Re: Sange Holdings P/L & Isaaka v Beneficial Finance Corp - [1999] QSC 122

IN THE SUPREME COURT
OF QUEENSLAND
Brisbane No.848 of 1991
Before the Hon. Mr Justice Mackenzie
[re: Sange Holdings P/L & Isaaka v Beneficial Finance Corp.]
BETWEEN:

SANGE HOLDINGS PTY LTD (IN LIQUIDATION)
Plaintiff

AND:

BENJAMIN ISAAKA
Second Plaintiff

AND:

BENEFICIAL FINANCE CORPORATION LIMITED
Defendant
JUDGMENT - MACKENZIE J.

Judgment delivered 7 June 1999
CATCHWORDS: PRACTICE AND PROCEDURE -- Amendment of writ - joinder of a party - requirement that the plaintiff show a prima facie case to justify joinder of defendant.

Sub-Contractors Charges Act 1974
Sharp v McGivney (1951) VLR 143

Counsel:Mr D.J. Campbell for the applicant
Mr P.J. Flanagan for the respondent

Solicitors: Prentice & Co for the applicant
Clarke & Kann for the respondent

Hearing date: 27 May 1999

IN THE SUPREME COURT
OF QUEENSLAND
Brisbane No.848 of 1991
Before the Hon. Mr Justice Mackenzie
[re: Sange Holdings P/L & Isaaka v Beneficial Finance Corp.]
BETWEEN:

SANGE HOLDINGS PTY LTD (IN LIQUIDATION)
Plaintiff

AND:

BENJAMIN ISAAKA
Second Plaintiff

AND:

BENEFICIAL FINANCE CORPORATION LIMITED
Defendant
JUDGMENT - MACKENZIE J.
Judgment delivered 7 June 1999

The summons in this matter seeks leave to join two persons as defendants and also seeks leave to amend the writ.
The action has a long and troubled history. It began as an action between Sange Holdings Pty Ltd (Sange) which subsequently went into liquidation and Beneficial Finance Corporation Limited (Beneficial). The action was commenced on 16 May 1991. The original statement of claim alleged that pursuant to a registered debenture charge, Beneficial had agreed to advance moneys to J.C. Scott Developments Pty Ltd (Scott Developments) so it might carry out construction of a large apartment building. An associated company J.C. Scott Nominees Pty Ltd carried on business as a building contractor under the name of J.C. Scott Constructions (Scott Constructions). The statement of claim alleges that Scott Developments employed Scott Constructions as contractor to build the building. Sange was a sub-contractor to Scott Constructions and constructed form work for the project.
It is alleged that some moneys for this work remained unpaid and between 10 September 1990 and 2 November 1990, the plaintiff issued four notices against Scott Developments and Scott Constructions under the Sub-Contractors Charges Act 1974. Judgments based on the notices were obtained in the Federal Court on 10 April 1991 against Scott Constructions and on the following day against Scott Developments. It is alleged in the original statement of claim that Beneficial's liability is alleged to arise from its being knowingly concerned in and benefiting from a breach of trust by Scott Developments in that it advanced moneys to Scott Developments with knowledge of the notices and with knowledge that Scott Developments was not retaining moneys to pay out Sange's charges. There was also a claim made in restitution based on the allegation that by breach of trust and by appointing a receiver and discharging Scott Developments from the project, Beneficial had gained a benefit from the enhanced value of the project.
The chronology of the matter, restricting it to significant events and omitting reference to some procedural matters is as follows. The original statement of claim was delivered on 29 May 1991. After a demurrer and defence was filed the statement of claim was amended and delivered on 8 July 1991. The matter was entered for trial on 18 June 1993, and eventually listed for trial on 21 November 1994. The trial was adjourned on the plaintiff's application until 28 November 1994 on which date the plaintiff made an unsuccessful application to amend its pleadings. The trial was aborted the next day and the plaintiff given leave to amend the pleadings.
This produced an amended statement of claim which purported to join four other defendants including Mr Jefferson, who is the subject of the present application, Scott Developments and Scott Nominees. It was delivered on the last day of the period allowed by Lee J. A request for particulars and a subsequent order that they be provided were not complied with by the plaintiff which led to an application to dismiss the action for want of prosecution. While it stood adjourned a "further further amended statement of claim" was delivered on 26 September 1995, without leave. (Exhibit IGP 5 to the affidavit of Mr Prentice). The application to dismiss for want of prosecution was dismissed but in late 1997 the defendant again applied to dismiss for want of prosecution. The application was adjourned to allow the liquidator of the plaintiff to seek litigation funding. Just before the matter was to come back before the chamber judge, the cause of action was assigned to Mr Isaaka. On 6 March 1998, Byrne J dismissed the application to dismiss for want of prosecution but refused to allow Mr Isaaka to be joined as a plaintiff.
On 11 December 1998, Mr Isaaka applied to be joined as second plaintiff and an order to that effect was made by Williams J on condition that a guarantee was provided. Other directions made on that day were not complied with leading to yet another application to strike the action out for want of prosecution. On 29 March 1999 the guarantee was provided and the time for interlocutory steps extended.
On 15 April 1999 the present application was made. It is common ground that Sange is now no longer a necessary party and that the application for leave to join the proposed second defendant will not be proceeded with.
By way of explanation of the basis upon which the application was made another proposed statement of claim (Exhibit IGP 7) has been drafted. However, Mr D Campbell who was not the pleader who drafted it made it plain in his submissions that he was not totally committed to the draft. Effectively he seeks only to amend the writ by adding Mr Jefferson as second defendant (since the person named in the summons as the prospective second defendant is not now proceeded against) and amending its endorsement, not in accordance with Exhibit IGP 8, but in a more limited way annexed to his written submissions. It is against this rather unsatisfactory background that the application must be determined. Recourse must also be had to some extent to the pleading about which Mr Campbell has reservations to understand the nature of the claim which is to be made. I should note that the written submissions focused on whether a claim of breach of fiduciary duty analogous to a duty arising under the Sub-Contractors Charges Act was subject to a limitation period, and, if it was, whether there were peculiar or special circumstances justifying leave. In my view there is a more fundamental problem.
The plaintiff needs to show a prima facie case to justify joinder of a defendant (Sharp v McGivney (1951) VLR 143, 145). The claim now made against Mr Jefferson is for equitable compensation or damages for breach of fiduciary duty. The basis of the claim as I understand it is that, having been appointed receiver/manager of the project, he became subject to a fiduciary duty to the first plaintiff of a like character to the statutory obligation which applied to Scott Developments and Scott Constructions under the Sub-Contractors Charges Act.
I note that it is alleged in paras 14 and 15 of Exhibit IGP 7 that the Act creates not only a charge but also a fiduciary duty owed to the first plaintiff by Scott Developments and Scott Contractors. As far as I am aware that involves a novel extension of what has hitherto been understood to be the effect of the Act. Nevertheless, the fundamental basis of Mr Campbell's submission is that Mr Jefferson had a fiduciary duty to the first plaintiff and that its content was similar to that arising under the Sub-Contractors Charges Act. He accepted that no claim under the Act itself could have been brought against Mr Jefferson. That is plainly a correct concession.
One of the difficulties I have with the application is that because of Mr Campbell's inclination not to adhere to the formulation of the detail of the basis of liability in Exhibit IGP 7, it is speculative how the claim is finally to be formulated. It is easy enough to state in bland terms that a breach of fiduciary duty is to be relied on but it is incumbent on the applicant to establish on a prima facie basis a conceptually acceptable case. It is not immediately apparent that there is one on the material before me.
The task is not made easier by reason of the absence in evidence before me of a good deal of the information referred to in Exhibit IGP 7, which might have revealed the character of the moneys apparently used to complete the project and the method by which they were channelled to people to whom they were paid. The notion in para 25 that from the time of the appointment of the receiver/manager, control of the project, including drawing down of finance and payment of amounts due or to be due under the contract from Scott Developments to Scott Constructions and/or the sub-contractors was in the hands of, inter alia, Mr Jefferson as well as or in substitution for Scott Developments and Scott Constructions does not give one cause for confidence that it is clear what the nature of the arrangement was and in particular what Mr Jefferson did. Further in para 28, the allegation that both Beneficial and Mr Jefferson knew of the charges, had constructive notice of them or were wilfully blind as to their existence is made. There is a good deal of particularity concerning Beneficial's knowledge but none as to Mr Jefferson's.
I am conscious of the need not to become involved in a too precise analysis of detail in deciding whether leave should be given to amend a writ by adding a defendant and by amending the endorsement. However, it is necessary to at least be prima facie satisfied, before inflicting the onerous consequences of a complex civil action on a person, that there is a viable basis in law for the proposed claim against the person.
This is especially so where an unusual kind of claim is made and it is inadequately explained on the material in evidence what the content of the duty is. This has largely come about because counsel for the applicant was, for reasons which may be apparent, unwilling to commit himself to the draft in Exhibit IGP 7. In the circumstances I am not satisfied on the material before me that I should give leave to amend to join Mr Jefferson as a defendant or to amend the claim in the writ.
I should add that in the current state of the action, it is agreed that the plaintiff Sange is superfluous to the action having regard to the acquisition of the chose in action by Mr Isaaka.
I should also record that, on the material read before me, there is nothing identifying Mr Isaaka's connection with Sange. What he acquired is undoubtedly expressed widely in Exhibit IGP6. Given the extent to which the action was properly constituted at the time he acquired the chose in action, the nature of the right he wishes to assert against Mr Jefferson and the need to join him in the action to assert it, whether there are any possible complications arising from Mr Isaaka's status was not explored before me.
The order is that the summons is dismissed with costs to be taxed.