Commonwealth Bank v White; ex parte Lloyd's [1999] VSC 262

Commonwealth Bank v White; ex parte Lloyd's [1999] VSC 262 - VSC 1999 case summary — Zoe

[30]

In addition to its statutory function as regulator of the underwriting business conducted in the Lloyd's market, Lloyd's provides ancillary services for its members such as the premises, services and aid necessary for the conduct of their underwriting businesses and for the regulation of operations of the market. I infer too from the terms of reference of its General Counsel in Australia that its services include, too, those of general marketing and promotion of the Lloyd's market, of monitoring local legislation and the compliance with it by Lloyd's and its members, and of representing the Lloyd's market on insurance bodies and government committees and, generally, liaising with the insurance industry regulatory authorities. A further indication of the scope of the services provided by Lloyd's to its members is to be found in the latest annual report which is in evidence, that for the calender year 1997. This shows that the activities of Lloyd's were handled by a number of units. These were the insurance services unit which provided business processing and technical services in support of members' underwriting activities; the business development unit which was concerned with the development and promotion of Lloyd's market activities throughout the world; the North American unit which was concerned with liaising with American regulatory authorities and generally promoting the activities of the members in the United States; the property services unit which managed Lloyd's property portfolio; and the members' services unit which was concerned with dealings between Lloyd's and its members including the collection of debts owed by members to Lloyd's and payment of sums due to them. Furthermore, a number of activities were handled centrally. These activities included strategic planning and finance including fixing members' subscriptions. Finally, in this very brief resume of its activities in England, Lloyd's deals with enquiries from prospective members and processes them as it did with Mr White in 1980. And to meet the cost of providing these services Lloyd's charges its members a fee in the form of an annual subscription.

[50]

It was accepted by both parties that it is for the defendant to establish in each case that there is a strong arguable case that service out of the jurisdiction was justified as falling within one or other of these circumstances: Williams v The Society of Lloyd's [1994] VicRp 19; [1994] 1 VR 274 at 291-2, per McDonald J. I, therefore, accept this as the basis of my task, without expressing any view whether in an application made under Rule 7.05 the onus lies on the serving party to show that the requirements of Rule 7.01(1) have been met and not on the applicant to demonstrate the contrary. Compare Voth v Manildra Flour Mills Pty Ltd [1990] HCA 55; (1990) 171 CLR 538 at 589-90 per Toohey J (dissenting). The difficulty, however, lies in identifying what it is that the serving party must establish. Counsel for Mr White contended that I must be satisfied that there is a strong arguable case for the existence of the jurisdictional facts set out in the relevant paragraphs of Rule 7.01(1). The contrary view, espoused by counsel for Lloyd's, was that I must be so satisfied not only of these facts but as to the validity of the claim itself. This latter view, expounded by the English Court of Appeal in Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391, has been laid to rest in that country by the House of Lords in Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1994] AC 438 and, closer to home, by the decision of the New South Wales Court of Appeal in Hyde v Agar (1999) Aust Torts Reports 65, 536. In a most helpful analysis of the comparable New South Wales rule Spigelman CJ, Mason P and Stein JA, held at 65,548 that it is for the serving party to establish the existence of a good arguable case with respect to the jurisdictional facts specified in the applicable paragraphs of Rule 7.01(1). This done, the court must then exercise its discretion, whether to permit the serving party to proceed under Rule 7.04 or whether to set aside service or stay the proceeding under Rule 7.05: (1999) Aust Torts Reports 65,536 at 65,546. With respect to the function of the court in this discretionary phase, their Honours said this: "...it is unlikely that questions of the merits of the case will play much role in the exercise of the ultimate discretion": (1999) Aust Torts Reports 65,536 at 65,551, approving the following observation of Lord Goff in Seaconsar Far East Ltd v Bank Markazi Jomhouri Islami Iran [1994] AC 438 at 456: "I can see no good reason why any particular degree of cogency should be required in relation to the merits of the plaintiff's case" It follows from this that, if I am satisfied to the required degree that a circumstance in Rule 7.01(1) has been made out, I might permit the proceeding to go forward unless there is good reason not to. Such a reason might be that the proceeding is futile. In a case such as this I would then turn to consider any forum arguments.

[76]

I shall consider first the last point which is a question of law. For this purpose I shall assume that the evidence shows to the required standard that the acts alleged to constitute the torts were committed in Victoria. The claims relied upon as falling within this paragraph include negligent misrepresentation which is clearly a tort. Those based on misleading and deceptive conduct and on breach of corporations legislation were said not to fall within that description. The difficulty which this submission highlights is that the word "tort" may be incapable of satisfactory or, indeed, any definition: Prosser and Keeton on Torts (5th ed 1984) 1. This is, however, a refuge which is not available to me. It does, however, appear that the word takes on a different meaning depending upon its context. Tortious liability, according to Professor Winfield, "arises from a breach of a duty primarily fixed by law; this duty is towards persons generally and its breach is redressable by an action for unliquidated damages": Winfield and Jolowicz on Tort (14th ed 1994) at p. 4. Where the word is used to describe a cause of action, as for example in the expression "an action of contract or of tort", it means a proceeding "in which the remedy is a common law cause of action although the right being enforced in the action may be a right created by either the common law or statute": Philip Morris Ltd v Ainley [1975] VicRp 32; [1975] VR 345 at 349, per Menhennitt J. See too Spotless Group Ltd v Proplast Pty Ltd (unreported, King J, 9 September 1987) at p.4. His Honour in the Philip Morris case concluded that, where a person who was paid workers' compensation claims a statutory indemnity against the person liable for the worker's loss, this claim is not an action of tort. This was because the existence of the statutory right to claim presupposed the non-existence of a common law remedy. On the other hand, in Wilson Electric Transformer Company Pty Ltd v. Electricity Commission of New South Wales [1968] VicRp 37; [1968] VR 330 at 332, Adam J was of opinion that the "substantial character" of such claim is that of an action in tort.

[83]

Finally, there remains the alleged wrong constituted by the breaches of the companies legislation. In paragraphs 32 and 41 Mr White alleges that by reason of the breaches he has been made liable to the Bank and has otherwise suffered loss and damage. In his prayer for relief, paragraph E, he seeks simply declarations that the agreements and undertakings are void or unenforceable for breach of the companies legislation and in paragraph B a general claim for damages. Counsel for Lloyd's did not for a moment accept that these breaches amounted to torts. They submitted that, on a proper analysis of the cause of action, the relief available to Mr White was a declaration that the transactions entered into by him as a consequence of the breaches were void and unenforceable: Hurst v Vestcorp Limited (1988) 12 NSWLR 394; O'Brien v Melbank Corp Limited (1991) 7 ACSR 19 (FC Vic); Australian Breeders Co-operative Society Limited v Jones [1997] FCA 1405; (1997) 150 ALR 488 (Full Fed Ct). As a consequence, Mr White might seek monetary relief in the form of restitution to the extent that Lloyd's had been unjustly enriched as a result of the void contract, in accordance with the principles expounded by the High Court in Pavey and Matthews Pty Ltd v Paul [1987] HCA 5; (1987) 162 CLR 221 and David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353. So much was not, I think, challenged by counsel for Mr White. Lloyd's argument moved from this position to the conclusion that the availability of restitution as the appropriate relief for the wronged investor shows that the breach of statute which gave rise to it is not a tort: Fleming, The Law of Torts (9th ed, 1998 at p.5). I am not at all confident that this conclusion necessarily follows. In Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391 at 479-80 the English Court of Appeal was prepared to accept the possibility that a claim may be founded on a tort irrespective of the relief or remedy sought, whether this be damages at common law or some equitable relief. In any event, the relief sought in this case is not restitution but damages. The validity of service in respect of the claim presently under consideration must be determined on its terms as pleaded, not on some other basis: Metall und Rohstoff AG v Donaldson Lufkin & Jenrette Inc [1990] 1 QB 391 at 436.

[119]

This submission is flawed at a number of levels. First and foremost, the mere pendency of similar litigation in London does not of itself render litigation in this Court inappropriate: Rocklea Spinning Mills Pty Ltd v Consolidated Trading Corporation [1995] 2 VR 181. Second, notwithstanding the common factual substratum, the causes of action in the Jaffray proceeding are fundamentally different from those in the present case which I have summarised in paragraphs [8] to [12] above. In the Jaffray proceeding it is not open for the claimant to seek damages for negligent misrepresentation having regard to s. 14(3) of the Lloyd's Act 1982. What is alleged in that proceeding is that Lloyd's recklessly and or deliberately misrepresented or concealed the true position from its members or acted fraudulently. Alternative claims are based on the English Misrepresentation Act 1967 ss. 2(1) and 2(2) and on breach of duty of care prior to the commencement of the Lloyd's Act 1982. The allegations of bad faith against Lloyd mean that the issues in the Jaffray proceeding differ from those based on the Initial Representations and the Subsequent Representations in the proceeding in this Court. The claims of Mr White based on misleading and deceptive conduct and breaches of the companies legislation have no counterparts in the London litigation. Given that there is probably little dispute between the parties about the making of the statements said to constitute the representations, this means that the evidence in the Jaffray proceeding will be very different from that in this proceeding. Furthermore, the existence of these differences means that the question as to forum becomes "whether, having regard to the controversy as a whole, the Australian proceedings are vexatious or oppressive in the Voth sense of those terms, namely, that they are `productive of serious and unjustified trouble and harassment' or `seriously and unfairly burdensome, prejudicial or damaging'": CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 at 400-1, per Dawson, Toohey, Gaudron, McHugh, Gummow, Kirby JJ.

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Judgment (127 paragraphs)

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Cases Cited (14)