Rinbridge Marketing Pty Ltd v Rinbridge Pty Ltd & Ors [1997] FCA 247

IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) NG 434 of 1996 ) GENERAL DIVISION ) RINBRIDGE MARKETING PTY LIMITED Applicant RINBRIDGE PTY LIMITED JOHN PROSPER CULLEN PETER THOMAS WALSH Respondents Coram: Whitlam J Place: Sydney Date: 9 April 1997

MINUTES OF ORDER THE COURT ORDERS THAT: 1. The applicant provide security for the costs of the first and third respondents in an amount of $30,000 by a guarantee of Steven Ceh and Frank Ceh in a form similar to that attached to the letter dated 4 April 1997 from the applicant's solicitors to the first and third respondents' solicitors. 2. The proceeding on any claims by the applicant for relief against the first and third respondents is stayed until such security is provided. 3. The motion, notice of which was filed by the first and third respondents on 27 August 1996, is otherwise refused.

4. The first and third respondents pay the applicant's costs of opposing this application for summary dismissal of the proceeding. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) NG 434 of 1996 ) GENERAL DIVISION ) RINBRIDGE MARKETING PTY LIMITED Applicant RINBRIDGE PTY LIMITED JOHN PROSPER CULLEN PETER THOMAS WALSH Respondents Coram: Whitlam J Place: Sydney Date: 9 April 1997

REASONS FOR JUDGMENT This is an application by the first respondent ("R") for an order that this proceeding be dismissed or, in the alternative, an order that the applicant ("RM") give security for costs. The proceeding was commenced on 30 May 1996. The accompanying statement of claim is substantially identical, save in one important respect, with the amended statement of claim in proceeding NG 723 of 1994 between the same parties. In the earlier proceeding R applied to strike out that amended statement of claim. The application was heard by Lockhart J. In reasons for judgment delivered on 23 October 1995 (unreported) his Honour summarized the pleaded allegations. They need not be repeated here. His Honour noted that the relief sought included a declaration in respect of an agreement made on 22 June 1994 between RM and R. After setting out relevant aspects of that agreement, his Honour referred to what he described as its "critical" provision, which was in the following terms: "24(a) In the event of any dispute or difference arising between the two parties hereto at any time as to the construction of this agreement or as to any matter or thing of whatsoever nature arising hereunder or in connection herewith then any party may give to the other notice in writing adequately identifying the matters the subject of that dispute or difference (herein after referred to as the 'Notice of Dispute') and the giving of such Notice of Dispute shall be a condition precedent to the commencement by any party of proceedings (whether by way of arbitration or litigation) with regard to the matters the subject of that dispute or difference as identified in that notice." It was common ground that no such notice was given by RM to R. Lockhart J held that clause 24 provides that the giving of a Notice of Dispute shall be a condition precedent to the commencement of proceedings, whether by arbitration or litigation. His Honour said (at p. 10): "The primary question in this case is whether the dispute between the parties falls within the description of a: 'dispute or difference arising between the two parties hereto at any time as to the construction of this agreement or as to any matter or thing of whatsoever nature arising hereunder or in connection herewith' (clause 24(a)) In particular, is the dispute 'as to ... any matter or thing of whatsoever nature ... in connection herewith'? As mentioned earlier the two causes of action pleaded in the amended statement of claim are based on representations alleged to have been made by R to RM and to have led and induced RM to enter into the agreement, one action being for damages for fraud and the other for relief for contravention of s. 52 of the [Trade Practices] Act. In either case, RM seeks an order that the agreement be set aside as void ab initio." After referring to several authorities on the ambit of arbitration clauses, Lockhart J concluded that the language of clause 24 was sufficiently wide to embrace the dispute which had arisen between the parties and that a Notice of Dispute was required. His Honour then said (at 14): "It follows that, on the facts of this case, the giving of a Notice of Dispute pursuant to clause 24(a) is a condition precedent to the commencement by RM of this proceeding. As no such notice was given, the proceeding must be dismissed." Since, however, this was not the order stated in R's notice, the motion was adjourned to 1 December 1995. On that day, having received submissions from the parties, Lockhart J ordered that the proceeding and a cross-claim by R be dismissed. In his reasons for judgment (unreported), his Honour said (at p. 2): "Once the applicant has given notice, assuming it does, pursuant to clause 24(a) of the agreement, assuming it is still entitled to do so, the whole dispute between the parties can be litigated in the appropriate court including the matters raised by the cross-claim." In the present proceeding the statement of claim contains an important, additional allegation, namely that on 6 May 1996 RM gave R a Notice of Dispute. That notice has been received in evidence, and counsel for R does not challenge the adequacy of the matters identified in it. In order to justify the summary dismissal of the proceeding, he relies upon (1) the doctrine of res judicata, (2) the so-called Anshun principles and (3) the alleged termination of the subject agreement. The evidence specifically touching on the third of these grounds will be described later. First, counsel for R submits that RM's pleaded causes of action merged in the judgment given on 1 December 1995. But, as Gummow J explains in Trawl Industries of Australia Pty Ltd (In liq) v Effem Foods Pty Ltd (1992) 36 FCR 406 at 409, no question of merger arises in a case such as the present. Lockhart J did not determine whether or not the pleaded causes of action existed. The instant condition precedent, namely the giving of notice, is not a constituent element of either of the pleaded causes of action. It is merely an additional formality which must be fulfilled so as to give rise to the entitlement to commence the proceeding. Failure to give such a notice operates like a limitation bar. In those circumstances summary dismissal is not available on the ground that no cause of action is disclosed: Ronex Properties Ltd v John Laing Construction Ltd [1983] QB 398 per Donaldson LJ at 404-405, cited with approval by Cooper J in Commonwealth v Mewett (1995) 59 FCR 391 at 398-399 (Spender J agreeing at 394). Accordingly, there can be no res judicata in the present case. Next, it is necessary to consider the application of the so-called Anshun principles. The Full Court of this Court in Ling v Commonwealth (1996) 139 ALR 159 described the fundamental issue to be considered as whether it was reasonable to fail to raise a claim in the first proceeding. No doubt, it lay within the capacity of RM to give the required Notice of Dispute prior to commencing the earlier proceeding. However, it did not do so, and I do not think it was unreasonable for it not to do so. The ambit of clause 24(a) was not a clear-cut question. Indeed, Lockhart J expressed reservations about the correctness of the conclusions in the authorities that he felt bound to follow. As in Ling, it was not unreasonable for RM not to have given notice the first time round. This brings me to the final ground upon which counsel for R seeks summary dismissal. RM's solicitors wrote to the respondents on 24 October 1994 notifying them that RM contended that it "has rescinded the agreement". On 10 January 1995 R's solicitors wrote to RM referring to "your notice dated 24 November 1994 [sic]" and accepting "your repudiation of the contract". It was submitted, therefore, that at the latest the agreement was terminated by 10 January 1995 and that clause 24(a) did not continue to operate after termination. However, procedural terms such as those in arbitration clauses are generally intended to survive termination, and I can discern nothing in the express terms of clause 24(a) to the contrary. It follows that the requirement for notice before action could also, in my opinion, be in no way dependent upon the giving during the currency of the agreement of another type of notice expressly provided for by the agreement to rectify a particular breach or breaches of the agreement. This submission is also rejected. Accordingly, the application for an order that the proceeding be dismissed will be refused. So far as security for costs is concerned, RM has offered to give security in an amount of $30,000. A partner of R's solicitor has estimated the costs of the proceeding at $78,000. However, that includes the costs of a hearing estimated at 10 days, all of which will be some way off. At this stage I think that $30,000 is quite adequate. It is agreed that the security may be given in the form of a guarantee by RM's directors. R must pay RM's costs of its motion.