Rowson v Alpass
[2017] VSC 401
•7 July 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY & PROBATE LIST
S CI 2016 04019
| MARK ROWSON | First Plaintiff |
| DARROLL NELSON | Second Plaintiff |
| v | |
| ALAN ALPASS | Defendant |
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JUDGE: | Derham AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 4 April 2017 |
DATE OF JUDGMENT: | 7 July 2017 |
CASE MAY BE CITED AS: | Rowson v Alpass |
MEDIUM NEUTRAL CITATION: | [2017] VSC 401 |
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PRACTICE AND PROCEDURE – Pleadings – Application to strike out pleadings pursuant to the Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 23.02 – Legal Profession Uniform Law Application Act 2014 (Vic), Schedule 1, Legal Profession Uniform Law, Chapter 6, s 366 – Whether section renders pleading of plaintiffs’ claim untenable ‑ Board of Fire Commissioners of NSW vArdouini, (1961) 109 CLR 105; Australian National Airlines Commission v Newman, (1987) 162 CLR 466; Suatu Holdings Pty Ltd v Australian Postal Corporation, (1989) 86 ALR 532; and Puntoriero v Water Administration Ministerial Corporation, (1999) 199 CLR 575 followed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr J G Levine | G R Campbell |
| For the Defendant | Ms P C Knowles | Minter Ellison |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Summary of Conclusion................................................................................................................... 2
Background......................................................................................................................................... 2
Statement of Claim........................................................................................................................ 2
Defence........................................................................................................................................... 3
The reply........................................................................................................................................ 4
The Summons..................................................................................................................................... 4
Submissions........................................................................................................................................ 5
The defendant’s submissions...................................................................................................... 5
The plaintiffs’ submissions.......................................................................................................... 7
Applicable law.................................................................................................................................... 8
Striking out pleadings.................................................................................................................. 8
The legislation and functions of a receiver............................................................................. 10
The scope of the ‘immunity’........................................................................................................... 14
Was the impugned conduct done in the exercise or purported exercise of the defendant’s function under Chapter 6 of the Uniform Law?............................................................................ 15
Principles applicable to immunity provisions............................................................................ 22
Application to the present proceeding......................................................................................... 22
Are the acts within the scope of the immunity?..................................................................... 22
The ‘good faith’ requirement..................................................................................................... 26
Conclusion......................................................................................................................................... 26
HIS HONOUR:
Introduction
These reasons for judgment concern a defendant’s application pursuant to r 23.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘the Rules’),[1] to strike out the plaintiffs’ statement of claim, and their reply (together, ‘the plaintiffs’ pleadings’) in their entirety as not disclosing a cause of action.[2]
[1]The defendant sought orders pursuant to the superseded 2005 Rules, as opposed to the now operable 2015 Rules. There is no relevant difference between those rules for present purposes.
[2]Summons filed 14 February 2017.
The proceedings are brought in respect of the receivership of a legal practice formerly known as Hardys (‘the Firm’).[3] Mr Alan Alpass (the defendant), was appointed as the Firm’s receiver by order of the Court made on 15 February 2016, pursuant to s 341 of the Legal Profession Uniform Law, Schedule 1 to the Legal Profession Uniform Law Application Act 2014 (Vic) (‘the Uniform Law’).[4] On the current material, the assets of the Firm were 35 current files, 6,000 deeds packets, and various archives (‘the Firm’s Assets’).[5]
[3]Commenced by writ issued on 3 October 2016 indorsed with the statement of claim.
[4]Order of the Cavanough J made 15 February 2016; see the affidavit of Gregory John Carfoot sworn 31 January 2015, Exhibit GJC-1 (‘Carfoot Affidavit’). Mr Alpass was the co-manager of the Firm pursuant to s 334 of the Uniform Law from 21 December 2015 until 15 February 2016.
[5]Defence [7(c)].
Mr Mark Rowson (the first plaintiff) and Mr Darroll Nelson (the second plaintiff), are the would-be purchasers of the Firm’s Assets. In essence, the plaintiffs allege that the parties had entered into an agreement to sell and purchase the Firm’s Assets. The plaintiffs allege that this agreement was breached and repudiated by the defendant. The defendant denies any concluded agreement and pleads, amongst other things that he is immune from liability pursuant to s 366 of the Uniform Law. That section provides that the defendant is immune from liability in respect of any act or omission done by him in good faith in the exercise or purported exercise of his functions under Chapter 6 of the Uniform Law, which he says includes the sale of the Firm’s assets. The issue is whether this aspect of the defence renders the statement of claim unsustainable as a pleading.
Summary of Conclusion
The defendant contends that by virtue of the immunity given by s 366 of the Uniform Law, the claim made in the statement of claim does not disclose a cause of action unless it includes an allegation that in breaching and repudiating the agreement, the defendant acted otherwise than in good faith.
It is not necessary for me to determine finally whether or not the conduct alleged by the plaintiffs against the defendant would fall within the scope of the immunity. It is sufficient that, given the considerations referred to below and the absence of direct authority, I have reason to conclude that the claim as pleaded (without an allegation of an absence of good faith) is not manifestly untenable as the defendant suggests. Accordingly, I will dismiss the defendant’s summons to strike out the plaintiffs’ pleadings.
Background
Statement of Claim
The plaintiffs plead that in June 2016, the defendant sought by public advertisement expressions of interest for the purchase of the Firm’s Assets. On 20 July 2016, the first plaintiff contacted the defendant, expressing such interest. The following day, both plaintiffs and the defendant had a meeting at which, the plaintiffs allege, an oral agreement was entered into for the purchase of the Firm’s Assets for $25,000.00, (‘the alleged agreement’). It was also agreed between the parties that the defendant would prepare a contract to give effect to the alleged agreement.
The plaintiffs allege that the defendant breached the alleged agreement by not preparing the contract and endeavouring to subsequently impose a further term - that the second plaintiff obtain a practising certificate with trust account authority. In an endeavour to complete the purchase, the plaintiffs’ allege that the second plaintiff initiated the process to obtain trust account authority, a fact said to be made known to the defendant. However, on 12 September 2016, the defendant purported to repudiate the alleged agreement. The plaintiffs were informed by letter that the Firm’s Assets had been sold.
The plaintiffs contend that based on the alleged agreement and the defendant’s conduct, they registered ‘a new incorporated firm’, relinquished their existing premises lease on 18 August 2016, sought new, larger premises, commenced negotiations for, and agreed to lease, new premises for a period of four years.
Accordingly, the plaintiffs allege that they have suffered loss and damage, the particulars of which are said to be ‘the net present value of the future potential earnings of the Firm and the replacement value of the fixed and floating assets of the Firm’. The plaintiffs further assert that they are ready, willing, and able to perform the alleged agreement by paying the purchase price. In the prayer for relief, they seek a declaration that there is a valid agreement to purchase the Firm and/or the Firm’s Assets, a declaration that the plaintiffs hold an equitable interest in the Firm’s Assets, an order that the defendant be estopped from unilaterally terminating the alleged agreement, an order for specific performance of the alleged agreement and alternatively, damages.
Defence
The defendant denies the alleged agreement. He contends that an offer to purchase the Firm’s Assets was made, broadly on the terms of the alleged agreement (with some additions), by telephone on 21 July 2016. Later that day, this was reiterated by email (‘the offer’) and the defendant says that the offer was neither accepted nor rejected.
The defendant agrees that a meeting took place on 21 July 2016 with the offer made the next day, but denies that the meeting occurred as the plaintiffs allege. The defendant says that during the meeting, the plaintiffs told the defendant they wanted to inspect the Firm’s files with a view to making an offer to purchase them. The defendant provided them with a list of the files, and allowed the plaintiffs to inspect them at a storage facility.
The defendant admits that in the course of a telephone conversation on 25 July 2016:
(a) he advised the first plaintiff that it was a prerequisite of the sale that the purchaser have a full Australian Practicing Certificate with authorisation to accept trust monies;
(b) the first plaintiff advised him that he did not, and could not obtain a practising certificate, accordingly the purchase would need to be in the name of the second plaintiff; and
(c) the defendant said that the second plaintiff, whilst holding a practising certificate, did not have authorisation to accept trust monies and accordingly could not be the purchaser of the Firm.
The defendant also admitted to various conversations in which he was advised that the second plaintiff was seeking the requisite trust authorisation. The defendant declined a subsequent offer by the first plaintiff to give a deposit for the purchase of the Firm’s Assets, and said he would sell the Firm to any third party and would only accept a deposit once a purchaser could enter into a binding contract of sale, which neither plaintiff could.
Most importantly for present purposes, the defendant also says that pursuant to s 366 of the Uniform Law, he is immune from liability in respect of any act or omission done by him in good faith in the exercise or purported exercise of his functions under Chapter 6 of the Uniform Law, which he says includes the sale of the Firm’s Assets.
The reply
The plaintiffs filed a reply to the defence on 7 December 2016. The reply is relevant for the present application only because it includes no response to the defence raised under s 366 of the Uniform Law.
The Summons
The defendant sought orders that the plaintiffs’ pleadings be struck out under r 23.02 of the Rules on the grounds that the plaintiffs’ pleadings do not disclose a cause of action, are scandalous and frivolous or may prejudice or embarrass the fair trial of the proceeding because:
(a) the defendant is an external intervener and receiver: ss 6 and 341 of the Uniform Law;
(b) in selling the Firm, the defendant was exercising his functions under Chapter 6 of the Uniform Law: ss 336(1)(g), 343(1) and 343(3) of the Uniform Law;
(c) by the plaintiffs’ pleadings, they do not allege that the defendant was acting otherwise than in good faith; and
(d) accordingly, pursuant to s 366 of the Uniform Law, no liability attaches to the defendant in respect of the matters alleged in the plaintiffs’ pleadings.
The summons was supported by the affidavit of the defendant’s solicitor, Gregory John Carfoot.[6] In that affidavit, Mr Carfoot exhibits the order of Cavanough J appointing the defendant as receiver of the Firm pursuant to s 341 of the Uniform Law and includes correspondence to the plaintiffs’ solicitor foreshadowing an application for summary judgment or determination of a preliminary point. The affidavit also refers to the solicitor mentioning such an application at the directions hearing before McMillan J on 2 December 2016.
[6]Carfoot Affidavit.
Submissions
The defendant’s submissions
The defendant submitted that whilst the jurisdiction to strike out a claim on the basis that it discloses no reasonable cause of action should be invoked sparingly,[7] this case warrants doing so as the plaintiffs’ case is manifestly groundless and obviously untenable.
[7]Referring to Dey v Victorian Railways Commissioners (1949) 78 CLR 62, a decision concerned primarily with summary judgment principles.
The defendant submits that s 366 of the Uniform Law ‘creates a protection from suit, in accordance with its terms’.[8] As an external intervener and receiver as defined under the Uniform Law,[9] and as appointed by Justice Cavanough,[10] the defendant is a ‘protected person’ for the purposes of s 366 of the Uniform Law.
[8]Defendant’s Outline of Submissions, 14 February 2017 [11] (‘Defendant’s Submissions’).
[9]See sections 6 and 341 of the Uniform Law.
[10]Order of Cavanough J made 15 February 2016; Carfoot Affidavit, Exhibit GJC-1.
Further, the defendant submits that in selling and managing the sale of the Firm, the defendant was exercising his functions as an external intervener under Chapter 6 of the Uniform Law. In particular:
(a) the defendant was authorised to carry on the legal practice;[11] and
(b) the defendant’s functions under Chapter 6 include winding up and terminating the affairs of the law practice, including selling the practice.[12]
[11]Order 2 of Cavanough J.
[12]Sections 343(1)(b) and 336(1)(g) of the Uniform Law.
A further requirement to satisfy s 366 is that the exercise of the appropriate functions be done in good faith. The defendant observes that the plaintiffs have not alleged that the defendant was acting otherwise than in good faith, and further, that such an allegation ‘is a serious matter involving personal fault on the part of the decision-maker; is not to be lightly made and must be clearly alleged and proved’.[13]
[13]Defendant’s Submissions [15], citing Doyle v Hall Chadwick [2011] NSWSC 895; SBBS v Minister for Immigration and Multicultural and Indigenous Affairs (2002) 194 ALR 749.
Accordingly, it is submitted that liability cannot attach to the defendant in respect of the matters alleged by the plaintiff, and consequently, the pleadings disclose no cause of action.
The defendant argued that although s 366 of the Uniform Law has not itself been judicially considered, the consideration of other, comparable, provisions is relevant. The defendant referred to Council of the Law Society of NSW v Sullivan,[14] Council of the Law Society of NSW v Dennis,[15] Doyle v Hall Chadwick,[16] and Singh v Super City Home Loans Pty Ltd,[17] QQ v NSW Ombudsman,[18] NSW v McMullin,[19] and Board of Fire Commissioners of NSW v Ardouin.[20]
[14][2017] NSWCATOD 2 [53].
[15][2014] NSWCATOD 136 [6].
[16][2012] NSWCA 175 [59] (Basten JA).
[17][2012] FCA 83 [58], [111], [148-]-[149].
[18][2012] NSWADTAP 34.
[19](1997) 153 ALR 473.
[20](1961) 109 CLR 105.
On the same basis, the defendant argues that the pleadings are scandalous and frivolous or may prejudice or embarrass the fair trial of the proceedings. The defendant submits that because s 366 creates a complete defence to the plaintiffs’ claim, the plaintiffs’ claim can be considered ‘frivolous’ in the sense that the claim is ‘so obviously untenable that it cannot possibly succeed’.[21] It is also said that the immunity granted by s 366 renders the plaintiffs’ claim ‘so manifestly hopeless that trial would be a futility’.[22] It was argued that the demands of the Civil Procedure Act 2010 (Vic) require that, consistently with the ‘just, efficient, timely and cost-effective resolution of this proceeding’,[23] the entirely of the plaintiffs’ pleadings be struck out.
[21]Defendant’s Submissions [20], citing Pridmore v Magenta Nominees Pty Ltd (1999) 161 ALR 458, 462-463; McKellar v Container Management Services (1999) 165 ALR 409, 418-419 [24].
[22]Defendant’s Submissions [22]-[23], citing Opat Decorating Service (Vic) Pty Ltd v Jennings Group Ltd (unreported, Supreme Court of Victoria, 16 September 1994, Byrne J) (‘Opat’); Murphy v Victoria [2014] VSC 363 [8]-[9].
[23]Defendant’s Submissions [24]; Civil Procedure Act 2010 (Vic), s 7(1).
The plaintiffs’ submissions
The plaintiffs refute the defendant’s arguments regarding s 366 of the Uniform Law, arguing that such contentions ‘are not supported by any direct authority and are untenable’.[24] There are three limbs to the plaintiffs’ submissions.
[24]Plaintiffs’ Submissions in Reply, 28 February 2017 [3] (‘Plaintiffs’ Submissions’).
First, the Uniform Law contemplates the receiver will enter into a valid contract to sell the Firm’s Assets, however, s 366 does not extend to ‘effectively invalidating that contract’, or making the contract subject to the receiver’s ‘whims or discretion’ as to whether or not the contract will be effected.[25] Further, while the law provides the receiver with the power to enter into contracts, such power extends ‘to imposing rights and liabilities upon the receiver that will not be lightly taken away unless the legislature intended such a result’.[26]
[25]Plaintiffs’ Submissions [5].
[26]Plaintiffs’ Submissions [6].
Second, the plaintiffs argue that the immunity goes no further than protecting the receiver from paying damages, and at best, from being personally liable. It is submitted that the immunity does not go so far as to prevent ‘liability attaching to the trust assets either by way of an order for damages or by way of an order for specific performance or even from a proceeding or suit, against the trust assets or the receiver’.[27]
[27]Plaintiffs’ Submissions [9].
Third, the defendant submits that the requirement in s 366 that the functions of a receiver be exercised in ‘good faith’ will not be satisfied if the receiver knowingly breaches a contract which he had entered into.[28]
[28]Plaintiffs’ Submissions [12].
Applicable law
Striking out pleadings
Rule 23.02 of the Rules relevantly provides:
23.02 Striking out pleading
Where an indorsement of claim on a writ or originating motion or a pleading or any part of an indorsement of claim or pleading—
(a) does not disclose a cause of action or defence;
(b) is scandalous, frivolous or vexatious;
(c) may prejudice, embarrass or delay the fair trial of the proceeding; or
(d) is otherwise an abuse of the process of the Court—
the Court may order that the whole or part of the indorsement or pleading be struck out or amended.
Under that rule, the objection is to the manner of expression of the claim or defence in the indorsement of claim or pleading. That is, the indorsement or pleading does not disclose the cause of action or defence or its contents are such that it is scandalous, frivolous or vexatious, or may prejudice, embarrass or delay the fair trial of the proceeding, or is otherwise an abuse of process.[29] The defendant does not ask that the proceeding be brought to an end but rather seeks an order that the offending indorsement be struck out or amended, and that the plaintiff present the claim in the proper way.[30]
[29]See generally Wheelahan v City of Casey (No 12), [2012] VSC 316 [25] and the cases there cited; Vo v Nguyen and Ors [2013] VSC 304; Hoh and Ors v Frosthollow Pty Ltd and Ors [2014] VSC 77 [1]-[20];
[30]Brinson v Rocla Concrete Pipes Ltd [1982] 2 NSWLR 937.
The power to strike out a pleading is discretionary. Like all discretions, it must be exercised judicially, that is, by reference to considerations relevant to the particular matter and applying the established applicable law. The discretion has as its starting point the requirement that pleadings and particulars be sufficient to enable the defendants to know what it is they have to meet and the trial judge to conduct a trial which is fair to all parties. In cases of doubt, the Court should refuse to exercise the power.[31]
[31]Opat, 4.
A cause of action is every allegation of fact which the plaintiff must prove to establish the right to the relief claimed.[32] A ‘reasonable cause of action’ means a cause of action with some chance of success, when considering the allegations of fact contained in the challenged pleading alone. The terms ‘vexatious’ and ‘frivolous’ have been used interchangeably.[33] ‘Frivolous’ is apt to describe proceedings in which the plaintiff’s claim is so obviously untenable that it cannot possibly succeed.[34] ‘Vexatious’ is apt to describe an action which is a sham and which cannot possibly succeed.[35]
[32]Letang v Cooper [1965] 1 QB 232; Do Carmo v Ford Excavations Pty Ltd (1984) 154 CLR 234; Pridmore v Magenta Nominees Pty Ltd (1999) 161 ALR 458, 462-463 (‘Pridmore’).
[33]The Atlantic Star [1974] AC 436, 464–8; Pridmore 462-463.
[34]Burton v Bairnsdale Shire (1908) 7 CLR 76, 92; Pridmore 462-463.
[35]Willis v Earl Beauchamp (1886) 11 PD 59, 63; Pridmore 462-463.
The Court is confined to what appears in the indorsement and the pleadings and may not consider affidavit or other extrinsic material.[36] The Court is, however, entitled to look at documents referred to in the pleading,[37] and of course consider legislation relevant to the claim or defence.
[36]Rule 23.04(2) of the Rules.
[37]Day v William Hill (Park Lane) Pty Ltd [1949] 1 KB 632; Williams, Civil Procedure Victoria [23.02.5].
The hearing progressed essentially on the basis that, in order for the defendant to succeed in this application, I needed to be persuaded that the defendant’s argument regarding s 366 of the Uniform Law renders the plaintiff’s claim, in its entirety, so manifestly hopeless that a trial on the basis of the present pleadings would be a futility. The defect in the plaintiffs’ pleading was essentially a failure to plead an absence of good faith on the part of the defendant in order to claim specific performance of the alleged agreement or damages for breach of it.
The legislation and functions of a receiver
Section 366 of the Uniform Law provides:
366 Protection from liability
(1)No liability attaches to a protected person in respect of any act or omission by an external intervener done in good faith and in the exercise or purported exercise of the intervener's functions under this Chapter.
(2)Without limitation, no liability (including liability in defamation) is incurred by a protected person in respect of anything done or omitted to be done in good faith for the purpose of disclosing information as permitted by this Law or the Uniform Rules.
(3)A protected person is the designated local regulatory authority, an external intervener or a person acting at the direction of the designated local regulator.
An external intervener is defined as ‘a supervisor, manager or receiver under Chapter 6’.[38] A receiver is appointed on the application of the Victorian Legal Services Board as the ‘designated local regulatory authority’[39] by the Supreme Court as the ‘designated tribunal’.[40] A ‘function’ includes ‘a power, authority or duty, and without limitation includes jurisdiction in relation to a court’.[41] The functions to which s 366 may apply are those under Chapter 6.
[38]Uniform Law, s 6.
[39]In Victoria, for the purposed of Chapter 6 of the Uniform Law, the Victorian Legal Services Board is the ‘designated local regulatory authority’: see s 10(1) of the Legal Profession Uniform Law Application Act 2014.
[40]In Victoria, for the purposes of Part 6.5 of the Uniform Law, the Supreme Court is the ‘designated tribunal’: see s 10(3) of the Legal Profession Uniform Law Application Act 2014.
[41]Uniform Law, s 6.
Counsel for the defendant referred the Court to the following sections as a source of relevant functions under Chapter 6.
Section 343 details the role of receivers:
343 Role of receivers
(1) The role of a receiver for a law practice is—
(a) to be the receiver of regulated property of the law practice; and
(b) to wind up and terminate the affairs of the law practice.
(2)For the purpose of winding up the affairs of the law practice and in the interests of the law practice's clients, the designated tribunal may, by order, authorise—
(a)the receiver to carry on the legal practice engaged in by the law practice, if the receiver is an Australian legal practitioner who holds an Australian practising certificate as a principal authorising the receipt of trust money; or
(b)an Australian legal practitioner who holds an Australian practising certificate as a principal authorising the receipt of trust money, or a law practice whose principals are or include one or more Australian legal practitioners who hold Australian practising certificates authorising the receipt of trust money, specified in the instrument to carry on the legal practice on behalf of the receiver.
(3)Subject to any directions given by the designated tribunal, the receiver, if authorised under subsection (2) to carry on the legal practice engaged in by a law practice, has all the powers and other functions of a manager under this Chapter and is taken to have been appointed as manager for the law practice.
Thus, by virtue of the operation of s 343(3) of the Uniform Law, the terms of the authorisation by the designated tribunal (in this case, the Supreme Court) are relevant. In this case, that is the order of Cavanough J of 15 February 2016, authorising the defendant, pursuant to s 343 of the Uniform Law, to carry on the legal practice engaged in by the Firm.[42] Thus, the receiver is afforded all the powers and other functions of a manager under Chapter 6, in particular those granted by s 336 of the Uniform Law.
[42]Order 4 of Cavanough J; Carfoot Affidavit, Exhibit GJC-1.
The functions conferred on managers are set out in s 336:
336 Role of managers
(1)A manager for a law practice may carry on the law practice and may do all things that the law practice or a legal practitioner associate of the law practice might lawfully have done, including but not limited to the following—
(a)transacting any business of the law practice that the manager reasonably believes to be urgent;
(b)transacting, with the approval of any or all of the existing clients of the law practice, any business on their behalf, including—
(i)commencing, continuing, defending or settling any proceedings; and
(ii)receiving, retaining and disposing of property;
(c)accepting instructions from new clients and transacting any business on their behalf, including—
(i)commencing, continuing, defending or settling any proceedings; and
(ii)receiving, retaining and disposing of regulated property;
(d)charging and recovering legal costs, including legal costs for work in progress at the time of the appointment of the manager;
(e)entering into, executing or performing any agreement;
(f)dealing with trust money or trust property;
(g)winding up the affairs of the law practice.
(emphasis added)
Counsel for the defendant also referred to the powers of a receiver under s 347 of the Uniform Law:
347 Power of receiver to deal with regulated property
(1)This section applies if a receiver for a law practice acquires or takes possession of regulated property of the law practice.
(2)The receiver may deal with the regulated property in any manner in which the law practice might lawfully have dealt with the property.
(emphasis added)
Regulated property is defined as:[43]
[43]Section 6 of the Uniform Law.
regulated property, in relation to a law practice, means the following—
(a)trust money or trust property received, receivable or held by the law practice;
(b)interest, dividends or other income or anything else derived from or acquired with money or property referred to in paragraph (a);
(c)documents or records of any description relating to anything referred to in paragraph (a) or (b);
(d)any computer hardware or software, or other device, in the custody or control of the law practice or an associate of the law practice by which any documents or records referred to in paragraph (c) may be produced or reproduced in visible form;
(e)client files;
Accordingly, the powers granted to, and relied upon by, the defendant are:
(a) pursuant to section 341(2) of the Uniform Law, the defendant is authorised by the designated tribunal, to carry on the legal practice engaged in by the Firm for the purpose of winding up its affairs and in the interests of its clients, and is taken to have been appointed as manager of the law practice under s 343(3);
(b) pursuant to section 343(3), the defendant is given the powers of a manager under s 336, which are relevantly, to carry on the law practice and do all things that the law practice might lawfully have done, including but not limited to winding up the affairs of the law practice: s336(1)(g); and
(c) pursuant to s 347(2), the defendant may deal with the regulated property, in this case primarily the client files, in any manner in which the Firm might lawfully have dealt with the property (emphasis added).
Section 343(1) of the Uniform Law does not itself confer functions on a receiver because:
(a) a ‘role’ is not included in the definition of functions (although I do note that the definition of functions is inclusive, but am reinforced in this view by the following); and
(b) the two roles detailed in s 343, namely, to be the receiver of regulated property of the law practice and to wind up and terminate the affairs of the law practice, are given subsequent specific authorisations and powers by sections 343(3) and 347 respectively. If these roles were to be considered powers or functions at large, the specific provisions detailing their powers would be otiose-
accordingly, I would read the powers given by those specific provisions as to be exercised for the purposes of the ‘roles’ given in s 343(1).
The consequence of this is, in my view, that the specific functions the defendant seeks to rely on in this case are both subject to a requirement that they be exercised lawfully.
The scope of the ‘immunity’
Section 366 of the Uniform Law has several requirements that must be satisfied for its protection to be applicable:
(a) the person seeking its protection must be ‘a protected person’, defined in s 366(3) as an external intervener;
(b) its protection is afforded in respect of any act or omissions by an external intervener done in the exercise or purported exercise of a function under Chapter 6 of the Uniform Law; and
(c) that act or omission by the external intervener must be done in good faith.
The real dispute arose between the parties as to the satisfaction of the requirement in paragraph (b).
Was the impugned conduct done in the exercise or purported exercise of the defendant’s function under Chapter 6 of the Uniform Law?
To properly understand the scope of s 366(1), it is necessary to consider the authorities governing the interpretation of such provisions. Although each provision must be considered on its own terms, some general interpretative propositions can be discerned, and these are referred to later in these reasons.
The defendant referred me to Singh v Super City Home Loans Pty Ltd (both first instance and appeal decisions)[44] where the question of the immunity said to be conferred in those cases was simply noted in passing.[45]
[44]Singh v Super City Home Loans Pty Ltd [2011] FCA 646; Singh v Super City Home Loans Pty Ltd [2012] FCA 83.
[45][2011] FCA 646 [111], [114]; [2012] FCA 83 [148].
In QQ v NSW Ombudsman, at issue was whether a particular statutory immunity under the Ombudsman Act 1974 (NSW) applied to the Ombudsman. A retired police officer had complained to the Ombudsman about the conduct and findings of the Commissioner of Police arising out of the investigation of complaints against the officer. The officer was dissatisfied with the Ombudsman’s response and complained of discrimination to the Anti-Discrimination Board. The President of the Board found the complaint lacked substance. At the officer’s request, the complaint was referred to the Administrative Decisions Tribunal. For the Tribunal to proceed further, it had to give leave. It declined to give leave because it considered it had no power to entertain the referral because of the statutory immunity afforded to the Ombudsman. The Officer appealed to the NSW Administrative Decisions Appeal Panel. The question was whether the statutory immunity applied to the referral.
The relevant provision was as follows:
35A Immunity of Ombudsman and others
(1)The Ombudsman shall not, nor shall an officer of the Ombudsman, be liable, whether on the ground of want of jurisdiction or on any other ground, to any civil or criminal proceedings in respect of any act, matter or thing done or omitted to be done for the purpose of executing this or any other Act unless the act, matter or thing was done, or omitted to be done, in bad faith.
(2)Civil or criminal proceedings in respect of any act or omission referred to in subs (1) shall not be brought against the Ombudsman or an officer of the Ombudsman without the leave of the Supreme Court.
(3)The Supreme Court shall not grant leave under subs (2) unless it is satisfied that there is substantial ground for the contention that the person to be proceeded against has acted, or omitted to act, in bad faith.
The Tribunal found that the object of the provision is to protect the office of the Ombudsman from external litigation over the office’s performance of its public functions regarding the investigation of public complaints of alleged maladministration by, amongst others, the Police Force. The immunity of the Ombudsman did not extend to public functions such as decisions relating to employment or copyright infringement.[46]
[46]Referring to The Ombudsman v Laughton [2005] NSWCA 339; (2005) 64 NSWLR 114 (Spigelman CJ, Handley, Basten JJA) and Micro Focus (US) Inc v State of New South Wales [2011] FCA 787 (Jagot J).
The Court found that the case clearly fell within the purview of the expression contained in s 35A and the Ombudsman’s actions were connected to one of the most important functions of the office – overseeing police investigations and complaints.
The defendant also referred me to NSW v McMullin, part of the well-known ‘Helix’ litigation. In that case, the statutory immunity relied upon by the State was s 31(1) of the Agricultural and Veterinary Chemicals Act 1988 (NSW) which provided that no action, suit or other proceeding for damages against the State may be brought for any loss or injury directly or indirectly suffered as a result of handling (including the use of) a chemical product or an active constituent for a proposed or existing chemical product in respect of which a permit or exemption has been issued or given by the National Registration Authority.
The State had been sued for damages in negligence and breaches of the Fair Trading Act 1987 (NSW) by the McMullins. Again, the decision provides little guidance. The Court concluded that s 31(1) of the relevant NSW Act could not be invoked due to the presumption against retrospectivity, the cause of action having vested before the commencement of that Act.[47]
[47]575-476.
A more helpful line of authority is that beginning with Board of Fire Commissioners of NSW v Ardouin, which counsel for the defendant handed up at the hearing.[48] In Ardouin, the High Court considered the scope of the protection afforded by s 46 of the Fire Brigades Act 1909-1956 (NSW), which, so far as is relevant provided that:
The Board, the chief officer, or an officer of the board, exercising any powers conferred by this Act or the by-laws, shall not be liable for any damage caused in the bona fide exercise of such powers.
[48](1961) 109 CLR 105 (‘Ardouin’).
The Court concluded that the section did not protect the Board from liability for damages resulting from negligent driving of a fire brigade vehicle on its way to a fire. Dixon CJ concluded:
Section 46, however, was relied upon as meaning that, provided there was good faith, no liability could be imposed on the Board or an officer of the Board by the mere fact that the duty of due care was not exercised and the plaintiff on his motor cycle sustained injury in consequence… When s. 46 speaks of the bona fide exercise of the Board's powers it appears to me to be referring primarily to the exercise of powers which of their nature will involve interferences with persons or property. …But it may be said generally that once a power is found which depends upon the statute and involves detriment or disadvantage to others, either necessarily or in consequence of its improper or faulty exercise, it appears to me that s. 46 is capable of applying: it is not, however, expressed in terms which make it applicable to the doing of things in the course of performing the functions of the Board, which are of an ordinary character involving no invasion of private rights and requiring no special authority...[49]
[49]Ardouin, 109-110 (emphasis added).
Kitto J’s judgment is also of particular relevance. His Honour said:
Section 46 operates, then, to derogate, in a manner potentially most serious, from the rights of individuals; and a presumption therefore arises that the Legislature, in enacting it, has chosen its words with complete precision, not intending that such an immunity, granted in the general interest but at the cost of individuals, should be carried further than a jealous interpretation will allow.
What, then, is the strict meaning that should be given to the description of the damage which may be caused with immunity from liability? It is limited to damage caused "in" the bona fide exercise of powers. In my opinion the meaning is that the immunity attaches in respect only of damage resulting from an act which, if it had not been negligent, would have been the very thing, or an integral part of or step in the very thing, which the provisions of the Act other than s 46 or the by-laws gave power in the circumstances to do, as distinguished from an act which was merely incidental to, or done by the way in the course of, the exercise of a power.[50]
[50]Ardouin, 116-117.
Kitto J then referred to earlier English authority for illustrative purposes and went on:
…the question in the present case is whether damage caused by the driving of one of the Board’s motor vehicles on a public street on the way to a fire is damage caused by an act which, in the absence of negligence, would have been within, as distinguished from being incidental to, the exercise of some power conferred by a provision other than s. 46. The answer offered … is that ss. 19 and 28 create duties, and therefore powers, and the Board is exercising these powers whenever one of its vehicles is being driven in an endeavour ‘by all practicable means’ (s. 19) and ‘with all speed’ (s. 28) to get to a fire for the purpose which the sections mention. There is no difficulty in finding in the creation of a duty an implied grant of power.… But the implication, arising as it does from necessity, must be limited by the extent of the need. There can be no implication of a grant of power to do, in the performance of the duty, what is in any case lawful. To drive a vehicle on a public street, for the purpose of dealing with a fire or for any other purpose, needs no grant of power. For that reason, neither s 19 nor s 28 can be said to confer a power to drive on a public street; and accordingly damage caused by an officer of the Board in driving on a public street is not damage caused in the exercise of a power conferred by either of those sections. It is caused in the exercise of the right of way which anyone may exercise in virtue of the public character of the highway.[51]
[51]Ardouin, 118 (emphasis added).
The reasoning in Ardouin was applied and considered in Australian National Airlines Commission v Newman.[52] In that case, Section 63(1) of the Australian National Airlines Act 1945 (Cth) provided:
All actions against the Commission or against any person for or arising out of anything done or purporting to have been done under this Act, shall be commenced within two years after the act complained of was committed.
[52](1987) 162 CLR 466 (‘Newman’).
An Australian National Airlines Commission (‘ANA’) employee who had slipped on a greasy flight services kitchen floor and been injured alleged that ANA failed properly to maintain its premises and to provide a safe system of work. ANA contended that the conduct complained of arose out of something done under the Act, namely the carrying on of a flight services kitchen, and was accordingly statute barred as it was brought after the two year limitation period. The Court rejected ANA’s argument. The majority concluded:
The flaw in this argument is that s. 63(1) lends no support to the view that, for the purpose of determining whether the sub-section applies, we should look to the general statutory function or power, pursuant to which the Commission carried on its relevant undertaking, rather than to the particular act of which the respondent complained. The expression at the end of the sub-section ‘the act complained of' refers back to the earlier words ‘anything done or purporting to have been done under this Act’. These words refer to the particular act that causes the injury complained of, rather than to the general function or power pursuant to which the Commission engages in the undertaking in the course of which the injury occurs. What the respondent complained of was not the carrying on of a flight services kitchen, but the failure to provide a safe means of access to a place of work, the failure to maintain the floor in good order and condition and the failure to properly maintain it.
As a matter of ordinary language, it seems to us that the Commission's failure in any of those regards could not, in the context of a disentitling provision of the kind contained in s. 63(1) of the Act, properly be seen as coming within the description of something ‘done or purporting to be done’ under an Act which contains nothing at all about either the failure to provide or the provision of safe means of access or about the neglect or the proper maintenance of floors in premises owned and occupied by the Commission. We are confirmed in that view by a consideration of the authorities to which we were referred in the course of argument. For present purposes, the most important of those authorities are the decisions of this Court in Ardouin and Hudson v. Venderheld.[53]
[53]Newman, 471-472.
In Suatu Holdings Pty Ltd v Australian Postal Corporation,[54] Gummow J was required to consider s104(1) of the Postal Services Act, which relevantly read:[55]
Proceedings do not lie against the Commission, an employee of the Commission, a person acting for or on behalf of the Commission under a contract with the Commission or an employee of such a person in respect of any loss or damage suffered by a person by reason of any default, delay, error, omission or loss in the receipt, transmission or delivery of postal articles or of money.
[54](1989) 86 ALR 532 (‘Suatu’).
[55]Suatu, 537.
The Commission contended, inter alia, that this provision was an answer to the applicant’s claim in contract against it. Gummow J concluded:
There are two precepts of statutory interpretation which provide some particular assistance in deciding this question. First, the provision is to be read in its context, including the other provisions of the statute, other statutes in pari materia and the existing state of the law: K & S Lake City Freighters Pty Ltd v Gordon and Gotch Ltd(1985) 60 ALR 509; 157 CLR 309 at 312,315,321. I have endeavoured to provide that context. Secondly, a statutory limitation or exclusion provision such as s 104 is to be strictly construed for it protects the interests of a statutory authority which is given privileges in the nature of a monopoly for provision of a public service, at the expense of what otherwise would be individual justiciable rights: Australian National Airlines Commission v Newman(1987) 70 ALR 275; 162 CLR 466 at 471, 476; Queensland v Australian Telecommunications Commission(1985) 59 ALR 243; 59 ALJR 562 at 563. Thus, such phrases in s 104(1) as “in respect of” and “by reason of” are to be construed narrowly rather than generously, as would otherwise be the case.[56]
…
The issue presented thus was not one of the fettering of a discretion reposed by statute in the respondent which affected the performance of contracts. It was whether s 104(1) imposed an absolute bar upon the making of contracts, proceedings for breach of which would fall within the terms of s 104(1) on their proper construction, or at any rate upon the bringing of such proceedings. My view, as I have indicated, is that the Parliament has not given wide contractual powers to the Commission on the one hand, and imposed with the other a bar of this nature which would so diminish not only the scope for the Commission to present itself to outsiders as an institution with which they might safely enter into contractual relations, but also the value of the rights of those persons if they did enter into certain categories of contract with the Commission.[57]
…
In my view, the proceedings in respect of loss or damage which s 104(1) states do not lie against the Commission, do not include proceedings for breach of contract made as I have described by the Commission pursuant to its powers. In such cases it will be open to the parties to agree upon terms excluding or qualifying what otherwise would be their contractual responsibilities. Any such provision will be interpreted in the light of the admissible evidence and in accordance with the principles explained by the High Court in Darlington Futures Ltd v Delco Aust Pty Ltd (1986) 161 CLR 500; 68 ALR 385.[58]
[56]Suatu, 541.
[57]Suatu, 543 (emphasis added).
[58]Suatu, 544.
In Puntoriero v Water Administration Ministerial Corporation,[59] the High Court was required to consider section 19(1) of the Water Administration Act 1986 (NSW), which provided as follows:
Except to the extent that an Act conferring or imposing functions on the [Corporation] otherwise provides, an action does not lie against the [Corporation] with respect to loss or damage suffered as a consequence of the exercise of a function of the [Corporation], including the exercise of a power:
(a) to use works to impound or control water, or
(b) to release water from any such works.
[59](1999) 199 CLR 575 (‘Puntoriero’).
The Corporation had supplied the Puntorieros with contaminated water, which had caused their potato crop to fail. The Puntorieros brought an action for damages against the Water Administration Ministerial Corporation (‘Corporation’) in negligence, alleging various failures in the testing and supply of the water and a failure to warn of danger of which the Corporation knew or ought to have known.
The Court concluded that the immunity provision did not apply. Gleeson CJ and Gummow J provided the following guidance:[60]
Accordingly, the principal task is to construe s 19(1). This should be done both by looking at the sub-section in the context of the Administration Act as a whole and on the footing that the immunity conferred by such a provision should not ‘be carried further than a jealous interpretation will allow’, to repeat a statement by Kitto J in Board of Fire Commissioners (NSW) vArdouin.[61]
[60]McHugh and Callinan JJ concluded to similar effect. Kirby J dissented.
[61]Puntoriero, 578 [4].
Their Honours then reviewed the provisions of the Act, particularly those that empowered the Corporation to enter into joint ventures and commercial operations and for that purpose, to form or join in forming companies, partnerships and trusts, and noted:
A power to join in forming a company, partnership, trust or joint venture necessarily carries with it the authority, for example, to perform the terms of the joint venture, partnership or trust. Section 7(2)(d) of the Administration Act, to which reference has been made earlier in these reasons, confirms this concomitant. Likewise, the power in s 11(4)(b) to enter into contracts involves purported observance and performance of such engagements.…Conduct which, it transpires, amounts to breach of contract, partnership or trust may inflict loss or damage on others which, in the literal sense of s 19(1), is suffered as a consequence of the exercise of a function of the Corporation. Such conduct would not be stigmatised as ultra vires the Corporation. However, to confer an immunity in respect of such loss or damage, which would not have been suffered if the engagement had been performed in accordance with its terms, would be to stultify the objects of the Act. To read s 19(1) in that fashion would create a significant deterrent to the entry by others into commercial relations with the Corporation.[62]
[62]Puntoriero, 583 [16] (emphasis added).
They then referred to the fact that the Puntorieros had no choice but to take water from the Corporation and stated:
These consideration support a jealous construction of s 19(1) to limit what otherwise would be the rights of plaintiffs and to immunise the Corporation from action only in respect of those positive acts in the exercise of functions ‘which of their nature will involve interference with persons or property’.[63] The supply of water by the Corporation to the appellants was not the exercise of a function ‘which of its nature involved such an interference.[64]
[63]Puntoriero, 583 [18].
[64]Ardouin, 109
Principles applicable to immunity provisions
From these authorities, the following propositions can be stated:
(a) the application and scope of an ‘immunity’ clause will always be dependent upon its precise terms and statutory context;[65]
[65]Ardouin, 116; Suatu, 541; Puntoriero [4]
(b) an immunity or limitation provision should be strictly construed, or given an interpretation that goes further than a ‘jealous interpretation would allow’, because it derogates from the ordinary rights of individuals.[66] The principles of statutory construction may require general words giving immunity for any action against the defendant to be read down so that they do not apply to functions of an ordinary character done pursuant to agreements with the consent of private citizens;[67]
(c) a Court is required to look to the precise conduct or omission sought to be impugned and said to have caused the injury or damage complained of, rather than the general statutory function or power, pursuant to which the authority carries on its relevant undertaking;[68] and
(d) such immunities may not apply to conduct which is already lawful absent the conferral of an authorisation or function by the statute in question.[69]
[66]Ardouin, 116; Newman, 471; Suatu, 541; Puntoriero [33] (per McHugh J) referring to Coco v The Queen, (1994) 179 CLR 427, 436.
[67](per McHugh J) in Puntoriero, 588-9 [37].
[68]Ardouin, 117; Newman, 474; Puntoriero [14].
[69]Ardouin, 109-110, 117-118; Newman, 472-473; Puntoriero, 583, 587.
Application to the present proceeding
Are the acts within the scope of the immunity?
The combined effect of the powers of the receiver to enter into, execute or perform any agreement,[70] to wind up the affairs of the law practice[71] and to deal with the regulated property in any manner in which the law practice might lawfully have dealt with the property[72] is to empower the receiver to offer, and to enter into an agreement, to sell the Firm’s Assets. The acts or omissions ‘done’ by the defendant in exercising or purporting to exercise these powers are ‘functions’ which are prima facie within the scope of the immunity given by s 366 so that no liability would attach to the defendant in respect of them if they are done in good faith.
[70]S 336(1)(f) of the Uniform Law.
[71]S 336(1)(g) of the Uniform Law.
[72]Section 347(2) of the Uniform Law.
In this case, the alleged entry into the agreement to sell the Firm’s Assets is an activity that, absent the power conferred on the defendant, it would not have been lawful for him to do. The defendant requires the authorisation of the Uniform Law and the order of the Court to take over the management of, and to sell, another person’s assets, as the Firm’s Assets clearly must be. To that extent, the entry into the agreement to sell (as alleged by the plaintiffs but denied by the defendant) is an act ‘by an external intervener … in the exercise of the intervener’s functions under this Chapter’. The plaintiffs do not, however, complain about the exercise of that function.
The conduct sought to be impugned by the plaintiffs is not the entering into the alleged agreement, but rather the asserted breach and repudiation of that agreement. Accordingly, the conduct that must fall within the terms of s 366 of the Uniform Law in order for the protection of that provision to apply is the alleged breach and repudiation of the alleged agreement.
The power to enter into the alleged agreement to sell the Firm’s Assets necessarily involves the performance of the agreement; that is a part of the express authorisation in s 336(1)(f) of the Uniform Law. Further, the power to carry the agreement into effect, whether the power is express or implied, must be carried through lawfully[73] and of necessity in accordance with the ordinary legal principles applicable to such agreements.[74]
[73]See s 366(1) of the Uniform Law.
[74]See the observations of Gleeson CJ and Gummow J in Puntoriero, supra [16].
Because the functions and powers exercised and performed by the defendant are required by the Uniform Law to be exercised lawfully, the question arises whether the conduct alleged by the plaintiff (wrongful breach and repudiation of the alleged agreement) would satisfy this requirement of the lawful exercise of the power to enter into (and perform) the agreement? There is at least a respectable argument that the wrongful breach and repudiation of the alleged agreement is not a lawful exercise of the power to perform an agreement to sell the Firm’s Assets and therefore not within the immunity as an ‘exercise or purported exercise of the intervener’s functions’.[75]
[75]Bearing in mind that ‘function’ is defined to include power in s 6 of the Uniform Law. In making this statement, I emphasise that I am assuming the allegations of fact (a concluded agreement, breach and repudiation) in the statement of claim to be true. That may well turn out not to be the case, but that is a different issue.
In answer to this proposition, it might have been said that the breach and repudiation of the alleged agreement, if wrongful as alleged by the plaintiffs, nevertheless is within the immunity because it was a ‘purported exercise’ of the power of performing the alleged agreement. It might be a purported exercise of the power if it is claimed or alleged to be in exercise of that power.[76] There is no short and easy answer to these matters and it is not sufficiently clear that that it can be said that the claim as presently pleaded is untenable.
[76]Macquarie Dictionary, 6th Ed, definition of ‘purported’.
However, if I wrong in my interpretation of the functions relied upon by the defendant, and they are not subject to the requirement that they be exercised lawfully in order to fall within the immunity provision, there remains a real prospect that s 366 of the Uniform Law may not apply to the conduct (breach and repudiation of the agreement) alleged against the defendant. That is because, to bend an analogy, the performance or non-performance of the function (power) to sell the Firm’s Assets by the alleged agreement is governed by the ordinary laws relating to contracts and their enforcement, just as in Ardouin the driving of a fire brigade vehicle on public road was governed by the road rules and the law of negligence. Once the defendant, as the appointed receiver, is authorised to enter into, execute and perform an agreement to sell the Firm’s Assets, the performance of that agreement must be in accordance with the law of contract. Put another way, and adapting the words of Dixon CJ in Ardouin, when s 366 speaks of any act or omission done in good faith and in the exercise or purported exercise of the receiver’s powers, it appears to be referring primarily to the exercise of powers which of their nature involve interferences with persons or property.
The power to sell the Firm’s Assets has that effect (involving interference with persons or property) in relation to the Firm’s proprietors, and perhaps to a limited degree its clients, but once the power to sell is exercised, the power to complete the process, to perform the alleged agreement, is not of that character at all. Only the wrongful performance of the alleged agreement has the potential to interfere with persons or property, but even then, not in the sense relevant to the interpretation of the immunity provision. That is because the performance of the agreement involves no invasion of the buyers rights pursuant to statutory authority. The manner of performance of the alleged agreement (in accordance with the law of contract) is incidental to the exercise of the power to enter into, execute and perform the agreement to sell, in the sense in which Kitto J used the term ‘incidental’ in Ardouin, and is therefore likely to be outside the immunity created by the section.[77]
[77]Ardouin, 118.
It is not necessary for me to determine finally whether or not the conduct alleged by the plaintiffs against the defendant would fall within ‘any act done… in the exercise of the intervener’s functions’, so as to fall within the scope of the immunity, and thus to give rise to a requirement for the plaintiff’s statement of claim to allege an absence of good faith in order to disclose a viable cause of action. It is sufficient that, given the above considerations and the absence of direct authority, I have reason to conclude that there is uncertainty and doubt as to whether the claim as pleaded (without an allegation of an absence of good faith) is so manifestly untenable as the defendant suggests.
Accordingly, I would dismiss the defendant’s summons to strike out the plaintiffs’ claim.
The ‘good faith’ requirement
The question of whether or not the conduct alleged was done in ‘good faith’ only arises if the conduct identified falls within the protected class of conduct. That is, within the scope of the section as I have referred to above. If it does not fall within the protected functions (including powers) as I consider to be arguable, there is no need to consider whether or not there is a need to plead that the conduct involved an absence good faith.
However, should the plaintiffs wish to make such an allegation, the authorities state that it should be made clearly and only upon a proper basis. Counsel for the plaintiffs indicated that they would seek leave to squarely allege that the impugned conduct occurred otherwise than in good faith. However, given my above conclusions it is unnecessary to consider further the parties’ arguments as to this element.
Conclusion
It is not clear that the statement of claim fails to disclose a cause of action absent an allegation that in breaching and repudiating the alleged agreement, the defendant acted otherwise than in good faith. The defendant’s summons will be dismissed. Unless there is good reason to the contrary, the plaintiffs’ costs should follow the event and be paid by the defendant.
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