Morris v IMF Bentham Limited

Case [2018] FCA 1009

FEDERAL COURT OF AUSTRALIA

Morris v IMF Bentham Limited [2018] FCA 1009

File number: NSD 494 of 2017
Judge: WIGNEY J
Date of judgment: 5 July 2018
Catchwords:

PRACTICE AND PROCEDURE – application for summary judgment pursuant to s 31A(2) of the Federal Court of Australia Act 1976 (Cth) – whether applicant had reasonable prospects of successfully prosecuting claim based on tort of deceit – where applicant has no standing to prosecute proceedings – where causes of action remain vested in applicant’s trustee in bankruptcy pursuant to s 58(1) of the Bankruptcy Act 1966 (Cth) – where claim concerning personal reputational loss not severable and distinct from case of financial or property loss – where deregistered companies proper plaintiffs – where leave of the Court to bring proceedings in name of company not sought – where loss not suffered by applicant personally – where claims statute-barred – where claims based on tort of deceit have no prospects of success – summary dismissal entered in favour of respondents

PRACTICE AND PROCEDURE – alternative application to strike out statement of claim pursuant to r 16.21 of the Federal Court Rules 2011 (Cth) – where claim not adequately pleaded – where certain claims discontinued or withdrawn – where appropriate to strike out parts of claim if summary dismissal not ordered

Legislation:

Australian Consumer Law (Sch 2 to the Competition and Consumer Act 2010 (Cth)) ss 18, 21, 236, 237

Australian Securities and Investments Commission Act 2001 (Cth) ss 12CB, 12DA, 12GF, 12GM

Bankruptcy Act 1966 (Cth) ss 5, 58, 116, 152, 153

Corporations Act 2001 (Cth) s 912A

Federal Court of Australia Act 1976 (Cth) s 31A

Trade Practices Act 1974 (Cth) (repealed) ss 51AC, 52, 82, 87

Federal Court Rules 2011 (Cth) r 16.21, 26.01

Limitation Act 1969 (NSW) Div 6, ss 14, 14B, 55

Cases cited:

Australian Competition and Consumer Commission v FDRA Pty Ltd [2016] FCA 429

Ballard v Multiplex Ltd [2008] NSWSC 1019; 68 ACSR 208

Ballina Shire Council v Ringland (1994) 33 NSWLR 680

Blakeley v National Australia Bank [2017] FCA 835

Bradford Third Equitable Benefit Building Society v Borders (1941) 2 All ER 205

Bryant v Commonwealth Bank of Australia (1997) 75 FCR 545

Chen v Karandonis [2002] NSWCA 412

Cox v Journeaux (No 2) (1935) 52 CLR 713

Cummings v Claremont Petroleum NL (1996) 185 CLR 124

Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45

Daemar v Industrial Commission of New South Wales (No 2) (1990) 22 NSWLR 178

Danthanarayana v Commonwealth of Australia [2016] FCAFC 114

Dey v Victorian Railways Commissioners (1949) 78 CLR 62

Faulkner v Bluett (1981) 52 FLR 115

General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125

Gould v Vaggaelas (1985) 157 CLR 215

Johnson v Gore Wood & Co (A Firm) [2002] 2 AC 1

Magill v Magill (2006) 226 CLR 551

Mannigel v Hewlett Phelps (unreported, Supreme Court of the New South Wales Court of Appeal, Kirby P, Meagher and…

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AGLC
Morris v IMF Bentham Limited [2018] FCA 1009
Case
[2018] FCA 1009
Decision Date

CaseChat Overview and Summary

In the matter of Morris v IMF Bentham Limited, the respondents sought summary judgment against Mr Morris, the applicant, on the grounds that he had no reasonable prospect of success in prosecuting his claims. The claims were primarily based on the tort of deceit and related to statements made by IMF in an announcement issued to the Australian Securities Exchange (ASX) on 22 July 2009. The respondents argued that Mr Morris lacked standing to pursue the claims as he had been declared bankrupt, and any causes of action had vested in his trustee in bankruptcy. Furthermore, they contended that the claims should have been brought by the corporate entities within the Minc Group, rather than Mr Morris personally. Additionally, the respondents submitted that the claims were statute-barred and lacked reasonable prospects of success due to the absence of reliance by Mr Morris on the allegedly false statements and the associated damages.

The court considered the respondents' arguments and found that Mr Morris did not have standing to prosecute the claims as they had vested in his trustee in bankruptcy. The court also held that the proper plaintiffs were the corporate entities within the Minc Group, as they were the ones that suffered any loss or damage from the allegedly false statements. Moreover, the court found that the claims were statute-barred as they were brought beyond the six-year limitation period for the tort of deceit. Finally, the court determined that the claims had no reasonable prospects of success as Mr Morris failed to allege reliance on the false statements or the associated damages.

Accordingly, the court ordered that the proceeding be summarily dismissed against all respondents, and the applicant, Mr Morris, was ordered to pay the respondents' costs. The dismissal was based on the findings that Mr Morris lacked standing to prosecute the claims, the proper plaintiffs were the corporate entities within the Minc Group, the claims were statute-barred, and the claims had no reasonable prospects of success.

Orders

Orders of the court

1. Pursuant to s 31A(2) of the Federal Court of Australia Act 1976 (Cth) and r 26.01 of the Federal Court Rules 2011 (Cth), the proceeding as against the first, second, third, fourth and fifth respondents be summarily dismissed.

2. The applicant pay the costs of the first, second, third, fourth and fifth respondents.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

As has already been noted, Mr Morris’ claims primarily concern the Announcement which IMF issued to the ASX on 22 July 2009. Before considering the terms of the Announcement, and the basis upon which Mr Morris contends that some of the statements made in it were false, it is necessary to summarise some of Mr Morris’ allegations concerning the background to the Announcement. Background to the Announcement At all times relevant to his claims, Mr Morris was a director and CEO of both Minc Financial Services Holdings Pty Ltd and Minc Financial Services Pty Ltd (MFS). Mr Morris held 50% of the issued shares in Minc. By 31 December 2010, that shareholding had increased to 60%. The other major shareholder in Minc was Optiver Financial Services Holdings BV. Optiver was a large Dutch global trading house. Minc owned all the issued shares in MFS. MFS provided stockbroking and financial services through contracted financial advisers and generated revenue through brokerage fees. It held an Australian Financial Services Licence. Prior to December 2007, Asandas was a wholly owned subsidiary of E*Trade Securities Australia Ltd. Asandas conducted a stockbroking and advisory business similar to the business conducted by MFS. Importantly, it executed and cleared all its client transactions through the agency of E*Trade. In mid-2007, Asandas agreed to appoint Stripe Capital Pty Ltd and its directors as its authorised representatives. Pursuant to its agreement with Asandas, Stripe agreed to place all trades on behalf of its clients through the E*Trade execution platform. Stripe and each of its directors agreed to guarantee the settlement of all Stripe’s trades and to indemnify Asandas against any loss that Asandas may suffer as a result of the conduct of Stripe or its directors. Mr King was one of Stripe’s directors. In December 2007, Mr Morris and Optiver entered into a joint venture agreement pursuant to which, amongst other things, they acquired Asandas through a wholly owned corporate subsidiary which held all the shares in Asandas. Asandas accordingly became part of the Minc Group. The acquisition included the arrangements and agreements that were already in place between Asandas and Stripe. On 30 June 2008, Mr King ceased to be a director and shareholder of Stripe. That occurred as a result of a dispute which had arisen after some of Mr King’s clients failed to settle a number of transactions. All but a few of Mr King’s clients subsequently transferred their accounts from Stripe to a new company associated with Mr King. It would appear that Mr King also ceased to be an authorised representative of Asandas from about this time. One of Mr King’s clients was Mr Edwin Smith. Mr Smith is the fifth respondent in this proceeding. In November 2008, Asandas became aware of a dispute between Mr Smith and Mr King and Stripe. The dispute arose out of agreements between Mr King and Mr Smith that were entered into in 2007, at a time when Asandas was owned by E*Trade and when Mr King and Stripe were authorised representatives of Asandas. Mr Morris’ Statement of Claim contains extensive details concerning the nature and origins of the dispute between Mr Smith and Mr King and Stripe. It is unnecessary for present purposes to rehearse that detail. Suffice it to say that it would appear from the pleading that Mr Morris disputes, or at least does not admit, the merits of Mr Smith’s complaint, or at least material parts of it.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

Mr Morris no longer seeks any relief against the individual respondents.THE APPLICATION FOR SUMMARY JUDGMENT OR THE STRIKING OUT OF MR MORRIS’ CLAIM IMF and the individual respondents applied for summary judgment to be entered against Mr Morris pursuant to s 31A(2) of the Federal Court of Australia Act 1976 (Cth) on the basis that Mr Morris has no reasonable prospect of successfully prosecuting the proceeding. Alternatively, they applied for an order that Mr Morris’ Statement of Claim be struck out on the basis that it discloses no reasonable cause of action. They put forward a number of reasons why Mr Morris’ claim has no reasonable prospects, or fails to disclose a reasonable cause of action. First, IMF and the individual respondents contend that Mr Morris has no standing to pursue the claims against them. That is because Mr Morris was declared bankrupt on 23 July 2012. Upon being made bankrupt, any cause of action that Mr Morris may have had against them, other than a cause of action for personal injury or wrong, vested in his trustee in bankruptcy by reason of ss 58(1) and 116(2)(g)(i) of the Bankruptcy Act 1966 (Cth). The causes of action did not re-vest in Mr Morris upon his discharge from bankruptcy. Second, IMF and the individual respondents contend that the causes of action alleged by Mr Morris are, upon analysis, causes of action properly prosecuted by Asandas and perhaps other companies in the Minc Group. Those companies are the proper plaintiffs or applicants, not Mr Morris. Any loss or damage suffered as a result of the allegedly false statements in the Announcement, or the allegedly false statements made to the administrators, was suffered by the corporate entities, not Mr Morris. Third, IMF and the individual respondents submit that the causes of action founded on the tort of deceit that Mr Morris continues to pursue are statute-barred. They submit that the losses allegedly suffered by the Minc Group companies and Mr Morris as a result of the Announcement were suffered by no later than 2009. The limitation period in respect of a cause of action founded on the tort of deceit is six years from the date that the cause of action accrued. Mr Morris was accordingly required to commence the proceedings by 2015. He did not commence the proceedings until April 2017. Fourth, IMF and the individual respondents contend the causes of action in deceit have no reasonable prospect of success. That is because the elements of a cause of action in deceit include that the defendant, the maker of the allegedly false statement, intended that the plaintiff would rely on the statement, that the plaintiff relied on the statement, and that the plaintiff suffered damage as a result of that reliance. They point out in that context that Mr Morris does not allege either that IMF intended that he would rely on the false statements in the Announcement, or that he relied on those statements, or that he suffered damage as a result of that reliance. The same can be said of the cause of action in deceit based on the allegedly false statements made to the administrators.

Ratio Decidendi

Legal Principle Established

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