Mill Estate Holdings Pty Ltd v Reinhardt
[2011] FMCA 134
•22 February 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MILL ESTATE HOLDINGS PTY LTD v REINHARDT | [2011] FMCA 134 |
| BANKRUPTCY – PRACTICE & PROCEDURE – Application to strike out application – related proceedings – in abeyance in Supreme Court Queensland – need for consolidation of proceedings – application for security for costs – offer of directors’ guarantees – sufficiency of offer subject to form. |
| Federal Court of Australia Act 1976 (Cth), s.31 Federal Court Rules (Cth), O.20 Trade Practices Act 1974 (Cth), s.52 |
| Harpur v Ariadne [1984] 2 Qd.R. 523 Harvey trading as Shortech v Commonwealth Scientific and Industrial Research Organisation (CSIRO) [1999] QSC 191 Multi Service Group Pty Ltd (in liquidation) and Robert Eugene Murphy (as liquidator) v Graham John Osborne and GRO Services Proprietary Limited [2010] QCA 72 |
| Applicant: | MILL ESTATE HOLDINGS PTY LTD |
| Respondent: | BRYAN REINHARDT |
| File Number: | BRG 1075 of 2010 |
| Judgment of: | Burnett FM |
| Hearing date: | 18 February 2011 |
| Date of Last Submission: | 18 February 2011 |
| Delivered at: | Brisbane |
| Delivered on: | 22 February 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr M.Jones |
| Solicitors for the Applicant: | Toogoods Solicitors |
| Counsel for the Respondent: | Mr D. Gardiner |
| Solicitors for the Respondent: | Eaton Lawyers |
ORDERS
That these proceedings be stayed pending an application being made by the Applicant in the Supreme Court and subject to a further application also being made for the cross vesting of the application to the Federal Court and in turn for transfer from the Federal Court to this Court; or alternatively application being made for this proceeding to be transferred to the Supreme Court for it to be resolved with the Supreme Court proceeding.
That the Respondent Mill Estate give security for costs in the sum of $17, 370.00. Such security can be satisfied by the Respondent providing a guarantee by the Director of it to the Applicant for security for costs in sum of $17, 370.00 in such form as the Applicant and Respondent agree or failing agreement in a form satisfactory to the Registrar.
The proceeding is stayed until the Respondent complies with Order 2 herein directing the provision of security for costs.
Costs of the Application be costs in the cause.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 1075 of 2010
| MILL ESTATE HOLDINGS PTY LTD |
Applicant
And
| BRYAN REINHARDT |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
In this application the applicant Bryan Reinhardt (Reinhardt) who is respondent in the principal proceeding seeks orders against the respondent Mill Estate Holdings Pty Ltd (Mill Estate) who is applicant in the principal proceeding:
(1)That the application and statement of claim in the proceeding BRG 1075 of 2010 be struck out.
(2)That the applicant provides security for costs of the respondent.
(3)In the alternative, should the applicant not provide sufficient security then the respondent seeks an order that the proceedings be dismissed with indemnity costs ordered to the respondent for costs.
By way of background, on 30 October 2007 Reinhardt commenced proceedings against Mill Estate in the Brisbane Magistrates Court seeking damages of $37,967.33. Those proceedings were subject to a defence and counterclaim made by Mill Estate against the company Reinhardt Proprietary Limited of which Reinhardt is a director, and which it joined as a second defendant. It sought an amount of $193,595.98 for damages for various contraventions of the Trade Practices Act 1974 (Cth), but in particular s.52, together with damages for breach of contract. In the pleading they are estimated to be in the order of $200,000.00. At that particular time, the relevant monetary jurisdiction of the Magistrates Court was $40,000.00 and it was not capable of exercising jurisdiction in respect of the remedies sought pursuant to the Trade Practices Act.
In September 2008 the proceedings were transferred to the Supreme Court of Queensland and it appears that at some stage they were placed on that Court’s supervised case list. The effect of that was that the proceedings were case managed, ultimately leading to an order made on 28 August 2009 by Atkinson J which, aside from procedural directions concluded with order 5 that the parties sign a request for a trial date no later than 20 December 2009 or the matter be deemed resolved. No request for trial date was in fact filed by 20 December 2009 which had the effect of order 5 coming into play. The effect of that order I will discuss in a short time. That order was perfected by an order made in the registry by the Deputy Registrar on 20 December 2009 when the Deputy Registrar ordered “the matter be deemed resolved,” being a reference to proceeding SC10558/2008.
On 22 October 2010 Mill Estate, which company was the first defendant in the proceedings of the Supreme Court commenced the proceedings in this Court. Since that time, the matter has been the subject of case management. Orders were made by me on 17 November 2010 which provided for Reinhardt to file and serve any application for security for costs, and that any such application if filed be listed for hearing before me on 4 February. The matter ultimately came on before me last Friday, 18 February.
Aside from the application for security for costs, as I earlier noted, the applicant now also seeks that the application be struck out. The principal basis upon which the applicant Reinhardt seeks that relief is that the claim contended for in these proceedings – that is, BRG 1075 of 2010 – have not been adequately particularised and that the present cause of action is based upon representations allegedly made in November 2006. The matter has not been argued completely or comprehensively but I envisage the essence of the argument to be that the circumstances give rise to an Anshun estoppel.
In response to Reinhardt’s complaints; First the respondent Mill Estate addresses the matter of particulars by noting that the function of particulars were described by Ambrose J in Harvey trading as Shortech v Commonwealth Scientific and Industrial Research Organisation (CSIRO) [1999] QSC 191 where his Honour observed that:
“The object of particulars is two-fold; the first is to allow the party seeking particulars to know precisely the case to be met at trial and thus avoiding the incurring of unnecessary expense preparing to meet a case not put forward at trial, and the second is to avoid being taken by surprise upon trial.”
It is noted that the particulars have been sought of paragraph 2.3 of the statement of claim, particularly in respect of the grounds on which it is alleged that Mr Reinhardt was authorised by the company of which he was director and shareholder. I agree with the submissions made on behalf of Mill Estate that there is no meaningful basis for the request having regard to the status of the shareholding and position of Reinhardt as the sole shareholder and director.
Reinhardt, I am satisfied, would well understand the case that is made against him in respect of the representations which are complained of in the statement of claim. A further matter identified seems to relate to a question of accessorial liability which is alleged against Reinhardt. The complaint is that the company in respect of which he was a director at the time has not been joined as a party. The answer to Reinhardt’s complaint about the pleading is succinctly addressed in the authority of ReMatheson Engineers Pty Ltd and Exearne Pty Ltd v El Sami Raghy; Michael John Brenz Kriewodlt and Kevin Bond [1992] FCA 417; (1992) 37 FCR 6, where his Honour French J, as he then was, addressed that very question and held that it is open to an applicant in proceedings for contraventions of s.52 of the Trade Practices Act to sue only the natural persons that are said to be involved in the relevant contraventions without joining the primary corporate contravener. That is the case here.
The real issue in this case, as was teased out in the course of submissions, relates not so much to the cause of action itself. It seems from a review of the pleading that there is indeed a proper cause of action claimed by Mill Estate against Reinhardt, but rather the issue concerns the status of these proceedings – vis a vis the proceedings which are presently deemed resolved in the Supreme Court.
That gives rise initially to an analysis of the various claims, for as it was pointed out by counsel for Mill Estate, despite there being some similar background in respect of the claims both in this Court and the Supreme Court, they in fact plead different causes of action. That in fact appears to be true when one has regard to the statement of claim which is pleaded in the Magistrates Court giving rise to those proceedings which devolved into the Supreme Court.
That statement of claim demonstrates basically a claim by Reinhardt against Mill Estate for misrepresentations giving rise to damages which are principally in the nature of commissions due following the sale by him of the real estate agency, and his employment on a retainer following that sale.
The defence and counterclaim to that proceeding likewise joins issue with those matters and further advances alleged misrepresentations in respect of the sale of the business itself alleging misleading and/or deceptive conduct by Reinhardt as director for Reinhardt Proprietary Limited in respect of matters relevant to the sale but, importantly, not dealing with matters relevant to the sale insofar as they concern the proceedings in this Court. Finally, the proceedings in this Court deal more specifically with the representations made through the course of the sale transaction relevant to the taking on of certain obligations in respect of chattels that form part of the business.
As I have earlier indicated, whether or not there ought be a stay of one or other of the proceedings was not debated before me in a fulsome manner and the matters which are relevant to consideration of an Anshun estoppel were not properly addressed, but in my view they did not need to be addressed at this time for reasons that will become apparent in a short time.
That leads then to a consideration of the status of the proceedings in the Supreme Court, which, as I have earlier noted, have been the subject of an order by the Registrar that they be deemed resolved. In Multi Service Group Pty Ltd (in liquidation) and Robert Eugene Murphy (as liquidator) v Graham John Osborne and GRO Services Proprietary Limited [2010] QCA 72, the Queensland Court of Appeal considered precisely the effect of an order that a matter be deemed to be resolved. In that regard, the Court was considering what could be regarded as identical facts to those that are before me.
Materially, when looking at the effect of the order, the Court noted that it would not readily conclude, despite the definition of resolve, that the fact that a proceeding should be deemed resolved should be read as meaning the parties should be deemed to have resolved their dispute. Their Honours noted that one possible meaning contended of a deemed resolution of a proceeding is that the proceeding must be taken to have been concluded finally. Their Honours continued, however:
“Such a construction is inconsistent with the structure and language of the practice direction”.
That is, the practice direction which gives rise to the deemed resolution.
More particularly, at paragraph [39] – [40] of their Honours’ judgment their Honours continued concerning para 5.4 which is a reference to the practice direction:
“A proceeding deemed resolved may be reactivated by the Registrar or the Registrar may refer an application to reactivate to a judge. It is implicit in para 5.4 that as long as the proceeding is deemed resolved no steps may be taken in it but that the proceedings nevertheless continues in existence and is susceptible to reactivation. It is inherent in the concept of reactivation that that which may be reactivated, although inactive at the time of making an application for reactivation, continues to exist. This construction of the Practice Direction is consistent with what one would expect given the wide range of circumstances in which a deemed resolution may take place. A deemed resolution of a proceeding thus results in something akin to the placing of the proceeding on an abeyance list. The deemed resolution of a proceeding may be contrasted with a process under the Rules which brings the proceeding to an end with the consequence that such parties’ rights and obligations are permanently affected. Such processes include”
for relevant purposes:
“the dismissal of proceedings for want of prosecution, judgment by default, summary judgment or an application to set aside all or part of a proceeding for failure to comply with the Rules.”
It follows in this instance the status of the proceedings before the Supreme Court are, as the Court of Appeal has noted, largely proceedings that have been placed on an abeyance list. They are not conclusively resolved. Insofar as a consideration of the issue of summary disposal of these proceedings, the relevant rules of this court which mirror order 20 of the Federal Court Rules (Cth) and s.31 of the Federal Court of Australia Act1976 (Cth) have been the subject of discussion in White Industries Australia Limited and Another v Federal Commissioner of Taxation and Another (2007) 160 FCR 298; [2007] FCA 511 by Lindgren J and have been subject to approval by a number of Full Courts since his Honour’s decision.
His Honour at page 10 made these observations:
“Section 31A of the FCA Act, like O 20 of the FCRs, is concerned with the bringing and defending of proceedings, not just with pleadings; with substance, not just with form. Section 31A(1) is comparable to O 20 r 1 in that they are both concerned with summary judgment for the party who is prosecuting the proceeding. Section 31A(2) is comparable to O 20 r 2 in that they are both concerned with dismissals of proceedings. The word “judgment” in s 31A(2) is defined in s 4 of the FCA Act to mean ‘a judgment, decree or order, whether final or interlocutory, or a sentence’. It is convenient in the context of the present case to think of the judgment to which s 31A(2) refers as an order of dismissal of a proceeding.
Is there a difference between the concept of no reasonable cause of action being disclosed (O 20 r 2(1)(a)) and no reasonable prospect of successfully prosecuting a proceeding (s 31A(2))? The only difference that suggests itself to me is that the latter makes plain that there may be taken into account the unavailability of evidence necessary to bring success at trial, whereas it is arguable that the former does not permit the unavailability of such evidence to be taken into account.
In the present case, the unavailability of evidence is not an issue. The respondents’ motion for summary dismissal is founded on their notice of objection to competency and on facts that are not in dispute: the existence of the Guidelines, Mr O’Neill’s making of his decision under them to allow access to Documents 226 to 238, and the giving of the notices to produce in the appeal proceedings.
The “no reasonable prospects of success” formula of s 31A is that which was adopted in r 24.2 of the United Kingdom’s Civil Procedure Rules (“CPRs”) following the recommendation of Lord Woolf, Master of the Rolls, in his Access to Justice: Final Report to the Lord Chancellor on the Civil Justice System in England and Wales (HMSO, 1996), ch 12, ss 31–36. The same test has been adopted in rr 292(2) and 293(2) of Queensland’s Uniform Civil Procedure Rules 1999.
Under s 31A I must be satisfied that the applicants have no reasonable prospect of success, but as s 31A(3) makes clear, this does not mean that I must be satisfied that the proceeding is hopeless or bound to fail. I suggest that the legislature’s intention in enacting s 31A was to lower the bar for obtaining summary judgment (including summary dismissal) below the level that had been fixed by such authorities as Dey v Victorian Railway Commissioners (1949) 78 CLR 62 at 91-92, and General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129-130: see Lawrenson Light Metal Die Casting Pty Ltd (in liq) v Cosmick Pty Ltd [2006] FCA 753 at [15].
Section 31A and the identically worded s 17A of the Federal Magistrates Act 1999 (Cth) (“the FM Act”) were introduced by the Migration Litigation Reform Act 2005 (Cth) (No 137 2005) which commenced on 1 December 2005.”
When one looks at the pleading before me, as I earlier noted, it is apparent that a proper cause of action is pleaded. It is adequately particularised to inform the respondent to the proceeding of the case that is sought to be agitated against it. Subject to disposal of the proceedings in the Supreme Court, it does not, in my view, have no reasonable prospects of success if the factual matters underlying it can be established to the requisite standard. It follows that it is not appropriate, at least at this point in time, to dispose of that proceeding finally by ordering it be dismissed.
However, as I have noted, I am troubled by the fact that there are on foot proceedings in the Supreme Court which are in abeyance. It seems to me that the appropriate resolution to the current dilemma is that I order that these proceedings be stayed, pending an application being made in the Supreme Court pursuant to paragraph 5.5 of the Practice Directions, which would involve the matter coming back before a Registrar or, in turn, a Judge, for reactivation. Further application also must be made for the cross-vesting of the application to the Federal Court and, in turn, for transfer from the Federal Court to this Court. Alternatively, subject to the case being reactivated, this proceeding being transferred to the Supreme Court for it to be resolved with the Supreme Court proceeding. I propose to make orders in those terms.
The next matter then concerns the issue of security for costs. At the time this application was made it appears that the parties had not engaged in serious discussion concerning appropriate orders for security. There is clear jurisdiction for the Court to make orders granting security and, in this instance, the facts of this case, in my view, lend support to orders being made.
In particular, I note that the applicant is a Body Corporate in respect of which the director, Mr Martin Millard, is the sole director and shareholder of the company. A review of the financial records of the company demonstrate that as at, 30 June 2009 there is equity in the company to a value of about $36,000.00. However, when one looks into the balance sheet one can see under the Assets heading that a significant asset is represented by intangible assets with a value of almost $50,000.00. One might conclude that, absent any allowance for the intangible goodwill, the company is, in fact, worth less than nothing.
In any event, the principles in relation to security in these instances were well articulated and have been well settled since the decision of the Queensland Full Court in Harpur v Ariadne [1984] 2 Qd. R. 523, where Connolly J, at page 532, made this statement:
“The mischief at which the provision is aimed is obvious. An individual who concludes his business affairs by medium of a corporation without assets would otherwise be in a position to expose his opponent to a massive bill of costs without hazarding his own assets. The purpose of an order for security is to require him, if not to come out from behind the skirts of the company, at least to bring his own assets into play. If however he is already available for whatever he is worth, the object of the legislation is seen to be satisfied.”
As I have already noted, in this instance, until recent times that object had not been fulfilled. However, on 16 February, that is two days before the application, the solicitors for Mill Estate wrote to the solicitors for Reinhardt indicating that their client, was, in fact, prepared to offer by Mr Millard a personal undertaking to guarantee any adverse costs orders which might be made against his client.
That, in my view, is the most relevant consideration in this application. And in saying that I am mindful also of the fact that the application has been brought in a timely way. This is a case where there seems to be a genuine dispute between the parties which is capable of resolution or ought be resolved, at least, by judicial intervention. The assets of the true benefactor of the litigation will be brought into play, thus ensuring that the respondent has the prospect of an enforceable order for costs.
It follows that I think, having regard to the offer made, that security ought be granted in terms of the offer, which would be the order that one would ordinarily expect to be made. As to the quantum, the affidavits deal with the quantum but, having regard to the affidavit material filed on behalf of Reinhardt, the estimate of costs do seem to be high. I am not left with any other material to assist me in assessing an appropriate quantum of costs for which the guarantee would be subject to.
Accordingly I have defaulted to the Court scale and the relevant following items have been allowed by me. Stage 1: $2350.00. Stage 2, which is an interim or summary hearing as a discrete event, $1465.00. Stage 5: preparation for a matter, I have allowed one day, it is $5285.00, and then for a second day which is $1670.00. I have then allowed an interim hearing which is, in effect, the hearing we had on 20 February, at $880.00 together with an advocacy loading. And I have allowed two days trial at $1760.00, each with an $880.00 advocacy loading, which gives a total of $17,370.00. So far as the security for costs application is concerned, I propose that the respondent Mill Estate give security for costs in the sum of $17,370.00.
Such security can be satisfied by the respondent providing a guarantee by the director of it to the applicant for security of costs in the sum of $17,370.00 in such form as the applicant and respondent agree or, failing agreement, in a form satisfactory to the Registrar, and that the proceeding is stayed until the respondent complies with the order for security for costs.
Now, that deals with the substantive parts of the application. That only leaves the matter of costs.
Orders
That these proceedings be stayed pending an application being made by the Applicant in the Supreme Court and subject to a further application also being made for the cross vesting of the application to the Federal Court and in turn for transfer from the Federal Court to this Court; or alternatively application being made for this proceeding to be transferred to the Supreme Court for it to be resolved with the Supreme Court proceeding.
That the Respondent Mill Estate give security for costs in the sum of $17,370.00. Such security can be satisfied by the Respondent providing a guarantee by the Director of it to the Applicant for security for costs in sum of $17,370.00 in such form as the Applicant and Respondent agree or failing agreement in a form satisfactory to the Registrar.
The proceeding is stayed until the Respondent complies with Order 2 herein directing the provision of security for costs.
Costs of the Application be costs in the cause.
I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for judgment of Burnett FM
Date: 17 March 2011
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