Lidden v Composite Buyers Ltd
[1996] FCA 728
•12 JULY 1996
CATCHWORDS
TRUSTS - Practice and Procedure - corporate trustee - receiver and manager appointed to corporate trustee - 1 class of beneficiaries comprised of directors of corporate trustee - directors sought to file application in name of corporate trustee - receiver and manager refused consent - corporate trustee named as respondent to application - whether competent for trust beneficiaries to commence application against 3rd parties on behalf of trust - whether equitable rule allowing beneficiaries to sue 3rd parties in exceptional circumstances confined to actions seeking equitable relief - post judicature procedure.
Hayim v Citibank NA [1987] 1 AC 730
Ramage v Waclaw (1988) 12 NSWLR 84
Vandepitte v Preferred Accident Insurance Corporation of New York [1933] AC 70
TRUSTS - Practice and Procedure - corporate trustee - whether competent for trust beneficiaries to commence application against 3rd parties on behalf of trust - exceptional circumstances required - actions by corporate trustee inter alia challenge debentures and appointment of receiver and manager.
Newhart Developments Ltd v Cooperative Commercial Bank Ltd [1978] 1 QB 814
Ramage v Waclaw (1988) 12 NSWLR 84
PRACTICE AND PROCEDURE - Parties - unwilling applicant named as respondent - subsequent consent of unwilling applicant - desirability of regulating conduct of proceedings - corporate trustee removed as respondent and named as 3rd applicant.
PRACTICE AND PROCEDURE - Abuse of Process - similar or same application lodged in same court 3 years after filing of first application - application involved same parties and same subject matter - whether abuse of process - power of court to stay similar proceedings where resolution of one will effectively dispose of the other.
Federal Court Rules O11 r16; O20 r2
PRACTICE AND PROCEDURE - Amendment to Pleadings - whether amendments introduce new causes of action which are statute barred - rule in Weldon v Neal - whether amendment 'just' - whether new cause of action arises out of 'same' or 'substantially similar facts'.
Federal Court Act 1976, s59(2B)
Federal Court Rules O13r2(2); O13r2(7)
Grundy v Lewis, Kiefel J, 24 November 1995, unreported
Harris v Western Australian Exim Corporation (1994) 129 ALR 387
Matthews v Ross Neilson Investments Pty Ltd, Kiefel J, 14 December 1995, unreported
PRACTICE AND PROCEDURE - Cause of Action - when cause of action accrues - whether fresh cause of action or instance of damage - whether fresh cause of action can be added to existing applications.
Federal Court Act 1976 s33K compared
Federal Court Rules, O11 r 7
Baldry v Jackson [1976] 2 NSWLR 415
Karedis Enterprises Pty Ltd v Antoniou (1995) ATPR 41-427
King v Milpurrurru, Full Court Federal Court, 12 April 1996, unreported
Saunders v Glev Franchises Pty Ltd (1996) ATPR 41-450
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514
JAMES LIDDEN AND MARGARET THERESE LIDDEN v COMPOSITE BUYERS LIMITED AND OTHERS
No ACT G19 of 1992
JAMES LIDDEN, MARGARET THERESE LIDDEN AND LIGON 105 PTY LIMITED v COMPOSITE BUYERS LIMITED AND OTHERS
No ACT G67 of 1995
FINN J
CANBERRA
12 JULY 1996
IN THE FEDERAL COURT OF AUSTRALIA )
)
AUSTRALIAN CAPITAL TERRITORY )
) No. ACT G 19 of 1992 DISTRICT REGISTRY )
)
GENERAL DIVISION )
BETWEEN: JAMES LIDDEN
First Applicant
MARGARET THERESE LIDDEN
Second Applicant
AND: COMPOSITE BUYERS LIMITED
First Respondent
PAYLESS SUPERBARN (NSW) PTY LIMITED
Second Respondent
LIGON 105 PTY LIMITED (RECEIVER AND MANAGER APPOINTED)
Third Respondent
COMPOSITE BUYERS LIMITED
Cross Claimant
JAMES LIDDEN
First Cross Respondent
MARGARET THERESE LIDDEN
Second Cross Respondent
COURT: FINN J
PLACE: CANBERRA
DATE: 12 JULY 1996
MINUTES OF ORDERS
THE COURT:
grants leave to the applicants to join Ligon 105 Pty Ltd as an applicant;
orders Ligon 105 Pty Ltd be struck out as a respondent on its being joined as an applicant;
grants leave to the applicants to further amend the amended statement of claim to make it identical with the statement of claim in ACT G67 of 1995;
orders that these proceedings and ACT G67 of 1995 be tried at the same time and that evidence in one be evidence in the other.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
)
AUSTRALIAN CAPITAL TERRITORY )
) No. ACT G 67 of 1995 DISTRICT REGISTRY )
)
GENERAL DIVISION )
BETWEEN: JAMES LIDDEN
First Applicant
MARGARET THERESE LIDDEN
Second Applicant
LIGON 105 PTY LIMITED
Third Applicant
AND: COMPOSITE BUYERS LIMITED
First Respondent
PAYLESS SUPERBARN (NSW) PTY LIMITED
Second Respondent
COURT: FINN J
PLACE: CANBERRA
DATE: 12 JULY 1996
MINUTES OF ORDERS
THE COURT ORDERS:
that the notice of motion be dismissed;
that costs be reserved.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
)
AUSTRALIAN CAPITAL TERRITORY )
) No. ACT G 19 of 1992 DISTRICT REGISTRY )
)
GENERAL DIVISION )
BETWEEN: JAMES LIDDEN
First Applicant
MARGARET THERESE LIDDEN
Second Applicant
AND: COMPOSITE BUYERS LIMITED
First Respondent
PAYLESS SUPERBARN (NSW) PTY LIMITED
Second Respondent
LIGON 105 PTY LIMITED (RECEIVER AND MANAGER APPOINTED)
Third Respondent
COMPOSITE BUYERS LIMITED
Cross Claimant
JAMES LIDDEN
First Cross Respondent
MARGARET THERESE LIDDEN
Second Cross Respondent
IN THE FEDERAL COURT OF AUSTRALIA )
)
AUSTRALIAN CAPITAL TERRITORY )
) No. ACT G 67 of 1995 DISTRICT REGISTRY )
)
GENERAL DIVISION )
BETWEEN: JAMES LIDDEN
First Applicant
MARGARET THERESE LIDDEN
Second Applicant
LIGON 105 PTY LIMITED
Third Applicant
AND: COMPOSITE BUYERS LIMITED
First Respondent
PAYLESS SUPERBARN (NSW) PTY LIMITED
Second Respondent
COURT: FINN J
PLACE: CANBERRA
DATE: 12 JULY 1996
REASONS FOR JUDGMENT
The notices of motion before me arise one each in two separate proceedings. Because of their interconnectedness it not only is appropriate but is necessary to deal together with these two motions. A brief description of each proceedings will suffice for present purposes.
The 1992 Proceedings
In May 1992 an application was filed in this Court by James and Margaret Lidden against Composite Buyers Ltd ("Composite"), Payless Superbarn (NSW) Pty Ltd ("Payless") and Ligon 105 Pty Ltd (Receiver and Manager appointed) ("Ligon"). That application sought relief for Ligon notwithstanding that it had been named as a respondent. No relief was sought against Ligon. The amended statement of claim para 1(c) noted of Ligon that it:
"has by its receiver and manager declined to be joined as an applicant in these proceedings by reason of which it
has been necessary to join it as a respondent."
Composite and Payless in their amended defence admit this.
Put briefly, the amended statement of claim relates (a) to the acquisition by Ligon from Payless of a supermarket business in Bombala and of a sublease of premises; and (b) to associated and consequential agreements with Composite. Ligon was established as a trustee company for the purpose of these transactions. It will be necessary to enlarge below on the relationship of the Liddens to Ligon.
The claims made by the Liddens in the amended statement of claim were that in taking the steps referred to above they were induced so to act by, and relied upon, particularised representations made by Composite and Payless which were misleading and deceptive or which were likely to mislead or deceive (the Trade Practices Act 1974 (Cth), s52 and Fair Trading Act (NSW), s42 claims).
Further claims were made in negligence; under the Contracts Review Act (NSW) 1980, s7(1); for contravention of the Companies (New South Wales) Code (1982), s171; and for breach of fiduciary duty.
The applicants claimed in the event to have suffered loss and damage.
The 1995 Proceedings
These arise out of the same circumstances as the 1992 proceedings. The application seeks the same relief as in those proceedings, though, in its detail, the statement of claim contains matter additional to that of its 1992 counterpart. Importantly where the two proceedings differ is in the status of Ligon in each of them. In the 1992 proceedings, as I have noted, Ligon was a respondent. In those of 1995, Ligon is an applicant.
It will be necessary to indicate later such significance as there is in the differences between the statements of claim in the two proceedings.
Before turning to the separate notices of motion, it is necessary to refer in a little detail to Ligon itself.
Ligon
Paragraph 13 of the operative statement of claim in both the 1992 and 1995 proceedings refers to Ligon, insofar as is relevant for present purposes, as follows:
"(b)Ligon was established as the trustee of the Rite-Way Bombala Unit trust and the applicants became directors of Ligon.
(c)[James and Margaret Lidden] became holders of 100 "A" class shares in Ligon and Composite became the holder of 101 "B" class shares in Ligon.
(d)a unit trust in respect of the Rite-Way Bombala Unit Trust was established by declaration of trust of which Ligon was the trustee.
(e)[James and Margaret Lidden] subscribed for and were allotted ordinary units in the trust for which they paid $90,000 and Composite subscribed for and was allotted preference units in the trust.
It is pleaded that the supermarket business acquired by Ligon was run by it at a loss and that on or about 16 November 1989 Composite purported to appoint a receiver and manager of the premises and business of the supermarket.
I have already noted in relation to the 1992 (but not the 1995) proceedings that the receiver and manager declined to allow Ligon to be joined as an applicant, hence its joining as a respondent. It is admitted to be the case, though, that the receiver has now retired and that the Liddens in consequence again have control of the company's affairs.
The Two Notices of Motion
The first of these has been filed in the 1992 proceedings. There are two substantial matters and a number of ancillary or consequential ones raised in it. The first substantial matter aims to have Ligon formally made a claimant against Composite and Payless. To this end the notice of motions seeks that I -
"2.Grant leave to Ligon to file a cross-claim against the other respondents to the same effect as its claim in proceedings No. ACT G67 of 1995 ("the 1995 Proceedings").
Alternatively, grant leave to join Ligon as an applicant on terms that the existing applicants first file a notice of discontinuance against Ligon."
The second substantial matter aims at harmonising the pleadings in the two proceedings. In consequence what is sought is that I -
"4.Further to 1 [sic] or 2, grant leave to amend the amended [sic] application and amended statement of claim so that they are identical with the statement of claim in the 1995 proceedings."
The other notice of motion, which has been filed in the 1995 proceedings, seeks that the proceedings, or the statement of claim or parts of it, be dismissed or struck out.
There are, in consequence, one distinct and two interrelated issues with which to deal. These are (i) the position of Ligon in the 1992 proceedings; (ii) the future terms of the statement of claim in the 1992 proceedings; and (iii) the fate of the 1995 proceedings or at least of the statement of claim in it. While the first of these can be dealt with as a discrete matter, the second two so interrelate as to make it convenient to consider them together.
(i) The Position of Ligon
As I have noted Ligon, as trustee of a unit trust of which the Liddens were ordinary unit holders and Composite was a preference unit holder, held and conducted the supermarket business. While relief was claimed for Ligon in the 1992 proceedings against Composite and Payless in consequence of their conduct, Ligon, as I also have noted, was made a defendant in those proceedings in consequence of its receiver and manager declining to have it joined as an applicant.
The situation, then, is one in which a trustee was unwilling to pursue a claim (the benefit of which would inure to the trust beneficiaries) against parties whose alleged wrongful conduct was said to have induced the creation both of the trust and of the trust business. That unwillingness, moreover, resulted from the decision of a receiver and manager appointed by one of the parties (Composite) against whom the trustee's claim was said to lie.
The first question is whether, in such circumstances, it was competent for the trust beneficiaries (or some of them) to institute proceedings in their own name to enforce such claims as the trustee has against third parties, the trustee having been joined as a defendant?
The longstanding rule in equity has been, as stated in Jacob's Law of Trusts in Australia, (5th ed, 1986) para 2303, that:
"... where a trustee refuses to institute proceedings against a debtor or to recover trust property, the beneficiary may wish to institute proceedings himself, either in his own name or in the name of the trustee. The rule here is that a beneficiary may sue in his own name only where the relief sought is in the equitable jurisdiction of the court and even then only where the circumstances are exceptional. If they are not exceptional or if the proposed action is to be commenced in the common law jurisdiction, the beneficiary's remedy is to sue the trustee for the execution of the trust and then apply for the appointment of a receiver and for leave to sue in the name of the trustee or of the receiver."
The learned authors, though, go on to add the rider in the same numbered paragraph that "[t]hese rules would be modified by judicature procedure".
There is recent Australian authority - of which the decision in Ramage v Waclaw (1988) 12 NSWLR 84 is a notable example - which applies the rule stated in Jacobs in circumstances where the relief sought was equitable. In the present case the relief sought is, variously, under statute, at common law and in equity.
The question posed in light of the relief sought is whether the Liddens at best could have instituted proceedings only in respect of those claims which gave rise to equitable relief or whether in a Judicature Act system it was competent for them to claim other relief as well.
Were there no authority on the matter from which guidance could be had, I would in any event have been inclined to the view that such claims could properly be made. I can see no compelling reason of principle or policy which should preclude this. And it is not at all apparent to me why, today, we should insist on a multiplicity of suits - as the older equity rule, unmodified, would require - for the purpose of resolving a matter which gives rise to claims for other, as well as equitable, relief: cf Federal Court of Australia Act 1976, s22.
The distinction between claims for equitable and for other relief has not commended itself to United States courts or text writers. Likewise it seems to have been ignored in observations made in Privy Council cases. So, for example, it is said in Scott and Fratcher, The Law of Trusts, Vol 4 para 282.1 (4th ed):
"If the trustee improperly refuses to bring an action against a third person who commits a tort with respect to the trust property, the beneficiaries can maintain a suit in equity against the trustee to compel him to do his duty and to bring the proper action against the third person. In the earlier law this was all that the beneficiaries could do. It was later held, however, that the whole controversy can be settled in a single suit, and in order to avoid multiplicity of suits the beneficiaries were permitted to join the third person as a co-defendant with the trustee, thus avoiding the necessity of two suits, one in equity by the beneficiaries against the trustee and another at law by the trustee against the third person. In such a proceeding the trustee is a necessary party defendant if he can be subjected to the jurisdiction of the court."
To illustrate this approach, this time in a contractual setting, the authors refer to observations of Lord Wright in the Privy Council in Vandepitte v Preferred Accident Insurance Corporation of New York [1933] AC 70 at 79:
"a party to a contract can constitute himself a trustee for a third party of a right under the contract and thus confer such rights enforceable in equity on the third party. The trustee then can take steps to enforce performance to the beneficiary by the other contracting party as in the case of other equitable rights. The action should be in the name of the trustee; if, however, he refuses to sue, the beneficiary can sue, joining the trustee as a defendant."
I should add that to like effect in my view are the comments of the Privy Council in Hayim v Citibank NA [1987] 1 AC 730 at 748, though the relief there sought was equitable. See also Bogert, The Law of Trusts and Trustees, (rev'd 2nd ed) para 869 where the subject is considered at length.
In the absence of any compelling reason in a Judicature Act system to limit the right of a beneficiary to claim
equitable relief alone, in light of the approach taken in the authorities I have referred to, and given the undesirability of adhering to an approach which promotes multiplicity of suits, I am prepared to hold that, provided the other - the "exceptional" or "special" circumstances - requirement of the rule is met, it is not necessary in a Judicature Act system that the relief be equitable or equitable alone that is sought by the beneficiary instituting proceedings for a trust.
When the 1992 proceedings were initiated it was the case that Ligon was unprepared to be joined as an applicant. There is no evidence before me to establish the reason for that unpreparedness. It may well have been that a satisfactory explanation for the refusal to have Ligon so joined could be furnished by its receiver and manager. I do not know, for example, whether or not an indemnity was proffered by the Liddens as beneficiaries - or as directors: cf Newhart Developments Ltd v Cooperative Commercial Bank Ltd [1978] 1 QB 814. Be this as it may, the proceedings were initiated against the party appointing the receiver (Composite), and the relief claimed involved (inter alia) orders setting aside (a) the various agreements between Ligon and Composite and Payless including (it would seem from the application) the debenture under which the receiver and manager was appointed; and (b) the appointment of the receiver and manager.
If in the Newhart case, above, it was thought the position there of the receiver was "very curious and unenviable" (ibid, 820), it was even more so here given the relief sought against Composite in particular. The conflicts of interest were acute. Prima facie at least, the circumstances here would appear to be ones in which it could be said that special or exceptional circumstances existed which would justify either an action being initiated by the beneficiaries in the manner in which they have, or the court refusing to strike out that action as one incompetently constituted if a motion to that effect had been brought. No such motion was in fact brought.
Ligon in substance, though not in form, was a claimant against Composite and Payless in the 1992 proceedings. It has not been demonstrated to me that the proceedings initiated by the Liddens and in the form that they were, were incompetent insofar as Ligon was concerned. Indeed as I have indicated the contrary would seem to be the case.
With the objection now having been removed to Ligon taking its proper place formally as an applicant in the 1992 proceedings with the retirement of the receiver and manager, and it having signified in this motion a consent so to act, it is appropriate that it now be constituted an applicant in the proceedings in lieu of the Liddens to the extent that, but only to the extent that, the Liddens in the 1992 proceedings have made the application on behalf of Ligon.
I am prepared to grant leave to the Liddens to join Ligon
as an applicant in the 1992 proceedings. The effect of this will be to make Ligon's joinder as a respondent not merely inconvenient but inappropriate: it will no longer be a proper respondent to the application. Accordingly I will order that on Ligon being joined as an applicant, Ligon be struck out as a respondent to the application.
Because of the view I have taken of the Liddens' actions in instituting proceedings on behalf of Ligon, it would be quite inappropriate to adopt the alternative course sought in the notice of motion of keeping Ligon as a respondent but giving it leave to file a cross-claim against Composite and Payless. Its claim against them has already been made.
Amending the 1992 Pleadings; and
Dismissing the 1995 Proceedings
To appreciate the burden of these two matters, it is necessary to refer in a little detail to the 1995 proceedings generally and to the statement of claim in particular.
The principal explanation given for the need for the 1995 proceedings is said to be that, because of uncertainty as to when the alleged causes of action both under the Trade Practices Act/Fair Trading Act and in negligence actually accrued, the 1995 proceedings were necessary to guard against the contingency of those causes of action accruing after the 1992 proceedings were instituted. The alleged uncertainty in this matter is said to be the product of uncertainty as to when the relevant loss or damage necessary to sustain these causes of action was suffered. Reference here was made to the decisions of the High Court in Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 and of the Full Court of this Court in Karedis Enterprises Pty Ltd v Antoniou (1995) ATPR 41-427.
In light of the fact that by the time of the 1992 pleading, things had come to such a pass that a receiver had been appointed to Ligon in 1989, and that the pleading itself claims that the supermarket was run at a loss from the time the business was taken over by Ligon in 1988, this explanation does seem to contain an element of the risk-averse about it.
Counsel both for the applicants and for the respondents have accepted that, if a cause of action arose subsequent to the 1992 pleading, that pleading could not be amended so as to include the later cause of action. I was asked to accept, in other words, that the Federal Court Rules, Order 11 rule 7 should be given the limited construction accorded its New South Wales counterpart in Baldry v Jackson [1976] 2 NSWLR 415, and so produce the exclusionary effect counsel accept: see also King v Milpurrurru, 12 April 1996, an unreported decision of the Full Court of the Federal Court. Though that construction could properly be said to be a cause of the pleading difficulty which exists in this case, I am content to adopt the course proposed by counsel in the absence of any
submissions to the contrary.
I would note, though, that the provisions of the Federal Court Act 1976, s33K may provide indication of the significance which should be given Baldry v Jackson, above, in relation to proceedings in this court - at least where (as here) the initial proceedings of which amendment is sought so as to include a later arising cause of action, does itself disclose a cause of action which had accrued at the time the initial proceedings were commenced.
Turning now to the pleadings. I have indicated that while broadly similar to the amended statement of claim in the 1992 proceedings, the 1995 statement of claim is not identical with it. I have been provided with a draft copy of the 1995 pleading in a form which, through underlining, indicates what it contains in addition to that contained in the 1992 pleading.
For present purposes it is only necessary to refer to the Trade Practices Act/Fair Trading Act and negligence claims. For convenience I simply reproduce these claims in the form contained in the draft copy referred to above and in so doing note again here that the claims arise out of the sale and purchase of a supermarket business.
(i) The Trade Practices Act/Fair Trading Act Claims:
"6.Composite and Payless represented to the first and second applicants that:-
(a)the stock level of the Payless Bombala supermarket was $250,000 which was sufficient stock for the Payless Bombala supermarket and that its creditors were and would be of the order of $75,000.
(b)alternatively, the stock level of the Payless Bombala Supermarket was and would be of the order of $350,000 which was sufficient stock for the Payless Bombala Supermarket and its creditors were and would be of the order of $175,000.
(c)the financing of the acquisition and operation of the Payless Bombala Supermarket proposed and arranged by Composite and Payless was feasible or viable based on (a) or alternatively (b) above.
("the First Representations")
PARTICULARS
(a)The First Representations were made orally on or about 8 April 1987 to the first and second applicants by Messrs Saunders and Spain on behalf of Composite and Payless at their premises at Botany.
(b)The First Representations were made orally by telephone to Mr Lidden in or about January 1988 by Mr Sugden on behalf of Composite and Payless.
(c)The First Representations were made in writing on or about 12 January 1988 at a meeting between Mr Lidden and Mr Sugden, on behalf of Composite and Payless, whereby Mr Sugden provided Mr Lidden with a feasibility study on which he or someone made a hand written notation indicating that stock of $350,000 included $100,000 for debtors.
The First Representations were false, misleading and deceptive in that:
(a)the stock level of the Payless Bombala supermarket was and had to be of the order of $337,000 or thereabouts and a lesser level or a level of $250,000 was insufficient.
(b)alternatively, creditors were not and would not be of the order of $175,000 but were and would be of the order of $60,000 or thereabouts.
(c)the financing of the acquisition and operation of the Payless Bombala Supermarket proposed and arranged by Composite and Payless was not feasible or viable having regard to (a) or alternatively (b) above.
(d)insofar as they related to the future there was no reasonable basis for making them.
Further or in the alternative, Composite and Payless represented to the applicants:
(a)that weekly cash sales in year 1 would be of the order of $48,924.
(b)that the gross profit percentage was and in year 1 would be of the order of 21.16%.
(c)that freight costs had been included in calculating the gross profit margins.
(d)that sales growth of 18% from a prior period sales result of $40,438 p.w. or 8% from a prior period sales result of $45,300 p.w. was to be expected.
("The Second Representations").
PARTICULARS
The Second Representations are evidenced by two feasibility studies for the Payless Bombala Supermarket provided by Composite and Payless to the applicants, the first in about July/August 1987 and the second in about December 1987/January 1988.
The Second Representations were false, misleading and deceptive because:
(a)Composite and Payless had no reasonable grounds for making them or any of them.
(b)weekly cash sales in year 1 were substantially less than $48,924.
(c)the gross profit percentage after freight costs then and in year 1 was substantially less than 21.16%.
(d)freight costs had not been included in the calculation of the gross profit margins in the said feasibility studies.
10.Further or in the alternative, Composite and Payless represented to the applicants that there were no financial statements available for the Payless Bombala Supermarket (the "Third Representation").
PARTICULARS
The representation was made orally by Mr Fisher on behalf of Composite and Payless to Mr Lidden on behalf of the applicants.
11.The Third Representation was false, misleading and deceptive in that financial statements were available for Payless Bombala Supermarket."
(ii)The Negligence Claim:
"17.Further or in the alternative the respondents were under a duty to the applicants to take care in the making of the said representations and in arranging the financing of the acquisition and operation of the Payless Bombala Supermarket and in advising the applicants.
18.In breach of the said duty, the respondents were guilty of negligence.
PARTICULARS
(a)Failing to make a proper assessment of or to take all reasonable steps to ascertain or estimate past or future stock levels, debtors, creditors, sales, gross profit percentages and whether freight costs were included in calculations of gross profit margins.
(b)failing to properly advise upon and organise appropriate funding arrangements for the purchase and operation of the business.
(c)failing to advise properly or at all upon the significance of hardware sales and stock requirements.
(d)advising the applicants that $350,000 was sufficient funding for stock and debtors.
(e)failing to adequately explain the figures in the feasibility studies.
(f)advising the applicants not to grant credit to and to withdraw credit from customers."
I have already indicated that the notice of motion in the 1992 proceedings seeks leave to amend the 1992 amended statement of claim so as to make it identical to its 1995
counterpart.
The new material in the 1995 pleading - the "couple of further complaints" as it was put for the applicants - was said to have arisen substantially out of matter revealed in the respondents' affidavits and out of discovery. Nonetheless the respondents have submitted that that new material not only altered the factual matrix from that relied on in the 1992 proceedings, it also would appear to have pleaded new causes of action.
It was then said that to allow these causes of action to be introduced by amendment into the 1992 pleadings would be to allow claims to be set up which at the time of the amendment were barred by limitation provisions.
Counsel for the respondent acknowledged as a result of changes made in 1994 to Order 13 rule 2, that this Court could allow an amendment in such circumstances: see also Harris v Western Australian Exim Corporation (1994) 129 ALR 387. But he submitted first, that the new 1995 claims and/or the new 1995 foundations for the existing 1992 claims encompassed by the proposed amendment did not arise out of the "same" or "substantially the same facts" as grounded the 1992 pleading -and such was required if an amendment was to be made under Order 13 rule 2 (7); secondly, because of the significant costs it was said would follow from such an amendment, it was not "just" (cf O13 r2(3)) to grant the amendment in the
circumstances.
Confronted with this comparison of the two pleadings and of the effect of an amendment under Order 13 rule 2, counsel for the applicants accepted that it may well be the case that some new claims or else new foundations for existing claims were raised in the proposed amendment. Nonetheless he reiterated that these matters arose in consequence of discovery and of the respondents' affidavit material and can be demonstrated clearly to have arisen out of the same or substantially the same facts pleaded in the 1992 pleadings. In the end I did not understand the respondents seriously to contend that such was not probably the case.
It is, in my view, clear that some new claims for relief are being made in both the Trade Practices Act/Fair Trading Act and the negligence claims. The "Third Representation" referred to in paragraphs 10 and 11 of the 1995 pleading set out above has that character as has the claim for negligent advice in paragraphs 17 and 18.
While I consider that these in particular of the proposed amendments can only with some difficulty be said to raise claims which arise "out of the same or substantially the same facts as those already pleaded to support existing claims for relief" - as Order 13 rule 2(7) requires; and see also Grundy v Lewis, unreported, 24 November 1995 and Matthews v Ross Neilson Investments Pty Ltd, unreported, 14 December 1995,
both decisions of Kiefel J - I am prepared to find that requirement satisfied in the present case, the more so because neither counsel made detailed submissions on this aspect of the proposed amendments themselves.
The remaining issue insofar as the amendment is concerned is whether it is "just" to grant leave to make it. I have not been provided with any particular explanation as to why there has been such a delay in seeking the amendment: cf Matthews v Ross Neilson Investments Pty Ltd, above. Nonetheless I am prepared to allow the amendments in the very distinctive circumstances which obtain here. First, for the reasons which I will give below, I am unwilling to stay the 1995 proceedings. In those circumstances it will be necessary for the respondents to consider their defence against the very allegations which the present motion seeks to have introduced by amendment into the 1992 proceedings. I accept though, that, for reasons relating to limitation of actions, the actual defence relied upon for the 1995 proceedings may not be that relied on in the 1992 proceedings. Secondly, to the extent that the amendments are the product of discovery I merely note the halting pace of discovery in this matter. Even now it is incomplete. Without in any way seeking to assign blame, delay has been a characteristic feature of this litigation and of itself it undercuts such argument as the respondents advance based on the prejudicial effect arising from allowing the further examination of events of eight years ago. Thirdly, I am not convinced that allowing the amendments
will have the effect of requiring the respondents to defend proceedings which are significantly different in character to those initiated by the 1992 pleadings. Fourthly, it does seem to me that the efficient conduct of this litigation - cf Bomanite Pty Ltd v Slatex Corp Australia Pty Ltd (1991) 32 FCR 379 - will be enhanced if the two proceedings are harmonised and can be tried in effect as one. Finally, I acknowledge that allowing the amendment sought may have quite significant cost implications for the respondents. I am not persuaded, though, that this provides adequate reason in the circumstances for refusing the amendment.
I will, then, allow the amendment sought in the notice of motion.
Now let me turn to the motion brought by the respondents to strike out the 1995 proceedings or else the statement of claim in it.
I earlier referred to the reason given by the applicants for the need to initiate these later proceedings. It is necessary to enlarge upon the explanation somewhat.
The evidence before me is that the proceedings were instituted because of concern that the applicants and Ligon may not have suffered damage until after the 1992 proceedings were instituted. It emerged apparently from documents produced on discovery by the respondents around June 1995 - I emphasise the date given what I said earlier about delay in these proceedings - that the receiver and manager of Ligon has sold the supermarket business in June 1992. This was a month or so after the 1992 proceedings were initiated. The applicants' apprehension apparently was that they may not have suffered loss until the sale, hence the need to institute new proceedings because, for the Baldry v Jackson reasons I have already noted, they could not merely amend the 1992 proceedings to add this later cause of action. I am informed that the applicants' evidence will be that they were unaware of the sale prior to the June 1995 discovery.
The respondents attack on the 1995 proceedings generally was founded on the Federal Court Rules O20 r2 and, on the statement of claim, on O11 r16. For convenience I will describe these compendiously, though somewhat inaccurately, as allegations of abuse of process.
The ill alleged in allowing the 1995 proceedings to stay on foot is this. The proceedings, it is said, merely duplicate the 1992 proceedings and that duplication itself constitutes an abuse of process. Inherent in this is the assertion that such causes of action as the applicants' may have against Composite and Payless arose, if they arose at all, before the 1992 proceedings were initiated. To sustain this assertion, they point to the 1992 amended statement of claim and to its unequivocal assertion that by then the applicants and Ligon had suffered loss and damage as a result of the relied upon representations, the negligence, etc of Composite and Payless. As no cause of action arose after the 1992 proceedings were begun - though further loss may have been suffered thereafter - no need existed to initiate new proceedings to meet that contingency. In other words, such case as the applicants and Ligon claim they have against Composite and Payless was a clear one capable of being fully encompassed in the 1992 proceedings so that the later proceedings in respect of the same case were repetitious, unnecessary, and an abuse of process.
For their part the applicants' submission is that (i) in light particularly of the decision of the Full Court of this Court in Karedis Enterprises Pty Ltd v Antoniou (1995) ATPR 41-427 which confirmed in the context of the purchase of a business that there was no one fixed and immutable time at which it would be said that loss was suffered as a result of the making of the purchase for the purposes of a Trade Practices Act, s82 damages claim but that the question of when loss was sustained was simply one of fact; and (ii) given the occurrence of events after the 1992 proceedings which may be the ones which gave rise at law to the loss sustained (the event primarily relied upon in this was the receiver's sale of the business) - it was necessary as a matter of insurance to institute the 1995 proceedings even if when the matter is fully inquired into at trial those proceedings may be found to be unnecessary.
While accepting that there may be adverse costs consequences which result from the proceedings being found in the event to be unnecessary, the matter is said not to be so unarguable that the proceedings should be struck out. And if the 1992 and 1995 pleadings are made identical - as I have indicated they should be - it is said no great inconvenience will be occasioned by keeping the latter on foot.
I would have to say that I have considerable sympathy for the submissions advanced by the respondents. Given the applicants' quite confident assertion that the actions of Composite and Payless had caused them loss by the time of the 1992 proceedings - and indeed for quite some time before - it is difficult to see the actual need for the 1995 proceedings. That need is not, in my view, strengthened greatly by the applicants' assertion that in relation to some of their causes of action they may indeed be mistaken as to when these accrued notwithstanding their 1992 pleading.
It is the case that, where proceedings have been started in one court, it is an abuse of process to duplicate proceedings in another court when a complete remedy is available in the first court. It likewise seems the case that where proceedings are pending in a court, a separate action in the same court should at least by stayed where both actions involve the same parties and the same subject matter and where the hearing of the first will effectively dispose of the need for the hearing of the second.
Because of the contingency on which they rely, the applicants' and Ligon's case is that the 1992 proceedings may not effectively dispose of the matter. This is the essential ground on which they resist the motion.
Because the 1992 statement of claim will, by amendment, be harmonised with the 1995 statement of claim, the sole outstanding justification for the 1995 statement of claim is to guard against the contingency of a later (i.e. post 1992) arising cause of action. Despite the sympathy to the contrary I noted above, given the undesirability of attempting to determine in interlocutory proceedings when causes of action arise - cf Saunders v Glev Franchises Pty Ltd (1996) ATPR 41-450 where the parties agreed the time when loss was suffered - and given the very limited function that the 1995 proceedings will serve, I am not prepared on balance to deny the applicants and Ligon their insurance policy. In saying this, though, I do not express any opinion on the issue of the costs of those proceedings if, in the event, the applicants are wholly or partially successful in the 1992 proceedings alone.
I will, then, refuse the notice of motion to strike out or dismiss the proceedings or the statement of claim. I do not understand that the other possible orders sought in the notice of motion have actually been pursued before me.
My orders then will be (a) in relation to the notice of motion in the 1992 proceedings, I:
grant leave to the applicants to join Ligon 105 Pty Ltd as an applicant;
order that Ligon 105 Pty Ltd be struck out as a respondent on its being joined as an applicant;
grant leave to further amend the amended statement of claim to make it identical with the statement of claim in ACT G67 of 1995; and
order that these proceedings and the 1995 proceedings be tried at the same time and that evidence in one be evidence in the other;
and (b) in relation to the notice of motion in the 1995 proceedings, I order:
that the notice of motion be dismissed; and
that costs reserved.
I certify that this and the preceding 25 pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.
Associate
Dated: 10 July 1996
Counsel for the applicant : P M Biscoe QC
W Davis
Solicitors for the applicant : Clayton Utz
Counsel for the respondent : P Greenwood
Solicitors for the respondent : Holman Webb
Date of hearing : 3 June 1996
Date of judgment : 12 July 1996
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