Rabvila Pty Ltd v Reymor Investments Pty Ltd

C A T C H W O R D S

l	FEDERAL COURT - accrued jurlsdiction - Trade Practices Act claim
!
I	- jolned with clalms in negligence and deceit - whether clalms
should be separated.
TRADE PRACTICES - claim under s.75B - whether respondent firm vlcariously liable - s.75B exhaustive.
Trade Practices Act, 1975, s s . 5 2 , 75B, 82, 87
QLD G106 OF 1985
PIWCUS J.
BRISBANE
8 April 1986
I

IN THE FEDERAL COURT OF AUSTRALIA

)

QUEENSLAND DISTRICT REGISTRY

)	QLD G106 of 1985

DIVISION

GENERAG

BETFEEN :

RABVILA

PTY.

LIMITED

Applicant

AND:

REYMOR

INVESTMENTS

PTY.

LIMITED

First Respondent

AND :

JOHN CHARLES

REYNOLDS

Second Respondent

AMD :

IAN MOIR

Third Respondent

AND :

HUNGERFOFD, HANCOCK h OFFNER (a firm)

Fourth Respondent

9INUTES OF ORDER

JUDGE MAKING ORDER:	PINCUS J.
DATE OF ORDER:	8 April 1986
WHERE MADE:	BRISEXFJE
THE COURT ORDERS THAT:

The appllcations to strike out

stay the claims

against the fourth respondent be dismissed.

2 .	The applicant have	leave to amend the Statement of
Claim.

3 .

The application for

security for costs be heard on

a date to be fixed by the Registrar.

4 . The fourth respondent

pay

the

costs

of and

incidental to the application mentioned in (l), to

be	taxed, the taxation not to take place until

further order,

or until a general order for costs

l	is made in the principal application, whichever
!	shall first occur.

NOTE:	Settlement and entry of orders 1 s dealt with in Order 36
of the Federal Court Rules.

QLD G106 of 1985

BETWEEN: RABVILA PTY. LIMITED

Applicant

I .

AND: REYMOR INVESTMENTS PTY. LIMITED

First Respondent

AND:	JOHN CHARLES REYNOLDS

Second Respondent

AND: IAN MOIR

Third Respondent

AND: HUNGERFORD, HANCOCX & OFFNER (a firm)

Fourth Respondent

PINCUS J .

8 Aprll 1986

REASONS FOR JUDGMENT

This is

an applicatlon by the fourth respondent in the

principal proceedings

for

an order that the action against it

should be struck out

on the ground that it is not within the

jurisdiction of this court, or

stayed

the

exerclse

discretion. There is also an application for security,

which has

been ad~ourned

to await the determination

of the other questions.

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I I	The principal proceedings arise out	of the	sale of a
I

business

the

first respondent,

Reymor

Investments

Pty.

I	Limited, to	the	applicant.	The second	and	third	respondents are
I

directors of the first respondent. The fourth respondent,

Hungerford, Hancock

and

Offner, is a flrm who are the accountants

of the first respondent

and they seek the relief just mentioned.

The applicant

seeks damages under ss.82 and 87

of the

Trade Practlces Act 1974, damages for negligent misstatement and/or damages for fraudulent misrepresentation in respect of the

sale of a business.

The fourth respondent

argues

that

the

Federal Court does not have, or should not exercise,

~urisdiction

to hear claims agalnst it

in relation to any

of those matters.

The claim under the

Trade

Practlces Act is based upon

s . 5 2 of

the Act which prohibits a corporatlon

from, in trade or

commerce, engaqlng In conduct that 1 s mlsleading or deceptive or 1s llkely to mislead or deceive. Sectlon 8 2 enables a person who

suffers loss or damage

by conduct of another person that was done

in contraventlon

of, Inter alia, 5 . 5 2 , to recover the amount

the loss or damage against that other person	or	agalnst "any
person involved in the contravention".

The expresslon "person involved In the contraventlon" obtains an expanded meaning

from s.75B of the Act, the operation

of which was recently considered by the

High Court in Yorke

Lucas (1985) 59 A.L.J.R. 776.

That case lays down the effect of

certain provisions	of the section, but it is	not necessary for	L -
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the purposes of this decision to deal with it

in detail; it is

enough to say that

5.7%

has the effect that certain natural

persons are taken to be involved

contraventions

the

provisions of

Parts IV and

V and that the High Court read the

section as requiring proof of some certaln mental elements.

The

3 .

case did not deal

wlth

the point on

which the application of

s.75B to the

fourth respondent depends; that is whether

a firm

may be made vicariously liable for misleading conduct engaged in

;

by an agent, the latter being liable under s.75B.

That problem arises here because the

fourth respondent

1s said to be liable for

false statements made by its agent, one

Warren Fellows. Although the statement of claim does not say

s o ,

it is common

ground that Mr. Fellows has

t relevant tmes been a

partner in the fourth respondent and I decide the matter on the assumption that the pleadings wlll reflect that.

Counsel for the fourth respondent relied on my decision

In Keen Mar Corporatlon Pty.

Ltd.

Labrador Park Shoppinq

Centre Ptv. Ltd.

61 A.L.R.

504 in which I said, relying in part

upon the decislon

of the Full Court In Yorke v. Lucas (1983) 49

A.L.R.

672,

that to make the

firm which was sued there liable

under s.75B "the representations must be sheeted

home to the

partners m

(the ilrm) themselves; it is not enough tn succeed

under s.75B, to show that a party to the contravention acted for

the third respondent

(firm) as agent or servant, the members of

the

thlrd respondent not being themselves said to

have

been

involved".

Nothing was said on the hearing of the application

induce me to depart from the

view just mentioned, and were there

nothing more in the

case, I would strike out the claim

as against

the fourth respondent. However, Mr. McMurdo for the applicant

relied, as a ground for distinguishing the	Keen Mar case, on the	I,
L
r.

4. ' .

l. .

fact that

here the

fourth respondent

is plainly brought in on

bases other than the

Trade Practices Act.

It is necessary to

expound this point in somewhat more detail by reference to the

I ,

I .

statement of claim.

That alleges two written misrepresentations.	Tne first	i
I '

complained of was constituted by the sending

post of the

parcel containing certain documents, apparently either being or Incorporating accounts prepared by che €ourth respondent. The

applicant pleads that the

fourth respondent, by

its

agent Mr.

Fellows, represented to aqents of the appllcant that the figures

In the document were accurate.

The second allegation of written

t :

mlsrepresentatlon relates to another document

also

belnq

lncorporating accounts prepared

by the fourth respondenk.

The

statement of clam

says, although rather vaguely,

that these representatlons were untrue

and, as

to the first but

not the cscond, that Mr. Fellows knew of the

untruth.

The

dlstinction made may not

have

teen intended; it does not, In any

event, seem to be

slgnlficant f o r present purposec.

to both

documentary

misrepresentations,

the applicant

advances

alternative case of negligence, saying that the

fourth respondent

became aware

its agent, Warren

Fellows, that the applicant

Intended to or

was likely to

act in reliance upon the accounts

and

that

Warren

Fellows, with such

knowledge,

negligently

represented that the accounts were accurate.

It may be that a

question will arise whether the circumstances were such as to give r1se to a duty of care, but no argument was based upon that aspect of the matter.

1 :

i "

is,

I think,

clear that the factual distinction

relied upon by Mr. McMurdo exlsts; here a case is pleaded against the fourth respondent that accounts it prepared were fraudulently or negllgently claimed to be accurate.

There is no

application to strike out the clam against

the fourth

respondent only insofar

as it relies upon the

Trade

Practices Act.

If there were,

I would decline to

do so on the

...

ground that it is, in

general, undesirable to isolate a point in

a case and decide it in advance of the trial. Here, striking out

the Trade Tractices Act claim agalnst the fourth respondent would

make no

slgnificant difference to the

amblt of

the factual

I ' .

1ssues.

I '

Nevertheless, the fact

that,

in my view, the Trade

Practlces Act claim

arsainst the fourth respondent is ill-founded,

on the statement of claim as

~t presently stands, assists

the

fourth respondent	in relatlon to the central point made on its
behalf. This was	that the pleadings disclose no such connection

between

the

claims

againsc

the

fourth respondent

and

those

against the other respondents

to bring the

whole collection

within the scope

of the notion

accrued jurlsdlction,

a s

expounded by

the High Court in the line of cases culminating in

Stack v. Coast Securitles

(No. 9 ) Pty. Ltd.

154 C.L.R. 261.

Mr.

Douglas for the

fourth respondent relied also upon the

unreported decision

of this court in Maisev v. First Coast Pty.

M. (21 February 19841, but I have not found	the case to be of
real assistance.

If one disregards the Trade Practlces Act claim against the fourth respondent for the

purposes of considering

the

Iursidictional question, what is left seems, on

the face of the

pleading, to be closely connected with the federal aspects of the

. _

_ .

matter.

The very documents which

are at the forefront of the

applicant's case against

all respondents are alleged to have been

prepared by the fourth respondent. As mentioned above, a partner

in the fourth respondent 1s said to have become aware that the

applicant intended to rely upon the accounts and wlth that

I.'

knowledge to

have

told the applicant that the accounts were

accurate.

The case against the fourth respondent is tied up In

another way

with that against the second and third respondents,

who are sald to have been dlrectors of the	first respondent; as
agalnst the second and thlrd respondents, a	s.75B claim has been

advanced, and as Mr. McMurdo pointed

out, resolution of that

issue 1 s llkely to involve investigation of the way In whlch the

accounts came Into existence, as the applicant wlll have to prove

the requisite knowledge or intentlon

on the part of the second.

and third respondents.

the contention advanced on behalf

of the

fourth

respondent firm

1s accepted, then the claim against them would

have to be pursued in

separate proceedings. One cannot say with

confidence

precisely

what

extent

such

proceedlngs

would

involve lssues overlapplng those in the clalms against the

first

three respondents. Experience suggests,

however, that

much of

what would

be in contention in the two cases would

be common:

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the question of the way in which the alleged accounts came into

existence, what passed between any

of the first three respondents

and the fourth respondent in the process of preparation

of those

I	accounts,	the statements made	by Mr.	Fellows to the applicant
I
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with respect to the accouncs, the accuracy of the accounts and,

course, the question

of damages. Whichever of the tests

mentioned in the majority judgment in Fencott

Muller (1983)

, '

152 C.L.R.

570 1 s applied, the answer must, I think, be the same:

the relevant claims against the

fourth

respondent cannot

I	I	described as	"dlstinct and unrelated" (p.603), nor is either	a
i
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"completely disparate claim constituting in substance

a separate

I . '

proceeding" (p.607), nor

the federal claim a "trivlal or

i	insubstantial aspect of the controversy" (p.609).

I	. .
1
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So far

from

thinklng,

then,

that

It would

I. 1

lnconvenlent or Inappropriate

that the claims against the

fourth

respondent

tried

.nth those

against

other

three

respondents, I believe that to be a more practical course than to

separate the two.

I	i have	derlved	assistance	from	the discussion by
I

Beaumont J. In Kennedv v. Australaslan Coal and Shale Employees Federation (1983) 50 A.L.R. 735 at 742 et seq.

I :

with respect to

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bringing a non-federal claim

agamst a party other than the

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respondent agamst

which the "anchoring" federal

claim is made.

i	I	I have also noted that Wilcox	J. in Obacelo Ptv. Ltd.	v. Taveraft	, ,	._
i
I

Pty. Ltd.

(1985) 59 A.L.R. 571 had a case a little like this

i	before him,	but the reasons his Honour gave there do not appear
i

to me applicable to the present

case, except insofar as he dealt

I	I .
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(at p.578) with the question of bringing in	a respondent agalnst
whom no federal claim is made.

The

application to

strike out the claim against the

fourth respondent must fail, as also, for similar reasons, must

the application to stay

it.

There remains

the

question

of costs. Although the

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discussion	pointed up some	deficiencies	in	the	applicant's	I :,
i ' .

pleading, and

I give leave

to amend it

generally, the pleading

points were quite incidental.

thmk the

fourth respondent

should pay the costs of the application to strike out, to be

taxed, but that the taxatlon should not take place until further

order, or until

general

order

for costs

made

the

principal application, whlchever shall flrst occur.

[1986] FCA 123

4 Aug 1986