CATCHWORDS FEDERAL COURT - accrued jurisdiction - Trade Practices Act claim - joined with claims in negligence and deceit - whether claims should be separated. TRADE PRACTICES - claim under s.75B - whether respondent firm vicariously liable - s.75B exhaustive. Trade Practices Act, 1974, ss.52, 75B, 82, 87 RABVILA PIY, LIMITED v. REYMOR INVESTMENTS PTY. LIMITED & ORS OLD G1i06 OF 1985 PIncus J. BRISBANE 8 April 1986 ? a eee ee eee Coan : wo wy Gren rape oe ae son Meee ae . wy yet ea ros ares tos apr OM enw yor IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G106 of 1985 } GENERAL DIVISION BETWEEN : AND: AND: AND: AND: JUDGE MAKING ORDER: DATE OF ORDER: WHERE MADE: THE COURT ORDERS THAT: RABVILA PTY. LIMITED Applicant REYMOR INVESTMENTS PTY. LIMITED First Respondent JOHN CHARLES REYNOLDS Second Respondent TAN MOIR Tnird Respondent HUNGERFORD, HANCOCK & OFFNER ({a_firm) Fourth Respondent MINUTES OF ORDER PINCUS J. 8 April 1986 BRISBANE 1. The applications ta strike out or stay the claims against the fourth cespondent be dismissed. 2. The applicant have leave to amend the Statement of Clain. 3. The application for security for costs be heard on a date to be fixed by the Registrar. on nena Rene an anata a a a re gto soe NOTE: The fourth respondent pay the costs of and incidental to the application mentioned in (1), to be taxed, the taxation not to take place until further order, or until a general order for costs is made in the principal application, whichever shall first occur. Settlement and entry of orders 1s dealt with in Order 36 of the Federal Court Rules. ed iS tae eee Nceenp me on t. ae wares ee 5 " ee aay - i IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G1i06 of 1985 GENERAL DIVISION ) BETWEEN: RABVILA PTY. LIMITED Applicant AND: REYMOR INVESTMENTS PTY. LIMITED First Respondent AND: JOHN CHARLES REYNOLDS Second Respondent AND: IAN MOIR Third Respondent AND: HUNGERFORD, HANCOCK & OFFNER (a firm) Fourth Respondent PINCUS J. 8 April 1986 REASONS FOR JUDGMENT This ig an application by the fourth respondent in the principal proceedings for an order that the action against it should be struck out on the ground that it is not within the jurisdiction of this court, or stayed in the exercise of discretion. There is also an application for security, which has been adjourned to await the determination of the other questions. The principal proceedings arise out of the sale of a business by the first respondent, Reymor Investments Pty. Limited, to the applicant. The second and third respondents are directors of the first respondent. The fourth respondent, pace sce sar oa y vo =e ce ert a at wep emer enn + pefooae 0 vf sorts. ity ge OF Hungerford, Hancock and Offner, is a firm who are the accountants of the first respondent and they seek the relief just mentioned. The applicant seeks damages under ss.82 and 87 of the Trade Practices Act 1974, damages for negligent misstatement and/or damages for fraudulent misrepresentation in respect of the sale of a business. The fourth respondent argues that the Federal Court does not have, or should not exercise, jurisdiction to hear claims against it in relation to any of those matters. The claim under the Trade Practices Act is based upon s.52 of the Act which prohibits a corporation from, in trade or commerce, engaging in conduct that is misleading or deceptive or 1s likely to mislead or deceive. Section 82 enables a person who suffers loss or damage by conduct of another person that was done in contravention of, inter alia, s.52, to recover the amount of the loss or damage against that other person or against "any person involved in the contravention". The expression "person involved in the contravention" obtains an expanded meaning from s.75B of the Act, the operation of which was recently considered by the High Court in Yorke v. Lucas (1985) 59 A.L.T.R. 776. That case lays down the effect of certain provisions of the section, but it is not necessary for the purposes of this decision to deal with it in detail; it is enough to say that s.75B has the effect that certain natural persons are taken to be involved in contraventions of the provisions of Parts IV and V and that the High Court read the section as requiring proof of some certain mental elements. The <= y ano Veo : Me gs 7 . area case did not deal with the point on which the application of s.75B to the fourth respondent depends; that is whether a firm may be made vicariously liable for misleading conduct engaged in by an agent, the latter being liable under s.75B. That problem arises here because the fourth respondent 1s said to be liable for false statements made by its agent, one Warren Fellows. Although the statement of claim does not say so, it is common ground that Mr. Fellows has at relevant times been a partner in the fourth respondent and I decide the matter on the assumption that the pleadings will reflect that. Counsel for the fourth respondent relied on my decision in Keen Mar Corporation Pty. Ltd. v. Labrador Park Shopping Centre Pty. Ltd. 61 A.L.R. 504 in which I said, relying in part upon the decision of the Full Court in Yorke v. Lucas (1983) 49 A.L.R. 672, that to make the firm which was sued there liable under s.75B "the representations must be sheeted home to the partners in (the firm) themselves; it is not enough to succeed under s.75B, to show that a party to the contravention acted for the third respondent (firm) as agent or servant, the members of the third respondent not being themselves said to have been involved". Nothing was said on the hearing of the application to induce me to depart from the view just mentioned, and were there nothing more in the case, I would strike out the claim as against the fourth respondent. However, Mr. McMurdo for the applicant relied, as a ground for distinguishing the Keen Mar case, on the toarcn fact that here the fourth respondent is plainly brought in on bases other than the Trade Practices Act. It is necessary to expound this point in somewhat more detail by reference to the statement of claim. That alleges two written misrepresentations. The first complained of was constituted by the sending by post of the parcel containing certain documents, apparently either being or incorporating accounts prepared by the fourth respondent. The applicant pleads that the fourth respondent, by its agent Mr. Fellows, represented to agents of the applicant that the figures in the document were accurate. The second allegation of written misrepresentation relates to another document also being or incorporating accounts prepared by the fourth respondent. a The statement of claim says, although rather vaguely, that these representations were untrue and, as to the first but mot the second, that Mr. Fellows knew of the untruth. The distinction made may not have been intended; it does not, in any event, seem to be significant for present purposes. As to both documentary misrepresentations, the applicant advances an alternative case of negligence, saying that the fourth respondent became aware by its agent, Warren Fellows, that the applicant intended to or was likely to act in reliance upon the accounts and that Warren Fellows, with such knowledge, negligently represented that the accounts were accurate. It may be thata question will arise whether the circumstances were such as to give rise to a duty of care, but no argument was based upon that aspect of the matter. _ ne ye ae ee ee me ee oe ee ee ee It is, I think, clear that the factual distinction relied upon by Mr. McMurdo exists; here a case is pleaded against the fourth respondent that accounts it prepared were fraudulently or negligently claimed to be accurate. There is no application to strike out the claim against the fourth respondent only insofar as it relies upon the Trade Practices Act. If there were, I would decline to do so on the ground that it is, in general, undesirable to isolate a point in a case and decide it in advance of the trial. Here, striking out the Trade Practices Act claim against the fourth respondent would make no significant difference to the ambib£ af the factual issues. Nevertheless, the fact that, in my view, the Trade Practices Act claim against the fourth respondent is ill-founded, on the statement of claim as 1 presently stands, assists the fourth respondent in relaticn to the central point made on its behalf. This was that the pleadings disclose no such connection between the claims against the fourth respondent and those against the other respondents as to bring the whole collection within the scope of the notion of accrued jurisdiction, as expounded by the High Court in the line of cases culminating in Stack v. Coast Securities (No. 9) Pty. Ltd. 154 C.L.R. 261. Mr. Douglas for the fourth respondent relied also upon the unreported decision of this court in Maisey v. First Coast Pty. Ltd. (21 February 1984), but I have not found the case to be of real assistance. If one disregards the Trade Practices Act claim against the fourth respondent for the purposes of considering the jursidictional question, what is left seems, on the face of the pleading, to be closely connected with the federal aspects of the matter. The very documents which are at the forefront of the applicant's case against all respondents are alleged to have been prepared by the fourth respondent. As mentioned above, a partner in the fourth respondent 1s said to have become aware that the applicant intended to rely upon the accounts and with that knowledge to have told the applicant that the accounts were accurate. The case against the fourth respondent is tied up in another way with that against the second and third respondents, who are said to have been directors of the first respondent; as against the second and third respondents, a s.75B claim has been advanced, andas Mr. McMurdo pointed out, resolution of that issue 1s likely to involve investigation of the way in which the accounts came into existence, as the applicant will have to prove the requisite knowledge or intention on the pact of the second and third respondents. If the contention advanced on behalf of the fourth respondent firm 1s accepted, then the claim against them would have to be pursued in separate proceedings. One cannot say with confidence precisely to what extent such proceedings would involve 1ssues overlapping those in the claims against the first three respondents. Experience suggests, however, that much of what would be in contention in the two cases would be common: the question of the way in which the alleged accounts came into oe ep eee t " existence, what passed between any of the first three respondents and the fourth respondent in the process of preparation of those accounts, the statements made by Mr. Fellows to the applicant with respect to the accounts, the accuracy of the accounts and, of course, the question of damages. Whichever of the tests mentioned in the majority judgment in Fencott v. Muller (1983) 152 C.L.R. 570 1s applied, the answer must, I think, be the same: the relevant claims against the fourth respondent cannot be described as "distinct and unrelated" (p.603), nor is either a "completely disparate claim constituting in substance a separate proceeding" (p.607), nor is the federal claim a "trivial or insubstantial aspect of the controversy" (p.609). So far from thinking, then, that 1t would be unconvenient or inappropriate that the claims against the fourth respondent be tried with those against the other three respondents, I believe that to be a more practical course than to separate the two. I have derived assistance from the discussion by Beaumont J. in Kennedy v. Australasian Coal and Shale Employees Federation (1983) 50 A.L.R. 735 at 742 et seq. with respect to bringing a non-federal claim against a party other than the respondent against which the "anchoring" federal claim is made. I have also noted that Wilcox J. in Obacelo Pty. Ltd. v. Taveraft Pty. Ltd. (1985) 59 A.L.R. 571 had a case a little like this before him, but the reasons his Honour gave there do not appear to me applicable to the present case, except insofar as he dealt DS oe seer pee et (at p.578) with the question of bringing in a respondent against whom no federal claim is made. The application to strike out the claim against the fourth respondent must fail, as also, for similar reasons, must the application to stay it. There remains the question of costs. Although the discussion pointed up some deficiencies in the applicant's pleading, and I give leave to amend it generally, the pleading points were quite incidental. I think the fourth respondent should pay the costs of the application to strike out, to be taxed, but that the taxation should not take place until further order, or until a general order for costs 1s made in the principal application, whichever shall first occur. > certify thar tf » certity that this and the 7 Preceding Pages ara a true copy of the reasons for judgment borein of His Hcacur HA Justice incus fp "3 > r 3 2 Pinc X VA cae Associate Dated ¢-4% ye wore oor 7 ae Mr oa ai i i Saeed re ere sie ee Ce ee 7" prey tor on on oe re ogee eae ee eee ee a a OC wove 4,