FEDERAL COURT OF AUSTRALIA
Benson v Carroll [2009] FCA 1217
Held: motion for summary dismissal dismissed
Benson Communications Pty Limited v Carroll [2009] FCA 632 cited
Benson v Carroll [2008] FCA 1729 cited
Gordon v Gibbons (1873) 12 SCR (NSW)(L) 40 followed
Henderson v Henderson (1843) 3 Hare 100 (67 ER 313) cited
Port of Melbourne Authority v Anshun Proprietary Limited (1981) 147 CLR 589 discussed
Public Trustee v Kenward [1967] 1 WLR 1062 distinguished
Sheaffe v Hungerford (1879) 1 QLJ (Supp) 51 distinguished
Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332 followed
NSD 1249 of 2007
LINDGREN J
28 OCTOBER 2009
SYDNEY
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IN THE FEDERAL COURT OF AUSTRALIA |
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NEW SOUTH WALES DISTRICT REGISTRY |
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GENERAL DIVISION |
NSD 1249 of 2007 |
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PETER MICHAEL BENSON First Applicant
BENSON COMMUNICATIONS PTY LIMITED as trustee for THE GRANTHAM PROJECT (TRUST) Second Applicant
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AND: |
ANDREW MICHAEL CARROLL First Respondent
HOBBS & CARROLL PARTNERSHIP PTY LIMITED as trustee for the HOBBS & CARROLL PROPERTY TRUST Second Respondent
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JUDGE: |
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DATE OF ORDER: |
28 OCTOBER 2009 |
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WHERE MADE: |
SYDNEY |
THE COURT ORDERS THAT:
1. The motion brought by the respondents by notice of motion filed on 9 December 2008 be dismissed.
2. The respondents pay the applicants’ costs of the motion.
3. The proceeding be listed for directions on Wednesday 4 November 2009 at 9:30am.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.
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IN THE FEDERAL COURT OF AUSTRALIA |
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NEW SOUTH WALES DISTRICT REGISTRY |
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GENERAL DIVISION |
NSD 1249 of 2007 |
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BETWEEN: |
PETER MICHAEL BENSON First Applicant
BENSON COMMUNICATIONS PTY LIMITED as trustee for THE GRANTHAM PROJECT (TRUST) Second Applicant
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AND: |
ANDREW MICHAEL CARROLL First Respondent
HOBBS & CARROLL PARTNERSHIP PTY LIMITED as trustee for the HOBBS & CARROLL PROPERTY TRUST Second Respondent
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JUDGE: |
LINDGREN J |
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DATE: |
28 OCTOBER 2009 |
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PLACE: |
SYDNEY |
REASONS FOR JUDGMENT
Introduction
1 By a notice of motion filed on 9 December 2008 the respondents move for summary dismissal or a permanent stay of this proceeding on the ground that it is an abuse of the process of the Court (the Summary Dismissal Motion).
2 The basis of the motion is to be found in proceeding number 4111 of 2006 in the Equity Division of the Supreme Court of New South Wales between Andrew Carroll as trustee for the Hobbs & Carroll Property Trust as plaintiff and Benson Communications Pty Ltd as trustee for the Grantham Project (Trust) (BCPL) as defendant (the Supreme Court Proceeding).
3 In the Supreme Court Proceeding, in September 2008 (see [28] below) the Supreme Court ordered and declared that:
1. Upon the taking of accounts pursuant to the order of the Court made on 23 February 2007 the amount owed by the Defendant to the Plaintiff is $446,314.14.
2. The Defendant pay to the Plaintiff the sum of $446,314.14.
3. Each party pay its own costs.
The order of the Supreme Court made on 23 February 2007 that is referred to in para 1 quoted above was an order made by consent that an account be taken of a certain partnership in which the plaintiff and the defendant were said to be the partners “limited to the dealings and transactions of the Partners with the Partnership”.
4 On 24 September 2008 judgment was given and entered substantially in the terms of the paragraphs numbered 1, 2 and 3 set out above.
5 In summary, the respondents submit, first, that the claims or some of the claims made in this proceeding could only have been made in the Supreme Court Proceeding, and, second, that the subject matter of this proceeding properly belonged to the Supreme Court Proceeding so that the applicants are precluded from pursuing this proceeding by reason of the principle commonly associated with Henderson v Henderson (1843) 3 Hare 100 (67 ER 313) and Port of Melbourne Authority v Anshun Proprietary Limited (1981) 147 CLR 589 (Anshun).
6 In my opinion, the motion does not succeed for the reasons set out below.
Facts
General – a chronology
7 At all material times the first applicant, Mr Benson, was a director of the second applicant BCPL. At all material times the first respondent, Mr Carroll, was a director of the second respondent, Hobbs & Carroll Partnership Pty Limited as trustee for Hobbs & Carroll Property Trust (HCPPL).
8 It is important to attend to the chronological sequence of events.
9 On 25 November 2004 HCPPL and BCPL entered into a Memorandum of Understanding (MoU) in relation to the purchase of a property known as “The Grantham”, 1 Grantham Street, Potts Point (Property) and the development of the Property as an apartment building (Project). The relationship between HCPPL and BCPL so established was referred to as the “Grantham Development Partnership”. Mr Carroll represented HCPPL and Mr Benson represented BCPL in the negotiations for the MoU and in all subsequent dealings. HCPPL and BCPL entered into the MoU expressly in their capacities as trustees of the respective trusts.
10 On 30 September 2005 HCPPL retired as trustee of the Hobbs & Carroll Property Trust and Mr Carroll became trustee in its place.
11 The Project was not carried out, apparently for lack of funds.
12 Mr Carroll in his capacity as trustee for the Hobbs & Carroll Property Trust commenced the Supreme Court Proceeding against BCPL on 7 August 2006.
13 In the Supreme Court Proceeding Mr Carroll (as trustee) sought against BCPL (as trustee) a declaration that the partnership known as the Grantham Development Partnership between Mr Carroll and BCPL was dissolved on 31 May 2006 or, alternatively, on the date of the filing of the summons on 7 August 2006. Mr Carroll sought an order that that partnership be wound up under the direction of the Court, the appointment of a receiver, and an order that accounts be taken between himself and BCPL as partners with a view to determining the extent, if at all, to which each of the partners was, as between themselves, liable to contribute to the discharge of the partnership’s liabilities or entitled to share in any surplus after the discharge of those liabilities, from the sale of partnership assets or entitled to be recouped by the other partner.
14 The relevant order made (by consent) in the Supreme Court Proceeding on 23 February 2007 is referred to at [3] above. The “Partners” were the plaintiff and the defendant in the Supreme Court Proceeding namely Mr Carroll (as trustee) and BCPL (as trustee) and the “Partnership” was the partnership between them said to be known as the Grantham Partnership.
15 It is desirable to pause here. Although neither the summons nor the order identified the time of commencement of the partnership to which it referred, that commencement could not have been earlier than 30 September 2005, the date when Mr Carroll replaced HCPPL as trustee. It may have been later but it could not have been earlier. The partnership said to be the subject of the Supreme Court Proceeding was a partnership between Mr Carroll and BCPL. It is a commonplace that upon an agreed change in the members of a partnership, the old partnership comes to an end and a new one begins. It might have been possible for a tripartite “novation” agreement to be entered into by BCPL, HCPPL and Mr Carroll overcoming some of the consequences of that well established legal position. In any event, there are limits to what can be done by a novation agreement in the case of a partnership. The critical issue is when BCPL accepted Mr Carroll as partner in place of HCPPL.
16 By consent, on 10 August 2006, the Supreme Court appointed Anthony Elkerton of Pitcher Partners receiver of the partnership (between Mr Carroll and BCPL) with certain powers. In his affidavit made on 19 January 2009 and filed in this proceeding, Matthew Thomas Kelly of the respondents’ firm of solicitors states that on that date the earlier partnership between BCPL and HCPPL was “dissolved”. This assertion is consistent with my statement above that the new partnership could not have commenced earlier than 30 September 2005. It would have commenced when Mr Carroll and BCPL agreed, expressly or by implication, that it commenced.
17 On 1 September 2006 in the Supreme Court Proceeding, BCPL applied for and was granted leave to file a cross-claim by 14 September 2006. On 21 September 2006, BCPL’s then solicitors sought an extension of time for the filing of the cross-claim to 29 September 2006. The evidence does not show whether the extension of time was granted. In any event BCPL never did file a cross-claim.
18 On 23 February 2007 the Supreme Court made by consent the order for the taking of partnership accounts to which I referred at [3] above. Also on that date by consent the Supreme Court ordered that each party on or before 15 March 2007 file and serve:
(a) detailed account verified by Affidavit of the dealings of each Partner with the Partnership from the commencement of the Partnership up to and including 31 May 2006, specifying in respect of each payment or receipt the date and amount thereof, to whom the amount was paid and the purpose or account for or to which the amount was paid or received, as the case may be (“Account”); and
(b) A detailed statement of:
(i) the assets and liabilities of the Partnership as at 23 February 2007; and
(ii) the respective interest of that Partner in the Partnership and of any liability of the Partnership to that Partner.
The significance of these directions is that they confirm the limited scope of the Supreme Court Proceeding as a conventional taking of partnership accounts.
19 On 2 March 2007, Mr Elkerton as receiver appointed by the Court filed a verified report to the effect that he had:
· realised all of the property of the partnership (between Mr Carroll and BCPL);
· paid all known third party creditors;
· been paid, and subject to the Court’s order allowed for payment of all costs and expenses incurred by him as receiver; and
· informed the parties of his intention to apply for termination of the receivership.
20 Mr Elkerton’s report began by referring to the Grantham Development Partnership as having been established in November 2004 by an MoU entered into by Mr Carroll as trustee for the Hobbs & Carroll Property Trust and Mr Benson as trustee for BCPL as trustee for The Grantham Project (Trust). This was wrong, and not only because of the obvious slip. As noted earlier, the MoU of 25 November 2004 was entered into by HCPPL (not Mr Carroll) as trustee for the Hobbs & Carroll Property Trust and BCPL (not Mr Benson) as trustee for The Grantham Project (Trust).
21 On 23 March 2007 the Supreme Court ordered that the receivership be terminated.
22 Mr Benson and BCPL launched the present proceeding on 3 July 2007, while the Supreme Court Proceeding was still unresolved. It was noted in para 3 of the statement of claim that accompanied the application that Mr Carroll claimed to have replaced HCPPL as the trustee of the Hobbs & Carroll Property Trust as from about September 2005 (the pleading actually states that Mr Carroll claimed to be the trustee of “HCPPL” from around September 2005 but this was clearly an error). I mention para 3 of the statement of claim because Mr Benson was to assert in para 4 of an affidavit made by him on 28 January 2009 in this proceeding that he had not become aware of the change of trustee until an affidavit made by Mr Carroll was filed in the Supreme Court Proceeding on 9 August 2007 referring to that change. Clearly, however, Mr Benson was aware of the change of trustee from HCPPL to Mr Carroll at least a month earlier when he and BCPL launched this present proceeding on 3 July 2007.
23 An amended statement of claim (ASC) filed on 18 May 2009 alleges several causes of action. These are summarised in some detail below. The centrepiece could be said to be the MoU entered into on 25 November 2004 by HCPPL and BCPL and its related negotiations. By the MoU, BCPL and HCPPL had agreed that as soon as practicable they would use their reasonable endeavours to negotiate and agree upon a transaction structure that would include certain features that were set out in the MoU. It is not necessary for me to refer to all of them. The parties, BCPL and HCPPL, were to be 50% participants each in the Project (more precisely, the MoU stated that the Hobbs & Caroll Property Trust and the Grantham Project (Trust) or their nominees were each to own 50% of the Venture); it was intended that each would be able to acquire beneficially a right to one apartment in the proposed apartment building; BCPL was to be entitled to a payment of $250,000 for having found the development opportunity; and apart from an initial deposit, the Project was to be funded by borrowings. In the Supreme Court Proceeding the MoU seems to have been treated as expressing the terms of the partnership between Mr Carroll and BCPL the subject of that proceeding. That is to say, in the Supreme Court Proceeding, Mr Carroll and Mr Elkerton seem to have proceeded on the erroneous assumption that Mr Carroll had been BCPL’s partner right from the time when the MoU was signed on 25 November 2004.
24 On 10 December 2007 the Supreme Court noted in short minutes of order that the receiver had paid certain money into court and further noted the agreement of the parties (Mr Carroll and BCPL) as to how that money was to be distributed. The short minutes of order also recorded that the payments to be made to the parties were without prejudice to the claims in either this present Federal Court proceeding or the Supreme Court Proceeding and that those payments might be pleaded by way of set-off to any award made in this Federal Court proceeding. The short minutes of order in evidence are not signed but Mr Kelly’s affidavit states that they were provided to the Supreme Court, and that notations and orders were made in accordance with them.
25 On 11 December 2007 BCPL filed a notice of motion in the Supreme Court Proceeding seeking a transfer of that Proceeding to this Court for determination concurrently with this present proceeding, but on 27 March 2008 the Supreme Court dismissed BCPL’s motion with costs. The present respondents did not apply for a transfer of this proceeding to the Supreme Court. However, the solicitors for the respondents wrote to the solicitors for the applicants on 17 April 2008 advising that in the light of the Supreme Court’s dismissal of BCPL’s motion for a transfer to this Court, they took the view that it was an abuse of process for the present applicants to pursue this proceeding in this Court. They asked the applicants to consent to an order for dismissal of this proceeding on the basis that each party bear its own costs, indicating that if the applicants did not agree, they were instructed to apply for an order for dismissal or permanent stay of this proceeding.
26 On 23 April 2008, in circumstances that are outlined in the reasons for judgment referred to at [31] below, I ordered that this proceeding be dismissed; that the order of dismissal not be entered without leave of the Court; that the respondents have liberty to apply at any time by motion on notice supported by affidavit for an order that the order of dismissal be entered; and that the applicants have leave to apply at any time by motion on notice supported by affidavit for an order setting aside the order of dismissal and the order granting liberty to the respondents to apply for the order to be entered.
27 On 22 May 2008, the applicants filed a notice of motion seeking a setting aside of the order of dismissal.
28 In September 2008 the Supreme Court Proceeding was settled. The parties filed short minutes of order dated 17 September 2008 on 18 September 2008 in terms of paras 1, 2 and 3 set out at [3] above. As noted at [4] above, on 24 September 2008 the Supreme Court gave judgment in the terms of the short minutes of order of 17 September 2008.
29 On 10 October 2008 Mr Carroll served a creditor’s statutory demand dated 7 October 2008 on BCPL requiring payment of the amount of the Supreme Court judgment, namely $446,314.14.
30 On 24 October 2008 BCPL commenced proceeding NSD 1674 of 2008 in this Court seeking an order setting aside the statutory demand (the Statutory Demand Proceeding).
31 On 6 November 2008, I dealt with the motion brought by the applicants in this proceeding to set aside the order of dismissal of 23 April 2008, and ordered that the order of dismissal be set aside: see Benson v Carroll [2008] FCA 1729.
32 On 26 May 2009, Mr Carroll as respondent in the Statutory Demand Proceeding filed a notice of motion seeking an order that the Statutory Demand Proceeding be heard concurrently with the present Summary Dismissal Motion.
33 The Statutory Demand Proceeding and the Summary Dismissal Motion were listed for hearing on 1 June 2009 on which date I ordered that the Statutory Demand Proceeding be dismissed and that BCPL pay Mr Carroll’s costs of that Proceeding: see Benson Communications Pty Limited v Carroll [2009] FCA 632.
34 The hearing therefore continued on the basis that it was only the Summary Dismissal Motion that was to be dealt with.
The claims made in the ASC
35 Against this background, the material facts as alleged in the ASC can be summarised. I will use abbreviated forms of reference in the ASC. Numerals in bold in square brackets are references to paragraphs so numbered in the ASC.
36 In about August to September 2004, Mr Carroll, alternatively HCPPL through its director Mr Carroll, made representations to Mr Benson (First Representations) [7]. Generally speaking, these were representations as to Mr Carroll’s financial capacity and business acumen relevant to the success of the Project.
37 On or between 27 August 2004 and 1 September 2004, Mr Carroll, or alternatively HCPPL through its director Mr Carroll, made further representations relevant to the success of the Project to Mr Benson (Second Representations) [8].
38 In reliance on the First and Second Representations, Mr Benson ceased negotiating with other parties who had expressed an interest in purchasing and developing the Property with him [10].
39 In reliance on the First and Second Representations, on or about 1 September 2004 Mr Benson and Mr Carroll entered into an oral agreement (Agreement) evidenced in writing relating to the purchase and development of the Property [11]. The Agreement identified the contributions that Mr Benson and Mr Carroll, respectively, were to make to the Project, the benefits they were to gain and the responsibilities they would have in relation to it. The written form of the Agreement was agreed by Messrs Benson and Carroll, though not executed, on or about 29 September 2004 [11].
40 There were express and implied terms of the Agreement [12], [13].
41 On 7 October 2004, in reliance on the First and Second Representations, and in consideration of the Agreement, Mr Benson agreed to borrow, and did borrow, $50,000 from Mr Carroll to be repaid from an “original fee” [of $250,000 (excluding GST) that was to be paid to Mr Benson by the Venture] within 21 days after a binding MoU was executed with the Vendor (Loan Agreement) [14].
42 On 7 October 2004, Messrs Benson and Carroll executed the Loan Agreement [15].
43 As at 7 October 2004, Messrs Benson and Carroll “had agreed upon all the terms of the MOU/Agreement and intended no departure from that agreement, subject to formally executing the Agreement in written form” [16].
44 As at 7 October 2004 the Agreement created legally binding obligations on Mr Carroll and Mr Benson [17].
45 In late October 2004 Mr Carroll made further representations to Mr Benson relating to the desirable structure of the Venture from a taxation viewpoint (Tax Structure Third Representations) [18].
46 If Mr Carroll intended by way of the Tax Structure Third Representations that the written MoU would vary the Agreement so as to limit his personal responsibility to perform his obligations under it, Mr Carroll did not disclose this to Mr Benson, yet he had a duty to make such a disclosure and by his silence represented that he would continue to meet his obligations under the Agreement (Representation by Silence Fourth Representation) [20]-[23].
47 Mr Benson, alternatively BCPL, would not have executed a MoU with HCPPL as opposed to with Mr Carroll if the effect of doing so would be to release Mr Carroll from his obligations under the Agreement [24].
48 In reliance on the Tax Structure Third Representations and the Representation by Silence Fourth Representation, Mr Benson agreed to the further terms of an amended agreement (Amended Agreement) [25].
49 The MoU contained certain implied terms to the effect that Mr Carroll and Mr Benson warranted that HCPPL and BCPL respectively would perform their obligations under the Agreement (Implied Terms) [26]. Alternatively, Mr Benson and Mr Carroll respectively warranted in a collateral agreement performance by their respective companies of the Agreement (Collateral Warranty) [27].
50 In reliance on the Tax Structure Third Representation, the “Grantham Development Partnership” was registered as a business name on 1 November 2004 owned by HCPPL and BCPL [28].
51 In reliance on the First and Second Representations, the Tax Structure Third Representations and the Representation by Silence Fourth Representation (Combined Representations), on 24 November 2004 BCPL and HCPPL entered into a MoU dated 24 November 2004 with the Vendor for the purchase and development of the Property [29].
52 In reliance on the Combined Representations, on the following day, 25 November 2004, Mr Benson caused BCPL to enter into an MoU with HCPPL [30].
53 The parties to the MoU dated 25 November 2004 executed it with the intention of being bound to acquire and develop the Property according to the terms expressed in it, and to formalise the Amended Agreement by executing a further formal agreement not in different terms (MoU evidencing Amended Agreement) [30A].
54 In the further alternative, the parties to the MoU of 25 November 2004 signed it on the assumption that a contract would be entered into to acquire and develop the Property and that the other party would not abandon the Project for a reason pertaining to its own interests (Quantum Meruit Claim) [30B].
55 The Combined Representations were warranties made by Mr Carroll and HCPPL to induce BCPL to enter into the Amended Agreement and the MoU dated 25 November 2004, and BCPL relied upon the Combined Representations in entering into the Amended Agreement and that MoU (Second Collateral Warranty Claim) [30C].
56 The Combined Representations created an assumption or expectation in the minds of the applicants that Mr Carroll and HCPPL would act to fulfil those representations and the Combined Representations were intended to induce the applicants to adopt that assumption or expectation; the applicants gave up the opportunity to development the Project with others relying on that assumption or expectation; and the respondents knew or intended that the applicants would not develop the Project with others because of the Combined Representations (Equitable Estoppel Claim) [30D].
57 The First and Second Representations, the Tax Structure Third Representations, and the Combined Representations were all made in trade or commerce [9], [19], [33](a).
58 The Combined Representations were representations as to future matters within s 51A of the Trade Practices Act 1974 (Cth) (TPA) or s 41 of the Fair Trading Act 1987 (NSW) (FTA) [32].
59 Mr Carroll owed a duty to take reasonable care in making the representations about his capacity or that of HCPPL to meet the obligations to which he or it was bound by the Agreement and the Amended Agreement [34].
60 The Combined Representations were made by Mr Carroll, or alternatively by HCPPL, to Mr Benson or alternatively to BCPL in breach of their duty of care and negligently and in contravention of the TPA and FTA [35].
61 In these circumstances the Combined Representations were misleading or deceptive in contravention of s 41 or 42 of the FTA or s 51A or 52 of the TPA, and further or alternatively were negligently made [36].
62 In the alternative, in so far as the Combined Representations were made by Mr Carroll on behalf of HCPPL to Mr Benson on behalf of BCPL, Mr Carroll aided and abetted, counselled or procured, or was directly or indirectly knowingly concerned in, the contraventions within the meaning of s 75B of the TPA [the pleading omits any reference to the comparable provision of the FTA] [37].
63 As a result of the matters pleaded in paras 31-37, the applicants or alternatively one of them suffered loss and damage for which Mr Carroll or alternatively HCPPL is liable. Particulars of the loss or damage are as follows:
(a) The loss of a $250,000 origination fee;
(b) Interest on that amount;
(c) Loss of opportunity to profit from the purchase and development of the [Property];
(d) Additional borrowing costs. [38]
It may be noted here that the loss or opportunity to profit has been said by the applicants to be in the order of millions of dollars, and therefore in an amount far in excess of Mr Carroll’s judgment against BCPL in the Supreme Court.
64 Further or in the alternative, Mr Carroll as a director of HCPPL assumed a personal responsibility for the obligations of HCPPL under the MoU dated 25 November 2004 so as to create a special relationship between him and Mr Benson, or alternatively between him and BCPL [40].
65 Mr Benson, or alternatively BCPL, executed with HCPPL the MoU on 25 November 2004 in reliance on his or its special relationship with Mr Carroll [41].
66 HCPPL breached the MoU dated 25 November 2004 [42].
67 Mr Carroll personally directed, procured or assisted HCPPL to act in the manner complained of and as a result of the special relationship between Mr Carroll and Mr Benson, or alternatively between Mr Carroll and BCPL, Mr Carroll is personally liable for the loss sustained by Mr Benson or alternatively by BCPL arising from the breaches of the MoU by HCPPL. The same particulars of loss are given [43].
68 Mr Carroll breached the Agreement or the Amended Agreement or the Collateral Warranty by failing to do certain things [45].
69 Alternatively, HCPPL breached the Amended Agreement by failing to do certain things [46].
70 In so far as BCPL or Mr Benson suffered loss or damage as a result of HCPPL’s breach of the Amended Agreement, Mr Carroll is liable for that loss under the Collateral Warranty [47].
71 The applicants or alternatively one of them has suffered loss and damage as a result of the breach of the Agreement, the Amended Agreement or Collateral Warranty by Mr Carroll, or alternatively the breach of the Amended Agreement by HCPPL. The same particulars of loss are given [48].
72 As to para 30B, in circumstances in which Mr Benson and/or BCPL had performed beneficial work not intended to be gratuitous, and Mr Carroll and HCPPL unilaterally abandoned the Project not for any reason associated with a bona fide disagreement concerning the terms of the agreement to be entered into but for reasons which pertained to their own position, Mr Benson and/or BCPL are entitled to payment on a quantum meruit for work and expenses and compensation for the loss of opportunity to profit from the purchase and development of the Property (Quantum Meruit Restitution) [49] [50].
73 As to para 30C, the warranties were broken and Mr Benson and BCPL repeat para 35 and say that as a result Mr Benson and/or BCPL has suffered loss and damage and they repeat the particulars in para 38 (Breach of Second Collateral Warranty) [51] [52].
74 Finally, as to para 30D, Mr Carroll and HCPPL resiled from the arrangement or understanding in abandoning the Project and failed to act to avoid the detriment suffered by Mr Benson and/or BCPL and he and/or it has suffered loss and damage and repeats the particulars in para 38 (Equitable Estoppel Claim) [53] [54].
75 According to [55], the applicants claim general damages and equitable compensation on various bases. The applicants also seek the following relief: [48]
(a) A declaration that the Agreement created a legally binding relationship between Carroll and Benson.
(b) A declaration that the Amended Agreement created a legally binding relationship between Carroll and Benson.
(c) A declaration that the Amended Agreement contained the implied terms pleaded in paragraph 25 above.
(d) Alternatively, a declaration that the Collateral Warranty is a term of the Amended Agreement and is legally binding on Carroll for any failure by HCPPL to perform it [sic] obligations under the written Memorandum of Understanding dated 25 November 2004.
76 A striking feature of the pleading is that it does not allege that there was a wrongful repudiation of any contractual arrangement which was accepted by the applicants or either of them. Unless there is a pleading that a contract has come to an end, there is no cause of action to recover general damages for breach of the contract because the loss has not crystallised: it may transpire that here will be no loss. Nor is the claim to recover $250,000 and interest on that amount sustainable in the absence of the pleading of a contractual time for payment and the pleading of facts showing that that time for payment arrived.
77 While the ASC is rather lengthy and detailed, upon analysis it suffers from some deficiencies. For example, it fails to distinguish between the two partnerships (see below). There is an allegation of abandonment of the Project by the respondents, but no particularisation of the abandonment or claim as to the time of it. I would have expected a claim by the applicants of wrongful repudiation of contract and of the acceptance of that wrongful repudiation.
Consideration
Law
78 The respondents rely on O 20 r 5 of the Federal Court Rules. Where that rule applies the Court may order that a proceeding be stayed or dismissed generally or in relation to a particular claim for relief. Subrule (1) provides that r 5 applies if the Court is satisfied that, for the proceeding generally or for a claim for relief in it, the proceeding or claim is “frivolous or vexatious” or “an abuse of the process of the Court”. The respondents rely on the “abuse of process” limb.
79 The respondents have not referred to the “no reasonable prospect” of success ground referred to in s 31A(2) of the Federal Court of Australia Act 1976 (Cth). Whether this ground or the abuse of process ground is relied on, the Court should deny the applicants a final hearing only if the ground is clearly established. In my opinion, neither ground is clearly established here.
80 As noted earlier, the respondents submit that some of the claims made by the applicants in this proceeding could only have been asserted in a taking of partnership accounts. The respondents have not, however, adequately identified the claims said to be of that kind. The respondents accept that there are other claims made by the applicants in this proceeding that could not have been addressed as part of a taking of partnership accounts, and submit that those claims should have been advanced by cross-claim in the Supreme Court Proceeding in accordance with what I shall describe as “the Anshun principle”. The respondents submit that the claims of the second kind are so intertwined with those of the first kind that both kinds should have been dealt with in the Supreme Court Proceeding.
81 In my opinion, the respondents’ submissions gloss over many difficulties.
82 In the first place, as noted earlier, there were two partnerships. There was the partnership between BCPL as trustee and HCPPL as trustee constituted by the MoU dated 25 November 2004 (the Earlier Partnership) and in the second place, at least according to Mr Carroll and apparently accepted in the Supreme Court Proceeding by BCPL, there was a partnership between Mr Carroll and BCPL from 30 September 2005 down to the time of the termination or dissolution of that partnership, whenever that was (the Later Partnership).
83 It may be that the parties to the Later Partnership, by their course of conduct, accepted that the terms of the MoU dated 25 November 2004 governed the Later Partnership, but there were two partnerships nonetheless, each existing during a different period of time.
84 The Supreme Court Proceeding could only have related to the Later Partnership because HCPPL was not a party to that Proceeding.
85 In any event, it is plain that it did so because in orders made in that proceeding, the expression “the Partnership” was defined to refer to the partnership between Mr Carroll (as trustee) and BCPL (as trustee).
86 As noted at [3] and [14] above, on 23 February 2007, the Supreme Court ordered by consent that:
An account be taken of the Partnership, limited to the dealings and transactions of the Partners with the Partnership.
87 I think it clear that the scope of the Supreme Court Proceeding was limited by reference to the assets and liabilities of the Later Partnership and of the parties to it. This included identification of the property of the Later Partnership (as distinct from the separate property of the individual partners); the incomings and outgoings of the Later Partnership; and unsatisfied liabilities of the Later Partnership and the dealings by the Partners with the Later Partnership.
88 The only claim made by the applicants in the present proceeding that might be said to be of a kind to fall within the scope of the taking of partnership accounts is the claim for the originating fee of $250,000. Upon analysis, however, that amount never became payable for the reason that the time for payment of it, namely “as soon as possible … provided that the Venture [was] likely to return a profit at least equal to $250,000” never arrived. In fact the applicants refer to that sum of $250,000 merely as a particular of the loss and damage suffered by reason of the respondents’ conduct for which general damages are sought.
89 The present proceeding is a claim for general unliquidated damages, not a claim for any particular liquidated amount (see [63], [75] above). It may have been reasonable for the claims in respect of both the Earlier Partnership and the Later Partnership, including the present applicants’ claim for general damages made in the present proceeding, to be wrapped up together in the Supreme Court Proceeding which would, in that event, have gone far beyond the taking of accounts in respect of the Later Partnership. It cannot be said, however, that any of the claims made in the present proceeding could only have been properly advanced in the Supreme Court Proceeding.
90 I therefore do not accept the respondents’ first ground of attack on the present proceeding.
91 I turn now to Anshun.
92 According to Anshun, the question to be asked in Australia in relation to the respondents’ second ground of attack is not whether the claims advanced in the later proceeding “could” more conveniently have been advanced in the earlier proceeding. The test is not whether it would have been more efficient and less wasteful, in terms of judicial and other resources, if the issues in the later proceeding had been made the subject of the earlier proceeding.
93 Anshun itself was a case of inconsistency between the determination of the earlier proceeding and the making of a claim in the later proceeding – a circumstance that does not attend the present case. In Anshun, a workman was injured in the course of his employment when a load of girders handled by a crane being used by Anshun Pty Ltd (Anshun) and hired from the Port of Melbourne Authority (Authority) struck him. Under the crane hiring agreement, the Authority enjoyed an indemnity by Anshun in relation to any injury arising directly or indirectly out of the use of the crane during the hiring period. The workman sued the Authority and Anshun. They claimed contribution from each other. The Authority’s contribution notice, however, did not claim the indemnity. In the earlier proceeding, judgment was entered in the action against both defendants with costs, and it was ordered that Anshun should recover from the Authority contribution to the extent of 90% and the Authority from Anshun to the extent of 10% of those damages and costs.
94 In the later proceeding, the Authority sued Anshun under the indemnity agreement to recover the amounts that the Authority had paid as damages and interest and for legal costs and disbursements. The primary Judge ordered that the Authority’s proceeding be perpetually stayed on the ground that the Authority should have pleaded the indemnity in the earlier litigation.
95 It will be seen that the determination of the cross-claims in the earlier proceeding decided the question of the extent of the liabilities inter se of Anshun and the Authority. It would be inconsistent with that determination for the Authority to be held entitled to recover 100% in the later proceeding. As Gibbs CJ, Mason and Aickin JJ noted, in the later proceeding the Authority asserted a right inconsistent with the right asserted in the earlier proceeding.
96 Addressing the failure of a defendant in an earlier proceeding to raise a defence which the defendant seeks to advance as a cause of action in a later proceeding, Gibbs CJ, Mason and Aickin JJ stated (at 602-603):
there will be no estoppel unless it appears that the matter relied upon as a defence in the second action was so relevant to the subject matter of the first action that it would have been unreasonable not to rely on it. Generally speaking, it would be unreasonable not to plead a defence if, having regard to the nature of the plaintiff's claim, and its subject matter it would be expected that the defendant would raise the defence and thereby enable the relevant issues to be determined in the one proceeding. In this respect, we need to recall that there are a variety of circumstances, some referred to in the earlier cases, why a party may justifiably refrain from litigating an issue in one proceeding yet wish to litigate the issue in other proceedings, e.g. expense, importance of the particular issue, motives extraneous to the actual litigation, to mention but a few.
97 The circumstances and issues in Anshun are far removed from those of the present case.
98 In Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332, Brennan and Dawson JJ stated (at 345) that it may be that Anshun is a case of mere issue estoppel. Pertinently for the present case, their Honours said (at 346):
A plaintiff who has an unadjudicated cause of action which can be enforced only in fresh proceedings (Duedu v Yiboe [[1961] 1 W.L.R. 1040, at p.1046] cannot be precluded from taking fresh proceedings merely because he could have and, if you will, should have counterclaimed on that cause of action in a forum chosen by the opposite party in proceedings in which the opposite party sued him. We do not read the majority judgment in Port of Melbourne Authority v. Anshun Pty. Ltd. as holding the contrary, except in a case where the relief claimed in the second proceeding is inconsistent with the judgment in the first: see especially at pp. 599-601. That is not the present case. [My emphasis]
The passage emphasised is applicable to the circumstances of the present case.
99 Another consideration demonstrating the distinctness of the claims advanced by the present applicants from the taking of accounts in respect of the Later Partnership in the Supreme Court Proceeding concerns the capacities in which the present parties sue and are sued. In the Supreme Court Proceeding Mr Carroll and BCPL were parties in their capacities as trustees of different trusts and as partners. In the present proceeding Mr Benson sues not as a trustee and not as a partner. Although BCPL sues as trustee, it does not sue as a partner but in respect of wrongs allegedly done to it outside its role as a partner in a subsisting partnership. Similarly, Mr Carroll is sued not as a trustee and not as a partner, while HCPPL is sued as trustee but in respect of wrongs it is alleged to have done outside its role as a partner in a subsisting partnership.
100 No doubt the Supreme Court Proceeding could have been substantially enlarged (and made much more complex) by the introduction of cross-claims and additional parties. The present point, however, is that the applicants were not compelled to embark on such a course at peril of abandoning the claims that they were advancing in this Court.
101 I will now turn to certain authorities to which I was referred.
102 The present case has some similarity to Sheaffe v Hungerford (1879) 1 QLJ (Supp) 51. In that case the plaintiff and the defendant agreed to enter into a partnership to form and carry on the business of a cattle station. The plaintiff was to provide the grazing country; the defendant 5200 head of cattle by instalments. After supplying some of the cattle, the defendant refused to supply any more.
103 The plaintiff sought:
(1) that the parties’ rights and interests under the partnership agreement might be defined;
(2) damages for breach of the agreement consisting of the defendant’s failure to send the cattle;
(3) a dissolution of the partnership if any had been created.
104 Lilley CJ said (at 53) in relation to the claim for damages:
The action is substantially for damages, and under the old system the defendant would be entitled to a verdict. But the plaintiff has asked that the suit may be treated as one for the administration of the partnership affairs, and for a dissolution. There are in my opinion sufficient grounds to grant this application, but I need not state them as the defendant does not oppose a decree on this point.”
In view of the consent and the absence of reasons on the point, the case is weak or no authority for the proposition that a claim for damages by one partner against another can, let alone should, be dealt with in a suit for the taking of partnership accounts. In any event, the claim for damages was one between the partners alone and was for breach or repudiation of the partnership agreement itself. The complexities to which I have already referred show that the circumstances of the present case are far removed from those in Sheaffe v Hungerford.
105 In Spencer Bower, Turner and Handley, The Doctrine of Res Judicata (3rd ed, Butterworths, 1996) the learned authors state (at [452]):
There is no doubt that the Henderson principle and the Kilbrandon test (a reference to Lord Kilbrandon’s remarks in delivering the judgment of the Privy Council in Yat Tung Investment Co. Ltd. v Dao Heng Bank Ltd. [1975] AC 581) apply with full rigour to proceedings for an account. A simple account may be taken at the trial, and where this occurs, the nature of the proceedings may be obscured. A judicial account involves the offsetting of credit items on both sides to reach a balance in favour of one party. The result can only be final if all relevant claims and cross-claims are either brought forward for adjudication or treated as abandoned.
Again, this passage leaves open the question what are “all relevant claims and cross-claims”. Clearly, it would not be open to a partner to advance a later claim to recover property that had been treated as partnership property in the taking of accounts or to contend in a later proceeding that the partners’ “loan accounts” in the partnership books, on the basis of which the partnership accounts had been taken, were otherwise than what they had been treated as being in the taking of those accounts. The claims for unliquidated damages made by the applicants outside the scope of the partnership are of a different kind.
106 Public Trustee v Kenward [1967] 1 WLR 1062 was also a case of the taking of partnership accounts. The plaintiff was judicial trustee of a deceased’s estate. He sued the defendant for the balance found due by the defendant to the estate on an account and inquiry taken in earlier administration proceedings to which the defendant was a party. The defendant had not challenged the Master’s certificate in that proceeding. The enquiry before the Master had related to a farming business carried on by the defendant in partnership with the deceased, in whom the farm was vested, and no evidence was adduced before the Master to suggest that the land was not the sole property of the deceased.
107 On the plaintiff’s application for summary judgment, the defendant sought leave to defend on the ground that he had a valid counterclaim for a share in the proceeds of sale of the farm land and the income thereof since the deceased’s death and for the cost of certain improvements, on the basis that the land was an asset of the partnership. He offered an explanation of his failure to raise this point before the Master on the taking of partnership accounts.
108 Buckley J held that the defendant was estopped by the Master’s certificate from setting up the claim that the land was a partnership asset, since an allegation that it was would have been germane to the accounts and enquiry before the Master, which was directed to determining finally what sum the defendant should pay to the estate. At 1067C, His Lordship stated:
I think the question in the present case must be whether it is right to regard the claim which the defendant now wants to raise as something which properly belonged to the subject-matter of the account and inquiry directed by the order of March 21, 1962. If it were a matter which can be said properly to have belonged to that investigation of the relative rights of the defendant and testatrix’s estate, then the fact that the defendant, whether it be by inadvertence or accident or as the result of his being unwisely advised or lacking advice, did not raise the point on any of those grounds would be no justification for allowing him to raise it now.
109 Like Anshun, the case raised an issue of inconsistency. Whether the farm was or was not partnership property lay at the heart of the Master’s inquiry and must be taken to have been determined by the Master’s certificate.
110 The applicants rely on Gordon v Gibbons (1873) 12 SCR (NSW)(L) 40. That case concerned an unincorporated mining company formed under a deed of settlement. In accordance with the terms of the deed, the directors sued a member for calls. It was held (by majority) that the action did not lie because any recovery would be partnership property and the defendant was a member of the partnership. The Court distinguished a claim for damages or money which, when recovered, would be the plaintiff’s own property.
111 This case lends support to the applicants. The damages that they seek to recover would not be partnership property but would be their own property (in the case of BCPL, as trustee for the Grantham Project (Trust), but that is beside the point).
Conclusion
112 For the above reasons, the respondents’ motion for summary dismissal should be dismissed with costs. The proceeding will be listed for the making of directions.
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I certify that the preceding one hundred and twelve (112) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. |
Associate:
Dated: 11 November 2009
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Counsel for the Applicants: |
Mr R W Evans |
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Solicitor for the Applicants: |
McKells Solicitors |
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Counsel for the Respondents: |
Mr K G Oliver |
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Solicitor for the Respondents: |
Kemp Strang |
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Date of Hearing: |
1, 5 June 2009 |
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Date of Judgment: |
28 October 2009 |
