Burchell & Anor v Hill & Ors

Facts

The plaintiff issued a subpoena to the National Australia Bank Limited, a non party. The NAB objected to producing the documents specified on the (not unusual grounds) that:

1. it was fishing for documents for the purpose of determining whether there was a cause of action against NAB;
2. it was oppressive and too wide;
3. the documents sought were irrelevant.

Analysis

The issue Muhktar AsJ considered was the scope and operation of the phrase “..to produce any document for evidence..” found in Order 42A.01.  He posited the question, at [3], as:

The question is: does the expression ”for evidence” mean that the only document capable of being sought under this rule is a document – a tenderable document – that the subpoenaing party wants to tender into evidence at trial? The Bank says the rule is to be so circumscribed and relies on the decision of Gillard J in Kennedy Taylor (Vic) Pty Ltd v Grocon.

The plaintiff/respondent submitted that the test was whether there is a legitimate forensic purpose in having the documents produced.  Reference to for evidence only requires that the documents may be needed for trial.  After a detailed review of authorities Muhktar AsJ set out the following applicable broad propositions:

1. at [15], “..the expression “for evidence” might be conjectural but the idea … is to convey an intention that an interlocutory subpoena under rule 42A should not be used as a substitute for non-party discovery. It is looking to obtain documents after the completion of the ordinary pleading and discovery process for use, or potential use, at trial. Whether the subpoena does, or does not, will depend on the terms of the subpoena…it will come to an examination, some times an impression by the Judge, of the breath of amplitude of the document description and nature, and whether the recipient is required to make a judgment whether a particular document satisfies the description
2. at [16], “..for evidence” means no more than the document produced may be potentially required for evidence, either in-chief or by cross-examination.”
3. at [17], “..for evidence” means no more than the document produced may be potentially required for evidence, either in-chief or by cross-examination. “
4. at [18], having regard to court’s practice prior to orders 42 and 42A “..the test was whether there was a legitimate forensic purpose in seeking documents before trial, and if it would be in the interests of justice to compel production. ..the essential test was whether the documents were identified with sufficient particularity.“
5. at [19], “..much might depend on the timing. At an early stage, a court might be more inclined to direct a party to rule 32.07 because at that stage attention is usually focussed on case formulation or pre-trial process. However, closer to trial, a court might be more supportive of the subpoena as long as it was not too wide.”
6. at [20], in determining whether the document can permissibly be subpoened “A useful test and one which I shall apply here is to ask whether the subpoena would have been objectionable if it was made returnable at trial.“

The NAB contended the subpoena was oppressive because there was evidence of illicit purposes.  Shortly before issuing the subpoena the plaintiff wrote to NAB and intimated that it was liable to compensate the plaintiff because a contravention of section 260A of the Corporations Act.  The court took into account the plaintiff’s disavowal of any ulterior purpose and noted that the subpoena was issued in the shadow of a looming trial.  The documents were relevant for that trial.  If they could be used for another purpose there would be a real question of the Court providing leave.  The Court was interested in the  issue at hand.  Compare this approach to that taken by Gillard J in Kennedy Taylor.

Issue

The propositions the court set out while very broad and general are a very useful point of reference when framing a subpoena under Order 42A and making application to set aside such a subpoena.  Some caution is warranted in relying on this decision as determinative of the scope of Order 42A subpoenas.  Gillard J in Kennedy Taylor (Vic) Pty Ltd v Grocon adopted a far more stringent test on the question of “evidence” as did Kaye J in Newnham v Davis. Muhktar AsJ essentially distinguished those decisions on the facts.

Re Bill Express Limited (in liq)

Facts

The applicant’s complaint at first instance, see [3],  was that the wording “all books and records relating to the affairs of [the] Bill Express [Group]” was oppressive and that the use of the expression “relating to the affairs” was uncertain and too wide.  On appeal the applicants in addition to maintaining the objection submitted the summons were beyond power because, see [6],:

1. summons issued under 596B of the Corporations Act must be “specified” whereas the summons described the documents as “relating to” the examinable affairs of the corporation;
2. the documents sought must be confined to examinable affairs of the corporation;
3. it is a fishing expedition;
4. it is too wide

Analysis

Davies J embarked upon a detailed analysis of sections 596D and 596B.  The court’s power under section 596B is enlivened when an eligible applicant provides sufficient facts which which satisfy it that the person summonsed may be able, rather than will be able,  to give information about the corporation or its examinable affairs.  It is not a high threshold (see [13]).  While the discretion is unfettered it must be exercised judicially (see analysis at [14]).

Davies J found that “relates”, a word capable of wide meaning, must be construed in the context within which it appears ([22]).  She found:

In this context, the phrase operates to indicate the requirement that there must be a connection between the documents sought to be produced and the examinable affairs of the company. It follows that a document that is unconnected with the company the subject of the examination or of its examinable affairs would not be a document required to be produced

Regarding point 2 of the applicants submissions her Honour summarised the guiding principles, after a detailed examination of the authorities,  as “the cases confirm that the scope and exercise of the power to order the production of documents for the purposes of an examination depends on the scope and exercise of the power to order an examination.” (see [26]). Where there is no limitation on the subject matter of the examination, other than it is about a corporation’s examinable affairs, the examinee must produce all books and records relating to the affairs of the  corporation.

Davies, extracting Re New Tel (In Liq) listed legitimate purpose of examination under 597 of the Corporations Act (see [27]):

(a) an examination is designed to serve the purpose of enabling an eligible applicant to gather information to assist the eligible applicant in the administration of the corporation;

(b) an examination assists the corporation’s administrators to identify the corporation’s assets, both tangible and intangible and also allows the corporation’s liabilities to be identified;

(c) the purpose is to protect the interest of the corporation’s creditors;

(d) the examination serves the purpose of enabling evidence and information to be obtained to support the bringing of proceedings against examinable officers and other persons in connection with the examinable affairs of the corporation;

(e) an examination assists in the regulation of corporations by providing a public forum for the examination of examinable officers of corporations.

Her Honour considered the meaning of “specified books” ([29] – [34]). She found that section 596D(2) requires no other construction than the ordinary meaning of “specified” (see [33]).   To that end she stated:

Where an order is made under s 596B, the summons must identify the books and records required to be produced with sufficient clarity to enable the recipient to know what the documents come within the terms of the summons to be able to form a reasonable view about what must be produced in order to comply with the summons. The inquiry, in each particular case, is the degree of specificity required to provide the clarity and precision that the section mandates.

Her Honour found the summonses were not too wide or oppressive noting that

1. the applicants, although not officers of the company had significant involvement in its affairs.  The onorous nature of the request is no reason not to comply provided it complies with the statutory requirements of section 596D.;
2. the appropriate test in determining whether the summons is oppressive is “.whether the summons makes “reasonably clear” what documents must be produced.” (see [37])

Issue

Courts take a broad view regarding liquidators summonses.  There is limited utility in taking issue with broad terminology typically used in framing such summonses.

]]> http://www.peteraclarke.com.au/2010/04/08/production-of-documents-summons-and-subpoena-re-bill-express-limited-in-liq-2010-vsc-101-31-march-2010-burchell-anor-v-hill-ors-2010-vsc-96-31-march-2010/feed/ 0 http://www.peteraclarke.com.au/2010/04/05/no-case-submission-operation-of-section-159-of-the-fair-trading-act-blackman-ors-v-gant-anor-2010-vsc-109-31-march-2010/ http://www.peteraclarke.com.au/2010/04/05/no-case-submission-operation-of-section-159-of-the-fair-trading-act-blackman-ors-v-gant-anor-2010-vsc-109-31-march-2010/#comments Mon, 05 Apr 2010 13:24:21 +0000 Peter Clarke http://www.peteraclarke.com.au/?p=635 In Blackman & Ors v Gant & Anor Vickery J considered a very interesting no case application by the Second Defendant.  This is a case that has drawn considerable press coverage, including in the Australian and the Age.

FACTS (pars 4 – 11)

The Plaintiffs are the artist Charles Blackman and his trustee, Robert Dickerson.  The Second Defendant is Peter Gant, an art dealer.  Gant originally supplied three works of art to a Helen Stewart , another art dealer, together with two valuations of the works.  She was the former First Defendant.  Stewart sold the works to a a Robert Blanche, giving him a copy of the valuations.  The evidence is that Blanche relied upon one of the valuations when purchasing the works and used the other for insurance valuation purposes.  When, later, Blanche was advised that the works were not authentic he returned them to Stewart who refunded his money.  Stewart then returned the works to Gant.   The Second Defendant maintains the works are authentic.  The issue before Vickery J was confined to the Second Defendant’s no case application.

ANALYSIS

The Plaintiffs claim, at [12], that the valuations impliedly represent that the works were authentic and consequently a breach of section 9 of the Fair Trading Act.  The Plaintiffs claim loss and damage (see [21] - [24], [27] and [33] – [36]).

No case submission – generally

Vickery J, as is his wont, set out the principles governing consideration of a no case submission, at [2], quoting Kaye in Oakley & Anor v Insurance Manufacturess of Australia:

1. Where a no case submission is made in a trial by jury, the role of the judge is to determine whether, on the view of the evidence most favourable to the party against whom such a submission has been made (“the respondent party”), the jury could (not would) find in favour of the respondent party.
2. The test which is applicable, where a judge is sitting without a jury, is less stringent. In such a case the judge may uphold a no case submission, notwithstanding that the evidence, on the view most favourable to the respondent party, could support a judgment in favour of the respondent party.
3. In such a case the judge may perform an assessment of the quality of the evidence which has been called on behalf of the respondent party. In some cases, such an assessment may involve the judge evaluating the credit of witnesses from whom such evidence has been called.
4. In determining a no case submission, the judge is entitled to draw inferences from the evidence.
5. On a no case submission, the judge cannot draw an inference against the party making the submission (“the moving party”) based upon the absence of evidence from that party.
6. Although the judge, sitting alone, may assess the quality of the evidence in determining a no case submission, nonetheless the test which is to be applied by the judge, at that stage, is different to the test which the judge would apply in determining the ultimate outcome of the case, at the conclusion of a trial. Notwithstanding that the judge, in determining the no case submission, may assess the quality of the evidence, nonetheless the test remains whether, on the evidence so assessed, the judge “could” (not would) find for the respondent party on the evidence so far led. In such a case, the judge would only find against the respondent party if the evidence, so far adduced, is so unsatisfactory or inherently unreliable or equivocal that he were to conclude that he could not be reasonably satisfied of the case made by the respondent party on the evidence thus far adduced.

(my emphasis)

No case application – misrepresentation.

Counsel for the Second Defendant submitted, (see [14 ] – [16]) that the valuations were opinions of market value, not representations of authenticity.  As such the valuations did not constitute a representation under section 9 of the Fair Trading Act.  A valuation is an opinion of worth, not statement of fact, and as such is not a representation or misrepresentation.

His Honour did not accept this submission stating at [18]:

18 However, I am satisfied that there is evidence from which it is open to conclude that the valuations served a dual purpose. True it is that they contained an opinion of value. However it is open to conclude that the valuations also contained an implicit representation of fact that each of the works in contention were authentic works, each having been created by one of the Plaintiffs.

(my emphasis)

No case application – loss and damage.

It was also submitted that the sole recipient of the representation was Blanche.  Blanche is not a Plaintiff.  There was no evidence that he suffered any loss or that the valuations were circulated in the market place.   Vickery J extracted the relevant paragraphs and found that the relief sought included future loss and damage if valuations were used in the future in conjunction with the sale of the works (see [27] – [28]).  That element of the claim justified the claim for permanent injunction regarding the use of the valuations.  In considering sections 149 and 149A of the Fair Trading Act, empowering the grant of injunctive relief, Vickery J stated, at [30]:

30 These sections of the Fair Trading Act are framed in broad terms. On their face they arguably do not depend upon any person being actually mislead by conduct which contravenes section 9 of the Act. Rather, it is the conduct in breach of section 9 which may give rise to a grant of relief under section 149 .. The relief sought by the Plaintiffs in this case under paragraphs 1-3 of the relief claimed, would appear to fall within the ambit of these statutory provisions.

While Vickery J found there was a case to answer regarding the claim for injunctive relief he found there was no case to answer regarding the Plaintiffs’ claim for $25,000 in damages.  Section 159 of the Fair Trading Act requires a causal link between the contravening conduct and the loss and damage claimed, [34].  After analysing the evidence thoroughly (at [37] – [43]) his Honour found while thre was considerable evidence going to authenticity of the works (though he noted no declaration was sought on same in the pleadings - [41]) there was no evidence that valuations or their use had any effect causing the loss claimed.  On that point Vickery J found there was no case to answer the claim for $25,000.

No case application – the election.

The usual rule in making a no case submission is:

1. a judge will not rule on a no case submission unless the applicant states it will not call evidence in the event that submission is unsuccessful [44]. It is however a matter of discretion whether the judge puts the applicant to his election.  The exercise of the discretion depends on “..depends on matters which go to the just and convenient disposition of the litigation and the interests of justice.”
2. a judge will rule on whether to put the the applicant to his election after the submission is made.

His Honour did not put the applicant to his election because of the serious allegations being made; that an art dealer represented that fakes were authentic and sold fakes.  This is particularly serious for a dealer continuing to operate in the art market. In the circumstances the Second Defendant should have the opportunity to put on evidence against the case put against him.  Curiously his Honour regarded the publicity associated with the case as a factor, stating (at [46]), “I cannot ignore the measure of publicity that this case has attracted.”

ISSUE

No case applications are, not surprisingly,  infrequently made.  In a matter where the facts are actively contested the prospect of being put to an election rightly warrants a conservative approach.  If an application is contemplated it is critical to carefully analyse the Plaintiff’s evidence against the pleadings.  In this case the  Second Defendant was partially successful because the Plaintiff’s evidence focused on authenticity claims rather than evidence of actual loss.  As Vickery J made clear, one does not equate with the other.

Sanelli v Sanelli & Anor

Mukhtar AsJ in Sanelli considered a very full throated application by the plaintiff for indemnity costs.  At [29] Mukhtar AsJ set out the broad principles

29 An order for indemnity costs is a departure from the Court’s usual course and special circumstances must be shown. In my experience, applications for such orders are increasing in modern litigation but overall they are difficult to obtain, certainly in borderline cases. Great care must be taken in reaching a conclusion at the urging of a victorious litigant that the losing litigant somehow conducted itself delinquently as litigant so as to attract an indemnity order, as if it were an expression of the Court’s admonition. Such an order may be made where proceedings are commenced or continued in wilful disregard of known facts or clearly established law, or where there is undue prolongation of a case by groundless claims, or conduct of proceedings for an ulterior motive, or where a litigant acts dishonestly in the litigation or flouts or abuses rights and privileges. They tend to be cases where a Court might think that a litigant properly advised had no hope of success and therefore must be taken to have proceeded for some illicit motive or chosen to wilfully disregard the law. That would require a strong finding to sustain a judicially exercised discretion.

The Plaintiff claimed indemnity costs arguing that the second defendant never had a case [2], more technically described wilful disregard of the law, and a Calderbank letter where the Plaintff offered to bear her own costs if the second defendant would consent to monies held in Court being released to her.  The second defendant, notwithstanding withdrawing its defence 5 days from the scheduled commencement of the trial date argued that there should be no order as to costs because of the Plaintiff’ obstructionist behaviour.  The plaintiff’s claim was grounded on the equity of exoneration (usefully described at [23] – [27]) however the Plaintiff did not plead her case in those terms until approximately half way through the proceeding.  Mukhtar did not regard the extensive discovery and enquiry as being evidence of a lack of a defence.  Similarly he regarded some of the defences as being dubious.  Against this he noted that the ultimately successful claim was formulated lateish in the piece [34].  His Honour in analysing whether the rejection of the offer was unreasonable in the circumstances noted that the Calderbank offer was made 2 months before the Plaintiff amended her claim and at the time the offer was made the second defendant still had not “.. had all the relevant objective material to enable a litigator to give definite advice, or at least could say to their client that they had exhausted all means to dutifully investigate the case.” [40].  Timing of an offer an offer  is critical in determining the reasonableness in rejecting it.

O’Reilly v TS & B Retail Systems Pty Ltd

This was an appeal regarding a costs ruling made at the conclusion of a County Court trial.  The Court set out in some detail the exchange of offers and related correspondence.  A Defendant’s offer was made on Friday 16 May 2009 and left open until 5pm Monday 19 May 2009.  The plaintiff rejected that offer just before noon on 19 May and made a counter offer, leaving it open until 5pm the next day.  The court noted the very short period within which the offers were left open but regarded it as significant that even with such a short time frame the Plaintiff was sure enough  to reject the defendant’s offer with 6 hours to spare. The trial judge found it was unreasonable to reject the 16 May offer.  The Court approved of the trial judge’s analysis, recounted at [31],  including the haste of the Plaintiff’s response without properly considering the risks. The Court also highlighted the fact, at [20], that “..An order for indemnity costs does not entitle the party in whose favour it is made to recover whatever sums he incurs. Costs incurred unreasonably are not recoverable, nor are those of an unreasonable amount.”  The Plaintiff’s figures lacked credibility. It is very important for the offeree to be as temperate and resaonable as possible in any correspondence and couteroffers.

Tenth Vandy Pty Ltd v Natwest Markets Australia Pty Ltd (No 2)

As is his wont Croft J undertook a very detailed analysis of the operation of Order 26 [12] – [16],  Calderbank offers [17] – [20] and orders for non party costs [40] – [53].

Croft cited the factors of reasonableness set out in Hazeldne’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2):

(a) the stage of the proceeding at which the offer was received;

(b) the time allowed to the offeree to consider the offer;

(c) the extent of the compromise offered;

(d) the offeree’s prospects of success, assessed as at the date of the offer;

(e) the clarity with which the terms of the offer were expressed;

(f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.

His Honour made the point that in exercising its discretion it must judge the conduct of the offeree at the time of the offer but not with the benefit of hindsight.  To that end his Honour considered the offers in the context of the stage of the litigation process.  The authorities make it clear there is no rule requiring the maker of an offer to set out the reasons why the offer should be accepted.  It depends upon the circumstances.  In Tenth Vandy the Court did consider the analysis set out in the various Calderbank offers.  In his considerations the Court also noted the intemperate and “quite ridiculous offers to settle with the defendants on payment of sums in the millions of dollars..” [38]. The Court found that the plaintiff’s correspondence indicates that it was not behaving reasonably. Interestingly the Court in O’Reilly referred to some quite pungent correspondence. All the more reason for an author to remove as much emotion from correspondence as possible.  In considering the reasonableness of the refusal one should assume a court will be unimpressed by an offeree making serious allegations of misconduct or allegations relating to the proceeding unless it is relevant to the offer.

The Court ordered costs against a non party in this case.  It is an unusual order to make.  The basis for making an order was set out in [51] where Croft J said:

51 The jurisdiction to award costs against a non-party is not enlivened unless the non-party has a sufficient connection to the proceeding.  Elaborating on this requirement, and by reference to Burns Philp & Co v Bhagat, Bischof v Adams and also Guss v Geelong Building Society (in liq), Ashley J said:

“The Court’s power to award costs under s 24(1) of the Supreme Court Act is wide enough to order that costs be paid by a non-party. Focussing upon the general situation – that is, putting the circumstances raised by r.6323 to one side – it may be said that such an order is always exceptional. In the vast majority of cases it would be unjust to make an award of costs against a non-party. It may also be said that whilst certain categories of persons have been identified as persons against whom such orders may be made, the Court’s discretion is not confined to those categories of persons. A further proposition may be put, that is, that a non-party against whom an order is made must have a connection with the proceeding in question. Gobbo J dealt with the matter of connection in Bischof. His Honour concluded that in the exercise of the discretion it would be pertinent to take into account the extent of the connection between the non-party and the proceeding and the causal connection between the third party and the costs. His Honour pointed out, correctly in my respectful opinion, that in some cases the connection between the non-party and the proceeding may be slender, but there may be a close relationship between the non-party and costs (or increased costs) incurred. At the other extreme it may be that the non-party stands to benefit greatly from a proceeding, but may not have had any real part in supporting the proceeding, and so any real part in the incidence of costs.”

The court made the connection between the natural person and Tenth Vandy, his corporate vehicle, in the conduct of the litigation and incurring of costs by the defendant.  The Court was satisfied that the natural person was in effect the driving force behind the litigation and he had personal interest in the outcome.  It should be noted that just being a director is not a basis for a non party costs order. There must be a significant connection to the proceeding.

Interestingly, while  the Court made the non party jointly and severably liable for the costs the  non party’ s liability “…should be subject to the proviso that the liability … is not to arise unless and until the plaintiff fails to meet its obligations to pay the defendant’s costs” [56].  Such an order is indicative on the conservative approach of the Courts to make non party costs orders.

But there is a limit and there is propriety………….and Singh v Secretary, Department of Employment and Workplace Relations is a salutory lesson in overstepping the line.  

The Full Court’s commentary on the merits of the appeal are uncontroversial and the path of the litigation, with a determined and somewhat obsessive self represented litigant  is fairly predictable.  The Full Court however was less than impressed when the Respondent, effectively the Commonwealth Government, embarked on communications with the bench after the conclusion of the hearing. The two issues Sparke Helmore raised was:

• a correction to the Appeal Book and Respondent’s submissions as to the name of the Respondent differed from the terms of the Order by Goldberg (par [63]).
• correcting a statement made by a witness in an affidavit (par [64])  

The bench quoting Mason J in Carr v Finance Corporation of Australia Ltd (No 1) [1981] HCA 20; (1981) 147 CLR 246, and Branson J in  Jackson v Conway [2000] FCA 1530 made it clear that Sparke Helmore should not have sent the letter without the court’s leave (par [68]).  Part of that irritation was no doubt because shortly thereafter the appellant, a tough customer by any measure, put in further submissions without leave.  When the door is opened all sorts walk through.     

One is fairly sure some judges are less than impressed when a decision contains comments such as:

73 The respondent’s solicitors’ letter not only should not have been written but it is not helpful.

74 The respondent’s solicitors suggest that the respondent should be described as “Secretary, Department of Employment and Workplace Relations” “as the proceeding was commenced in that name and the Court has not made an order changing the name”.

75 We do not agree. The respondent should be correctly described.

The general principle is pithily and pointedly set out at paragraphs [70] – [71]:

70 Legal practitioners and the parties, represented or not, must understand that they should not make supplementary submissions to the Court after an appeal has been heard, and whilst judgment is under consideration, without first obtaining the Court’s permission. The parties must make their written submissions before the hearing of the appeal. The hearing of the appeal is for oral submissions. It is not designed to provide the parties with material for further written submissions.

71 At the completion of the hearing of the appeal the parties’ right to make submissions on the appeal is exhausted. If it were otherwise and a party could simply present a further submission, the appeal could go on interminably. Such would be inconsistent with the maintenance of the administration of justice.

The fact situation in Woy Woy Promenade Pty Ltd v Nu Squeeze Cafe Pty Ltd  involved a determination on whether a lease was enforceable and the respondents liable as guarantors for the lessee against the respondent’s claim that there had been a valid termination on the basis that the building works were not concluded by a specified date.   The appellant did not either election or waiver, presumably in a reply, or in oral submissions.  On appeal the appellant wanted to raise election or waiver for the first time. Giles J dealt with the late submissions in every bit a snippy way was the Federal Court in Singh when he said:

48 Election and waiver were not pleaded below. Nor were they raised in submissions, save that counsel for the respondents observed that there had been no suggestion of waiver or estoppel or any conduct that would otherwise prevent them from relying on cl 2.5(b) of the deed.

49 The appellant submitted that it should be permitted to raise election and waiver on appeal. It said that the first respondent’s payment of rent after 30 June 2004 and until October 2004 was a clear election and founded a clear waiver, and that other evidence could not reasonably have been given to negate election or waiver. It said that election and waiver were always relevant to the question of valid termination, as indicated by the observation made by the respondents’ counsel.

50 These last submissions were rather remarkable. Even if relevant, election and waiver were not relied on, and that was the point of counsel’s observation. Pointing out that something is not an issue does not make it an issue.

51 There had to be conduct unequivocally affirming the deed, with knowledge of the facts entitling termination. While the evidence of it was sketchy, the payment of rent was accompanied by complaints about access to the ramp; in substance, about the absence of the kerb scoop and the marked pedestrian crossing, affecting access by potential customers to shop 4. It is not clear that the respondents knew of the consent plans, or of condition 22; some knowledge may be inferred from the letter of 29 October 2004, which referred to inquiries indicating “that the work in accordance with the development consent has not been complied with and Council has now issued an order requiring compliance”, but when any knowledge was acquired is unclear. Neither other communications with the appellant nor knowledge of construction of the ramp contrary to the development consent was explored at the trial, as matters bearing upon whether there was election or waiver by the payment of rent. This could well have been done if election or waiver had been pleaded. In my opinion, the appellant should not now be permitted to rely on election or waiver: it is sufficient to refer to Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418 at 438 and Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1 at 7-8.      

(My emphasis)

The current movement for intensive case management puts pressure on that parties to plead only that upon which they intend to rely.  That seems trite given that is as it should be.  But not to raise waiver and election in a case like this does make one check his or her P & I policy. 

In Worldwide Enterprises Pty Ltd v Silberman & Anor Forrest  J  heard an appeal by defendants seeking to stay the pleading under Rule 1.7 of hte Supreme  Court Rules until the plaintiff engaged solicitors.  The Defendant also sought security for costs.

Representation

Forrest J rejected a submission that there  was no  discretion to permit  a corporation to take a step in a proceeding without proper legal representation.  At  paragraph [20] he set out the guiding principles:

20 In light of the foregoing discussion, the following principles, I think, can be distilled:

(a) The starting point, as rule 1.17 shows, is that usually a company will not be permitted to appear without a legal representative. However, the rule is not absolute.

(b) Where such circumstances warrant it, a company may be permitted to “take a step” without being represented by a legally qualified person.

(c) The following matters are relevant to determining whether such circumstances have been shown.

(i) The manner in which the case has progressed at the time that the application is made.

(ii) The manner in which the case can proceed in the future without a solicitor;

(iii) The complexity of the issues involved in the case.

(iv) Whether the lack of disciplinary measures in relation to the person seeking to represent the company will affect the administration of justice;

(v) Whether the case can be conducted in an orderly and responsible fashion without a solicitor;

(vi) Whether there are financial considerations which would inhibit a company from obtaining legal representation;

(vii) The stage which the case has reached;

(viii) Whether the defendant is likely to expend more funds in defending the claim absent a solicitor acting for the company;

(ix) What effect, if any, permitting a company to appear without a solicitor will have on Court resources and, particularly, the effect upon other litigants in the Court List.

At paragraphs [21] – [29] Forrest applied the principles to the facts in the case to date.  And what a dismal history it seems to have been.  The defendants found their without prejudice communications being splashed about in affidavits and counsel being attacked by name.  That unfortunately is depressingly familiar.

Security for Costs

The principles surrounding security for costs is well established.  Forrest J set out the key principles at paragrah [30] – [33].  At its essence if there is reason to believe a plaintiff corporation is unable to pay a defendant’s costs, with the defendant having the onus, the court will consider such an order.

Here the plaintiff made the defendants case.  The reason the corporation did not have legal representation was that it couldn’t afford it.  That may have helped it in trying to fend off the stay application but was ammunition for the second application. And so it went.

Strike out application (paragraphs 4 – 5,  8 & 10).

Features of a strike out application are:

• the rule applies to the adequacy of the pleadings only;
• the facts are not under any consideration.  In fact the facts are assumed to be true;
• the test as to when to strike out has been variously described but the most common formulation is that the statement of claim does not admit of reasonable argument;
• that it is an interlocutory order from which appeal can’t be taken without leave; and
• where a court determines that a claim should proceed it will hesitate in striking out that portion of the claim whose legal basis may be doubtful or problematical.

Summary judgment application (paragraphs 6 – 10).

Features of this form of application are:

• there is an analysis of the facts outside the pleadings;
• that it is essentially a summary trial;
• the test is that the proceeding has no reasonable prospects of success;
• it is easier to obtain summary judgment than strike out because the applicant in the former need only show that there is no dispute of material fact ; and
• an order granting summary judgment is final and appellable as of right.  Where summary judgment is granted for less than the totality of the claim it is arguable that those orders may be interlocutory (see paragraph 9).

Barnes v Addy

Finkelstein J, in his refreshingly crisp prose, summarised the core requirement of a Barnes v Addy claim,  knowledge, at paragraph 15 as:

For a knowing receipt claim under Barnes v Addy, there are three elements: (1) receipt by the defendant of (2) trust property with (3) knowledge of the facts that (a) the property was trust property and (b) receipt was pursuant to a breach of fiduciary duty or misapplication of the property: Spangaro v Corporate Investment Australia Funds Management Ltd (2003) 47 ACSR 285 at [54]-[60] and especially [55]. The banks attack both the second and third elements. The second element of course depends on whether there was a trust over the loaned shares in the first place. The applicant’s claim for the existence of a trust is founded in various causes of action: (1) an equity of redemption based on the allegation that the investors mortgaged rather than sold their securities to Opes; (2) a claim for rescission based on the argument that the investors entered into the securities lending agreements with Opes under the unilateral mistake that they were mortgaging rather than selling the shares; (3) breach of express trust, on the basis that Opes made representations reflecting an intent by Opes to hold the shares on trust for the investors; (4) estoppel, based on the allegation that Opes made representations that the investors remained the beneficial owners of the shares and the investors relied on those representations to their detriment; and (5) breach of fiduciary duty, based on the allegation that Opes had a conflict of interest arising from its on-lending relationship with the banks (pursuant to which it wished to place the investors’ shares in jeopardy) giving rise to a fiduciary duty to disclose to the investors the true nature of the share lending transaction.

At paragraph 27 Finkelstein J states that in pleading knowledge for the purpose of a Barnes v Addy claim it is sufficient to:

to plead and prove knowledge of facts that would put an honest and reasonable person on notice (but not merely inquiry) of a real and not remote risk that the transfer was in breach of trust or fiduciary duty or involved the misapplication of trust property..

As to what constitutes knowledge Finkelstein J said, at paragraph 28:

..In my view, it would be simpler to adopt a uniform approach to Barnes v Addy scienter based on the standard categories of mens rea (in descending order): (1) intent; (2) actual knowledge; (3) recklessness (which I would define in these circumstances as a conscious disregard of a substantial and unjustifiable risk that the property was subject to a trust and was received pursuant to a breach of trust or of fiduciary duty or a misapplication of trust property); (4) negligence (here, a failure to perceive a substantial and unjustifiable risk that the property was so received); and (5) strict liability. Categories (1) and (2) are self-explanatory and clearly sufficient to establish liability; it is also now clear, after Say-Dee, that strict liability (ie an unconscionability or unjust enrichment approach) is not applicable. There is a bit more difficulty with categories (3) and (4), but I think it is also safe to say that negligence is out. In Say-Dee, the High Court suggested (at [175]-[178]) that the fifth Baden category (knowledge of facts sufficient to put an honest and reasonable person on inquiry) would not suffice to establish Barnes v Addy liability in Australia. To my mind, the rejection of a duty of inquiry is effectively the rejection of a negligence standard.

In this case the applicants did not plead facts giving rise to an inference of recklessness in the Barnes v Addy claims.

I am forever grateful to read that his Honour describes the law of constructive trusts as being in a mess!  I have 5 turgid tomes on equity evidencing that fact.