Re Glenn Wayne Maisey and Jacqueline Annette Maisey; Elizabeth Smedley and Nick James Pty Limited v First Coast Pty Ltd; Surety Investments Pty Ltd; Mudgeeraba Village Estates Pty Ltd; Zolene Elizabeth Perry; Stephen Joseph English; Mudgeeraba Village [1984] FCA 21 (21 February 1984)

FEDERAL COURT OF AUSTRALIA

Re: GLENN WAYNE MAISEY and JACQUELINE ANNETTE MAISEY;
ELIZABETH SMEDLEY and NICK JAMES PTY. LIMITED
And: FIRST COAST PTY LTD; SURETY INVESTMENTS PTY LTD; MUDGEERABA VILLAGE
ESTATES PTY LTD; ZOLENE ELIZABETH PERRY; STEPHEN JOSEPH ENGLISH; MUDGEERABA
VILLAGE ESTATES PTY LTD; ZOLENE ELIZABETH PERRY; FIRST COAST PTY LTD; SURETY
INVESTMENTS PTY LTD and DAVID WHITE
No. Qld G109, G110 and G112 of 1983
(1984) ATPR para 40-442 / 1 FCR 316
Jurisdiction of Federal Court - High Court and Federal Court

COURT

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Fitzgerald J.(1)

CATCHWORDS

Jurisdiction of Federal Court - exercise of Court's discretion to entertain action - claims against all respondents related to single set of associated transactions - claims against fifth respondent wholly divorced from claims against other respondents - entirely separate and severable non-federal controversy - potential disadvantages to fifth respondent.

High Court and Federal Court - Jurisdiction of Federal Court - Exercise of court's discretion to entertain action - Claims against all respondents related to single set of associated transactions - Claims against fifth respondent wholly divorced from claims against other respondents - Entirely separate and severable non-federal controversy - Potential disadvantages to fifth respondent - Trade Practices Act 1974 (Cth), s.52. Three proceedings were commenced by different applicants against the same five respondents. The claims against the first four respondents were based on misleading and deceptive conduct under s.52 of the Trade Practices Act 1974 (Cth), deceit and negligent misstatement. The claims against the fifth respondent, a solicitor, were for breach of duty and breach of contract. The fifth respondent applied to have the proceedings against him dismissed on grounds that thet were outside the jurisdiction of the court, or alternatively in the exercise of the court's discretion to decline jurisdiction. The acts, omissions and state of mind relied on as against the fifth defendant were different in form and unconnected with those against the other respondents.

Held: (1) That the causes of action against the fifth respondent were both in nature and in most of their constituent elements quite separate and distinct from those pleaded against the other respondents in that:
(a) the acts, omissions and state of mind relied upon were erent

entirely different from and unconnected with those relied
on against other respondents; and
(b) the knowledge attributed to the fifth respondent was not alleged
to include knowledge of any aspect of the impugned conduct
of the others.

(2) That in those circumstances, and there being no overlap of parties

between the two sets of claims, and no relationship between the fifth respondent and the other respondents, the claims against the fifth respondent could not properly be regarded as other than an entirely separate and severable non-federal controversy.

(3) That the potential disadvantages to the fifth respondent far outweighed any legitimate advantage that might accrue to the applicants if they were permitted to proceed with the claims as joined.

(4) That, therefore, the claims against the fifth respondent should be dismissed, but without prejudice to the rights of the applicants to commence other appropriate proceedings against the fifth respondent.

Fencott v. Muller (1983) 57 A.L.J.R. 317; Polkinghorne v. Holland [1934] HCA 28; (1934) 51 C.L.R. 143; Spector v. Ageda (1971) 3 W.L.R. 498; Holmes v. Walton (1961) W.A.R. 96; Griffith v. Evans (1953) 1 W.L.R. 1424; Stack v. Coast Securities No. 9 Pty Ltd [1983] HCA 36; (1983) 57 A.L.J.R. 731; Queensland Estates Pty Ltd v. Co-Ownership Land Development Pty Ltd (No. 2) (1971) Qd. R. 164; Henschel v. Brittany Crepe Company Pty Ltd (1981) Qd. R. 173, referred to.

HEARING

Brisbane, 1984, February 13, 21. 21:2:1984

NOTICE OF MOTION.

Notice of motion to strike out claims against one of five respondents.

D. O'Donnell, for the applicant.

D. Cooper, for the respondents.

Solicitors for the applicant: Feez Ruthning & Co.

Solicitors for the respondent: M. G. Lyons & Co.
P.H.M.

ORDER

1. In each of Applications G109, G110 and

G112 of 1983, the Application be struck
out as against the Fifth Respondent, but
without prejudice to the right of the
Applicants to commence other appropriate
proceedings against the Fifth Respondent.

2. The Applicants pay to the Fifth

Respondent his taxed costs of each of
Applications G109, G110 and G112 of 1983
including reserved costs, if any.

Orders accordingly.

DECISION

Three separate proceedings were commenced on 22 and 23 November 1983 by different applicants against the same five respondents. In each case, the claim of the applicants against the first, second, third and fourth respondents is for damages for breach of s.52 of the Trade Practices Act 1974 ("the Act"), deceit, and negligent misstatement. The fifth respondent is alleged to be the former solicitor of the various applicants and their claims against him are for "damages for breach of duty and or breach of contract" and in the alternative "damages and or compensation for breach of duty and, in particular, his duty of disclosure ...".

2. There has been some delay in finalising directions with respect to the interlocutory course to be followed in the proceedings because of questions concerning service upon the first and second respondents and the applications for directions stand adjourned until next Wednesday, 22 February 1984. However, some steps have been taken. The third and fourth respondents entered appearances on 7 December 1983 and the fifth respondent entered an appearance on 8 December 1983 when the Applications first came before the Court for directions. On that occasion, the fifth respondent by his solicitor foreshadowed a possible dispute as to the Court's jurisdiction and it was directed, inter alia, that on or before Friday 27 January 1984 the fifth respondent either deliver a defence and cross-claim, if any, or file and serve an application to have the proceedings against him dismissed or stayed. On 14 December 1983, the fifth respondent delivered requests for particulars of the Statement of Claim and the particulars were delivered shortly afterwards. On 26 January 1984, the fifth respondent filed the Notices of Motion which are now before me by which he seeks to have the proceedings against him dismissed or stayed on the ground that they are outside the Court's jurisdiction or in the alternative in the exercise of the Court's discretion. No attention was directed to the questions whether the joinder was in any event proper and appropriate under the Court's Rules. At the conclusion of argument, I ordered that each Application be dismissed against the fifth respondent but without prejudice to the right of the respective applicants to commence other appropriate proceedings against the fifth respondent and I ordered that the fifth respondent recover his taxed costs, including reserved costs, of each Application from the applicants. I then indicated that I would deliver these reasons for the orders made as soon as possible.

3. Shortly stated, the applicants' allegations against the first to fourth respondents are that the third respondent and/or the fourth respondent carried on business as "Camelot Real Estate" which was the real estate agent for the first and second respondents in and about the sale of shares in a limited partnership and the sale of units in a building to be constructed at Broadbeach in the State of Queensland, that one David White was a real estate salesman in the employ of Camelot Real Estate, that in about August 1981 White made various misrepresentations to the applicants which were made fraudulently, negligently, and in breach of s.52 of the Act, that in reliance upon the misrepresentations the applicants contracted to purchase shares in the limited partnership and units in the proposed building and paid substantial sums of money, that the first respondent failed to pay deposits received from the applicants in respect of the unit purchases into an interest-bearing trust account as required by the contracts, that in or about the month of December 1982 the contracts for the purchase by the first respondent of the land upon which the unit-building was to be constructed were terminated by the vendors thereunder for breach by the first respondent and the deposits thereunder were forfeited, that from in or about that month the building has not been possible and the shares in the limited partnership have been worthless, and that the applicants have lost the monies which they paid.

4. There are some differences in the terms in which the alleged misrepresentations are pleaded in the various actions. Broadly, they are asserted to have concerned payments made by or on behalf of the first respondent for the land upon which the unit building was to be constructed (in one case that the land had already been acquired by the first respondent), the use for which money paid by the applicants would be available and to which it would be put, the number and type of units which had been sold, the possible consequences if the project (or the applicants) did not proceed, the limited nature of the risks to the applicants, and the character, reputation, experience and expertise of the respondents and those associated with them.

5. The allegations against the fifth respondent in Application G109 of 1983 are as follows:

"27.(a) The Fifth Respondent is and was at all
times material to this action a Solicitor
of the Supreme Court of Queensland and
carried on practice as such.

(b) On or about the 23rd day of September,
1981, the Applicants orally retained the
Fifth Respondent to act as their
Solicitor in and about the transaction
referred to in paragraphs 6 and 7 hereof;

(c) The Fifth Respondent accepted the said
retainer and acted for the Applicants in
the said transaction;

(d) The Fifth Respondent at all times
material to this action acted for a
vendor or vendors of the said land
referred to in paragraph 11(b) hereof to
the First Respondent;

(e) By virtue of the Fifth Respondent's
acting for such vendor or vendors he
became aware on or prior to the date
referred to in paragraph 27(b) or in the
alternative on or before the date when
the Applicants made the payments referred
to in paragraph 10 hereof that the First
Respondent was having difficulty in
fulfilling its obligations under the said
contract or contracts;

(f) The Fifth Respondent did not disclose the
acts referred to in subparagraphs (d)
and (e) hereof to the Applicants;

(g) In the premises, the Fifth Respondent had
a duty to advise and warn the Applicants
as to:

(i) the extent to which any moneys paid
or payable by the Applicants in the
course of the said transaction were
unsecured or at risk;

(ii) the nature and extent of the risk
assumed by the Applicants in comparison
with a normal contract for the sale and
purchase of land or units;

(iii) the financial status of the First
and/or Second Respondents.

(h) The Fifth Respondent in breach of his
said duty failed to advise or warn the
Applicants as aforesaid;

(i) As a result of the Fifth Respondent's
said breach of duty the Applicants have
suffered loss and damage.

28. Further or alternatively:

(a) on or about the 23rd day of September,
1981 the Applicants orally retained the
Fifth Respondent to act as their
Solicitor in and about the transaction
referred to in paragraphs 6 and 7 hereof
and to advise in relation thereto;

(b) The Fifth Respondent accepted the said
retainer and acted for and advised the
Applicants with respect to the said
transaction;

(c) The Fifth Respondent owed a duty to the
Applicants to exercise all due
professional care skill and diligence in
advising the Applicants in relation to
the said transaction;

(d) the Fifth Respondent knew or ought to
have known that he was being trusted to
give such advice as a basis for action on
the part of the Applicants;

(e) the Applicants relied upon the Fifth
Respondent's advice in entering into the
said transaction;

(f) the Fifth Respondent failed to exercise
all due professional care skill and
diligence in advising the Applicants in
that he:-

(i) expressly or impliedly advised the
Applicants that the said transaction was
sound and not attendant with any
particular risk;

(ii) advised that the said project was a
sound one and that if he himself had the
resources he would invest in it;

(iii) failed to advise the Applicants
that the said investment they were
proposing to make was unsecured and
thereby was attendant with risk; and

(iv) failed to advise the Applicants
that the First Respondent was having
difficulty fulfilling its obligations
under the contract or contracts referred
to in paragraph 11(b) hereof;

(h) the Applicants, acting in reliance on the
said advice have suffered loss and
damage."

With minor and presently immaterial differences of detail, the allegations in paragraphs 27, supra, are repeated in Applications G110 and G112 of 1983. In each of those matters, a paragraph substantially in the following terms appears in lieu of paragraph 28, supra:

"29. Further or alternatively:

(a) The Fifth Respondent on or about the
25th day of September, 1981
expressly or impliedly advised the
Applicant that the said transaction
was sound and not attendant with any
particular risk to the Applicant;

(b) the Fifth Respondent knew or ought
to have known that he was being
trusted to give such advice as a
basis for action on the part of the
Applicant;

(c) the Applicant relied upon the Fifth
Respondent's advice in entering into
the said transaction;

(d) the Fifth Respondent failed to
exercise all due professional care
skill and diligence in the giving of
such advice.

(e) the Applicant, acting in reliance on
the said advice has suffered loss
and damage."

6. The claims against all respondents are lacking in any detail concerning the loss and damage alleged to have been suffered by the applicants but, in the course of argument, counsel for the applicants indicated that the applicants seek to recover from all respondents the amounts which they have paid away and incidental expenses, such as legal costs.

7. In a broad sense, all claims in each proceeding are related to a single set of associated transactions. There there is a temporal coincidence or overlap between the various events and there are common elements to be proved in each case in the claims against the first and fourth respondents on the one hand and, on the other, the claims against the fifth respondent. Thus, to succeed on any basis against any respondent, it will be necessary for the applicants to prove what they signed, what they paid, the termination of the contracts by which the first respondent was acquiring the land upon which to build the building, and the applicants' loss of their money and any expenses which they seek to recover. Counsel for the fifth respondent sought to distinguish the claims against her client from the claims against the other respondents on the basis that, in the assessment of any amount which might properly be awarded against the fifth respondent, it would be necessary to bring to account the applicants' prospects of recoverability and/or enforceability against the other respondents who were, she said, primarily responsible for any loss suffered by the applicants. However, I have not found it necessary to consider this submission and have placed no reliance upon it in arriving at my conclusion.

8. Except to the extent which I have indicated, the claims against the fifth respondent are wholly divorced from the claims against the other respondents. The acts and omissions and state of mind alleged against the fifth respondent are entirely different from and unconnected with those alleged against the other respondents. The knowledge attributed to the fifth respondent in the applicants' pleadings is not alleged to include knowledge of any aspect of the impugned conduct of the other respondents, with respect to the topics which are the subject matter of their alleged representations, or of the connection asserted between that conduct and the steps taken by the applicants or other reasons for those steps, but is related only to the position of one of the respondents, the first respondent, in relation to other transactions with strangers to the litigation, namely the first respondent's acquisition of the land upon which the building was to be constructed. The causes of action against the fifth respondent are both in nature and in most at least of their constituent elements quite separate and distinct from those pleaded against the other respondents.

9. In the circumstances, including of course the circumstance that there is no overlap of parties between the two series of claims and no relationship between the fifth respondent and the other respondents, it seems to me that the claims against the fifth respondent could not properly be regarded as other than an entirely separate and severable non-federal controversy.

10 It is unnecessary to pursue that further because,
however that may be, I feel no doubt but that, if this Court has a discretion to permit the claims against the fifth respondent to proceed in this Court or to require them to be raised in the State Courts, it should follow the latter course.

11. As matters presently stand, the potential disadvantages to the fifth respondent if he is obliged to contest the respective proceedings in this Court, in most aspects of which he has no interest, with obvious increased cost and inconvenience, far outweight any legitimate advantage which might accrue to the applicants if they were permitted to continue as at present with the claims against the fifth respondent joined with their claims against the other respondents. I should add, since the point was mentioned by Counsel for the applicants, that I have not overlooked the steps taken thus far in the litigation by the fifth respondent, but I have found what has been done of no significant assistance in determining how to exercise any discretion which I may have.

12. The one point which caused me any pause is the possibility that, with separate proceedings in different courts, the litigation in the different courts might be tried in an inappropriate order. However, any such possibility seems remote in the present instance and I am confident that, should the need arise, the respective courts can adequately control the cases before them to ensure that justice is done.

13. Accordingly, as I have already indicated, I considered that the appropriate order was for the dismissal of the applicants' claims in this Court against the fifth respondent.