Mercer v Business Class Transport Pty Ltd
[2011] FMCA 321
•18 April 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MERCER v BUSINESS CLASS TRANSPORT PTY LTD & ANOR | [2011] FMCA 321 |
| PRACTICE & PROCEDURE – Discontinuance against corporate respondent – application for default orders against individual respondent – discontinuance implies no admissions of contravention by corporate respondent – inability to pursue rights on accessorial grounds pursuant to s.75B TPA. |
| Trade Practices Act 1974, ss.52, 52A, 75B, 87(1)(a), 87(2)(d) |
| Australian Competition and Consumer Commission (ACCC) v Albert [2005] FCA 1311 Miller’s Annotated Trade Practices Act (33rd Edition) |
| Applicant: | LINDA JOSEPHINE MERCER |
| First Respondent: | BUSINESS CLASS TRANSPORT PTY LTD |
| Second Respondent: | SHAUN ANTHONY HOGAN |
| File Number: | BRG 638 of 2010 |
| Judgment of: | Burnett FM |
| Hearing date: | 18 April 2011 |
| Date of Last Submission: | 18 April 2011 |
| Delivered at: | Brisbane |
| Delivered on: | 18 April 2011 |
REPRESENTATION
| Solicitors for the Applicant: | Bruce Graham Lawyers |
| There was no appearance by or on behalf of the First Respondent |
| There was no appearance by or on behalf of the Second Respondent |
ORDERS
That the second Respondent pay the Applicant the sum of $1,320.00 by way of costs of and incidental to the application made today.
That the Application against the second Respondent be dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 638 of 2010
| LINDA JOSEPHINE MERCER |
Applicant
And
| BUSINESS CLASS TRANSPORT PTY LTD |
First Respondent
| SHAUN ANTHONY HOGAN |
Second Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
This matter was listed for trial, commencing for four days from 18 April 2011. Recently, the applicant entered a notice of discontinuance against the first respondent only. I have been informed this morning by the solicitor for the applicant that the terms upon which the applicant resolved the application with the first respondent was on the basis that the application be discontinued by the applicant against the first respondent without any order as to costs. In other words, each party was to bear their own costs.
The application was not resolved as against the second respondent, and at the commencement of the hearing this morning the applicant made an application for default summary judgment against the second respondent who has not attended the hearing today. Further, I note from the submissions made by the applicant that there have been a number of defaults by the second respondent in respect of compliance with various interlocutory orders made by the court, in particular orders directed to the service and exchange of material.
The action was one brought by the applicant against the first and second respondents for contraventions of the Trade Practices Act 1974 (Cth) (TPA), and in particular s.52 insofar as it related to representations made in the course of a contract for the sale of an interest in a hire vehicle transport license.
The second respondent, Mr Hogan, was a director and shareholder of the first respondent, and the action pursued against him was pursuant to his accessorial liability under s.75B of the TPA, in respect of the contravening conduct alleged on the part of the first respondent, Business Class Transport Propriety Limited. In the applicant’s application for summary judgment, the applicant has contended that, notwithstanding the discontinuance of the principal proceeding against the first respondent, the corporate entity, he is entitled to pursue to judgment the claim against the second respondent, an individual.
In particular, he relies upon the observations made in Miller’s Annotated Trade Practices Act (33rd Edition) at page 792, where the author says:
“Proceedings may be taken against individuals allegedly involved in contravention, even though the proceedings are not pursued against a corporation alleged to be the primary contravener. See ACCC v Albert and Matheson Engineers Pty Ltd v El Raghy.”
While the proposition cited and the authorities in support of it are plainly correct, respectfully I think the applicant has misapprehended the nature of that principle and the authorities. The contravening conduct was conduct alleged against the first respondent, and the liability of the second respondent is purely accessorial; that is, his, the second respondent’s liability is conditional upon the applicant succeeding in the action against the first respondent. That is to be distinguished from the circumstances identified in cases such as ACCC v Albert[1] and Matheson Engineers Pty Ltd v El Raghy,[2] which, for instance, involved instances where the principal contravenor was not pursued because of insolvency but otherwise, by findings or admission, the contraventions were established.
[1] [2005] FCA 1311
[2] (1992) 37 FCR 6
The position was addressed by the court in Trade Practices Commission (TPC) v Manfal Pty Ltd & Ors (No. 3) (1991) 33 FCR 382, where a similar problem presented itself before Lee J. The facts of that case, which were considered by the South Australia Supreme Court in Harris Scarfe Limited (Receivers and Managers Appointed) (in liquidation) & Ors v Ernst & Young & Ors (No. 8),[3] where Trade Practices Commission (TPC) v Manfal (supra) was cited with approval.
[3] [2006] SASC 317
In TPC v Manfal the Commission claimed under s.87(1)(a) and (2)(d) of the TPA for remedial orders on behalf of particular consumers for loss and damage suffered by them by reason of Manfal having allegedly engaged in contravention of s.52A of the TPA.
The summary provided in Harris Scarfe supra continued:
“[11] …Also joined in the proceedings were natural persons who claimed to be jointly and separately liable with Manfal for the loss and damage. Those persons were not persons to whom s.52A of the TPA applied. The remedy against them was as persons involved in the contravention as defined in s.75B of the TPA. Their liability depended upon proof of the contravention of s.52A by Manfal, and their respective liability, according to the pleadings, would have been a joint liability with that of the company.
12 Manfal had been placed in liquidation. The Trade Practices Commission sought leave to discontinue the action against Manfal. Manfal’s defence to the claim was germane to the defence of all of the individuals. If Manfal succeeded, the claim against the other defendants would fail. If the case against Manfal was discontinued, and the case proceeded against the others based on Manfal’s contravention, satisfaction of the judgment by an individual or individuals would constitute a bar and further action against Manfal.”
It was argued that if leave were given to discontinue the action, there would need to be further proceedings for leave to issue cross-claims by the individuals against Manfal, being cross-claims of uncertain nature, leading to a substantial delay of the proceedings. However, if the pleadings stood and the Trade Practices Commission succeeded, there would be joint liability on the part of all respondents and the discharge of the judgment of an individual would provide a foundation for a right of contribution against the company, which would not be the case if the action were discontinued.
In the course of Lee J’s judgment, his Honour identified what could be described as the community of interest in respect of the matter of liability between the corporate respondent and the individual respondents in the context of Manfal, but which equally apply in the context of the current application. At page 385, his Honour stated:
‘Pursuant to section 87(1)(a) of the Act, the orders the court may make by way of remedy may extend to and bind a person who has been involved in a contravention of section 52A by Manfal if such is found to have occurred, but the right conferred by section 87(1)(b) to make an application for such an order is entirely dependent upon proof that Manfal engaged in conduct which contravened section 52A. In the absence of proof of such conduct by Manfal, the Commission has no right to make an application under section 87(1)(a), and the individual respondents are not liable to have an order made against them under section 87(1)(a).’”
Although s.75B of the TPA defines a person involved in a contravention of the provision of, inter alia, Part V of the TPA as a person who has aided, abetted, counselled, procured, induced, been knowingly concerned in the contravention or who has conspired with others to effect the contravention, no discrete right of action is provided by the Act against such persons in respect of any of the acts described. The acts are used as a means of definition of the persons to whom remedial orders may be directed in respect of the conduct of the corporation that has contravened, in this case, Part V of the Act, and occasioned loss or damage to another.
In that sense the power of the Court to make an order against a person involved in a contravention, as defined by s.75B, and the liability of such a person to be made subject to such an order is entirely dependent upon and derived from the proof of conduct in contravention of the provision of Part V of the Act by a person to whom the Act applies.
In case there was any uncertainty that his Honour was directly linking the liability of the individuals to that of the corporate entity, I think the matter is plainly addressed by his Honour’s remarks commencing at page 386, where when discussing the question of joint liability, in the instance before him concerning the prospect of a cross-claim, his Honour continued:
“Upon the entry of judgment and irrespective of the grounds of liability relied upon at law to obtain the judgment, the entry of judgment will create a coordinate liability between Manfal and the relevant respondents in respect of the sum recoverable under the judgment on behalf of each consumer. The amount of the loss or damage in respect of which judgment is entered will be the amount of loss or damage suffered by reason of the conduct of Manfal in contravention of the Act, not by reason of the conduct of a person involved in that contravention. The right of action and the quantum of the remedy flows from the conduct of Manfal in contravention of the Act. It will be the same liability which gives rise to a joint judgment against Manfal and the other respondents. There will be a common interest and common burden under such a judgment.
Although such conduct by Manfal must be proved in order to obtain an order for compensation under s.78(1A) against a person involved in the contravention, the absence of Manfal as a party to the proceeding would mean that there could be no judgment binding upon Manfal. However, the discharge of liability under the judgment by any one of the individual respondents would discharge the consumer's claim for the amount of loss or damage suffered by reason of Manfal’s conduct and, therefore, any claim against Manfal. If Manfal were a party to that judgment there would be no question that it would be obliged to make proportionate contribution to any other party to the judgment who voluntarily or involuntarily discharged the judgment and it would be entitled to receive proportionate contributions from all other parties to the judgment if it discharged the judgment.
Whatever may have been the situation at law and in equity in respect of rights of contribution prior to the entry of judgment, the entry of a joint or joint and several judgment creates a common burden between the parties to the judgment, although execution of such a judgment may be directed or levied against and satisfied by one of the parties to the judgment.
Once the coordinate liability of the parties has been established in a joint judgment a new burden is created to which rights of contribution are attached. It follows that all parties to the judgment must bear the judgment equally and no one of the judgment debtors is able to profit from the discharge of that equal responsibility by another ….
Manfal’s defence to the Commission’s claim is germane to the defence of all individual respondents. If Manfal were to succeed in its defence the actions against all other respondents must fail.
Historically, such a discontinuance would operate to the benefit of other respondents sought to be made jointly liable in respect of the one liability, and judgment would be entered for all ….”
As I noted, in that case the Commission sought only to discontinue against Manfal, but otherwise prosecute its claim against the individuals involved. The complaint by the individuals involved was that in permitting such a discontinuance, they would be denied their right to prosecute an action against Manfal for any contribution or relief in respect of Manfal’s contraventions.
It seems from his Honour’s view of the matter that there was to be a limit on the liability of those individual respondents by reference to Manfal’s liability, and that assisted in determining the application. As I noted, a similar view was taken by the court in Harris Scarfe v Ernst & Young (supra).
In this case the facts are, in my view, materially similar in that there is an action prosecuted by the application against the principal respondent in respect of an alleged contravention of Part V of the TPA and the related party claims are leveraged on the principal claim.
The applicant has settled the claim against the principal respondent, on the basis that the action be discontinued and each party bear their own costs. In other words, the first respondent as principal respondent has not incurred any liability in the claim by the applicant. It follows that that discontinuance of proceedings between the applicant and principal respondent must limit the liability of the second respondent in the proceedings. It follows, on that basis that as there is no liability by the first respondent to the applicant, the second respondent too has no liability to the applicant.
That leaves only the matter of costs. The applicant seeks an order for costs, largely because of a non-appearance by the second respondent today. The second respondent has previously appeared in the application by telephone. On those occasions, orders were made relating to the delivery of material and the second respondent has failed to comply with those orders. He appears largely to have allowed his position to follow the position of the first respondent. Attempts have been made to contact the second respondent, but he is not available today, and I do not know whether that is because he believes the matter, as against the first respondent, had settled, and accordingly there was no need for his appearance, or whether he has simply chosen to ignore the proceedings today.
His appearance would have been helpful in resolving the application. Given the notice of discontinuance did not address the claim against him I consider it is appropriate that he ought at least pay the costs of the application which has been made necessary today, because he has not communicated with the applicant. I will allow the applicant costs today of the application for summary judgment, even though it was unsuccessful, on the basis that I thought the application was appropriate, having regard to the failure by the second respondent to engage with the applicant in the proceeding, and on the basis that had he done so, and informed the applicant of his attitude, the matter may well have resolved before today without need for application. Additionally, because the matter was listed for trial, and as the matter had not resolved between the applicant and the second respondent, it was necessary for the applicant to appear in any event as a matter of courtesy, if nothing else, to ensure the application was concluded today. I will allow the applicant a half-day hearing fee, together with an advocacy loading. I will assess costs at $1,320.00, and I will direct the second respondent pay the applicant the sum of $1,320.00 by way of costs of and incidental to the application made today. In view of the discontinuance by the applicant against the first respondent there is now no utility in the action against the second respondent. I will direct that the application against the second respondent be dismissed.
I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of Burnett FM
Date: 6 May 2011
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