Showtime Touring Group Pty Ltd v Mosley Touring Inc
[2011] NSWSC 1401
•22 November 2011
Supreme Court
New South Wales
Medium Neutral Citation: Showtime Touring Group Pty Ltd v Mosley Touring Inc [2011] NSWSC 1401 Hearing dates: 10 October 2011 Decision date: 22 November 2011 Jurisdiction: Common Law Before: Walmsley AJ Decision: See paragraph 77
Catchwords: TRADE PRACTICES ACT - accessorial liability - no allegation of any acts in Australia - no jurisdiction - expert evidence - non compliance with code - consequences - costs - gross sum costs order - principles Legislation Cited: Civil Code of Florida
Court Suppression and Non Publication Orders Act 2010
Legal Profession Act 2004
Trade Practices Act 1974 (Cth).Cases Cited: Australian Wool Innovation Ltd v Newkirk [2005] FCA 290; (2005) ATPR 42-053
Beach Petroleum NL & Claremont Petroleum NL v Johnson (No 2) (1995) 57 FCR 119
Bray v F Hoffman-La Roche Ltd [2002] FCA 243; (2002) 118 FCR 1
Brookvista Pty Ltd v Meloni [2009] WASCA 180
CJD Equipment Pty Ltd v A & C Construction Pty Ltd [2009] NSWSC 1085
Clark v Auspicious Yacht Sales Pty Ltd [2006] NSWSC 37
Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; (2002) 55 NSWLR 1
Hadid v Lenfest Communications Inc [2000] FCA 628
Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738
Hodder Rook & Associates Pty Ltd v Genworth Financial Mortgage Insurance Pty Ltd [2011] NSWCA 279
Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1985) 61 ALR 504
L Shaddock & Associates Pty Ltd v Parramatta City Council (No 2) [1982] HCA 59; (1982) 151 CLR 590
Lorenzato v Lorenzato (No 2) [2011] NSWSC 790
News Corporation Ltd v Lenfest Communications Inc (1996) 21 ACSR 553
Quinlivan v Australian Competition and Consumer Commission [2004] FCAFC 175; (2004) 160 FCR 1
Richards v Kadian (No 2) [2005] NSWCA 373
Slomowitz v Walker, 429 So.2d 797,800 (Fla. 4th DCA 1983)
Trade Practices Commission v Australia Meat Holdings Pty Ltd (1988) 83 ALR 299
Wright Rubber Products Pty Ltd v Bayer AG [2010] FCAFC 85
Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661Texts Cited: P Taylor, E Elms, G Bellew, M Meek, T Bartush-Peek, Ritchie's Uniform Civil Procedure NSW (2006) Lexis Nexus
J Gleeson SC, "Extraterritorial application of Australian statutes proscribing misleading conduct" (2005) 79 Australian Law Journal 296Category: Interlocutory applications Parties: Showtime Touring Group Pty Limited (Plaintiff)
Mosley Touring Inc (First defendant)
Timothy Mosley (Second defendant)Representation: D Baran (Plaintiff)
R Lancaster SC with P Blackadder (Defendants)
Stephen Smart and Associates (Plaintiff)
Simpsons Solicitors (Defendants)
File Number(s): 2009/00297756 Publication restriction: Pursuant to s 7 of the Court Suppression and Non-Publication Orders Act 2010, the Court orders that until further order, no person shall publish the residential address of the second defendant.
Judgment
Introduction
For resolution in this contractual and trade practices claim, are matters arising from five notices of motion. Some matters were agreed or resolved before or in the course of the hearing. Most were not. Before I refer specifically to the areas of dispute I shall say something about the background.
Background
The first defendant is a company which carries on business in the USA. The second defendant is what the amended statement of claim (ASC) describes as a "performance artist", who performs hip-hop and rhythm and blues music under the name Timbaland. The plaintiff is a Sydney-based company which promotes such visiting performers, and arranges and publicises the Australian and New Zealand legs of their tours.
The plaintiff says that in May 2008 it made an agreement with both defendants, to procure the second defendant's services to perform at concerts in Australia and New Zealand in that year. The plaintiff was required to pay a performance fee of US$1 million. This was to be paid by instalments. After the agreement was made, the plaintiff paid some instalments. However, the defendants did not assist with publicity when they should have, and then arbitrarily changed the tour dates. Then, having changed the dates, with the plaintiff's ultimate acquiescence, the second defendant declined to come at all, preferring instead to perform on the agreed dates in Poland and Finland. The result, for the plaintiff, was said to be a substantial financial loss. First, the plaintiff paid a large part of the performance fee in advance and received nothing for it. Secondly, it outlaid a great deal of money to third parties for publicity and the like in anticipation of the tour. Thirdly, it lost the profits it would, but for the defendant's cancellation of the tour, have made from it.
Litigation history
No defences have been filed. The plaintiff has encountered some jurisdictional difficulties. Shortly after it was issued, the statement of claim was served on both defendants in the USA. Both challenged service but applied to set aside service if the process was found validly served. On 3 September 2010 Hislop J held that the statement of claim had been validly served on the first defendant. As to the second defendant, his Honour made an order for substituted service under rule 10.14(3), which by operation of rule 10.14(4), was taken to constitute personal service. However his Honour then set aside service on both defendants, because he found there was no connecting factor with New South Wales as required by Schedule 6 of the UCPR to authorise service of originating process outside Australia. In short, the contract pleaded, his Honour found, had not been made in New South Wales, the law governing the contract was not the law of New South Wales, but the law of New York State, and no relevant breaches of the contract could be said to have occurred in New South Wales.
When he set aside service, Hislop J ordered the plaintiff to pay the defendants' costs. Before his Honour, both defendants were represented by the same solicitors and counsel. No application was made to his Honour at the time the costs order was made, under UCPR 42.7(2), for an order that the defendants have liberty to have their costs assessed forthwith. Nor was any such application later made to his Honour under the slip rule: UCPR 36.17.
On 29 March 2011, seven months after his Honour had set aside service, by an ex parte order by Fullerton J, the plaintiff obtained leave to serve the ASC. The ASC retained without amendment the contractual claim considered by Hislop J. But it had added to it a new cause of action against each defendant. Each new claim was said to have arisen under the Trade Practices Act 1974 (Cth) (TPA). As against the first defendant it averred:
(a) It was a foreign corporation,
(b) Certain people were authorised to make representations on its behalf,
(c) From May to July 2008 it engaged in misleading and deceptive conduct, such as by sending recorded forms, of what proved to be inaccurate advertising promotions, for use in Australia, and
(d) The plaintiff was thereby induced to pay $500,000 to the first defendant, and to incur debts to third parties of over $1 million, and lost ticket sales to a value in excess of $3.5 million.
As against the second defendant, the plaintiff averred:
(a) That he is liable as an accessory for the above referred to breaches, under s 75B TPA ;
(b) As the first defendant's alter ego, he had instructed those earlier referred to, to make the representations;
(c) That was a knowing contravention.
At paragraph 52 ASC it was alleged that all of the representations were communications received by the plaintiff in New South Wales. No allegation was made as to where the second defendant had been at the time he was said to have done the acts said to amount to the breach of s 75B TPA . In particular, it was not alleged he had done any of them in Australia.
After the ASC was filed, the plaintiff attempted to serve it on both defendants in the USA. It was not disputed before me by the first defendant that the ASC was eventually served on it in accordance with the law of the USA. Further, I understand the first defendant to concede that the claim pleaded against it under the TPA can proceed in this court. But the attempt to serve the second defendant had its complexities. A question I have to decide is whether the second defendant was properly served. If he was, I am called on to decide whether this court has jurisdiction to hear the s 75B TPA claim against him. Absent any allegation he did any act in Australia, and given s 75B has no application to accessorial liability cases unless some relevant conduct occurs in Australia, he argued there is no jurisdiction in this court to hear that case against him. So if I find service valid, I should set it aside.
There is a subsidiary argument concerning service. The plaintiff has applied for a substituted service order if I find service was not valid. Obviously, if I find the court has no jurisdiction to hear the s 75B TPA claim, then there would be no utility in my making that order.
For service of this court's process in the USA to be valid, it must be served in accordance with the law of the place of alleged service, here, the law of Florida (see UCPR 11.6). The plaintiff says that the first defendant was served with the amended statement of claim in accordance with Florida law, on 20 May 2011. As I have observed, the first defendant concedes valid service on it occurred. I take it to concede too that service occurred on 20 May 2011. The parties agree that the first defendant then had 28 days within which to file its defence. On 16 June 2011 the first defendant's solicitor told the plaintiff's solicitor the pleading had not come to the notice of the relevant officers until 14 June, and requested a 28 day extension from 17 June 2011. On 17 June 2011, the plaintiff's solicitor consented to an extension of time of only 14 days, and an appearance was filed by the first defendant. On the same day the second defendant filed a notice of motion seeking orders concerning the purported service on him.
The first defendant did not file its defence within the 14 days extension permitted by the plaintiff. Its solicitor did not make a further request to the plaintiff's solicitor for more time. Instead, it filed a motion on 30 June 2011 for an order extending time to file its defence until after resolution of other motions. Ultimately, there was no opposition to that application when it came before me. I propose to make an appropriate consent order.
Not having received a defence from the first defendant within the extended time allowed to it, the plaintiff on 5 July 2011 applied by motion for interlocutory judgement, with damages to be assessed.
In the meantime, the solicitors for the defendants learned that the plaintiff had been deregistered by the Australian Securities and Investments Commission. They pointed this out to the plaintiff's solicitors. It seems that deregistration had occurred because the plaintiff had not paid its annual ASIC fees.
A notice of motion was filed on 5 August 2011 by the first defendant to have the proceedings struck out under UCPR 14.28, alternatively a stay, until, or pending resolution, of an application for reinstatement.
Reinstatement occurred on or by 8 August 2011. The first defendant did not then proceed with its motion. The motion came before Registrar Bradford on 11 August 2011. The notice of motion was withdrawn. Costs were reserved. On 23 August 2011, the second defendant's notice of motion of 17 June 2011 was due to be heard. But Mr Baran was ill. So the motion had to be adjourned. The motion was by consent amended on 24 August 2011 to add, inter alia, requests for orders concerning the costs order made by Hislop J. Costs of the adjournment were reserved.
When all extant motions were before me on 10 October 2011, the plaintiff agreed to dismissal of its notice of motion seeking interlocutory judgement against the first defendant. Although the plaintiff asked for the costs of that motion, or alternatively that I make no order as to those costs, the first defendant asked for an order that the plaintiff pay its costs.
I shall now deal with the various notices of motion in the order in which they were filed.
The first defendant's notice of motion of 30 June 2011 to extend time
It is now agreed between the plaintiff and the first defendant that the first defendant may have three weeks from the date of resolution of these matters within which to file its defence. No further orders were sought in the first defendant's notice of motion of 30 June 2011. However in light of my findings below, it may be necessary for the ASC to be amended further, to exclude the contract count, and that pleaded against the second defendant. Although, as later appears, the proceedings can continue against the first defendant, the contract claim cannot. This court cannot have jurisdiction over it simply because there is a cause of action pleaded with it over which it does have jurisdiction. The jurisdiction nexus is required in relation to each pleaded cause of action: News Corporation Ltd v Lenfest Communications Inc (1996) 21 ACSR 553 at 557 (per Giles J).
The plaintiff's motion for interlocutory judgment of 5 July 2011
As Mr Baran agreed to dismissal of this motion, the only issue for me to decide concerns the costs. Mr Lancaster accepted the ASC was served on 20 May 2011 on the first defendant. It follows from UCPR rule 14.3, requiring a defence to be filed within 28 days from service, and from UCPR rule 16.3, which gives a plaintiff the right to apply for judgement after that time has expired in the absence of a defence, that the plaintiff had a right, when it applied, to ask for interlocutory judgement for damages to be assessed (see Form 39).
Mr Baran put to me that his client had had no way other than by filing this motion to move the case forward when the first defendant had failed to file its defence within the extended time given for that purpose.
Mr Lancaster, conceding his client had been in default, put to me that the plaintiff had known his client was proposing to defend, and had filed a motion for an extension of time: the motion for leave to extend time had been filed before expiry of the time the plaintiff had agreed to extend service to, the motion had been precipitate. Mr Baran submitted however the defendant's notice of motion to extend time should have been filed earlier.
The first defendant was in default of UCPR 14.3 in not filing its defence in time; it could have applied earlier than it did for an extension of time. The plaintiff, to keep its case going, had no alternative procedural step available to it than the one it took. The plaintiff, I am satisfied, through its legal advisers, knew at that time that the first defendant proposed to defend the matter. But at that stage it had defaulted in its procedural obligations. I do consider the plaintiff could have waited a while before filing its motion for interlocutory judgement. But since the plaintiff's motion was made necessary by the first defendant's default, I consider it appropriate that the first defendant pay the costs of that motion.
Amended Notice of Motion of 24 August 2011
The relevant orders sought in this Notice of Motion were:
"1. A declaration that the originating process has not been duly served on the second defendant, pursuant to Rule 12.11 (1) (c) of the Uniform Civil Procedure Rules 2005 (UCPR).
2. In the alternative, an order setting aside service of the Amended Statement of Claim on the second defendant, pursuant to Rule 12.11 (1) (b) of the UCPR.
3. In the alternative, an order setting aside the Amended Statement of Claim, pursuant to Rule 12.11 (a) of the UCPR in relation to the second defendant.
4. A declaration that the Court has no jurisdiction over the second defendant in respect of the subject matter of the proceedings, pursuant to Rule 12.11 (1) (h) of the UCPR.
5. In the alternative, that the Court decline to exercise jurisdiction in the proceedings, pursuant to Rule 12.11 (1) (h) of the UCPR in relation to the second defendant.
6. In the alternative, an order that the proceedings or permanently stayed, in the Court's inherent jurisdiction, in relation to the second defendant.
7. Until further order, no person shall publish the residential address of the second defendant.
Other orders:
8. An order that, pursuant to Rule 42.7 (2) of the Uniform Civil Procedure Rules 2005 (UCPR) the costs required to be paid pursuant to the order of his Honour Hislop J on 3 September 2010 be paid forthwith.
8A. An order pursuant to S 98 (4) (c) of the Civil Procedure Act 2005 (NSW) that the plaintiff pay the defendants forthwith the specified gross sum of $90,500 or such other some as the court orders in respect of the costs required to be paid pursuant to the order of Hislop J of 3 September 2010.
8B. An order pursuant to S 67 of the Civil Procedure Act 2005 (NSW) that until such time as the gross sum or such proportion of the gross sum as the Court may order has been paid, the proceedings are stayed.
8C. In the alternative, an order pursuant to Rule 12.10 of the UCPR that until such time as the gross sum or such proportion of the gross sum as the Court may order has been paid, the proceedings are stayed.
8D. An order that the proceedings be dismissed if the gross sum or such proportion of the gross sum as the Court may order has not been paid by 22 September 2011 or such other date as specified by the court.
9. An order that the names of the defendants in the judgement of 3 September 2010 of his Honour Hislop J in these proceedings be corrected, pursuant to Rule 36.17 of the UCPR so that:
a. "Mosely Touring, Inc" is replaced with "Mosley Touring, Inc"; and
b. "Timothy Mosely" is replaced with "Timothy Mosley".
10. An order that the plaintiff is to pay the defendants' costs of this application forthwith.
11. Such further or other relief as the Court considers appropriate."
Service on the second defendant (orders 1 to 6)
Mr Lancaster was content to proceed only with an application for orders 1 and 2 in relation to the second defendant. He conceded that orders 3 to 6 inclusive had no utility.
UCPR 11.6 says
"A document to be served outside Australia need not be personally served on a person so long as it is served on the person in accordance with the law of the country in which service is effected."
There was evidence before me to show the ASC had been served on the second defendant in Florida, USA. It was the submission of the second defendant that he had not been properly served.
An objection to expert evidence
The parties proceeded on the assumption that the law of Florida should determine whether the second defendant had been validly served. Each party read an affidavit from an expert on the law of Florida. No objection was taken to the expertise of either witness. There was however a difficulty with an affidavit and report by Ms Susan Capote, read by Mr Baran. She had not complied with the expert witness code of conduct: UCPR 31.23 (3). There is authority for the proposition that absent compliance with that rule, and evidence the expert had the code in mind at the time of preparation of the opinion, the report is inadmissible unless there are exceptional circumstances: CJD Equipment Pty Ltd v A & C Construction Pty Ltd [2009] NSWSC 1085 at [11] (per McDougall J). So Mr Lancaster objected to the admission of her evidence.
However Mr Baran informed me that Ms Capote had given evidence in another matter in a recent New South Wales action, so would have been familiar with the code when she swore her affidavit; he put to me that it had been an accidental omission. I permitted him to read the affidavit, conditionally on his filing by 5pm on 14 October 2011, a supplementary affidavit in which Ms Capote demonstrated compliance with the code. I granted Mr Lancaster liberty to apply to make further submissions in respect of that supplementary affidavit. When the supplementary affidavit was filed and served, Mr Lancaster in a written submission argued that it did not cure the defect referred to in CJD Equipment , because (as was indeed the case) Ms Capote did not say she had had any familiarity with the code of conduct at the time she swore her first affidavit. However in his response, Mr Baran pointed out that in Hodder Rook & Associates Pty Ltd v Genworth Financial Mortgage Insurance Pty Ltd [2011] NSWCA 279 at [61] the Court of Appeal had recently overruled CJD Equipment , in so far as it regarded UCPR rule 31.23 (which imposes the requirement for the code to be taken into account) as requiring special circumstances to be present before admitting an expert report with that defect. I accept Mr Baran's submission that the fact the supplementary affidavit did not cure what was said to be a fatal defect in CJD Equipment , does not prevent Ms Capote's evidence from going in. I infer from its contents Ms Capote knew of the importance of being impartial. The evidence is probative and relevant to the issue of service. I admit the parts objected to.
The law concerning service
The second defendant read an affidavit from Stanton Larry Stein of 16 June 2011. The plaintiff did not seek to cross-examine him. Annexed to Mr Stein's affidavit was a copy of an extract from the relevant Civil Code of Florida (s 48.031 of Civil Practice and Procedure ) as follows:
"(1)(a) Service of original process is made by delivering a copy of it to the person to be served with a copy of the complaint, petition, or other initial pleading or paper or by leaving the copies at his or her usual place of abode with any person residing therein who is 15 years of age or older and informing the person of their contents. Minors who are or have been married shall be served as provided in section"
Mr Stein annexed to his affidavit a number of decisions of the Supreme Court of Florida. The principles to be gleaned from them may be summarised thus:
(a) Where process is left with a person other than the defendant, the person with whom the documents are left must be residing in the house of the person to be served.
(b) It has been held that a person who has stayed at a residence for six weeks and when asked answers affirmatively that he or she lives there, may be deemed to be a person residing there.
(c) There is not good service where the person with whom the documents are left is not told of the contents of the documents.
Ms Capote annexed documentary material to her affidavit. Some of it was disallowed. She was not cross examined. Unlike Mr Stein, who practises in California, she practises in Florida. Whereas Mr Stein is the attorney in California for the defendants, Ms Capote does not act for any party.
Ms Capote relied on and cited Florida authority. The substance of her evidence is that a process server's return of service on a defendant which is regular on its face is presumed valid in the absence of clear and convincing evidence presented to the contrary. She cited Slomowitz v Walker , 429 So.2d 797,800 (Fla. 4th DCA 1983) for the proposition that a defendant must present clear and convincing evidence of invalid service, as follows:
"[C]lear and convincing evidence requires that the evidence must be found to be credible; the facts to which the witnesses testify must be distinctly remembered; the testimony must be precise and explicit and the witnesses must be lacking in confusion as to the facts in issue. The evidence must be of such weight that it produces in the mind of the trier of fact a firm belief or conviction, without hesitancy, as to the truth of the allegations sought to be established."
Ms Capote did not say whether she agreed with Mr Stein as to the formal requirements for service under Florida law. But I took both parties to agree that the law is as in the extract from the Civil Code of Florida, s 48.031.
The facts concerning service
Mr Evans swore an affidavit of 16 June 2011 in which he said inter alia:
"1. I am Michael Evans, a personal acquaintance of Timothy Z Mosley.
...
3. On or about Tuesday, May 10, 2011, I was present at the personal residence of Timothy Z Mosley p/k/a "Timbaland" in Miami, Florida.
4. My presence at Mr Mosley's residence on or about May 10, 2011 was at all times purely of a personal nature.
5. While I was present at Mr Mosley's residence in Miami, Florida on or about May 10, 2011, I responded to a buzz at the front gate of the residence. On the other side of the gate was an individual who did not identify himself. To the best of my recollection, he asked me: "Do you live here?" I responded "No, I'm just visiting." He asked me "Who are you?" I responded: "I'm Mike Evans, a friend." At that point, the individual handed me the documents annexed hereto and marked "ME- 1".
6 I do not presently reside at Mr Mosley's personal residence in Miami, Florida.
7. I have never resided at Mr Mosley's personal residence in Miami, Florida.
8. I am not, nor have I ever been, an employee of Mr Mosley, his household, or Mosley Touring, Inc.
9. I am not, nor have I ever been, an authorised agent for service of process for Mr Mosley or Mosley Touring, Inc."
The plaintiff read an affidavit of the process server Paulo Soler, sworn 16 August 2011. He said (omitting formal parts):
"1. I Paolo Soler am over the age of 21, and I have personal knowledge of the facts stated here in.
2. I am a certified process server of court express services, located in Miami, Florida. My certified process server number is #2030.
3. I was retained by Stephen Smart and Associates, through the law firm Lewis Tein P.L. of Coconut Grove, Florida, to serve copies of the Notice to Defendant and Amended Statement of Claim on Timothy Mosley at...
4. I received copies of the Notice to Defendant and Amended Statement of Claim on May 8, 2011, at 2pm.
5. At 9.30pm, on May 10, 2011, I delivered the Notice to Defendant and Amended Statement of Claim to... and served Timothy Mosely via substitute service by delivering the documents to a resident of the house.
6. Specifically, the man who answered the door identified himself as Michael Evans. At that time, I asked Michael Evans whether he resided at the above referenced address. He responded that he did.
7. I then initialled the first page of the documents being served and noted that date (05/10/11), the time (about 9.30pm) and that "Michael Evans lives @ home." I then served Michael Evans with the documents and informed him of their content, specifically that they contained a Notice to Defendant and Amended Statement of Claim."
Both counsel asked me to resolve this matter in the absence of cross examination of Messrs Evans and Soler. There was no evidence Mr Soler had any personal relationship with Mr Evans or anyone else associated with the case. I conclude from paragraphs 5 and 6 of his affidavit that he spoke to a man he found in attendance at the relevant address and learned from him that the name of the man he spoke with was Michael Evans. He says Mr Evans told him that: Mr Evans agreed he gave the process server his name. But he denies having said he lived there at the time. It seems not disputed (and I infer) that after he served the documents, Mr Soler made a note on the first page of the documents being served, with a note saying "Michael Evans lives @ home." There is no evidence Mr Evans made any note of his conversation with Mr Soler. The event occurred on 10 May 2011, which was the day when Mr Soler made his note. Mr Evans' affidavit on the other hand was sworn on 16 June 2011, over a month after the relevant date. Although there was no evidence of any personal connection between the process server and anybody associated with the case, there was evidence that Mr Evans is a friend of the second defendant. I infer from his own evidence that he was sufficiently close to the second defendant to feel at liberty to open the door to callers. I infer that as a licensed process server, Mr Soler was fully familiar with the requirements of the laws of Florida concerning the serving of process in that state. Having regard for those matters. I prefer and accept the affidavit evidence of Mr Soler. It follows that there is evidence that at the time he received the document, Mr Evans resided with the second defendant.
Mr Lancaster submitted that it would not be enough if I found that Mr Evans lived there at the time of service: there would need to be evidence he had lived there for at least six weeks. But the law of Florida concerning service of civil process merely contains a requirement that the documents be left with a person who resides there. The case law annexed to the affidavit of Mr Stein showed that in one case, a period of six weeks residence was found to be sufficient for good service to be carried out by leaving documents with that person. But I do not understand the law as described by either expert as requiring any particular period of time of residence before somebody qualifies as one with whom documents may be left. Thus I reject Mr Lancaster's submission. I also reject a submission he made to me that Mr Soler failed to inform him of the contents of the documents. Providing the titles to the documents was I think sufficient information.
Thus I am satisfied that Mr Soler served Mr Evans in accordance with the law of Florida and that he thereby served the second defendant. It follows that it is unnecessary for me to consider the alternative order sought by the plaintiff, namely one of substituted service pursuant to UCPR 10.14(3). It also follows that I must decline to make order 1 in the defendant's amended notice of motion of 24 August 2011. I will now consider order 2 in the amended notice of motion of 24 August 2011, the alternative to order 1. In doing so, I must consider an argument put to me by Mr Lancaster that service should be set aside by reason of a lack of utility, namely that the only causes of action pleaded against the second defendant are the contractual one Hislop J held cannot run, and a claim for accessorial liability under s 75B TPA , which, he submitted, was doomed to fail.
Section 75B Trade Practices Act: the accessorial liability claim against the second defendant
The TPA case pleaded against the second defendant is essentially as follows:
"49...[I]n respect of each and every one of the representations pleaded herein, the plaintiff pleads that the second defendant being the alter ego, guiding mind and an officer of the first defendant gave instructions, directions and information to Rick Frazier and Monique Mosley together with the lawyers representing the first defendant to make the representations to the plaintiff upon which it placed reliance. Further the second defendant gave such directions, instructions and information to persons and the first defendant to enter into negotiations and conclude an agreement... to procure the services of the second defendant and contract with the first defendant to perform... in Poland and Finland contrary to the express representations that had been made by the first defendant to the plaintiff as pleaded herein.
50...[T]hat the second defendant has, contrary to s75B of the [TPA], engaged in conduct to intentionally aid, abet, counsel or procure the contraventions... [earlier pleaded and] by providing the audio drops and additional instructions to change [performance dates], knowingly aided, abetted, counselled or procured the contravention as pleaded against the first defendant.
51...[T]hat by his conduct the second defendant, by providing information, directions and instructions to...[others] has knowingly been involved, either directly or indirectly, and concerned or otherwise [as] a party to the contravention of the [TPA] as pleaded against the first defendant..."
On their face, paragraphs 49 to 51 of the ASC (which contain all the specific allegations against the second defendant) do not allege any knowledge of the falsity of the representations. Nor do they plead material facts which could support such an inference. Although they assert that the second defendant gave instructions directions and information, no material facts or acts are alleged, and, especially, none in Australia. It is not asserted anyone for the plaintiff ever spoke to the second defendant.
When a breach of s 75B TPA is alleged, actual knowledge of the essential elements of the contravention must be alleged: Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 at 666-670; Quinlivan v Australian Competition and Consumer Commission [2004] FCAFC 175; (2004) 160 FCR 1 at [8]-[11]. From the use of the expression "being the alter ego, guiding mind and an officer of the first defendant" in paragraph 49, I take the plaintiff to plead constructive, rather than actual, knowledge.
A person against whom a s 75B TPA claim is brought, must at least be aware of the relevant representations: Keen Mar Corporation Pty Ltd v Labrador Park Shopping Centre Pty Ltd (1985) 61 ALR 504 at 506-507. In my view what is pleaded avers insufficient awareness to satisfy s 75B TPA . On the basis that an applicant had not pleaded or adduced evidence that a respondent had personal knowledge of what was alleged to have been the misleading or deceptive nature of representations relied on, the Federal Court of Australia declined to give leave to an applicant to serve process out of the jurisdiction: Minerals Commodities Ltd v Promet Engineers Africa (Pty) Ltd [2008] FCA 30 at [17] (per Siopsis J).
Further, a s 75B pleading must "identify unambiguously the matters known" to the defendant and not be "left to the surmise of the reader": per Jessup and Dodds-Streeton JJ in Wright Rubber Products Pty Ltd v Bayer AG [2010] FCAFC 85 at [79]. See to like effect Clark v Auspicious Yacht Sales Pty Ltd [2006] NSWSC 37 at [17]. I accept Mr Lancaster's submission that paragraphs 50 to 51 of the ASC do not support an allegation against the second defendant pursuant to s 75B.
I also accept Mr Lancaster's submission that to the extent it is asserted the second defendant's conduct in providing instructions, directions, information or audio drops was conduct in which the second defendant engaged, was not merely conduct attributed to him, the conduct is not pleaded as having occurred in New South Wales. As Mr Lancaster notes, the plaintiff does allege in paragraph 52 that all representations were "received" in New South Wales by the plaintiff, but he does not plead that the second defendant made any of them. As to the representations themselves, in paragraph 41, it is alleged only that the first defendant made representations to the plaintiff.
Quite apart from the pleading difficulties to which I have alluded, there is I think a more fundamental difficulty with the pleading as it relates to the second defendant. Unlike primary breaches of the TPA such as a breach of s 52, s 75B TPA is not given an extended extra territorial operation by s 5(1) TPA . In Bray v F Hoffman-La Roche Ltd [2002] FCA 243; (2002) 118 FCR 1 Merkel J held at [55] that s 75B is to be construed as being applicable only to conduct which occurs in Australia. For the same reason, in Australian Wool Innovation Ltd v Newkirk [2005] FCA 290; (2005) ATPR 42-053 at [55] Hely J said of a pleading before him:
"The amended statement of claim should be struck out insofar as it alleges accessorial liability under s 75B of the TPA based on conduct occurring outside Australia."
On this issue, Mr Baran referred me to and relied on an article titled " Extraterritorial application of Australian statutes proscribing misleading conduct " (J Gleeson SC, (2005) 79 Australian Law Journal 296) and, in particular, a passage in Trade Practices Commission v Australia Meat Holdings Pty Ltd (1988) 83 ALR 299 at 355. However I do not accept either the article or that decision gives support for the plaintiff's position. Reference to the discussion in the article must be read in proper context. Willcox J at 355-6 dealt with a submission by counsel for a foreign respondent sued under s 75B that it was not open to his Honour when considering whether he had been "involved" in an alleged contravention, to take into account any events which had occurred outside Australia. It was submitted to his Honour that the conduct in Australia must, of itself, be capable of amounting to the representation. It was put that the expression "knowingly concerned" in its context means the court could not take into account conduct outside Australia in combination with conduct in Australia to find a respondent had been "knowingly concerned". There was in that case evidence of relevant conduct in Australia by the respondents to the application. His Honour said that the submission went too far. At page 356 he said:
"In a case where there is relevant conduct in Australia, it is a misuse of language to speak of the statute being given extraterritorial effect. The statute applies because of that conduct. It attaches to conduct within Australia. But in assessing that conduct, in relation both to its nature and to its quality, the court is required to take into account the whole of the available evidence. Evidence of events outside Australia may, for example, establish or negative the necessary knowledge. There is nothing unusual about that. Australian courts commonly receive evidence of overseas events which bear upon conduct affected by Australian law"
This is not a case such as his Honour was describing. There was there clear evidence of conduct both within Australia and outside Australia. Here there is no evidence or allegation of any conduct on the part of the second defendant in Australia. The TPA has no reach over one against whom a s 75B claim is made where none of the acts alleged have occurred in this country. Although Mr Baran submitted the applicant should be permitted to argue providing an "audio drop" or tape recording saying he was coming to Australia, and he assisted in and had knowledge of dissemination and reproduction of a press release would be sufficient, it is the pleading itself to which I must turn. As I have observed, it makes no allegation the second defendant did anything in this country. Mr Baran's proposed argument that transmission of a press release and audio drops was conduct in Australia, does not arise on the face of the pleading. It is true, as Mr Baran noted from Mr Gleeson's article at p 309, that if information sent from outside the country and downloaded off the internet in this country could, arguably be caught. But that is not alleged here.
It is not in issue but that the second defendant is a foreigner to this jurisdiction.
As the ASC does not allege he performed any act in Australia, I infer that the only acts alleged must have been outside Australia. I have, accordingly, reached the view that the s 75B claim against the second defendant cannot, as presently pleaded, succeed. Hislop J has held the contract claim also cannot run against the second defendant. Accordingly the second defendant is entitled to order 2 in the amended notice of motion of 24 August 2011.
Address of Second Defendant
For reasons of privacy, the first defendant sought an order that the second defendant's address not be published. Mr Baran did not oppose the application. I was persuaded, for reasons I gave during the hearing of the motion, that a proper case had been made out for making an order under s 7 of the Court Suppression and Non Publication Orders Act 2010, prohibiting publication or other disclosure of information tending to reveal the address of the second defendant. Accordingly, on 10 October 2011, I made order 7.
Revisiting Hislop J's Costs Order
UCPR rule 42.7 provides:
"(1) Unless the court orders otherwise, the costs of any application or other step in any proceedings, including:
(a) costs that are reserved, and
(b) costs in respect of any such application or step in respect of which no order as to costs is made,
are to be paid and otherwise dealt with in the same way as the general costs of the proceedings.
(2) Unless the court orders otherwise, costs referred to in subrule (1) do not become payable until the conclusion of the proceedings."
The defendants have applied for an order giving them liberty to have assessed now, the costs ordered by Hislop J to be paid by the plaintiff when his Honour set aside service of the statement of claim on 3 September 2010. Because they have put forward evidence of the costs, they have also asked for a lump sum order, by which I specify the sum to be paid to satisfy the order.
In support of the orders, Mr Lancaster submitted:
(1) The rule envisages that interlocutory costs may be ordered to be paid before the proceedings have been concluded;
(2) The hearing before Hislop J related to a distinct issue which is separate from the substantive issues in the proceedings;
(3) Almost a year has gone by, and jurisdictional issues have still not been resolved;
(4) It will be a long time yet before the proceedings are finished;
(5) The defendants were put to significant expense in making their successful application;
(6) In correspondence, the solicitors for the plaintiff conceded the amended pleading (including the new TPA counts) would have the effect of "circumventing [the] Schedule 6 argument" (referring to their successful argument before Hislop J that this Court had no jurisdiction over the contractual claim);
(7) The TPA counts had been "tacked on" to the contract claim which Hislop J found could not run in this Court: further, the effect of Hislop J's orders was not brought to the attention of Fullerton J, when she gave leave to the plaintiff to serve the ASC in March 2011;
(8) Not only have the defendants had their costs assessed by an assessor (though the assessment has not been finalised in a formal sense), they have offered to settle for a modest part of that assessment, and the plaintiff has, unreasonably it is said, declined to accept the offer.
Is there power to make the order?
Counsel for neither party was able to refer me to any case where a party, having received an interlocutory costs order, and not having asked for or received leave to have costs assessed forthwith, had made a subsequent application. One can readily see that a party who has overlooked asking for leave to have costs assessed forthwith at the time the order was made may seek and obtain leave by making an application under the slip rule: UCPR rule 36.17. However, usually, when a slip rule application is made, the applying party explains why no order was asked for at the time. For example in L Shaddock & Associates v Parramatta City Council (No 2) [1982] HCA 59; (1982) 151 CLR 590 counsel forgot to ask for interest on damages. At [11] (p 597) the Court (Mason ACJ, Wilson and Deane JJ) referred to the fact that there had been evidence to explain the failure. That was treated by their Honours as a significant matter.
Mr Lancaster did not make this application under the slip rule. Nor did the defendants provide any explanation for not having asked Hislop J for an appropriate order at the time his Honour made the costs order. Mr Lancaster conceded that had he made the application to Hislop J at the time of his Honour's order, he would have put the arguments he now puts to me.
He referred me to and relied on Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; (2002) 55 NSWLR 1 at [11] to [13] (per Barrett J); and Lorenzato v Lorenzato (No 2) [2011] NSWSC 790 as to the applicable principles when considering and application under rule 42.7.
Because of the breadth of rule 42.7, I consider I do have the power to make the order sought and that there is nothing to prevent my exercise of the power. There is nothing in the rule which, on its face, requires the application made here, to be made at the time the costs order is made. Mr Baran submitted that no authority supported the proposition that an application may be made to a different judge from the one who has heard the earlier motion; but the novelty of the application does not I think lead to the conclusion that I may not entertain it. Although, arguably, the application ought to have been made to Hislop J, I have had to consider the whole of the case and I do not consider I am at any disadvantage in assessing the merits of it. I have considered Mr Baran's argument that the application offends the principles in ss 56, 57 and 58 of the Civil Procedure Act , but I do not agree. By making the orders sought I consider I will be facilitating compliance with those principles.
Should I exercise the power?
Although the defendants did not explain why they had not made an application when the order was made, or a slip rule application after it was made, they did explain well enough why they had made the application now. The question then, is whether I should exercise the power and to what extent.
Mr Baran argued I should not make the orders sought. He argued the application is a very late one; it could and should have been made to Hislop J; there was no appeal from his Honour's order: and costs are not usually due in common law matters until a case has concluded.
Although the defendants argued that the plaintiff should have told Fullerton J of the previous jurisdictional argument when obtaining an ex parte order to amend the statement of claim in March 2011, I do not agree. The record was plain. And an ex parte application was appropriate: the defendants were not on the record, given the effect of Hislop J's orders. So I do not regard that issue as relevant. However I have reached the view that I should give the defendants leave to have their costs of the motion before Hislop J assessed forthwith. My reasons are these:
(1) The order was made on 3 September 2010. At that stage, the only cause of action pleaded was in contract. Both defendants succeeded in having service set aside. Although the ASC has been served on the first defendant, the only count in it which can run in this court against it is that under the TPA . No doubt the circumstances surrounding the creation of the contract will achieve some relevance in that case, but as Hislop J has found, the case said in the pleading to arise from the contract cannot be heard in this court. That is a separate and identifiable issue, which in effect has concluded: Fiduciary at [11].
(2) A large part of the delay in taking this matter further was due to the fact that the plaintiff took almost seven months to seek leave to serve an amended pleading, then a further period of almost two months to serve the ASC. Before the proceedings finally conclude, a great deal more time may elapse: Fiduciary at [13].
(3) The case against the second defendant in this court cannot, on the current pleading, run. So as far as he is concerned, the proceedings against him have not progressed since he was first served, almost two years ago, and indeed are now finished.
(4) So far as the second defendant is concerned, this is not a case where there are likely to be other costs orders along the way, some of which might be in favour of the plaintiff; so there will be no need or opportunity to have a balancing of orders at the end of the proceedings: Richards v Kadian (No 2) [2005] NSWCA 373 at [7].
(5) The liability for the costs does not change. It has always been there. All that is different now is that the costs will be paid earlier than they would have been absent my giving leave.
Should an order be made for payment of a lump sum for costs?
The defendants have not had their costs formally assessed. But the assessment process has begun and is now well advanced. According to the evidence of Mr Simpson, solicitor for the defendants, he tried to persuade the plaintiff to agree to pay a sum which he calculated was half the total costs incurred in the proceedings, by sending a Calderbank letter on 18 March 2011. The plaintiff through its solicitor, declined the offer. Then on 15 April 2011 Mr Simpson sent a further Calderbank letter, offering to settle this costs dispute by accepting a different, but higher, amount. That offer was also declined.
On 25 May 2011 Mr Simpson retained, apparently for the first time in these proceedings, a costs consultant. He instructed her to prepare a bill of costs. She provided a draft bill of costs on 19 July 2011. For reasons which included matters of privilege, Mr Simpson said it was not possible for the draft bill of costs to be finalised. But having received her draft he asked her to prepare an assessment of the costs which in her opinion would likely be recovered by the defendants on the motion before Hislop J. She assessed that sum at $90,500. That sum is significantly higher than either of the sums the defendants had offered in their Calderbank offers to accept. There was no objection to the evidence on this issue. Based on that evidence, the defendants ask for orders including that the plaintiff pay the sum of $90,500 or a proportion of it, and that the proceedings be stayed until it is paid.
Section 98(1) of the Civil Procedure Act provides relevantly that the Court may make an order that a party to whom costs are to be paid is entitled to a specified gross sum instead of assessed costs. When the power is used a court will use a broad brush approach: Hadid v Lenfest Communications Inc [2000] FCA 628 at [35]. As Black J observed recently in Lorenzato at [3]:
"The power to make a gross sum costs order should only be exercised where the court considers it can do so fairly between the parties, including achieving an appropriate sum on the materials available to it and the courts have typically applied a discount in assessing costs on a gross sum basis: Ritchie's Uniform Civil Procedure NSW [s 98.65]"
There is no evidence here that the plaintiff would not be able to meet any gross sum costs order made. But in any event, the power is appropriately exercised in cases where the party obliged to pay would not be able to meet a liability for the order likely to result from an assessment: Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738 at [21] (per Giles JA).
I have formed the view that I should make a gross sum costs order. My reasons are these:
(1) As against the second defendant, as I have explained above, the proceedings cannot go further, on the current pleading.
(2) There has been an assessment (although not a final one) made by a costs assessor, and her evidence was not challenged; Mr Baran conceded the assessor has a thorough knowledge of costs.
(3) The making of the order will eliminate the need for a formal assessment.
(4) The plaintiff has now pleaded two cases, one in contract, the other under the TPA , against the second defendant, and has failed to save either when challenged.
I have taken account of, but do not regard as a highly significant matter, the fact that offers were made by the defendants' solicitors to settle the costs issue, because at that stage the defendants had not asked for an order giving them the right to have their costs assessed forthwith.
Mr Baran submitted that if I make the order, his client will have to pay a substantial sum although the matter has not been heard. But that argument ignores the fact that as against the second defendant, there is no case going forward.
Mr Baran submitted that making the order would remove his client's rights and privileges under the Legal Profession Act 2004, and his client is entitled to receive a bill and have the costs assessed; this case is a far cry from the case considered by Black J in Lorenzato ; there must be some form of bad behaviour (not present here) before such an order is made.
However the availability of the power to order lump sum costs is a recognition by the legislature that in certain cases parties are to lose the rights they would otherwise have to a bill of costs and a formal assessment under the Legal Profession Act ; as to conduct, while his client has not been involved in conduct of the type which occurred in Lorenzato , it was responsible for a considerable delay in serving the ASC after Hislop J's costs order, and it has now been responsible for a further pleading, as against the second defendant, which has been found wanting.
What gross sum costs order should be made?
I propose to assess the costs at $70,000. My reasons are these:
(a) The total sum assessed by the assessor as likely payable is $90,500;
(b) A broad brush approach is applied when making these assessments: Hadid at [35]; but because the costs are not subjected to the detailed scrutiny often applied on a taxation or assessment, some caution is necessary: the broad brush approach must still be logical, fair and reasonable: Beach Petroleum NL & Claremont Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 123 (per von Doussa J): I am satisfied, having regard to the uncontested evidence concerning the assessment, that what I propose is logical, fair and reasonable; sufficient material must be available too: Brookvista Pty Ltd v Meloni [2009] WASCA 180 at [27] (per Newnes JA); Harrison v Schipp [2002] NSWCA 213; (2002) 54 NSWLR 738 at [22] (per Giles JA): I am satisfied I have sufficient material;
(c) I consider this order will achieve fairness between the parties: P Taylor, E Elms, G Bellew, M Meek, T Bartush-Peek, Ritchie's Uniform Civil Procedure NSW (2006) Lexis Nexus, s 98.65; Lorenzato ;
(d) Courts typically apply a discount and I have done that: Ritchie and Lorenzato op cit.
I do not consider I should order a stay until the costs are paid. If the case pleaded against the first defendant has merit, there may be a substantial sum ultimately payable by it to the plaintiff. The first defendant concedes it has been validly served, and that this Court has jurisdiction to hear the claim pleaded against it under the TPA . There is no suggestion the plaintiff will not or cannot pay the sum I propose to order it to pay now. The first defendant will have an advantage other defendant litigants do not enjoy, when I make the order.
Amendment of names
Until I heard these motions, the names of both defendants had been misspelled in all court documents. When I heard this motion, I made order 9 by consent.
Costs of this motion
Mr Lancaster submitted that if this motion succeeds, the plaintiff should pay his client's costs and leave should be given to have them assessed forthwith. The motion has succeeded and costs should follow the event. The issue involving the second defendant is discrete. He is not involved in any continuing proceedings. It may be quite some time before proceedings against the first defendant are completed. I give leave to have the costs of this motion assessed forthwith.
Reserved costs order made by Johnson J on 23 August 2011
As I have observed, the second defendant's motion of 17 June, later amended on 24 August, was due to be heard on 23 August but the hearing was vacated on the day because Mr Baran, who had been briefed for the plaintiff, had suffered a back injury. His Honour reserved the question of the costs thrown away by reason of the adjournment. I was asked to resolve the issue. I told the parties I would deliver these reasons and give them a further opportunity to address me on those costs, before I decide the matter. I shall hear from the parties as to the further disposition of that issue.
The plaintiff's application for a substituted service order against the second defendant: Notice of Motion of 31 August 2011
The plaintiff had on a notice of motion of 31 August 2011 in which it sought inter alia an order for substituted service on the second defendant if I made either order 1 or 2 of the second defendant's amended notice of motion of 24 August 2011. In other words, if the defendant succeeds in having the purported service set aside, then the plaintiff asks for an order for substituted service. By reason of my conclusions above it is unnecessary for me to consider that application. There would be no utility in my making it.
Conclusion
I propose making orders to reflect the above findings and reasons. I will hear from counsel on the form of the orders.
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Decision last updated: 22 November 2011
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