IN THE FEDERAL COURT OF AUSTRALIA) NEW SOUTH WALES DISTRICT REGISTRY) No. NG 737 of 1994 GENERAL DIVISION ) BETWEEN: MARTIN GRIMSON First Applicant RICKY MARTIN GRIMSON Second Applicant AND: GARY FRANCIS O'DONNELL First Respondent EVENLONG PTY LIMITED (ACN 051 752 277) Second Respondent and ENIMA PTY LIMITED (ACN 008 619 298) Third Respondent CORAM: WILCOX J PLACE: SYDNEY DATE: 31 AUGUST 1995 EXTEMPORE REASONS FOR JUDGMENT WILCOX J: The matter before the Court is a notice of motion, filed on 5 April 1995, whereby the three respondents sought an order under Order 6, rule 9 of the Federal Court rules that the third respondent cease to be a party to the proceeding; or alternatively pursuant to Order 20, rule 2 of the Federal Court rules, that the proceeding be dismissed. The application for dismissal from the proceeding of the first two respondents, Gary Francis O'Donnell and Evenlong Pty Limited, was based on the fact that a deed of release was executed by the applicant after the events complained of and the damage allegedly sustained. At a hearing in May I held that the causes of action relied upon, assuming they had initial validity, were clearly released and that, consequently, it was appropriate to order the dismissal of the proceeding as against those two respondents. I understand that my order is now subject to appeal. Unfortunately, it was not then possible for me to dispose of the application insofar as it concerned the third respondent. The reason was that there had been a misapprehension as to the events that would occur at that hearing and in relation to the provision of evidence. The application, insofar as it involved the third respondent, Enima Pty Limited, had to be adjourned until 27 July 1995. On that occasion some evidence was taken; but there was again a problem. It transpired that documents produced to the Court on subpoena had not been inspected by anybody acting on behalf of the applicant. I was asked to adjourn the further hearing of the matter to allow that to occur. I did so and the matter came back before me today. No further evidence was adduced today but I heard submissions from counsel as to the course I should take. If this was a trial of the matter, and I had to determine on the balance of probabilities whether any representations that were made by Mr O'Donnell were made on behalf of Enima Pty Limited, I would conclude that I was not satisfied of that fact. The evidence that Mr O'Donnell was not acting on behalf of Enima is strong. First, Mr O'Donnell gave sworn evidence to that effect. He was cross‑examined on his evidence but was unshaken and nothing emerged from his evidence to cause me to doubt what he said. His evidence is supported by the fact that Evenlong Pty Limited, the company that was eventually involved in the transaction, was incorporated in May 1991 and came under the control of Mr and Mrs O'Donnell in June. The representations relied upon by the applicant commenced some time in July. So the company that was the vehicle for the transaction was in existence, and under Mr O'Donnell's control, at the time of the negotiations during which it is said representations were made. The material that suggests to the contrary of what Mr O'Donnell has sworn consists of three items. The first item is that, in his affidavit, Mr Grimson referred to the fact that, in August 1991, he received a valuation prepared by a valuer, Mr Marjason. Mr Grimson did not indicate the source of the valuation but, presumably, it was given, or sent, to him by somebody acting on behalf of the O'Donnell interests, to use a neutral term. On the back of the valuation, which related to the hotel the subject of the transaction, appeared the words under the name of the job: "Under instructions from Mr Gary O'Donnell, Enima Pty Limited, 147 Newcastle Street, Fyshwick ACT 2609". Mr Grimson does not claim that Mr O'Donnell ever told him that he (O'Donnell) was negotiating on behalf of Enima. Nor does he claim that he knew Mr O'Donnell to be associated with Enima at any relevant time; so that there were circumstances under which it might be argued that he (Grimson) was being constructively informed of an agency relationship. But he did receive the valuation with the words "Enima Pty Limited" on the back of it. In his affidavit he did not say this caused him to have any particular belief, or that this was followed by a conversation at which he explored the name of the relevant company. However, he did refer to an alleged conversation, dated only "August 1991", in which Mr O'Donnell told him on the telephone that he was "now buying the hotel through another of his companies" and that this would not affect him. The other piece of evidence is in an affidavit sworn by Christopher Stavenhagen, an officer of the Department of Gaming and Racing. It appears that, on 1 December 1994, Mr Stavenhagen accompanied Detective Sergeant Graham Wheeler of the New South Wales Police Service to an interview with Mr O'Donnell at his office in Fyshwick. Mr Stavenhagen was concerned with complaints of licensing conditions in licensed premises. It is not clear why there would have been discussion about the identity of the company that was involved in the purchase from Sedore Pty Limited of the hotel and its subsequent lease to Mr Grimson. However, according to Mr Stavenhagen's affidavit there was conversation on this subject. He said that Detective Sergeant Wheeler asked Mr O'Donnell why it was that Enima was the company that initially entered the offer to purchase the Royal Hotel in Bungendore. He attributed to Mr O'Donnell the reply: "I decided to form a separate company for this purpose. The new company was then substituted on to the documentation for the purchase some time after initial negotiations had commenced with Sedore Pty Limited. The main delay was caused by the time taken getting the new company registered with the Australian Securities Commission". During cross‑examination, Mr Stavenhagen accepted a summary of the situation which started with the proposition that the conversation arose out of the fact that Detective Sergeant Wheeler had in his possession a copy of the Marjason valuation with the name "Enima Pty Limited" on the back sheet. He also accepted that Mr O'Donnell's reference to a separate company was in relation to the decision to purchase the hotel and he said this was all that he could recall about the matter. It is obvious that this evidence falls short of attributing to Mr O'Donnell an admission that Enima was the intended vehicle for the transaction at the time of his negotiations with Mr Grimson. The date of commencement of the negotiations with Sedore Pty Limited, which are the only negotiations to which reference was allegedly made, may well have been earlier than the date of commencement of negotiations with Mr Grimson. This would be consistent with a statement that there was some delay in getting the new company registered. Plainly there was no problem about registration in relation to the consummation of negotiations with Mr Grimson. The company was already registered and under the control of Mr O'Donnell before those negotiations commenced. The Marjason valuation has loomed large in the application. The main reason for the adjournment of the matter from May to July was to enable steps to be taken to have Mr Marjason give evidence. During this period, I was informed that Mr Marjason had been served with a subpoena to produce documents but declined to co‑operate. At the request of the applicant I put the matter back into the list for directions on this subject. However, after discussion it appeared that Mr Marjason would be likely to produce his file to the Court. So it was unnecessary to make formal directions. I understand that Mr Marjason did produce his file and that it was inspected on behalf of the applicant; but nothing from the file has been tendered. Neither has Mr Marjason been called. This omission was the subject of competing complaints between the parties, each of them contending that the other party should have called him. Whatever the merits of these contentions, the fact remains that we have not heard from Mr Marjason. However, when Mr O'Donnell gave evidence, he was asked about his instructions to Mr Marjason. He said he never told Mr Marjason that the purchaser would be Enima and that, so far as he recalled, he had not mentioned Enima at any stage in connection with this transaction. He also said he had never intended that Enima would be involved; he had always intended that there would be a separate company, apparently the company Evenlong. Mr O'Donnell suggested that Mr Marjason wrote the name "Enima" on the back sheet because he had previously done valuations, on Mr O'Donnell's instructions, that were intended to be used in connection with Enima transactions. The above is the whole of the relevant evidence, as it presently stands. As I have said, if I had to determine the matter on the basis of the balance of probabilities, there would be no doubt in my mind that the proper conclusion was that the applicant had failed to establish that Enima was involved. Not only is there no substantial evidence to that effect, there is a sworn denial by Mr O'Donnell. The difficulty, however, is that the relevant test, in relation to this application, is not the balance of probabilities but, rather, whether it can be said that the action against Enima is "so obviously untenable that it cannot possibly succeed" or "manifestly groundless": see Barwick CJ in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129. The relevant test is one of degree and my mind has fluctuated as to whether or not the respondent has gone so far as to make out the ground. In the end I have concluded that it has not. As I have said, there is no doubt as to the course I would take if this was a trial. Unless the evidence changes significantly, I would expect the respondent to succeed at trial. For this reason, it is tempting to exercise the Court's power of summary dismissal and thereby spare the parties and the Court the burden of what I think will turn out to be an unnecessary trial of a misconceived case. But I do not think I can confidently conclude that there is no chance of success. There has not yet been discovery of documents. It is possible, although I think unlikely, that discovery of the records of Enima will reveal a document or course of conduct that assists the applicant's case. I also bear in mind that Mr Grimson's affidavit was compiled by himself; he was then acting in person. I do not know to what extent he had the benefit of legal assistance in compiling the affidavit; but the affidavit is not skilfully compiled. Much of the material in the affidavit is irrelevant or otherwise inadmissible. It may be that the affidavit does not do full justice to Mr Grimson's case. I think the Court should hesitate before striking out a claim, essentially on the basis on inadequate proof, where the primary material has been put together by an applicant acting in person and manifestly needing legal assistance. As I say, I have hesitated; but, in the end, I have decided I should not strike out the claim. I think, however, that the material put before the Court, and the expenditure incurred, will not be totally wasted. It will undoubtedly expedite the trial. I therefore think that the appropriate course, in regard to costs, is to make the costs of the application costs of the trial. It is desirable for directions to be made to allow the trial to take place at an early date, with the issue of damages being deferred until after determination of liability. I think I should regard myself as disqualified from conducting the trial, because I have reached views about some aspects of the case. So, I propose to give directions and thereafter dissociate myself further from it. I make the following orders: (1) In regard to the notice of motion, I dismiss the application of the respondents in relation to Enima Pty Limited; (2) I order that the costs of the notice of motion in connection with that respondent be costs in the proceeding generally; (3) I direct that the issue of damages be tried separately from the issue of liability and after determination of the issue of liability, in the event that the applicant succeeds at the trial; (4) I direct that the proceeding be tried on the basis of affidavit evidence, subject to cross‑examination, and subject also to the direction that, if any party wishes to call a witness who will not make an affidavit, that party is to supply a summary of the evidence that it hopes to adduce from that witness at the time of serving his or its affidavits; (5) All affidavits to be relied upon by the applicant are to be filed and served by 13 October and all affidavits of the respondent are to be filed and served by 10 November. Any affidavits in reply are to be filed and served by 24 November. (6) I direct that the matter be placed in the directions list of another judge on Friday 1 December. (7) List of documents to be filed and served by 10 November. I certify that this and the preceding nine (9) pages are a true copy of the Reasons for Judgment of Justice Wilcox. Associate: Dated: 31 August 1995 APPEARANCES Counsel for the Applicant: I H Wallach Counsel for the Respondent: J W Stevenson Solicitor for the Respondent: Clayton Utz Date of hearing: 31 August 1995