JUDGMENT No. ....MC2O3 7 FH CATCHWORDS PRACTICE AND PROCEDURE - application to strike out - whether statement of claim discloses cause of action against respondent - allegation that "financial interest" amounted to agency Corporations Law ss 66(2), 170(6), 588M(3), 588R(1) and 1018(1) P_F Browne & Ors v_ J C Hall & Ors FEDERAL COURT (No. VG 295 of 1994) AUSTRALIA INCI REGISTRY Judges Heerey J Date: 8 December 1994 Place: Melbourne IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) No. VG 295 of 1994 ) GENERAL DIVISION ) BETWEEN: PAUL FRANCIS BROWNE First Applicant - and - PAUL WILLIAM HOLYOARK Second Applicant - and - JOHN WALTON ELDRIDGE Third Applicant - and - JAMES CHARLES HATT, First Respondent - and - LINDSAY FREDERICK OLDAKER Second Respondent - and - HOWARD _ JOHN FRANCIS TRELOAR Third Respondent - and - F_ F AUSTRALIA PTY LTD (In Liquidation) (formerly known as Filter Fresh Australia Pty Ltd) (ACN 058 110 259) Fourth Respondent JUDGE : Heerey J DATE: 8 December 1994 PLACE: Melbourne MINUTE OF ORDERS 1. Paragraphs 24 to 29 inclusive of the statement of claim be struck out, as against the third respondent. 2. Grant liberty to the applicants to re-plead. 3. Costs of the third respondent's application be costs in the cause. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) No. VG 295 of 1994 ) ) GENERAL DIVISION BETWEE N: PAUL FRANCIS BROWNE First Applicant - and - PAUL WILLIAM HOLYOAK Second Applicant - and - JOHN WALTON ELDRIDGE Third Applicant - and - JAMES CHARLES HALL First Respondent - and - LINDSAY FREDERICK OLDAKER Second Respondent - and - HOWARD _ JOHN FRANCIS TRELOAR Third Respondent - and - F_F AUSTRALIA PTY LTD (In Liquidation) (formerly known as Filter Fresh Australia Pty Ltd) (ACN 058 110 259) Fourth Respondent JUDGE: Heerey J DATE: 8 December 1994 PLACE: Melbourne EX TEMPORE REASONS FOR JUDGMENT I have found this a difficult application. I am concerned that a pleading summons should not degenerate into an exercise in pedantry; but on the other hand, if it is seen that there is some fundamental defect in the case as pleaded, it is in everybody's interest that that should be exposed as early as there was jurisdiction in this Court to review the deportation order in question under the Administrative Decisions (Judicial Review) Act 1977 (Cth) and s 39B of the Judiciary Act 1903 (Cth). In the course of discussion at the outset of the hearing counsel for both parties agreed that the question was to be decided on administrative law grounds, and on such of the grounds in s 5 of the AD(JR) Act as were referred to in the application for review. Many of such grounds assume that an administrative decision may be legally valid even if it discloses factual error or want of logic: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 356. However, in the course of written submissions filed after the conclusion of the hearing, counsel for the respondent referred to Minister for Immigration and Ethnic Affairs v Naumovska (1983) 88 ALR 589, a case concerning threatened deportation as a result of a false statement on an incoming passenger card. In answer to a submission on behalf of the Minister that the Act as it then stood made the determination of the falsity of the information in the card a matter for the immigration officer who decides to grant an entry permit Lockhart J said (at 601): "It is for the courts to say whether information 1n a passenger card produced to an immigration officer by a person for the purpose of securing entry into Australia is false or misleading 1n a material particular. It 1s not for immigration officers to determine these matters. Before the Minister may deport a prohibited immigrant he must, of course, conclude on the material before him that the person is a prohibited immigrant, but that is not to say that' the determination of the person's statue as a prohibited immigrant rests on the Minister's opinion. This status rests on the establishment of objective facts whose existence may be reviewed by the courts." 3. PARTICULARS (a) Hall had a fanancial interest in the company, further particulars of which the applicants at present are unable to supply until after discovery and inspection herein. (b) Upon the occasion of the first meeting referred to in the particulars under paragraph 9 herein, Hall informed the applicants that if they wished to invest in the company's business he would speak to and arrange a further meeting with the persons concerned in its management. (c) The second meeting was arranged by Hall as referred to in the particulars under paragraph 9 herein, and at that meeting Messrs McPherson and Oldaker attended. (da) By reason of the foregoing matters, Hall made the representations with the express or actual implied authority or alternatively the ostensible authority of the company." In my opinion para 17 read as a whole, including the particulars, does not make out a case that Mr Hall in making the representations was the agent of the company. All the facts alleged in the particulars are equally consistent with Mr Hall doing no more than recommending investment in the company in his capacity as an accountant in private practice. The allegation in particular that he had "a financial interest in the company further particulars of which are to be supplied", does not carry the matter any further. It is trite to say that the mere fact that a person has a "financial interest in a company" does not make that person an agent of the company. Looked at another way, the particulars serve the function of setting out the material facts on which the applicants rely in support of their allegation. If all those material facts are admitted, they still do not lead to a conclusion that the agency existed. 4. I do not think it is any answer to this to say that the applicants could request more particulars. The particulars are pleaded as being complete in themselves and, for the reasons I mentioned, I do not think they make out a case. That being so, if one looks at paras 25 to 29 which make the allegations against Mr Treloar, they have to be considered from the starting point that the allegations as pleaded of Mr Hall's conduct do not make out a case that the company is vicariously liable for what Mr Hall did. Further, there is the problem in relation to para 24 that the allegation that investment was "procured by the company" necessarily involves the proposition that the company, through the agency of some person, procured the investment. That person, on the face of the statement of claim, can only be Mr Hall and therefore the problems about the agency of Mr Hall to my mind render that paragraph defective. It cannot stand alone as a separate cause of action. In any case, the allegations of a contravention of the requirements of Part 7.12 of the Corporations Law and, in particular, s 1018(1) raise the problem that, by virtue of s 1017(a), Part 7.12 does not apply in relation to "an excluded issue of securities". That expression in turn is defined by s 66(2). On its face, the applicants' claim would appear to be excluded under s 66(2)(d), but it is in any case a matter for the applicants to plead the particular facts which bring Part 7.2 into operation in relation to the investment complained of. The same considerations apply to para 25(a) of the statement of claim. There is the further problem that it would seem implicit in the pleading that s 170(6) is relied on but the Matters said to make Mr Treloar "a party to the arrangement" have not been pleaded. The same may be said of para 26. Paragraph 27 again turns on the question of Hall's agency. Paragraph 28 raises a fraudulent trading cause of action under Divisions 3 and 4 of Part 5.7B. Section 588M(3) provides a right of recovery for creditors, subject to the obtainment of the liquidator's consent under s 588R(1). The obtainment of this consent has not been pleaded. For those reasons, I accede to the application on behalf of Mr Treloar for the striking out of paras 24 to 29 inclusive as against Mr Treloar, but I will grant liberty to re-plead. I think Mr Treloar has succeeded and I agree this application has been a worthwhile exercise. On the other hand, and this is certainly no criticism of counsel appearing today, the long-standing ethic of the Bar that a pleading point should be notified to an opponent who then has the opportunity to see if there is merit in it and amend the pleading with minimum cost, ought to be supported and encouraged. I think the best solution is that I make the costs of this application Mr Treloar's costs in the cause so that on a final resolution, if 6. he is successful, he will get the costs of today. I certify that this and the preceding 5 (five) pages are a true copy of the reasons for judgment of his Honour Mr Justice Heerey. Dated: 8,December 5994 el Appearances Counsel for the applicants: P H Clarke Solicitor for the applicants: Nevett Ford Counsel for the third respondent: D Wyles Solicitor for the third respondent: Hall & Wilcox Date of hearing: 8 December 1994