The Finance Brokers Supervisory Board v Van Stokkum

[2006] WASCA 97

THE FINANCE BROKERS SUPERVISORY BOARD -v- VAN STOKKUM [2006] WASCA 97

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2006] WASCA 97
Court:	THE COURT OF APPEAL (WA)
Case No:	FUL:165/2003	Heard:	2 MARCH 2006
Coram:	STEYTLER P MCLURE JA BUSS JA	Delivered:	31/05/06
No of pages:	19	Judgment Part:	1 of 1
Result:	Leave to appeal granted Appeal allowed
Category:	B
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Parties:	THE FINANCE BROKERS SUPERVISORY BOARD BERNARDUS HUBERTUS VAN STOKKUM
Catchwords:	Practice and procedure Interlocutory appeal Statutory immunity defence struck out Whether defence arguable Refusal of leave to amend defence Turns on own facts
Legislation:	Finance Brokers Control Act 1975 (WA), s 81, s 82, s 83, s 87, Finance Brokers Control Amendment Act 2004 (WA) Motor Vehicles (Third Party Insurance) Act 1942 (NSW), s 16 Rules of the Supreme Court 1971 (WA), O 20 r 19(1)(a) Western Australian Marine Act 1982 (WA), s 124
Case References:	Bell v The State of Western Australia (2004) 28 WAR 555 Bell v The State of Western Australia [2005] HCA Trans 561 Cowell v Corrective Services Commission of New South Wales (1988) 13 NSWLR 714 Darling Island Stevedoring and Lighterage Co Ltd v Long (1957) 97 CLR 36 De Bruyn v South Australia (1990) 54 SASR 231 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Hollis v Vabu Pty Ltd (2001) 207 CLR 21 Kimberley Downs Pty Ltd v The State of Western Australia, unreported; SCt of WA; Library No 6414; 25August 1986 Parker v The Commonwealth of Australia (1965) 112 CLR 295 Ramsay v Pigram (1968) 118 CLR 271 State of New South Wales v Lepore (2003) 212 CLR 511 Stoneman v Lyons (1975) 133 CLR 550 Twine v Bean's Express Ltd (1946) 62 TLR 458 671122 Ontario Ltd v Sagaz Industries Canada Inc [2001] 204 DLR (4th) 542 A Solicitor v Council of the Law Society of New South Wales (2004) 216 CLR 253 Astley v Austrust Ltd (1999) 197 CLR 1 Australian National Airlines Commission v Newman (1987) 162 CLR 466 Australian Securities and Investments Commission v Rich (No 3) (2003) 45 ACSR 305 Australian Securities Commission v Kippe and Forgie (1996) 67 FCR 499 Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300 Bazley v Curry (1999) 174 DLR (4th) 45 Bell v The State of Western Australia [2003] WADC 18 Bennett v Minister of Community Welfare (1992) 176 CLR 408 Board of Fire Commissioners (NSW) v Ardouin (1961) 109 CLR 105 Bone v Robins; Ex parte Bone [1990] WAR 94 Brodie v Singleton Shire Council (2001) 206 CLR 512 Broom v Morgan [1953] 1 QB 597 Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520 CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 Clyne v The New South Wales Bar Association (1960) 104 CLR 186 Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194 Commissioner of Railways (Qld) v Ruprecht (1979) 142 CLR 563 Coulthard v Henneker [2003] WASCA 187 Coulton v Holcombe (1986) 162 CLR 1 Dalgety Australia Ltd v Rubin, unreported; SCt WA, Library No 5485; 24 August 1984 Doe v Bennett (2004) 236 DLR (4th) 577 Dubai Aluminium Co Ltd v Salaam [2003] 2 AC 366 Eastman v Director of Public Prosecutions (ACT) (2003) 214 CLR 318 Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 Everett v The State of Western Australia & Anor [2001] WADC 18 Garcia v National Australia Bank Ltd (1998) 194 CLR 395 Grljusich v Andrews [2003] WASCA 206 Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365 House v The King (1936) 55 CLR 499 Hughes and Vale Pty Ltd v The State of New South Wales (No 2) (1955) 93 CLR 127 Imperial Chemical Industries Ltd v Shatwell [1965] AC 656 Inglis v Moore (1979) 46 FLR 3 Jacobi v Griffiths (1999) 174 DLR (4th) 71 Johnson Tiles Pty Ltd v Esso Australia Ltd (2000) 104 FCR 564 Kennedy v Lovell (2002) 27 WAR 39 L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225 Lister v Hesley Hall Ltd [2002] 1 AC 215 Little v State of Victoria [1998] 4 VR 596 London Drugs Ltd v Kuehne and Nagel International Ltd [1992] 97 DLR (4th) 261 McNamara (McGrath) v Consumer, Trader and Tenancy Tribunal (2005) 79 ALJR 1789 Miller v McKeon (1905) 3 CLR 50 Morelle Ltd v Wakeling [1955] 2 QB 379 Packhard v Transport, Trading & Agency Co Ltd & Weir (1912) 14 WALR 191 Petracaro v Commissioner of Consumer Affairs (1994) 62 SASR 387 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 Puntoreiro v Water Administration Ministerial Corporation (2000) 199 CLR 575 Pyrenees Shire Council v Day (1998) 192 CLR 330 R v De Simoni (1981) 147 CLR 383 Re Real Estate and Business Agents Supervisory Board; Ex parte Cohen (1999) 21 WAR 158 Registrar, Real Estate and Business Agents Supervisory Board & Anor v Barnett, unreported; FCt SCt of WA, Library No 970426; 26 August 1997 Ringelstein v Redford Cattle Co Pty Ltd [1995] 1 Qd R 433 Rogers v Whitaker (1992) 175 CLR 479 Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 76 ALJR 436 Ruddock v Taylor (2005) 79 ALJR 1534 Scott v Davis (2000) 204 CLR 333 Smith v The Queen (1994) 181 CLR 338 Sobey v Commercial and Private Agents Board (1979) 22 SASR 70 State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 Staveley Iron and Chemical Co Ltd v Jones [1956] AC 627 Sutherland Shire Council v Finch (1970) 123 CLR 657 Tavelli v Johnson, unreported; SCt of WA; Library No 960693; 25 November 1996 The New South Wales Bar Association v Evatt (1968) 117 CLR 177 Theophanous v Herald & Weekly Times Ltd (1994) 182 CLR 104 Waugh v Waugh (1950) 50 SR (NSW) 210 Wilson v Metaxas [1989] WAR 285 Xenophon v State of South Australia (2000) 78 SASR 251 Ziems v The Prothonotary of the Supreme Court of New South Wales (1957) 97 CLR 279

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : THE FINANCE BROKERS SUPERVISORY BOARD -v- VAN STOKKUM [2006] WASCA 97 CORAM : STEYTLER P

MCLURE JA
BUSS JA

HEARD : 2 MARCH 2006 DELIVERED : 31 MAY 2006 FILE NO/S : FUL 165 of 2003 BETWEEN : THE FINANCE BROKERS SUPERVISORY BOARD

Appellant

AND

BERNARDUS HUBERTUS VAN STOKKUM
Respondent

ON APPEAL FROM:

Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA

Coram : MASTER SANDERSON

Citation : BERNARDUS HUBERTUS VAN STOKKUM AND THE PEOPLE NAMED IN SCHEDULE A & ORS - v - THE FINANCE BROKERS SUPERVISORY BOARD [2005] WASC 2004

File No : CIV 1197 of 2002

(Page 2)

Catchwords:

Practice and procedure - Interlocutory appeal - Statutory immunity defence struck out - Whether defence arguable - Refusal of leave to amend defence - Turns on own facts

Legislation:

Finance Brokers Control Act 1975 (WA), s 81, s 82, s 83, s 87,

Finance Brokers Control Amendment Act 2004 (WA)
Motor Vehicles (Third Party Insurance) Act 1942 (NSW), s 16
Rules of the Supreme Court 1971 (WA), O 20 r 19(1)(a)
Western Australian Marine Act 1982 (WA), s 124

Result:

Leave to appeal granted

Appeal allowed

Category: B

Representation:

Counsel:

Appellant : Mr R J Meadows QC & Ms J C Pritchard
Respondent : Mr C L Zelestis QC & Mr D H Solomon

Solicitors:

Appellant : State Solicitor's Office
Respondent : Solomon Brothers

Case(s) referred to in judgment(s):

Bell v The State of Western Australia (2004) 28 WAR 555
Bell v The State of Western Australia [2005] HCA Trans 561
Cowell v Corrective Services Commission of New South Wales (1988) 13 NSWLR 714
Darling Island Stevedoring and Lighterage Co Ltd v Long (1957) 97 CLR 36
De Bruyn v South Australia (1990) 54 SASR 231

(Page 3)

General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Hollis v Vabu Pty Ltd (2001) 207 CLR 21
Kimberley Downs Pty Ltd v The State of Western Australia, unreported; SCt of WA; Library No 6414; 25August 1986
Parker v The Commonwealth of Australia (1965) 112 CLR 295
Ramsay v Pigram (1968) 118 CLR 271
State of New South Wales v Lepore (2003) 212 CLR 511
Stoneman v Lyons (1975) 133 CLR 550
Twine v Bean's Express Ltd (1946) 62 TLR 458

Case(s) also cited:

671122 Ontario Ltd v Sagaz Industries Canada Inc [2001] 204 DLR (4th) 542
A Solicitor v Council of the Law Society of New South Wales (2004) 216 CLR 253
Astley v Austrust Ltd (1999) 197 CLR 1
Australian National Airlines Commission v Newman (1987) 162 CLR 466
Australian Securities and Investments Commission v Rich (No 3) (2003) 45 ACSR 305
Australian Securities Commission v Kippe and Forgie (1996) 67 FCR 499
Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300
Bazley v Curry (1999) 174 DLR (4th) 45
Bell v The State of Western Australia [2003] WADC 18
Bennett v Minister of Community Welfare (1992) 176 CLR 408
Board of Fire Commissioners (NSW) v Ardouin (1961) 109 CLR 105
Bone v Robins; Ex parte Bone [1990] WAR 94
Brodie v Singleton Shire Council (2001) 206 CLR 512
Broom v Morgan [1953] 1 QB 597
Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384
Clyne v The New South Wales Bar Association (1960) 104 CLR 186
Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194
Commissioner of Railways (Qld) v Ruprecht (1979) 142 CLR 563
Coulthard v Henneker [2003] WASCA 187
Coulton v Holcombe (1986) 162 CLR 1
Dalgety Australia Ltd v Rubin, unreported; SCt WA, Library No 5485; 24 August 1984

(Page 4)

Doe v Bennett (2004) 236 DLR (4th) 577
Dubai Aluminium Co Ltd v Salaam [2003] 2 AC 366
Eastman v Director of Public Prosecutions (ACT) (2003) 214 CLR 318
Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241
Everett v The State of Western Australia & Anor [2001] WADC 18
Garcia v National Australia Bank Ltd (1998) 194 CLR 395
Grljusich v Andrews [2003] WASCA 206
Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365
House v The King (1936) 55 CLR 499
Hughes and Vale Pty Ltd v The State of New South Wales (No 2) (1955) 93 CLR 127
Imperial Chemical Industries Ltd v Shatwell [1965] AC 656
Inglis v Moore (1979) 46 FLR 3
Jacobi v Griffiths (1999) 174 DLR (4th) 71
Johnson Tiles Pty Ltd v Esso Australia Ltd (2000) 104 FCR 564
Kennedy v Lovell (2002) 27 WAR 39
L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1981) 150 CLR 225
Lister v Hesley Hall Ltd [2002] 1 AC 215
Little v State of Victoria [1998] 4 VR 596
London Drugs Ltd v Kuehne and Nagel International Ltd [1992] 97 DLR (4th) 261
McNamara (McGrath) v Consumer, Trader and Tenancy Tribunal (2005) 79 ALJR 1789
Miller v McKeon (1905) 3 CLR 50
Morelle Ltd v Wakeling [1955] 2 QB 379
Packhard v Transport, Trading & Agency Co Ltd & Weir (1912) 14 WALR 191
Petracaro v Commissioner of Consumer Affairs (1994) 62 SASR 387
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355
Puntoreiro v Water Administration Ministerial Corporation (2000) 199 CLR 575
Pyrenees Shire Council v Day (1998) 192 CLR 330
R v De Simoni (1981) 147 CLR 383
Re Real Estate and Business Agents Supervisory Board; Ex parte Cohen (1999) 21 WAR 158
Registrar, Real Estate and Business Agents Supervisory Board & Anor v Barnett, unreported; FCt SCt of WA, Library No 970426; 26 August 1997
Ringelstein v Redford Cattle Co Pty Ltd [1995] 1 Qd R 433
Rogers v Whitaker (1992) 175 CLR 479
Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 76 ALJR 436

(Page 5)

Ruddock v Taylor (2005) 79 ALJR 1534
Scott v Davis (2000) 204 CLR 333
Smith v The Queen (1994) 181 CLR 338
Sobey v Commercial and Private Agents Board (1979) 22 SASR 70
State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146
Staveley Iron and Chemical Co Ltd v Jones [1956] AC 627
Sutherland Shire Council v Finch (1970) 123 CLR 657
Tavelli v Johnson, unreported; SCt of WA; Library No 960693; 25 November 1996
The New South Wales Bar Association v Evatt (1968) 117 CLR 177
Theophanous v Herald & Weekly Times Ltd (1994) 182 CLR 104
Waugh v Waugh (1950) 50 SR (NSW) 210
Wilson v Metaxas [1989] WAR 285
Xenophon v State of South Australia (2000) 78 SASR 251
Ziems v The Prothonotary of the Supreme Court of New South Wales (1957) 97 CLR 279

(Page 6)

1 STEYTLER P: I agree with McLure JA.

2 MCLURE JA: This is an application for leave to appeal from interlocutory orders made by Master Sanderson in an action by thousands of investors (respondents/plaintiffs) against the Finance Brokers Supervisory Board ("Board") (the appellant/defendant). On 11 November 2003, Master Sanderson ordered that par 269 and par 270 of the defence be struck out and he refused leave to amend the defence to insert a new par 265A. Paragraphs 269 and 270 raised the defence of statutory immunity under s 87 of the Finance Brokers Control Act 1975 (WA) ("the Act"). Proposed par 265A related to the Board's jurisdiction to hold an inquiry and take disciplinary action under s 82 and s 83 of the Act respectively.

3 By the Finance Brokers Control Amendment Act 2004 (WA) the Board was dissolved and its rights, liabilities and obligations devolved on the Commissioner acting on behalf of and in the name of the State. At the conclusion of the application for leave, counsel for the appellant applied to substitute the State of Western Australia in place of the Board as the appellant/defendant. The application was unopposed and the order made.

The immunity defence

4 Section 87 of the Act provides:

"Immunity of Board and officers

No liability shall attach to a member or the deputy of a member, or the Registrar, an inspector, or any other officer, of the Board for any act or omission by him, or by the Board, in good faith and in the exercise or purported exercise of his or its powers or functions, or in the discharge or purported discharge of his or its duties under this Act."

5 The relevant paragraphs of the defence provided:

"269. At all material times each of the members of the Board, the deputies of members, and officers of the Board, including the Registrar and inspectors, conducted themselves in good faith and in the exercise or purported exercise of the powers or functions under the Act or, as the case may be, in the discharge or purported discharge of their duties under the Act.

(Page 7)

270. By reason of section 87 of the Act and the matters pleaded in paragraph 269 above:

(a) no liability can in any event attach to any members of the Board, to any deputies of members or to any officers of the Board, including the Registrar and inspectors, for any misfeasances and breaches of duty as pleaded respectively in paragraphs 31 to 39 and 58 to 67 of the Statement of Claim; and

(b) in the absence of any such liability, the Board is in any event not liable for any misfeasances or breaches of duty as pleaded respectively in paragraphs 31 to 39 and 58 to 67 of the Statement of Claim."

6 The statement of claim exceeds 200 pages. For the purposes of this application it is sufficient to note that the respondents claim against the Board for misfeasance in public office and negligence. In respect of each cause of action, the respondents plead that the Board is both directly liable and vicariously liable. As to the latter, the respondents claim the Board is vicariously liable for specified acts and omissions of, inter alia, members and other officers of the Board including Registrars and inspectors (defined in the pleading as "Board personnel"). On the hearing of the application, the Solicitor-General confirmed what is apparent from the pleading, namely that the immunity defence responds only to those claims in which it is alleged that the Board is vicariously liable for the acts and omissions of Board personnel.

7 In essence, the Board's defence in par 269 and par 270 was that it could not be vicariously liable for the acts or omissions of Board personnel because the Board personnel had immunity under s 87 of the Act. The learned Master referred to and acknowledged that there were two conflicting lines of authority on the point which depended (at least in part) on different views as to the jurisprudential basis for the principle of vicarious liability. The respondents relied upon the judgment of Kitto J in Darling Island Stevedoring and Lighterage Co Ltd v Long (1957) 97 CLR 36 at 60 - 65. Fullagar J in that case states the contrary and conflicting view. The Master continued:

"22 There is nothing to be gained by a Master sitting at first instance attempting a detailed analysis of the different

(Page 8)

jurisprudential theories which have led to opposing conclusions. I have simply to follow one line of authority or the other. That being the case, I would follow the Darling Island line of authority. I find the reasoning of Kitto J utterly compelling. On that basis then, the pleas in par 269 and 270 cannot stand and they should be struck out.

23 In the ordinary course I would not be inclined to deal with the strike-out application of par 269 and 270 on an interlocutory basis. Neither paragraph will require any evidence. In a trial that was to run for a few days it would be proper to leave the issues raised by these paragraphs of the defence to the trial Judge who could deal with the issue in the course of his or her reasons. That would avoid the necessity for the defendants to run an interlocutory appeal. But this is no ordinary case … None of these issues, either alone or taken together, will, when resolved in the plaintiffs' favour, result in a knock-out blow to the defendants. But in lengthy and complex litigation such as this, there is much to be gained, in my view, from attempting to remove as issues as many matters as possible."

8 The Master did not base his decision on the ground that he was required by binding authority to do so. After the Master published his reasons, the Full Court handed down its decision in Bell v The State of Western Australia (2004) 28 WAR 555. The Full Court in Bell did not follow the line of authority represented by Kitto J's judgment in Darling Island.

9 The respondents in this Court contended that the Master was correct in following Kitto J in Darling Island because that judgment was consistent with binding High Court authority in support of the "master tort theory" of vicarious liability, which theory the respondents further contended required the Court to conclude that vicarious liability of the Board could co-exist with the statutory immunity of Board personnel. The respondents also filed a notice of contention seeking to affirm the Master's decision on the ground that pars 269 and 270 did not disclose a reasonable defence by reason of the proper construction of s 87 of the Act.

10 Before addressing those submissions it is necessary to refer to Bell. The central question in Bell was whether the State could be vicariously

(Page 9)

liable for the negligent acts of an official if that official was entitled to immunity under s 124 of the Western Australian Marine Act 1982 (WA) ("Marine Act"). The Court answered that question in the negative. I concluded (and Le Miere J agreed) that the balance of authority and the rejection of the master tort theory of vicarious liability supported the conclusion that, at common law, immunity from liability of the servant could not co-exist with vicarious liability of the employer and that s 124 did not create a liability where none would otherwise exist.

11 Section 124 of the Marine Act provides:

"Immunity of Minister and officials

No liability shall attach to the Minister, the chief executive officer or any other official of the Department, or to any person acting with the authority or on the direction of the Minister or the chief executive officer in good faith and in the exercise or purported exercise of a power or in the discharge or purported discharge of a duty under this Act."

12 Although the State contended in Bell that s 124 on its proper construction also rendered the State immune from direct liability for negligence, it was unnecessary to answer that question because the parties agreed that the trial Judge had not found the State to be directly liable in negligence. The appellant in Bell applied for, and obtained, special leave to appeal to the High Court on the question answered by the Full Court. Special leave was granted on the basis that the question had not been settled at High Court level (Bell v The State of Western Australia [2005] HCA Trans 561 at 4). However, the matter settled before the hearing of the appeal by the High Court and the appeal was discontinued.

13 The respondents in this application contended that Bell is not a binding precedent and should not be followed "because it was decided per incuriam, having been decided without the Court having been referred to or having considered binding authority". It is correct that no party in Bell claimed that there was binding authority as to the juristic basis of vicarious liability (or on the question whether vicarious liability of the employer could co-exist with the employees' immunity from liability).

14 The respondents to this application submitted that there is binding High Court authority that the foundation for vicarious liability is the master tort theory rather than the servant tort theory. Under the master tort theory the employer is said to have an independent duty of care which is breached by the acts and omissions of the employee being attributed to

(Page 10)

the employer (in circumstances which do not give rise to personal liability). Under the servant tort theory the employers' liability is derivative in that the employees' tort is attributed to the employer. The respondents contended that there is majority support for the master tort theory in Darling Island (Webb, Kitto and Taylor JJ); Ramsay v Pigram (1968) 118 CLR 271 at 278 (Barwick CJ), 285 (Taylor J, Kitto J agreeing) and 284 (McTiernan J); and Stoneman v Lyons (1975) 133 CLR 550 at 573 - 574 and 577 (Mason J with whom Barwick CJ and Gibbs J agreed), and 562 (Stephen J).

15 I am not persuaded that approval of the master tort theory is (or unarguably is) part of the ratio in Darling Island or that Webb J is unarguably of the same view as Kitto and Taylor JJ on that issue. The question for determination in Darling Island was whether the phrase "person-in-charge" in subsidiary legislation should be construed to include the employer of the person actually exercising control. As Fullagar J observed (at 56), it was neither necessary nor profitable in that case to inquire into the nature, origin or theoretical justification of the doctrine of vicarious liability. Notwithstanding that statement, he did so and Fullagar J (with Williams J) supported the servant tort theory. Kitto and Taylor JJ support the master tort theory. On my reading, Webb J is silent on the subject.

16 I am also not persuaded that acceptance of the master tort theory is necessarily part of the ratio in Ramsay v Pigram or Stoneham v Lyons. The issue in Ramsay v Pigram was whether the respondent was estopped from asserting negligence by a police officer in the course of his duty. The respondent was injured when a government owned vehicle driven by the police officer collided with the respondent's vehicle. The police officer had sued the respondent for personal injuries arising out of the collision. The respondent was found to be negligent and the police officer was found not guilty of contributory negligence. Later, the respondent sued the appellant, as nominal defendant representing the government, for personal injuries suffered in the same collision. The Court held there was no issue estoppel because there was no privity of interest between the appellant (nominal defendant) and the police officer to entitle the appellant to rely on the findings in the police officer's action. The appellant's liability, if any, to the respondent, depended on the content of the duty owed by the owner of the car (the New South Wales Government) by virtue of s 16 of the Motor Vehicles (Third Party Insurance) Act1942 (NSW) (Barwick CJ at 279, McTiernan J at 282 - 283, Taylor J at 285, with whom Kitto J agreed, and Windeyer J at 289). Section 16 provided that the driver of certain vehicles was

(Page 11)

deemed to be the agent of the owner acting within the scope of his authority for the purpose of enabling a third party injured by the negligence of the driver to recover against the insured owner. A principal is liable for loss or damage caused by the tort of his agent if the agent was acting within the scope of the agent's authority. It has not been established that a principal's liability for the agent's tort is "truly vicarious": Bowstead & FMB Reynolds Reynolds on Agency (17th ed) 2001 at par 8-177 to par 8-183. On my reading of the judgments in Ramsay, only Taylor J (and Kitto J) expressly characterises the statute as imposing vicarious liability on the owner of a vehicle for the acts or omissions of the driver. Three members of the Court (Barwick CJ, McTiernan and Windeyer JJ) also concluded that the issues in the two actions were not identical. They did so because of their view that the owner of the car owed an independent duty, which was not necessarily co-extensive with the personal duty of the driver, to persons injured by the negligence of the driver. However, that can occur regardless of the juristic basis for vicarious liability: see Twine v Bean's Express Ltd (1946) 62 TLR 458 (an employer was not liable for the negligence of his employee in the course of his duties). Barwick CJ's approval of Kitto J's judgment in Darling Island is arguably obiter.

17 The issue in Stoneman v Lyons was whether an employer was liable in trespass to an adjoining land owner for the act of an independent contractor. That has, at best, a remote connection with the juristic basis for vicarious liability. Further, more recent High Court authority suggests that legal policy may explain the existence and scope of the doctrine of vicarious liability rather than the master (or indeed servant) tort theory: Hollis v Vabu Pty Ltd (2001) 207 CLR 21 at 37 per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ, at 55 per McHugh J; State of New South Wales v Lepore (2003) 212 CLR 511 at 553 per Gaudron J, at 580 - 581 per Gummow and Hayne JJ, at 611 - 614 per Kirby J.

18 In any event, even if the master tort theory is the rationale for vicarious liability, there is direct High Court authority on the central issue of the effect of employee immunity on vicarious liability. Windeyer J in Parker v The Commonwealth of Australia (1965) 112 CLR 295 concluded that immunity from liability of the servant cannot co-exist with vicarious liability of the employer whatever the jurisprudential basis of vicarious liability. He said (at 300 - 301):

"Whether the so-called 'vicarious' liability of a master for the tortious acts of his servant arises because the master is answerable for his servant's torts, or because the acts of his

(Page 12)

servant are imputed to him so as to make him himself liable in tort, has been much discussed and has provoked differing views, judicial and academic … But, however the principle of liability should be expressed, I think that the Commonwealth is only liable for the acts or omissions of a servant if the servant would himself be liable." (footnotes omitted)

19 This statement of principle has been applied by intermediate courts of appeal in South Australia (De Bruyn v South Australia (1990) 54 SASR 231 at 235 per King CJ) and New South Wales (Cowell v Corrective Services Commission of New South Wales (1988) 13 NSWLR 714 at 731 - 733 per Clark JA).

20 That brings me to the question of statutory construction. The approach taken in Bell (and De Bruyn and Cowell) is that at common law, vicarious liability does not attach for the negligent acts or omissions of another if that other is immune from liability. On that view of the common law, the question is whether the statutory provision granting immunity expressly or impliedly preserves vicarious liability in the State. Thus, the statutory construction question addressed in Bell was not whether s 124 of the Marine Act granted immunity to the State but rather whether the section altered or abrogated the common law rule so as to preserve the State's vicarious liability. If Bell correctly states the common law, it is arguable that s 87 of the Act does not manifest an intention to alter the common law so as to make the Board vicariously liable for the acts of Board personnel who are immune from liability.

21 For these reasons, I am satisfied that the defence in pars 269 and 270 is at least arguable. That being the case, the Master erred in striking out pars 269 and 270. He failed to apply the correct test. A court may strike out a pleading if it discloses no reasonable defence: O 20 r 19(1)(a) of the Rules of the Supreme Court 1971 (WA). A defence will not be reasonable if it is so clearly untenable that it cannot succeed: General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 130. Making the same point another way, a strike-out application must fail if the defence is arguable. A court should not summarily reject a defence where there is a reasonable possibility that, as the law develops, the legal principle relied upon will be confirmed: Kimberley Downs Pty Ltd v The State of Western Australia, unreported; SCt of WA; Library No 6414; 25August 1986 at 6 per Master Staples.

22 In the circumstances confronting the Master, being a conflict of what he regarded as non-binding authority, it was not his role "simply to follow

(Page 13)

one line of authority or the other". The sole question for him was whether the defence was arguable. The existence of conflicting lines of (non-binding) authority, one of which supported the defence, was sufficient in itself to establish that the defence was arguable and thus reasonable. That being so, the Court's discretion to strike out was not enlivened. The Master was required to dismiss the application. Accordingly, it is not necessary to address the discretionary considerations to which the Master had regard in par 23 of his reasons. However, I wish to record my disagreement with his judgment that there was much to be gained from summarily resolving the question as early as possible. The determination of the issue would not resolve the litigation and would not materially reduce the factual matters for determination. Although it is incorrect to say that proof of the defence will not require any evidence, it is the case that there is a significant factual overlap between what the respondents have to prove to establish misfeasance in public office and the requirement of good faith in s 87. Further, having regard to the nature of the issue and the conflicting lines of authority, the summary dismissal of the defence would inevitably result in an appeal to this Court and this Court is required to confine itself to the only relevant issue, namely whether the defence was arguable.

Proposed par 265A

23 The statement of claim contains a number of allegations that the Board had knowledge that finance brokers were engaging in conduct that was inconsistent with the pooled mortgage and prescribed interest provisions of the Corporations Law ("the alleged conduct"). It is then pleaded that the Board was guilty of misfeasance in public office and negligent because of a failure or refusal by the Board to hold an inquiry under s 82 of the Act into whether finance brokers had engaged in the alleged conduct and to discipline those finance brokers who had engaged in such conduct pursuant to s 83 of the Act. Proposed par 265A responds to those allegations. The negligence plea also covers other alleged misconduct (defined in the pleading as "predatory conduct") but par 265A does not respond to those claims. Paragraph 265A provided:

"As to the allegations in the Statement of Claim that the Board, its members or deputy members, Registrar or inspectors were aware of, but did not take disciplinary action under s.83 of the Act in relation to, conduct by finance brokers inconsistent with the pooled mortgage and prescribed interest provisions of the Corporations Law, ('the alleged conduct'), the Defendant says:

(Page 14)

(a) the Board had jurisdiction under section 82 of the Act to hold an inquiry into whether there had been alleged conduct by a finance broker, only if, and to the extent that, any such inquiry was solely for the purpose of determining whether the finance broker had, by the alleged conduct, acted in conformity with the special conditions, if any, of the finance broker's licence and business certificate and with the Code of Conduct and the requirements of the Act in force at the time the alleged conduct occurred (together called 'the regulatory requirements');

(b) further or in the alternative to sub-paragraph (a), the Board had power in the course of an inquiry under section 82 to examine the alleged conduct only for the purpose of determining whether such conduct was in conformity with the regulatory requirements;

(c) the Board could be satisfied for the purposes of section 83 of the Act that proper cause existed for disciplinary action against a finance broker in respect of the alleged conduct only if:


(i) a valid enquiry under section 82 had been held by the Board; and

(ii) the finance broker –


(A) had been convicted under the Corporations Law for the alleged conduct and that conduct was such as, within the meaning of section 83(2)(b) of the Act, would or might prejudice any rights or interests of the borrower or lender or prospective borrower or lender, or

(B) had by the alleged conduct breached the regulatory requirements, or

(C) was, by reason of the alleged conduct, unfit, within the meaning of section 83(2)(d) of the Act, to hold a licence;

(d) the alleged conduct –

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(i) was not the subject of a conviction of a finance broker for a breach of the Corporations Law;

(ii) was not such as to prejudice or potentially prejudice any rights or interests of the borrower or lender or prospective borrower or lender within the meaning of section 83(2)(b) of the Act;

(iii) was not capable of breaching, and did not breach, the regulatory requirements;

(iv) did not render the finance broker unfit to hold a licence, within the meaning of section 83(2)(d) of the Act;

(e) in the premises –

(i) the Board had no jurisdiction under section 82 of the Act to inquire into the alleged conduct; and

(ii) the Board had no jurisdiction or power to take disciplinary action against a finance broker under section 83 of the Act in relation to the alleged conduct."

24 Section 81 of the Act provides that the Board may approve a code of conduct for finance brokers. It has done so. The current code is a comprehensive statement of finance brokers' duties to parties, borrowers and lenders, including a duty not to knowingly or recklessly mislead or deceive. Section 82 is headed "Inquiries into conduct of finance brokers". It materially provides:

"(1) The Board may on the application of the Registrar, an inspector, or any other person, or of its own motion hold an inquiry into the conduct of any finance broker for the purpose of determining whether or not the finance broker is acting in conformity with the special conditions, if any, of his licence and business certificate and with the finance brokers code of conduct and is complying with the requirements of this Act."

25 Section 83 materially provides:

"Powers on inquiry

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(1) If after conducting an inquiry under section 82(1) the Board is satisfied that proper cause exists for disciplinary action, the Board may do any one or more of the following things –

(a) reprimand or caution the finance broker;

(b) impose a fine not exceeding $1 000 on him; and

(c) suspend or cancel his licence and any business certificate in respect thereof and, in addition, disqualify him either temporarily or permanently, or until the fulfilment of any condition which may be imposed by the Board, or until the further order of the Board, from holding a licence or business certificate, or both.


(2) There shall be proper cause for disciplinary action if –

(a) the finance broker improperly obtained a licence or business certificate;

(b) the finance broker, or any person acting with the authority or upon the instructions of the finance broker, has, in the course of any dealings with a borrower or a lender or a prospective borrower or lender, been guilty of conduct that constitutes a breach of any law other than this Act and that prejudices or may prejudice any rights or interests of the borrower or lender or prospective borrower or lender;

(c) the finance broker is acting or has acted in breach of –


(i) a special condition of his licence or business certificate;

(ii) the requirements of this Act; or

(iii) the finance brokers code of conduct; or


(d) any other cause exists that, in the opinion of the Board, renders the finance broker unfit to hold a licence."

(Page 17)

26 There are three parts to the proposed defence. First, subpars (a), (b), (d)(iii) and (e)(i) of par 265A plead that the Board had no jurisdiction to conduct an inquiry into the alleged conduct because it would not have been an inquiry for one of the purposes in s 82(1) of the Act. The argument is as follows. Under s 83(1), it is a precondition for taking disciplinary action against a finance broker that the Board has conducted an inquiry under s 82(1) of the Act. An inquiry under s 82(1) may be held only for the specific purposes there set out, namely to determine whether or not the finance broker is acting in conformity with the special conditions, if any, of his licence and business certificate, complying with the finance brokers' code of conduct or complying with the requirements of the Act. The alleged conduct does not fall within any of the stated purposes. This links with the second part of the proposed defence and will be discussed in that context. However, it is apparent from the text of the legislation that the issues to be resolved are whether there is a necessary conflict between the scope of the inquiry power in s 82(1) and the matters listed in s 83(2) and if so, how the conflict is to be reconciled.

27 Secondly, subpars (c)(ii)(C), (d)(iv) and (e)(ii) of par 265A plead that the Board had no jurisdiction to take disciplinary action against a finance broker in respect of the alleged conduct under s 83(2)(d) of the Act. The appellant's contention was that disciplinary action could be taken under that paragraph only if the Board was satisfied, following the conduct of an inquiry under s 82(1), that the finance broker was unfit to hold a licence. Other aspects of this plea are that s 83(2)(d) excludes the matters referred to in subpars (a) - (c) of s 83(2) and that the alleged conduct did not render the finance brokers unfit to hold a licence.

28 The Master concluded that "the discretion given to the Board to [a]ct under subpar (2)(d) [of s 83] is wide and unfettered and there is no warrant at all for limiting its scope as the [appellant] would have it in the proposed par 265A". The Master rejected the contention that the Board's power to conduct an inquiry under s 82 was limited to the purposes enumerated in s 82(1). Such an approach he said "would render the powers of the Board to conduct an inquiry so limited as to be meaningless". That is an obvious overstatement, particularly when regard is had to the extensive duties imposed on finance brokers in the Code of Conduct. The Master did not consider whether there was a conflict between s 82(1) and s 83(2) or the ways any conflict may be reconciled.

29 The Master also determined that s 83(2)(d) empowered the Board to conduct an inquiry to determine whether the conduct of the finance broker was contrary to the provisions of the Corporations Law in the absence of

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any conviction for a breach of that law. However, he did not address the argument that s 83(2)(d) excludes the matters in subpars (a) - (c) (relying on the words "any other cause" in par (d)). Nor did he consider the claim that the alleged conduct did not render the finance brokers unfit to hold a licence within the meaning of s 83(2)(d) of the Act. Whether the Board could have been satisfied that the alleged conduct rendered the finance brokers unfit to hold a finance broker's licence would depend on the evidence that could have been placed before the Board and whether that evidence was capable of supporting a finding that the alleged conduct rendered the finance broker unfit.

30 Thirdly, subpars (c)(ii), (d)(ii) and (e)(ii) of par 265A plead that the Board had no jurisdiction or power to take disciplinary action against a finance broker under s 83(2)(b) in relation to the alleged conduct. The appellant claims that the Board could only be satisfied that a finance broker was guilty of conduct that constituted a breach of a law other than the Act if it became known to the Board that a broker had been convicted under the Corporations Law in respect of the alleged conduct. It relies on the ordinary and natural meaning of the term "guilty" and the reference to "conduct that constitutes a breach of any law" to limit the Board's jurisdiction to those cases where a finance broker had been convicted of a breach of a criminal law. In support of this proposition it also relies on the different terminology used in s 83(2)(b) and s 83(2)(c); the fact that s 82(1) does not permit the Board to hold an inquiry for the purpose of determining whether or not a finance broker is guilty of conduct that constitutes a breach of any other law; that breaches of the prescribed interest provisions of the Corporations Law were at the relevant time prosecuted by the Australian Securities Commission; and finally that a broker could be found to have committed an offence without the advantages afforded to him in a criminal trial.

31 It is also pleaded that the Board had no jurisdiction to act under s 83(2)(b) because the alleged conduct was not such as to prejudice or potentially prejudice any rights or interests of the borrower or lender or prospective borrower or lender within the meaning of s 83(2)(b). Whether or not that is so is a matter for evidence. The Master rejected without explanation the contention that s 83(2)(b) is limited to circumstances where a broker has been convicted of an offence under any other law and did not deal with the no prejudice aspect of the proposed defence.

32 This is not a case where the facts are indisputable and permit of only one conclusion. The outcome on two aspects of the proposed defence could be altered by evidence adduced at trial. Those aspects are whether

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the alleged conduct rendered the finance brokers unfit to hold a licence within the meaning of s 83(2)(d) and whether it prejudiced any rights or interests of the borrowers or lenders, or prospective borrowers or lenders within the meaning of s 83(2)(b). The Master erred in depriving the appellant of its right to have these issues determined at trial.

33 Although other aspects of the defence do not depend on disputed facts, it cannot be said that the statutory construction of s 82 and s 83 contended for by the appellant is unarguable. In particular, I remain to be satisfied that an inquiry for one or more of the purposes stated in s 82(1) could not possibly result in findings that establish proper cause for disciplinary action under each paragraph of s 83(2) which in turn enlivens the Board's power to impose one or more of the penalties specified in s 83(1). That is, there may be no necessary conflict in the scope of s 82(1) and s 83(2) of the Act. The trial Judge who has the benefit of hearing the evidence and submissions, not only in relation to the alleged conduct, but also in relation to the so-called predatory conduct, will be in a significantly better position to resolve the issues of statutory construction that arise.

34 I am satisfied that proposed par 265A raises real questions of fact and law that ought to be determined at trial. It follows that the Master erred in refusing leave to amend to insert par 265A in the defence.

35 I would grant leave to appeal, allow the appeal, set aside orders 2, 4 and 6 of the orders made by Master Sanderson on 11 November 2003 and in lieu thereof order that:

(a) the appellant/defendant have leave to amend the defence to insert par 265A of the minute of proposed amendments to defence filed 30 September 2003; and

(b) the respondents/plaintiffs' application to strike out pars 269 and 270 of the defence be dismissed.

36 I would hear the parties on costs.

37 BUSS JA: I agree with McLure JA.