Sooty Super Fund v Financial Services Partners Pty

[2011] VCC 1371

IN THE COUNTY COURT OF VICTORIA Revised

(Not) Restricted

AT MELBOURNE
COMMERCIAL LIST -

GENERAL DIVISION

Case No. CI-09-02531

SOOTY SUPER FUND and WENDYJOY SMITH and PETER SMITH	Plaintiffs
v.
FINANCIAL SERVICES PARTNERS PTY LTD	Defendant

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JUDGE:	His Honour Judge Anderson
WHERE HELD:	Melbourne
DATE OF HEARING:	26 October 2011
DATE OF JUDGMENT:	26 October 2011 (Revised 28 October 2011)
CASE MAY BE CITED AS:	Sooty Super Fund & Ors v. Financial Services Partners Pty Ltd
MEDIUM NEUTRAL CITATION:	[2011] VCC 1371

REASONS FOR JUDGMENT

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Catchwords:  Practice and procedure – Application to substitute plaintiff – Party names as the Superannuation Fund – Trustee of the fund sought to be substituted – Rule 36.01 – Bridge Shipping Pty Ltd v Grand Shipping SA (1991) 173 CLR 231 applied.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J.D. Loewenstein	Fleming & Rhoden
For the Defendant	Mr A. Rollnik	Moray & Agnew
HIS HONOUR:

1           The first plaintiff is named in the proceeding as “Sooty Super Fund”. The plaintiffs now seek to substitute Controlair (Aust) Pty Ltd as the first plaintiff. The company has, at all relevant times, been the trustee of the Sooty Superannuation Fund. The

plaintiffs’ cause of action arises out of financial advice given to them in May or June
2004, which resulted in an investment by the superannuation fund in a forestry
scheme which proved to be unsuccessful.

2           It is likely that if the proceeding were commenced at the present date, any cause of action would be statute-barred. For this reason, the plaintiffs’ application to substitute the first plaintiff is brought pursuant to Rule 36.01 rather than Rule 9.06. Rule 36.01 was considered by the High Court in Bridge Shipping Pty Ltd v Grand Shipping SA (1991) 173 CLR 231. The majority of the Court agreed with the judgment of McHugh J. At page 260, McHugh J said, “Rule 36.01(4) is a remedial rule and should be given

a beneficial interpretation. It is proper to give it the widest interpretation which its

language will permit”.

3 a mistake in the name of a party…whether or not

The rule allows the Court to correct ““the rule imposes three limitations on a person’s right to amend. First, there must be a

mistake. Secondly, the mistake must be ‘in the name of a party’. Thirdly, the Court may only make the order where it is satisfied that any other party to the proceeding would not, by reason of the order, be prejudiced in the conduct of his or her claim or

defence in a way that could not be [otherwise] fairly met”.

4           I am satisfied, in the present case, that each of these matters has been made out by the plaintiffs. The issue relating to the description of the first plaintiff was first raised shortly prior to the matter being listed for trial on 8 September 2011. That trial date was vacated, with the express purpose of allowing the plaintiffs to consider their

position. It was also necessary to correct the title of the proceeding to reflect the fact
that the third plaintiff, Mr Smith, had died and his wife, the second plaintiff, was to
continue the proceedings as his representative as well as on her own behalf.

5           Defendant’s counsel delivered to the Court yesterday evening very helpful and comprehensive written submissions. Those submissions analyse the statements made in the statement of claim and in the affidavits filed by the second plaintiff and the plaintiffs’ solicitor in support of the application. It appears clear from that material that during the course of dealings between the financial adviser, Mr Crabtree, and Mr

6           It is likely that Mr and Mrs Smith, who ran a business through the company, had at some stage been advised to establish a superannuation fund to make provision for their retirement and that there was a blurring of the fact that Mr and Mrs Smith as

directors of the company which was the trustee of the fund, had very different responsibilities and obligations than they had as the potential beneficiaries.
7	makes clear what responsibilities and obligations are imposed on a trustee to ensure that the taxation and other benefits obtained by such funds are not misused.

The legislative scheme which permits the creation of private superannuation funds of a superannuation fund from ignoring the legal realities of the situation and pleading a claim as if the superannuation fund were simply an extension of the individuals. The draft proposed amended statement of claim is also inadequate and should not be the basis upon which this action goes forward.

8           On the other hand, it is clear that in the dealings between the parties, as they are presently articulated in both the statement of claim and the defence and the way in which the proceeding was conducted between the parties until immediately before the trial date in September 2011, that the inadequate pleading of the plaintiffs’ claim was not a matter which caused any difficulty to the defendant. In fact, the dealings between Mr Crabtree and Mr and Mrs Smith and the way in which the action was pleaded and responded to in the defence support the conclusion that there has been a mistake in the name of the first plaintiff and that, upon a proper examination, it is clear that the company as trustee should, at all times, have been the appropriate party.

9           Application was made by the defendant to remove Mrs Smith as a plaintiff on the basis that any losses that have occurred have been suffered by the superannuation fund and not by her or her husband personally. The statement of claim is presently inadequate in that respect as there has been a rolled up plea and no separate statement of the losses of the separate plaintiffs, the superannuation fund on the one hand and the individual plaintiffs on the other.

10         Plaintiffs’ counsel, Mr Loewenstein, was unable to articulate adequately the loss of the superannuation fund. The expert’s report presently filed on behalf of the plaintiffs contains actuarial calculations based on the interests rates under the Penalty Interest Rates Act. This appears to be inadequate expression of the losses of the superannuation fund. In relation to any losses of Mr and Mrs Smith personally, Mr Loewenstein suggested that there may have been a transfer of funds from other superannuation funds into the Sooty Superannuation Fund in order to make the investment in the forestry scheme. If that is the position, there has presently been no articulation of a claim on that basis or of the losses which are alleged to have been suffered.

11         The trial of this proceeding is presently fixed for 21 November 2011. It is likely that the case will not be ready to proceed at that time. The next available date for hearing this case is likely to be in May 2012. I consider, however, that before the trial date is formally vacated, the parties should amend the writ to accord with the orders I have made in relation to the parties and the plaintiffs should have the opportunity of delivering a further proposed amended statement of claim seeking to address the inadequacies of the present pleading and draft proposed amended pleading.

12         There are also outstanding issues of discovery and it is probably better that these matters also be resolved at this stage. Some of the discovery issues may, however, depend upon the final articulation of the plaintiffs’ claim.

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Certificate

I certify that these 3 pages are a true copy of the reasons for decision of His Honour Judge

Anderson delivered on 26 October 2011 and revised on 28 October 2011.

Dated: 28 October 2011

Caroline Dawes

Associate to His Honour Judge Anderson