Treacy v Rylestone Pty Ltd
[2006] WASC 92
TREACY & ORS -v- RYLESTONE PTY LTD & ORS [2006] WASC 92
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2006] WASC 92 | |
| Case No: | CIV:2189/2001 | 26 APRIL 2006 | |
| Coram: | MASTER SANDERSON | 25/05/06 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | Leave to amend granted to sixth defendant Leave to amend refused to fourth defendant | ||
| B | |||
| PDF Version |
| Parties: | JOANNE MARIE TREACY GEORGE ROBERT SOULLIER DOROTHY MARY JOY SOULLIER COLIN DOUGLAS HENNING DOREEN RUTH HENNING RYLESTONE PTY LTD (ACN 009 351 768) IVAN JOHN HILL GEOFFREY TERRANCE ROWE MORTGAGE FACILITIES PTY LTD (ACN 069 502 530) LINDSAY CHARLES SPENCER SANFORD JOHN CLARENCE LESTER WARD CLAIRS KEELEY (A Firm) RONALD GRAHAM O'CONNOR |
Catchwords: | Practice and procedure Application to amend defence of fourth and sixth defendants Turns on its own facts |
Legislation: | Corporations Law, s 1005, s 1006(1), s 1006(2), s 1008(3) Rules of the Supreme Court 1971 (WA), O 20 r 18(1), O 67 r 11 |
Case References: | Maguire v Makaronis (1997) 188 CLR 449 Astley v Austrust Ltd (1999) 197 CLR 1 Atkinson v Fitzwalter [1987] 1 All ER 483 Bahr v Nicolay (No 2) (1988) 164 CLR 604 Baird v Magripilis (1925) 37 CLR 321 Banque Commerciale SA (In Liq) v Akhil Holdings Ltd (1990) 169 CLR 279 Bradley West Clarke List v Keeman [1998] ANZ ConvR 77 Clark Boyce v Mouat [1994] 1 AC 428 Commonwealth Bank of Australia v Smith (1991) 42 FCR 390 Dare v Pulham (1982) 148 CLR 658 DrummondJackson v British Medical Association [1970] 1 WLR 688 EastWest Airlines (Operations) Ltd v Commonwealth of Australia & Ors (1983) 49 ALR 323 Gould & Birbeck & Bacon v Mount Oxide Mines Ltd (In Liq) (1916) 22 CLR 490 Harris v Cigna Insurance Australia Ltd & Dicke, unreported; Fed Crt of A; 3 November 1995 Hooker Corporation Ltd v Commonwealth (1986) 65 ACTR 32 Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365 Settlement Agents Supervisory Board v Crozet Pty Ltd [2006] WASAT 65 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- GEORGE ROBERT SOULLIER
DOROTHY MARY JOY SOULLIER
COLIN DOUGLAS HENNING
DOREEN RUTH HENNING
Plaintiffs
AND
RYLESTONE PTY LTD (ACN 009 351 768)
First Defendant
IVAN JOHN HILL
GEOFFREY TERRANCE ROWE
Second Defendants
MORTGAGE FACILITIES PTY LTD (ACN 069 502 530)
Third Defendant
LINDSAY CHARLES SPENCER SANFORD
Fourth Defendant
JOHN CLARENCE LESTER WARD
Fifth Defendant
- CLAIRS KEELEY (A Firm)
Sixth Defendant
RONALD GRAHAM O'CONNOR
Seventh Defendant
Catchwords:
Practice and procedure - Application to amend defence of fourth and sixth defendants - Turns on its own facts
Legislation:
Corporations Law, s 1005, s 1006(1), s 1006(2), s 1008(3)
Rules of the Supreme Court 1971 (WA), O 20 r 18(1), O 67 r 11
Result:
Leave to amend granted to sixth defendant
Leave to amend refused to fourth defendant
Category: B
Representation:
Counsel:
Plaintiffs : Mr D H Solomon
First Defendant : No appearance
Second Defendants : No appearance
Third Defendant : No appearance
Fourth Defendant : Mr M G Pendlebury
Fifth Defendant : No appearance
Sixth Defendant : Mr K J Martin QC
Seventh Defendant : No appearance
(Page 3)
Solicitors:
Plaintiffs : Solomon Brothers
First Defendant : No appearance
Second Defendants : No appearance
Third Defendant : No appearance
Fourth Defendant : Murfett & Co
Fifth Defendant : No appearance
Sixth Defendant : Mallesons Stephen Jaques
Seventh Defendant : No appearance
Case(s) referred to in judgment(s):
Maguire v Makaronis (1997) 188 CLR 449
Case(s) also cited:
Astley v Austrust Ltd (1999) 197 CLR 1
Atkinson v Fitzwalter [1987] 1 All ER 483
Bahr v Nicolay (No 2) (1988) 164 CLR 604
Baird v Magripilis (1925) 37 CLR 321
Banque Commerciale SA (In Liq) v Akhil Holdings Ltd (1990) 169 CLR 279
Bradley West Clarke List v Keeman [1998] ANZ ConvR 77
Clark Boyce v Mouat [1994] 1 AC 428
Commonwealth Bank of Australia v Smith (1991) 42 FCR 390
Dare v Pulham (1982) 148 CLR 658
DrummondJackson v British Medical Association [1970] 1 WLR 688
EastWest Airlines (Operations) Ltd v Commonwealth of Australia & Ors (1983) 49 ALR 323
Gould & Birbeck & Bacon v Mount Oxide Mines Ltd (In Liq) (1916) 22 CLR 490
Harris v Cigna Insurance Australia Ltd & Dicke, unreported; Fed Crt of A; 3 November 1995
Hooker Corporation Ltd v Commonwealth (1986) 65 ACTR 32
Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365
Settlement Agents Supervisory Board v Crozet Pty Ltd [2006] WASAT 65
(Page 4)
1 MASTER SANDERSON: This is the application on the part of both the fourth and sixth defendants for leave to amend their respective defences. In the case of the fourth defendant, leave was sought to amend in terms of a document titled "Further Revised Amended Defence of the Fourth Defendant". This document had not actually been filed but a copy had been provided to the plaintiffs. In the case of the sixth defendant, leave was sought to amend in terms of a "Minute of Proposed Amended Defence" filed 23 January 2006. In each case, the plaintiffs opposed leave being granted.
2 Before going to the proposed amended pleadings, it is necessary to say something about the facts and the case put against the fourth and sixth defendants. This case is one of a number of actions which have arisen out of the collapse of certain finance brokers. In this action, the plaintiffs sue a company to which they loaned money (the first defendant), the guarantors (the second defendants), the finance broker and its directors (the third, fourth and fifth defendants), a firm of solicitors (the sixth defendant) and the valuer (the seventh defendant).
3 The case against the fourth defendant can be summarised in this way. It is said the plaintiffs lent $121,000 (the "Loan") to the first defendant on security of a registered mortgage dated 7 August 1998 (the "Mortgage"). By letter sent in or about July 1998, the plaintiffs say that the third defendant offered to each of the plaintiffs an interest in the Loan and the Mortgage. They say that the Loan and the Mortgage properly considered were a Managed Investment Scheme (the "MIS") as defined in s 9 of the relevant corporations legislation. The plaintiffs say that as the fourth defendant was a director of the third defendant, he is rendered liable for any loss and damage suffered as a consequence of the plaintiffs investing in the Loan and the Mortgage.
4 The claims against the sixth defendant are somewhat more complicated. The plaintiffs allege that the sixth defendant was engaged by the plaintiffs (through the third defendant) to act as solicitors for the plaintiffs. It is said in consequence of that engagement the sixth defendant owed the plaintiffs certain duties. It is alleged that the sixth defendant failed to give certain advice. The plaintiffs go on to say that if the sixth defendant had provided advice to the plaintiffs, they would not have entered into the Loan and the Mortgage and they would not have suffered loss and damage. With that general overview, it is necessary to consider more closely the case pleaded against the sixth defendant.
(Page 5)
5 As I have indicated, the plaintiffs allege that they engaged the sixth defendant as their solicitors. Paragraph 37 of the amended statement of claim is in the following terms:
"37. By reason of the matters pleaded in paragraphs 7, 35 and 36, CK owed the plaintiffs:
37.1 fiduciary duties not to prefer:
37.1.1 its interests to the plaintiffs' interests;
37.1.2 MF's interests to the plaintiffs' interests; or
37.1.3 the interests of Rylestone and Maclou or either of them to the plaintiffs' interests;
37.2 duties of care and in contract:
37.2.1 in the same terms pleaded in paragraph 37.1;
37.2.2 to take reasonable care to advise the plaintiffs of any unusual features or unusual risks associated with the Loan and Mortgage; and
37.2.3 to take reasonable care to adequately protect the plaintiffs in relation to the Loan and the Mortgage."
(Page 6)
7 The paragraph which the sixth defendant wishes to plead and to which the plaintiffs take objection is par 15. It is in the following terms:
"15 Further, in response to paragraphs 37, 40, 41 and 47 of the amended statement of claim, the sixth defendant says that:
(a) The plaintiffs, prior to committing themselves to obtaining an interest in the Loan and Mortgage and prior to their agent, the third defendant, instructing the sixth defendant, knew:
(i) the contents of the property valuation of 13/15 Tribute Street, Shelley prepared by the seventh defendant and dated 23 July 1998;
(ii) the declared assets and liabilities of the first defendant as set out in a letter from the third defendant to the first named plaintiff dated 20 July 1998;
(iii) the assets and liabilities of the second defendants as set out in a letter from the third defendant to the first named plaintiff dated 20 July 1998; and
(iv) the sixth defendant would be instructed by their agent, the third defendant, to prepare a mortgage to secure the Loan and to attend to settlement and to lodge the Mortgage for registration.
PARTICULAR OF KNOWLEDGE
(A) The plaintiffs were in possession of the valuation of the seventh defendant (see the plaintiffs' discovered document number 134).
(B) The plaintiffs were advised of the assets and liabilities of the first and second defendants by letter from the third defendant. The letter to the
- first named plaintiff is dated 20 July 1998 (discovered by way of supplementary discovery on 16 July 2003).
- (C) The plaintiffs authorised the third defendant to provide instructions to the sixth defendant on their behalf.
- (b) The interest rate provided to the plaintiffs under the Loan and Mortgage was 12.5% which rate was above standard commercial interest rates at the relevant time.
(c) The plaintiffs had prior experience in investments similar to their investment in the Mortgage and Loan.
PARTICULARS OF PRIOR EXPERIENCE
- (i) the first named plaintiff had invested in:
(A) a mortgage to the Stewarts through Richard P Bird and Associates;
(B) a mortgage for $44,000 to Wendy M Bunbury through Richard P Bird and Associates; and
(C) a mortgage for $53,000 over 23 Seaview Way, Hopetoun through First Chartered Mortgage Services;
(ii) the second and third named plaintiffs had invested in:
(A) a mortgage for $50,000 over unit 14/7 Delage Street, Joondalup through First Chartered Mortgage Services; and
(iii) the fourth and fifth named plaintiffs had invested in:
- (A) a mortgage of $53,000 over 22 Seaview Way, Hopetoun through First Chartered Mortgage Services.
- (d) The plaintiffs did not consult or seek the advice of the sixth defendant about any of the matters pleaded in paragraph 15(a)(i), 15(a)(ii), 15(a)(iii) and 15(a)(iv) above."
8 By way of further explanation, par 40 pleads the alleged breaches of the duties pleaded in par 37.1 and par 37.2.1. Paragraph 41 pleads further and in the alternative, by reason of the matters pleaded in par 39, the sixth defendant breached the duties pleaded in par 37.2.2 and par 37.2.3. Paragraph 39 refers back to par 6.3, par 15 to par 18 (other than par 18.3) and par 36. Paragraphs 15 to 18 are the plea of the MIS. Paragraph 47 is the plea of loss and damage.
9 The argument put by the plaintiffs can really be summarised in this way. They say that they have pleaded that the sixth defendant breached the fiduciary duty that it owed to the plaintiffs. The pleaded breach is a conflict of interest. The plaintiffs say that the only answer that can be put to such a plea is for the sixth defendant to establish that the plaintiffs gave their informed consent to the acts of the sixth defendant. Absent that informed consent they say there is no way that the sixth defendant can be absolved of liability for breach of the fiduciary duty. That being so, the plea proposed in par 15 is not proper, at least not so far as it purports to deal with the plea of breach of fiduciary duty. Counsel for the plaintiffs developed this submission with some care, referring in particular to the High Court decision in Maguire v Makaronis (1997) 188 CLR 449.
10 In answer to the plaintiffs' position, counsel for the sixth defendant made a number of submissions. First, he pointed out that in any pleading it is material facts which must be pleaded, not a cause of action or defence. Counsel submitted that par 15 was a plea of material facts and as such was unobjectionable. Second, counsel suggested that given the way the alleged breach of fiduciary duty is pleaded, the sixth defendant should be permitted to plead par 15 as the facts contained therein, if established, might be of importance in determining the scope of the fiduciary duty. Thirdly, counsel submitted that whatever the relevance of the proposed par 15 to the fiduciary duty claim, the facts were important in deciding what duties might arise either in contract or in tort. Given that par 37 in its separate sub-paragraphs covered both the equity and common law
(Page 9)
- duties, counsel submitted there was no mischief in pleading par 15 as proposed. It is worth dealing with each of these points in turn.
11 There is no doubt that in this Court there is a tendency to plead causes of action. The statement of claim in these proceedings is a good example of that trend. There is much that is positive about that approach. A series of facts are set out which are said to be particular to each pleaded cause of action. But such an approach does not accord with classical pleading practice. Order 20 r 18(1) requires that a pleading contain "the material facts on which the party pleading relies for his claim or defence". It is not, strictly speaking, necessary to say how those facts give rise to a cause of action or a defence or, in other words, where the material facts will lead if proved. So the submission put by counsel for the sixth defendant on this point is, in my view, correct, and on that basis alone the paragraph ought to stand.
12 It must be said that it is somewhat difficult to see how the facts pleaded in par 15 can be an answer to the alleged breach of fiduciary duty. But caution must be exercised in deciding at an interlocutory stage what facts might be relevant to determining the scope of any duty existing between the plaintiffs and the sixth defendant. In Maguire v Makaronis (supra), the majority said (at 464):
"… to say that the appellants stood as fiduciaries to the respondents calls for the ascertainment of the particular obligations owed to the respondents and consideration of what acts and omissions amounted to failure to discharge those obligations."
13 As I have indicated above, it is difficult to see, given the plea put against the sixth defendant, that the facts in par 15 can assist. They do not go to a question of informed consent. But, in my view, to refuse the sixth defendant leave to plead these facts at an interlocutory stage would be inappropriate. It may eventually be that these facts are relevant to determining the particular obligations owed by the sixth defendant to the plaintiffs.
14 Finally, I would accept that these material facts may well be relevant to determining the scope of the common law duty of the sixth defendant either in contract or tort. As the sixth defendant is entitled to make the plea on that basis, it would, I think, be too technical an exercise of the rules of pleading to so limit the sixth defendant that the pleaded facts
(Page 10)
- could not be taken into account in relation to the alleged breach of fiduciary duty. There is no practical reason for taking such a step.
15 For all these reasons I am prepared to allow the sixth defendant to plead in terms of par 15 of the minute. I will hear the parties as to the precise form of orders and as to costs.
16 Turning then to the fourth defendant, the objection is to the proposed par 34 of the further revised amended defence. That paragraph is in the following terms:
"34. The fourth defendant denies each and every allegation in paragraph 34 of the plaintiffs' amended statement of claim dated 24 September 2003, and says further that:
34.1 The materiality of any alleged statement or omission by MF, further or alternatively Ward, has not been alleged by the plaintiffs such that the operation of s1006(2) of the Corporations Law has not been invoked;
34.2 Further or alternatively the fourth defendant is not liable by virtue of section 1008A(3) of the Corporations Law in that:
(a) The letter of offer referred to in paragraph 14 of the amended statement of claim was issued without the fourth defendant's knowledge and/or consent; and
(b) As soon as practicable after the fourth defendant was made aware of the alleged issue of that letter, he gave reasonable public notice that it was issued without his knowledge.
PARTICULARS
- (i) The fourth defendant was only made aware of the letter of offer upon the issue of the writ in this action, and he has defended the plaintiffs' claims from the outset.
- (ii) Given that the matters the matters pleaded in paragraphs 9 to 13 inclusive of the statement of claim are alleged to have taken place prior to the issue of the writ in these proceedings, it is reasonable for the fourth defendant to give public notice only by way of the proposed amended defence."
17 To understand this objection, it is necessary to refer to s 1006(2) of the Corporations Law. Presently relevant is s 1006(1) (a section which has subsequently been repealed). It is in the following terms:
"This section applies for the purposes of an action under section 1005 in respect of conduct being the issue of a prospectus in relation to securities of a corporation:
(a) in which there is a material statement that is false or misleading; or
(b) from which there is a material omission."
18 It is clear from the way par 34.1 is pleaded that the fourth defendant says that there has been no plea in the statement of claim of either a material statement that is false or misleading, or that there was a material omission from the prospectus. The plaintiffs say that the materiality of any statement or omission is a condition precedent to liability of the fourth defendant and as such there is no requirement that it be pleaded. Counsel for the plaintiffs conceded that this was a short point and if it was necessary for him to plead the material omissions from the prospectus, he would seek leave to amend the statement of claim to do so.
19 On balance, I think it would be preferable if the plaintiffs did plead what they say was missing from the prospectus. The fourth defendant would then know what case he had to meet. Such an approach may not be entirely consistent with good pleading practice, but it seems to me to be in this case the preferable course. I will give the plaintiffs the necessary leave to amend their pleading.
20 The second complaint made by the plaintiffs is as to the proposed par 34.2. As is pleaded, under s 1008(3) of the Corporations Law, a director has a defence to a claim under s 1005 of the Corporations Law if he is able to establish that the prospectus was issued without his consent
(Page 12)
- and that as soon as practicable after he was made aware of the issue of the prospectus, he gave reasonable public notice that it was issued without his knowledge. Here, it is said that the "reasonable public notice" was constituted by filing "the proposed amended defence".
21 That plea cannot stand. Under O 67 r 11, there are only limited categories of documents which can be inspected by a member of the public who is not a party to a proceeding. A defence is not one of those documents. It is simply not the case that the filing of a defence could satisfy the requirement of reasonable public notice. The amendment should not be permitted.
22 It is apparent, given that the statement of claim with respect to the fourth defendant is to be amended, an amended defence will need to be filed. It would then be inappropriate to give leave to the fourth defendant to amend in terms of its minute. But when an amended defence is filed, it should not contain a plea that reasonable public notice was given by the fourth defendant by the filing of a defence.
23 Again, I will hear the parties as to the form of orders and as to costs.
0
13
0