Magarditch v Australia & New Zealand Banking Group Ltd
[1998] FCA 246
•2 MARCH 1998
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 1065 of 1997
BETWEEN:
GERIER AGOP MAGARDITCH
First ApplicantJAKE SOURIAN
Second ApplicantMAGIC AUSTRALIA PTY LIMITED
Third ApplicantAND:
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522)
First RespondentIAN LAWRENCE STRUTHERS "THE APPOINTED LIQUIDATOR FOR MAGIC AUSTRALIA PTY LIMITED"
Second Respondent
JUDGE:
EMMETT J
DATE:
2 MARCH 1998
PLACE:
SYDNEY
THE COURT ORDERS:
I give the applicants leave to file a notice of motion seeking leave to amend the amended statement of claim by adding allegations that the liquidator was in breach of his duties and was negligent in failing to pursue a cross-claim in proceedings 14913 of 1989 in the Common Law Division of the Supreme Court.
I appoint 10.15 am on 9 March 1998 before Einfeld J for the return of that notice of motion, the time for hearing to be at the discretion of Einfeld J.
I abridge the time for service of the motion to 5.00 pm on Thursday 5 March 1998.
I direct that there be served with the notice of motion a minute of the proposed further amended statement of claim.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 1065 of 1997
BETWEEN:
GERIER AGOP MAGARDITCH
First ApplicantJAKE SOURIAN
Second ApplicantMAGIC AUSTRALIA PTY LIMITED
Third ApplicantAND:
AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522)
First RespondentIAN LAWRENCE STRUTHERS "THE APPOINTED LIQUIDATOR FOR MAGIC AUSTRALIA PTY LIMITED"
Second Respondent
JUDGE:
EMMETT J
DATE:
2 MARCH 1998
PLACE:
SYDNEY
EX TEMPORE REASONS FOR JUDGMENT
HIS HONOUR: These proceedings have been set down for hearing before Einfeld J on 9 March 1998. In the proceedings Gerier Agop Magarditch and Jake Sourian, together with a company in liquidation known as Magic Australia Pty Limited, make allegations against Australia and New Zealand Banking Group Limited (“ANZ”) and the liquidator of Magic Australia Pty Limited (“Magic Australia”). There is before me a motion to set aside a subpoena addressed to Mr Brent Hedges, solicitor. In order to explain the possible relevance of Mr Hedges' evidence it is necessary to consider briefly the claims that are made in the amended statement of claim.
The proceedings have had an unusual history. They were begun in the Equity Division of the Supreme Court of New South Wales. However, because very serious allegations were apparently made in those proceedings, Young J considered it appropriate to transfer the proceedings to the Federal Court under the cross-vesting legislation and the proceedings have now been in this Court since December 1997.
The relevant allegations in the amended statement of claim are that Magic Australia made a claim against VACC Insurance Co Limited (“VACC”) under a contract of insurance. The claim was made in respect of a fire which occurred on 3 February 1988. VACC rejected the claim on the basis of alleged fraudulent non-disclosure in the proposal which led to the making of the contract of insurance. Following the rejection of that claim Magic Australia was ordered to be wound up and the second respondent in these proceedings was appointed as its liquidator.
In the proceedings allegations are made against the liquidator. Paragraph 22 alleges that the second plaintiff was in breach of his duties to the plaintiffs and was negligent. That is clearly intended to be a reference to the second defendant. The relevant allegations appear to be that:
Either the liquidator (a) failed to make any preliminary or any proper investigation of the affairs and assets of the company; (b) failed to preserve the assets of the company by failing to commence proceedings against VACC Insurance Co Limited before the limitation period expired and; (c) was negligent in not obtaining legal advice in respect of the third plaintiffs, that is, the company's right to claim insurance from VACC Insurance Co Limited.
Mr Hedges filed an affidavit in support of his notice of motion in which he said he had a conversation with Mr Sourian following service of the subpoena. Mr Hedges said that he asked Mr Sourian:
I would like to know what is the nature of the evidence that you think I can give in relation to these proceedings - I am not involved in the matter either personally nor am I representing any of the parties.
Mr Sourian then replied in words to the following effect:
You can give evidence regarding the liquidation of Magic Australia.
Mr Hedges responded:
I know nothing about the liquidation of Magic Australia. Could you tell me what it is about the liquidation that you think that I know which would be of assistance.
Mr Sourian then replied in words to the following effect:
The facts of the liquidation.
Mr Hedges said:
I know nothing about the facts of the liquidation and if that is all you are going to tell me then I will apply to the Court to have the subpoena set aside.
Mr Hedges said that the conversation continued for some time with Mr Sourian raising a number of matters which Mr Hedges did not think were connected with the present proceedings.
On the hearing of the motion Mr Sourian, who appeared in person, tendered part of an affidavit which had been filed in the Commercial Division of the Supreme Court in the proceedings between Magic Australia and VACC. That affidavit contained allegations that Mr Sourian had had a discussion with the chairman of directors of VACC concerning proceedings which had been taken against Mr Sourian in relation to alleged fraudulent non-disclosure in the making of the proposal for the contract of insurance. The affidavit alleges that a meeting took place which as attended by Mr Sourian, his father, a solicitor acting for Mr Sourian, Mr Hedges, and the chairman of VACC.
Mr Sourian said that following that meeting he communicated with the liquidator and said that he had been corresponding with VACC and had a meeting with their chairman to discuss settling Magic Australia’s grievance. He said that they had had some constructive conversations with their lawyers, who had asked Mr Sourian to arrange for the liquidator to contact them. Mr Sourian says that he gave the liquidator the name and particulars of Mr Hedges.
Subsequently Mr Sourian said that he received communications from Mr Hedges' firm indicating that they might be interested in further discussing the possible resolution of the claim. The thrust of Mr Sourian's contention is that Mr Hedges may well be able to give evidence as to the extent of communication, if any, between VACC and the liquidator in relation to the possible pursuing of the claim which Magic Australia had against VACC. It seems to me that the subpoena should stand. Even if Mr Sourian did not want to call Mr Hedges himself, it is a legitimate forensic tactic to ensure that a witness who might otherwise dispute evidence given for one party, is available to give evidence so that comment could be made in the event that he is not called. In the circumstances I do not think that it is appropriate to set aside the subpoena.
The question, however, of whether the motion was justified is a different matter. On the basis of the material in the affidavit of Mr Hedges, Mr Hedges might be excused for concluding that he was unable to give any relevant evidence if he was told that he was only going to be asked about the liquidation of Magic Australia.
Mr Sourian asked during the course of the hearing before me that Mr Hedges be available to be cross-examined, although there is some dispute as to whether or not any prior notice had been given. Mr Sourian said from the bar table, without giving evidence, that Mr Hedges' affidavit did not disclose all of the conversation. The affidavit itself, of course, discloses that fact. On the basis of the version of the conversation in the affidavit, Mr Hedges may have been justified in bringing the motion, although, had Mr Sourian taken the trouble to explain all of the relevant evidence that he considered Mr Hedges might be able to give, the motion may not have been brought. On the other hand, Mr Sourian has not been given the opportunity to pursue those matters and give evidence, in the interests of saving time. Rather than involve further time and expense in having Mr Hedges come to court, it seems to me that the appropriate course is simply to dismiss the notice of motion without making any order as to costs, bearing in mind that Mr Sourian appeared in person.
Following the hearing of the notice of motion, Mr Sourian sought leave to file a notice of motion seeking leave to amend the statement of claim to include the pleadings of Magic Australia in matter number 14913 of 1989 in the Common Law Division of the Supreme Court of New South Wales against ANZ. I declined to give leave to file such a notice of motion, as it seemed to me to be futile. I raised with Mr Sourian the doubts in my mind as to whether or not anybody other than the liquidator has authority to bring and prosecute proceedings in the name of Magic Australia. Magic Australia is shown as an applicant in the proceedings which were transferred from the Supreme Court of New South Wales and I am not sure to what extent, if any, the question of the authority of those who brought it in its name has been raised.
The same problem arises in relation to the pursuit of the claim made in proceedings 14913 of 1989. Some indication was given by Mr Sourian that the liquidator had obtained directions from McLelland J that he would be justified in withdrawing from the defence of those proceedings in which possession was sought by ANZ against Magic Australia. Mr Sourian informed me that, following that step, judgment for possession was entered in favour of ANZ. However, it was not clear whether judgment was given in relation to a cross-claim. Quite apart from the question of the authority of Mr Sourian to bring proceedings in the name of Magic Australia, there may well also be issues or questions as to res judicata or issue estoppel if the proceedings in the Common Law Division have otherwise been disposed of.
For that reason, I indicated that I was not prepared to give leave for a notice of motion in the form sought by Mr Sourian to be filed. On the other hand, if the only allegation that has been made is a further particular of breach of duty on the part of the liquidator in not pursuing the Magic Australia’s rights in relation to the proceedings in the Common Law Division, then that may be something which the liquidator and ANZ would be in a position to meet.
The liquidator, however, has not been represented in this application which has been made ex parte, though I should observe that Mr Bevan, the solicitor for ANZ, was in Court and indicated that he wished to be heard if the motion for amendment was to proceed. I indicated to him that I would treat the application as being made ex parte for leave to file the notice of motion and that I would hear him if he wished to be heard. Mr Bevan indicated that he did not wish to oppose the orders which I propose to make.
Whether or not the liquidator will be in a position to meet the additional claims is something I cannot comment on, but that is a matter which can be taken into account by Einfeld J, both in considering whether or not he will hear the motion at that stage and in deciding whether or not to grant the leave if he decides to hear the motion.
The orders I propose are:
I give the applicants leave to file a notice of motion seeking leave to amend the amended statement of claim by adding allegations that the liquidator was in breach of his duties and was negligent in failing to pursue a cross-claim in proceedings 14913 of 1989 in the Common Law Division of the Supreme Court.
I appoint 10.15 am on 9 March 1998 before Einfeld J for the return of that notice of motion, the time for hearing to be at the discretion of Einfeld J.
I abridge the time for service of the motion to 5.00 pm on Thursday 5 March 1998.
I direct that there be served with the notice of motion a minute of the proposed further amended statement of claim.
I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett
Associate:
Dated: 2 March 1998
Counsel for the Respondent: P. Gerber Solicitor for the Respondent: Allan Dixon Farrer, White Barnes Date of Hearing: 2 March 1998 Date of Judgment: 2 March 1998
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