![]() |
[Home]
[Databases]
[WorldLII]
[Search]
[Feedback]
Federal Court of Australia |
COURT
IN THE FEDERAL COURT OF AUSTRALIACATCHWORDS
Practice and Procedure - judgment by default - respondents not contesting application - power of Court to order judgment - effect on other parties continuing to contest proceedings - appropriateness of relief sought - declaratory relief - minimum relief necessary to determine rights of the parties.Judgments and Orders - declaratory order - judgment by default - relevant principles.
Federal Court of Australia Act 1976
New Brunswick Railway Co. v. British and French Trust Corporation Ltd (1939) AC 1
Wallersteiner v. Moir (1974) 1 WLR 991
BMI Limited v. Federated Clerks Union of Australia (1983) 51 ALR 401
HEARING
PERTH Counsel for the Applicants in Mr R.J. Price
WA G111 of 1990:
Counsel for the Respondents in Parker and ParkerWA G111 of 1990:
Counsel for the Respondents in Mr P.G. TaylorWA G111 of 1990:
Solicitors for the Respondents in Blake Dawson Waldron WA G111 of 1990:
Counsel for the Applicant in Mr J.T. Gleeson WA G134 of 1990:
Solicitors for the Applicant in Northmore Hale Davy and Leake WA G134 of 1990:
Counsel for the First and Second Mr P.G. Taylor Respondents:
Solicitors for the First and Second Blake Dawson Waldron Respondents:
Counsel for the Third Respondent Mr J.D. Heydon QC andin WA G134 of 1990: Mr I.M. Jackman
Solicitors for the Third Respondent Mallesons Stephen Jaquesin WA G134 of 1990:
Counsel for the Fourth Respondent Mr S.K. Shepherdin WA G134 of 1990:
Solicitors for the Fourth Respondent Robinson Coxin WA G134 of 1990
ORDER
It be declared that the first applicant's indebtedness to the first respondent in respect of a loan of $2,705,460 made in or about July 1989 by the first respondent to the first applicant and relating to the Australian Viticultural Project No. 2 has been and is absolutely extinguished, both as to the first applicant's liability to repay the principal amount of the said sum and interest thereon.It be declared that the second applicant's liability to the first respondent under a written guarantee given by the second applicant in or about July 1989 guaranteeing the obligations of the first applicant to the first respondent in respect of a loan of approximately $2,705,460 made by the first respondent to the first applicant and relating to the Australian Viticultural Project No. 2, has been and is absolutely extinguished and further declared that the said guarantee has been and is discharged.
It be declared that the third applicant's liability to the first respondent under a written guarantee given by the third applicant and contained in a document addressed to the first respondent dated 7 July 1989, guaranteeing the obligations of the first applicant to pay interest to the first respondent in respect of a loan of approximately $2,705,460 made by the first respondent to the first applicant and relating to the Australian Viticultural Project No. 2 has been and is absolutely extinguished and further declared that the said guarantee has been and is discharged.
The first respondent and the second respondent do pay the first applicant's, second applicant's and third applicant's costs of the application to be taxed.
The solicitors for the first and second respondents have leave to withdraw from the record.
By default of the first and second respondents against only the first and
second respondents and not so as to derogate from the
rights of the third and
fourth respondents to pursue any issue arising in the proceedings THE COURT
ORDERS:
That it be declared that the applicant is not obliged under the Guarantee Agreement between the applicant and the first, third and fourth respondents dated 30 June 1989 to pay to the first respondent any amount in relation to the loan agreements entered into between the first respondent and certain borrowers, full particulars of which loan agreements are contained in Schedule A to the amended statement of claim.
That there be judgment against the first respondent in the sum of $433,869.86 inclusive of pre-judgment interest.
That the first and second respondents pay the applicant's costs.
The solicitors for the first and second respondents have leave to withdraw from the record.
There be liberty to the applicant to apply for leave to enforce this
judgment as against the second respondent.
NOTE: Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules.
DECISION
Actions WAG 111 of 1990 and WAG 134 of 1990 both arise out of financing arrangements connected with investment in a viticultural project. The applicants in each case move for judgment by default against three companies which are respondents in the actions. The companies in question do not contest the motions, but it is necessary to consider the appropriateness of the orders sought. To do that some consideration of the statements of claim is required. The summary that follows sets out the substance of the allegations made by the applicants. None of it involves any finding of fact.2. A scheme was established in 1989 under which prospective investors in what was known as the Australian Viticultural Project No.2 would raise their subscriptions by borrowing from Mid-West Finance (ACT) Pty Limited. Mid-West was a wholly-owned subsidiary of Growth Industries Pty Ltd. An agreement called the "Guarantee Agreement" was made on 30 June 1989 between MGICA Limited, Mid-West, Permanent Trustee Australia Limited and Hambros Australia Limited. MGICA agreed, for a fee, to give guarantees to Mid-West of the interest payment obligations of such of the investors as it approved. The Guarantee Agreement provided that MGICA would be relieved of its obligation to pay money in relation to any loan unless at the time Mid-West made demand the loan and any guarantee or indemnity of the borrower's obligation were "duly enforceable in accordance with their terms." It was also a term that Mid-West, in giving notice of demand to MGICA, would be deemed to warrant that the borrower's obligation was then enforceable.There was a covenant that Mid-West would notify MGICA of any arrears of interest under any loan in excess of 30 days and would provide monthly reports. It was also to keep MGICA informed of all matters which might reasonably be expected to have a material effect on the ability of any borrower or guarantor to satisfy any of its obligations. Mid-West would take all reasonable steps necessary to ensure that each borrower complied with the terms of its loan and would take all reasonable steps necessary to recover moneys which could be recovered from borrowers and their guarantors. A further agreement was made between MGICA, Mid-West and Permanent on 28 July 1989 under which MGICA would approve specified loans pursuant to the Guarantee Agreement in consideration of Mid-West providing certain promises and security to MGICA. And on several subsequent occasions up to January 1990, MGICA, Mid-West and Permanent agreed that additional loans would also be treated as covered by the 28 July 1989 agreement.
3. MGICA says that certain of the loans covered by the 28 July 1989 agreement and their associated guarantees were either not legally binding or enforceable or were liable to be set aside or otherwise avoided. And for that reason it has not, and never has had, any obligation under the Guarantee Agreement to pay Mid-West any amount in relation to them. In the alternative it says that Mid-West and Growth Industries made pre-contractual representations to it about the loans covered by the 28 July 1989 agreement. Those representations are said to have been false and/or misleading and deceptive and to have constituted conduct by Mid-West and Growth Industries which was misleading or deceptive, or likely to mislead or deceive, in contravention of s.52 of the Trade Practices Act 1974.
4. Facts are pleaded upon which the claim is made that Growth Industries was a promoter of the Viticultural Project and owed a fiduciary duty to MGICA to exercise utmost good faith in making disclosure of all matters material to its decision to assume the obligations it did. The misrepresentations already pleaded and failure to disclose other matters constituted a breach of that duty. Mid-West also owed a duty, which was breached, to disclose to MGICA "any unusual matters" relating to any of the loan agreements covered by the Guarantee Agreement. MGICA says it executed the 28 July 1989 agreement in reliance upon the representations made to it by Mid-West and Growth Industries and in the belief that they had fulfilled their fiduciary duties. A continuance of the representations to 22 August 1989, further representations in January 1990 and further non-disclosures in relation to the loans are alleged. Again, misleading or deceptive conduct and breaches of fiduciary duty are set up. There are also said to have been breaches by Mid-West of the deemed warranties and other terms of the Guarantee Agreement.
5. Demands for payment under the Guarantee Agreement were made in September 1990. On 2 October 1990 MGICA paid $410,000 to Permanent. The payment was expressed to be without prejudice to its right to assert that the demand on which it was made was of no force and effect and that it was entitled to recover the money back. Mid-West or Permanent are said to hold the $410,000 as money had and received to the use of MGICA. MGICA now seeks various declarations and orders, including an order for the repayment of $410,000 by Mid-West, Growth Industries and Permanent. Declaratory relief, and an order under s.87 of the Trade Practices Act or for rescission of the 28 July 1989 agreement, is sought against Hambros. Only Permanent has filed a defence. It has also cross-claimed against MGICA and Mid-West.
6. The application in WAG 134 of 1990 was filed on 22 November 1990 and the first return date for directions was 19 December. With the application MGICA filed a motion returnable on 19 December seeking orders for the consecutive and expedited trials of Nos. WAG 111 and 134 of 1990 before the same Judge. The motion also sought an order that as against Growth Industries, to which a provisional liquidator had been appointed, leave be granted to MGICA, nunc pro tunc, to proceed on condition that it would not, without the prior leave of the Court, seek to enforce any judgment obtained against it. On 19 December an order for leave to proceed was made, but the motion was otherwise adjourned to 1 February. Directions were given for filing of defences and any cross-claims claims by 21 January 1991 and replies to defences and defences to any cross-claims by 31 January 1991. Leave was also given to amend the application and statement of claim in terms of minutes filed in Court on 19 December.
7. Both WAG 134 and WAG 111 of 1990 came on Friday, 1 February 1991. Counsel
for Mid-West and Growth Industries, which had filed
no defence as required by
the direction on 19 February, indicated that they would be taking no further
part in the proceedings and
would abide the Court's order. He was also
appearing for Mid-West and Growth Industries Management in WAG 111 of 1990 and
adopted
a similar position. He said that his instructing solicitors sought
leave to withdraw from the record. Counsel for MGICA in WAG
134 of 1990
evidently had some prior notice of this and produced a motion for judgment
against Mid-West and Growth Industries. Counsel
for the applicants in WAG 111
of 1990 had no motion, but indicated a desire to move orally for judgment
instanter against Mid-West
and Growth Industries Management. Counsel
appearing for Permanent wished to seek the advice of senior counsel on the
implications
for his client of the orders sought against Mid-West and Growth
Industries in WAG 134 of 1990. There was also before the Court a
motion filed
by Permanent on 31 January 1991 to strike out the amended statement of claim.
In the event the following orders were
made:
1. Any motion for judgment by the applicant in 134 of 1990An extension to regularise a minor delay in the filing of Permanent's defence was ordered. Further programming directions were given and the proceedings in WAG 134 of 1990 fixed for hearing on 20 - 24 May and 4 - 7 June 1991. Before dealing with the motion for judgment in that action, it is convenient to consider the statement of claim in WAG 111 of 1990. Again the narrative format, which is adopted for convenience, does not involve any finding of fact. It simply sets out the allegations.
against the first and second respondents is to be filed
and served on all parties by midday on 4 February 1991.
2. Any such motion to be returnable at 2.15 pm on 5 February 1991.
3. The third respondent's motion to strike out filed 31
January 1991 is adjourned to 25 February 1991.
4. The applicants' motion filed 22 November 1990 be
adjourned to 5 February 1991 at 2.15 pm.
8. This application was instituted on 17 October 1990. Joseph Charles Learmonth Duffy (NSW) Pty Ltd is a wholly-owned subsidiary of Joseph Charles Learmonth Duffy Limited which is in turn a wholly-owned subsidiary of Capital Hall Limited. They sue Mid-West and Growth Industries Management Limited. Growth Industries Management is the vineyard manager of the Australian Viticultural Project No. 2 described as "an investment project established under a Viticultural Investment Deed dated 24 May 1989". Under that Deed investors subscribed $10,000 each for contracts which entitled them to have grapes cultivated for them on parcels of land. JCLD was a sub-underwriter for the issue of contracts in relation to the project and was obliged under an underwriting agreement (in conjunction with the main underwriter) to take up the shortfall of contracts subscribed for under the project as at 30 June 1989. In the event it became liable to take up 266 contracts. These were entered into by JCLD (NSW). They were financed by a loan agreement under which JCLD (NSW) agreed to borrow $2,705,460 from Mid-West and to pay interest on that loan. JCLD agreed to guarantee JCLD (NSW)'s obligations under the loan agreement. It was a term of the agreement that for each contract applied for after 30 June 1989 by investors other than the applicants and other underwriters, the amount repayable by JCLD (NSW) would be reduced by $10,000. The sum of $2,705,460 was advanced and paid by Mid-West on behalf of JCLD (NSW) to Growth Industries Management. By November 1989 Growth Industries Management had received subscriptions for more than 266 new contracts. On that basis the amount of principal repayable under the loan agreement was extinguished. JCLD (NSW) had paid all interest and charges. In spite of this, Mid-West maintained that JCLD (NSW) and JCLD were still indebted to it.
9. Additional and alternative pleas are set up, one of which was that there was a collateral agreement to reduce JCLD (NSW)'s indebtedness along the lines already indicated. And it was said that on 7 June 1989, Capital Hall entered into a Guarantee Agreement with Mid-West on the basis that JCLD (NSW)'s advances would be reduced according to the subscriptions of new contracts. Capital Hall claims that it is no longer liable under that agreement, a matter which it says is contested by Mid-West. The promise of Mid-West to treat JCLD's indebtedness as reduced according to new contracts made is also pleaded as a representation which did not reflect its true intention. It is thereby said to have engaged in misleading or deceptive conduct in contravention of s.52 of the Trade Practices Act. A further plea is that there was an Allotment Agreement between JCLD (NSW) and Growth Industries Management, under which JCLD (NSW) agreed to subscribe for 266 contracts and Growth Industries Management agreed that as and when new contracts were received it would "arrange and procure the novation or cancellation of an equivalent number of the 266 contracts allotted to JCLD (NSW)". Growth Industries Management failed and refused to arrange or procure the novation or cancellation of the contracts. Again, promissory statements were made as representations of intentions which were misleading or deceptive.
10. The first directions hearing in WAG 111 of 1990 was on 7 November 1990,
and was adjourned to 15 November. Programming orders
were then made. A
defence was filed by Mid-West and Growth Industries Management on 10 December,
although it was 4 days out of
time. No further steps have been taken since
then and apart from the late filing of the defence, the respondents were not
in breach
of any order of the Court. It is, however, clear that they propose
to take no further steps in response to the application, and
I infer that they
do not intend to provide discovery as directed, but merely to submit to
whatever order the Court makes.
The Motions for Judgment
11. On 5 February the Court had before it the motion for judgment in WAG 134
of 1990 which had been produced in Court on 1 February,
but not filed until 4
February 1991. There was also a motion for judgment in WAG 111 of 1990 filed
on 4 February 1991. Permanent
was now represented by senior counsel, Mr J.D.
Heydon QC. Mr Taylor appeared for Mid-West, Growth Industries and Growth
Industries
Management in the respective actions. After hearing from Mr Price,
counsel for the applicants in WAG 111 of 1990, I asked Mr Taylor
to again
state his clients' position in respect of the motion. The following exchange
then occurred;
"Mr Taylor: My clients' position, as was the case on12. It is convenient to deal first with the motion for judgment on WAG 134 of 1990, as it attracted some substantive argument. Mr Gleeson, counsel for MGICA, relies upon the fact that Mid-West and Growth Industries have failed to plead as directed and invokes O.10 r.7(1)(b) and O.11 r.23(1)(b). Order 10 r.7(1)(b) provides:
Friday, is that it instructs me to apply to withdraw
as solicitors on the record for the first and second
respondent, and secondly I am also instructed to
inform the Court that the attitude of the first and
second respondent to the application is that it is
simply not in a position to defend the actions due to
lack of funds, and therefore it can do nothing else
but abide by the order of the Court in the
circumstances.
The Court: Well, they don't consent to the orders?
Mr Taylor: They don't consent to the orders, in short.
The Court: And your clients are the provisional
liquidators, is that correct?
Mr Taylor: In the case - it's the provisional
liquidator of - well, in fact our client is the
provisional liquidator of the parent company of the
first applicant and also the second applicant.
The Court: You mean the first respondent?
Mr Taylor: I beg your pardon, the first respondent and
the second respondent.
The Court: And you have seen the notice of motion and
the orders that are sought?
Mr Taylor: Yes, right.
The Court: And your client had no instructions in
relation to any of those?
Mr Taylor: No, your Honour."
"7(1) Where a party fails to comply with an order ofAnd O.11 r.23(1)(b) provides:
the Court directing that party to take a step in the
proceeding, any other party may move the Court on
notice -
.
.
.
(b) if the party in default is a
respondent - for judgment or an order
against him;"
"23(1) Where a party is in default in filing andI would add that, in my opinion, in a case where a respondent indicates that it does not propose to contest the application or take any further steps relating to it, the Court may pronounce judgment. It may be that O. 35 r.1 provides the necessary authority:
serving any pleading as required by this Order, any
other party may move the Court on notice -
.
.
.
(b) if the party in default is a
respondent - for judgment or an order
against him;"
"1. The Court may, at any stage of any proceedings, onIf it does not, it is in any event implicit in the Court's statutory powers under the Federal Court of Australia Act 1976. But whether or not the Court will in a given case pronounce judgment where the respondents do not contest the action, and what judgment it will pronounce, will depend upon the circumstances of the case.
the application of any party, pronounce such judgment
or make such order as the nature of the case requires,
notwithstanding that the applicant does not make a
claim for relief extending to that order in any
originating process."
13. By its motion in WAG 134 of 1990, MGICA seeks orders against Mid-West in
the following terms:
1. A declaration that the Applicant is notAnd against Growth Industries it seeks similar declarations, an order under s.87 and costs. Interest is claimed at the rate of 17% pursuant to s.51A for the period from 2 October 1990 to 5 February 1991, a sum of $23,869.86.
obliged under the Guarantee Agreement
between the Applicant and the First, Third
and Fourth Respondents dated 30 June 1989
to pay to the First Respondent any amount
in relation to the loan agreements entered
into between the First Respondent and
certain borrowers, full particulars of
which loan agreements are contained in
Schedule A to the Statement of Claim (the
"Schedule A loans").
2. A declaration that the First Respondent,
in trade or commerce, has engaged in
conduct that is misleading or deceptive or
likely to mislead or deceive in relation
to the entry of the agreement between the
Applicant, the First Respondent and the
Third Respondent dated 28 July 1989 (the
"28 July 1989 Agreement") and each
subsequent amendment to the Schedule of
the 28 July 1989 Agreement, full
particulars of which amendments are set
out in paragraph 11 of the attached
Statement of Claim (the "amendments").
3. Further or in the alternative, a
declaration that the First Respondent
breached its duty to the Applicant in
failing to disclose to the Applicant
matters required to be disclosed to it
prior to the entry by the Applicant into
the 28 July 1989 Agreement and the
amendments thereto.
4. An order pursuant to s.87 of the Trade
Practices Act 1974 (Cth) declaring the
whole of the 28 July 1989 Agreement and
the amendments thereto to be void or
alternatively void ab initio.
5. $410,000.
6. Interest.
7. Costs.
14. Senior Counsel for Permanent opposed the orders in the form sought by
MGICA, even though they did not involve any relief against
his client. He
submitted that the first two declarations sought turned on the construction of
documents. Reference was made to
New Brunswick Railway Co. v. British and
French Trust Corporation Ltd (1939) AC 1 where Lord Maugham L.C. said at 22:
"I think it right to observe that it is in my viewThis view was supported by Lord Russell of Killowen at p 28. In Wallersteiner v. Moir (1974) 1 WLR 991 at 1030, Scarman L.J. spoke of the duty of the Court to exercise caution before committing itself to sweeping declarations. And the Full Court of this Court in BMI Limited v. Federated Clerks Union of Australia (1983) 51 ALR 401 held, by majority, that it was undesirable to grant declaratory relief under s.108 of the Conciliation and Arbitration Act 1904 where there was no contest on the question and no contradictor. Of course, that was concerned with the validity of an award; it was not merely a matter of private rights between particular parties. Various alternative orders were proposed by Permanent, each carrying the preamble that they were "not to derogate from the right of the Third and Fourth Respondents to pursue any issue arising in the proceedings". Such a preamble is almost certainly unnecessary. Judgment against Mid-West and Growth Industries could not give rise to any res judicata or issue estoppel against Permanent or Hambros. Nevertheless, out of an abundance of caution, I am prepared to include it in the orders to be made.
undesirable that judges should make declarations as to
the true construction of documents on motions for
judgment in default of defence. It has not, I
believe, been the practice to do so in the Chancery
Division for a good many years. As far as possible
the Court should make such declarations only when the
matter has been argued by counsel on each side, and is
then the subject of adjudication by the judge."
15. Accepting that the Court should act cautiously before making
declarations, this is a case in which the respondents are represented
before
the Court, are in default or do not intend to comply with further directions,
and have expressly stated that they do not intend
to contest the action. I
consider in the circumstances that it is appropriate to award such declaratory
relief as is necessary to
conclude the issue so far as it relates to the
rights inter partes of MGICA, Mid-West and Growth Industries. In my opinion,
however,
in circumstances where like issues remain to be litigated with other
parties, I should not go beyond what is strictly necessary to
achieve that
result. Declarations of misleading or deceptive conduct and breach of
fiduciary duty do go beyond that limit. It is
sufficient that MGICA is not
obliged under the Guarantee Agreement and that it have its money judgment,
interest and costs. As to
the relief sought under s.87, it seems to me that
the operation of the agreement of 28 July 1989 as pleaded is dependent upon
that
of the Guarantee Agreement. The claim for s.87 relief in respect of that
agreement becomes academic once the obligations under the
Guarantee Agreement
are found to have been extinguished. I propose therefore in WAG 134 of 1990
to make orders as follows:
The Court, by default of the first and secondAs to the motion in WAG 111 of 1990, the three applicants, JCLD (NSW), JCLD and Capital Hall seek orders in the following terms:
respondents, against only the first and second
respondents and not so as to derogate from the rights
of the third and fourth respondents to pursue any
issue arising in the proceedings, orders:
1. That it be declared that the applicant is not obliged
under the Guarantee Agreement between the Applicant and
the first, third and fourth respondents dated 30 June
1989 to pay to the first respondent any amount in
relation to the loan agreements entered into between the
first respondent and certain borrowers, full particulars
of which loan agreements are contained in Schedule A to
the amended statement of claim.
2. That there be judgment against the first respondent in
the sum of $433,869.86 inclusive of pre-judgment interest.
3. That the first and second respondents pay the applicant's costs.
1. A declaration that the first applicant's indebtedness toI am prepared on this motion to make declarations in terms of paras. 1 to 3 inclusive. No point is served by the restraining orders sought in para.4 and the precise meaning of the order sought in 5 is unclear. An order will be made substantially in terms of para.6. There will be no preamble in relation to this order as Permanent is not a party to these proceedings. There will be liberty to apply in relation to the question of leave to enforce the judgment in WAG 134 of 1990 as against Growth Industries. The solicitors for Mid-West, Growth Industries and Growth Industries Management have leave to withdraw from the record in each case.
the first respondent in respect of a loan of $2,705,460
made in or about July 1989 by the first respondent to the
first applicant and relating to the Australian
Viticultural Project No. 2 has been and is absolutely
extinguished, both as to the first applicant's liability
to repay the principal amount of the said sum and
interest thereon.
2. Declare that the second applicant's liability to the
first respondent under a written guarantee given by the
second applicant in or about July 1989, guaranteeing the
obligations of the first applicant to the first
respondent in respect of a loan of approximately
$2,705,460 made by the first respondent to the first
applicant and relating to the Australian Viticultural
Project No. 2, has been and is absolutely extinguished
and further declare that the said guarantee has been and
is discharged.
3. Declare that the third applicant's liability to the first
respondent under a written guarantee given by the third
applicant and contained in a document addressed to the
first respondent dated 7 July 1989, guaranteeing the
obligations of the first applicant to pay interest to the
first respondent in respect of a loan of approximately
$2,705,460 made by the first respondent to the first
applicant and relating to the Australian Viticultural
Project No. 2, has been and is absolutely extinguished
and further declare that the said guarantee has been and
is discharged.
4. The first respondent, its servants and agents be
restrained from commencing or pursuing legal proceedings
against the first applicant, the second applicant, the
third applicant and any of them to recover any monies by
way of damages or otherwise, in connection with or
arising out of a loan of approximately $2,705,460 made in
or about July 1989 by the first respondent to the first
applicant or any guarantee given by the second applicant
to the first respondent or by the third applicant to the
first respondent in relation to the said loan.
5. The second respondent do forthwith cancel the 266
contracts held by the first applicant in the Australian
Viticultural Project No. 2 established under the
Viticultural Investment Deed dated 24 May 1989.
6. The first respondent and the second respondent do pay the
first applicant's, second applicant's and third
applicant's costs in these proceedings (including the
costs of this application), such costs to be taxed.
AustLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.austlii.edu.au/au/cases/cth/FCA/1991/28.html