Olympic Airways SA v Alysandratos & ors
[1998] VSC 31
•11 AUGUST 1998
SUPREME COURT OF VICTORIA
CAUSES JURISDICTION
Not Restricted
No. 5864 of 1995
OLYMPIC AIRWAYS S.A. Plaintiff v. SPIROS ALYSANDRATOS Defendants CONSOLIDATED TRAVEL (VIC) PTY LTD NELSON WHEELER ARNOLD Third Party MANN JUDD PTY LTD 3rd Third Party ---
JUDGE: HARPER, J. WHERE HELD: MELBOURNE DATE OF HEARING: 6 and 7 AUGUST 1998 DATE OF JUDGMENT: 11 AUGUST 1998 MEDIA NEUTRAL CITATION: [1998] VSC 31 ---
CATCHWORDS:
JUDGMENT - Application by third party for summary judgment against defendant - r.11.14. r.23.01 and r.23.03 Supreme Court Rules - Use of material filed in related proceeding - Absence of evidence of reliance by the plaintiff on the third third party - No disputed facts - Application granted.
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APPEARANCES: Counsel Solicitors For the Plaintiff Mr P. Hayes QC Mallesons Stephen Jaques For the Defendants Dr. C. Pannam QC with Clayton Utz Mr. M. Bevan-John For the Third Party Mr. M. Thompson Herbert Geer & Rundle For the 3rd Third Party Mr. P. Jopling QC with Connery Partners Mr. M. Osborne HIS HONOUR:
By a summons first issued on 17 July 1998 and amended on 7 August 1998, Mann Judd Associates Pty Ltd, who are a firm of accountants, seek the following orders against Nelson Wheeler Arnold, another firm of accountants:
"1. An order pursuant to Rule 23.03 that the court give judgment for the third third party against the defendant, and order the defendant to pay the third third party's costs of the proceeding. 1A Alternatively to paragraph 1 hereof, an order pursuant to Rule 23.01(1)(b) and/or (1)(c) that there be judgment for the third third party in respect of the defendant's claim made against the third third party. Alternatively, that the said claim be stayed. 1B Alternatively to paragraphs 1 and 1A hereof, an order pursuant to Rule 11.14(1) that there be judgment for the third third party in respect of the defendant's claim made against the third third party." Rule 23.03 reads: "On application by a defendant who has filed an appearance, the court at any time may give judgment for that defendant against the plaintiff if the defendant has a good defence on the merits."
In Cannington Confirmers Pty Ltd v. Cascio and Mirabelli (unreported, 8 November 1991) Mr Justice Ormiston opened his judgment with the following observation:
"The assumption made in this application on behalf of the third party, Anthony Andrew Mirabelli,is that a third party may seek summary judgmentagainst a defendant which has joined that thirdparty on the ground that he has a good defenceon the merits to the statement of claim appearingin the third party notice, as if he were a defendant bringing application pursuant to Order 23.03 (sic). Whether or not that procedure be available to a third party, or whether some other procedure should be adopted consistent with the giving of a third party notice (compare Order 11.13) (sic), the issue wasnot raised in argument and I shall deal with the question upon the assumption that the remedy isavailable."
In my opinion, the procedure to which Mr Justice Ormiston there referred is in an appropriate case, available to a third party. I can see no reason why a rule thought to be beneficial as between a defendant and a plaintiff, strictly so called, should be thought to be entirely bereft of that beneficial quality as between a plaintiff to third party proceedings and a defendant to those proceedings. In short, provisions inserted into the rules of the Supreme Court because it is thought they should be there, ought not on an entirely artificial basis, be given an operation which limits their usefulness and hence inhibits the realisation of the beneficial purposes which inspired their inclusion in the first place.
The expression "at any time" in Rule 23.03, is wide enough to encompass judgment given before trial, provided that the court is then in a position - even without the benefit of a trial - to satisfy itself that the existence of a defence on the merits has been established. This would be no common occurrence. An application for summary judgment should seldom, if ever, be determined in the applicant's favour where there is a bona fide dispute about material facts. Summary judgment for a defendant is far more likely to be indicated where the application of the law to the admitted or uncontested facts, indicates that result. Less likely, but on occasions appropriate nevertheless, is judgment where there is no real dispute about the facts and where those which are known point unequivocally to the conclusion that the plaintiff could not prove its case to the requisite standard: which of course is, in civil proceedings, the balance of probabilities.
The next rule relied upon by the applicant is Rule 23.01(1). That rule provides:
"Where a proceeding generally or any claim in a proceeding ...
(b) is scandalous, frivolous or vexatious; or (c) is an abuse of the
process of the court, the court may stay the proceeding generally or
in relation to any claim or give judgment in the proceeding generally
or in relation to any claim."As I understand the applicant's case, it is that the continuation of the present proceeding against it by Nelson Wheeler Arnold would be vexatious or amount to an abuse of process.
The last of the rules upon which the applicant relies is Rule 11.14(1), which is in the following form:
"Where a third party has been joined under this order, the court may at or after the trial of the proceeding, or on its determination otherwise than by trial, give judgment for the defendant by whom the third party was joined against the third party, or for the third party against that defendant."
These are third party proceedings brought against the applicant by Nelson Wheeler Arnold which is the defendant in the principal proceeding, number 5864 of 1995. A brief description of the background of this action and of related proceedings will assist in an understanding of the genesis of the present application.
The Consolidated Travel Group (CTG) operates a number of travel agencies in Australia. Olympic Airways SA (Olympic) was attracted to the proposition that it acquire shares in the group. A firm of chartered accountants, Nelson Wheeler Arnold, was engaged to examine CTG's financial position. A report was prepared by those accountants. Following its receipt the board of Olympic decided to proceed with the proposed share acquisition. On 30 June 1992, the relevant deed of sale and purchase of shares was executed. This deed provided for the purchase by Olympic of a 50 per cent interest in CTG at a cost of $20 million.
According to Olympic, the transaction proved to be a mistake. In proceeding number 7193 of 1993, Olympic claims that it was misled by financial forecasts put to it by the vendor of the relevant shares, a man named Spiros Alysandratos. In proceeding number 6367 of 1995, Olympic claims that it was misled by historical information put before it by Mr Alysandratos. In the meantime, in proceeding number 5064 of 1995, the present proceeding, Olympic claims that Nelson Wheeler Arnold was negligent in the preparation of its report, that Olympic relied upon that report in reaching its decision to execute the deed of sale and purchase, and that Olympic thereby suffered damage. In a fourth set of proceedings, number 8171 of 1993, CTG claims the unpaid balance of the purchase price from Olympic.
Each proceeding has spawned its share of interlocutory disputation. Portion of the material relevant to one interlocutory dispute in one proceeding was and is or may be relevant to another dispute in a related proceeding. In these circumstances, it would be productive of nothing but waste were the court automatically to forbid recourse in one proceeding to relevant material filed in another. Accordingly, on 24 November 1997, Master Kings ordered that discovery in the present proceeding, number 5064 of 1995, be treated as discovery in each of proceeding 7193 of 1993 and 6367 of 1995. The master also then ordered that, subject to any further order of the trial judge, each proceeding be heard together, and the evidence in one be evidence in the others.
This order seems to me, with respect, to be so entirely in accordance with commonsense that I am prepared to extend the principle upon which it rests to the limited extent required to do justice in this case. In my opinion it is proper in the application presently before me to allow the parties to it to rely upon affidavit and like evidence (such as sworn answers to interrogatories), even where that material is filed in a related proceeding or sworn by a party who is not a party to this application. This, it seems to me, would cause no injustice even in circumstances (unlike those of the present case) where, for example, the interrogatories were neither asked nor answered by a party to the present application. Each of the proceedings with which I am concerned for presently relevant purposes is very much alive; and each is very closely related to the other. Each deponent can be cross-examined at the trial.
If litigation is to be conducted in circumstances in which considerations of cost, utility and efficiency are not to be utterly ignored but rather given their proper place (regard always being had to the paramountcy of the interests of justice) then the parties should, in my opinion, be allowed to use the material filed in any related proceeding unless in the particular case there is good reason why such permission should not be given. In my opinion no good reason applies here. Accordingly, I allowed the present applicant to rely (a) upon interrogatories delivered by Nelson Wheeler Arnold for the examination of Olympic in the present proceeding, (b) upon Olympic's answers to those interrogatories and (c) upon affidavits filed by Olympic in proceedings 7193 of 1993 and 6367 of 1995. In my opinion this course in no way impinges upon the principle laid down by the Court of Appeal in the well known English case of Home Office v. Harman [1981] Q.B. 534.
The chronology of relevant events commences on 7 May 1992. On that day the board of Olympic resolved to purchase a 50 per cent interest in CTG subject to independent audit and evaluation. A week later Olympic put out to tender an audit of CTG; among those invited to tender were Nelson Wheeler Arnold and Mann Judd. On 22 May 1992 the tender of Nelson Wheeler Arnold was accepted and that firm was retained to conduct an audit and evaluation of CTG.
By 30 May 1992 the resultant report prepared by Nelson Wheeler Arnold was published. It was distributed to members of the Olympic board before a meeting of the board held on 11 June that year.
A day before the meeting of the board another travel agency intervened. Euro International Travel (EIT) proposed a joint venture between itself and Olympic to promote and manage Olympic's Australian business. This, however, did not have the effect of delaying an "in principle" decision by Olympic to proceed with the CTG share purchase; indeed, on 12 June 1992 Olympic and CTG signed "heads of agreement" by which Olympic agreed to purchase a 50 per cent share in CTG for $20 million.
Whether or not aware of these developments, EIT pressed ahead. On 19 June 1992 it submitted an outline of its proposal. On 25 June, the board of Olympic met to discuss that proposal and resolved to request its general manager, Mr Loukas Grammatikos, to review and compare the EIT and CTG offers and report back to the board. On the same day Mr Grammatikos sent a facsimile to Mann Judd in the following terms: "This is a mandate to perform an audit and evaluation on the business of Continental Travel. The work will be completed within eight to nine days and the fee will be $A30,000 in accordance with your letter of 15 May 1992".
In the interrogatories which they delivered for the examination of Olympic, Nelson Wheeler Arnold asked about this "mandate". Interrogatories 7 and 8 are set out below, together with the answers sworn on 12 June 1998 by Konstantinos Mandroukros, Olympic's director, marketing:
"7. Prior to its execution of the deed, did Olympic decide to
retain -
(a) Mann Judd; (b) Mann Judd Associates; (i) to provide a report for the purpose of assessing whether Olympic should pay $20 million for a 50 per cent shareholding in Consolidated;
(ii) to provide a report for any other and what reason connected with the possible purchase of a shareholding inConsolidated?"
Answer:
"Prior to the execution of the deed by Olympic, Mr Grammatikos on his own initiative and without any resolution by or knowledge of Olympic's board, retained Mann Judd Associates Pty Ltd to provide a report to perform an audit and evaluation of the business of Consolidated ('the Mann Judd retainer')."
"8.
Was the decision to enter into the Mann Judd retainer one made by resolution by the board of directors of Olympic and if yes, state if the resolution was contemporaneously recorded stating the usual particulars of such recording."
Answer: "No."
Mann Judd accepted the retainer proffered by Mr Grammatikos. By 29 June 1992 it had produced an evaluation report. In it Mann Judd valued the business of CTG at $28.168 million. This value was predicated, among other things, on the continuation of an average income tax rate of 1.5 per cent as opposed to the then current company income tax rate - which the report noted as being 39 per cent. The report also contained the following disclaimer:
"As stated above, we have not audited the accounting records of the companies comprising the Consolidated Travel Group nor have we audited the financial accounts. Rather, we have relied upon information provided by the officers of the group and by Mr Simmons [a member of Nelson Wheeler Arnold]. Accordingly neither Mann Judd Associates Pty Ltd or any of its directors or other employees undertake responsibility in any way whatsoever to ny person in respect of any opinion expressed in its report which relies upon information provided by other parties".
Despite taking a mere four days to prepare the report of 29 June, Mann Judd did not perhaps get it done in time. On that same day the board of Olympic met in Athens and unanimously approved the "in principle" decision of 11 June. Accordingly, the earlier resolution to purchase 50 per cent of the shares in CTG for a purchase price of $20 million was confirmed. But, of course, confirmation was decided upon at a meeting held on 29 June, Athenian time.
Back in Melbourne, by letter dated 30 June 1992 and forwarded by fax to Mr Grammatikos in Athens that day Eastern Australian Time, Mann Judd wrote:
"We refer to your facsimile letter received on 25 June 1992 and advise that we have completed our business evaluation of the Consolidated Travel Group of companies. Six copies of our report have been handed to Mr Alysandratos of Consolidated Travel in a sealed envelope for personal delivery to you. If you require a facsimile of our report prior to Mr Alysandratos' arrival in Athens, please let us know."
There is no evidence of any request for a facsimile of the report. There is evidence that on 30 June the report was delivered to Spiros Alysandratos in Melbourne who was travelling to Greece that day and who had agreed to hand the report to Mr Grammatikos after his arrival.
In these circumstances, the likelihood that the board of Olympic, in making its decision of 29 June, relied on a report dated 30 June is very small indeed and relies entirely on the difference between Athenian time and Melbourne time. Even on the most favourable view, however, the chance that the board had any opportunity to properly consider the Mann Judd report before its decision was made is negligible.
Nevertheless, Nelson Wheeler Arnold have joined Mann Judd as a third party to the proceeding between Olympic and Nelson Wheeler Arnold. By paragraph 24 and following of the third party statement of claim, Nelson Wheeler Arnold allege as follows:
"In about 25 June 1992 Olympic retained Mann Judd Proprietary, alternatively Mann Judd, to undertake a business evaluation of the members ('the Mann Judd retainer')...
25. Pursuant to the Mann Judd retainer Mann Judd... provided to Olympic on or about 30 June 1992 alternatively 6 July 1992 a written business evaluation report evaluating the business of the members... 26. By reason of the fact that Mann Judd... knew or ought to have known that Olympic would;
(a) Rely on representations made in the Mann Judd report;
(b) Rely on it to assess the accuracy of the Alysandratos representations;
Mann Judd ... owed a duty to Olympic to take care in ensuring the accuracy of representations contained in the Mann Judd report and to advise Olympic of any inaccuracy's in the Alysandratos representations.
27. In providing the Mann Judd report to Olympic Mann Judd... made the following representations ('the Mann Judd representations'):
(a) there were reasonable grounds for believing that CTG would have a pre-tax operating profit for 1992 of $3,765,000, alternatively $3,350,000;
(b) here were reasonable grounds for believing that CTG would have a projected pre-tax operating profit for 1993 of $4,393,000, alternatively $3,557,000;
(c) there were reasonable grounds for believing that CTG would have a projected pre-tax operating profit for 1994 of $5,125,000, alternatively $3,817,000;
(d) there were reasonable grounds for believing that Olympic would achieve an annual post tax return of approximately $2.18 million on a proposed investment of $20 million being an annual return of 10.9 per per cent, alternatively $1.76 million on a proposed investment of $20 million being an annual return of 8.8 per cent;
(e) there were reasonable grounds for valuing the business of CTG at $39.258 million, alternatively $28.168 million.
30A ..In deciding to purchase the shareholding Olympic relied upon: (a) the Mann Judd representations;
(b) the fact that Mann Judd failed to advise of inaccuracies in the Alysandratos representations".
Paragraph 30A of the third party statement of claim was the subject of an interrogatory delivered by Mann Judd to Nelson Wheeler Arnold. The interrogatory, interrogatory 3, reads as follows:
"Look at paragraph 30A of the claim and identify by name the officer or officers or employee or employees of Olympic who is alleged to have relied upon;
(a) the Mann Judd representations referred to therein;
(b) the failure to advise."
To that interrogatory Nelson Wheeler Arnold provided the following answer in answers sworn on Nelson Wheeler's behalf by Bruce Kenneth Simmons on 22 April 1998:
"In answer to interrogatory 3 I say: This is presently not known to the defendant but the matters enquired of are the subject of interrogatories administered for the examination of Olympic and the information will be supplied once ascertained".
Given the comments which, in its report, Mann Judd made about the significance of the rate of income tax, it might well prove difficult to maintain the allegations made in paragraph 27 of the third party statement of claim. But Nelson Wheeler Arnold must also prove, as an essential element in its case, the reliance alleged in paragraph 30A. On the facts as I have already outlined them, proof of such reliance would be impossible.
The position for Nelson Wheeler Arnold is, however, much worse than that. In his answers to the following interrogatories of Nelson Wheeler Arnold, Mr Mandroukros said (and I quote in turn from the interrogatory and the answer):
"10. Prior to its execution of the deed, did Olympic receive into its
possession a written report prepared by;(a) Mann Judd...?"
Answer: "I believe that the written report prepared by Mann Judd ... was hand delivered to Loukas Grammatikos by Spiros Alysandratos on or about 30 June 1992. The report was not given to the board of directors of Olympic prior to the execution of the deed."
"12. Prior to execution of the deed, did Olympic receive from... Mann Judd... other than by the receipt of a written report any communication relating to the worth of Consolidated?"
Answer: "No." "18. State in full all facts, matters,circumstances or things by which it is alleged that Olympic relied on any and which representations contained in the Nelson Wheeler Arnold report in deciding to execute the deed."
Answer: "The decision of Olympic's board of directors to purchase the shares and execute the deed was made in reliance on the reliability and independence of the Nelson Wheeler Arnold report." "27. Refer to the document annexed hereto and marked C [the Mann Judd report dated 29 June 1992] and state if a copy of that document was received into the possession of Olympic prior to its execution of the deed".
Answer: "Olympic, through its board of directors, did not receive the Mann Judd valuation. I believeit was provided by Mr Alysandratos to Mr Grammatikos on or about 30 June 1992. He did not provide it to Olympic's board of directors".
These negative answers are supported by two affidavits filed on behalf of Olympic in proceeding 7193 of 1993 and proceeding 6367 of 1995. Each affidavit has been sworn by a person who, as a then director of Olympic, attended the board meeting held on 29 June 1992. Each deponent swears that he was not then aware of, nor can recall anything about, Mann Judd. The minutes of the meeting of 29 June are consistent with these disclaimers. The names of the deponents are respectively Georgio Kasimis and Stavros Psycharis.
There is no material whatsoever to the effect that any member of the then board of Olympic had seen, let alone relied on, the Mann Judd report before the decision to execute the deed of sale and purchase was made. In other words, on this point there are no disputed facts. The evidence is all one way; unequivocally against the contention upon which Nelson Wheeler Arnold depend for the success of their third party proceeding against Mann Judd.
It was submitted on behalf of Nelson Wheeler Arnold that the position may change at trial. If judgment in favour of Mann Judd is given now on a summary basis Nelson Wheeler Arnold will lose the ability to make use of an admission which might be made at trial by a relevant witness to the effect that the Olympic board did indeed rely on the Mann Judd report. But such an admission, sufficient to show reliance involving the board as a board, is unlikely in the extreme.
It was also submitted by Nelson Wheeler Arnold that if Mann Judd had, before the execution of the deed of sale and purchase, informed Olympic of the true financial position of CTG then the board would have changed its decision of 29 June and declined to proceed with the transaction the following day. That submission involves a number of propositions:
(1) That Mann Judd had a duty to formulate correct conclusions about the
financial position of CTG within a maximum of five days.
(2) That Mann Judd then had a duty to transmit those conclusions to a
representative of Olympic within that time.
(3) That the conclusions would have led to advice to the effect that the deed of
sale and purchase not be executed.(4) That that advice would have been transmitted through the initial recipient to
the board.(5) That the board would have acted upon that advice, rescinded its decision to
execute the deed and refused to bind itself to the relevant transaction.
None of the latter is pleaded in the third party statement of claim. Not only that, but it would in any event face the difficulty that by his letter of 25 June Mr Grammatikos allowed eight to nine days for completion of the task which he thus entrusted to Mann Judd. In other words Mann Judd had until 3 July or the following day before receipt of the report was due.
The authorities are clear that the jurisdiction to give summary judgment against a plaintiff should be exercised with the greatest caution. Litigants are not to be deprived of a full adjudication of their dispute at trial unless the court is satisfied that the case is hopeless. Where the relevant litigant is the plaintiff, that position is often particularly difficult to reach.
Where it is reached, however, justice generally demands that there be judgment for the defendant. That, in my opinion, is the position in this case. Everything points to the practical impossibility of Nelson Wheeler Arnold being able to establish the facts without proof of which the third party statement of claim cannot be made out. In those circumstances, justice points unequivocally to an order that there be judgment for the third party. It would be quite unjust, for example, were a third party to be forced to either continue as a party to the proceeding or settle, not on the basis of a true compromise, but only because it would be economically less disadvantageous to pay something to the relevant defendant, than remain in the action and recover, at the conclusion of the trial, less by way of an order for costs than the innocent third party was required to spend in defending its position through the trial. Such a circumstances would, in my opinion, amount to what would properly be described as an abuse of process.
It is, it seems to me, clear that in these days where there is a very proper concern for the expeditious and, as far as possible, economical disposition of litigation, the court not hesitate in a proper case to ensure that parties are not unjustly required to participate in a continuation of a litigious process which is demonstrably without foundation. It seems to me that those conditions obtain here. For these reasons, in my opinion, the application should be allowed and there should be judgment for the applicant on the summons of 17 July.
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