FEDERAL COURT OF AUSTRALIA

Akai Pty Limited (in liq) v Ho [2006] FCA 511

PRACTICE AND PROCEDURE – service outside the jurisdiction – whether prima facie case

CORPORATIONS – whether shadow directors and officers – whether deemed holding companies

Corporations Act 2001 (Cth), ss 9, 46, 47, 48

Federal Court Rules,O 8 r 2, O 9 r 7

Bluebird Investments Pty Ltd v Graf (1994) 13 ACSR 271 distinguished

Bray v F Hoffman-La Roche Ltd (2003) 130 FCR 317 followed

Costa Vraca Pty Ltd v Bell Regal Pty Ltd [2003] FCAFC 305cited

Humane Society International Inc v Kyodo Senpaku Kaisha Ltd(2005) 212 ALR 551 cited

Merpro Montassa Ltd v Conoco Specialty Products Inc (1991) 28 FCR 387 cited

Re HIH Insurance Ltd (in prov liq) and HIH Casualty and General Insurance Ltd (in prov liq); Australian Securities and Investments Commission (ASIC) v Adler (2002) 168 FLR 253,(2002) 41 ACSR 72discussed

Standard Chartered Bank of Australia Ltd v Antico (1995) 131 ALR 1;(1995) 38 NSWLR 290referred to

Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) 68 FCR 539cited

Western Australia v Vetter Trittler Pty Ltd (In liq) (Receiver and Manager appointed) (1991) 30 FCR 102 cited

WSGAL Pty Ltd v Trade Practices Commission (1992) 39 FCR 472 cited

AKAI PTY LIMITED (IN LIQUIDATION) (ACN 001 500 714) AND NEIL ROBERT CUSSEN IN HIS CAPACITY AS LIQUIDATOR OF AKAI PTY LIMITED (IN LIQUIDATION) (ACN 001 500 714) v CHRISTOPHER HO, THE GRANDE GROUP LIMITED, THE GRANDE HOLDINGS LIMITED, MICHAEL ANDREW BARCLAY BINNEY, ROGER NUEBEL, TOSHIYA SUZUKI AND TOSHIO TAMAKI

NSD 1840 OF 2004

GYLES J

5 MAY 2006

SYDNEY

THE COURT ORDERS THAT:

1. The Application and service of the Application upon each of The Grande Group Limited and The Grande Holdings Limited is set aside in so far as paragraphs 2 and 3 of the Details of Claim are concerned.

2. Fifty per cent of the costs of the respondents to the motion (the applicants in the proceeding) will be the applicants’ costs in the cause.

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

REASONS FOR JUDGMENT

1                     This motion is a challenge to the validity of service outside the jurisdiction pursuant to O 9 r 7 of the Federal Court Rules. On 24 February 2005 a judge of this Court granted leave to serve the proceeding out of Australia upon each of the first to fourth respondents respectively. The Application and Statement of Claim were served thereafter upon each of those respondents.

2                     The Details of Claim in the Application which was served are as follows:

‘1. As against the First, Second, Third and Fourth Respondents as directors or officers:

1.1 Declarations that each of them, as deemed directors, have contravened Section 588G of the Corporations Lawand/or Corporations Act,

1.2 Orders pursuant to Section 588J of the Corporations Lawand/or Corporations Actrequiring each of them to compensate the First Applicant for loss and damage incurred as a consequence of such contraventions;

1.3 Declarations that each of them as deemed directors and/or as deemed officers of Akai Australia contravened sections 180, 181 and 182 of the Corporations Lawand/or Corporations Act;

1.4 Declarations that each of them have by reason of them aiding, abetting, counselling or procuring the relevant breaches by the Fifth, Sixth and Seventh Respondents have contravened Sections 181 and 182 of the Corporations Lawand/or Corporations Act;

1.5 Orders pursuant to Section 1317H of the Corporations Lawand/or Corporations Actrequiring each of them to compensate the First Applicant in respect of damages resulting from such contraventions;

1.6 Declarations that each of them are liable as accessories to the relevant breaches of fiduciary duty by the Fifth, Sixth and Seventh Respondents;

1.7 Interest;

1.8 Costs.

2. As against the Second and Third Respondents as holding companies:

2.1 Declarations that each of them have contravened Section 588V of the Corporations Lawand/or Corporations Act;

2.2 Orders pursuant to Section 588W of the Corporations Lawand/or Corporations Act requiring each of them to compensate the First Applicant for loss and damage incurred as a consequence of such contraventions;

3. As against the Second and Third Respondents as employers/principals:

3.1 Declarations that they are vicariously liable for the conduct of Ho and Binney;

3.2 Orders that they are liable to Akai Australia in respect of the liability of Binney and Ho to Akai Australia.

4. As against the Second Respondent under the Management Agreement:

4.1 Damages for breach of contract;

4.2 A declaration that under the Management Agreement it assumed a fiduciary relationship in relation to the First Applicant;

4.3 A declaration that it breached its fiduciary obligations;

4.4 Equitable Compensation;

4.5 Interest;

4.6 Costs.

5. As against the Fifth, Sixth and Seventh Respondents as directors:

5.1 Declaration that each of them have contravened section 588G of the Corporations Law and/or Corporations Act;

5.2 An Order pursuant to section 588J of the Corporations Law and/or Corporations Act requiring each of them to compensate the First Applicant for the loss and damage suffered by it as a consequence of such contravention;

5.3 Declarations that each of them have contravened Sections 180, 181 and 182 of the Corporations Law and/or Corporations Act;

5.4 Orders pursuant to Section 1317H of the Corporations Law and/or Corporations Act requiring them to compensate the First Applicant in respect of damage resulting from such contraventions;

5.5 Declarations that each of them have breached their fiduciary duties to the First Applicant;

5.6 Orders requiring each of them to pay equitable compensation to the First Applicant for the damage suffered by it as a consequence of such breaches;

5.7 Interest;

5.8 Costs.’

3                     The fifth, sixth and seventh respondents have not been served. The first and third respondents challenge service generally, whereas the second respondent objects to service in relation to paragraphs 2 and 3 of the Details of Claim. The second respondent does not now challenge service in relation to paragraphs 1 or 4 of the Details of Claim. The fourth respondent does not seek relief on the motion.

4                     This is a review of the original decision to grant leave by way of rehearing (Bray v F Hoffman-La Roche Ltd (2003) 130 FCR 317 at [53]). Evidence has been tendered which was not before the judge who made the original order and I have had the benefit of detailed submissions from both sides. The substance of the motion requires the application of O 8 r 2 and, in particular, O 8 r 2(2). The applicants on the motion do not raise any issue as to compliance with to O 8 r 2(2)(a) or (b). It is submitted that the applicants in the proceeding (together called Akai) do not have a prima facie case for the relief sought within the meaning of O 8 r (2)(c). The burden of establishing a prima facie case lies upon Akai who obtained leave to serve out of the jurisdiction.

5                     Akai initially took a preliminary point based upon lack of evidence which was overtaken by events, but which, in any case, did not take account of the nature of the proceeding on the motion.

6                     It is necessary to bear in mind that the requirement of a prima facie case has to be met at the outset of proceedings, usually on an ex parte basis. A prima facie case in this sense does not amount to a prediction of an outcome or a conclusion that a finding for the applicant is the likely ultimate result of a case. It is necessary that there be a foundation established for an arguable case (WSGAL Pty Ltd v Trade Practices Commission (1992) 39 FCR 472 per Beaumont J at 476; Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) 68 FCR 539 at 549). It has been said that ‘a prima facie case is made out if, on the material before the court, inferences are open which if translated into findings of fact, would support the relief claimed’ (Western Australia v Vetter Trittler Pty Ltd (In liq) (Receiver and Manager appointed) (1991) 30 FCR 102 at 110; Bray v F Hoffman-La Roche Ltd (above) per Carr J at [17]; and Humane Society International Inc v Kyodo Senpaku Kaisha Ltd(2005) 212 ALR 551 at [23]. See also Merpro Montassa Ltd v Conoco Specialty Products Inc (1991) 28 FCR 387 per Heerey J at 390.) In Costa Vraca Pty Ltd v Bell Regal Pty Ltd [2003] FCAFC 305 at [25] the Full Court cited with approval the following passage from Lee J in Century Insurance Ltd (in provisional liquidation) v New Zealand Guardian Trust Ltd [1996] FCA 376:

‘What the Court must determine is whether the case made out on the material presented shows that a controversy exists between the parties that warrants the use of the Court’s processes to resolve it and whether causing a proposed respondent to be involved in litigation in the Court in Australia is justified.’

7                     On 22 March 2000 a provisional liquidator was appointed to Akai Pty Limited (Akai Australia) and liquidation followed on 13 April 2000. The case concerns financial dealings by Akai Australia in the months prior to the appointment of the provisional liquidator. Akai Australia was a wholly owned subsidiary of a Japanese company Akai Electric Limited (Akai Electric), the ultimate holding company of which was a Hong Kong company, Akai Holdings Limited (Akai Holdings). Akai Australia was, until shortly before the appointment of the provisional liquidator, the sole distributor in Australia and New Zealand of the ‘Akai’ brand of electronic goods. It had offices in Australia and New Zealand and a number of employees. Its head office was in Sydney. Its stock was imported from suppliers in various locations throughout south-east Asia.

8                     By the second half of 1999 the Akai group of companies was in financial difficulty. An arrangement was come to between that group, on the one hand, and a group of companies of which the third respondent, The Grande Holdings Limited (Grande Holdings), a Bermudan company listed on the Hong Kong Stock Exchange, was the ultimate parent. The arrangement involved, amongst other things, the second respondent, The Grande Group Limited (Grande Group) managing the business of Akai Holdings, its subsidiaries and affiliates. That part of the arrangement was formalised by an agreement dated 12 November 1999 between Akai Holdings and Grande Group (the Agreement). The substantive provision of the Agreement was as follows:

‘MANAGEMENT AUTHORITY. In consideration of good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Akai has transferred to Grande all authority to manage the Business of Akai. It is intended that this agreement will evidence that Grande is authorized to perform all actions, execute all documents, and otherwise conduct the Business of Akai in such a manner as Grande shall consider appropriate, in the sole discretion of Grande, including, without limitation, (i) managing all financial matters of Akai, (ii) managing all legal matters involving Akai, including defending all litigation to which Akai is a party, or bringing lawsuits on behalf of Akai against third parties, retaining outside counsel and consultants to represent Akai in litigation proceedings for or against Akai and filing all documents and taking all action in such proceedings on behalf of Akai, (iii) executing and filing on behalf of Akai claims Akai has against third parties, (iv) causing Grande employees to be responsible for the financial, accounting, operational, legal, corporate, administrative or other matters involving Akai, and (v) generally conducting all aspects of the Business of Akai in such a manner as Grande shall consider appropriate.’

The term “Business of Akai” as used in that Agreement meant:

‘all business activities of Akai, including without limitation all financial, operational, legal, corporate, administrative and other matters involving Akai.’

9                     Grande Group was a Singaporean company which was a wholly owned subsidiary of Grande Holdings. The Grande group of companies also included Toyo Holdings Limited (Toyo), another Hong Kong listed Bermudan company.

10                  Christopher Ho (Ho), the first respondent, was the President and Group Chief Executive of Grande Holdings. He indirectly controlled 74.9 per cent of the issued share capital of Grande Holdings. Ho signed the Agreement with Akai Holdings for Grande Group.

11                  There is ample material in the evidence that, if accepted, would establish that the provisions of the Agreement were implemented as far as Akai Australia was concerned in the sense that the executives of Akai Australia acted upon instructions from persons connected with the Grande companies. There is a live issue as to responsibility amongst the respondents for the instructions which were acted upon.

12                  There is a prima facie case, which has not seriously been challenged, that Akai Australia was insolvent by at least 12 November 1999 and continued to be insolvent thereafter. There is an ample prima facie case that there were reasonable grounds to suspect that insolvency at all material times. The Statement of Claim identifies three causes of loss to Akai Australia thereafter: general insolvent trading; a transaction on or about 17 January 2000 known as the ‘Capetronics transaction’; and events in February 2000 known as the ‘Silver Phoenix transaction’. There is a prima facie case that each involved vulnerable transactions, as pleaded, causing loss.

13                  The first basis for relief (as appears from paragraph 1 of the Details of Claim) is the shadow director or officer basis. Ho and Grande Holdings deny the existence of a prima facie case against either of them respectively. There is no evidence of any direct instruction from Ho to any of the Australian executives leading to any of the impugned transactions. There is no evidence of any express instruction in the name of Grande Holdings to any Australian executive in relation to the impugned transactions. The fourth respondent, Michael Binney, gave most of the relevant instructions, although each of Messrs Yuen and Tony Lam did give instructions to, or make requests of, the Australian executives. There is no direct evidence that any of Messrs Binney, Yuen or Lam were officers of Grande Group. Nonetheless, counsel for Ho and Grande Holdings submits that the only reasonable inference to be drawn from the circumstances is that such instructions as were given to the executives of Akai Australia were given by virtue of the power in the Agreement with the authority of Grande Group. It is said that there is no occasion to, nor basis for, attributing any different or wider authority.

14                  Counsel for Akai submits that there is a body of evidence which points to the inference that Messrs Binney, Yuen and Lam were each, in fact, acting upon instructions given to them by Ho on behalf of Grande Holdings. There is a sound factual basis for the submissions by counsel for Akai bearing in mind the interlocutory nature of this proceeding and the admissibility of hearsay evidence (Bray v F Hoffman-La Roche Ltd (above)at [58]).

15                  Binney made it clear at his public examination that he acted upon the instructions of, and reported to, Ho in connection with the affairs of Akai Australia. There is documentary evidence of the direct involvement of Ho in decision making in relation to the Silver Phoenix transaction. There is also documentary evidence that Ho was effectively in charge of negotiations concerning the refinancing and restructuring of the whole Akai group, including Akai Australia. Paragraph 26 of the Statement of Claim particularises a number of actions of officers connected with the Grande companies other than Binney related to the giving of instructions to officers of Akai Australia. Although there appears to be an error in describing Mr Tony Lam as a director of Grande Holdings, there is material in the evidence to support the contention that each of the parties particularised (including Mr Tony Lam) was acting as an officer of Grande Holdings or upon the instructions of Grande Holdings in relation to the affairs of Akai Australia. In particular, this applies to Yuen.

16                  Nonetheless, the point remains that the Agreement underpinned the dealings and can be seen as the legal foundation for giving and receiving the instructions. Counsel for Ho and Grande Holdings makes the point that the involvement of Ho and Grande Holdings in negotiations concerning the overall restructure of the worldwide Akai Group, including the relevance of that restructure to Australia, is a different subject from, and should not be confused with, the day to day administration of the Agreement which it is submitted formed the basis of the dealings with Akai Australia.

17                  A shadow director of a company includes a person who is not validly appointed as a director where the directors of a company are accustomed to act in accordance with the person’s instructions or wishes (Corporations Act 2001 (Cth) (the Act) s 9). There is authority that a corporation can be a shadow director (Standard Chartered Bank of Australia Ltd v Antico (1995) 131 ALR 1;(1995) 38 NSWLR 290 at 323). .

18                  A prima facie case has certainly been established that the directors and officers of Akai Australia regarded themselves as bound to follow the instructions of Grande Group during the relevant period. The question is whether there is a prima facie case that they were accustomed to act in accordance with the instructions or wishes of Ho and Grande Holdings. The mere fact that Grande Group was a subsidiary of Grande Holdings and that Grande Holdings was accustomed to act in accordance with the instructions or wishes of Ho would not be sufficient to establish such a case (Standard Chartered Bank (above) at 324B and 327G). It seems to me, however, that a possible view of the facts at a prima facie level is that the directors and officers of Akai Australia were prepared to, and did, accept instruction from those whom they regarded as speaking for the Grande group of companies as a whole and, in particular, from those speaking with the authority of the ultimate holding company, Grande Holdings, and its effective controller, Ho. Binney does not appear to have been a director or officer of Grande Group and the communications, generally speaking, do not purport to emanate from that particular company. I have already referred to the evidence of involvement of officers acting on behalf of Grande Holdings.

19                  In my opinion, there is a prima facie case that Grande Holdings was a shadow director of Akai Australia. I am not persuaded that the same conclusion should be reached in relation to Ho. It needs to be borne in mind that the question is not one of actual or ultimate control by Ho but, rather, concerns the propensity of the local executives to act upon the instructions and wishes of Ho. I cannot see a sufficient basis for raising an arguable case that Ho gave any direct instructions to any such executive, or that there is a proper basis upon which it could be concluded that those who did give instructions gave them in the name of Ho. Even if there were, there is nothing to indicate that Ho was acting as an individual rather than as the chief executive of Grande Holdings.

20                  However, paragraph 1 of the Details of Claim also alleges that Ho and Grande Holdings are deemed officers of Akai Australia. A shadow ‘officer’ of a company includes:

‘(b) a person:

(i) who makes, or participates in making, decisions that affect the whole, or a substantial part, of the business of the corporation; or

(ii) who has the capacity to affect significantly the corporation's financial standing; or

(iii) in accordance with whose instructions or wishes the directors of the corporation are accustomed to act (excluding advice given by the person in the proper performance of functions attaching to the person's professional capacity or their business relationship with the directors or the corporation).’

21                  It is at least arguable by analogy with shadow directors that a corporation can be an ‘officer’. It would follow from what I have already said that, in the particular circumstances of this case, there is a prima facie case in relation to Grande Holdings. The more important practical question is whether the same can be said in relation to Ho. The relevant allegation appears in paragraph 30 of the Statement of Claim, although there was little separate attention paid to the point during the course of argument.

22                  The particular definition of ‘officer’ was introduced to the Act in 1999 by the Corporation Law Economic Reform Program Act 1999 (Cth). However, like issues have arisen in relation to similar provisions at various times. A useful summary appears in the judgment of McColl JA in Forge v Australian Securities and Investments Commission (2004) 213 ALR 574 at [183]–[195]. A very wide application was given to the definition by Santow J in Re HIH Insurance Ltd (in prov liq) and HIH Casualty and General Insurance Ltd (in prov liq); Australian Securities and Investments Commission (ASIC) v Adler (2002) 168 FLR 253,(2002) 41 ACSR 72 at [55]–[75]. There does not appear to have been any discussion about that aspect of the judgment on the appeal (Adler v Australian Securities and Investments Commission (2003) 179 FLR 1,(2003) 46 ACSR 504). Austin J also recently discussed some former similar provisions in Australian Securities and Investments Commission v Vines (2006) 55 ACSR 617 at [1030]–[1056], [1123]–[1131], [1266]–[1276] and [1415]–[1425], although the factual situation in that casediffered substantially from the present facts.

23                  The facts in Australian Securities and Investments Commission v Adler are somewhat closer. Adler was a director of HIH Insurance Limited (HIH) from 16 April 1999 to 26 February 2001. He joined the Investment Committee of HIH on 2 June 1999 and was a member of that Committee throughout 2000. HIH Casualty and General Insurance Co Limited (HIHC) was a wholly owned subsidiary of HIH. Adler had no office in that company. It was held that Adler was an officer of HIHC by virtue of his participation in decisions by the Board of HIH and the Investment Committee of HIH affecting the affairs of HIHC. It was found that he was one ‘who makes or participates in making, decisions that affect the whole, or a substantial part, of the business of HIHC’, namely investment decisions, and also, as a director of the parent HIH, had at the relevant times ‘a capacity to affect significantly the corporation’s (HIHC’s) financial standing’.

24                  That reasoning is not directly applicable to the present circumstances as it was a case of parent and subsidiary. However, it can be argued that the effect of the Agreement is to substitute the board of Grande Group for the board of Akai Australia for all practical purposes and it can also be argued that the position of Ho viz a viz Grande Group is more significant than was the role of Adler in relation to HIHC. Whilst any such conclusion, and indeed the correctness of the reasoning in Australian Securities and Investments Commission v Adler, may be debateable, the issue is appropriate to be settled at trial rather than at this interlocutory stage. I thus conclude that there is a prima facie case that Ho was a deemed officer of Akai Australia at the relevant time, although not a deemed director. As appears from paragraph 1 of the Details of Claim, there are relevant differences in the effect of being a deemed officer as compared with a deemed director as some consequences of being a director are not suffered by officers (eg, there is no liability under s 588G). All of paragraph 1 of the Details of Claim is predicated upon the respondents being directors or officers.

25                  The next issue is whether there is a prima facie case that either Grande Group or Grande Holdings was a holding company of Akai Australia such as to lead to the potential contravention of s 588V as alleged in paragraph 2 of the Details of Claim. By s 9, ‘holding company’, in relation to a body corporate, means a body corporate of which the first body corporate is a subsidiary. Whether a body corporate is a subsidiary is determined by the application of ss 46, 47 and 48 of the Act. It is suggested that here each of Grande Group and Grande Holdings controlled the composition of the Board of Akai Australia and was in a position to cast, or control a casting of, more than one-half of a maximum number of votes that might be cast at a general meeting of Akai Australia.

26                  In the case of Grande Group, it is alleged that the prima facie case followed from the Agreement and the control it could exercise directly and through Akai Electric; and, in the case of Grande Holdings, by virtue of its shareholding in, and control of, Grande Group.

27                  In my opinion, no such prima facie case has been established. The Agreement is not capable of any reasonable construction which would give Grande Group any power of control of the composition of the Board or any power to cast or control the casting of votes at a general meeting of Akai Australia. Any suggestion that this could be achieved through Akai Electric is speculation not supported by any reasonable evidentiary base. I do not regard the decision of Santow J in Bluebird Investments Pty Ltd v Graf (1994) 13 ACSR 271 at 279–284 as providing any support to Akai in that respect. The case against Grande Holdings cannot rise above that against Grande Group. This affects the whole of paragraph 2 of the Details of Claim in the Application.

28                  It is alleged in Paragraph 3 of the Details of Claim that each of Grande Group and Grande Holdings are vicariously liable for the conduct of Ho and Binney as employers and principals. Paragraph 72 of the Statement of Claim carries that allegation no further in substance. There have been no detailed submissions addressed to the point and no authorities cited in support of it. As submitted on behalf of the respondents, vicarious liability is a principle of the law of torts and its application in these circumstances is far from self explanatory. In the absence of an explanation, no prima facie case is established.

29                  There is now no challenge to the paragraph 4 of the Details of Claim, being the claim against Grande Group arising out of the Agreement.

30                  A prima facie case of one sort or another has been found against each of Ho, Grande Group and Grande Holdings. It is submitted for Akai that this is sufficient to lead to dismissal of the motion as a whole in view of the decision of the Full Court in Bray v F Hoffman-La Roche Ltd (above). Counsel for the Grande parties accepts that I am bound by that decision, although the formal submission was made that the dissenting judgment of Finkelstein J is to be preferred. Carr J said (at [47]–[55]):

‘Accordingly, once the court is satisfied that it has jurisdiction in the proceeding and that one or other of the various cases referred to in O 8 r 1 apply, then, in my opinion, the party seeking leave or resisting a revocation of such leave, need only show a prima facie case for the relief sought in the proceeding.

…

As the primary judge noted at [11] of his reasons, the applicant’s proceeding is founded on breaches in Australia of s 45 of the TPA (in summary, giving effect to the Cartel Arrangement by making agreements containing price-fixing and market-sharing provisions and giving effect to those provisions) and is brought in respect of, and for the recovery of, damage suffered by the group members in the Commonwealth.

Senior counsel for the Aventis Foreign Respondents submitted that the causes of action against those respondents were disparate. One set of claims was based on a series of communications between them and the Australian Aventis Respondents. The other was put on the basis that the Aventis Foreign Respondents were at all times active in Australia.

But there was no submission that the applicant was seeking to litigate matters which had no real connection with Australia, or that the applicant had joined a trifling claim having merit and falling within r 1, with other claims without substance which did not fall within r 1.

…

In my view, the primary judge did not err in holding that it was sufficient, for the purposes of O 8 r 2(2)(c), to be satisfied that the applicant had a prima face case for relief on the basis of any of the causes of action relied upon by her against each of the Foreign Respondents.’

Branson J said (at [176]–[191]):

‘It was argued on the appeal that before the court can have the satisfaction required by O 8 r 2(2)(c), it is necessary for the court to be satisfied that the party seeking leave has a prima facie case for the relief sought pursuant to each of the causes of action relied upon. The alternative possibility is that it is sufficient that a prima facie case for the relief sought is made out on one of the causes of action relied upon.

…

In my view, at least where the relevant originating process is an application, the inference is strong that the expression “the relief sought by the party in the proceeding” in O 8 r 2(2)(c) is intended to carry the same meaning as the expression “the relief claimed by the applicant” in O 4 r 3(1)(a). As is mentioned above, that meaning is the remedy sought by the applicant in the proceeding rather than the relief sought pursuant to each cause of action to be relied upon.

…

It is significant, in my view, that O 8 r 2(2) does not give rise to an entitlement to serve originating process outside the Commonwealth; it gives the court a discretion to give leave which may only be exercised if the court is satisfied as to the matters identified in the subrule. The court might be satisfied of those matters but nonetheless decide, in the exercise of its discretion, to refuse leave to serve outside of the Commonwealth. Alternatively, the court could give leave to serve outside the Commonwealth but make such leave subject to terms and conditions which the court considered appropriate. I am not presently able to think of any reason why a condition imposed on the leave to serve could not, in an appropriate case, limit the causes of action which the applicant was entitled to plead in the statement of claim or rely upon in the affidavit should a statement of claim not be appropriate (O 4 r 6).

…

I conclude that it is not necessary, before the court can have the satisfaction required by O 8 r 2(2)(c), that the court be satisfied that the party seeking leave to serve originating process outside the Commonwealth has a prima facie case for the relief sought pursuant to each of the causes of action relied upon. In my view, O 8 r 2(2)(c) requires the court to be satisfied that the party has a prima facie case for the remedy sought by the applicant in the proceeding.

The relief sought by the applicant in this proceeding is identified by para 4 of the second amended application. That relief is declaratory relief pursuant to s 163A of the TPA, damages pursuant to s 82(1) of the TPA, injunctions under s 80(1) and possibly, relief under s 87(1) of the TPA. I agree, for the reasons given by Carr J, that it was open to the primary judge to be satisfied that the applicant has a prima facie case for the relief sought by her in the proceeding within the meaning of O 8 r 2(2)(c) of the Rules.’

Finkelstein J, having held that the conditions in r 2 must be satisfied in respect of each cause of action raised in the proceeding, went on to say (at [229]):

‘A different construction has been placedon O 8 r 2(2)(c) by the other judges. In their opinion, if an applicant makes out a prima facie case for the relief (that is, the remedy) he seeks the condition will be satisfied, whether or not that relief is based on more than one cause of action. I accept, of course, that this construction of the rule is open, though it is not the construction which I prefer. Moreover, it is a construction which has the potentialto bring about some unusual results. Let it be assumed that three plaintiffs each bring an action for two causes, one in contract and the other in tort, and that each cause of action arises out of the same facts. In one case the plaintiff seeks specific performance of the contract and damages for the tort. This plaintiff will be required to establish a prima facie case in respect of each cause of action because each gives rise to different relief. The second plaintiff claims damages for breach of contract and tort and, let it be assumed, when properly assessed the measure of those damages will be the same for each cause. This plaintiff will only be required to establish a prima facie case for one cause of action. The third plaintiff is in the same situation as the second save that the measure of damages for each cause is different. It is not clear what this plaintiff must prove to satisfy the condition. He may be required to establish a prima facie case for each cause of action because the measure of damages is different. On the other hand, the answer may depend upon the manner in which this plaintiff has formulated his relief; for example, he may only seek “Damages” or he may describe the nature of those damages in a way which indicates they are different. Whatever be the position, I see no reason in principle why any one of these plaintiffs should be treated differently from the others. On the construction of O 8 r 2(2)(c) which I prefer each will be treated in the same way.’

31                  The application of that decision to this proceeding is not crystal clear. That question can be illustrated by considering the position of Ho. The only relief sought against him is in the first paragraph of the Details of Claim. I have held that there is no prima facie case against him in relation to paragraphs 1.1 and 1.2. I have found that there is a prima facie case against him in relation to part of paragraph 1.3. It can be concluded that a case against Ho has been made in relation to the relief identified in paragraph 1.5, namely, orders pursuant to s 1317H of the Act requiring him to compensate the first applicant in respect of damages resulting from such contraventions. When the Statement of Claim is considered (as it should be in view of its incorporation in the Details of Claim) it is clear that those orders relate to the three heads of loss earlier identified, namely, general insolvent trading, the Capetronics transaction and the Silver Phoenix transaction. Indeed, that relief, in substance, is also sought in paragraph 1.2.

32                  If, in substance, the one form of monetary compensation is sought by way of relief based upon various causes of action, then the case is on all fours with Bray v F Hoffman-La Roche Ltd (above). If not, then it seems to me that Bray v F Hoffman-La Roche Ltd (above) should be applied as if the principle related to each separate and independent form of relief. As pointed out by Branson J in Bray v F Hoffman-La Roche Ltd (above), the same practical result can be achieved by imposing terms.

33                  I am satisfied that the relief sought in paragraphs 1.2 and 1.5, when understood in the light of the Statement of Claim, is, in substance, the same and can be regarded as the same relief for present purposes. Thus, Ho is not entitled to have service upon him set aside in any respect. I am not disposed to impose terms at this stage limiting the effect of service by excluding the shadow director allegations. The underlying facts are likely to be similar in relation to all aspects of paragraph 1 of the Details of Claim and a decision as to whether that part of the claim should be struck out is best made in the context of the overall management of the case. Consideration will also need to be given to paragraphs 1.4 and 1.6.

34                  I take a different view in relation to paragraphs 2 and 3. It is questionable whether the relief sought is the same relief as that involved in paragraphs 1 and 4 and, in my opinion, is sufficiently distinct from it to make it unnecessary and undesirable that an overseas party should be put to the trouble and expense of coming to Australia to defend.

35                  I have found that there is no prima facie case against Grande Group pursuant to paragraphs 2 or 3 of the Details of Claim. Grande Group does not challenge service in relation to paragraphs 1 and 4 of the Details of Claim. On one view, the substance of the relief sought in paragraphs 1, 2, 3 and 4 of the Details of Claim is the same – designed to recoup the identified losses. If that were so, Bray v F Hoffman-La Roche Ltd (above) would indicate that Grande Group is not entitled to relief on the motion – otherwise then pursuant to the general discretion. I am not satisfied that the relief sought in paragraphs 2 and 3 of the Details of Claim is identical to that sought in paragraphs 1 and 4. I am prepared to set aside service in relation to paragraphs 2 and 3. Even if I am wrong in that, I would achieve the same result by imposing terms.

36                  Grande Holdings is implicated in relation to more of paragraph 1 of the Details of Claim than Ho and is in the same position as Grande Group in relation to paragraphs 2 and 3.

37                  The Application and service of the Application upon each of Grande Group and Grande Holdings will be set aside in so far as paragraphs 2 and 3 of the Details of Claim are concerned. Subject to submissions to the contrary, the Application should be amended to delete paragraphs 2 and 3 of the Details of Claim and the Statement of Claim should be amended accordingly. As the major relief sought in the motion has not been granted, but there has been a measure of success, 50 per cent of the costs of the respondents to the motion (the applicants in the proceeding) will be the applicants’ costs in the cause.

Associate:

Dated: 5 May 2006