Rafferty v Time 2000 West Pty Ltd (No 5) - [2010] FCA 873

FEDERAL COURT OF AUSTRALIA
Rafferty v Time 2000 West Pty Limited (No 5) [2010] FCA 873

Citation: Rafferty v Time 2000 West Pty Limited (No 5) [2010] FCA 873

Parties: PATRICK CAMPBELL RAFFERTY, SANTORA HOLDINGS PTY LIMITED ACN 128 467 550 and KARAVILLE HOLDINGS PTY LIMITED ACN 009 439 178 v TIME 2000 WEST PTY LIMITED ACN 127 893 270, TIME 2000 SYSTEMS (AUSTRALIA) PTY LIMITED ACN 127 853 614, TIME 2000 OPERATIONS (AUSTRALIA) PTY LIMITED ACN 128 700 541, EMBLETON LIMITED (A COMPANY INCORPORATED IN HONG KONG), STEPHEN GERARD DONOVAN and MADGWICKS

File number: SAD 122 of 2008

Judge: BESANKO J

Date of judgment: 17 August 2010

Catchwords:
TRADE PRACTICES — application for relief under s 87 of the Trade Practices Act 1974 (Cth) — where fifth respondent was a natural person and second, third and fourth respondents corporations associated with him — where applicants entered into agreements with second to fifth respondents and paid moneys under those agreements to certain of the respondents — where respondents found to have contravened ss 51AD and 52 of the Trade Practices Act 1974 (Cth) — where fifth respondent ‘knowingly involved’ in the s 52 contravention under s 75B(1) of the Trade Practices Act 1974 (Cth) — where applicants did not prove an amount of loss or damage — where applicants entitled to order rescinding the agreements — whether respondents who had not received moneys under the agreements could be jointly and severally liable for payment of the moneys to the applicants under s 87

Held: applicants entitled to compensation for moneys paid under the agreements — fifth respondent owned and controlled corporate respondents — appropriate to treat second, fourth and fifth respondents as all having received the moneys — second, fourth and fifth respondents jointly and severally liable under s 87(2)(c) for repayment to the applicants of moneys paid under the agreements — alternatively same order could be made under s 87(1) to compensate applicants for loss or damage incurred in entering into agreements where applicants would not have entered into same but for the contravention — appropriate to make order because second to fifth respondents related parties who all benefited from applicants’ entry into agreements

COSTS — where applicants successful against second to fifth respondents and unsuccessful against sixth respondent — where second to fifth respondents had brought cross-claim against sixth respondent — where applicants later joined sixth respondent — where applicants could not have succeeded against sixth respondent if they had failed against second to fifth respondents — where second to fifth respondents did not suggest sixth respondent solely liable — where it was not necessary for the applicants to join the sixth respondent — whether Sanderson order should be made

Held: applicants not entitled to Sanderson order — applicants’ decision to join sixth respondent not unreasonable — nothing in conduct of second to fifth respondents made it reasonable that they should bear sixth respondent’s costs.

Legislation:
Fair Trading Act 1999 (Vic) s 9
Federal Court of Australia Act

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.

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Details

Case: [2010] FCA 873
Decision Date: 17 August 2010

CaseChat Overview and Summary

Rafferty and Karaville Holdings Pty Ltd, trading as Madgwicks, sought relief under the Trade Practices Act 1974 (Cth) against several respondents, including Time 2000 West Pty Ltd and others. The applicants alleged that the respondents had contravened sections 51AD and 52 of the Act by engaging in misleading or deceptive conduct, and that the fifth respondent was knowingly involved in the contravention. The applicants sought compensation for moneys paid under the agreements, and for the contracts to be set aside. The respondents denied the allegations and argued that the applicants were not entitled to relief because they had not proved an amount of loss or damage.

The court held that the applicants were entitled to compensation for the moneys paid under the agreements, as the fifth respondent was the owner and controller of the corporate respondents, and the corporate respondents were associated with the fifth respondent. The court found that it was appropriate to treat the second, fourth, and fifth respondents as having received the moneys, and that they were jointly and severally liable for repayment to the applicants under section 87(2)(c) of the Act. The court also held that a similar order could be made under section 87(1) to compensate the applicants for loss or damage incurred in entering into the agreements. The court found that the applicants were not entitled to a Sanderson order, as it was not necessary for the applicants to join the sixth respondent, and the second to fifth respondents did not suggest that the sixth respondent was solely liable.

The court ordered that the Heads of Agreement, the Joint Venture and Shareholders' Agreement, and the Rights Agreement be set aside. The first, second, fourth, and fifth respondents were jointly and severally liable to repay the applicants the moneys paid under the agreements, plus interest. The shares of Santora in Time 2000 West Pty Ltd were to be cancelled, and Rafferty was to resign as a director of Time 2000 West Pty Ltd upon payment by the respondents. The second and fourth respondents were to pay the applicants' costs, and the fifth respondent was to pay the applicants' costs after 31 August 2009. The applicants' claims against the sixth respondent were dismissed, and the applicants were to pay the costs of the sixth respondent. The cross-claim by the third respondent against the first applicant was dismissed, and the third respondent was to pay the first applicant's costs of the cross-claim. The cross-claim by the second to fifth respondents against the sixth respondent was dismissed, and the second to fifth respondents were to pay the costs of the sixth respondent in relation to the cross-claim.

Orders

Orders of the court

1. The Heads of Agreement referred to in paragraph 9 of the Applicants’ Further Amended Statement of Claim dated 19 January 2010, the Joint Venture and Shareholders’ Agreement referred to in paragraph 15 of the Further Amended Statement of Claim and the Rights Agreement referred to in paragraph 19 of the Further Amended Statement of Claim be set aside.

2. The applicants be repaid the following sums subject to and upon the terms of the orders set out hereinafter:

2.1 as to $200,000 to the first applicant (“Rafferty”);

2.2 as to $500,000 to Karaville Holdings Pty Limited (“Karaville”); and

2.3 as to $1,000,000 to Karaville.

3. The first, second, fourth and fifth respondents jointly and severally pay to the applicants the following moneys:

3.1 as to Rafferty, the sum of $200,000.00; and

3.2 as to Karaville, the sum of $1,500,000.00.

4. The first, second, fourth and fifth respondents pay the applicants interest of $416,111.29 in accordance with section 51A of the Federal Court of Australia Act 1976 (Cth) and Practice Note CM16.

5. Upon payment by the first, second, fourth and fifth respondents as provided in paragraphs 2, 3 and 4 above:

5.1 the shares of Santora in Time 2000 West Pty Limited be cancelled; and

5.2 Rafferty provide to Time 2000 West Pty Limited by its director, the fifth respondent, a notice of resignation as a director of Time 2000 West Pty Limited.

6. With respect to the costs of the applicants’ claims against the second to fifth respondents:

6.1 the second and fourth respondents pay those costs and after 30 January 2009 those costs be assessed on an indemnity basis; and

6.2 the fifth respondent pay those costs after 31 August 2009.

7. The applicants’ claims against the sixth respondent be dismissed.

8. The applicants pay the costs of the sixth respondent in relation to the claims by the applicants against the sixth respondent.

9. The cross-claim by the third respondent against the first applicant be dismissed and the third respondent pay the first applicant’s costs of the cross-claim.

10. The cross-claim by the second to fifth respondents against the sixth respondent be dismissed.

11. The second to fifth respondents pay the costs of the sixth respondent in relation to the cross-claim by the second to fifth respondents against the sixth respondent.

Note:

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The Donovan respondents should pay Madgwicks’ costs of their cross-claim against Madgwicks. Madgwicks made a genuine offer of compromise to the Donovan respondents by letter dated 8 December 2009. However, the offer was a joint offer to the applicants and the Donovan respondents and it could not be accepted by the Donovan respondents alone. In those circumstances, I do not think it can form the basis of an order for indemnity costs.CONCLUSION I will make the following orders:1.That the Heads of Agreement referred to in paragraph 9 of the Applicants’ Further Amended Statement of Claim dated 19 January 2010, the Joint Venture and Shareholders’ Agreement referred to in paragraph 15 of the Further Amended Statement of Claim and the Rights Agreement referred to in paragraph 19 of the Further Amended Statement of Claim be set aside.2.The applicants be repaid the following sums subject to and upon the terms of the orders set out hereinafter:2.1as to $200,000 to the first applicant (“Rafferty”);2.2as to $500,000 to Karaville Holdings Pty Limited (“Karaville”); and2.3as to $1,000,000 to Karaville.3.The first, second, fourth and fifth respondents jointly and severally pay to the applicants the following moneys:3.1as to Rafferty, the sum of $200,000.00; and3.2as to Karaville, the sum of $1,500,000.00.4.The first, second, fourth and fifth respondents pay the applicants interest of $416,111.29 in accordance with section 51A of the Federal Court of Australia Act 1976 (Cth) and Practice Note CM16.5.Upon payment by the first, second, fourth and fifth respondents as provided in paragraphs 2, 3 and 4 above:5.1the shares of Santora in Time 2000 West Pty Limited be cancelled; and5.2Rafferty provide to Time 2000 West Pty Limited by its director, the fifth respondent, a notice of resignation as a director of Time 2000 West Pty Limited.6.With respect to the costs of the applicants’ claims against the second to fifth respondents:6.1the second and fourth respondents pay those costs and after 30 January 2009 those costs be assessed on an indemnity basis; and6.2 the fifth respondent pay those costs after 31 August 2009.7.The applicants’ claims against the sixth respondent be dismissed.8.The applicants pay the costs of the sixth respondent in relation to the claims by the applicants against the sixth respondent.9.The cross-claim by the third respondent against the first applicant be dismissed and the third respondent pay the first applicant’s costs of the cross-claim.10.The cross-claim by the second to fifth respondents against the sixth respondent be dismissed.11.The second to fifth respondents pay the costs of the sixth respondent in relation to the cross-claim by the second to fifth respondents against the sixth respondent.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.

Citation:		Rafferty v Time 2000 West Pty Limited (No 5) [2010] FCA 873
Parties:		PATRICK CAMPBELL RAFFERTY, SANTORA HOLDINGS PTY LIMITED ACN 128 467 550 and KARAVILLE HOLDINGS PTY LIMITED ACN 009 439 178 v TIME 2000 WEST PTY LIMITED ACN 127 893 270, TIME 2000 SYSTEMS (AUSTRALIA) PTY LIMITED ACN 127 853 614, TIME 2000 OPERATIONS (AUSTRALIA) PTY LIMITED ACN 128 700 541, EMBLETON LIMITED (A COMPANY INCORPORATED IN HONG KONG), STEPHEN GERARD DONOVAN and MADGWICKS
File number:		SAD 122 of 2008
Judge:		BESANKO J
Date of judgment:		17 August 2010
Catchwords:		TRADE PRACTICES — application for relief under s 87 of the Trade Practices Act 1974 (Cth) — where fifth respondent was a natural person and second, third and fourth respondents corporations associated with him — where applicants entered into agreements with second to fifth respondents and paid moneys under those agreements to certain of the respondents — where respondents found to have contravened ss 51AD and 52 of the Trade Practices Act 1974 (Cth) — where fifth respondent ‘knowingly involved’ in the s 52 contravention under s 75B(1) of the Trade Practices Act 1974 (Cth) — where applicants did not prove an amount of loss or damage — where applicants entitled to order rescinding the agreements — whether respondents who had not received moneys under the agreements could be jointly and severally liable for payment of the moneys to the applicants under s 87 Held: applicants entitled to compensation for moneys paid under the agreements — fifth respondent owned and controlled corporate respondents — appropriate to treat second, fourth and fifth respondents as all having received the moneys — second, fourth and fifth respondents jointly and severally liable under s 87(2)(c) for repayment to the applicants of moneys paid under the agreements — alternatively same order could be made under s 87(1) to compensate applicants for loss or damage incurred in entering into agreements where applicants would not have entered into same but for the contravention — appropriate to make order because second to fifth respondents related parties who all benefited from applicants’ entry into agreements COSTS — where applicants successful against second to fifth respondents and unsuccessful against sixth respondent — where second to fifth respondents had brought cross-claim against sixth respondent — where applicants later joined sixth respondent — where applicants could not have succeeded against sixth respondent if they had failed against second to fifth respondents — where second to fifth respondents did not suggest sixth respondent solely liable — where it was not necessary for the applicants to join the sixth respondent — whether Sanderson order should be made Held: applicants not entitled to Sanderson order — applicants’ decision to join sixth respondent not unreasonable — nothing in conduct of second to fifth respondents made it reasonable that they should bear sixth respondent’s costs.
Legislation:		Fair Trading Act 1999 (Vic) s 9 Federal Court of Australia Act