RGM Graphic Services Pty Ltd v Moon

[2001] FCA 1913

FEDERAL COURT OF AUSTRALIA

RGM Graphic Services Pty Ltd v Moon [2001] FCA 1913

RGM GRAPHIC SERVICES PTY LTD & ORS v ROBERT GEORGE MOON & ANOR
N1128 of 2001

MADGWICK J
13 DECEMBER 2001
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1128 of 2001

BETWEEN:

RGM GRAPHIC SERVICES PTY LTD (ACN 083 056 777)

FIRST APPLICANT

IAN FORRESTER KERR
SECOND APPLICANT

WAYNE PATRICK BONHAM
THIRD APPLICANT

AND:

ROBERT GEORGE MOON
FIRST RESPONDENT

AUSTRALIAN SECURITIES AND INVESTMENT COMMISSION
SECOND RESPONDENT

JUDGE:	MADGWICK J
DATE OF ORDER:	13 DECEMBER 2001
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.The first respondent’s notice of motion be dismissed.

2.The first respondent pay the applicants’ costs of the motion.

3.The matter be listed for further directions before Emmett J on 28 March 2002 at 9:30am.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1128 of 2001

BETWEEN:

RGM GRAPHIC SERVICES PTY LTD (ACN 083 056 777)

FIRST APPLICANT

IAN FORRESTER KERR
SECOND APPLICANT

WAYNE PATRICK BONHAM
THIRD APPLICANT

AND:

ROBERT GEORGE MOON
FIRST RESPONDENT

AUSTRALIAN SECURITIES AND INVESTMENT COMMISSION
SECOND RESPONDENT

JUDGE:	MADGWICK J
DATE:	13 DECEMBER 2001
PLACE:	SYDNEY

REASONS FOR JUDGMENT
(revised from transcript)

HIS HONOUR:

1. The applicants in the principal proceedings are a company RGM Graphic Services Pty Ltd, which it will be convenient to refer to simply as “the company” and two individuals.  The respondents are a natural person, Mr Moon, and the Australian Securities and Investment Commission (“ASIC”), which is a party for the purposes of enabling regard to be had to the conduct of a deregistered company which Mr Moon had controlled.

2. On 6 July 1998, the company entered into an agreement for the purchase of a printing business from the formerly registered company (which I will call, the vendor) that the vendor had conducted.  Negotiations were conducted between Mr Moon on behalf of the vendor and Mr Kerr and Mr Bonham, on behalf of the company. 

3. According to the applicants, Mr Moon made representations from about February 1998 until 6 July 1998 on a continuing basis that:

   (a)the gross turnover of the vendor's business for the 1997 tax year had been in the order of $450,000;

   (b)that for the period 1 July 1997 to 16 February 1998 the gross turnover was about $280,000 so that the average monthly turnover of the business was approximately $37,000; and

   (c)that after the sale of the vendor’s business, the turnover would be about $4,000 per month less than that referred to in (b) because part of the vendor’s business, being a mail order printing venture, would not be sold but would be operated by Mr Moon and his daughter, although the actual printing work would be sub-contracted to the company.

4. It was also represented, according to the applicants, that Mr Moon would introduce the applicants to and assist them in the retention of the vendor’s customers. The applicants sue for loss and damage arising from representations alleged to be in contravention of ss 51A and 52 of the Trade Practices Act1974 (Cth) and/or ss 41 and 42 of the Fair Trading Act 1987 (NSW). Further or in the alternative, the applicants frame their case on causes of action alleging negligent misrepresentation and breach of contract, alleging that Mr Moon, contrary to a provision in the agreement, refused to make himself available for the introduction of the vendor's customers to the applicants and gave no appreciable assistance to the applicant in the retention of such customers.

5. The principal proceedings were instituted by the applicants on 26 July 2001.  The agreement provided that it would be completed on 31 July 1998, time being of the essence.  The agreement provides for a purchase price of $234,800 allocated as to $54,000 for goodwill and as to $180,000 for plant and chattels.  A deposit of $20,000 was to be paid (and, I take it, was paid).  The agreement provided that the vendor would lease to the purchaser certain premises for two years at $750 per week.  There was also a special condition that the sum of $34,800 would not be paid on settlement but would be secured by a fixed and floating charge over the assets of the purchaser. 

6. Settlement, including entry into the charge of debenture, is alleged to have occurred on 31 July 1998 as the contract had contemplated.  Mr Moon, the first respondent moves to strike out the statement of claim so far as it depends on the Trade Practices Act and/or the Fair Trading Act.

7. It is convenient to deal with the matter by reference only to the Trade Practices Act 1974 (“the Act”).  The first respondent has also brought a motion seeking security for costs. 

   Application to strike out proceedings

8. The first respondent submits that the applicants’ claims under ss 51A and 52 of the Act should be struck out as they were commenced after the expiry of the three year limitation period provided by s 82(2) of the Act.

9. Section 82 of the Act as in force at 31 July 1998 provided as follows:

   “(1)A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV, IVB or V or section 51AC may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.

   (2)An action under subsection (1) may be commenced at any time within 3 years after the date on which the cause of action accrued.”

   (The Act has since been amended to provide a six year limitation period.)

10. This application requires consideration of when the alleged cause of action under the Act accrued. The first respondent asserts that the cause of action accrued, at the latest, on 6 July 1998 when the Sale Agreement and Lease were executed. The argument for the first respondent is that so far as those causes of action go, this is a very simple case of the sale and purchase of an asset and as such satisfies the strictures of the majority of the High Court in Wardley Australia Limited v State of Western Australia (1992) 175 CLR 514 at 533 where Mason CJ and Dawson, Gaudron and McHugh JJs said:

    “We should, however, state in the plainest of terms that we regard it as undesirable that limitation questions of the kind [then and here] under consideration should be decided in interlocutory proceedings in advance of the hearing of the action, except in the clearest of cases.  Generally speaking,

    in such proceedings, insufficient is known of the damage sustained by the plaintiff and of the circumstances in which it was sustained to justify a confident answer to the question.”

11. The submission for the applicants is that the case is manifestly distinguishable from the agreement under consideration in Wardley and distinguishable also, despite the provision for entry into a lease, from the decision of the Full Court of this Court in Karedis Enterprises Pty Ltd v Antoniou (1995) 59 FCR 35 in which, as I understand that judgment, their Honours appear to have extended the principles discussed in Wardley to some extent.  The view propounded in Karedis was that the cause of action accrued when the loss or damages were first ascertainable, that being a question of fact which, as the Full Court held, had not been correctly approached by the trial judge.

12. For a proper answer to this question, some difficult legal issues may arise.  For example, although dissenting in Wardley, Brennan J focused on the phrase "the amount of the loss or damage" in s 82(1) of the Act. In this case it is, at least arguably, the position that the applicants or first applicant derived no right to the tangible assets, choses in action and presumably immunities or privileges that might have been bound up in the notion of the goodwill, until completion of the agreement. On the other hand, if the respondent is right and the case falls to be determined as if it were the simple sale of a tangible asset, such as a motor car, the purchaser (the applicants) would immediately on entering into the agreement have had some rights, if only to a return of the deposit upon rescission. However, as rescission did not occur, even that may be less clear than the respondent would have it.

13. Wardley itself may have represented some development in the law as to when a cause of action accrues under the Act. Karedis appears to me to have been a development of the law from Wardley, but drawing strongly on the reasoning and underlying values apparent in Wardley.  It is at least arguable to my mind that such distinctions as there are between this case and Karedis are distinctions without a material difference.  It may even be arguable that this case, as an extension of the Wardley approach, is an even more justified case than one such as Karedis where all that was involved was the entry into a lease.

14. It seems to me that it can fairly be said that the law in Australia, whatever the position may be in England, is not entirely settled such that it is inappropriate to deal with a strike out application on the basis that the law is clear. The law, it seems to me, may well be in a process of development that would not avail the respondent.  It may be that, on mature reflection, the law in its present state should be held positively to assist the applicants.  In my opinion, it is inappropriate, without full and complete argument of the matter to deal with a contentious legal issue on an interlocutory basis as is requested here by the first respondent. 

15. Further, the only evidence before me is the bare text of the agreement and such admissions as to time frames by the applicants as may be drawn from the further amended statement of claim.  The true character of the agreement may only finally appear after all the evidence is given.  Likewise the true character and completion date of the representations may only appear after all the evidence is known.  For example, the evidence may show that Mr Moon continued to make reassuring representations of the kind pleaded up to and even after 31 July 1998, being representations made in trade or commerce, and it might be that the applicants were induced by those continuing representations to act or to refrain from acting to their detriment.  Each representation might possibly be viewed as an item of conduct giving rise to a cause of action.  In my opinion, almost quintessentially, this case shows, with respect, the wisdom of the strictures in Wardley.  In my opinion this is far from being the clearest of cases.  Accordingly, the application to strike out the relevant parts of the statement of claim will fail as being premature.  This will, of course be without prejudice to the ability of the respondents to argue the limitation point at a full hearing of the matter.

    Security for costs application

16. The other matter raised in the first respondent’s notice of motion is that the first applicant, the company, should provide security for costs.

17. The company had been having some financial difficulties and it is not suggested that its finances are such as to reassure the respondent that if the applicants were unsuccessful that the first applicant would be in a position to pay the first respondent’s costs in full.  However, it was pointed out to the first respondent, before the notice of motion was filed, that the application would appear doomed to fail because there are personal applicants against whom a costs order could be enforced.  Further, the applicants claim that any fears that might be held about the company’s ability to pay costs would have resulted entirely from the first respondent’s conduct.

18. On that being said to the first respondent, they were perfectly entitled to understand that the costs of the first respondent were being guaranteed by the personal applicants, a position confirmed by counsel for all applicants today.  On this basis, in my opinion, the application for security for costs must fail.  In my view this was so even though it was only after that intimation and after the filing of a notice of motion that the personal applicants provided information to the first respondent as to their financial position.  As a practical matter it is difficult to see that, even had those personal applicants been persons of straw, there would have been any real loss to the respondents arising therefrom should they be ultimately successful in the proceedings.

19. In any case, the claim that the applicant company's impecuniosity resulted from the conduct of the respondents, when it is the allegation that the first applicant was formed for the purpose of buying and carrying on the business sold, would ordinarily dissuade a court from ordering security for costs. 

20. For these reasons the notice of motion will be dismissed with costs.

I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Madgwick.

Associate:

Dated:             25 February 2001

Counsel for the Applicants:	Mr P Biscoe QC
Solicitors for the Applicants:	Bowles & Company
Counsel for the First Respondents:	Mr R Newlinds
Solicitors for the First Respondent:	Baker & McKenzie
No appearance by the Second Respondent.
Date of Hearing:	13 December 2001
Date of Judgment:	13 December 2001