Leisure Boating Club (Roseville) Incorporated v Q-Corp Marine Pty Limited

REASONS FOR JUDGMENT 1 The respondents contend that these proceedings are an abuse of process or that they are frivolous and vexatious. Accordingly, they seek to have the application struck out or stayed under O 20 r 2 of the Federal Court Rules. 2 The grounds upon which this contention is made is that, according to the respondents, the purpose of these proceedings is to delay and, therefore to frustrate, the proceedings which are on foot in Queensland and which were commenced nearly six months before the commencement of the proceedings in the Federal Court. 3 The applicant in the Federal Court proceedings ("Leisure Boating") is an association incorporated under the Associations Incorporations Act 1984 (NSW). It carries on the business of a recreational boating club. It appears that, under the Rules of the Club, members are entitled to use vessels owned by Leisure Boating for periods and on terms set out in the rules and regulations. 4 In 2000 and 2001, Leisure Boating entered into three contracts to purchase Mustang Cruiser vessels from the first respondent ("Q-Corp") which manufactured the vessels in Queensland. 5 In these proceedings, Leisure Boating claims damages for breach of contract and for contravention of the Trade Practices Act 1974 (Cth)and the Fair Trading Act 1989 (Qld) arising from the purchase of the three vessels. Leisure Boating claims that the vessels were not of merchantable quality and were not fit for the purpose for which they were sold in breach of the implied conditions contained in the Sale of Goods Act 1923 (NSW). 6 The breaches which are the subject of the Statement of Claim in the Federal Court include claims that the vessels suffered from de-lamination of the hulls. 7 In the Queensland proceedings, Q-Corp seeks injunctive relief against Leisure Boating and an officer of that Association arising from an advertisement published by Leisure Boating. The advertisement referred to hull de-lamination, hull splitting and cracking in Mustang Cruiser vessels. 8 In its further amended defence in the Queensland proceedings, Leisure Boating has pleaded the truth of the assertions in the advertisement and has particularised, in support of this, the difficulty experienced by it with the de-lamination of the hull in one of the vessels purchased by it from Q-Corp. The defence also refers to cracking in two of the hulls of Leisure Boating's Mustang Cruiser vessels and alleges that certain models of the Mustang Cruiser type vessel are built below Australian standards. 9 The central plank of Q-Corp's motion to strike out or stay these proceedings is that Leisure Boating could, and should, bring the claims which are the subject of the Federal Court proceedings by way of a cross-claim in the Queensland proceedings. No such cross-claim has been filed in Queensland. 10 Q-Corp points to the allegations of hull de-lamination and contravention of Australian standards in the defence filed in the Queensland proceedings and to what appear to be the same allegations made in the Statement of Claim filed in the Federal Court. Q-Corp says that if the Queensland proceedings are tried before the proceedings in the Federal Court, Leisure Boating will be estopped under the principle stated in Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 from pursuing its claims in the Federal Court. 11 Thus, Q-Corp submits that I should infer from this and from correspondence to which I will refer below, that Leisure Boating is intent upon delaying the Queensland proceedings so as to avoid being subject to an Anshun estoppel. 12 However, Leisure Boating contends that it has no such purpose. It says that it has properly invoked the jurisdiction of the Federal Court and that it intends to cross-vest the Queensland proceedings to New South Wales so that they can be consolidated with the action in this Court. 13 Q-Corp also seeks, in the alternative, to strike out a number of paragraphs of the Statement of Claim filed by Leisure Boating and to strike out the whole of the claim against the second respondent ("Mr Ingram") and against the third respondent ("Mr Garroni"). I will deal with those matters under the heading "Pleadings" set out below. Relevant Facts 14 Q-Corp filed an "originating application" in the Supreme Court of Queensland on 12 June 2002 seeking an interlocutory injunction restraining Leisure Boating and Mr Ian Cran ("Mr Cran"), who is an officer of Leisure Boating from publishing an advertisement asserting that Q-Corp's Mustang Cruiser vessels are of poor quality or lack fitness for the purpose. 15 An interlocutory injunction in those terms was granted on 12 June 2002 and Q-Corp filed a Statement of Claim on 18 June 2002. The Statement of Claim sets out the advertisement which was in the form of a public notice. 16 The advertisement contained the words "Mustang Cruisers" and "hull de-lamination - hull splitting and cracking" in bold print. The Statement of Claim alleges in para 7.2 that there was not, and is not, some form of defect in Mustang Cruisers which was or is sufficiently widespread to justify a public notice. 17 Paragraph 9 of the Statement of Claim in the Queensland proceedings also alleges that the Mustang 3200 and 2800 models do not have cracks in the hull and the thickness of the hull complies with the relevant Australian standards. 18 In its further amended defence in the Queensland proceedings, Leisure Boating alleges that there was a defect in Mustang Sports Cruiser Models 3000/3200 and 2600/2800. Leisure Boating states in its particulars to paragraph 4 of the Statement of Claim that, in mid to late 2001, Leisure Boating began to experience difficulty with one of the two Mustang Cruisers purchased from the applicant (ie Q-Corp) in that the hull on the 32 ft vessel was delaminating. 19 In answer to the claims set out in paragraph 9 of the Statement of Claim, Leisure Boating alleges in paragraph 10 of its defence that two of the four Mustang Cruiser vessels, Models 3000/3200, which it has in its fleets, had cracks in the hull and it says that the Mustang Cruiser Models 3000/3200 are built below Australian standards. 20 The application and Statement of Claim in the Federal Court were filed on 17 December 2002. The three contracts on which Leisure Boating sues in the Federal Court are pleaded in paragraph 5 of the Statement of Claim. 21 The first contract was for a Mustang 3000 vessel which was purchased "on or about February 2000" for a price of $164,200. 22 The second contract was also for a Mustang 3000 vessel. It was purchased on or about 14 November 2000 for just over $160,000. 23 The third contract was for a Mustang 3650 vessel. It was purchased on or about 7 March 2001 for $283,800. 24 The breaches of the implied conditions under the Sale of Goods Act are pleaded in paragraph 10 of the Statement of Claim as follows:- "In breach of the Mustang Cruiser Contracts the Contracted Cruisers were not fit for purposes for which they were sold and were not of merchantable quality but were defective, unfit for that purpose and unmerchantable. Particulars (a) the hulls of the 3000 Contracted Cruisers the subject of the February 2000 Contract and the November 2000 Contract: (i) delaminated within 12 months of purchase; (ii) were underbuilt without ample structural support; and (iii) were not built to Australian Standards for ship and boat design and construction; (b) the design of the through hull exhaust system of the 3650 Contracted Cruiser, the subject of the March 2001 Contract, was defective causing water ingress to the two engines of the said 3650 Contracted Cruiser causing the said two engines to fail." 25 These claims are also said to give rise to breaches of s 52 of the Trade Practices Act and s 38 of the Fair Trading Act (Qld). 26 There is a claim for damages for over $1,500,000 which is particularised in paragraph 22 of the Statement of Claim. It is unnecessary to set out the particulars but I note that a very large proportion of the claim is comprised of a claim for loss of membership ($950,950) and loss of membership referrals ($319,000). 27 There are other proceedings on foot between the parties in the Local Court. On 14 October 2002, Q-Corp filed a Statement of Claim seeking damages from Leisure Boating and Mr Cran for the alleged wrongful detention of two engines which were delivered by Q-Corp to Leisure Boating for the purpose of replacing other engines fitted to a boat operated by Leisure Boating. 28 Leisure Boating and Mr Cran have filed defences to the claim in the Local Court. Leisure Boating has also filed a cross-claim which is in similar terms to the claim for damages made in the Federal Court proceedings. 29 The Federal Court proceedings were listed for directions before me on 3 February 2003. On that date, I made directions which were not opposed by the respondents for the filing of a defence by 24 February 2003 and for discovery by both parties on or before 24 March 2003. Directions were also made for the filing of affidavits. 30 After I indicated that I would make the directions, the solicitor who appeared for Leisure Boating informed me, for the first time, that there were proceedings on foot in Queensland and in the Local Court. In the light of that, it seemed to me to be appropriate to bring the matter back for directions on 27 March 2003 so that I could determine what the effect of the other proceedings might be on the action in the Federal Court. 31 On 5 February 2003, two days after the directions hearing, the Queensland solicitors for Q-Corp wrote to the solicitors for Leisure Boating. They stated that they were ready to give discovery in Queensland and asked for confirmation that Leisure Boating was in a position to provide its list of documents. 32 Leisure Boating's solicitors replied on the same day. They referred to the existence of the Queensland proceedings, the Local Court proceedings and the Federal Court proceedings. They said that, in their submission, the proceedings should be consolidated and heard together in the Federal Court in Sydney because most of the witnesses are located in New South Wales and the boats, which are the subject matter of the proceedings, are located here. The letter also said that the Local Court proceedings should be consolidated with the other actions. 33 The letter continued as follows:- "Since a timetable for discovery in the Federal Court proceedings has already been set, namely that 'Both parties discover all relevant documents by 24 March 2003', we submit that it would be a duplication of effort to also discover documents in the Queensland Supreme Court proceedings. In any event, since the writer will be on leave from 7 February to 1 March 2003, our client is not in a position to provide a list of documents by 10 February 2003 as requested in your letter. Would you kindly advise your client's attitude to consolidation of the matters in the Federal Court in Sydney. Please note that if your client does not so consent, that we anticipate receiving instructions to file a Notice of Motion in the Supreme Court of Queensland in early March 2003 seeking orders that those proceedings be transferred to the Federal Court in Sydney." 34 The respondents' solicitors replied on 7 February 2003. They said that they would "revert regarding the possibility of consolidation of the actions shortly." They pointed out that discovery was due in the Queensland proceedings at the end of October 2002. 35 The letter also said:- "Your client chose to issue separate proceedings out of the Federal Court in Sydney rather than to issue a counterclaim in the Queensland Supreme Court proceedings. Had your client opted for the latter, they would not be in the position of having to complete disclosure twice." 36 The respondents' notice of motion was filed on 26 February 2003 and was returnable before me on 4 March 2003. 37 In an affidavit in support of the motion, the solicitor for the respondents to these proceedings referred to the rules of the Supreme Court of Queensland which deal with the filing of cross-claims. The rules provide that a defendant may make a counter-claim against a plaintiff instead of bringing a separate proceeding. The rules also provide for the Supreme Court at any stage of the proceedings to be able to give leave for the filing of a cross-claim. 38 The solicitor's affidavit states that he is not aware of any reason why Leisure Boating could not raise the matters in the Statement of Claim in the Federal Court proceedings by way of a counter-claim in the Queensland action. Nor is he aware of any reason why leave would not have to be granted to Leisure Boating although it would have been ordered to pay the costs of the application for leave. Apparently, those costs would have been payable immediately upon being taxed or agreed. Decision 39 It is now well-established that the Anshun principle extends to a failure to raise a matter in a cross-claim in earlier proceedings if the claim was intimately connected with the subject matter of the proceedings; see Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287 per Beaumont, Wilcox and Moore JJ ("Bryant"). 40 As the Full Court said in Bryant at 298, if each claim arises out of substantially the same matters of fact, there is every reason to require that both be litigated at the same time, thereby minimising costs and avoiding the possibility of inconsistent judgments. 41 It is not clear from the evidence whether Leisure Boating gave proper consideration to the implications of the Anshun principle before commencing these proceedings. If it had done so, I would have expected its solicitors to have informed Q-Corp's solicitors prior to the directions hearing on 3 February 2003 why Leisure Boating was not filing a cross-claim in Queensland and stating that it proposed to cross-vest and consolidate the Queensland claim with the Federal Court proceedings. 42 There was correspondence between the solicitors before the directions hearing but the evidence filed on this motion shows that the question of cross-vesting and consolidation was not mentioned. Any reference to this issue at the directions hearing by Leisure Boating's solicitors seems to me to have been no more than an afterthought. 43 It is true that in the letter of 5 February 2003 to which I refer at paragraphs [31] and [33] above, Leisure Boating's solicitors proposed consolidation of all three sets of proceedings to be heard together in the Federal Court in Sydney. Leisure Boating asks me to infer that this was its purpose in commencing the Federal Court proceedings. It is difficult to see that there is any other explanation for the course taken by Leisure Boating and I accept that this was its purpose. 44 I do not think that, at least in one respect, Leisure Boating's purpose was well thought out. The claim made by Q-Corp in the Local Court has no relationship with the subject matter of the Federal Court proceedings. The fact that Leisure Boating has cross-claimed in terms similar to the claim made in the Federal Court does not make the Local Court claim suitable for consolidation with the Federal Court proceedings. 45 Moreover, as I have said above, I have doubts as to whether Leisure Boating's solicitors addressed, as part of their strategy in commencing the proceedings in the Federal Court, the question of whether Leisure Boating would be met by an Anshun estoppel if the Queensland proceedings were heard before the Federal Court action. 46 Nevertheless, it follows from what I have said above about Leisure Boating's purpose in commencing the proceedings that it cannot be said to have commenced the Federal Court proceedings for a collateral purpose of the type which enlivens the power of the Court to stay the proceedings as an abuse of process; see Williams v Spautz (1992) 174 CLR 509; Palm Springs Limited v Darling [2002] FCAFC 239 ("Palm Springs"). 47 It is not open to me to find that Leisure Boating's predominant purpose in commencing these proceedings was to do anything other than to claim the relief set out in its application. 48 In Palm Springs, the applicant's purpose involved the Federal Court in becoming a "jurisdictional transit point". Here, Leisure Boating's purpose seems to be for the Federal Court to be a jurisdictional destination. However, its purpose includes an attempt to seek one forum in which all issues can be tried together. The case is therefore not distinguishable from Palm Springs. 49 I do not consider that Leisure Boating was bound to bring its claim by way of a cross-claim in the Queensland proceedings. It was open to it to do so under the Rules of the Supreme Court of Queensland but it was also open to it to adopt the course which it has followed here. 50 Whether Leisure Boating will achieve its purpose of obtaining one forum is not for me to determine in this application. One possibility is that the Queensland Supreme Court will not cross-vest the Queensland proceedings to the Federal Court. If it does not, Leisure Boating will have to decide what to do about the Federal Court proceedings. This seems to me, as I have said, to be something which Leisure Boating has not previously addressed. However, when I raised the question with counsel for Leisure Boating, he informed me that if Leisure Boating is unable to cross-vest the Queensland proceedings to the Federal Court, the likely course which will be adopted is that he will apply to cross-vest these proceedings to the Supreme Court of Queensland. 51 Thus, there is nothing in the procedural course proposed by Leisure Boating to suggest that it did not, at the time of commencement of the proceedings, and does not, intend to pursue the Federal Court claim. Counsel for the respondents conceded that the Federal Court is not a clearly inappropriate forum; see Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538. The only question is whether the claim will be heard here or, perhaps, in Queensland if the Queensland proceedings are not cross-vested to the Federal Court. 52 Nor is it open to me to find that Leisure Boating is intent upon delaying the Federal Court proceedings so as to avoid an Anshun estoppel. The matters raised in the letter dated 5 February 2003 from Leisure Boating's solicitors should have been considered much earlier. However, it does not follow that there was any improper purpose. 53 The authorities relied upon by the respondents included Moore v Inglis (1976) 9 ALR 509. That case dealt with two separate sets of proceedings brought by the same person against another person in different courts. It is well established that this is prima facie vexatious but, here, the claim is brought, not by the same person, but by the person who is the defendant in the Queensland proceedings and the Local Court. 54 Thus, the principle stated in Moore v Inglis and other similar authorities to which counsel referred are not applicable. 55 The fact that this claim could have been brought by way of a counter-claim in the Supreme Court of Queensland does not make it an abuse of process. Nor does it enliven the power of the Court to strike out or stay the proceedings under O 20 r 2. 56 However, the course which is to be followed will not be known until after the outcome of an application for cross-vesting is made in Queensland. Counsel for Leisure Boating undertook that this application would be made by 18 March 2003. It is therefore appropriate that I grant a temporary stay in accordance with the principles referred to by Lockhart J in Sterling Pharmaceuticals Pty Ltd v Boots Company (Australia) Pty Ltd (1992) 34 FCR 287 pending the outcome of the application to the Supreme Court of Queensland. Pleading Issues 57 There were only two real issues. The other matters were acknowledged in the course of debate not to be fatal to the pleading. 58 The two substantial issues were as follows; first, the claim against Mr Ingram is a claim for damages under s 99 of the Fair Trading Act (Qld) but such a claim is only available where the loss or damages is suffered by a consumer. 59 The second issue is that the claim against Mr Garoni is said to be for knowing involvement in Q-Corp's alleged contravention of s 52 of the Trade Practices Act and the corresponding provisions of the Fair Trading Act (Qld). Thus the claim is brought in accordance with s 75B of the Trade Practices Act but the complaint which is made about the pleading is that the particulars of knowing involvement do not satisfy the test laid down by the well-known decision of the High Court in Yorke v Lucas (1985) 158 CLR 661. 60 In my view, each of these complaints about the pleadings is well founded. 61 Leisure Boating is not a consumer within the definition contained in s 6 of the Fair Trading Act (Qld); see s 6(2). Moreover, it acquired the goods for the purpose of making them available to its members. It may therefore be excluded from the definition of "consumer" by reason of the provisions of s 6(3) of the Fair Trading Act (Qld). 62 The facts, matters and circumstances relied upon to support the allegation of knowing involvement were set out in a letter dated 22 January 2003 from the solicitors for Leisure Boating as follows:- "The 3rd respondent is and was at all material times the managing director of the first respondent and at all material times had a controlling interest in the first respondent. The 3rd respondent knew of the misleading and deceptive conduct pleaded in paragraphs 13-15 inclusive of the statement of claim and/ or paragraphs 16-17 inclusive of the statement of claim and are centered (sic) to the contravention." 63 In Yorke v Lucas the High Court held that a claim of knowing involvement can only be made out where a party has knowledge of the falsity of the representations and can therefore be said to have intentionally participated in the contravention. 64 The particulars do not in express terms state that Mr Garoni knew that the representations were false at the time when they were made. This is perhaps implicit in the passage which I have set out above. Nevertheless, the claim of knowing involvement is a serious one. It must be pleaded in the Statement of Claim in a manner which alleges all of the ingredients of the claim as stated in Yorke v Lucas. 65 It follows that the claims against Mr Ingram and Mr Garoni should be struck out. I will grant leave to re-plead them if the legal advisers for Leisure Boating are in a position to do so. I certify that the preceding sixty-five (65) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.