Repatriation Commission v Hawkins

[1993] FCA 479

PITCAIRN INVESTMENTS PTY LTD and JOHN EDWARD LOCAL v. BIRWICK MARCH PTY LTD
and ANTHONY STANLEY MARWICK
No. WAG210 of 1992
FED No. 479
Number of pages - 6
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
French J(1)

CATCHWORDS

Practice and Procedure - pleadings - breach of contract - alleged lack of privity - embarrassing pleadings - inadequate logical connection between paragraphs - proposed amendments refused - re-amendment paragraphs struck out - leave to amend granted - security for costs - corporate trustee - weight to be given to right of indemnity.

Laundry Coin-Wash Nominees Pty Ltd v. Dunlop Olympic Ltd (1985) 7 ATPR 40-584

HEARING

PERTH, 8 July 1993

#DATE 13:7:1993

Counsel for the Applicants: Mr S. Leslie

Solicitors for the Applicants: Phillips Fox

Counsel for the Respondents: Mr D. Bishop

Solicitors for the Respondents: Clayton Utz

ORDER

The Court orders that:

On the Applicants' motion filed 24 June 1993:

1. The amendments to paras. 20, 21, 24 and 26 are disallowed.

2. The amendments to the amended statement of claim are otherwise allowed.

3. The applicants pay the respondents' costs of the motion in any event and any costs thrown away by reason of the amendments.

On the Respondents' motion filed 31 May 1993:

1. Paragraphs 19, 20, 21, 22, 23, 24 and 26 of the amended

statement of claim are struck out.

2. The first applicant on or before 27 July 1993 to provide

security for the respondents' costs of the action up to trial in the amount of $12,500 by way of bank guarantee to be lodged as agreed between the parties.

3. There be liberty to apply to vary the form of security.

4. The applicants to pay the respondents' costs of the motion. Directions

1. The applicants have leave to file a re-amended statement of claim embodying the amendments permitted pursuant to the orders made on their motion filed 24 June 1993 and amended paragraphs 19, 20, 21, 22, 23, 24 and 26 in accordance with these reasons.

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

JUDGE1

REASONS FOR JUDGMENT ON MOTIONS RELATING TO AMENDED STATEMENT OF CLAIM AND SECURITY FOR COSTS

FRENCH J On 2 April 1993 I gave judgment on the respondents' motion to strike out the statement of claim. That motion had been met by proposed amendments to the pleading. In the event, I indicated that certain paragraphs of the statement of claim could not stand and ordered that the proposed amendments not be allowed and that the applicants have leave to file a statement of claim amended in accordance with the reasons for judgment. On 19 April 1993, an amended statement of claim was filed pursuant to the order made on 2 April 1993. On 31 May, the respondents filed a further motion seeking to strike out various paragraphs of the amended statement of claim. They also sought an order for security for costs. The motion was supported by an affidavit sworn by Douglas Bishop, a partner in the firm of solicitors acting for the respondents. An outline of submissions was also filed. On 9 June the respondents' motion was adjourned to 8 July and directions given for the filing of further written submissions. An affidavit sworn by the second applicant, John Local, on the question of security for costs was also filed on that day. On 24 June the applicants filed a motion seeking leave to re-amend the amended statement of claim in accordance with a minute filed that day. The respondents filed submissions arguing their strike out motion and the proposed amendments. I shall deal first with the attack upon the proposed re-amended statement of claim.

1. I note at the outset that the respondents contend that the second applicant is improperly a party to these proceedings, there being no relief claimed on his behalf. The applicants say that the second applicant is "joined to the proceedings in order that all relevant parties may be bound by any decision of the Court concerning the receipt and allocation of moneys pleaded in paragraph 12...". A comparison is drawn between the position of the assignor and assignee in equity who must both be parties to proceedings to enforce the relevant equitable right although the assignor seeks no relief. There is, on the face of it, no basis for apprehending inconvenience, complication or delay in the conduct of the proceedings that would militate against the joinder of the second applicant (cf O.6 r.6). There are allegations of fact in relation to moneys paid and allocated as between the applicants which would, if sustained, be reflected in findings that should bind the applicants inter se. The joinder of the second applicant exposes him personally to the risk of a costs order in the event that the application fails. That is not to say such an order would necessarily be made against a natural person who seeks no relief in the proceedings. But where that person is a principal of the corporate applicant, the prospect of such an order being made is increased. I see no reason therefore for striking out the statement of claim or any part of it so far as it relates to the second applicant.

2. Paragraph 19 alleges that it was an express written term of a pleaded agreement of 28 November 1991 between the applicants and the first respondent "that the Technology being provided by the First Respondent had been sufficiently tested and developed to be ready and suitable for commercial sale and that the Solar Systems and New Solar Products complied with quoted stated warranty conditions". Paragraph 20 alleges breaches of those terms by reason of matters pleaded in a number of earlier paragraphs which are enumerated. The respondents contend that the right to use the Technology and to produce and sell the products was acquired by the vehicle company and not by the applicants. There being no privity, the breach of contract claim, it is said, should be dismissed as hopeless. But as the applicants point out, the terms said to have been breached are terms of a contract between the applicants and the first respondent. On the face of it, it is arguable that conditions of the kind pleaded might have been part of that agreement. Secondly it is said that there is nothing in the enumerated paragraphs to support the allegation that the Technology was deficient. That objection is, I think, made out. The matters set out in the enumerated paragraphs go to deficiencies in the design and performance of solar hot water units. It is not apparent how these are related to the elements of the "Technology" as defined in the proposed re-amended statement of claim or which element of the "Technology" they relate to. To that extent, paragraph 20 is embarrassing. The "stated warranty conditions" are not identified. And the ways in which Non Solar Products fail to meet such conditions are not identified. These are material matters which should be pleaded clearly. In my opinion, the amendment to para.20 should not be allowed and paras. 19 and 20 should be struck out as they stand.

3. Paragraph 21 sets out the loss and damage said to have been suffered by the first applicant as a result of the alleged breaches. It is attacked upon the basis that it asserts a claim for damages by the first applicant in respect of breaches of agreements to which it was not a party. The fate of para.21 hangs on that of paras 19 and 20. I am not prepared to regard the damages claim in this respect as unarguable, but in light of the orders I propose to make in respect of paras.19 and 20, para. 21 must also be struck out.

4. Paragraph 22 alleges that the terms of the agreement pleaded in para. 19 constituted representations by the respondents to like effect. Paragraph 24 seeks to characterise the representations as false by reference to the same prior enumerated paragraphs as are relied upon to support the breach of contract plea. Paragraphs 22, 23 and 24 in my opinion, are embarrassing for the same reasons as paras.19 and 20 and should be struck out. Paragraph 26 is dependent upon para.22 and falls with it.

5. In summary, I would therefore strike out paras. 19, 20, 21, 22, 23, 24 and 26, and disallow the proposed amendments to paras. 20, 21, 24 and 26.

6. In support of the claim for an order for security for costs, Mr Bishop's affidavit exhibits searches of records held by the Australian Securities Commission relating to the first applicant, including copies of annual returns for the financial years ended 30 June 1987 to 30 June 1992 inclusive. The 1992 return discloses that the first applicant has total assets of $2 represented by shareholders' equity in that amount. It had, however, incurred liabilities of $336,385 as a trustee and according to the return is entitled to be indemnified out of trust assets in that amount. Mr Bishop asserts in his affidavit that, taking into account the normal interlocutory steps, he believes that the costs the respondents will incur up to trial, not including the trial, will be at least $50,000. The figure is not elaborated or supported by a draft bill of costs for the various interlocutory steps contemplated.

7. Mr Local in his affidavit sworn 8 June, says that the first applicant is the trustee of the Local Family Trust. Clause 15 of the Deed of Settlement creating the trust confers upon the trustee the right to be indemnified out of the assets of the trust against liabilities incurred in the execution or attempted execution of the trusts authorities, powers and discretions of the trustee under the Deed. The first applicant evidently sues in its capacity as trustee. The 1992 balance sheet of the Trust discloses a surplus of assets over liabilities in the amount of $33,758. However, this amount includes, as a receivable, the money claimed by the first applicant in these proceedings. Since 30 June 1992, according to Mr Local, the position of the Trust has improved. Shares in Mount Burgess Goldmining Co. shown at $27,139 in the balance sheet are said to be currently worth about $160,000. Mr Local also says that he is prepared to offer a personal guarantee to cover the respondents' costs of the proceedings in the event of a costs order against the applicants. He and his wife are jointly worth $850,000. He puts his personal worth therefore at about $425,000. It is to be noted that Mr Local and his wife are beneficiaries of the Trust. It is also the fact that the Trust is empowered by cl.6 of the Deed to distribute the assets of the Trust. If the amount claimed in these proceedings is excluded from the assets of the Trust then, according to the submissions made by the first applicant, the net worth of the Trust is $9,569. The asset position of the first applicant is said to have been adversely affected by its transactions with the respondents. I am, however, unable to bring that to bear as a factor weighing against the respondents without some finding as to culpability which, absent an admission or trial, I am unable to do.

8. In my opinion, it is not sufficient for the first applicant to point to the right of indemnity out of the Trust assets as its answer to the application for security. A successful respondent ought not to have to resort to the enforcement of derivative rights to recover its costs - see Laundry Coin-Wash Nominees Pty Ltd v. Dunlop Olympic Ltd (1985) 7 ATPR 40-584 at 46,729. In this case these rights are reflected in a very modest net asset position when recovery under the present claim is excluded. It is an asset position which can be diminished at the will of the first applicant. The second applicant and his wife and their family plainly stand to benefit from these proceedings. They stand behind the first applicant and, in my opinion, should be prepared to support its claim with adequate security. I propose therefore to direct that the first applicant provide security up to but not including trial in the sum of $12,500. The security can be provided in the form of a bank guarantee approved by the Registrar or otherwise as agreed between the parties. There will be liberty to apply to vary the order to give effect to any such agreement or otherwise.