McIntosh & Co Holdings Ltd v Pyramid Technology Corp Ltd
[1996] FCA 844
•30 Aug 1996
LIMITED DISTRIBUTION
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 389 of 1994
)
GENERAL DIVISION )
BETWEEN:McINTOSH & CO HOLDINGS LIMITED
Applicant
AND:PYRAMID TECHNOLOGY CORPPORATION LIMITED
First respondent
PYRAMID TECHNOLOGY CORPORATION INC
Second respondent
CORAM: BEAUMONT J.
DATE: 30 AUGUST 1996
MINUTES OF ORDERS
THE COURT ORDERS THAT:
The notice of motion filed 9 February 1995 be dismissed.
Costs of the motion to be costs in the principal proceeding.
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 ) No. G 389 of 1995
)
GENERAL DIVISION )
BETWEEN:McINTOSH & CO HOLDINGS LIMITED
Applicant
AND:PYRAMID TECHNOLOGY CORPPORATION LIMITED
First respondent
PYRAMID TECHNOLOGY CORPORATION INC
Second respondent
CORAM: BEAUMONT J.
DATE: 30 AUGUST 1996
REASONS FOR JUDGMENT
This is a motion by the second respondent, Pyramid Technology Corporation Inc. (Pyramid Inc.") to set aside an order made by Lindgren J on 13 October 1994 in which his Honour granted leave to serve process out of the jurisdiction and in the United States of America. His Honour gave short reasons on that date for making the order which was made ex parte. His Honour there pointed out that, under O.8 r.2, service outside the Commonwealth of an originating process is not valid unless it is with the prior leave of the Court. Order 8 r.2 stipulates three conditions which must be satisfied before that leave is granted.
His Honour said that he was satisfied that the proceeding was one in which the Court has jurisdiction and was one to which r.1 of O.8 applies but that the third condition, namely, that the Court be satisfied that the applicant McIntosh & Co. Holdings Limited ("McIntosh") has a prima facie case for the relief sought against Pyramid Inc., gave rise to difficulty.
His Honour referred to the circumstance that, subsequent to the initial application for leave, McIntosh filed substantial further evidence. His Honour did not describe that evidence in detail but referred to the following aspects of it: the advertising in Australia by Pyramid Inc.; the fact that the first respondent was a wholly owned subsidiary of Pyramid Inc.; the fact that there was at least one director in common; the fact that there was, at the relevant time, a close relationship of co-operation between the respondents of an ongoing nature; the fact that Pyramid Inc. promoted itself in Australia as operating in the Asia Pacific region through the first respondent's premises in Chatswood, Sydney, and the fact that the first respondent was an instrument of Pyramid Inc. and subject to its control and direction.
By notice of motion dated 9 February 1995, Pyramid Inc. seeks an order that service of process upon Pyramid Inc. be set aside, a declaration that the Court has no jurisdiction to hear and determine these proceedings against Pyramid Inc. and finally, an order dismissing the application as against Pyramid Inc. It appears that the notice of motion has been
brought pursuant to the provisions of O.9, r.7. In any event there is no doubt that the Court has jurisdiction to entertain Pyramid Inc.'s motion.
Since Lindgren J dealt with the matter there have been a number of developments. First of all, a substantial body of affidavit evidence has been filed on behalf of McIntosh. An index to that affidavit material is contained in MFI4 and need not be repeated here. Further, McIntosh has, by leave granted on 18 March 1996, filed on 26 March 1996 an amended version of its statement of claim. Although the material before Lindgren J was more limited in terms of evidence and in terms of the claims made in McIntosh's pleading, the particular aspects of the evidence then before his Honour remain true and I propose to accept those findings for present purposes. Indeed, they are if anything reinforced in the affidavit material subsequently filed and identified in MFI4.
In fairness to Mr Cotman who appeared for Pyramid Inc., it should be noted that in the course of argument before me he did indicate that there was some evidence that Pyramid Inc. was carrying on business in Australia. The real thrust of his submission was that there was simply no evidence that even a prima facie case against Pyramid Inc. had been made out.
As has been said McIntosh amended its statement of claim by leave granted in March of this year. The amended statement of claim is a lengthy document and I will not attempt, nor is it appropriate for me to attempt, to summarise it. It appears from the pleading and from the affidavit material before me that there were negotiations between McIntosh and both respondents over a substantial period of time for the supply by the respondents of sophisticated computer equipment. The negotiations for this transaction were undoubtedly complex, the transaction itself was, without question, complex and it follows that the present litigation is also complex.
The present question arises because, although the first respondent is a wholly owned subsidiary of Pyramid Inc. and although the first respondent is a company incorporated in New South Wales and a trading corporation formed within the limits of Australia and carrying on business in Australia, Pyramid Inc. is a United States corporation incorporated in the State of Delaware. That being so, the leave of the Court was undoubtedly required before service of the process could be effected in the United States.
There has been no real, or at least substantial, area of dispute between the parties on the legal principle that governs the outcome of this motion. By O.8 r.1 a number of circumstances are prescribed as situations in which it may be
appropriate to grant leave. It is not necessary to discuss them in any detail, save to note paragraph (a) which confers the power to grant leave where the proceeding is founded on a cause of action arising in the Commonwealth and paragraph (g) which is applicable where the proceedings properly brought against a party served in the Commonwealth and the person served outside the Commonwealth is properly joined as a party to the proceeding.
As has been noted, the first respondent is on any view within the jurisdiction of the Court and has been served in the Commonwealth. It is not necessary to pursue the point but it may be that, given the dual involvement of each of the respondents in the transaction, and in particular, given the dual office held by the common director already mentioned, it would have been appropriate to join Pyramid Inc. as a party to the principal proceeding. It is also common ground in accordance with the authority of the High Court, as explained in a recent decision of the Full Court, that the onus lies upon McIntosh as the applicant in the principal proceedings to demonstrate that leave ought to be granted, (see Voth v Manilda Flour Mills Pty Limited (1990) 171 CLR 538; Syd-Bank Serndinland AS v Bannerton Holdings Pty Limited, Full Federal Court, 9 August 1996, unreported).
Another matter considered but not decided in Bannerton above (see at p.18) is the question whether, on the
one hand, McIntosh must establish a prima facie case for each cause of action relied on, or, on the other hand, whether it is sufficient for McIntosh to show a prima facie case for the relief sought in the application. Whilst I incline to the latter view, I need not pursue the point here.
The real issue in this motion is, as I follow the submissions of Mr Cotman, one of fact. In order to understand how this issue arose it should be noted that in the amended statement of claim a number of facts are alleged. It is not appropriate that I attempt to summarise those facts however two features of the pleading may be mentioned and I speak in the most general terms for this purpose. The first is the claim made in the pleading that the respondents held themselves out as having specialised knowledge in connection with the sophisticated computer equipment that was to be supplied. The second feature that stands out is that there were apparently serious difficulties encountered with the operation of that equipment.
As has been said a substantial body of affidavit evidence has been filed on behalf of McIntosh. In my opinion at the prima facie, or triable issue level, which is the criterion now applicable for the purposes of this motion, that affidavit evidence demonstrates the two features of the pleading I have mentioned. Having alleged that factual context in considerable detail, the pleading proceeds in
para.39 and following to claim that the conduct of the respondents gave rise to several causes of action, being alleged contraventions of several of the provisions of Part V of the Trade Practices Act, ss.51A, 52, 53(c) and 53(g).
McIntosh also claims that the respondents were negligent at common law. In its application in the principal proceedings, McIntosh claims from each of the respondents damages pursuant to s.82 of the Trade Practices Act or, alternatively, damages for negligence. A further alternative claim is made under s.87 to the effect that an order be made under that provision dealing with lease payments due under the finance lease made in respect of the equipment, that arrangement having been made between McIntosh and a finance company at arms length with the present party. It is appropriate to note at this stage that, although Mr Cotman briefly cross-examined some of the witnesses whose affidavit evidence was relied on on behalf of McIntosh, Pyramid Inc. did not call evidence. It is fair to say though that the cross-examination was directed towards seeking a concession from the witnesses that certain representations alleged to have been made in the course of the negotiations for the supply of the hardware which McIntosh allege to be misleading, were, literally at least, true.
I have difficulty, for the present very limited purposes, in seeing that there can be any real force in Mr
Cotman's approach. It is certainly convenient, and indeed usual, for an analysis to be made of an allegation of a contravention of s.52 in terms of a claim that there has been a misrepresentation of some matter. However, the authorities make it clear that whilst it may be convenient to paraphrase s.52 in this fashion, the words of the provision are clear. That is to say, whilst in many cases in which misleading conduct is demonstrated there will have been a misrepresentation, either expressly or by implication or by conduct, in strictness, the ultimate issue for the Court is whether the conduct is misleading or deceptive or likely to be so. In other words, it is not an essential element of a contravention of s.52 that a misrepresentation be made out.
This logically leads to a second difficulty which Mr Cotman must confront. That is, a settled course of authority makes it plain, as any ordinary reading of s.52 indicates, that in order to determine whether conduct is misleading or deceptive or likely to be so the Court must have regard to all the material circumstances. A pertinent example of that principle, for present purposes, is the analysis that has been made by the Court of the circumstances in which silence may constitute misleading conduct. As was said in Bannerton above, at p.12:
"In the light of a pre-existing relationship between parties created by a statement a failure to disclose a change of mind, i.e. silence, is capable of being misleading and deceptive conduct."
In Demagogue Pty Limited v Ramensky (1992) 39 FCR 31, Gummow J said (at 41):
"Conduct in contravention of section 52 may not always involve a misrepresentation"
And went on to agree with remarks made by French J in Kimberley NZI Finance v Terraro (1989) ATPR 53-193 (at 53-195) where French J said:
"The cases in which silence may be so characterised are no doubt many and various and it would be dangerous to essay any principle by which they might be exhaustively defined. However, unless the circumstances are such to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist."
In my opinion, reading the affidavit evidence as a whole, considered in the light of the cross-examination by Mr Cotman of those witnesses who were cross-examined, indicates that at the prima facie or triable issue level there may be inferred from the relationship between the three parties before the Court and from the course of their dealings that there was at least a reasonable expectation on the part of McIntosh that the respondents would warn it of the difficulties that were in fact encountered.
It must follow from this, I think, that at the prima facie or triable issue level there is a basis for inferring from the whole of the circumstances, that is, the whole of the course of the dealings between the parties, that there may have been conduct which was likely to mislead. As I have said, Mr Cotman sought to meet this by endeavouring to show in the course of cross-examination that the representations pleaded, or at least some of them, could fairly be regarded as literally true. As I have already mentioned, there are a number of difficulties for Mr Cotman in this approach. In the first place, the inquiry is, as I have said, not restricted to the making of representations as such. In the second place, of course, a statement may be literally true but taken in its full context may still be liable to mislead.
Similar considerations apply, so it seems to me, in the case of the common law claim in negligence having regard in particular to the evidence that the respondents held themselves out as having specialised knowledge in this area. I am also of the view again at the triable issue or prima facie level that there was a duty of care and that it was breached. Again, I am not satisfied that by his cross-examination, Mr Cotman has eliminated this as a possibility. It follows that I have concluded that McIntosh has shown a prima facie case with respect to each of the causes of action alleged.
That is not an end of the matter. I do have an overriding discretion to refuse to grant leave, however, given the close relationship between the first and second
respondents and given, in particular, the circumstances that there was a common director who was actively involved in the transaction, it is appropriate that I should exercise the discretion to grant leave. It follows then that I dismiss the motion of Pyramid Inc. to set aside the order made by Lindgren J on 13 October 1994 granting leave to serve out of the jurisdiction. In the circumstances, the costs of the motion should be costs in the principal proceeding.
I certify that this and the preceding ten (10) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Beaumont.
Associate
Dated: 23 September 1996
Counsel and Solicitors Mr. G.T.W. Miller Q.C. with
for Applicant: Mr. M. Galvin instructed by
Gadens
Counsel and Solicitors Mr. N. Cotman instructed by
for First and Second Abbott Tout
Respondents:
Date of hearing: 23, 28 August 1996
Date Judgment delivered: 30 August 1996
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