A C & M Prince Pty Ltd v Slater & Gordon Ltd [2007] FCA 1002

FEDERAL COURT OF AUSTRALIA

A C & M Prince Pty Ltd v Slater & Gordon Ltd [2007] FCA 1002 Corporations Act 2001 (Cth) s 459G Federal Court of Australia Act 1976 (Cth) s 31A(2) A C & M PRINCE PTY LTD v SLATER & GORDON LTD AND FLEXIBLE PACKAGING PTY LTD VID 507 OF 2007

HEEREY J

2 JULY 2007

MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VID 507 OF 2007

BETWEEN: A C & M PRINCE PTY LTD

Applicant

AND: SLATER & GORDON LTD

First Respondent

FLEXIBLE PACKAGING PTY LTD

Second Respondent

JUDGE: HEEREY J DATE OF ORDER: 2 JULY 2007

WHERE MADE: MELBOURNE

THE COURT ORDERS THAT:

1. The proceeding against the first respondent be dismissed. 2. The motion by the second respondent filed 25 June 2007 be amended to include reliance on Order 20 rule 2 of the Federal Court Rules. 3. The proceeding against the second respondent be dismissed. 4. The applicant pay both respondents' costs on an indemnity basis.

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 VID 507 OF 2007

BETWEEN: A C & M PRINCE PTY LTD

Applicant

AND: SLATER & GORDON LTD

First Respondent

FLEXIBLE PACKAGING PTY LTD

Second Respondent

JUDGE: Heerey J

DATE: 2 JULY 2007

PLACE: MELBOURNE

REASONS FOR JUDGMENT 1 This litigation arises out of the supply by the second respondent of packaging material to the applicant, which is a manufacturer of popcorn confectionery. The applicant retained the first respondent, Slater and Gordon Ltd, to act on its behalf in proceedings which it had already commenced against the second respondent in the District Court of New South Wales. In those proceedings the applicant alleged the second respondent had provided material which was not of merchantable quality and not fit for purpose and had engaged in misleading or deceptive conduct. The applicant terminated the retainer of Slater and Gordon. The firm issued a statutory demand for its costs and out of pocket expenses amounting to $48,615.51. The demand was dated 4 June 2007, and was served at the latest by 6 June. 2 By the present application filed on 8 June 2007 in this Court the applicant sought an order against the first respondent under s 459G of the Corporations Act 2001 (Cth) setting aside the statutory demand, and also claimed damages for "the supply and delivery of legal services that were not of merchantable quality or delivered with due care and skill". The application also contained a claim against the second respondent for breach of warranty conditions implied under s 71 of the Trade Practices Act 1974 (Cth). 3 Slater and Gordon have moved to have the application struck out as disclosing no reasonable causes of action. The appropriate standard to apply is that mandated by s 31A(2) of the Federal Court of Australia Act 1976 (Cth), namely whether the Court is satisfied that the applicant has no reasonable prospect of successfully prosecuting the proceeding. 4 Dealing first with the application to set aside the statutory demand, the affidavit in support sworn by Mr Alan Carl Prince reads as follows: [10] I went to the first respondent in May 2006, because my then solicitor had not achieved a result for me and the first respondent, instead of pointing out to the solicitors for the Second respondent, that further litigation on their part would be 'unconscionable conduct: within they [sic] meaning of that term in section 12CA Australian Securities and Investment[s] Commission Act 2001, for litigation to continue after an Insurance Company has offered indemnity, the first respondent considered my engagement of them was an instruction to continue to litigate. [11] On the 7th September 2006, Slater and Gordon issued what is termed an Amended Statement of Claim which is numbered 4971 of 2006. [12] The Amended Statement of Claim issued by Slater and Gordon, bearing the number 4971 of 2005, does not claim that on the admissions made in the above defence, the second respondent, after admitting that it would continue to supply the same product, as admitted in Paragraph 5 (5) above, that on its admission that it supplied substituted product, it had breached the written agreement it had made with the applicant, and breached the provisions of section 71(1) and 71 (2) of the Trade Practices Act 1974 as claimed in Paragraph 33 of the Statement of Claim filed on the 6th November 2005. [13] In consequence of that omission, the first respondent has breached Section 74(1) of the Trade Practices Act 1974 and the entire conduct of the proceedings by the first respondent have been in breach of the Trade Practices Act 1974. [14] On the 24th May 2007, I obtained a Memorandum of Advice of Dr John Walsh of Brannagh, Barrister at law, who stated: 'In view of the admissions and expert witness report made available to me, I consider that further litigation may well be in breach of the Civil Procedure Act 2005 and the matter ought to immediately be set down for a settlement conference. 5 I agree with the submissions of Mr Over for Slater and Gordon that the affidavit does not show any reasonable prospects of success in the application to set aside the statutory demand. No defect in the demand is pointed to. From the Bar table, counsel for the applicant said that the bill of costs was disputed, but that no affidavit has been filed within the 21 day period of service of notice to make out such a claim or defence. 6 Section 12CA of the Australian Securities and Investments Commission Act 2001 (Cth) has no application because it only applies to the supply of financial services, and not legal services. 7 The allegation in par 10 of Mr Prince's affidavit, that Slater and Gordon were somehow at fault for allowing the litigation to continue after the second respondent's insurer had offered indemnity, is based on a the misconception. As is clear from a letter from the former solicitors for the applicant dated 21 February 2006, the second respondent's insurer had agreed to extend indemnity to its insured; that is to say, it agreed to indemnify the second respondent against any claim by the applicant. The insurer has not admitted the second respondent's liability to the applicant. 8 As to the allegation in par 12 of Mr Prince's affidavit, an examination of the second respondent's defence in the District Court to the applicant's amended statement of claim makes it clear that liability is denied. In particular, the second respondent denies it agreed to supply only packaging film manufactured by Shorko Australia (par 8.1). It admits that it supplied film that was not manufactured by Shorko but denies the film it supplied did not comply with applicable Australian standards, was not fit for purpose, was not of merchantable quality or was unsuitable for use with oil based products (par 22.2). 9 In its application, under the heading "Details of Claim", the applicant expands its claim in the following terms: The First respondent supplies legal services to clients in Sydney and while acting for the applicant supplied and delivered legal services that were not of merchantable quality or delivered with due care and skill, insofar as they failed, when confronted with an opinion from Counsel, that the matter was one best conducted in the Federal Court, instead of in the District Court of New South Wales the first respondent set a letter of demand and a Section 459E Statutory demand, in respect of services rendered that are not and remain not rendered with due skill and care. This breaches the implied warranty contained in Section 74 Trade Practices Act 1974. 10 There is no foundation for this, as the opinion of counsel was only obtained after Slater and Gordon had, on 25 May 2007, ceased acting for the applicant. The orders sought do not include a claim for damages against Slater and Gordon. Maybe that is an oversight, as a substantive part of the application seems to seek such an order. In any event, I am satisfied that such an application has no reasonable prospects of success, and I make the order sought by Slater and Gordon in its motion. 11 The claim against the second respondent is stated in the application in these terms: "The second respondent supplied packaging film to the applicant that breaches the implied warranty conditions contained in section 71 Trade Practices Act 1974 and has made admissions in the existing proceedings in Sydney, in respect of the supply of the material that render themselves liable to the applicant under section 82 Trade Practices Act 1974." 12 As has already been pointed out, the second respondent has not admitted liability. The only remaining justification for keeping the matter in this Court was the suggested connection with the application to strike out the statutory demand. That has now gone, but, in any event, I am not satisfied that, given the lack of proper basis for the statutory demand application, it was proper to bring this application against the second respondent in the first place. It would be an abuse of process for duplicate litigation to proceed in this Court. 13 The Court orders that: 1. The proceeding against the first respondent be dismissed. 2. The motion by the second respondent filed 25 June 2007 be amended to include reliance on Order 20 rule 2 of the Federal Court Rules. 3. The proceeding against the second respondent be dismissed. 4. The applicant pay both respondents' costs on an indemnity basis. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey.