Liaw v Loh

REASONS FOR JUDGMENT 1 This is an application by the third respondent pursuant to O 20 r 2(1) of the Federal Court Rules, for summary judgment dismissing the claims made by the applicants in the substantive application on the grounds that no reasonable cause of action is disclosed. The substantive application comprises causes of action founded on misleading and deceptive conduct in breach of s 52 of the Trade Practices Act 1974 (Cth) ('the TP Act') and s 945 of the Corporations Law; and on the insolvent trading provisions of the Corporations Law. 2 The progress of this application, and other related applications, to trial has been chequered. That history is described by French J in a decision dated 6 April 2005 (Salim v Loh [2005] FCA 372). On that occasion French J heard an application by the respondents for the relief which included, the striking out of the statement of claim as it then existed. In his reasons, French J referred to the fact that there had been several previous attempts made to plead a statement of claim and he said at [38]: 'I have a considerable degree of sympathy for the respondents in facing the task of pleading to the [substituted statement of claim] and its proposed successor, the amended [substituted statement of claim]. Some parts use language whose meaning and construction is at best illusive. I fear however, that taking a scalpel to particular paragraphs will simply inflate the expense and delay involved in a proceeding which should have been heard and determined some time ago. It is, in my opinion, necessary to find a way forward in the management of this case that does not involve further undue expense and delay. I propose therefore to allow the applicant's pleading to stand. The amended [substituted statement of claim] may be substituted for it. It will stand as a statement of the applicant's contentions of fact and law. However I will dispense with further pleadings. The respondents will not be required to plead to the amended, [substituted statement of claim]. That, I think, is too onerous a task, given its shortcomings. Rather I will require the respondents to file statements of the contentions of fact and law upon which they each rely in answer to the applicant's case. This will not require them to address the amended [substituted statement of claim] in the way that they would be required to if pleading a formal defence.' 3 French J went on to say at [39]: 'I propose thereafter, consistently with directions previously given in relation to the proceedings in the Federal Magistrates Court, that the trial of the action be on affidavit and/or by the tender of written statements sworn to or affirmed by witnesses called by the parties. Thus the applicant will be required to file all his affidavits and/or witness statements to be relied first and so to disclose the entirety of his case.' 4 French J's comments and directions referred to above, applied both to this application and to a related application, namely WAD 9 of 2004. In application WAD 9 of 2004, the son of the applicants in this application, Iwan Salim, also known as John Salim, seeks relief founded on claims that he was induced to invest monies in a project carried out by the fifth respondent, which I will call the 'ostrich scheme', by misleading and deceptive conduct engaged in by and on behalf of the fifth respondent. 5 In accordance with the directions of French J referred to above, the applicants in this case filed witness statements dated 5 December 2005. It was in response to the filing of those witness statements that this application for summary judgment was brought. 6 The applicants' claims against the third respondent in this application are based upon allegations of the accessorial liability of that respondent for the misleading and deceptive conduct of the fifth respondent. It is alleged that the third respondent was at all material times a director of the fifth respondent. The third respondent submits that as a consequence of the filing of the applicants' witness statements it is now clear that there is no reasonable cause of action disclosed in respect of the claims by the applicants based on misleading and deceptive conduct. 7 The third respondent submits that a perusal of the witness statements shows that there was no conveyance of any representation which was made by or on behalf of the fifth respondent to the applicants, who, as I have said, are the parents of the applicant in WAD 9 of 2004. Further, it is said that there was no evidence that the applicants relied on any representations allegedly made by or on behalf of the fifth respondent. It is also argued that the applicants are precluded from bringing a claim because they suffered no loss. In this regard, the third respondent submits that the applicants' witness statements disclose that the money which was provided for the investment in the ostrich scheme and which was paid to the fifth respondent for that purpose, was paid by the son and not the applicants. 8 The applicants submit the principles in Webster v Lampard (1993) 177 CLR 598 ('Webster') apply to this application. The applicants rely upon the following observations of Mason CJ and Deane and Dawson JJ in Webster at 602: '…the issue before the learned Master on the application for summary judgment was not whether [the plaintiffs] would probably succeed in their action against [the defendant]. It was whether the material before the Master demonstrated that the action should not be permitted to go trial in the ordinary way because it was apparent that it must fail.' 9 Their Honours continued at 602: 'The power to order summary judgment must be exercised with "exceptional caution" (General Steel Industries Inc. v. Commissioner for Railways (N.S.W.) (1964), 112 C.L.R. 125, at p. 129) and "should never be exercised unless it is clear that there is no real question to be tried" (Fancourt v. Mercantile Credits Ltd. (1983), 154 C.L.R. 87, at p. 99).' 10 I accept that the observations in Webster, referred to above, apply to the disposition of this application. 11 Further, the applicants submit that, in accordance with the principles in the case of Janssen‑Gilag Pty Limited v Pfizer Pty Limited (1992) 37 FCR 526 ('Janssen'), it is not necessary for an applicant to show that the misleading and deceptive conduct was made to him or her or that he or she relied on the misleading and deceptive conduct for that applicant to seek relief under the TP Act. It is sufficient if the misleading and deceptive conduct is relied upon by someone other than the applicant, provided that the loss suffered by the applicant was causally linked to that conduct. It was submitted that, in this case, there was arguably a sufficient link between the alleged misleading and deceptive conduct of the fifth respondent and the alleged loss of the funds, to permit the applicants to make the claims based thereon. 12 I now turn to the contents of the witness statements of the applicants. I deal firstly with the father, the first named applicant. He says, at par 9 of his witness statement, that: 'In about mid 1998 John telephoned me and we had a conversation as follows: He said: "I have found a good investment. It is an investment in farming ostriches in Perth. I want to use your name for the investment. It's going to be a surprise for your nephews and nieces." I said: "OK. Have you seen the farm? You should make sure the farm is real." John said: "Yes, I will go to see the farm." ' 13 At par 10 of the witness statement, the first named applicant deposed that: 'Two or three months after that conversation I had a further discussion with John on the telephone during which John said: "I have been to the farm. The farm is very big. There are lots of ostriches in paddocks. There are many paddocks. I met one of the directors of the company. He says this is a very good investment".' 14 The mother, the second named applicant, says in her witness statement at par 9 that: 'Sometime in 1998, after my husband had been on the telephone to John, he said to me: "[The son] wants to use our names to make investment its for ostriches. It will give a good return. [The son]wants the investment income distributed amongst the nephews and nieces not just his own children." ' 15 The first named applicant goes on to say that about a month after the conversation referred to above, his son, John, telephoned him and said that he was going to send a contract for the ostrich scheme for the first named applicant to sign. The first named applicant says that he did sign that contract without reading it. The first named applicant then says that the money which was invested in the ostrich scheme came from the son. 16 It was on the basis of the first named applicant's statement that the money that was paid to the fifth respondent, as the investment in the 'ostrich scheme', came from the son, that counsel, on behalf of the third respondent, submitted that there could be no loss suffered by the applicants; and that, therefore, the applicants could not make out a cause of action in damages for misleading and deceptive conduct. 17 On the basis of the statements in the witness statements it is, in my view, arguable that the applicants became trustees of the monies supplied by the son which were invested in the ostrich scheme, and that the trust was to be for the benefit of the son's children and his nephews and nieces. 18 In Halsbury's Laws of England, 4th edn, vol 48, [820] it is stated: 'If necessary, a trustee must institute legal proceedings to effect the security of the trust property or its recovery, and where he has a reasonable prospect of being able to do so successfully, he should defend actions brought against him in respect of trust property.' (footnotes excluded) 19 In my view, it does not matter, therefore, that the applicants are not the beneficial owners of the monies which were invested because arguably, as trustees, they would in that capacity be entitled to seek to recover the funds. 20 Further, in my view, it is at least arguable that the representations which were made by the son and which are referred to in par 9 and par 10 of the first named applicant's witness statement were representations which were originally made by or on behalf of the fifth respondent. In particular, I refer to the statement which appears in par 10 of the witness statement of the first named applicant where he says that his son told him that he had met one of the directors of the fifth respondent, who had said that this was 'a very good investment'. In my view, therefore, it is arguable that there were representations that were passed on by the son to the applicants. 21 It is also arguable, based on those paragraphs of the witness statement of the first named applicant, that the applicants relied upon those representations in becoming trustees and in investing in the ostrich scheme. 22 I also accept the submissions of the applicants that it is also arguable that this is a case where the principles which are espoused in the Janssen case could be applicable. Thus, even if there were no passing on of the representations to the applicants, it is, at least, arguable that the applicants, as trustees, would be able to recover funds that had been invested as a consequence of the son, as settlor of trust funds, being misled. 23 It follows that I do not accept the submissions of the third respondent that there is no reasonable cause of action disclosed in relation to the applicants' claims for misleading and deceptive conduct, under the TP Act and the Corporations Law. 24 In addition, counsel for the third respondent submitted that there were defects in the claim which was brought under the insolvent trading provisions of the Corporations Law which were so serious that the matter should be summarily dismissed. 25 The first argument that counsel for the third respondent raised was that the applicants were precluded from bringing a claim under the insolvent trading provisions of the Corporations Law because they had suffered no loss, in the sense that the monies that were invested with the fifth respondent were not their monies. For the reasons which I have given above and the fact that it is certainly arguable that the monies that were advanced were trust monies, I reject that argument. 26 Counsel also submitted that there had been a failure to comply with the formalities for the bringing of an action under the insolvent trading provisions. However, the third respondent advanced no evidence in support of this allegation and, in the circumstances, I am not in a position to make any finding on the submission. 27 I, therefore, dismiss the third respondent's notice of motion which was filed on 7 January 2006.