Security Pacific Gold Ltd v Tricontinental Corporation Ltd

Re: SECURITY PACIFIC GOLD LTD
And: TRICONTINENTAL CORPORATION LIMITED; COMMONWEALTH BANK OF AUSTRALIA; ROSS
DAWSON and STATE OF VICTORIA
No. G182 of 1991
FED No. 524
Practice and Procedure
(1991) 31 FCR 213
(1991) 107 ALR 351

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Foster J.(1)

CATCHWORDS

Practice and Procedure - Pleadings - Application to strike out Statement of Claim as against a respondent under Order 11 rule 16 - respondent entitled to immunity from liability under s 49 State Bank Act 1988 (Vic) where respondent acted in "good faith" - whether absence of "good faith" need be pleaded in Statement of Claim - onus of proof of "good faith" - whether pleading that an individual was involved in, knowingly concerned with or aiding, abetting, counselling or procuring a contravention of the Trade Practices Act 1974 amounts to a pleading of bad faith - necessity of pleading factual basis of s 75B claim.

Trade Practices Act 1974 (Cth) - s 52, s 75B, s 82

Fair Trading Act 1985 (Vic) - s 11

State Bank Act 1988 (Vic) - s 49

State Bank (Succession of Commonwealth Bank) Act 1990 (Vic) - s 20

Federal Court Rules - Order 11 rule 16, Order 12 rules 2 and 5, Order 20 rule 2

Yorke v Lucas (1985) 158 CLR 661

Mallan v Lee (1949) 80 CLR 198

Sutton v A.J. Thompson Pty Limited (in liq) and Ors (1987) 73 ALR 233

Horrocks v Lowe (1975) AC 135

Calwell v Ipec Australia Limited (1975) 135 CLR 321

Chugg v Pacific Dunlop Limited (1990) 170 CLR 249

Vines v Djordjevitch (1955) 91 CLR 512

HEARING

SYDNEY

#DATE 30:8:1991

Counsel for the Applicant: M. Walton instructed by

Sly and Weigall

Counsel for the First, Second
and Fourth Respondents: Mallesons Stephen Jaques

Counsel for the Third Respondent: A.R. Emmett QC with S.D. Rares

instructed by Phillips Fox

ORDER

1. That the applicant file and serve on the third respondent particulars of the claims made in paragraph 86 of the Statement of Claim.

2. That the motion contained in paragraph 2 of the third respondent's Notice of Motion of 23 August 1991 be dismissed.

3. That the balance of the Notice of Motion be stood over to a date to be fixed after the completion of the pleadings.

4. That costs of this hearing be reserved until the final disposal of the Notice of Motion.

5. That the parties have liberty to apply for further directions on two days' notice.

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

JUDGE1

I have before me a Notice of Motion brought by the third respondent in these proceedings. It is brought in respect of those portions of the Statement of Claim which make claims against that respondent. The Statement of Claim itself, in a newly amended form, was filed in Court at the hearing of the Notice of Motion. A copy of the Statement of Claim had previously been served on the third respondent. A further copy is Exhibit RD1 to the third respondent's affidavit filed in support of the Notice of Motion. There are currently no other pleadings in the proceedings. In particular, the third respondent has filed no defence, but seeks by this Notice of Motion the dismissal of the proceedings against him pursuant to Order 20 rule 2 or, alternatively, the striking out from the Statement of Claim of those portions which relate to the claim against him, pursuant to Order 11 rule 16.

The claim for the striking out is based upon an assertion that the third respondent has an immunity from liability pursuant to s 49 of the State Bank Act 1988 (Vic) and that the Statement of Claim is defective in that, in the circumstances pleaded in the Statement of Claim, the statutory immunity would necessarily arise unless the applicant established that there was absence of "good faith" on the part of the third respondent, within the meaning of that section. In so far as this matter is not raised in the Statement of Claim, it is submitted that it fails to disclose a cause of action against the third respondent.
The claim for dismissal against the third respondent under Order 20 rule 2 relates to the same subject matter. This claim has not been fully litigated at this stage as I have ruled that its determination should await the determination of the claim based on Order 11 rule 16. However, it may be noted that in respect of this claim, the third respondent seeks to assert, by way of his own affidavit, that the acts in respect of which he is sued were performed by him "in good faith", with the result that whether the onus lies upon the applicant to establish absence of good faith or upon him to establish his own good faith, the result would inevitably be the same, namely that he will be entitled to statutory immunity in respect of the applicant's claim against him.
Certain objections relating to this issue have been taken to the third respondent's affidavit. In the course of the discussion relating to those objections, it became clear that the more desirable course was to deal with the narrower question under Order 11 rule 16 and then return to the wider question under Order 20 rule 2. It also became apparent that a subsidiary but nevertheless significant question arose as to whether the Statement of Claim might not be deficient in another respect, namely that it failed to provide adequate particulars of the claim against the third respondent. In the course of argument it was agreed that I should also determine this latter question before the continuation of the proceedings in respect of the claim under Order 20 rule 2.
The Statement of Claim is a lengthy document. There is no need to refer to it in detail. The applicant alleges against the first and second respondents that it suffered significant loss and damage as a result of breaches by the first respondent and/or the State Bank of Victoria ("SBV") of s 52 of the Trade Practices Act 1974 (Cth) and s 11 of the Fair Trading Act 1985 (Vic). The first respondent was a wholly owned subsidiary of SBV and the second respondent has assumed all liabilities of SBV by virtue of s 9 of the State Bank (Succession of Commonwealth Bank) Act 1990 (Vic) and s 67 of the Commonwealth Banks Restructuring Act 1990 (Cth). The claim against these corporations is based, in part, on representations allegedly made by the third respondent in the course of his employment with SBV. The portions of the Statement of Claim relating to the third respondent are as follows:

7. At all material times the third respondent was the Senior Manager, Projects (Corporate Banking) of SBV and as such had authority to act on behalf of that company and on behalf of the first respondent.

27. Subsequently, also in or about May 1989, the third respondent on behalf of the first respondent or alternatively on behalf of SBV or alternatively on behalf of both the first respondent and SBV expressly represented to Mr N. Curtis and Miss L. Tees on behalf of the applicant in a telephone conversation between them that:

(a) the risk to the applicant under both the gold delivery agreement and the gold purchase agreement would be fully covered by the first respondent;

(b) there was no need for recourse by the applicant to Centaur;

(c) the cover which the first respondent would give to the applicant as aforesaid was in turn fully covered by SBV under the said deed of guarantee and trust;

(d) there was no necessity for a deed of covenant between the applicant and the first respondent.

29. By making the representations in sub-paragraph (a),

(b), (c) and (d) of paragraph 27 the first respondent engaged in conduct that was misleading or deceptive or was likely to mislead or deceive in contravention of both section 52 of the Trade Practices Act and section 11 of the Fair Trading Act in that the first respondent at the time the said representations were made did not have reasonable grounds for making the representations or any of them.

30. (Similar claims are made in respect of SBV under s 11 of the Fair Trading Act).

31. In or about June 1989 the third respondent on behalf of the first respondent or alternatively SBV or alternatively both the first respondent and SBV expressly represented to Mr N. Curtis on behalf of the applicant in a conversation between the two that the cover which the first respondent would give to the applicant was fully covered by the SBV under the said deed of guarantee and trust.

33. By making the representations in paragraph 31 the first respondent engaged in conduct that was misleading or deceptive or was likely to mislead or deceive in contravention of both section 52 of the Trade Practices Act and section 11 of the Fair Trading Act in that the first respondent at the time the said representation was made did not have reasonable grounds for making the representation.

34. (A similar claim is made in respect of SBV under S 11 of the Fair Trading Act).

35. By letter dated 30 June 1989 from the third respondent on behalf of SBV to Miss L. Tees on behalf of the applicant SBV expressly represented to the applicant that:

(a) SBV had sent instructions to Freehill Hollingdale and Page concerning a draft deed of covenant;

(b) the said deed of guarantee and trust gave legal expression to the public assurances of SBV concerning the obligations of, inter alia, the first respondent,

and impliedly represented, the implication arising from the express representations referred to above and from the matters set out in paragraph 27 and 31 hereof, that:

(c) SBV would procure the execution by the first respondent of a deed of covenant with the applicant whereby the first respondent would ensure the applicant suffered no loss as a consequence of any default by Centaur of either of the agreements; and

(d) SBV would guarantee the obligations of the first respondent under the deed of covenant.

37. By making the representations in sub-paragraph (c) and

(d) of paragraph 35 SBV engaged in conduct that was misleading or deceptive or was likely to mislead or deceive in contravention of section 11 of the Fair Trading Act in that SBV at the time the said representations were made did not have reasonable grounds for making the representations or any of them.

45. By letter dated 8 December 1989 from the third respondent on behalf of the first respondent or alternatively SBV or alternatively both the first respondent and SBV it was expressly represented to Mr N. Curtis on behalf of the applicant that:

(a) a letter of credit confirmation facility may no longer be unnecessary on the basis of the said deed of guarantee and trust, and it was impliedly represented, the implication arising from the express representation referred to above, that:

(b) the first respondent would by deed of covenant ensure the applicant suffered no loss as a consequence of any default by Centaur of either of the agreements; and

(c) SBV would guarantee the obligations of the first respondent in that regard.

47. By making the representations in sub-paragraphs (a),

(b) and (c) of paragraph 45 the first respondent engaged in conduct that was misleading or deceptive or was likely to mislead or deceive in contravention of both section 52 of the Trade Practices Act and section 11 of the Fair Trading Act in that the first respondent at the time the said representations were made did not have reasonable grounds for making the representations or any of them.

48. (Similar claims in respect of SBV under s 11 od the Fair Trading Act).

81. In making the representations on behalf of the first respondent referred to in paragraphs 27, 31 ... and 45 hereof, the third respondent ... (was) acting within the scope of ... (his) ... actual or apparent authority as servant or agent of SBV.

86. In making the representations on behalf of the first respondent or alternatively on behalf of SBV or alternatively on behalf of both the first respondent and SBV referred to in paragraphs 27, 31, 35 and 45 hereof, the third respondent was involved in the contraventions by the first respondent or alternatively by SBV or alternatively by both the first respondent and SBV of:

(a) in the case of the first respondent section 52 of the Trade Practices Act and section 11 of the Fair Trading Act;

(b) in the case of SBV section 11 of the Fair Trading Act,

referred to in paragraphs 29, 30, 33, 34, 37, 47 and 48 hereof within the meaning of section 75B of the Trade Practices Act and section 31 of the Fair Trading Act respectively in that in each case the third respondent:

(c) aided, abetted, counselled or procured the contravention; or

(d) was knowingly concerned in or party to the contravention.

It will be observed that claims are made against the first and second respondents on the basis of vicarious liability for the representations allegedly made by the third respondent. It is not clear whether the allegations of absence of reasonable grounds for a making of the representations in the paragraphs set out above which allege liability in the first respondent and SBV relate solely to such absence in the third respondent as the maker of the representations, or such absence in other persons for whom the first and second respondent and SBV would be vicariously liable. It may be, of course, that, in the ultimate, it will be alleged that the third respondent had no reasonable grounds for making the representation and that no other relevant person in the organisation of the first respondent and SBV had such grounds.
Be that as it may, the claim of personal liability in the third respondent is made in paragraph 86. The claim obviously relates to ss 82 and 75B of the Trade Practices Act 1974 and equivalent sections of the Fair Trading Act. It is clearly alleged that the third respondent was a "person involved in the contravention" (s 82(1)) and was so involved as having "aided, abetted, counselled or procured the contravention" (s 75B(1)(a)) or as having been "knowingly concerned in or party to the contravention" (s 75B(1)(c)).
In my view, at the very least, these claims amount to an allegation that the third respondent, when he made the representations, was aware that there were no reasonable grounds for the making of them. This result necessarily follows from the decision in Yorke v Lucas (1985) 158 CLR 661. That case, in my view, is clear authority for the proposition stated in the headnote, that:

"For par. (a) of s 75B to apply to a person it must be shown that he intentionally aided, abetted, counselled or procured a contravention; and to form the necessary intent he must have knowledge of the essential matters which make up the contravention whether or not he knows that those matters amount to a contravention."

(See generally pp 666-669.)

In relation to s 75B(1)(c), it is said in the majority judgment (Mason A.C.J., Deane and Dawson JJ.) at p 670 that:

"There can be no question that a person cannot be knowingly concerned in a contravention unless he has knowledge of the essential facts constituting the contravention".

It is stated also, in relation to the second portion of the paragraph, that:

"the proper construction of par. (c) requires a party to a contravention to be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention".

It should also be borne in mind that the representations relied upon are alleged in the Statement of Claim to have been made by the third respondent himself. In these circumstances, the observations of Dixon J in Mallan v Lee (1949) 80 CLR 198 at 216 that "it would be an inversion of the conceptions on which the degrees of offending are founded to make the person actually committing the forbidden acts an accessory to the offence consisting in the vicarious responsibility for his acts" (see York v Lucas at p 671).
It is to be observed that the allegations made against the third respondent in paragraph 86 do no more than set out the wording of the provisions of s 75B. Consequently, the paragraph fails completely to indicate the factual basis upon which the allegations are made. It pleads merely conclusions of fact. In this regard consideration must be given to what was said by the Full Court of this Court in Sutton v A.J. Thompson Pty Limited (in liq) and Ors (1987) 73 ALR 233 at 242 where their Honours said:

"In the claim against Mr Sutton under s 75B of the Act, no material facts constituting his being `knowingly concerned' in the contravention were pleaded. The allegation was simply made in terms of the section. This is undesirable, at least where the respondent concerned is not a principal of the respondent company or the prime actor in the conduct alleged. The consequences for the individual can be so serious that he is entitled to have the details of his alleged involvement, amounting as it must to something akin to fraudulent conduct, spelt out".

It is important, also, to note the requirements of Order 12 rule 2 of the Federal Court Rules, viz, "a party pleading shall give particulars of any fraud, misrepresentation, ... on which he relies".
In light of the authorities and the rule, I am satisfied that paragraph 86, asserting personal liability in the third respondent, fails completely to plead the essential facts upon which that liability is said to be based. As I have been asked to rule upon this question, as though it were raised in the Notice of Motion before me I hold that the paragraph in its present form is deficient for want of the provision of particulars. I consider that the matter is best rectified by my making an order under Order 12 rule 5(1) and (2) that the applicant file and serve on the third respondent particulars of the claims made in paragraph 86 of the Statement of Claim and include in those particulars, particulars of the facts on which it relies for the necessary allegation that the third respondent was aware at the time of the making of the representations that there were no grounds for the making of them.
I turn to the question whether the issues raised under s 49 of the State Bank Act 1988 (Vic) should properly be addressed in the applicant's Statement of Claim or rather be raised by the third respondent in his defence. The section provides as follows:

"49. (1) No liability attaches to a director or officer of the Bank, or a director of a related corporation who is nominated or appointed to the office by the Bank, for any act or omission done or made, in good faith, and in carrying out or purporting to carry out, the duties of his or her office.

(2) Any liability that would, but for sub-section

(1), attach to a director or officer of the Bank shall attach instead to the Bank."

The immunity provided by this section is carried on by s 20 of the State Bank (Succession of Commonwealth Bank) Act 1990. By virtue of this section the liability attaching to the Bank "attaches instead to the State".
As was correctly pointed out in argument, the relevant legislative provisions, which there is no need to set out, produce the result that the State Bank of Victoria is an instrumentality of the Crown which would, apart from express statutory enactments have the "shield of the Crown". In such circumstances the Crown instrumentality, unless made liable by statute, is not liable for the tortious acts or omissions of its servants. The tortfeasor servant remains personally liable, but vicarious liability is not imposed on the Crown. Clearly s 49 of the State Bank Act was a statutory provision designed to alter this situation. It provides immunity to the servant of the Bank, in circumstances where that immunity is earned, and provides for a corresponding liability to be imposed upon the Bank itself.
As already indicated, this liability has now been transferred to the State itself, which accounts for the State of Victoria being the fourth respondent in these proceedings. As is pointed out in P.W. Hogg Liability of the Crown 2nd Ed p 91 "many statutes contain immunity clauses that relieve Crown servants from liability in tort for acts done in good faith in the intended execution of their duties". The researches of counsel have, however, not produced any decided case in which there is a resolution of the question of whether the Crown servant bears the onus of establishing the matters giving rise to the immunity or whether that onus lies upon the person alleging the commission of the tort by the Crown servant. The question, therefore, would appear to be one simply of construction of the relevant statutory provision conferring the immunity.
In the present case the question is whether s 49, construed against the background that the "officer of the Bank" referred to in the section is to be regarded as a servant of the Crown, requires that that officer plead and prove in any litigation brought against him that his relevant act or omission occurred "in good faith", or whether it devolves upon the person suing to plead and establish absence of such good faith in the officer.
In the present case, the requirements of establishing that the third respondent aided or abetted or was knowingly concerned in the contravention of s 52 of the Trade Practices Act 1974 would appear to carry with it the need to establish what, in the circumstances, would amount to an absence of good faith in the making of the relevant representations. The making of them with knowledge that there was no reasonable grounds for so doing would, as is suggested in Sutton in the passage cited, allege what would amount to dishonesty or absence of good faith. However, in the absence of pleaded factual allegations, it is, perhaps, not possible to assert this with absolute certainty. In any event, it is clear that the third respondent wishes to place reliance upon the immunity provided for in s 49, although, in the final analysis, it may be possible to allege this immunity simply by traversing allegations of knowledge to be put forward in particulars of the allegation in the Statement of Claim.
Be that as it may, the question of who bears the onus of pleading and establishing the issues raised by s 49 of the State Bank Act, still remains for decision. As already indicated, counsel were unable to cite any decisions directly in point. They referred to decisions relating to the law of defamation such as Horrocks v Lowe (1975) AC 135 and Calwell v Ipec Australia Limited (1975) 135 CLR 321. These decisions deal with the onus of proof of malice or want of good faith lying on the plaintiff in circumstances where a defendant established publication of defamatory material on a privileged occasion. I have considered them but do not find them of assistance in determining the present question. Similarly, cases such as Chugg v Pacific Dunlop Limited (1990) 170 CLR 249, following cases such as Vines v Djordjevitch (1955) 91 CLR 512, dealing with the onus of proof in the negativing of exceptions in legislative provisions constituting offences do not, in my view, provide any significant assistance.
I approach the question of construction of s 49 on the basis that were it not for the enactment of the section, the tortfeasor Crown servant would be personally liable to the injured party to the exclusion of any vicarious liability for that tort in the Crown. The section is clearly designed to reverse this situation. It does so by removing liability from the servant and attaching it to the Crown instrumentality in circumstances where the Crown servant who would otherwise have been liable for the act or omission in question did or made such act or omission "in good faith". The section therefore purports to exclude a liability which would otherwise attach to the servant. It makes this exclusion depend upon the establishment of "good faith" in relation to that act or omission. I can see no warrant, in these circumstances, for requiring the injured party to establish absence of such "good faith". In my view, the onus clearly lies upon the Crown servant seeking to avoid liability which would otherwise attach, to establish the exculpatory facts. I, therefore, hold that it lies upon the third respondent, in the present proceedings, to plead and establish the presence of relevant good faith.
It, therefore, follows that the Statement of Claim is not defective in this regard and no remedy is available to the third respondent under Order 11 rule 16. It remains necessary for the third respondent specifically to plead by way of defence his reliance upon s 49 of the State Bank Act.
I should add that in the course of argument further questions in relation to the application of s 49 were adumbrated. These were whether the section, as a provision in State legislation, could prevail in circumstances where the cause of action sued upon arose under legislation of the Commonwealth. Also the question was raised whether, these proceedings having been commenced in the New South Wales Registry of this Court, a provision of legislation enacted in the State of Victoria could be availed of in the litigation. These matters were not the subject of any argument and, accordingly, I express no views upon them. If they are to be raised, they must necessarily appear in the pleadings which are, of course, at this stage, far from complete. If raised, they may have a bearing on the success of the third respondent's current application under Order 20 rule 2 in respect of the Statement of Claim.
I therefore dismiss the Notice of Motion of the third respondent so far as it is based upon Order 11 rule 16. In my view, the balance of the Notice of Motion, under Order 20 rule 2, cannot properly be dealt with until the completion of the pleadings. I stand it over generally restorable on two days' notice. I reserve the question of costs until the final disposal of the Notice of Motion.
I therefore make the following orders:

1. that the applicant file and serve on the third respondent particulars of the claims made in paragraph 86 of the Statement of Claim.

2. that the motion contained in paragraph 2 of the third respondent's Notice of Motion of 23 August 1991 be dismissed.

3. that the balance of the Notice of Motion be stood over to a date to be fixed after the completion of the pleadings.

4. that costs of this hearing be reserved until the final disposal of the Notice of Motion.

5. that the parties have liberty to apply for further directions on two days' notice.

[1991] FCA 524

30 AUGUST 1991