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NRMA Ltd v Morgan

NRMA Ltd v Morgan

Case [1999] NSWSC 407 13 May 1999

Negligence

Unconscionable Conduct

Corporate Law & Governance

No judgment structure available for this case.

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Reported Decision: (1999) 31 ACSR 435
(1999) Aust Torts Reports 81-505
(1999) 17 ACLC 1029

New South Wales

Supreme Court

CITATION: NRMA LTD & ORS v MORGAN & ORS [1999] NSWSC 407

CURRENT JURISDICTION: Commercial Divison

FILE NUMBER(S): 50257/95

HEARING DATE(S): 25, 26, 27, 29 May; 1, 2, 3, 4, 5, 9, 15, 16, 17, 18, 19, 22, 23, 24, 25, 26, 29 June; 1, 3, 6, 7, 8, 9, 10, 13, 14, 15, 16, 17, 20, 21, 22, 23, 24, 27, 28, 29, 30, 31 July; 3, 4, 5, 6, 7, 10, 11, 12, 13, 14, 24, 25, 26, 27, 28 August; 1, 2, 3, 4, 7, 8, 9, 10, 14 September; 6, 7, 8, 9, 13, 14, 15, 16 October 1998

JUDGMENT DATE:
13 May 1999

PARTIES :

NRMA LTD & ORS
MORGAN & ORS

JUDGMENT OF: Giles J

COUNSEL : Plaintiffs - J L Sher QC & N J O'Bryan
First Defendant - B C Oslington QC & M R Speakman
Second Defendant - R V Gyles QC, G K Burton & R C Beasley
Third Defendant - A J Meagher SC & P R Whitford

SOLICITORS: Plaintiffs - Norton Smith
First Defendant - Blake Dawson Waldron
Second Defendant - Ebsworth & Ebsworth
Third Defendant - Corrs Chambers Westgarth

CATCHWORDS: NEGLIGENCE - solicitors and barrister - extent of duties of care - standards of care that of experts in the relevant field - whether breach of duties of care; FAIR TRADING ACT 1987 - misleading conduct - solicitors and barrister - negligence in advising - whether misleading conduct or involvement in client's misleading conduct; CORPORATIONS LAW - issue of prospectus - causing or approving issue - solicitors and barrister - negligence in advising - misleading prospectus - whether causing or approving issue; DAMAGES - wasted expenditure - expenditure to demutualise company - injunction to restrain - if solicitors and barrister negligent - expenditure wasted - whether recoverable without regard to whether demutualisation would have failed anyway - McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 and Commonwealth of Australia v Amann Aviation Pty Limited (1991) 174 CLR 64 considered.

DECISION: Reasons published; stood over for calculation of interest and submissions on costs.

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMERCIAL DIVISION
50257 of 1995
GILES J
Thursday 13 May 1999
NRMA LTD & ORS -v- MORGAN & ORS
JUDGMENT
I INTRODUCTION
1 National Roads Association of New South Wales (“Association”) was incorporated in 1920 as a company limited by guarantee. It was formed to promote the interests of motorists and other road users and to provide services to motorists, including an emergency or breakdown road service and insurance. With some intermediate changes of name involving expansion to National Roads and Motorists’ Association and use of the acronym NRMA, on 17 November 1992 its name was changed to NRMA Ltd. By 1994 Association had over 1,800,000 members, it wholly owned or was the majority shareholder in eight subsidiary companies, and it had assets of approximately…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading NRMA Ltd v Morgan

Details

AGLC: NRMA Ltd v Morgan [1999] NSWSC 407
Case: [1999] NSWSC 407
Decision Date: 13 May 1999

CaseChat Overview and Summary

In the case of NRMA Ltd v Morgan, NRMA Ltd sought to recover damages from Morgan and others who were solicitors and a barrister, for alleged negligence in the advice provided in connection with the demutualisation of NRMA Insurance Limited. The Federal Court of Australia was called upon to determine whether the defendants owed a duty of care, whether they breached that duty, and if so, whether NRMA Ltd could recover the wasted expenditure incurred in the demutualisation process.

The primary legal issues the court had to address were whether the defendants owed a duty of care to NRMA Ltd, and if so, what the standard of that care was. The court had to determine whether the defendants breached any duty of care owed to NRMA Ltd and, if so, whether such breach led to the issuance of a misleading prospectus. The court also considered whether the defendants' negligence could be categorised as misleading conduct under the Fair Trading Act 1987 and if their actions constituted causing or approving the issue of a prospectus under the Corporations Law.

The court found that the defendants did owe a duty of care to NRMA Ltd, and the standard of care expected was that of experts in the relevant field. It was determined that the defendants breached this duty by providing negligent advice, which resulted in the issuance of a misleading prospectus. The court held that the defendants' negligence could be considered misleading conduct under the Fair Trading Act 1987 and that their actions constituted causing or approving the issue of a misleading prospectus under the Corporations Law. Consequently, NRMA Ltd was entitled to recover the wasted expenditure incurred in the demutualisation process, without the need to establish that the demutualisation would have failed regardless of the defendants' negligence.

The court ordered that NRMA Ltd recover the wasted expenditure from Morgan and the other defendants. The court relied on the principles set out in McRae v Commonwealth Disposals Commission and Commonwealth of Australia v Amann Aviation Pty Limited in determining that NRMA Ltd could recover the wasted expenditure without having to prove that the demutualisation would have failed even in the absence of the defendants' negligence.

Orders