Travel Compensation Fund v Lam, John Kam Man

[1997] FCA 308

IN THE FEDERAL COURT OF AUSTRALIA	)
)
NEW SOUTH WALES DISTRICT REGISTRY	)     No. NG  52 of 1995
)
GENERAL DIVISION	)

BETWEEN:             

TRAVEL COMPENSATION FUND
Applicant

  AND:  

JOHN KAM MAN LAM
First Respondent

WILSON KAM FAI WU
Second Respondent

ADRIAN DOUGLAS  MILLER
Third Respondent

ALOYSIUS TSE SANG LEE
Fourth Respondent

TREVOR JOHN KENNEDY
Fifth Respondent

CHRISTINA LAIDLEY KENNEDY
Sixth Respondent

ALAN MICHAEL WARD
Seventh Respondent

GORDONS INTERNATIONAL PTY LIMITED (IN LIQUIDATION)
Eight Respondent

CORAM:

EMMETT J

PLACE:

SYDNEY

DATED:

21 March 1997

EX TEMPORE REASONS FOR JUDGMENT

This is a notice of motion for orders pursuant to order 29 rule 2 for the decision separately from other questions arising in the proceedings and before the determination of those other questions of certain questions set out in the schedule to the motion.  The questions arise out of allegations in the statement of claim, examples of which are found at paragraphs 89 and 90 of the second amended statement of claim. 

There are eight separate claims made. Mr Einstein, senior counsel for the moving party, the fifth respondent in the proceedings, frankly accepted that, even if he were successful in his contentions as to the proposed separate questions, the resolution of the questions would not resolve the proceedings as against the parties for whom he appears.   Nevertheless, the general contention was that there was some utility in resolving the questions because it may well have the effect of reducing the time for the trial.   Paragraphs 89 and 90 were said to be typical of similar allegations made in other counts in the statement of claim.

The proceedings involve a claim by the Travel Compensation Fund which by statute has a capacity to sue in that name.  Generally, and I am over simplifying, the claim depends upon allegations made that directors of the 8th respondent, Gordon's International Pty Limited, (“Gordons”) have a liability under section 40(4) of the Travel Agents Act (NSW) 1986 (“the Act”).

The effect of that provision is that where the rights conferred by section 40(3) of the Act are exercisable against a body corporate, those rights are enforceable severally against the body corporate and each of the directors of that body corporate. Section 40(3) provides that “where a payment is made to a claimant under the compensation scheme” as defined in the Act, “by reason of an act or omission by a person carrying on business as a travel agent, the compensation scheme trustees”, namely the applicant in these proceedings, “are subrogated to the rights of the claimant in relation to that act or omission”.

The general contention is that directors of Gordons have a liability to various clients of Gordons in respect of moneys paid by the client to Gordons in anticipation of travel arrangements to be made by Gordons. Gordons became insolvent before providing the travel arrangements that were paid for in advance.

The claims in paragraphs 89 and 90 are, first, that the various clients had assigned in writing for valuable consideration all of their rights in law and in equity as against Gordons with respect to the various payments that they had made.   Secondly, it is alleged that by operation of section 40(3) of the Travel Agents Act, the applicant is subrogated to the rights of each of those clients in respect of the payments made by the applicant to those clients.

On the one hand, a claim is made that causes of action have been assigned in a way which entitles the applicant to bring proceedings for recovery of moneys in right of the clients. The alternative is that it is said that there is a statutory subrogation by the operation of section 40(3). The net effect is the same, namely, that the applicant brings these proceedings for recovery from the directors of the moneys which were paid by the applicant to clients of Gordons by way of compensation under the compensation scheme.

The 5th respondent has filed a defence raising a number of questions which it is contended are appropriate for preliminary determination.  The first question concerns the effect of the trust deed under which the compensation scheme operates.  Clause 15.1 of that deed relevantly provides that the applicant shall pay compensation out of the fund to a beneficiary, as defined, who is a client of a travel agent, such as Gordons, who has suffered or may suffer pecuniary loss where relevantly the client is not protected against a loss by a policy of insurance. Clause 15.2 provides that the applicant may in its absolute discretion pay compensation to a beneficiary to whom the applicant is not required to pay compensation by virtue of clause 15.1.

Thus the scheme of the deed seems to be that the applicant has an obligation, so long as certain prerequisites are satisfied, to pay compensation but nevertheless has a discretion to pay compensation even where those prerequisites have not been satisfied.

The contention on the part of the 5th respondent, again perhaps over-simplified, is that a number of the clients in respect of whom the claim is made in these proceedings were protected against the relevant loss by a policy of insurance. Nevertheless the applicant paid moneys out to those clients on the basis that they were not protected. 

The argument will be that, whereas the applicant may have been entitled to make the payment under clause 15.2, it purported to act under clause 15.1 without having regard to the relevant considerations necessary to justify the payment under clause 15.2. It is then said that, in those circumstances, there has been no payment to a claimant under the compensation scheme and, accordingly, section 40(3) does not apply to give any right of subrogation.

The first question which Mr Einstein seeks to have ventilated by way of preliminary hearing is the question of whether, if it can be shown that the payments were made in those circumstances, that would disqualify the applicant from being subrogated under section 40(3). Mr Einstein acknowledges that the determination of that question of itself has no utility because of the alternative claim made in paragraph 89 of the statement of claim that there has been an assignment of each client's claim against Gordons independently of any statutory right of compensation.

The argument in relation to that question involves a contention that the relevant assignment was given as consideration for the payments that were made by the applicant, purportedly under clause 15.1. The argument is that, in effect, those payments were made in circumstances where there was no obligation to make the payment and in circumstances where 15.2 was not adequately adverted to by the applicant.

The result, it is said, is that the payments are recoverable by the applicant, with the consequence that the assignment is null and void or invalid or inoperative because there has been a total failure of consideration for the assignment.

The difficulty with that question is that it raises the spectre of an inquiry into the circumstances of each assignment given by each of the clients in whose right the applicant presently sues. It was said by Mr Einstein, albeit from the bar table, that he expects that it may well be that the facts in relation to each of some 300 assignments are sufficiently similar for there to be thrown up issues of principle that might be resolved.   However at this stage, the preparation of the case has not progressed to the state where one can say that that is so.

It is possible that, after detailed particulars have been furnished from both sides as to the matters that would be raised by that question, there could be a question isolated that would resolve the matter so far as a number of the claims is concerned.  At this stage, however, it is not possible to say that there would be utility at all in resolving the question as formulated because the question as formulated would involve a detailed examination of some 300 cases.

In those circumstances, even if one resolved the first question concerning the statutory subrogation, it would still be necessary to resolve the second series of factual matters which it appears to me on the material that is presently available, is simply not appropriate for preliminary determination. 

The third question concerns the effect of clause 15.1(d) in so far as it requires a determination of whether or not a client is protected against the loss in question by a policy of insurance. That question, of course, only arises as a sub question of the first question to which I have referred and there is no utility in determining that question unless the first question is also to be pursued.

Mr Einstein effectively concedes that the fourth question raised in the notice of motion is inappropriate for preliminary determination because it involves an examination of the events which happened. That would involve canvassing much of the material that would otherwise be evidence at the trial.

In the circumstance it seems to me, therefore, that there is no present utility in making an order under order 29 for the preliminary determination of any of the questions which have thus been formulated. 

As I have indicated, however, it may be that at a future time, questions could be isolated which would be appropriately dealt with as preliminary issues. I am inclined to think at this stage, however, that they are questions that are more appropriately dealt with by the judge who is seized of the hearing who may be able to give directions or formulate a process whereby the detailed factual matters could be explored less formally than in the course of the trial.  With co-operation and goodwill on both sides, one would expect that there may well be detailed factual matters which could be resolved without the need to involve the court in the determination of those matters as part of the trial.

In the circumstances, I propose to dismiss the notice of motion in so far as it has not already been dismissed and to order the moving party to pay the applicant's costs of the motion.  I have, however, indicated my view that it may well be that it would be appropriate for the judge who is seized of the trial to examine closely, any procedures whereby the matters that are raised by the second question could be resolved. 

I will have some inquiries made to endeavour to ensure that, when the matter is listed for hearing, the trial judge is made aware of the observations that I have made and I expect that, in those circumstances, there would be a reasonably lengthy directions hearing at which the parties might be invited to formulate procedures in which these matters might be resolved. 

If by chance I happen to be the trial judge I would certainly intend to embark on such a course.

I certify that this and the preceding six pages are a true copy of the Reasons for Judgment of his Honour Justice Emmett.

Associate:

Dated:               21 March 1997

Heard:            21 March 1997

Place:              Sydney

Decision:        21 March 1997

Appearances:

Counsel for the applicant (respondent on the notice of motion):      M.J. Neil QC

M.K. Minehan

Solicitor for the applicant (respondent on the notice of motion):      Blessington Judd

Counsel for the 5th respondent (applicant on the notice of motion): C. Einstein QC

G.A.Laughton

Solicitor for the 5th respondent (applicant on the notice of motion):           McGrohon Bergseng