FEDERAL COURT OF AUSTRALIA Lakshmanan v Janarthanan (No 2) [2006] FCA 832 PRACTICE AND PROCEDURE – submission of no case to answer Held – application refused Federal Court Rules O 35 r 2 Hamilton v Whitehead (1988) 166 CLR 121 referred to Hummerstone v Leary [1921] 2 KB 664 referred to James v ANZ Banking Group Ltd (No 2) (1985) 9 FCR 448 followed Jones v Dunkel (1959) 101 CLR 298 referred to Menzies v Australian Iron and Steel Limited (1952) 52 NSWSR 62 referred to Rasomen v Shell Company of Australia Ltd (1997) 75 FCR 216 followed Winterton Constructions Pty Ltd v Hambros Australia Limited (1992) 39 FCR 97 followed ARUNACHLAM LAKSHMANAN & ANOR v PERUMAL JANARTHANAN & ORS NSD 1689 OF 2004 RARES J 8 MARCH 2006 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 1689 OF 2004 BETWEEN: ARUNACHLAM LAKSHMANAN FIRST APPLICANT MONTBLUE PTY LTD (ACN 087 324 507) SECOND APPLICANT AND: PERUMAL JANARTHANAN FIRST RESPONDENT JANA HOLDINGS PTY LTD (ACN 002 252 066) SECOND RESPONDENT ROBERT PETER ROSS-EDWARDS THIRD RESPONDENT NICHOLAS ANNABEL PTY LTD (ACN 063 012 340) FOURTH RESPONDENT CASSONE HOLDINGS PTY LTD (ACN 002 821 623) FIFTH RESPONDENT STANLEY ROBERT SHAW SIXTH RESPONDENT ELKVILLE HOLDINGS PTY LTD (ACN 002 683 481) SEVENTH RESPONDENT JUDGE: RARES J DATE OF ORDER: 8 MARCH 2006 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The application of the fifth respondent that the Court rule on whether there is no case for it to answer be dismissed. 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 NSD 1689 OF 2004 BETWEEN: ARUNACHLAM LAKSHMANAN FIRST APPLICANT MONTBLUE PTY LTD (ACN 087 324 507) SECOND APPLICANT AND: PERUMAL JANARTHANAN FIRST RESPONDENT JANA HOLDINGS PTY LTD (ACN 002 252 066) SECOND RESPONDENT ROBERT PETER ROSS-EDWARDS THIRD RESPONDENT NICHOLAS ANNABEL PTY LTD (ACN 063 012 340) FOURTH RESPONDENT CASSONE HOLDINGS PTY LTD (ACN 002 821 623) FIFTH RESPONDENT STANLEY ROBERT SHAW SIXTH RESPONDENT ELKVILLE HOLDINGS PTY LTD (ACN 002 683 481) SEVENTH RESPONDENT JUDGE: RARES J DATE: 8 MARCH 2006 PLACE: SYDNEY REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) 1 Following my judgment earlier today, Mr Wood announced that the fifth respondent had elected that it would not be going into evidence. As I understand the authorities that does not preclude it from participating further in the trial if it were to proceed, including by its counsel being able to cross examine to the extent that one is able to do so to elicit evidence from other parties' witnesses. 2 The question for decision now is whether to entertain the application of Mr Wood for me to dismiss the proceedings against the fifth respondent on the basis that there is substantively no case to answer or otherwise to act pursuant to the power of the court recognised or reflected in O 35 r 1. The fifth respondent submits that there are three aspects of the cause of action under s 52 of the Trade Practices Act 1974 (Cth) ('the Act') which cannot succeed were I to accept the evidence at its highest. Secondly, it submits that the whole count in fraud should be dismissed. 3 Turning briefly to that matter, it is conceded by the applicants that the allegations of fraud relating to the making of what are described as the first and second representations in the amended statement of claim cannot be sustained against the fifth respondent and I dismiss the application so far as it relates to those counts. I will reserve the question of costs in relation to that matter. 4 It is convenient to deal with the issue of the claim under the Act first. Mr Wood has submitted that there are three basis on which this can be dismissed. First, it is said that the fifth respondent cannot be liable, as a separate legal entity, for the alleged conduct of its director, Mr Spratt, during the course of meeting the subject of the evidence at which it is alleged Mr Spratt was present. That is because it is said that under s 84(2) of the Act Mr Spratt must be shown to be acting in the course of his duty as a director of the fifth respondent and that the true position revealed by the evidence is that at the relevant time he was acting as a director or officer of Furniture Australia Pty Limited ('Furniture Australia') which was the company in which all of the corporate respondents and the corporate applicant were or were to become shareholders. 5 Mr Wood points to the fact that Dr Lakshmanan gave evidence that he understood that Mr Spratt was present at the relevant meetings in his capacity of his representative of Furniture Australia and that there is no evidence upon which I can find that he had any relevant representational capacity on behalf of the fifth respondent. Ms Williams, who appears for the applicants, submitted that the interest of the fifth respondent was relevantly shown in the material in evidence in exhibit A. It held a substantial holding in the capital of the company at the time at which Dr Lakshmanan was being asked to invest. The applicants submit that the company was in, and had for some time since September the previous year been in, a precarious or difficult financial position. The applicants have pointed to the evidence on which they would rely for me ultimately to come to such a finding. 6 The second basis of attack by the fifth respondent was that in the circumstances disclosed in the evidence there exists no basis on which I could find a duty on the part of the fifth respondent to speak. It was submitted that there was too remote a connection between whatever was happening during the meetings at which Mr Spratt was present and the existence of any relevant requirement of the more remote fifth respondent to cause a correction to be made to what are alleged to have been the errors in representational conduct or statements. Moreover, it was submitted that the applicants could not allege any form of duty on the part of a corporation in the position of the fifth respondent to speak when the applicants had no knowledge of the existence of the entity concerned. 7 It was put that silence itself could not be misleading and that, as Hill J had said in Winterton Constructions Pty Ltd v Hambros Australia Limited (1992) 39 FCR 97 at 114: '… it is difficult to see how mere silence could, of itself, constitute conduct which was misleading or deceptive or likely to mislead or deceive.' 8 His Honour, however, went on there to say: 'However, if the circumstances are such that a person is entitled to believe that a relevant matter affecting him or her adversely would, if it existed, be communicated, then the failure to so communicate it may constitute conduct which is misleading or deceptive because the person who ultimately may act to his or her detriment is entitled to infer from the silence that no danger of the detriment existed. Thus, where a duty to speak is imposed, silence may constitute misleading and deceptive conduct. Whether such a duty exists would clearly depend upon all the circumstances of the case.' I agree. 9 Ms Williams said that a lack of the knowledge of the existence of the corporate party with whom Mr Spratt, in this circumstance, was connected, was irrelevant and that indeed, there can be situations where one is dealing, as commonly happens, with a business name that is quite dissimilar to the actual name of the corporate actor. A member of the public dealing with the business name would not have any idea whether or not it was an incorporated company, a partnership or an individual with whom he or she was trading yet it may well be that there is a responsibility able to be made out at the end of the day against the entity which ran whatever business it carried on under or through the business name. 10 Moreover, there is a further difficulty here that Ms Williams submitted and Mr Wood did not suggest to the contrary. At this stage there is no evidence that Mr Bayliss knew anything that he said was incorrect, whereas there is some evidence that representatives of the corporate entities with whom the fifth respondent was associated, namely, Furniture Australia and the fifth respondent itself through Mr Spratt, had knowledge of a different factual position of Furniture Australia from that the subject of the alleged representations. 11 Lastly, it was put that there was no evidence of reliance on the fifth respondent because of Dr Lakshmanan's lack of knowledge of its existence and that in order to enable the applicants to succeed they had to know of the existence of that corporation. I put to Mr Wood examples where courts have held, such as in Hamilton v Whitehead (1988) 166 CLR 121 at 127, that the act of an individual was the act of the corporation. If, here, it could be found, and I make no finding about this, that Mr Spratt was acting on behalf of the fifth respondent then his acts could be, I do not say they would be, found to be the fifth respondent's acts and likewise his omissions its omissions. 12 This application was made without notice, by only one of the respondents. The other respondents do not ask me to dismiss the case against them and the factual and legal issues which I have recounted above suggest that in order to resolve the matter at this point would require me to reserve judgment, analyse in some detail the evidence and then deliver a judgment at a later time, thereby interrupting the flow of the evidence. I do not believe that that would be in the interests of justice in a case in which fraud is alleged and where I have just had the benefit, as a trial judge, of observing two of the principal witnesses giving evidence as to the circumstances in which it is alleged that fraud or misleading conduct occurred. 13 The other basis on which Mr Wood submitted that I should dismiss the proceedings was that the allegation of fraud itself was so serious that there being the legal and evidentiary weaknesses to which he pointed in respect of the s 52 counts I should dismiss the case rather than require his client to be faced in litigation with the prospect of an adverse finding. 14 Here there is no danger that his client or any person associated with it will be submitted to cross-examination for the fifth respondent has elected not to call evidence. Again, I think an attempt to analyse and untangle the separate issues between the fifth respondent and the applicants from the issues involving the applicants and the other remaining parties would not be in the interests of justice. It is quite unusual in the run of cases for a court to accede to a no case submission by one defendant or respondent when others remain in the case and where there is no completely separate or discrete issue arising on the facts by which that defendant's or respondent's position can be distinguished from the others. 15 In James v ANZ Banking Group Ltd (No 2) (1985) 9 FCR 448, Toohey J considered a similar situation and (at 9 FCR at 453) his Honour referred to decisions of the English Divisional Court in Hummerstone v Leary [1921] 2 KB 664, and of the Full Court of the Supreme Court of New South Wales in Menzies v Australian Iron and Steel Limited (1952) 52 NSWSR 62. In the latter case, at the close of the plaintiff's case, counsel for the employer applied for a verdict by direction. The trial judge said that the application was premature but that it might be renewed later and that counsel could call and not call evidence as he thought fit. Toohey J said that a practice had been approved by the Full Court, which also gave its endorsement to Hummerstone v Leary and to the passage in Glanville Williams on Joint Torts and Contributory Negligence, at 59, in the following terms: 'In actions against concurrent tortfeasors there is a further rule that if a plaintiff shows that prima facie one if not both of the defendants was negligent, the judge should not at the close of the plaintiff's evidence non suit him against one defendant only, but should hear the whole case before coming to a decision.' 16 His Honour then continued: 'In the present case the first respondent has not made a no case submission and so the applicants have not been concerned to show a prima facie case against that respondent. But I can see no difference in principle to the procedure to be followed where one respondent impliedly acknowledges a prima facie case against him.' 17 In Rasomen v Shell Company of Australia Ltd (1997) 75 FCR 216 at 226C-E the Full Court of this Court said: 'The cases referred to concern civil trials before a judge and jury, and the statements of principles in the judgment must be understood in that context where the trial judge is the arbiter of the law and not of the facts. In civil trials conducted before a judge alone the judge is arbiter both of the law and the facts, and the principles require modification to reflect that different considerations apply. In Jones v Dunkel (1959) 101 CLR 298 at 330-331 Windeyer J said: When there is no jury, the proposition "no case" to answer may obviously mean far more than "is there evidence on which a jury could find for the plaintiff? It may mean would you, the judge, on the evidence given find for the plaintiff?"' 18 Their Honours in the Full Court continued: 'In the Protean case Young CJ, with whose reasons Fullagar J agreed, explained the circumstances where the appropriate test would be: "would you, the Judge, on the evidence given, find for the plaintiff". The learned Chief Justice said (at 215) where a trial judge sitting alone in a civil case entertains a submission that there is no case to answer without requiring an election any one of three results may ensue.' 19 And, relevantly, the third result to which they referred was: 'The result of the submission might be that the judge is persuaded by the submission that there is no case and upholds it.' In the third situation the Chief Justice went on to explain: 'In reaching such a conclusion the trial judge is entitled to draw all proper references from the evidence but he cannot draw inferences against the party making the submission based on the absence of evidence from that party. Theoretically he then concludes that the evidence could not sustain a finding against the party making the submission. In such a case he upholds the submission. The consequence must then be that judgment must be entered for the party making the submission. His opponent has simply not discharged the burden which rested on him of establishing his case. Where this result ensues there is no room for a distinction between whether the evidence could sustain a finding against the party making the submission or whether the judge would make such a finding. Such a case is covered by the second possible result referred to above. This third possibility is where the proposition "no case to answer" means "would you, the Judge, on the evidence given, decide for the party against whom the submission is made?"' 20 And a reference was then given to Jones v Dunkel (101 CLR at 330-331). 21 In my opinion, if I were to approach the case on the basis of deciding whether or not I would find for the fifth respondent as the judge on the evidence given I would become involved in an adjudication of facts arising out of circumstances in which there were common elements and common alleged admissions to which the other respondents participating in the trial were party. I would run the risk of expressing a view which may mean that my continued ability to conduct the trial could be prejudiced by having in one way or another decided a matter of fact. It would involve me reviewing the evidence, analysing it in circumstances where there is a deal of evidence already, not all of it wholly consistent, and forming a view about what parts of it I should accept as being what I was told was: '...the applicant's case at its highest...'. 22 Ms Williams addressed that last consideration, in part, by pointing to a passage in the evidence in chief of Dr Lakshmanan in which in effect, he said that he would not have gone into the investment had he not been told that it was a good business. On the evidence thus far at its highest, all of the relevant corporate respondents and the human beings who were directors or associated with them were present during the visit to the factory on 6 March 1999 at that moment, including Mr Spratt, a then director of the fifth respondent. 23 I do not believe that it is in the interests of justice that I, at this point in a fraud trial where other respondents have yet to give evidence, should be diverting myself from considering the evidence as a whole at the end of the case by considering this submission on the basis as to whether I, as the judge, would find for the fifth respondent. Moreover, I think that it would interrupt the fair and orderly conduct of the trial for all the other parties were I to do so. I am conscious that the allegation of fraud made against the fifth respondent, so far as it still remains, is a serious allegation and ought not lightly to be allowed to stand if it were clearly to be seen to have no prospect of success. 24 I do not believe I am in a position where I can safely venture into the field of making a judgment on that matter despite the considerations which Mr Wood has urged upon me. 25 Mr Wood acknowledged that he knew of no case which said that it was necessary for a party to know the actual name of the entity said to have been the principal of the human being who made a representation. I put to him in argument that there were cases in other areas of the law where a party, including in fraud cases, who takes the benefit of someone else's representation may well be liable where they themselves do nothing. It does not seem to me to be a crystal clear issue of law open to be decided on an argument such as this in the middle of a trial for me to accede to his submission that I should venture where he is not able to identify authority to support the argument. Indeed, I do not think it would be in the interests of justice to do so. It would be a matter upon which I would want to reserve my decision were I to embark on that. 26 For these reasons I am of opinion that it would not be in the interests of justice to entertain the no case to answer submission made by the fifth respondent and I decline to do so. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. Associate: Dated: 29 June 2006 Counsel for the First and Second Applicant: Ms K Williams Solicitor for the First and Second Applicant: Debney Williamson Counsel for the First and Second Respondents: Mr GL Turner Solicitor for the First and Second Respondents: Barker Lawyers Counsel for the Third and Fourth Respondents Mr JE Lazarus Counsel for the Fifth Respondent Mr CD Wood Solicitor for the Fifth Respondent Hugh & Associates Date of Hearing: 8 March 2006 Date of Judgment: 8 March 2006