Jovanovic v Woods (No 3)

[2001] TASSC 96

[2001] TASSC 96

CITATION:              Jovanovic & Anor v Woods & Ors (No 3) [2001] TASSC 96

PARTIES:  JOVANOVIC, Jon

TAPPING, Ian Maxwell
v
WOODS, John William
PURDON, Scott Robert
AUSTRALIAN SECURITIES AND INVESTMENT 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:  15 August 2001
DELIVERED AT:  Hobart
HEARING DATE:  3, 9 August 2001
JUDGMENT OF:  Master Holt

CATCHWORDS:

Procedure - Tasmania - Practice under Rules of Court - Amendments - Statement of Claim - Whether all material facts pleaded - Exercise of discretion.

Supreme Court Rules 2000 (Tas), rr227, 258, 259 and 427.
McKellar & Anor v Container Terminal Management Services Ltd & Ors (1999) 165 ALR 409; Banque Commerciale SA (In Liq) v Akhil Holdings Ltd (1990) 169 CLR 279; Bruce v Odhams Press Ltd [1936] 1 KB 697; H 1976 Nominees Pty Ltd v Galli (1979) 30 ALR 181; Bond Corp Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215; Queensland v Pioneer Concrete (Qld) Pty Ltd (1999) ATPR 41-691; The Commonwealth of Australia v Verwayen (1990) 170 CLR 394, referred to.
Aust Dig Procedure [276]

Evidence - Witnesses - Immunities - Preparation of statement for purpose of court proceedings.
Munnings v Australian Government Solicitor & Ors (1994) 118 ALR 385; Darker v Chief Constable (2000) 4 All ER 193, applied.
Aust Dig Evidence [205]

REPRESENTATION:

Counsel:
           Plaintiffs:  J Jovanovic
           First Named Defendant:  G L Sealy
           Second & Third Named Defendants:      P A Bowen
           Fourth & Fifth Named Defendants:       D F M Zeeman
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:  [2001] TASSC 96
Number of paragraphs:  8

Serial No 96/2001
File No 94/1999

JOVANOVIC & ANOR v WOODS & ORS (No 3)

REASONS FOR JUDGMENT  MASTER HOLT

15 August 2001

The application to amend

1. The plaintiffs have applied for leave to amend their statement of claim.  The action was commenced by the plaintiffs in person by a writ filed 5 February 1999.  The plaintiffs claim damages for defamation and damages for negligent mis-statement.  There is no complaint about the proposed defamation pleading. As to the negligence claim, in very brief summary, the plaintiffs were directors of D W & I M Tapping Pty Ltd ("the Company"), which operated a mortgage investment fund.  The first named defendant ("Woods") was an accountant engaged by the third named defendant ("ASIC") to report as to the financial affairs of the Company.  The report was prepared under the supervision of the second named defendant, an employee of ASIC ("Purdon")  The resultant report led to an application being made by ASIC to the Federal Court of Australia for an order that the Company be wound up.  The Court granted the application and the plaintiffs claim to have thereby suffered financial loss.  The plaintiffs allege that their loss can be traced back to the negligent preparation of the report, for which they say Woods, ASIC and Purdon were liable.  Shortly following the commencement of proceedings, the defendants applied for summary judgment or, in the alternative, that the plaintiffs' statement of claim be struck out.  Cox CJ, in relation to those applications in Jovanovic & Anor v Woods & Ors [1999] TASSC 106, declined to grant summary judgment or strike out the statement of claim, but said:

   "Unfortunately, neither of the plaintiffs is represented by a legal practitioner and the statement of claim upon which they rely has been inexpertly drawn. It is prolix, argumentative and confusing. Instead of confining itself to stating the facts upon which the causes of action against the defendants are based, it contains a great deal of material which is or may constitute evidence by which the plaintiffs hope to prove their cases. It has been difficult to disentangle the mixture of allegations made and to ascertain with any precision what causes of action they have.

   …

   Though containing much that is inappropriate, it nevertheless contains sufficient to found actions for negligence, negligent mis-statement and defamation. I express the hope that the plaintiffs will use their best endeavours to secure proper legal advice in refining their pleadings, preparing their case in an orderly way and assessing the strength of the foreshadowed defences."

   The plaintiffs secured legal representation and through their legal representative have filed the current application to amend.  The amendment is opposed on the bases firstly that it fails to disclose a cause of action and secondly that in any event the immunity or absolute privilege applicable to witness statements renders the negligence claim and hence the amendment futile.  The latter point was not argued in the earlier proceeding before Cox CJ.

The form of the proposed amendments

1. A most helpful collection of general principles and authorities concerning pleadings, equally applicable under the Tasmanian Rules, is to be found in the judgment of Weinberg J in McKellar & Anor v Container Terminal Management Services Ltd & Ors (1999) 165 ALR 409 at 417 - 421. Relevant matters include:

(i)A pleading is to contain in summary form a statement of all the material facts upon which the party relies, but not the evidence by which those facts are to be proved.   Rule 227.

(ii)Material facts are those facts 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.  Bruce v Odhams Press Ltd (1936) 1 KB 697 at 712.

(iii)"The function of pleadings is to state with sufficient clarity the case that must be met".  Banque Commerciale SA (In Liq) v Akhil Holdings Ltd (1990) 169 CLR 279 at 286.

(iv)It is not sufficient simply to plead a conclusion drawn from unstated facts.   H 1976 Nominees Pty Ltd v Galli (1979) 30 ALR 181 at 186. It is necessary to set out the facts which constitute the causal connection between the impugned conduct and the loss claimed. Bond Corp Pty Ltd v Thiess Contractors Pty Ltd (1987) 14 FCR 215 at 220 ff.

(v)Particulars are not to be used to fill gaps which ought to have been filled by appropriate statements of the material facts in the pleadings.  Bruce v Odhams Press Ltd (supra).

(vi)Pleadings which may be unnecessary or which will tend to prejudice or delay the fair trial of the proceedings may be struck out.  Rule 258.

(vii)A statement of claim which does not disclose a reasonable cause of action may be struck out.  Rule 259.

(viii)In considering whether or not to strike out a defective pleading, the Court will take into account whether the defects are of substance and whether notwithstanding the deficiencies, the fundamental function of pleading is still served.  Queensland v Pioneer Concrete (Qld) Pty Ltd (1999) ATPR 41-691 at 42-828.

(ix)An amendment to pleadings on appropriate terms as to costs will generally be allowed for the purpose of enabling the determination of the real question in controversy between the parties, provided that it will not result in injustice.  The Commonwealth of Australia v Verwayen (1990) 170 CLR 394 at 456.

(x)An amendment which is futile because it is obviously bad in law will not be allowed.  The Commonwealth of Australia v Verwayen (supra) at 456.

1. In general terms, the facts alleged in the proposed pleading are that Woods was instructed by ASIC to investigate and submit a report concerning the financial affairs of the Company.  The report which was submitted on 16 October 1998, was prepared under the supervision of Purdon.  On 2 November 1998, relying upon the report, ASIC applied to the Federal Court of Australia for an order winding up the Company under the Corporations Law, s461(1)(h) or (k). The report was evidence before the Federal Court and its contents were relevant to the decision made by the Court on 23 February 1999 to order that the Company be wound up. Woods, in his report, over-stated the amount that the Company had advanced by way of loans to borrower G W Stanton & Associates Pty Ltd and but for the acceptance by the Federal Court of that incorrect information, the winding up order would not have been made. Woods' error was negligently made, and negligently overlooked by ASIC and Purdon. The plaintiffs say that as a result of the winding up, they have been deprived of directors' fees and that the value of shares in the Company held by the second plaintiff was adversely affected. They claim damages for negligence against Woods, Purdon and ASIC.

1. The form of the proposed pleading leaves a lot to be desired.  It has been set out in a disorganised fashion.  It lacks precision and contains unnecessary material and repetition.  The facts linking the damage claimed to the winding up order have not been pleaded.  I accept, however, the submission made by counsel for the plaintiffs that the claim remains in substance the same as that earlier considered by Cox CJ and is now set out in improved form.  Cox CJ, in his discretion, declined to strike out the existing statement of claim.  The document, although not free of defects, is capable of comprehension.  The defendants to the negligence claim were active participants in the chain of events which led to the Company being wound up and after taking this matter into account I do not believe that permitting delivery of the document would cause prejudice, confusion, mis-understanding or result in the trial being delayed.  The defendants have been given adequate information in the proposed pleading for the fundamental function of pleading to be served.  In particular, the case to be met is stated with sufficient clarity.  I would not disallow the amendment because of its form.

The public policy immunity applying to witnesses statements

1. The defendants say that the proposed amendments setting up the negligence claim are futile and should be disallowed.  They submit that the Woods report, upon which it is contended that Woods, ASIC and Purdon are answerable in negligence has the benefit of immunity, or absolute privilege.

1. As is the case with a party, counsel, jury or judge, a witness (not committing a substantive administration of justice offence or an associated offence) cannot be made the subject of an action in respect of his evidence.  R v Skinner (1772) Lofft 54, at 56 (98 ER 529 at 530); Munster v Lamb (1883) 11 QBD 588 at 603 - 605; Cabassi v Vila (1940) 64 CLR 130 at 140; Evans v London Hospital Medical College [1981] 1 All ER 715 at 720; Giannarelli v Wraith (1988) 165 CLR 543 at 595; X& Ors (minors) v Bedford Shire CC [1995] 3 All ER 353 at 384 - 386; Munnings v Australian Government Solicitor & Ors (1994) 118 ALR 385 at 390. As Salmon J said in Marrinan v Vibart [1962] 1 All ER 869 at 871:

"This immunity exists for the benefit of the public, since the administration of justice would be greatly impeded if witnesses were to be in fear that any disgruntled and possibly impecunious persons against whom they gave evidence might subsequently involve them in costly litigation."

1. Here, the plaintiffs complain about the preparation of the Woods report and not merely its reception into evidence in the winding up proceedings.  It is plain, however, from the facts alleged in the proposed pleading that proceedings were in contemplation at the time the report was produced.  According to the proposed pleading, par 16(e), the report stated that the Company was insolvent as a result of a series of uncommercial and non-performing loans made to a related company.  Woods must have formed this opinion prior to delivering his report.  The Corporations Law, s461(1)(h) empowers the Court to make a winding up order if ASIC states in a report that in its opinion the Company cannot pay its debts and should be wound up. The immunity of witnesses is not confined to evidence actually given in Court. It applies even in the early stages where evidence is being prepared or collected for proceedings in contemplation. Darker v Chief Constable (2000) 4 All ER 193. It is the winding up order which is alleged to have caused the damage and accordingly the parts of the report which the plaintiffs seek to impugn must necessarily relate to the proceedings which led to that order. There is no suggestion by the plaintiffs that in producing or presenting the report an administration of justice or associated offence was committed. Accordingly the immunity applies making the negligence claim obviously bad in law. Unlike in Mann v O'Neill (1997) 145 ALR 682 the defendants' contention is not an attempt to extend the immunity or absolute privilege to a new situation. Here the report, as I have said, based on the plaintiffs' allegations and the legislation, must have been prepared in contemplation of the possibility of it being relied upon in court proceedings to wind up the Company. In Evans v London Hospital Medical College (supra) at 721, Drake J said:

   "If this object is to be achieved I think it essential that the immunity given to a witness should also extend to cover statements he makes prior to the issue of a writ or commencement of a prosecution, provided that the statement is made for the purpose of a possible action or prosecution and at a time when a possible action or prosecution is being considered.  In a large number of criminal cases the police have collected statements from witnesses before anyone is charged with an offence; indeed sometimes before it is known whether or not any criminal offence has been committed …  If immunity did not extend to such statements it would mean that the immunity attached to the giving of evidence in court or the formal statements made in preparation for the court hearing could easily be outflanked and rendered of little use.  For the same reason I think that the immunity must extend also to the acts of the witness in collecting or considering material on which he may later be called to give evidence.  If it does not so extend then a convicted person could, for example, sue the police officers for the allegedly negligent manner in which they had investigaged the crime, by complaining that they had wrongly assessed the evidential value of certain matters or had failed to interview possible witnesses whose evidence was thought by the accused to be favourable to him."  [My emphasis.]

Order

1. I have been advised by counsel for Woods, ASIC and Purdon that they intend applying to have the negligence claim struck out, or at least that part of the action permanently stayed on the grounds that it is untenable and also because it is an abuse of process being a collateral attack upon the decision of the Federal Court to order that the Company be wound up.  Hunter v The Chief Constable of West Midlands [1982] AC 529. However, as the proposed defamation pleading is not subject to attack, it is appropriate for me to make an order now granting leave to amend in respect of the defamation action. The defamation pleading is contained in pars 1 - 12 inclusive of the proposed amended statement of claim. There will be an order that the plaintiffs have leave to amend the statement of claim in the terms of the proposal in pars 1 - 12 inclusive and the prayer for relief insofar as it applies to the defamation claim.