FEDERAL COURT OF AUSTRALIA

PRACTICE - self-executing order - non-compliance with directions to provide particulars - time expired - application for extension of time - applicant proposes to deliver confused amended statement of claim that makes unnecessary provision of some of the particulars never delivered - power to extend time not exercised - Federal Court Rules O 3 r 3

Bankruptcy Act 1966 (Cth), s 60(3)

Trade Practices Act 1974 (Cth), ss 51AA, 51AB, 52

Federal Court Rules, O 3 r 3

FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) CLR 268, referred to

JOHN CAMPBELL HOWARD & ANOR v P D  MORTGAGE SERVICES PTY LTD & ORS

QG 164 of 1996

DRUMMOND J

BRISBANE

12 OCTOBER 1998

THE COURT ORDERS THAT:

1.                  The notice of motion filed 23 June 1998 and the amended notice of motion filed 14 July 1998 be dismissed with costs, including any reserved costs on the notices of motion.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

By notice of motion filed 23 June 1998, the second applicant sought a number of orders, including:

(1)        a declaration that the first and second applicants have complied with the orders made on 23 April 1997;

(2)        in the alternative, that the Court extend the time for compliance with the orders of 23 April 1997.

By an amended notice of motion filed soon after, the second applicant sought an additional order that “[t]he Applicants (sic) have leave to amend the Statement of Claim and Application” in accordance with drafts attached to the amended motion.  After action was commenced, but before the original notice of motion was filed, the first applicant became bankrupt and his trustee has made a decision not to pursue the action.  By force of s 60(3) the Bankruptcy Act 1966 (Cth), his action is now deemed to have been abandoned.

At the hearing, counsel for the second applicant did not seek to argue an entitlement to the first order sought in the notice of motion; debate turned on whether the second orders there sought should be made.

On 23 April 1997 and following a long history of non-compliance by the applicants with directions, I made orders and gave directions to the following effect:

(1)        By 22 May 1997 the applicants file and serve a response to paragraphs 52 to 56 and 58 to 60 of the first to third respondents’ request for further particulars of the statement of claim.

(2)        That they be deemed to have complied with another order I then made for delivery of certain particulars to the fifth respondent by filing and serving the response mentioned above to the first three respondents’ request for particulars.

(3)        By 22 May 1997 the applicants provide to the sixth respondent particulars of the conspiracy alleged in paragraph 24 of the statement of claim, ie, the particulars sought by paragraph 53 of the first to third respondents’ request for particulars.

I further ordered that in default of the provision of these particulars to these various respondents, the applicants’ action stand dismissed against the respondent in question on 23 May 1997.  These guillotine orders were made in circumstances where the applicants had repeatedly failed to comply with directions given for the progress of the action, a delay they then explained by the financial difficulties they were in.

It is common ground that the necessary particulars were not supplied so that the applicants’ actions against the first to sixth respondents came to an end on 23 May 1997.  There things stood for thirteen months until the second applicant filed her notice of motion in June last.  Counsel for that applicant did not attempt to point to any express explanation for this delay in applying to resurrect the action, but submitted that it should be inferred that the explanation for this delay between May 1997 and June 1998 was to be found in a continuance of the same sort of financial difficulties upon which both applicants had successfully relied to procure the final opportunity, which they obtained on 23 April 1997, to remedy their repeated defaults in complying with directions given in respect of the action.  For their part, none of the respondents led any evidence to suggest special prejudice had accrued since 23 May 1997; each, however, relied upon the general prejudice which it can be inferred they would suffer if the action commenced as long ago as 13 September 1996, which terminated over a year ago due to the default of both applicants, were now to be resurrected.

It is not in dispute that the Court has power under O 3 r 3 the Federal Court Rules to extend the time allowed by the order of 23 April 1997 to comply with the directions then given for the provision of particulars, even though that time has long since expired and the proceedings, in consequence, have terminated.  Cf FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268.

However, the second applicant does not seek an extension of time within which to remedy her failure to comply with the orders for the delivery of particulars made on 23 April 1997.  Instead, what she proposes is that the action be resurrected and she be permitted to deliver an amended statement of claim in which the action against the respondents is recast in significant respects.  What has been done is to provide some of the particulars the subject of the orders of 23 April 1997, but to recast the action so as to abandon certain of the allegations originally made in respect of which particulars were also ordered on 23 April 1997, but which have never been given.

Although the second applicant recognised, by alone bringing the motion before the Court to which I have referred, that it was no longer open to the first applicant to claim such relief, she made no attempt, in preparing the proposed amended pleading, to limit it to the claims she wishes to make on her own behalf:  the document is in form a pleading intended to state the basis upon which both applicants are entitled to claim the extensive relief, including relief which could only be available to the first applicant if he were free to sue for it, set out in the proposed amended application also annexed to the notice of motion.

The central allegation in the action as originally formulated was that the first to sixth respondents had conspired with each other to obtain possession of the applicants’ separate landholdings by arranging for each applicant to enter into an agreement with the first respondent to obtain loan moneys from the first respondent on the security of mortgages which they granted over their respective lands; the loan moneys were never advanced, with the consequence that neither applicant was able to meet the interest payments due on the existing mortgages over their respective lands.  A seventh respondent was named in the original proceedings, but he has never been served, although it is apparent from the proposed amended pleading that it is intended to pursue him and also to join a company associated with the sixth respondent as eighth respondent.

The claims contained in the proposed amended statement of claim are to the following effect:

(1)               As at January 1994, the first applicant was in the process of subdividing certain of his lands (called “the subdivision lands”), which were then subject to mortgages to Metway Bank;

(2)               The second applicant then owned other land (called “the shopping centre land”), which was subject to a mortgage she had granted to Westpac Banking Corporation.

(3)               The first applicant was then in arrears in respect of the Metway Bank mortgages and lacked the relatively small amount of moneys necessary to bring his subdivisional development to the stage where he would be able to generate income from the sale of lots in that subdivision, with which he would have been able to clear the arrears under the Metway mortgages and fund the next stage of the development of the subdivision lands.

(4)               It is then said that the applicants approached the fourth and fifth respondents, expert financial advisers, who in June 1994 informed the applicants that the first applicant’s subdivision lands could be refinanced with Capital Benefits of Australia and that the second applicant’s shopping centre land could also be refinanced with that same organisation.  It is alleged that the fourth and fifth respondents also offered to manage the subdivision development so that it would be completed within the twelve month period of the refinancing arrangements which they proposed to the first applicant in respect of that subdivisional land.

(5)               It is then said that both applicants were informed by Capital Benefits of Australia that their applications for refinance had been approved, but the fourth and fifth respondents did not take any further steps to arrange such refinance.  Instead, it is said that in August 1994 these two respondents advised that a new organisation they were starting up “would refinance and fund the said subdivision” and that a person they suggested would carry out the further subdivision work.

(6)               It is next alleged that in September 1994, the fourth and fifth respondents advised the first applicant (but not the second applicant) that their new organisation had approved the first applicant’s finance application and were prepared to lend the funds necessary to pay out the first applicant’s mortgagee, Metway Bank Ltd; it is further alleged that the fourth and fifth respondents then handed “the Applicants” a letter of offer by Private Mortgage Finance Pty Ltd (not presently a party but intended to be made the eighth respondent if the action is resurrected) that “there would be a loan of $765,000” from a source not identified to be secured by mortgages on both the first and second applicants’ lands, which loan would be used to pay out the first applicant’s mortgagee, Metway Bank Ltd, and the second applicant’s mortgage, Westpac Banking Corporation, and from which loan proceeds $100,000 would be available to fund the remaining subdivisional development work.  The terms of this offer included a provision that the balance loan moneys of $195,000 would be paid into the third respondent’s trust account, that $10,000 would be used to pay legal fees and other outgoings, apparently in connection with the loan due to the third respondent, with the balance being paid out on direction of Private Mortgage Finance Pty Ltd.  Another term of this loan was said to be a requirement that both applicants enter into a joint venture agreement with Private Mortgage Finance Pty Ltd.

(7)               It is then alleged that both applicants signed this letter of offer at a time when the fourth and fifth respondents knew that the first applicant’s mortgagee, Metway Bank, had commenced action to enforce its mortgage over the first applicant’s subdivision lands in respect of which nearly $450,000 was owing.

(8)               It is then said that “as a result of signing the letter of offer”, both applicants attended the office of the seventh respondent where each applicant executed a mortgage over their respective lands, cross-guaranteed each other’s indebtedness in respect of those mortgages and executed a joint venture agreement with Private Mortgage Lending Ltd, another entity who has never been and is not now sought to be made a party to the action.

(9)               Although the allegation is that each applicant granted a mortgage over their respective lands to the first respondent, it is said that, pursuant to the joint venture agreement, the stranger to the action, Private Mortgage Lending Limited, undertook to arrange finance to pay out the applicants’ existing mortgages and meet “development costs”, ie, the first applicant’s costs of developing his subdivision lands.  The joint venture agreement is also said to contain promises by Private Mortgage Lending Limited that the existing mortgages of the applicants to Metway Bank and Westpac Bank respectively would be paid out from a total of $780,000 in loan funds.  It appears, although it is far from clear, that the balance of the total advance, viz, $209,000, was to be paid to Private Mortgage Lending Limited as to $10,000 “for development costs and contingencies”, as to $90,000 “for interest, loan fees, development costs and contingencies” and as to $100,000 “for development costs” with $10,000 being paid “for legal costs and stamp duty”.  From a source unidentified a further $70,000 was to be paid to someone “for brokerage fees”.  It is also alleged that under the joint venture agreement Private Mortgage Lending Limited was “to receive $150,000.00 profit” while the applicants were to receive “$64,290.00 profit” with “any balance of profit 70% of such profit to Private Mortgage Lending Limited and 30% to the applicants”.

It appears that the arrangements the applicants say they entered into at the seventh respondent’s office “as a result of signing the letter of offer” were quite different from the proposal in the offer, in so far as it involved Private Mortgage Finance Pty Ltd dropping out of the picture and being replaced by Private Mortgage Lending Limited, an increased total advance to the applicants and the applicants entering into a joint venture with Private Mortgage Lending Limited.

(10)           It is then alleged that the loan advance to the first applicant of $475,000 was expended in paying out the Metway Bank mortgage of about $460,000 and that, of the second applicant’s advance of $205,000, the Westpac mortgage of about $105,000 was paid out, a total of about $22,300 was paid to the third respondent and $64,500 was paid to Private Mortgage Lending Limited.

(11)           It is then alleged that Private Mortgage Lending Limited appointed Daleman Pty Ltd and/or Melseem Pty Ltd, companies of which the fourth respondent was a director, to be the manager of the first applicant’s subdivision project “pursuant to the said joint venture agreement” and that, at the request of Melseem Pty Ltd, the first applicant paid it nearly $22,000 to be used by it “to pay the costs of sealing development plans to the Caboolture Shire Council”.

(12)           It is then alleged that Private Mortgage Lending Limited, Private Mortgage Finance Pty Ltd, Daleman Pty Ltd and Melseem Pty Ltd did not provide any of the necessary funds to complete the work on the first applicant’s subdivision land until about March 1995, did not, until October 1995, pay Caboolture Shire Council fees for the sealing of the subdivision plans “enabling the said plans to be sealed on 27 November 1995” and ceased paying interest payments in respect of “the said mortgages in or about March 1995”.  There may be an allegation implicit in para 17(e)(ix), (x) and (xi) of the proposed pleading that Private Mortgage Lending Limited was under some obligation to one or other of the applicants to make these payments and there is an express allegation in para 19 that Melseem Pty Ltd received almost $22,000 from the first applicant expressly for the purpose of paying to the Caboolture Shire Council “the costs of sealing development plans”.  But there is nothing in the pleading to suggest that either Private Mortgage Finance Pty Ltd or Daleman Pty Ltd was under any obligation to make any of the payments or do any of the things they are said to have failed to do in para 20.

(13)           It is next alleged that the second and/or third respondent, on or about 27 November 1995, agreed with the applicants to lodge “the said sealed plans in the Titles Office so as to enable the issue of Certificates of Title in respect of” the nine blocks which the first applicant all along planned to have available for sale, but the particular respondent failed to do so until 22 January 1996 and falsely claimed to both applicants that this delay was caused by a problem in the Titles Office.

(14)           It is then alleged that the failure of Private Mortgage Lending Limited, Private Mortgage Finance Pty Ltd, Daleman Pty Ltd and Melseem Pty Ltd to complete the subdivisional works and their failure to pay the sealing plan fees to the Caboolture Shire Council (all alleged in para 20), together with the failure of the second and/or third respondent to lodge the plans in the Titles Office until 22 January 1996 deprived both applicants of the sum of about $340,000:  the first applicant said he had anticipated in January 1994 and before be became involved with either the second applicant or any of the respondents or any of the other entities referred to in the proposed pleading that he would be able to generate this sum from the sale of the subdivision, if only he then had available the small amount of funds necessary to enable completion of those works.  There is nothing in the pleading to indicate the basis upon which the failures referred to deprived both applicants of this sum of $340,000, an allegation which, in any event, appears to be inconsistent with what is said about the terms of the joint venture agreement which both applicants entered into with Private Mortgage Lending Limited on 3 October 1994, under which both were to receive a total of only $64,290 profit and an additional 30% of any balance profit.  However, the proposed pleading focuses on the loss to both applicants in a way wholly unexplained in the pleading, which is then said to have put both applicants in the position of being unable to meet interest payments on “the said mortgages”, presumably their respective mortgages to the first respondent.  It has also led, so the pleading alleges, to both applicants being unable to carry out subsequent stages of “the said division and obtain further funds as a result of the sale of further blocks of land”.

(15)           It is then said that “[t]he said delays and failures to pay Council fees and failures to carry out works”, ie, failures alleged to have been the responsibility of Private Mortgage Lending Limited, Private Mortgage Finance Pty Ltd, Daleman Pty Ltd, Melseem Pty Ltd and the second and/or third respondent, were committed fraudulently with the intention of obtaining possession of the said lands from the applicants and in breach of the mortgages between the first and second applicants and the first respondent.  While the allegation in para 24 of the original pleading of a conspiracy between the first to sixth respondents to fraudulently obtain possession of the applicants’ lands is abandoned in the proposed new pleading, an allegation equivalent to that of conspiracy made against the first to sixth respondents originally is now made against Private Mortgage Lending Limited, Private Mortgage Finance Pty Ltd, Daleman Pty Ltd, Melseem Pty Ltd and the second and/or third respondents.  It is also said that these delays and failures were “in breach of the mortgages between the First and Second Applicants and the First Respondent”.  It is difficult to make any sense of this later allegation:  it is not apparent how conduct by the second and third respondents, let alone conduct by entities who were not parties to the action and who are not intended to be made parties to the action if resurrected, could be said to involve breaches of the mortgages between the first and second applicants and the first respondent.  That the second respondent is a director of the first respondent and that the third respondent is a firm of solicitors which is alleged to have controlled the first respondent, Private Mortgage Lending Limited and Private Mortgage Finance Pty Ltd does not take this allegation any further.

(16)           While, as I have said, the allegation of a conspiracy to fraudulently obtain possession of the lands of both applicants originally made against the first, second, third, fourth, fifth and sixth respondents is now intended to be abandoned, it is proposed to make a new allegation that the second, third, fourth, fifth and sixth respondents, together with the seventh respondent (who has never been served) and Private Mortgage Finance Pty Ltd (intended to be made eighth respondent) and Private Mortgage Lending Limited, Melseem Pty Ltd and Daleman Pty Ltd “were servants or agents of the first respondent acting within the scope of their actual or ostensible authority” at all material times.  It is not apparent, from a reading of the pleading, that allegations are made which clearly show conduct by these entities which points to each being the servant or agent of the first respondent at all material times.  If an allegation of agency is of any relevance to the claims the second applicant wishes to make against anyone, it is essential that particulars be provided of the facts relied on to show the actual or ostensible agency alleged.  Moreover, this allegation of agency is not identified in the proposed pleading as leading to any conclusion favourable to the second applicant.

(17)           The pleading goes on to allege the issue by the third respondent, on instructions from Private Mortgage Lending Limited, of “Notices of Exercise of Sale on behalf of the First Respondent” with respect to both the first applicant’s lands and the second applicant’s lands; a subsequent agreement between both applicants and Private Mortgage Lending Limited for the provision by the latter of $40,000 to complete the development of the subdivision lands and finally, the payment by Private Mortgage Lending Limited (the entity alleged to have instructed the third respondent to issue notices of exercise by the first respondent of its power of sale under its mortgages from both applicants) of “mortgage payments”, presumably payments due under those very same mortgages by the applicants to the first respondent, “so long as the joint venture was proceeding satisfactorily”.  It is alleged that, as a result of this agreement with Private Mortgage Lending Limited, the first respondent withdrew its “Notices of Exercise of Sale” and granted a twelve month extension of the mortgages to both applicants.  It is then said that, in breach of this agreement, presumably by Private Mortgage Lending Limited, no further development works were undertaken and the first respondent then issued new notices of exercise of sale with respect to the lands of both applicants.

(18)           Allegations of breach of statutory duty, breach of fiduciary duty and breaches of contract originally made are proposed to be abandoned and instead, new allegations are made that conduct particularised in various paragraphs of the proposed statement of claim, including conduct by an officer of Capital Benefits of Australia referred to in para 10 “was unconscionable in breach of” s 51AA and s 51AB the Trade Practices Act 1974 (Cth) and was misleading or deceptive in breach of s 52 of that Act.  Apart from this allegation, at the end of the pleading, Capital Benefits of Australia appear to be entirely free of any suggestion of wrongdoing.

The proposed new pleading, while abandoning certain allegations in respect of which the applicants were ordered to give particulars on 23 April 1997 and raising new allegations, is a wholly confused document.  It is not, in my opinion, possible to identify with any precision just what is the case the second applicant wishes to make against any of the respondents.  The framing of a proposed pleading which does not seek to identify, with any attempt at clarity, the basis of any claim she may herself have against any respondent but which instead links claims to be made by both applicants reinforces this conclusion.

The case is not one in which respondents seek to terminate an action for want of particularity of the applicants’ allegations or because the pleading containing them is embarrassing or vexatious.  The action is at an end and has been at an end since 23 May 1997.  The second applicant comes to court in an attempt to resurrect that action.  She seeks to avoid the difficulties she has had in providing proper particulars of the allegations of serious misconduct levelled against the respondents by saying that, if she is permitted to resurrect her action, she wishes to run it on a different basis, which makes unnecessary the provision of certain of the particulars she has failed to provide.

In addition, there is no satisfactory explanation from the second applicant for the delay, from May 1997 to June 1998, in allowing the termination of the action to remain undisturbed.

The motion and the amended motion are dismissed with costs.

Associate:

Dated:              12/10/98