O'Connell, Ian v Havencharm Pty Ltd

[1996] FCA 204

IN THE FEDERAL COURT OF AUSTRALIA                 ) 
  )  
NEW SOUTH WALES DISTRICT REGISTRY                )  No G 3355 of 1995
  )     
GENERAL DIVISION  )     

BETWEEN:          IAN RONALD O'CONNELL and KATHRYN ANNE O'CONNELL                 

Applicants

AND:                   HAVENCHARM PTY LIMITED

(ACN 003 900 507)

First Respondent

BRIAN HAROLD HEYWARD

Second Respondent

DIANNE CHALLINOR

Third Respondent

ROY FREDERICK CHALLINOR

Fourth Respondent

Coram:        Davies J.
Date:          12 March 1996
Place:         Sydney

REASONS FOR JUDGMENT

This is a motion for judgment against the first, second and third respondents ("the respondents"), the motion being brought under O.10 r7(1)(b) of the Federal Court Rules.  I am satisfied that the respondents have not complied with directions

that have been given.  Indeed, the respondents' solicitor withdrew and filed Notices of Ceasing to Act in late 1995.  At that time the respondents were in default and since then there have been directions hearings but there has been no appearance on behalf of the respondents.  On a previous occasion, and again this morning, there has been a facsimile sent to the Court.  I have only just become aware of the latest fax, received this morning, but it reads:

"Dear Sir, Unable to defend ourselves in this matter today.  We have applied for legal aid which is not available, as we strongly deny all allegations put before you.  Could we request a further stay in proceedings to give us time to organise finance to gain legal representation?  Thank you for your consideration.

It was signed Brian Heyward.  On the last directions hearing, I indicated that I thought that the matter could not be left in the state where it simply went into limbo while the respondents earned money to enable them to obtain legal representation, and that the matter ought to be brought to a head by listing the motion for judgment.  That course was taken and the respondents were given time to take steps in relation to it.  This Court is always prepared to assist unrepresented people.  It seems to me that this is the type of case where a person could appear for himself or herself or for the company in which the person was interested, and could put forward a version of events differing from the applicants' version of events, if that person wished to do so.

The Court is indulgent of unrepresented persons who are unable to obtain legal aid and assists them to present their case in such circumstances.  It seems to me that the respondents could have pursued a case if they wished to do so.  But it becomes impossible for the Court to do anything about the matter if all that happens
is that people write and say they wish an adjournment.  I am not prepared to let this matter go off to some unstated time in the future and I am of the view, therefore, that the application for adjournment made by fax should be refused.

I am satisfied of the defaults and I need not go into them.  The statement of claim raises a number of possible causes of action but the substance of the matter is that Mr Brian Heyward and Mrs Dianne Challinor were directors and shareholders of Havencharm Pty Ltd ("Havencharm").  They persuaded Mr and Mrs O'Connell to invest moneys in Havencharm, on the face of representations that the moneys would be used in connection with the purchase and exploitation of a quarry.  The substance of the O'Connells' understanding of the matter is set out in a letter from their accountant to the accountant for the respondents dated 30 September 1994.

I need not set the contents out, but it is quite clear from that letter that there were discussions between Mr and Mrs O'Connell and Mr Heyward and Mrs Challinor concerning the acquisition by Havencharm of a quarry and the exploitation, one way or another, of the potential for profit which that purchase would provide.  The evidence shows, however, that thereafter the $100,000 which Mr and Mrs O'Connell provided quickly disappeared out from the bank account of Havencharm, much of it being demonstrably used for expenses which ought not to be expenses of Havencharm, and the remainder being for matters which are at the present unexplained.

The quarry was acquired but within a short time it had been used as security for a debt owed by another company in which Mr Heyward and Mrs Challinor were also directors.  As a result of the exercise of that security, again within a short time, the quarry was lost to Havencharm.  Thus, so far as Mr and Mrs O'Connell have been able to understand, the moneys they put in were dissipated, they received no benefit and it does not appear that there is any potential for benefit or any prospect of their benefiting from the investment.

The investment made by way of a loan of $100,000 was made on the understanding that the O'Connells would become directors of and would have a one-third shareholding in Havencharm. It is not clear that that was ever formally arranged in the sense that such a shareholding was entered in the records of Havencharm. In any event, the arrangement was not given substantive effect. It seems to me that, in the circumstances, the claim that there was a misrepresentation or was misleading and deceptive conduct on the part of Mr Heyward and Mrs Challinor, conduct which was in breach of s.42 of the Fair Trading Act 1987 (NSW), should be upheld. I also think a conclusion should be drawn that Havencharm was a party to that conduct by reason of the actions of its two directors.

It was as a result of that misleading and deceptive conduct that the O'Connells paid moneys to and on behalf of Havencharm.  Those moneys have been proved to be the sum of $100,000, which was lent to Havencharm in September 1994, a sum of $330,  which the O'Connells paid to Myron Eaton on behalf of Havencharm, and a sum of $2625 which was also paid by them on behalf of Havencharm.  It seems to me that those sums at least constitute the loss which Mr & Mrs O'Connell suffered from the misleading and deceptive conduct.  The applicants also seek to recover interest which they have had to pay to their bank.  Another way of looking at the matter would be pre-judgment interest, which I think would exceed the interest paid to the bank.  Either way, one arrives at the figure for which judgment is sought, which is $109,735.49.

For these reasons I am satisfied that the liability of the respondents has been established in that sum and I make orders in accordance with the short minutes.

I certify that this and the 4 preceding pages
are a true copy of the reasons for judgment herein of
the Honourable Justice Davies.

Associate:

Date:  12 March 1996

Counsel for the applicants:                 C.D. Freeman

Solicitors for the applicants:               Egan Simpson Eyers

Date of hearing:  12 March 1996

Date of judgment:  12 March 1996