Yunghanns v Elfic Ltd
[1999] VSC 291
•27 July 1999
SUPREME COURT OF VICTORIA
CAUSES JURISDICTION Do not Send for Reporting Not Restricted
No. 5970 of 1997
(F4932)
| PETER NICHOLAS YUNGHANNS & ORS | Plaintiffs |
| v | |
| ELFIC LTD & ORS | Defendants |
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JUDGE: | McDonald J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 19 and 20 July 19999 | |
DATE OF JUDGMENT: | 27 July 1999 | |
CASE MAY BE CITED AS: | Yunghanns & Ors v Elfic Ltd & Ors | |
MEDIA NEUTRAL CITATION: | [1999] VSC 291 | |
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiffs | Mr R.McK. Robson QC with | Strongman & Crouch |
| For the Defendants | Mr N.J. Young QC with Mr M Connock | Arthur Robinson & Hedderwicks |
HIS HONOUR:
The present proceedings before the court include proceedings initiated by two summonses issued on behalf of the first, the seventh and ninth plaintiffs.
On their first summons filed on 25 June 1999 directed to the defendants and the eighth plaintiff they seek leave of the court to add as defendants Elders Finance Group Limited, John Henry York Syme and James William Maguire and also to make substantial amendments to the statement of claim.
As appears from the affidavit of the first plaintiff sworn in support of that application the first to seventh and ninth plaintiffs also proposed to discontinue their claim against the third defendant, Elders Nominees Pty Ltd and the fourth defendant, Fosters Brewing Group Limited. At all material times to these proceedings the third defendant was and is a company which is not registered. It has not taken any part in the proceedings.
The writ in these proceedings was issued in the name of nine plaintiffs on 21 June 1997. The statement of claim of those nine plaintiffs was filed on 8 September 1997. At the time of the issue of the writ and service of the statement of claim the first plaintiff was a director of each of the eight plaintiff companies. It was alleged that he was authorised to manage and to act on behalf of each of those companies. However, on or about 2 November 1998 the first plaintiff ceased to be a director of the eighth plaintiff, Schadenfreude Pty Ltd.
By the statement of claim as filed and served each of the plaintiffs sought relief against the defendants. Subsequent to the first plaintiff ceasing to be a director of the eighth plaintiff the solicitors then acting for the plaintiffs filed a notice that they had ceased to act for the eighth plaintiff. There was not filed in the proceedings and by any solicitor on behalf of the eighth plaintiff a notice of change of solicitor.
The second summons issued on behalf of the first to seventh and ninth plaintiffs was filed on 14 July 1999 and it was directed to the defendants and the eighth plaintiff. By that summons the first to seventh and ninth plaintiff sought orders that the defendants make further discovery in the proceedings. The summonses and the affidavit material in support of the same were served on the eighth plaintiff by leaving the same at the registered office of the eighth plaintiff. No legal practitioners or any other person appeared on the return of those summonses on 19 July 1999 on behalf of the eighth plaintiff. The eighth plaintiff has taken no part in the proceedings since the solicitors for the plaintiffs ceased to act for that plaintiff.
Senior counsel for the first to seventh and ninth plaintiffs informed the court that it was considered that the eighth plaintiff was a necessary part of the proceedings but as the other plaintiffs were in no position to prosecute any claim on behalf of that plaintiff the other plaintiffs would apply to the court for an order that the eighth plaintiff cease to be a plaintiff in the proceedings but be added as a defendant to the same.
On 19 July 1999 I ordered that the first to seventh and ninth plaintiffs have leave to forthwith issue a summons against that plaintiff returnable on 20 July 1999 seeking that relief. On the return of that summons on 20 July 1999 a solicitor appeared before the court on behalf of the eighth plaintiff. He informed the court that although he was not instructed generally in the proceedings on behalf of the eighth plaintiff he was instructed, on its behalf, to appear in answer to the summons. That solicitor informed the court that on instructions from the eighth plaintiff it was accepted that it was appropriate in the circumstances that it ceased to be a plaintiff in the proceedings and that it be ordered that it be joined as a defendant or alternatively, that it be ordered that the eighth plaintiff be removed as a plaintiff to the proceedings on condition that it be bound by the outcome of the action.
Senior counsel for the first to seventh and ninth plaintiffs informed the court, in substance, that those plaintiffs sought to obtain orders as sought by their summons. In the circumstances where proceedings are initially instituted in the name of several plaintiffs but the solicitor who caused the proceedings to be initiated and has the conduct of the proceedings on their behalf ceases to act for one of the plaintiffs and that plaintiff takes no step in the proceedings or does not seek to prosecute its claim for relief, it is appropriate in order that the claims of the other plaintiffs may proceed and that the interlocutory steps and the trial of the action may proceed in an orderly fashion where it is contended that such plaintiff be a necessary party to the action that an application of the plaintiffs seeking to prosecute the claim that the action be amended by ordering that such plaintiff cease to be a plaintiff and be added as a defendant to the action (see F Gould and Porter Pty Ltd & Ors v The Housing Commission (1974) VR 102).
This application of the first to seventh and ninth plaintiffs was not opposed by the first, second and fourth defendants but they sought that at all questions of costs relevant to this matter be reserved. Having regard to the situation of the eighth plaintiff and its attitude to the proceedings as stated by the solicitor appearing on its behalf I propose to make the orders sought by the first to seventh and ninth plaintiffs by their summons dated 19 July 1999.
It will be necessary for the remaining plaintiffs to amend their statement of claim so as to reflect the circumstances in which Schadenfreude Pty Ltd appears in the proceedings as a defendant. I propose to also order that the question of costs, including the costs of the first to seventh and ninth plaintiffs’ summons filed 19 July 1999 and any other party, including Fosters Brewing Group Limited, be reserved.
Agreement has been reached between the first to seventh and ninth plaintiffs and the defendants relating to the question of further discovery which is the subject of the second summons. Orders relevant to those matters will be made reflecting such agreement.
The amendments sought to the present statement of claim are substantial. By such amendments the first to seventh and ninth plaintiffs seek to recast the present statement of claim to articulate more clearly the claims of those plaintiffs against the first and second defendants. They seek to incorporate further claims against those defendants and further, they seek to add as parties to the proceedings the additional defendants, Elders Finance Group Limited, Syme and Maguire, and to make claims against and seek relief against those added defendants.
Counsel who appeared on behalf of the first, second and fourth defendants informed the court that the correct name of Elders Finance Group Limited which is sought now to be added as a defendant was EFG Australia Limited. This was not disputed by counsel for the first to seventh and ninth plaintiffs. I shall refer hereafter to that proposed party as EFG Australia.
Syme and Maguire did not appear on the return of the summons. They were not served and were not parties to the plaintiffs’ application to amend the statement of claim and add them as defendants. Accordingly, insofar as the application before the court or application to join them as parties to the proceedings as constituted by the amended statement of claim the proceedings were ex parte. A similar position also prevails in respect of EFG Australia.
Counsel for the first, second and fourth defendants did not seek to oppose the discontinuance of the proceedings against the fourth defendant subject to orders for costs being made that the plaintiffs pay that defendant’s costs of the proceedings, including reserved costs. That application was not opposed by the plaintiffs. I propose to order that the plaintiffs have to discontinue their claims against the fourth defendant, Fosters Brewing Group Limited, and that the first to seventh and ninth plaintiffs pay that defendant’s costs of and incidental to the proceedings, including reserved costs.
There was no issue raised as to the orders sought that the plaintiff have leave to discontinue their proceedings against the third defendant. In the circumstances where at all material times to this proceeding that defendant was no longer a registered company, it is appropriate to make the order sought which I propose to make.
Counsel for the first and second defendant, which companies will continue to be defendants in the proceedings, informed the court that subject to two matters to which I shall later refer those defendants made no submissions that in the circumstances the court did not have power pursuant to rule 9.06(b) to join EFG Australia Limited as a defendant.
Counsel further stated that based on the plaintiff’s proposed amended statement of claim he made no submissions that the court ought not, as a matter of discretion, join that company as a defendant to the proceedings. However, although counsel for the first and second defendants generally addressed no submission as to why the court should, in the exercise of its discretion, not permit the plaintiffs to amend their statement of claim as now sought, he specifically submitted that the plaintiffs should not be given leave to amend their statement of claim to plead paragraph 118 of the proposed amended statement of claim.
After some discussion on this matter senior counsel for the plaintiffs informed the court that the plaintiffs did not pursue their application to include in the amended statement of claim paragraph 118 of the proposed amended statement of claim.
Counsel for the first and second defendants, although not seeking to address any argument as to why the court should not order that the plaintiff have leave to amend their statement of claim, specifically reserved all rights relevant to the statement of claim in the event that it should be amended as sought by the plaintiffs, including whether it disclosed causes of actions as now sought to be pleaded.
As to the plaintiffs’ application to join Syme and Maguire as defendants, counsel for the first and second defendants specifically addressed no argument to the court on the matter of their joinder as defendants. The fact that present defendants did not seek to oppose the plaintiff’s application to amend the plaintiff’s statement of claim and to add Syme and Maguire as defendants is a relevant matter to be had regard to by the court in considering whether in the exercise of its discretion it should be ordered that the plaintiffs have leave to amend their statement of claim and at this stage in the proceedings it should be ordered that Syme and Maguire be added as defendants, although it certainly is by no way conclusive of that matter.
The principles relevant for the court to have regard to an application by a party to amend a pleading is that stated by Mr Justice Winneke in Howarth v Adey (1996) 2 VR 526 at page 542 where His Honour said:
“The fundamental principle which I think should guide a trial judge upon an application by a party to amend his pleadings so as to plead a new or alternative claim or defence is that such application should ordinarily be allowed provided that any injustice arising to the other party from so doing can be compensated by the imposition of terms. This principle is I think clearly implicit in order 36.01 of the rules of the civil procedure which (insofar as relevant) provide that `for the purpose of determining the real question in controversy between the parties to any proceeding ... the court may at any stage order ... that a party have leave to amend any document in proceedings’. For the purpose of this rule `document’ includes pleadings’.”
In their application to have Syme and Maguire joined as defendants to the proceedings the plaintiffs rely on rule 9.06(b)(ii) of the Rules of Civil Procedure. Insofar as the plaintiffs seek at the same time to extensively amend their statement of claim it is appropriate to have regard to the proposed amended statement of claim and in particular the claims now sought to be made against the first and second defendants and EFG Australia in order to assess whether there may exist between the plaintiffs and those persons a question arising out of or relating to or connected with any claim in the proceedings which it is just and convenient to determine between the plaintiffs and those persons as well as between the plaintiffs and the existing defendants and the proposed other defendants to the proceedings, EFG Australia.
It is necessary that I refer in some detail as to the claims now sought to be made by the plaintiffs against the existing defendants and the proposed added defendants as appears from the plaintiff's proposed amended statement of claim.
By the proposed amended statement of claim the plaintiffs allege that in or about June 1984 the first plaintiff, Yunghanns, and the first defendant, Elfic, entered into a joint venture, the terms of which included that Yunghanns would identify and evaluate suitable companies as takeover targets which Elfic would independently evaluate, and either reject it as unsuitable or agree to pursue the takeover, that Yunghanns and Elfic would identify companies in which shares would be acquired to be sold at a profit at a later stage; that Elfic and companies associated with it would provide loans at commercial rates to the joint venture vehicle to acquire shares; that security for the loans would be limited to the shares acquired with the loan funds; that Yunghanns and Elfic would, from time to time, nominate or procure companies under their control or direction to undertake and perform such tasks or enter into such transactions as were necessary or convenient for completion of the takeover or for the performance of the joint venture.
It is alleged that between 1984 and 1991 Yunghanns nominated or procured each of the plaintiffs companies plus Schadenfreude Pty Ltd (collectively referred to as the Yunghanns Group) and that Elfic nominated or procured the second defendant (EFGL) and EFG Australia Ltd (EFG). It is alleged that by reason of their relationship as joint venturers Elfic and its nominees owed to Yunghanns and the Yunghanns Group fiduciary duties.
Further, it is alleged that between June 1984 and July 1988, pursuant to the joint venture agreement Yunghanns and Elfic took over a target company and acquired shares, the acquisition of the joint venture shares being funded by advances made by Elfic to or on behalf of the third plaintiff, Merim Pty Ltd.
It is alleged that before July 1988 the joint venture vehicle, Merim, was indebted to Elfic for a sum in excess of $100 million with interest accruing, that the fourth plaintiff, Rentiers Pty Ltd (Rentiers) was indebted to Elfic pursuant to a plant and machinery lease but neither Yunghanns nor any company in the Yunghanns Group save for Merim and Rentiers was indebted to any company in that referred to as the Elders Group being the first and second defendants, together with EFG Australia Limited.
It is further alleged that the second plaintiff, Mardasa Pty Ltd, was the registered proprietor of land being identified as "the Knox land" as trustee for Yunghanns, which land was subject to a registered mortgage to the Australian Industrial Development Corporation but that Mardasa, as trustee for Yunghanns in that land held equity in the land in the amount of not less than $33 million. It is alleged that the Knox land, although mortgaged to Australian Industrial Development Corporation, was not merged to secure the debts of any other member of the Yunghanns Group.
It is alleged that in February 1998 EFG Australia on the one part and Yunghanns and Mardasa on the other part agreed that the former would advise them and assist them to implement a refinancing proposal in respect of the Knox land and that pursuant to that agreement EFG Australia owed to Yunghanns and Mardasa the duties identified in those proceedings.
It is alleged that between February 1988 and May 1988 EFG Australia procured its wholly owned subsidiary, Elfic, to assist it to act on its behalf in performing the duties pursuant to the financial advisor/retainer and that each of EFG Australia and Elfic owed to Yunghanns and Mardasa fiduciary duties as identified.
It is alleged that between February 1988 and May 1988 pursuant to the financial advisor/retainer EFG Australia and Elfic devised and recommended to Yunghanns and Mardasa that they enter into an agreement with EFG Australia and Elfic in respect of the Knox land. However, it is further alleged that by July 1988 EFG Australia and Elfic had determined to seek to improve Elfic's overall security position in respect of the joint venture debt and to obtain access to Yunghanns equity in the Knox land to secure the joint venture debt.
It is alleged that in or about October 1988 Elfic, or Elfic and EFG Australia, proposed to Yunghanns and Yunghanns agreed in principle to restructure the joint venture on terms including that Elfic would fund further joint venture acquisitions by a proposed new venture vehicle, Schadenfreude, and Elders Securities Limited and Elfic would get tax benefits in respect of any future venture losses, that a formal written venture agreement on the terms would be entered into and that the amount of the joint venture debt, if any, to be assumed by the new joint venture vehicle would be agreed.
It is alleged that in November 1988 Elfic or Elfic and EFG Australia presented to Yunghanns documents to implement the 1988 proposed restructure to be executed by Yunghanns and companies in the Yunghanns Group. That group of documents included a guarantee and indemnity by Merim, Mardasa, Yunghanns and the fourth, sixth, seventh and ninth plaintiffs, together with Schadenfreude.
It is alleged that the guarantee and indemnity was presented by Elfic and and/or Elfic and EFG Australia for the Yunghanns Group for execution by them in order to achieve that which they had determined to do in July 1988 and with the intention to assert that the 1988 guarantee and indemnity would be effective and valid to access the Yunghanns Knox equity to secure the joint venture debt regardless of whether the 1988 proposed restructure was implemented.
It is alleged that in order to induce Yunghanns and the Yunghanns Group to execute the 1988 restructure documents Elfic or Elfic and EFG Australia represented and warranted that the guarantee and indemnity was for the sole purpose of implementing the 1988 proposed restructure and that it would not take effect or be relied on unless or until all parts of the 1988 proposed restructure were agreed on and implemented.
It is alleged that in order to induce Yunghanns and the Yunghanns Group to execute the 1988 restructure documents Elfic or Elfic and EFG Australia represented and warranted that the guarantee and indemnity was for the sole purpose of implementing the 1988 proposed restructure and that it would not take effect or be relied on unless or until all parts of the 1988 proposed restructure were agreed on and implemented.
It is alleged, however, that each of the representations was false and the restructure warranties were breached in that the 1988 guarantee and indemnity was intended by Elfic or Elfic and EFG Australia to be used for the benefit of improving Elfic's overall security position in respect of the joint venture debt and to access Yunghanns Knox land equity to secure the joint venture there and that it was intended by Elfic or Elfic and EFG Australia that the guarantee and indemnity take effect and would be relied upon irrespective of whether the 1988 proposed restructure was implemented.
The plaintiffs allege that in breach of the retainer contractual duties and joint venture fiduciary duties and retainer fiduciary duties identified in the proposed amended pleadings Elfic or Elfic and EFG Australia induced and procured Yunghanns and the Yunghanns Group to execute the 1988 guarantee and indemnity without disclosing that which they had determined in July 1988 and that which they intended to achieve as at November 1988 and as previously referred to.
It is alleged that relying on and induced by the restructure representations and warranties Yunghanns and the Yunghanns Group, without there being disclosed to them the determination made in July 1988 and the intention of Elfic and EFG Australia in November 1988, they executed the guarantee and indemnity. It is alleged that the nondisclosure of these matters by Elfic and/or EFG Australia have amounted to them in trade and commerce engaging in misleading or deceptive conduct contrary to the provisions of section 52 of the Trade Practices Act 1974 Commonwealth and section 11 of the Fair Trading Act 1985 Vic. The plaintiffs allege that Yunghanns and the Yunghanns Group have suffered and continue to suffer loss and damage thereby. It is further alleged in the alternative that in the circumstances Yunghanns and the Yunghanns Group executed the 1988 guarantee and indemnity in a mistaken belief induced as previously referred to, that the amount secured under the document would be limited to liability undertaken or assumed by the proposed new venture vehicle, Schadenfreude.
The plaintiffs claim that it would be unjust and inequitable and unconscionable for Elfic to rely on the 1988 guarantee and indemnity as security for the joint venture debt or at all, that the same is void or voidable or otherwise ought to be rescinded. Alternatively, it is alleged that it was a term of the guarantees and indemnity that all parts of the proposed restructure be agreed upon and be implemented before the guarantee and indemnity became effective, which it is alleged did not occur causing the guarantee and indemnity to be void.
Further, the plaintiffs allege that in or about June 1989 EFG Australia and Elfic proposed to Yunghanns a further restructure of the joint venture on terms including that Elfic would fund further joint venture acquisitions by a proposed new venture vehicle, the fifth plaintiff, Tygola Pty Ltd, that a formal joint venture agreement on terms to be agreed would be entered into, that the amount of the joint venture debt, if any, be assumed by the new joint venture vehicle. It is alleged that in June 1989 Elfic, EFG and the second defendant EFG Leasing Pty Ltd (EFGL) presented to Yunghanns and the Yunghanns Group for execution documents to implement that scheme including that which is referred to in the pleadings as the 1989 Knox scheme, which documents included a guarantee and indemnity between Elfic as creditor and Yunghanns and other Yunghanns Group identities as guarantors.
It is alleged that in order to induce Yunghanns and the Yunghanns Group to execute the 1989 documents various representations and warranties were made to Yunghanns and the Yunghanns Group which were false and further, that the same were presented to Yunghanns and the Yunghanns Group by EFG Australia, Elfic and EFGL in order to achieve the 1988 determination and with the intent to assert that the 1989 guarantee and indemnity would be effective and valid to access Yunghanns' equity in the Knox land so as to secure the joint venture debt whether or not the 1989 proposed restructure occurred and irrespective of representations and warranties given to Yunghanns at the time.
It is alleged that in breach of the retainer duties and the contractual duties and joint venture fiduciary duties and retainer fiduciary duties as proposed to be pleaded and identified Elfic and EFG Australia induced members of the Yunghanns Group to execute the 1989 guarantee and agreement without disclosing a determination made in July 1988 or the intention as arrived at in June 1989. It is alleged that on various grounds in consequence of the conduct of Elfic and EFG Australia Yunghanns and the Yunghanns parties who executed the 1989 guarantees and indemnities have suffered loss and damage.
It is further alleged that it would be unjust, inequitable and unconscionable for Elfic to rely on the 1989 guarantee and indemnity for security for any indebtedness other than arising from advances made to Mardasa under that scheme and that the 1989 guarantee and indemnity is void or voidable or ought to be rectified or rescinded. Alternatively, it is alleged that the 1989 guarantee and indemnity did not take effect and is otherwise void.
In addition, it is alleged that Yunghanns and the Yunghanns Group, Elfic and EFG Australia, are parties to an agreement in writing dated 25 June 1991, a loan facility dated that day and that Elfic of one part, Yunghanns Rentiers and Jones and Mayhew are parties to a guarantee and indemnity dated the same date and other documents dated that day, which documents are collectively referred to in the proposed pleadings as the 1991 agreements.
It is alleged that in 1990 Elfic wrongly threatened to enforce the 1988 and 1989 guarantee and indemnities against Yunghanns and parties to those guarantees and indemnities and that Elfic wrongly threatened Yunghanns and the Yunghanns Group that if Yunghanns did not sign a letter of undertaking and agree on his own behalf and on behalf of the Yunghanns Group to execute subsequent documents Elfic would commence proceedings against Yunghanns and the Yunghanns Group to recover the joint venture debt purportedly secured by the 1988 and 1989 guarantees and indemnities. These threats included, as it is alleged, that proceedings would be taken including bankruptcy and liquidation proceedings. It is alleged that the threats constituted breaches of the retainer contractual duties, the joint venture fiduciary duties, the retainer fiduciary duties by Elfic, EFG Australia and EFGL. It is alleged that in consequence of such breaches Yunghanns and the Yunghanns Group were introduced and procured to execute agreements in 1991 without disclosing relevant matters relevant to the 1988 determination and facts not disclosed in 1989.
It is alleged that in 1991 the Yunghanns and the Yunghanns Group executed agreements in 1991 in circumstances giving rise to further claims to be brought against Elfic, EFGL and EFG Australia. It is alleged that in or about 1993, pursuant to the 1991 agreements, Elfic acquired ownership of the Knox land and subject to the 1991 agreements and until 1997 Yunghanns made payments pursuant to the loan facility agreement entered into in 1991 but that by reason of matters alleged Elfic holds the Knox land as a constructive trustee for Yunghanns and Mardasa and is obliged to account to Yunghanns and Mardasa for all profits and benefits accruing therefrom. It is on the basis of these allegations against Elfic, EFGL and EFG Australia that the plaintiffs seek to join as defendants Syme and Maguire.
It is alleged that since 1960 successive firms of solicitors have carried on legal practice under various names, all of which include the name "Corr" or "Corrs" and each successive firm took over and continued to conduct the legal practice conducted by the previous firm.
It is alleged that since or about May 1988 to in or about November 1998 the proposed defendants, Syme and Maguire, were each partners in the firm or firms of solicitors and as such are liable for the acts and omissions of the various respective firms causing them to be jointly and severally liable for the acts and omissions of the firm or firms.
It is alleged that at all material times the firm or firms of solicitors were retained and acted as solicitors on behalf of Elfic, EFGL and EFG Australia while also acting for Yunghanns and the Yunghanns Group in respect of the joint venture, that referred to as the Knox scheme, the 1988 restructure, the 1989 proposed restructure, the 1989 Knox scheme proposal and the 1991 agreements. It is alleged that in consequence of the firm or firms of which Maguire and Syme were partners acting as solicitors for Yunghanns and the Yunghanns Group the firms at all material times owed fiduciary duties to Yunghanns and the Yunghanns Group and further owed duties and obligations to Yunghanns and the Yunghanns Group pursuant to them being retained as their solicitors.
It is alleged that at all material times after July 1988 the firm or firms of solicitors of whom Syme and Maguire were partners knew and believed in the determination as previously referred to and in or about November of 1988 the firm knew or believed in the existence of the 1988 proposed restructure and with that knowledge and belief assisted Elfic or Elfic and EFG Australia to implement the July 1988 determination by advising those companies and preparing the 1988 guarantee and indemnity so as to achieve that which the companies had determined to do in July 1988.
It is further alleged that in November 1988 the firm or firms of which Syme and Maguire were partners were aware of the November 1988 intention previously referred to and in the Yunghanns Group with without knowledge of the July 1988 determination and the intention of November 1988.
It is alleged that the firm or firms had a conflict of interest between those of the Elders Group and those of Yunghanns and the Yunghanns Group but negligently failed to advise Yunghanns and the Yunghanns Group properly at all having regard to their knowledge and belief with respect to the July 1988 determination and November 1988 intention.
It is alleged that in consequence of the negligence of the firm or firms of which Syme and Maguire were partners Yunghanns and the Yunghanns Group suffer and continue to suffer loss and damage. Further, it is alleged that from or after July 1988 until July 1989 the firm or firms of which Syme and Maguire were partners were aware of the determination of the Elders Group arrived at in July 1988 and in June 1989 the firm or firms knew or believed of the existence of the 1988 proposed restructure and the 1989 Knox scheme proposal while acting for Yunghanns and the Yunghanns Group advised Elfic, EFG Australia and EFGL as to the means to achieve the 1988 determination and further prepared the 1989 guarantees and indemnities to achieve that determination.
It is further alleged that the firm or firms knew or believed that Elfic, EFG Australia and EFGL had the intention to do the restructure in 1989 as referred to and that Yunghanns and the Yunghanns Group were without knowledge of the previously referred to determination and intention causing them to have a conflict between the Elders Group and the Yunghanns Group and further, that the firm or firms negligently and in breach of their retainer and fiduciary duties failed to advise Yunghanns and the Yunghanns Group of the previously referred to determination and restructure intention and on matters relevant to the 1989 guarantee and indemnity and steps which Yunghanns and the Yunghanns Group might take to protect their interest including the interest of Yunghanns in the equity of the Knox property. It is alleged further that by their actions the firm or firms acted in breach of section 11 of the Fair Trading Act and that in consequence of the acts and omissions of the firm or firms Yunghanns and the Yunghanns parties in 1989, parties to the 1989 agreement, suffered loss and damage.
Further, it is alleged that with respect to the 1991 agreements the firm or firms of which Syme and Maguire were partners, again acted for both Yunghanns and the Yunghanns Group and also EFG Australia, Elfic and EFGL notwithstanding that there was a conflict of interest and by the acts and omissions of the firm or
firms in failing to advise Yunghanns or the Yunghanns Group in various matters pleaded were negligent, they acted in breach of the duties arising by their retainers, they were in breach of fiduciary duties owed to Yunghanns and the Yunghanns Group and further, engaged in this misleading and deceptive conduct which resulted in Yunghanns and the Yunghanns parties executing the 1991 agreements which permitted the Elders Group to have access to Yunghanns equity in the Knox land to secure, inter alia, the joint venture debt and to undertake a liability of $11.3 million. It is alleged that in consequence Yunghanns and the Yunghanns Group have suffered loss and damage.
Other associated claims were made by the proposed intended statement of claim against the firm or firms of which Syme and Maguire were partners relevant to the 1991 agreements executed by Yunghanns and members of the Yunghanns Group which it alleges caused them to suffer loss and damage.
The plaintiffs, by their proposed amended statement of claim, seek to recover damages and other relief against Syme and Maguire as partners for the relevant firm or firms who at the relevant times acted for the Yunghanns Group, Yunghanns and Elfic and EFGL and EFG Australia. The claims sought to be made against Syme and Maguire is that they were partners in the firm or firms bearing the name of Corr or Corrs during the time and those firm or firms acted for both Yunghanns and the Yunghanns Group and Elfic, EFG Australia and EFGL and that they, as partners, are liable for the acts, omissions, negligence and breach of duty of a firm or firms relevant to them being solicitors for Yunghanns and the Yunghanns Group resulting in them entering guarantees, indemnities and other agreements to their detriment but to the advantage of and to achieve the intention of that which had been determined by Elfic, EFGL and EFG Australia and in particular for them to obtain access to and have Yunghanns security in the Knox land secure the joint venture debt and to also cause Yunghanns to be personally liable for $11 million.
In an affidavit sworn by Yunghanns on 16 February 1999, and in part relied on in this application to amend the statement of claim and to add defendants to the action, Yunghanns has deposed as to events that occurred in these proceedings and in particular proceedings taken against the firm of solicitors, Corrs Chambers Westgarth, seeking to have them not act for the defendants in the proceedings and to recover from them files which they had relevant to matters in respect of which they had acted for the plaintiffs. In these proceedings it was ordered by His Honour, Mr Justice Gillard on 3 July 1998 that the defendants be restrained from reobtaining those solicitors to act for them in these proceedings.
Although a statement of claim was served on 8 September 1997 and a defence delivered on 8 October 1997 Yunghanns has deposed that until after these interlocutory proceedings were determined no substantive step was taken in the proceedings. That appears to be the case. It is deposed, however, that during the period from September 1997 to June 1998 a large number of files were returned to the plaintiffs by the solicitors.
Discovery in the proceedings was not undertaken or performed until after the decision of Mr Justice Gillard on 3 July 1998. In his affidavit Yunghanns has deposed that during the period from November 1998 to December 1998 the defendants filed lists of discoverable documents. An inspection was carried out in respect of those documents. He has deposed that during this time there was obtained and he saw for the first time copies of files of the referred to firms of solicitors, including internal memoranda and diary notes which had previously not been made available to him.
In a further affidavit sworn by Yunghanns on 16 July 1999 he has deposed that before the defendants commenced to provide discovery in the proceedings and Corrs Chambers Westgarth Solicitors provided documents and files to him he had no knowledge of the facts and matters (set out in particular in paragraph 5 of his affidavit) relevant to the claims now sought to be made against the defendants. He has also deposed in such paragraph, again giving particulars, that until those documents were made available to him he had no knowledge of the facts and matters with respect to the solicitors' knowledge of the matters relevant to the defendants' intentions and actions and that the solicitors' acts and omissions relevant to them acting as the plaintiffs' solicitors in the transaction which resulted in them entering into the agreement referred to in the proposed amended statement of claim.
He has deposed that the knowledge that he now possesses concerning the alleged acts and omissions of the solicitors relates directly to the claim that the plaintiff now seeks to make against Syme and Maguire as set out in the proposed amended statement of claim. This material, in part, gives explanation for the application to amend and add parties to the proceedings being made at this point of time.
From the material now put before the court and the proposed amended statement of claim I am satisfied that the claims that the plaintiffs now seek to make against Syme and Maguire, as set out in the proposed amended statement of claim, are such that they will give rise to questions to be determined which are connected to and relate directly to questions to be determined in the proceedings between the plaintiffs and the defendants, including EFG Australia.
In the event of an order being made adding Syme and Maguire as defendants to the proceedings as provided by rule 9.11(3)(a) the proceedings against such new defendants (and also EFG Australia) will commence "upon the amendment of the filed originating process in accordance with paragraphs (1) or (2)".
In Bridge Shipping Pty Ltd v. Grand Shipping SA (1991) 173 CLR, 231 at 236 Mr Dawson J said:
"The accepted view now is – particularly having regard to the present form of the relevant rule, rule 9.11(3) - that the substitution or addition of a defendant by amendment does not relate back to the commencement of the proceedings, but takes effect from the time of that amendment. That means that the amendment cannot prejudice any existing rights under a statute of limitation (or any other limitation period)."
His Honour then further said:
"Accordingly, leave to amend to substitute or add a defendant who has a good defence under a period of limitations will generally be refused as serving no useful purpose."
On the question of whether any limitation period was relevant to the claims and relief that the plaintiff now seeks to make against Syme and Maguire such that to order that they be added as defendants would serve "no useful purpose".
Senior counsel for the plaintiffs addressed submissions to the court. In substance he submitted that in the circumstances of this case Syme and Maguire did not have available to them a good defence under the Statute of Limitations 1958 or any defence of a like nature. Further, it was submitted that it was not appropriate to investigate or determine such issues on this application. In part it was submitted that should Syme and Maguire be added as defendants and should they plead that the plaintiffs' claims against them in contract and tort, being statute barred pursuant to statute 5(1) of the Limitations of Actions Act 1928 the plaintiff would rely on section 27 of the Act. His submission was based on the facts deposed to by Yunghanns as previously referred to, that the facts relevant to the acts and omissions giving rise to the plaintiffs' proposed claims against Syme and Maguire only were discovered by the plaintiffs during the process of discovery and that they had previously been "concealed by fraud" as that expression is relevantly understood.
Further, senior counsel for the plaintiffs submitted that with respect to other claims to be made against Syme and Maguire, including the claim based on the breach of a fiduciary duty, there existed no arbitrary period of limitations which could bar the plaintiff's proposed claims against Syme and Maguire. Counsel for the present defendants addressed no submission relevant to these matters.
In these proceedings at this point I do not intend to deal in detail with the submissions made on this matter on behalf of the plaintiffs or to review the authorities to which I have been referred. In my view in the circumstances of this case and the facts and matters put before the court relevant to joining Syme and Maguire as defendants it cannot be concluded at this point, it cannot be said that it would serve "no useful purpose" to join them as defendants by reason of any defence which may be said to be available to them or either of them under the Statute of Limitations.
In my view it would only be in the clearest case where it could be said that the Statute of Limitations would apply in the event of a person being joined as a defendant should the court, in the exercise of its discretion, decline to do so on the ground that a defence of limitations would cause the joinder of such person to serve no useful purpose.
In Wardley Australia Ltd v. Western Australia (1992) 175 CLR at 514, at 533 Chief Justice Mason and Justices Dawson, Gaudron and McHugh cautioned against trial judges deciding limitation questions in interlocutory proceedings and in advance of the hearing of the action. I am satisfied that the claims which the plaintiff seeks to make against EFG Australia give rise to questions to be determined which are connected to and relate directly to questions to be determined against Elfic and EFGL and it is just and convenient to determine the questions arising in the proposed amended statement of claim as between the plaintiffs and EFG Australia as well as between the plaintiffs and Elfic and EFGL.
Being satisfied that the claims which the plaintiff seeks to make against Syme and Maguire by the proposed amended statement of claim give rise to questions to be determined which are connected to and relate directly to questions to be determined between the plaintiffs and Elfic and EFGL I am also satisfied that it is just inconvenient to determine the questions arising in the proposed statement of claim as between the plaintiff and Syme and Maguire as well as between the plaintiff and the other defendants to the proceedings. Accordingly, the conclusion that I have reached is that the plaintiffs ought to be permitted to join as fifth, sixth and seventh defendants respectively to these proceedings, EFG Australia Limited, Syme and Maguire and further, that leave should be granted to the plaintiffs to amend the statement of claim substantially in the form comprising exhibit PNY9 to the affidavit of Peter Yunghanns sworn on 25 June 1997, with such amendment necessary to reflect the joinder of such company and persons as defendants and that Schadenfreude Pty Ltd ceases to be a plaintiff and be added as the eighth defendant and that paragraph 118 thereof be deleted.
I was informed by senior counsel for the plaintiffs and counsel for the defendants that in the event of the applications presently before the court that I should make orders, as I have so decided and so identified that agreement exists between counsel for the plaintiffs and counsel for the defendant as to the orders to be made to reflect the same and to give directions and make orders relevant to times by which procedural steps should be taken.
I have read a draft minutes of proposed orders. I will make orders in accordance with the minute to be put before the court taking into account that I make the orders this day.
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