particularity as to the supervision will need to be given prior to the trial. As to the question of duty of care, I have significant reservations as to whether, in the circumstances of this case, an action for negligent misrepresentation is maintainable at the suit of directors or shareholders of the company. However, although the matter was raised, it was not argued in any detail. In light of my earlier findings, it is not necessary for me to now determine the point which may turn out to be fatal to the whole of the negligence part of the claim, howsoever it is pleaded. The point is best left to await further argument if and when the need arises.
Clearly the plaintiffs will need to carefully review the matter to consider whether or not they have a reasonable cause of action in negligence. In addition to the matters already mentioned in these reasons, it may be that in any event an action for negligence is not maintainable against ASIC for the careless performance by it of its statutory, investigative and enforcement functions. See Dunlop v Woollahra Municipal Council (1981) 33 ALR 621; X & Ors (Minors) v Bedfordshire County Council [1995] 3 All ER 353 and M (A Minor) v Newham London BC [1994] 4 All ER 602.
The application for leave to deliver the proposed amended statement of claim will be dismissed insofar as it concerns the first, second and third named defendants. As indicated earlier, the fourth and fifth named defendants do not oppose the amendment. It is only the defamation part of the action which applies to them and there is no suggestion that the proposed defamation pleadings, insofar as they apply to the fourth and fifth named defendants, fail to disclose a cause of action or are otherwise defective. I will hear counsel as to whether, in light of the refusal of leave to deliver the proposed pleading to the first, second and third named defendants, leave should be given to deliver to the fourth and fifth named defendants, an amended statement of claim containing only those allegations in the proposed pleading which relate to them.
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