Posselt, Allan John & Anor v Wolfenden, Kenneth James & Ors

[1998] FCA 468

ALLAN JOHN POSSELT AND LYNETTE JANICE POSSELT v KENNETH JAMES WOLFENDEN, WAYNE PATRICK WARRICK, WILLIAM ARTHUR HEADLEY, THE PRUDENTIAL ASSURANCE CO LTD AND WILLIAM WORKMAN
THE PRUDENTIAL ASSURANCE CO LTD (First Cross-Claimant) v KENNETH JAMES WOLFENDEN, WAYNE PATRICK WARRICK AND WILLIAM ARTHUR HEADLEY (First Cross-Respondents)
No. WAG 135 of 1995
FED No. 468/98
Number of pages - 11
Procedure

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

GENERAL DIVISION

NICHOLSON J

Procedure - application for leave to file re-amended statement of claim - motion for stay - whether leave should be granted - whether action vexatious or embarrassing - whether just to grant leave given limitation issues.

Federal Court Rules, O 13 rr2, 2(2), 2(3), 2(7), 7

Bowstead & Reynolds on Agency (16th ed 1996)

Abela v Giew (1964) 81 WN (Pt 1) (NSW) 344, followed

Londish v Gulf Pacific Pty Ltd (1993) 45 FCR 128, followed

Liptons Cash Registers and Business Equipment Ltd v Hugin (GB) Ltd [1982] 1 All ER 595, followed

ANZ Banking Group Ltd v Larcos (1987) 13 NSWLR 286, followed

PERTH, 16 December 1997 and 23 April 1998 (hearing), 5 May 1998 (decision)

#DATE 5:5:1998

Appearances

Counsel for the Applicants: N D C Dillon

Solicitor for the Applicants: Corrs Chambers Westgarth

Counsel for the First Respondent: M Cornes

Solicitor for the First Respondent: Barker Gosling

Counsel for the Second Respondent: R J Ainslie

Solicitor for the Second Respondent: Mallesons Stephen Jaques

Counsel for the Third Respondent: No appearance

Solicitor for the Third Respondent: None on record

Counsel for the Fourth Respondent: M J Stevenson

Solicitor for the Fourth Respondent: Jackson McDonald

Counsel for Fifth Respondent K Banks-Smith

Solicitor for Fifth Respondent Phillips Fox

THE COURT ORDERS THAT:

1. The fourth respondent's motion to stay the proceedings be refused.

   2. Costs on the motion reserved for submission.

   3. The applications for leave to file the Re-amended Statement of Claim and to file a minute of amendment to par 12D therein be granted provided that:

   (a) the joinder of the second applicant shall be effective only from the date of this order; and

   (b) the respondents have leave to reply by way of defence to any cause of action by the first or second applicants regarding the expiration of any relevant limitation period.

   4. The costs of the application for leave to amend and the joinder application be reserved for submission.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

NICHOLSON J

The applicants seek leave to re-amend their Statement of Claim and to add another applicant ("Lavar"). The grant of leave and the addition of Lavar are opposed, particularly on behalf of the fourth respondent which brings a motion to stay the proceedings in the present or re-amended form as vexatious and as not disclosing any reasonable or probable cause of action against it. The fifth respondent relies on submissions made for the fourth respondent.

PREVIOUS APPLICATIONS

The fourth respondent previously brought two strike out applications in relation to the Statement of Claim. Those motions were generally unsuccessful for reasons delivered on 3 January and 22 April 1996. Those reasons were given before delivery of further and better particulars by the applicants. In the former of those reasons the following broad outline was given of the Statement of Claim:

"... the applicants are shareholders and directors of Lavar Pty Ltd, trading as Dala Transport ("Dala"). The first, second and third respondents were partners in an accounting firm ("the Accountants") who were retained by the "Retainer Agreement" and agreed to provide accounting and other financial advice to the applicants and Dala and so were engaged in trade or commerce. It is pleaded that it was an "Implied Term" of the Retainer Agreement that the Accountants would exercise all due care, skill and diligence in advising the applicants and in making the Representations. It is further pleaded that in 1990 the applicants started to expand Dala's business, purchased a 50 acre site ('the Site'), decided to effect improvements ('the Improvements') and sought advice under the Retainer Agreement from the Accountants in respect of the most effective arrangements for the applicants to fund the cost of the Improvements, taking into account the financial position of the applicants and Dala. The Accountants gave certain advice which involved the applicants entering into the "Prudential Policies"["the Policies"] as part of a "Scheme". In addition to the advice, it is claimed the Accountants provided "Flow Charts" with calculations and that all these things constituted "Representations" by them. The Prudential Policies were issued by the fourth respondent. It is claimed that in giving advice in respect of the Scheme and the Prudential Policies the Accountants acted either as agents for the fourth respondent or on their own account.

The applicants paid the premiums due on the Policies to the fourth respondents for the years 1990-92. However, in 1993 it is said the applicants were informed by the fourth respondent that the Policies were not performing sufficiently to allow the premiums for 1993 to be borrowed back by the applicants; this lack of performance was a result of adverse changes in the interest rate and in the financial markets; and the applicants could not recover the initial premiums of $20,000 each. As a result of the inability to borrow back the premiums, the applicants were forced to give up the Policies and to abandon the Scheme.

In addition to the pleading of the Implied Term, it is also pleaded that the Accountants were acting under a "fiduciary duty or a duty in equity". By the making of the Representations it is claimed that the Accountants acted in breach of the Implied Term and negligently and in breach of the alleged equitable duties. So far as concerns the fourth respondent, it is pleaded that the Accountants were acting as agents of the fourth respondent, or alternatively on their own account, and that the fourth respondent, in making the Representations, engaged in misleading and deceptive conduct."

It should be added the fifth respondent was said to be the agent of the fourth respondent.

The causes of action which would be brought in the re-amended statement would therefore be in (1) contract, (2) negligence, (3) fiduciary duty and a duty in equity, (4) misleading and deceptive conduct.

PROPOSED AMENDMENTS

The issues are to be decided on the pleadings and not any assertion of facts which may be said to be awaiting proof in the applicants' case. It is common ground that I may nevertheless have regard to the applicants' further and better particulars.

Turning therefore to the proposed re-amended Statement of Claim, the major changes are to introduce Lavar into the pleadings as a client of the Accountants whose assets, profit and loss and cash flow were considered in their advice on funding the cost of the Improvements and which was induced to enter the Scheme. It is further proposed to plead the Representations by the Accountants were made to the first applicants in their individual capacity and as directors and sole shareholders of Lavar.

Then it is proposed to plead the Accountants acted also as agents of the fifth respondent or on their own account. Additionally it is proposed to plead the Accountants made the Representations as agents of the fourth respondent; alternatively as agents of the fifth respondent (or as authorised by him) or on their own account.

It is further proposed to plead the consequences of the reliance on the Representations by the applicants (and now Lavar), it was Lavar which agreed to borrow monies and pay premiums and entered into a Commercial Bill Facility guaranteed by the applicants. It would also be claimed that Lavar as well as the applicants was forced to give up the Policies as a result of the inability to borrow back the premiums.

In the alternative to the Representations it would be pleaded the Accountants made certain warranties to the applicants and Lavar. The capacities in which these were given are pleaded in the alternatives previously mentioned. It is in consideration of these the applicants and Lavar are said to have entered the Scheme and Policies (defined as the Collateral Contract). The breaches of that Contract are pleaded in proposed par 12D.

Likewise it is proposed to introduce Lavar into the pleading of the fiduciary duty and the duty in equity.

FOURTH RESPONDENT'S CONTENTIONS

The opposition of the fourth respondent to the grant of leave and the addition of Lavar as an applicant is broadly based on two grounds. The first is the addition of Lavar destroys any case the applicants might seek to advance solely in their own right. The second is that embarrassment and oppression will be caused to all parties and in particular to the fourth respondent.

The specific bases on which the fourth respondent objects to the joinder of Lavar and other amendments are:

"(a) on the pleading there is no possible cause of action capable of being established at the suit of Lavar against [the fourth respondent];

(b) there is no cause of action demonstrated by way of linked cause of action of the [applicants] and Lavar against [the fourth respondent];

(c) the claims as presently formulated both by Lavar itself, and Lavar in association with the [applicants] are vexatious and are likely to prejudice or delay the fair trial of any action and show [sic] no comprehensible or ascertained basis for claiming damages are pleaded either by the [applicants] or Lavar;

(d) the claims sought to be raised by Lavar are statute barred not merely under the Trade Practices Act but also by virtue of s38 (or s.47) of the Limitation Act 1935 of Western Australia;

(e) the whole mode of the present pleadings against [the fourth respondent] are embarrassing and close to incomprehensible and are likely to prejudice or delay the fair trial of the action.

(f) because Lavar is obviously statute barred under the Trade Practices Act, even if the cause of action did not accrue until 1993 - para 10(c) and (d), (and it could not recover expectation damages under the Trade Practices Act in any event: Gates v City Mutual etc (1986) 160 CLR 1; Wardley v Western Australia (1992) 175 CLR 514, 534; Sharp v Ramage (1995) 12 WAR 325), there is no original jurisdiction in the Federal Court and the present claims by the applicants and Lavar should be by fresh proceedings in the Supreme Court."

It is submitted by the fourth respondent the proposed amendments render immaterial any previous rulings on the sufficiency of the pleading.

LEAVE REQUIREMENTS

The application for leave falls for consideration pursuant to O 13 r 2 of the Federal Court Rules ("FCR"). The Court must consider that necessary amendments shall be made for the purpose of determining the real questions raised or of correcting any defect or error in the proceeding or of avoiding multiplicity of proceedings: FCR O 13 r 2(2). Furthermore it is provided in FCR O 13 r 2(7):

"An amendment may be made notwithstanding that the effect of the amendment will be to add or substitute a new claim for relief or another foundation in law for a claim for relief if the new claim for relief or foundation in law for that claim arises out of the same facts or substantially the same facts as those already pleaded to support existing claims for relief by the party applying for leave to make the amendment."

Where an amendment of that type arises the Court may grant leave even if the application "is made after any relevant period of limitation current at the date of commencement of the proceeding has expired" provided it "thinks it is just to do so.": FCR O 13 r 2(3).

The general approach is that where a party satisfies the Court he or she genuinely desires to amend the pleadings so as to alter an existing claim or to introduce a new claim, leave should be granted subject to proper terms unless the proposed amendment is obviously futile or would cause substantial injustice which cannot be compensated for: Abela v Giew (1964) 81 WN (Pt 1) (NSW) 344 at 345. Furthermore, to allow an amendment before a trial begins (when there is time for a proper defence to be filed) stands in a very different position to amendment, for example, towards the end of a trial: Ketteman v Hansel Properties Ltd [1987] AC 189 at 220 per Lord Griffiths. In Londish v Gulf Pacific Pty Ltd (1993) 45 FCR 128 at 141-142 the Full Court (Neaves, Burchett and Ryan JJ) said FCR O 13 r 2 was plainly intended to apply to the case of an applicant for an indulgence sought to cover the consequences of the careless or incompetent conduct of his proceeding in the court.

I have also had regard to the review of relevant authorities by the Full Court in Australian Building Industries Pty Ltd v Stramit Corporation Limited (Northrop, Lindgren and Lehane JJ, Federal Court of Australia, 1 December 1997, unreported).

MATTERS RELEVANT TO GRANT OF LEAVE

(1) PREVIOUS INACTION

It is no valid objection to the grant of leave that the applicants have not previously joined Lavar although urged to do so: FCR O 13 rr 2, 7; Londish.

The dicta of Kirby J in State of Queensland v J L Holdings (1997) 141 ALR 353 at 366 -371 is not authority to the contrary on an amendment at the stage the amendment is sought here. Indeed, it is confirmatory of amendments being allowed where they will ensure justice between the parties.

(2) NO CAUSE OF ACTION IN AGENCY

The argument for the fourth respondent that there can be no possible cause of action by Lavar (itself) or Lavar and the applicants (together) against the fourth respondent is based on the view which did not succeed in either of the earlier strike out applications (which did not concern Lavar). That view is that no case of agency can be made out in respect of the fourth respondent as a consequence of the actions of the fifth respondent.

The agency pleas complained of are set out in pars 2(d), 7B, 7C, 12AA, 12C and 16 of the proposed re-amended Statement of Claim. The basis of these pleadings is the sharing of commission. Agency may arise by implication from the conduct or situation of the parties: Bowstead & Reynolds on Agency (16th ed 1996) at 36, par 2-001. Remuneration by commission can be a feature of agency: Bowstead at 8, par 1-014. In these circumstances and on the face of matters, it cannot be beyond argument that an agency relationship of the type pleaded may be able to be implied from the pleaded sharing of commission.

The case for the fourth respondent also seeks to raise difficulties in relating a payment of a commission by the fifth respondent to the Accountants to the period of the agency. It is for the applicants to make their case within the pleadings provided they are arguable. Matters raised in this paragraph may be valid answers on the evidence when it is in. They are not grounds of objection to the pleading.

The same issue is also raised in other ways.

For the fourth respondent it is contended there is no connection between the representations said to have been made by the Accountants and pleaded in pars 6, 7, 7A, 7B, 7C and 7D and the pleaded action taken in reliance thereon by the first applicant and Lavar as stated in pars 8(a), (c), (d) and (e). The arguable point of connection appears in par 7A where it is pleaded the Accountants made the representations as agents for the fourth respondent. It is open to argument the fourth respondent is therefore fixed with the Accountant's knowledge of the particular knowledge of the financial position of the applicants and Lavar.

Likewise the connection between the representations or warranties pleaded in par 12A and the Collateral Contract pleaded in par 12B is the pleading in par 12AA that the Accountants gave the warranties as agents for the fourth respondent.

It is also contended for the fourth respondent that to amend the pleading to assert the Collateral Contract with Lavar as well as the applicants without explanation is prima facie an abuse of process, particularly in light of the applicants' decision now to claim the fourth respondent through the Accountants was a long term adviser of Lavar. Reference to par 2(d) however shows that not to be the case. The pleading is the Accountants were agents for the fourth respondent only when giving advice in respect of the Scheme and the Policies. Furthermore, the proposed amendments are being made for the purpose of clarifying the claim in relation to Lavar and I do not consider the introduction of it in relation the Collateral Contract as part of a range of changes can be characterised as an abuse of process.

Paragraph 14 pleads the Accountants owed the applicants and Lavar a fiduciary duty or a duty in equity to exercise all reasonable skill, care and diligence in providing advice to each of them. In the particulars it is pleaded these duties arose from knowledge in the Accountants of Lavar's lack of capacity to pay the premiums due under the Policies in circumstances where the premiums could not be borrowed back from the fourth respondent. The fourth respondent's objection to this pleading is it purports to saddle the fourth respondent with vicarious detailed knowledge of the financial affairs of Lavar over an unspecified period of time. On its behalf it is submitted this is a substantive material fact which should have been more extensively pleaded. However, the applicants' case is capable of being argued in terms of the limitation on the duration of the agency of the Accountants in relation to the fourth respondent as expressed in par 2(d). The proposed amendments are capable of being understood as having given rise to the requisite knowledge within the terms of par 2(d).

It is then contended the impecuniosity of both the applicants and Lavar was chronic and pre-existed any representations being made so it was not caused by anything done, even by the Accountants, so this is a case where damages cannot be recovered. Again the point is to be understood in the context of the pleading of the agency relationship between the Accountants and the fourth respondent. If the representations by the Accountants were made with the knowledge of the alleged critical financial position of the applicants and that was the knowledge of the fourth respondent, it is arguable its duty of care will have increased. Further, it is premature to raise these issues now, as they are more properly dealt with at trial.

The case for the fourth respondent also turns to the common law on agency to support the contention that there are limits to which knowledge of an agent will be attributed to a principal. It is submitted for it that those limits are such that the pleading of agency could not be made out in point of law.

In Harkness v Commonwealth Bank of Australia Ltd (1993) 12 ACSR 165 it was held a director did not owe a duty to a bank to divulge information he received as an officer of another body, nor was the bank imputed with that knowledge. That is a principle dependent upon findings of the relevant factual circumstances and for argument at trial. It cannot preclude the pleading a priori. There is nothing in the other similar authorities relied upon for this submission which leads to any different view: Freeman & Lockyer (a firm) v Buckhurst Park Properties Mangal Ltd & Anor [1964] 2 QB 480; Armagas Ltd v Mundogas SA [1986] AC 717; Garnac Grain Co v Faure & Fairclough [1968] AC 1130; Kooragang Investments Pty Ltd v Richardson & Wrench Ltd [1982] AC 462; and Crabtree Vickers Pty Ltd v Australian Direct Mail Advertising and Addressing Company Pty Ltd (1978) 133 CLR 72. It is not the case the law attributes knowledge of an agent only in cases of fraud. Whether attribution is appropriate and the limits to it are to be the subject of findings of fact in the proper evidentiary setting.

It is not precluded on the pleading to include Lavar as the recipient of financial advice from the Accountants: it will be the evidence and findings which determine whether the pleading can be made out in that respect. Findings now that the pleading cannot be made out and is "unreasonable" are not the basis on which the issues relating to the pleading can be resolved. Likewise it cannot now be decided the warranties are "extraordinary" or that the inference the Accountants could not bind the fourth respondent is one which cannot be drawn.

Whether or not provisions of the Insurance (Agents and Brokers) Act 1984 (Cth) can apply is a matter only for judgment in the context of found facts.

Many other matters raised for the fourth respondent are in truth objections to the proposed pleading on agency being made out. Read within its confines, I consider the pleading of agency is not "obviously futile".

(3) CAPACITY OF PARTIES

Paragraph 1 of the proposed re-amended Statement of Claim would plead the first applicants are the sole shareholders and directors of Lavar. Paragraph 1A would plead Lavar was a trustee of the A J Posselt Family Trust acting through the first applicants. The claims for loss and damage would be in the name of the first applicants and Lavar (see pars 22, 22A, 23, 25, 25A, 26, 26A and 27). So far as the claims for misleading and deceptive conduct are concerned, the claim for loss and damage is by the first applicants alone (par 24). It is submitted on behalf of the fourth respondents the only party which could recover substantial damages theoretically would be Lavar and that, apart from the premiums paid to the fourth respondent less borrowings, the first applicants had no claim in isolation from Lavar: Morewood v Chemdata Pty Ltd (1995) ATPR 41-429 at 40,837 applying Prudential Assurance Co Limited v Newman Industries Limited (No 2) (1982) 1 Ch 204 at 210.

The decision in Morewood v Chemdata relies on the decision in Prudential Assurance. The Prudential Assurance case dealt with a situation where the relevant plaintiff's shareholders suffered no personal loss. As analysed by the High Court in Gould & Anor v Vaggelas & Ors (1985) 157 CLR 215 there is a fundamental distinction between a claim by shareholders for damages for the loss they have personally suffered which is separate and distinct from the loss suffered by the company.

As in Gould v Vaggelas, it is alleged the first applicants in this case have been induced by misrepresentations, breaches of fiduciary duty or breaches of warranties to alter their personal positions and enter into guarantees for the liabilities of Lavar. More widely, it is also alleged they have been induced to follow a scheme which has failed and which has caused them loss and damage: see Gould v Vaggelas at 245, 246, 253 and 255. Whether any damages of the applicants and Lavar overlap, will be an issue to be determined at trial once the damages, if any, have been established.

In any event, as has been pleaded here, the affairs of the first applicants and the second applicant were inextricably mixed. It is the first and second applicants' case that the Accountants were fully aware of the close relationship. It is open to submission that this Court may find any losses by the first applicants and second applicant are losses by the same party: see Walker & Ors v Hungerfords & Ors (1987) Aust. Torts Reports 80 - 145 at 69,130-69,131; Bacich v ABC (1992) 29 NSWLR 1; Esso Petroleum Co Ltd v Mardon [1976] 1 QB 801; and Maylon v Plumber [1962] 3 All ER 884. See also Patek v City of Melbourne (Smithers J, Federal Court of Australia, 20 August 1986, unreported).

For the fourth respondent it is contended neither Gould v Vaggelas nor Walker v Hungerfords has any application nor is there any case to apply Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 or s 11(2) of the Property Law Act 1969 (WA). Those are premature submissions. The applicants showing the matters to be open to argument, the Court needs a trial of the facts to have a proper evidentiary foundation to which to apply the fourth respondents submissions.

(4) CAUSAL LINK TO REPRESENTATIONS

For the fourth respondent it is submitted there is nothing in the pleading to provide any reasonable basis for asserting that the actions of the applicants and Lavar proposed in par 8 flowed from or were a foreseeable consequence of any of the Representations pleaded in par 5.

It is pleaded in par 6 that the Accountants advised the applicants and Lavar to enter into the Scheme. Paragraph 8 pleads that induced by and in reliance on the Representations (including the matters pleaded in par 6), the applicants and Lavar agreed to undertake the Scheme and took steps to implement the Scheme. It is pleaded the Accountants misrepresented the capacity of the Scheme and the Policies to support the Scheme. The case is that "but for" the Representations, the applicants and Lavar would not have entered into the Scheme or the Policies, and, having entered into the Scheme and the Policies and consequent on their failure, the applicants and Lavar have suffered loss and damage. The pleading is clear.

In any event, whether there is a causal link between the Representations and the pleaded actions, the applicants' and Lavar's actions and the loss suffered will be a matter for judgment. As noted in Richochet Pty Ltd & Anor v Equity Trustees Executor and Agency Co Ltd & Ors (1993) 113 ALR 30 "Ultimately, the "causative threshold" beyond which liability attaches to a misrepresentation which is one of a number of factors inducing a decision that produces loss, will be a question of judgment". The decision in Ricochet v Equity Trustees was made following the trial Judge reviewing "ample evidence" of whether the representations were relied upon or not.

It follows, until the evidence is adduced, any submission of the type made by the fourth respondent is premature.

(5) EMBARRASSMENT

Arguments previously rejected are resurrected on this application. In my view the matters raised are not able to be characterised as likely to prejudice or delay fair trial of the action.

It is submitted for the fourth respondent that the applicants and Lavar claim exactly the same moneys throughout. The effect of pars 8(a) and (e) is Lavar, acting for and on behalf of the applicants, provided to the Accountants a cheque made out to the fourth respondent for $40,000, being the initial premium required to be paid to it for the purpose of each of the applicants offering to enter into the Policies. It is submitted, assuming Lavar could show a case, it could only claim that $40,000 and interest or stamp duty as its damages if the claims by the applicants under that head are abandoned and Lavar demonstrates for reasons beyond its control it was unable to obtain reimbursement from the applicants. However this seems to overlook the pleading in par 8(c) that Lavar entered into the Commercial Bill Facility to borrow $240,000. It is pleaded it did so in reliance on the Representations. There is no reason why the claim of Lavar should be confined to the payment of $40,000 and interest or stamp duty being that already particularised in the applicants' claim for loss and damage. The claim of Lavar is further and alternative to the claim by the applicants for loss and damage.

For the fourth respondent it is contended the further particulars of the first applicant's loss and damage must be provided now. Consistently with the prior reasons, this is not a ground for a strike out. Furthermore, pars (i)-(iii) provide greater particularisation than was previously the case. Also, there must be allowance for the effect of expert evidence on the calculation of consequential losses.

There is reference to the financial position and cashflow of Lavar as central to the terms of the Collateral Contract in pars 12A(b), (c) (ii), and (g) and the Representations in pars 7(b) and (g). It is submitted no amendment could be allowed without the position of Lavar, which had to be considered in the giving of the advice, being pleaded or particularised expressly. I am unable to accept this submission. The pleadings are founded on the intimate knowledge by the Accountants of Lavar's financial position. That may be contested by way of defence. It becomes an issue of fact for trial. For the purposes of the amendment it is not necessary that Lavar's position at that time be particularised in the manner contended for. The pleading is arguable in its present form.

On behalf of the fifth respondent it is said the authorisation pleaded in pars 7C, 12C(c) and 16(c) exists in a vacuum in that it is not made clear how authorisation gives rise to any cause of action separate from those pleaded elsewhere or how it augments or co-exists with the allegation the accountants were the agents of the fifth respondent. In my view it does not need to do so - it is open to argument as being the authorisation falling within the pleaded agency relationship and not supplemental to it.

(6) JURISDICTION

The argument on jurisdiction is entirely dependent on resolution of the limitation point under the Trade Practices Act 1975 (Cth) in the respondents favour, a matter not yet determined.

(7) LIMITATION ISSUES

For the fourth respondent it is claimed some of the pleaded causes of action are subject to limitation points: Limitation Act 1935 (WA), s 47. These submissions are supported by other respondents. For the second and fifth respondents there is no opposition to the addition of Lavar provided their rights to take limitation of action points in their defence in regard to Lavar's claim in negligence and contract are preserved.

In my opinion the claims in the proposed re-amended Statement of Claim arise out of the same facts or substantially the same facts as those already pleaded: FCR O 13 r 2(7). The question is, so far as the limitation points are concerned, whether it would be "just to grant leave". The effect of a grant of leave would be the amendments would take effect from the date of the original pleading: Sneade v Wotherton Barytes and Lead Mining Co Ltd [1904] 1 KB 295 at 297.

There is the further question from which date the joinder of Lavar would be effective. I consider it would be "just" to grant leave if, as submitted for the fifth respondent, the leave preserved the right to the respondents to fully argue the limitation issues: cf the issues arising in Harris v Western Australian Exim Corporation (1994) 56 FCR 1; Commonwealth of Australia v International Air Aid Pty Ltd (Neaves J, Federal Court of Australia, 2 September 1994, unreported); and the joinder was effective only from the date of this order: Liptons Cash Registers and Business Equipment Ltd v Hugin (GB) Ltd [1982] 1 All ER 595; Ketteman v Hansel Properties Ltd; and ANZ Banking Group Ltd v Larcos (1987) 13 NSWLR 286.

VEXATION

I rule against the admission for the purposes of this application of the affidavit of the fifth respondent. It seeks in reality findings of fact on preliminary issues. The evidentiary effect could only be properly assessed in the context of the evidence supporting the breadth of the claim by the applicants.

The case for the fourth respondent seeks to have the proceeding or claims in it stayed on the ground they are vexatious or an abuse of process: FCR O 20 r 2(1). It is well known the court must find it is apparent the action must fail (Webster v Lampard (1993) 177 CLR 598 at 602); and that the power must be exercised with 'exceptional caution' (General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129) particularly where "the ultimate outcome turns upon the resolution of some disputed issue or issues of fact ..." (Webster at 603).

As to agency claims: I have already concluded these claims satisfy the tests for a grant of leave. They are not vexatious or abusive.

As to the Collateral Contract claims: I do not consider the claims to be "fantastic". In my opinion par 12(c) of the proposed re-amended Statement of Claim makes clear the Collateral Contract is alleged to have been between the applicants and Lavar and either the Accountants acting on their own account or as agents for the fourth or fifth respondents or authorised by the fifth respondent. As to responsibility for the giving of the Warranties, I consider par 12AA makes an arguable case.

As to the consideration issue with respect to the Collateral Contract: I do not consider the plea in par 12A can be characterised as "hopelessly embarrassing". The pleading opens itself to the contention the consideration received by the Accountants and the fifth respondent was the entry of the applicants into the Scheme and the Policies and the consequent receipt of commissions by the Accountants. The consideration received by the fourth respondent was the promise of the applicants to pay the annual premiums on the Policies.

Furthermore, the Collateral Contract alleged gave the fourth or fifth respondents the right to enforce Lavar's promise to borrow the premiums and pay them on behalf of the applicants. Moreover, it is arguable the alleged Collateral Contract could also be enforced by or against the fourth or fifth respondents, whether pursuant to the common law contract principles enunciated in Trident v McNiece or by invoking subs 11(2) of the Property Law Act 1969 (WA). This is not the time in the trial process to determine whether those arguments are not open on the facts.

Paragraph 12D pleads issues of breach of the Collateral Contract. It is conceded on behalf of the applicants par 12D should be amended to include a breach of the term of the Collateral Contract set out in par 12A(b). Leave is granted by them to file a further minute to include this additional plea.

As to the trade practices claims: it cannot be the function of this court to now hold they are incapable of being made out as a matter of evidence. The matters argued as issues of evidence cannot fall for consideration here.

CONCLUSION

The tests to be applied by the court in relation to leave and stay do not entitle the court to refuse leave or permanently stay the proceeding.

The motion for stay should be refused and leave granted to file the re-amended Statement of Claim subject to the joinder of Lavar being effective only from the date of the order to follow these reasons and to the right of the respondents to plead and fully argue limitation points.