Federal Court of Australia|1995-11-01|Before: Cohen J, Beaumont J, Mr J, Lindgren J

National Mutual Property Services (Australia) Pty Ltd and Ors v Citibank Savings Limited and Ors (No 1) [1995] FCA 1628 (1 November 1995)

NATIONAL MUTUAL PROPERTY SERVICES (AUSTRALIA) PTY LTD and ORS v. CITIBANK

Practice and Procedure - joinder of parties - large number of claims for damages arising out of circumstances in which investors were induced to enter into "Negative Gearing Package" - claims asserted against individual agents and also against insurance group and bank as principals - insurance group pays investors' claims in full and takes assignment of investors' causes of action against bank and individual agents - first three applicants are companies in insurance group and fourth applicants are individual investors - whether wrongful joinder of investors' claims in one proceeding.

Tort - assignments of causes of action - whether assignments by large number of investors of causes of action in tort and statutory causes of action analogous to tort are valid - whether assignees have a "genuine commercial interest" in the causes of action and in their enforcement.

Tort - rule against double satisfaction - large number of claims for damages arising out of circumstances in which investors were induced to enter into "Negative Gearing Package" - claims asserted against individual agents and also against insurance group and bank as principals - insurance group pays investors' claims in full - whether claims by investors against bank would involve double satisfaction.

Agency - vicarious liability for acts of sub-agents - whether basis of vicarious liability adequately pleaded.

Trade Practices Act 1974 (Cth) ss 52, 82

Securities Industry Code (Vic) ss 68E, 68F

Federal Court Rules O 6, r 2; O 11, r 2; O 12, rr 1, 3, 5

Monk v Australia and New Zealand Banking Group Ltd (1994) 34 NSWLR 148

Castellan v Electric Power Transmission Pty Ltd (1967) 69 SR (NSW) 159 (FC)

Trendtex Trading Corporation v Credit Suisse (1982) AC 679 (HL)

Park v Allied Mortgage Corporation Ltd [1993] FCA 286; (1993) ATPR 46-105 (FCA/Davies J)

Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No

First City Corporation Ltd v Downsview Nominees Ltd [1989] NZHC 566; (1989) 3 NZLR 710 (HC/Gault J)

Mr J C Kelly SC with Mr J T Gleeson of Counsel instructed by Cutler Hughes and Harris appeared for the Applicants.

Mr A R Emmett QC with Mr S D Epstein of Counsel instructed by

Holmes and Bevan appeared for the first Respondent.

Mr N C Hutley with Mr I M Jackman of Counsel instructed by Phillips Fox appeared for the second and third Respondents.

Mr P Davey, Solicitor, of Le Compte Davey, appeared for the fourth and fifth Respondents.

THE COURT ORDERS:

1. THAT the proceedings be stood over to 9 November 1995 at

9.30 am for the making or orders in conformity with the Reasons

for Judgment (No 1) of Lindgren J delivered on 1 November 1995.

2. THAT the parties submit to Lindgren J's Associate by 8

November 1995 agreed short minutes of orders, or if agreement

has not by then been reached, the forms of short minutes of

orders for which the parties will respectively contend.

3. THAT the parties' costs to date of the motions be reserved

pending the final determination of the motions.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

LINDGREN J These reasons for judgment relate to three motions. One, by the first respondent ("Citibank") is brought by notice of motion bearing date 3 February 1995 filed on 10 February 1995, and seeks the following orders:

"1. An order that the Statement of Claim be struck

out in whole or in part.

2. Alternatively, an order that the applicants file

and serve:

(a) further particulars in response to paragraphs

1-14 and 16-18 of the first respondent's

solicitors' letter dated 16 December 1994;

(b) particulars of the facts on which they rely

in support of their allegations as to the first

respondent's knowledge in paragraphs 116(a), (e),

(f), (g) and (h), 133 and 134 of the Statement of

Claim.

3. An order that the fourth applicants cease to be

parties to these proceedings and that the remaining

applicants be ordered to amend the Application and

Statement of Claim accordingly.

4. An order that the applicants pay the first

respondent's costs of this Notice of Motion."

2. The second motion is brought by the second respondent ("LKFM") and the third respondent ("Kelly"), also by a notice of motion filed on 10 February 1995. It seeks the following orders:

"1. The Application and the Amended Statement of

Claim be struck out or dismissed pursuant to Order 6

rule 6 or alternatively pursuant to Order 20 rule 2.

2. The causes of action alleged in the following

paragraphs of the Amended Statement of Claim be struck

out or dismissed pursuant to Order 20 rule 2:

(a) paragraphs 54-57;

(b) paragraphs 58-61;

(c) paragraphs 89-90;

(d) paragraphs 91-93; and

(e) paragraphs 94-98.

3. The claim for relief made in paragraphs 1(b), 2(b),

4(b), 6(b), 7(b) and (c) and 8 of the Application be

dismissed pursuant to Order 20 rule 2.

4. Such further or other order as the Court thinks

fit.

5. Costs."

3. The third motion is brought by the applicants by notice of motion filed on 6 February 1995 and seeks the following orders:

"1. Leave be granted for these proceedings to

continue against Lance Kelly (Financial Management)

Pty Limited (In Liquidation) subject to the Applicants

not enforcing any judgement without leave of the Court.

2. There be heard separate from and prior to any other

issue in these proceedings the claims of the Fourth

Applicants listed below.

3. Directions be given for the hearing and

determination of those claims.

4. Such further or other orders that the Court thinks

fit.

5. Costs.

The Fourth Applicants referred to above:

Byrne, Peterkin, Grech, E. J. W. Gibbs and Law."

4. I will refer to the first applicant as "NMPS", to the second applicant as "NMAM", to the third applicant as "NMLA", to the fourth respondent as "DJC" and to the fifth respondent as "Jones". I will sometimes also refer to NMPS, NMAM and NMLA collectively as "the National Mutual companies".

5. The applicants' case is pleaded in an amended statement of claim filed on 8 November 1994. Below, I give an account of that pleading in some detail. It is, however, useful to begin with a brief account of the background facts as revealed by it.

6. The case concerns what is referred to in the pleading as a "Negative Gearing Package". This involved the issue of units in the National Mutual Australian Property Trust No 1 ("units" and "the Property Trust") to the fourth applicants, being the persons, couples and corporations referred to in schedule 1 to the amended statement of claim ("the Claimants") and loans to them from the National Mutual Australian Income Fund ("the Mortgage Trust") to enable them to purchase the units. Some of the Claimants also borrowed from Citibank a "Mortgage Power Loan" to enable them to purchase the units.

7. The Claimants were introduced to the Negative Gearing Package through DJC or LKFM. DJC acted through Jones and others. LKFM acted through Kelly and others. Those Claimants who were introduced by DJC are named in schedule 2 (references to schedules and to paragraphs are references to schedules to, and paragraphs of, the amended statement of claim) and are called "the Jones Applicants". According to schedule 2, the Jones Applicants number 78. Those Claimants who were introduced by LKFM are named in schedule 4 and are called "the Kelly Applicants". According to schedule 4, the Kelly Applicants number 68. According to schedules 2 and 4, there are 146 Claimants in all. Yet 156 Claimants are named in schedule 1] The discrepancy of 10 is one of several such distracting and annoying numerical inconsistencies in the amended statement of claim. They must not be allowed to occur in any further amended statement of claim to be filed.

8. Schedules 2 and 4 set out in columns against the names of the respective Jones Applicants and Kelly Applicants, the names of the individual agents of DJC or LKFM, as the case may be, who introduced the Claimants to the Negative Gearing Package, the dates of solicitation by such agents, the representations allegedly made to the Claimants which led them to invest and the amounts borrowed by the Claimants from NMPS and/or Citibank and expenses incurred by the Claimants to enable the investments to be made.

9. Each of Jones and Kelly is said to have been an agent of NMPS and NMAM. Each of DJC and LKFM is said to have been an agent of all three of the National Mutual companies. LKFM is said to have been an agent of Citibank. The conduct of the individuals who introduced the Claimants is categorised as misleading or deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) (the "TP Act") and as giving rise to a liability in damages under s 82 of the TP Act; as negligence giving rise to a liability in damages under the general law; and, in some cases, as a contravention of ss 68C and 68E of the Securities Industries Code (Victoria) (the "SIC") giving rise to a liability in damages under s 68F of the SIC.

10. Vicarious liability of DJC and Jones for the conduct of those who introduced the Jones Applicants is pleaded. Vicarious liability of LKFM and Kelly for the conduct of those who introduced the Kelly Applicants is pleaded. Beyond this, the pleading of vicarious liability becomes more complex. For a start, it is pleaded that Jones and DJC acted "as an agent for Kelly and LKFM in the performance by Kelly and LKFM of their role as agents for" the National Mutual companies, with the result that Kelly and LKFM are liable to the Jones Applicants in the same manner and to the same extent as Jones and DJC.

11. Then there is the position of Citibank. It is pleaded that LKFM was an agent for Citibank for the purpose of obtaining applications to Citibank for, inter alia, its Mortgage Power Loan; that LKFM, in the performance of that agency, engaged Kelly, DJC, Jones and other individuals to assist it in selling and promoting, inter alia, the Mortgage Power Loan; that those persons acting as agents of DJC or LKFM, and in each case as an agent for Citibank ("the Citibank Agents"), solicited applications from those 51 Jones Applicants and the 38 Kelly Applicants listed in schedule 6 ("the Citibank Applicants" - totalling 89) for a Mortgage Power Loan as part of their entering into the Negative Gearing Package; and that Citibank is liable to the Citibank Applicants in the same way and to the same extent as the Citibank Agents are.

12. The National Mutual companies are said to be vicariously liable to the Jones Applicants and the Kelly Applicants in consequence of the liability to them of their agents, DJC and LKFM respectively. It is said that it follows, and the pleading so alleges, that the National Mutual companies are under a coordinate liability to the Jones Applicants with DJC and Jones and to the Kelly Applicants with LKFM and Kelly. It is also said that it follows, and the pleading so alleges, that since the Citibank Applicants are either Jones Applicants or Kelly Applicants, the National Mutual companies are under a coordinate liability with Citibank to the Citibank Applicants.

13. As can be seen, the supposed liability of Citibank discussed above depends upon whether Citibank is vicariously liable for the conduct of the Citibank Agents. The appropriateness of the pleading of that liability was the subject of much argument on the hearing. If the pleading of the agency of the Citibank Agents for Citibank survives Citibank's challenge to it, it will provide the basis of Citibank's pleaded liability to the National Mutual companies in two ways. First, the National Mutual companies claim that they and Citibank are under a coordinate liability to the Citibank Applicants and that in consequence they are entitled to contribution under general law principles or indemnity or contribution under s 5 (1) (c) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) ("the LR(MP) Act") or its Victorian equivalent. Secondly, the National Mutual companies rely on an assignment by the Citibank Applicants to them of the Citibank Applicants' rights and remedies against Citibank. It is pleaded that the National Mutual companies have similar rights of indemnity and contribution against DJC and Jones on the one hand and LKFM and Kelly on the other hand and that there have been similar assignments by the respective Claimants to the National Mutual companies of their causes of action against DJC and Jones and LKFM and Kelly. In general, I will address the pleaded rights of the National Mutual companies as derived through the Citibank Applicants but similar considerations will apply to their pleaded rights derived through the Jones Applicants and the Kelly Applicants.

14. According to the pleading, the National Mutual companies settled the claims against them of the Jones Applicants and the Kelly Applicants (and therefore of the Citibank Applicants) pursuant to deeds of assignment under which the liability of the National Mutual companies was released and they took an assignment of the Jones Applicants' rights and the Kelly Applicants' rights against DJC and Jones, LKFM and Kelly and, where there was a Mortgage Power Loan, Citibank.

15. Although, as has been seen, the National Mutual companies say that DJC and Jones, LKFM and Kelly, and Citibank are liable to them, the Claimants are joined as fourth applicants on the basis that if for some reason the assignments by them to the National Mutual companies are not effective to entitle those companies to proceed in their own names, the Claimants would remain entitled to damages and/or compensation in their own right, and, by reason of the deeds of assignment, would be required to hold any recovery upon trust for the National Mutual companies.

16. The bases of Citibank's liability as noted to date is its alleged liability to the Citibank Applicants - a liability which depends upon an appropriate pleading of its vicarious liability for the conduct of the Citibank Agents ("the agency issue"). However, paras 122-124 and 133-137 of the amended statement of claim are of a different order in that they do not raise the agency issue. Paragraphs 122-124 plead that Citibank owed to the Citibank Applicants a duty to take reasonable care to ensure that they understood the risk associated with the Mortgage Power Loan, that Citibank breached that duty of care and that Citibank is liable to the Citibank Applicants for the loss or damage suffered by them in consequence of Citibank's negligence. Thus, paras 122-124 plead a failure by Citibank to act in a certain way when it had a duty under the general law to do so.

17. Paragraphs 133-137 plead a direct liability of Citibank to the National Mutual companies. Those paragraphs plead that by entering into the Mortgage Power Loan, Citibank, in the circumstances pleaded, represented to the National Mutual companies that the Citibank Applicants were able to fund the acquisition of units independently of a loan from NMPS and were able to provide those units as security to NMPS for its loans to them. It is pleaded that in so representing, Citibank engaged in misleading and deceptive conduct in contravention of s 52 of the TP Act and breached the duty of care which it owed to NMPS and NMAM, in consequence of which the National Mutual companies suffered loss or damage in the amounts which they have paid or will pay in settlement to the Citibank Applicants.

18. The present three motions are interrelated. The applicants would have it that the only issue presented is one of how best to manage the litigation. As noted earlier, according to the first schedule, there are 156 Claimants and according to the second and fourth schedules there are 146 (the aggregate of the numbers of Jones Applicants (78) and Kelly applicants (68)). On either view, there is a large number of "cases" involving similar features. The applicants ask that the claims in respect of five Claimants be heard as "test cases" and submit that from the decisions in those cases certain estoppels will arise.

19. In their motions, Citibank and LKFM and Kelly (DJC and Jones have not taken an active role in the litigation to date) seek a dismissal of the application in certain respects and/or a striking out of parts of the amended statement of claim.

20. It was agreed that I would deal with the motion of Citibank and the motions of LKFM and Kelly first, at least in so far as they seek a dismissal or striking out, because these matters should be resolved prior to a determination of any question of particulars, of joinder and of the appropriate management of the proceedings. But after determining the dismissal/strike-out issues, I will refer to these other matters. Although submissions were addressed to the joinder and case management questions, I will allow an opportunity for the making of further submissions in the light of these Reasons for Judgment.

21. LKFM has been ordered to be wound up. Mr D R McVeigh of Horwath and Horwath was appointed as its liquidator on 17 November 1994. There is evidence that he has consented to the continuance of the proceedings against LKFM in liquidation.

22. The amended statement of claim comprises 138 paragraphs on 35 pages and seven schedules on 134 pages - a total of 169 pages in all. The following is an outline of the case as pleaded.

23. Part A (paras 1-13) identifies the parties. LKFM was an agent of the National Mutual companies and Citibank (para 7). Kelly, either by himself or through LKFM, acted as agent for NMPS, NMAM and Citibank (para 8). As well, Kelly was a duly accredited representative of NMAM under the SIC, NMAM being an investment adviser under the SIC (para 9).

24. DJC was an agent of the National Mutual companies and Citibank (para 11). Jones, "either by himself or through DJC", acted as agent for NMPS, NMAM, Citibank, LKFM and Kelly (para 12). Like Kelly, Jones was a duly accredited representative of NMAM under the SIC (para 13).

25. Part B (paras 14-45) pleads the case against DJC and Jones. From at least January 1989 until at least April 1993, Jones was an agent for NMPS and NMAM for the purpose of obtaining applications for "financial products" offered by them, including units and loans from the Mortgage Trust to purchase such units (para 14). Throughout the same period, DJC was an agent for all three National Mutual companies for the purpose of obtaining applications and proposals for financial and insurance products offered by them, including, in the case of NMPS and NMAM, units and loans from the Mortgage Trust (para 16).

26. Paragraph 18 of, and schedule 2 to, the amended statement of claim deal with the solicitation of applications from the 78 Jones Applicants for units, loans from the Mortgage Trust for the purchase of units, and, as well, insurance products of NMLA. That paragraph pleads that Jones "personally or with the other persons referred to in Column 2 of Schedule 2, or by such persons acting on his behalf", solicited the applications. The solicitation was by way of the presentation of the Negative Gearing Package.

27. The Negative Gearing Package, as presented to the Jones Applicants, involved their entering into some or all of the transactions described as follows:

"(a) an initial number of units in the Property

Trust would be applied for and purchased ('the initial

units');

(b) an application would be made to NMPS for a loan

from the Mortgage Trust (which would be on interest

only terms) to enable the purchase of further units in

the Property Trust ('the further units');

(c) in support of the loan application both the

initial units and the further units would be offered

as security for the loan by way of a unit mortgage;

(d) proposals for the issue of insurance policies

would be made to NMLA;

(e) the purchase price of the initial units, the first

years interest on the loan from the Mortgage Trust and

the first years premium on the insurance policies, or

some of these amounts, would be paid for either from

an interest only loan (which in many cases was made by

Citibank) or from other funds available to the Jones

Applicants;

(f) loans would be sought thereafter from NMLA against

the value of any policies issued and applied either to

fund the ongoing premium liability for the said

policies or to purchase further units in the Property

Trust;

(g) any reduction in the tax payable by the Jones

Applicant (sic) arising from this package would be

utilised either to pay interest on any interest only

loan (referred to in (e) above) or to pay interest on

the loan from the Mortgage Trust (referred to in (b)

above);

(h) income from the units would be applied to pay

interest on the loans referred to in (g);

(i) at the end of the a nominated number of years the

units would be redeemed and the policies surrendered

and the monies thereby obtained applied to repay the

loans referred to in (g) leaving the investor with a

substantial sum as a profit from the investment."

(underlining supplied - I will henceforth use the abbreviated forms of reference which I have underlined in this passage.)

28. Paragraph 19 pleads representations by Jones or the other persons referred to in column 2 of schedule 2 acting upon his behalf, to the respective Jones Applicants. The representations fall into two categories: those set out in column 4 of the schedule 2 against the respective names of the Jones Applicants; and in cases where the Negative Gearing Package involved a mortgage to Citibank, a representation that the Jones Applicants would have a solicitor engaged on their behalf who would look after their interests. The representations set out in column 4 of schedule 2 are not identical as between the various Jones Applicants although there is considerable overlap between them.

29. Paragraphs 20-25 plead a duty to give to the Jones Applicants certain warnings and a written explanation in respect of the Negative Gearing Package and the risks associated with it, a failure to give the warnings or written explanation, and, in the result, representations by Jones to each of the Jones Applicants that the Negative Gearing Package was:

"(a) safe and risk free;

(b) suitable for each of the (Jones) Applicants".

(para 23)

30. It is pleaded that the representations set out in paras 19 and 23 were (a) to the extent that they were representations of the existing fact, false; (b) to the extent that they were representations as to future matters, made without a reasonable basis; and (c) to the extent that they were representations of opinion, not honestly held and reasonably based (para 24). It is then pleaded that the representations to the Jones Applicants were misleading or deceptive (para 25).

31. Next, it is pleaded (paras 26, 27) that Jones made recommendations with respect to "securities" (the units to those 75 Jones Applicants listed in schedule 3) and so was obliged by ss 68C and 68E of the SIC to disclose the commission, fee or other benefit he would obtain from their entering into the Negative Gearing Package, and to have a reasonable basis for recommending the Negative Gearing Package to them. It is alleged that he failed in both respects.

32. Finally a case of negligent representation and advice is pleaded against Jones (paras 28, 29). The representations and advice are alleged to have been made and provided by Jones and the other persons in his or their capacity as an officer, employee or agent of DJC, in consequence of which DJC is said to be liable to the Jones Applicants in the same manner as Jones (paras 30, 31).

33. According to para 32, the Jones Applicants are said to have relied on the representations and recommendations (a) by applying for and acquiring the initial units and the further units and a loan from the Mortgage Trust; (b) in certain cases, by applying for and receiving a Mortgage Power Loan from Citibank and applying it or part of it to acquire the initial units and in associated ways; (c) by applying for and receiving a loan from the Mortgage Trust and using it to acquire the further units; (d) by incurring an application fee to NMPS and (in certain cases) Citibank and paying valuation fees, legal fees, stamp duty and other associated costs; and (e) in certain cases, by acquiring an insurance policy or policies from NMLA and paying insurance premiums.

34. The misleading and deceptive conduct and negligence caused the Jones Applicants to suffer loss or damage which is particularised in para 33 as follows:

"The amount of the loss or damage is the amount

that would be required to put each of the Jones

Applicants back in the position he or she was in

before the investment was made. That amount, after

the Applicant surrenders the units in the Property

Trust and the policy, is the amount set out in column

7 of Schedule 2."

35. Column 7 of schedule 2 sets out in respect of each of the Jones Applicants, amounts for "compensation", "legal fees", "accounting fees", and a "total" amount. The aggregate of the totals in respect of the 78 Jones Applicants is $6,985,189.97. Paragraph 34 pleads that by reason of s 68F of the SIC, Jones is liable to pay amounts of damages to those 75 Jones Applicants listed in schedule 3, particulars of which amounts are the particulars given in respect of those 75 Jones Applicants in column 7 of schedule 2 referred to earlier.

36. Paragraphs 35-45 plead three bases on which it is said that DJC and Jones come to be liable to the National Mutual companies: assignment (paras 35-37), contribution or indemnity (paras 38-43) and breach of agency agreements (paras 44, 45). According to para 35, the Jones Applicants have assigned for valuable consideration to the National Mutual companies their rights to recover damages or compensation against Jones and DJC, by written assignments contained in agreements bearing the dates set out opposite their respective names in column 8 of schedule 2. A separate deed of assignment has apparently been entered into by each Jones Applicant. According to para 36, the consequence of the assignments is that the National Mutual companies are entitled to recover judgment against Jones and DJC for the loss or damage suffered by the Jones Applicants, or in the alternative, the Jones Applicants themselves are so entitled in which case they must hold all moneys recovered from Jones and DJC on trust for the National Mutual companies (paras 36, 37).

37. In the alternative to the deeds of assignment, a right to contribution or indemnity is pleaded against Jones and DJC in paras 38-43.

38. Paragraphs 38-42 plead that the representations and advice made or given by Jones and DJC were made or given by them as agents for the National Mutual companies or in circumstances where the latter were responsible for the representation and advice. It is pleaded that, in consequence, each of Jones and DJC on the one hand and the National Mutual companies on the other hand are under a coordinate liability to the Jones Applicants to make good their loss or damage. It is then pleaded that the National Mutual companies, having settled with the Jones Applicants, are entitled to recover contribution from Jones and DJC in respect of the amounts paid, or which they may yet pay, in settlement to the Jones Applicants. It is pleaded (para 43) that the National Mutual companies are entitled to contribution or indemnity from Jones and DJC under para 5 (1) (c) of the LR(MP) Act or its Victorian equivalent.

39. Finally, paras 44 and 45 plead that the settlement moneys paid by the National Mutual companies to the Jones Applicants became payable as a result of breaches by Jones and DJC of the agency agreement and that the National Mutual companies are entitled to recover those amounts from Jones and DJC as damages for breach of contract. These paragraphs are not of relevance to the present motions.

40. Part C (paras 46-101) pleads the case against LKFM and Kelly. Part C's structure is similar to that of Part B. Many of the material facts pleaded in Part C as against LKFM are Kelly are the same, mutatis mutandis, as those pleaded in Part B as against DJC and Jones.

41. Paras 46-49 plead the agency of LKFM and Kelly for the National Mutual companies. Kelly is said to have been an agent for NMPS and NMAM for the purpose of obtaining applications to them for, inter alia, units and loans from the Mortgage Trust to purchase such units (para 46; cf para 14 earlier). LKFM was an agent for all three of the National Mutual companies for the purpose of obtaining applications and proposals to them for financial and insurance products, including, in the case of NMPS and NMAM, units and loans from the Mortgage Trust (para 48; cf para 16 earlier).

42. Paragraphs 50-53 plead a liability of LKFM and Kelly to all 78 Jones Applicants. Importantly, para 50 pleads that Jones and DJC acted as agents for Kelly and LKFM in the performance by Kelly and LKFM of their role as agents for the National Mutual companies. The agency is particularised as follows:

"The agency of Jones and DJC is implied from:

(a) the sharing of commissions arising from the entry

into the Negative Gearing Package;

(b) the explanation of the Negative Gearing Package by

Jones in the presence of Kelly (or persons acting on

his behalf);

(c) the submission by Kelly and LKFM of applications

to NMAM and NMPS:

(i) solicited by Jones and DJC; and

(ii) completed by Kelly and LKFM from information

obtained from or by Jones and DJC; and

(d) the tutelage of Jones by Kelly in the presentation

of the Negative Gearing Package."

43. It is pleaded in para 51 that, in the alternative, Kelly and LKFM are estopped from denying that Jones and DJC so acted as their agents. Paragraphs 52 and 53 are as follows:

"52 Further, by reason of the matters in

paragraphs 50 and 51, Kelly and LKFM are liable to and

responsible to each of the Jones Applicants in the

same manner as Jones in respect of the conduct of

Jones referred to in paragraphs 19-21 above.

53 Further, or in the alternative to paragraph 52

Kelly or LKFM, through its servants or agents

including Kelly, made or participated in the

presentation of the Negative Gearing Package to

certain of the Jones Applicants rendering Kelly and

LKFM liable to and responsible to those Jones

Applicants in the same manner as Jones and DJC.

Particulars

The Jones Applicants and the occasions concerned

are those in Schedule 2 where the name in Column

2 is followed by an asterisk."

44. An asterisk appears against nine of the 78 Jones Applicants. Thus, it is said that in addition to the liability of LKFM and Kelly to all 78 Jones Applicants on the basis of the agency of Jones and DJC, they are directly liable to those nine Jones Applicants.

45. The succeeding paragraphs plead the basis on which it is said that LKFM and Kelly become liable to the National Mutual companies in respect of that liability to the Jones Applicants. Again, "assignment", "contribution or indemnity" and "breach of agency agreements" are referred to. Paragraph 54 repeats para 32 (relating to the Jones Applicants' reliance on the recommendations and representations of Jones and of the other agents of DJC), para 33 (relating to the suffering of loss or damage by the Jones Applicants by reason of the agents' misleading and deceptive conduct and negligent misrepresentation and advice) and para 34 (relating to the liability of Jones to pay to those 75 Jones Applicants listed in schedule 3, damages under s 68F of the SIC).

46. Paragraph 55 pleads the same deeds of assignment to the National Mutual companies, this time of the Jones Applicants' right to recover damages or compensation against Kelly and LKFM; para 56, that as a result of the assignments the National Mutual companies are entitled directly to recover judgment against Kelly and LKFM; and para 57, that in the alternative, the Jones Applicants are entitled to recover from Kelly and LKFM the amount of the loss or damage suffered by them in which case they must hold any moneys recovered by them on trust for the National Mutual companies.

47. Paragraphs 58 to 62, in the terms, mutatis mutandis, of paras 38 to 43 noted earlier, plead a coordinate liability to the Jones Applicants of Kelly and LKFM on the one hand and the National Mutual companies on the other hand, and so a liability of the former to the latter to make contribution or provide indemnity. Notwithstanding sub-para 2 (b) of their motion, Kelly and LKFM indicated on the hearing that they do not press to have paras 58-61 struck out.

48. Paragraphs 63 and 64 plead a liability of Kelly and LKFM to the National Mutual companies for breach of the agency agreements similar to the liability of Jones and DJC pleaded in paras 44 and 45 noted earlier. Like them, paras 63 and 64 are not relevant to the present motions.

49. A particular basis of liability of Kelly and LKFM to the National Mutual companies not pleaded against DJC and Jones is found in paras 65-73. This arises out of the use of a form of "Borrower's Acknowledgment" signed by those 29 Jones Applicants who are named in schedule 3A. The Borrower's Acknowledgment was allegedly procured in connection with the obtaining of loans from Citibank and was directed to reassuring Citibank of the matters stated in the form and that the forms were understood by and binding upon those Jones Applicants.

50. Paragraph 65 pleads, however, that Kelly or LKFM procured the documents from those 29 Jones Applicants without requiring or ensuring that they complied with the matters set out in the document. Additionally, para 66 pleads that Kelly or LKFM, by its employee or agent, a Ms P Van-Minnen, executed the Borrower's Acknowledgments as a witness to the signatures of the respective Jones Applicants (I do not understand how a person can witness another's signature through an agent]) and represented her as a solicitor and represented that she fully explained the mortgage documentation to those respective Jones Applicants, when those matters were contrary to the fact. Paragraph 67 pleads, in the alternative, that those acts of Ms P Van-Minnen were known to Kelly and LKFM who adopted and relied on them "to obtain the mortgage (apparently this is intended to be a reference to the Mortgage Power Loan) from Citibank."

51. Paragraphs 68-73 proceed along the following lines. But for the advance by Citibank, NMAM would not have issued the further units and NMPS would not have approved the loan from the Mortgage Trust (para 68). In approving that loan, NMPS relied upon each particular Jones Applicant's being able to fund the acquisition of the initial units independently of the loan and being able to provide the initial units as security for the loan (para 69). Kelly and LKFM knew or should have known of such reliance (para 70). By providing to NMPS those 29 Jones Applicants' applications for finance to purchase units and accompanying applications for the issue of units, Kelly and LKFM falsely represented to NMPS that they had the financial capacity referred to (para 71), engaged in misleading and deceptive conduct in contravention of s 52 of the TP Act and s 11 of the Fair Trading Act 1985 (Vic), breached "the duty of care they owed to NMPS and NMAM" (no such duty of care had been pleaded - see later), and/or breached their agency agreements with the National Mutual companies (para 72). In the result, the National Mutual companies have suffered loss and damage in amounts of the settlement moneys which they have paid or will pay to those 29 Jones Applicants (para 73).

52. The remainder (paras 74-101) of Part C pleads a liability of Kelly and LKFM to the 68 Kelly Applicants. The total of the amounts paid to them by the National Mutual companies is $3,552,149.27. These are people to whom Kelly personally, or with or by the other persons referred to in column 2 of schedule 4, presented the Negative Gearing Package and solicited applications for units, loans from the Mortgage Trust to purchase such units, and insurance products of NMLA (para 74). The persons mentioned in column 2 of schedule 4 do not include Jones and the agents of DJC. In other words, the individuals who introduced the 78 Jones Applicants and those who introduced the 68 Kelly Applicants are mutually exclusive classes. But it will be recalled that paras 50-53 plead that DJC and Jones were also agents of Kelly and LKFM, with the result that Kelly and LKFM are also said to be liable to the 78 Jones Applicants. Accordingly, the total amount paid out by the National Mutual companies of $10,537,339.24 is sought to be recovered by them from LKFM and Kelly.

53. It is pleaded that in presenting the Negative Gearing Package, Kelly made express representations and provided express advice to the Kelly Applicants:

"(a) in or substantially to the effect of that set

out in Column 4 of Schedule 4 ... ;

(b) in cases where the Negative Gearing Package

involved a mortgage from Citibank, that the Kelly

Applicants would have a solicitor engaged on their

behalf who would look after their interests."

54. (para 75 - cf para 19 noted earlier in relation to the Jones Applicants) The particular representations listed in column 4 are not identical as between the 68 Kelly Applicants although there is much overlap. Nor are they identical to the representations listed in column 4 of schedule 2 as having been made to the Jones Applicants, but again there is much overlap.

55. It is unnecessary to give a detailed account of paras 74-101. They deal in turn, and in terms identical, mutatis mutandis, to those of paras 14-45 relating to the liability of Jones and DJC, with the liability of LKFM and Kelly to the Kelly Applicants and to the National Mutual companies. Thus, they deal with the solicitation of the 68 Kelly Applicants by Kelly personally or with or by the other persons referred to in column 2 of schedule 4 (para 74); the representations and advice to the Kelly applicants (paras 75-81); Kelly's liability under ss 68C and 68E of the SIC to those 55 Kelly Applicants listed in schedule 5 (paras 82, 83); a duty of care owed by Kelly and breach of it (paras 84, 85); the acting by Kelly and the other persons referred to in column 2 of schedule 4 as an officer, employee or agent of LKFM and, in consequence, LKFM's being liable to the Kelly Applicants in the same manner as Kelly (paras 86, 87); reliance by the Kelly Applicants (para 88); the suffering of loss and damage by them (paras 89, 90); the assignment by the Kelly Applicants to the National Mutual companies of their rights to recover damages or compensation from Kelly and LKFM and its consequences (paras 91-93); and the liability of Kelly and LKFM to contribute to or indemnify against the liability of the National Mutual companies to the Kelly Applicants (paras 94-99) (the liability of Kelly and LKFM to the National Mutual companies for breach of the agency agreements (paras 100, 101) is not of relevance to the present motions).

56. Part D (paras 102-137) pleads the case against Citibank. This part of the pleading was given detailed consideration on the hearing of the motions. Paragraph 102 pleads that from at least 3 April 1989 until 25 March 1992, LKFM was an agent for Citibank "for the purpose of obtaining applications to Citibank for the promotion and sale of its financial products including its Mortgage Power Loan." The agency is particularised as being "in writing" (the terms of the document are discussed below). According to para 103, LKFM, "in the performance of its agency for Citibank", engaged Kelly, DJC, Jones "and various of the other persons referred to in column 2 of Schedules 2 and 4, to assist (LKFM) in the sales and promotion of Citibank's financial products, in particular, the Mortgage Power Loan, ..." Importantly, para 104 pleads as follows:

"104 Between the dates in column 3 of Schedules 2

and 4 the persons referred to in paragraph 103 acting

as servants or agents of DJC or LKFM and, in each

case, as agent for Citibank ('the Citibank agents'),

solicited applications from each of the Fourth

Applicants listed in Schedule 6 (the 'Citibank

Applicants') for a Mortgage Power Loan as part of the

entry into the Negative Gearing Package."

57. (I will use the expression "Citibank agents" with the meaning referred to in this passage.) It will be recalled that "the persons referred to in paragraph 103" are LKFM, Kelly, DJC, Jones "and various of the other persons referred to in column 2 of Schedules 2 and 4" (emphasis supplied). The Citibank Applicants listed in schedule 6 number 89. They are individuals and couples who are either Jones Applicants or Kelly Applicants, that is to say, they are some of the individuals and couples listed in schedules 2 and 4. In fact, 51 of them are Jones Applicants and 38 of them are Kelly Applicants.

"105 During the course of that solicitation, the

Citibank agents made express representations to and

provided express advice to the Citibank Applicants

(a) in or substantially to the effect of that set

out in Column 4 of the Schedules 2 and 4 hereto;

and

(b) that the Citibank Applicants would have a

solicitor engaged on their behalf who would look

after their interests."

59. Paragraphs 106 and 107 respectively plead that the Citibank agents had a duty to warn and a duty to provide a written explanation to each of the Citibank Applicants. Paragraph 108 pleads that they failed to perform those duties.

60. Paragraph 109 pleads that in the circumstances, the Citibank agents represented to each of the Citibank Applicants that the investment was:

"(a) safe and risk free;

(b) suitable for each of the (Citibank) Applicants."

61. Paragraph 110 pleads falsity of the representations of existing fact, the making of representations as to future matters without a reasonable basis, and, in the case of "opinion-representations", the absence of honestly held and reasonably based opinions. Paragraph 111 pleads that the Citibank agents' representations were misleading or deceptive.

62. Paragraphs 112 and 113 plead contravention by the Citibank agents of ss 68C and 68E of the SIC in relation to those Citibank Applicants listed in schedule 7. Schedule 7 lists 103 individuals, couples and companies. But, as noted earlier, according to schedule 6 there are only 89 Citibank applicants in all] A study of schedule 7 reveals that 40 of the Claimants mentioned in it are Jones Applicants or Kelly Applicants whose names do not appear in schedule 6, that is to say, in the list of those who took a Mortgage Power Loan from Citibank] The remaining 63 do appear in schedule 6. This is another illustration of a time wasting and distracting anomaly which must be eliminated from any further amended statement of claim. Paragraphs 114-115 plead a duty of care owed by the Citibank agents to the Citibank Applicants and breach of that duty.

63. Paragraphs 116-119 are headed "Liability of Citibank". Since particular criticisms are levelled at these paragraphs, I set them out in full as follows:

"116 The representations and advice were made or

provided by the Citibank agents to the Citibank

Applicants in his or their capacity as an agent of

Citibank.

Particulars

(a) Citibank knew of the proposed appointment by

LKFM of Kelly, DJC, Jones and various of the

other persons referred to in column 2 of

Schedules 2 and 4 to assist it in the sales and

promotion of Citibank Financial Products, in

particular the Mortgage Power Loan;

(b) Citibank either directly or through LKFM

provided its application forms to Kelly, DJC,

Jones and various of the other persons referred

to in column 2 of Schedules 2 and 4;

(c) Citibank accepted numerous application forms

solicited and/or completed by Kelly, DJC, Jones

and various of the other persons referred to in

column 2 of Schedule 2 and 4 on behalf of

Citibank;

(d) Citibank accepted documents executed in

furtherance of its loan application solicited and

completed by Kelly, DJC, Jones and various of the

other persons referred to in column 2 of

Schedules 2 and 4 on behalf of Citibank;

(e) Citibank knew of the matters in paragraph 104

above;

(f) Citibank knew of the matters alleged in

paragraph 105 above, or alternatively knew that

it was likely that the matters alleged in

paragraph 105 above were true, yet Citibank

failed to take any or any adequate steps to

prevent such matters occurring;

(g) so far as Citibank knew, Citibank agents had

not provided any of the warnings referred to in

paragraph 106 or written explanation referred to

in paragraph 107;

(h) Citibank knew that it was at least likely

that the Citibank Applicants would understand

that the Citibank agents were representing that

the investment was safe and risk free and

suitable for each of the Applicants;

(i) Citibank failed to take any steps to ensure

the Citibank agents disclosed all commissions,

fees or benefits or had a reasonable basis for

the recommendations they were making.

117 By reason of the matters in paragraph 116,

Citibank is liable to and responsible to each of the

Citibank Applicants in the same manner as the Citibank

agents.

118. Further, by reason of the matters referred to in

paragraph 116 above, the conduct of the Citibank

agents as referred to in paragraphs 105-115 above

occurred within their actual or apparent authority

from Citibank, or at the direction or with the consent

or agreement (whether express of implied) of LKFM

which was an agent of Citibank, where the giving of

directions, consent or agreement was within the scope

of the actual or apparent authority of LKFM; in the

premises, under s.84 of the Trade Practices Act

that conduct is deemed to have been engaged in by

Citibank."

64. Paragraph 119 pleads the Citibank Applicants' conduct in reliance on the representations and recommendations. Paragraph 120 pleads their suffering of loss or damage in the amounts set out in column 7 of schedules 2 and 4 in respect of those Jones Applicants and Kelly Applicants respectively who are Citibank Applicants (the amounts total $6,822,023.76), by reason of the Citibank agents' misleading and deceptive conduct and negligence. Paragraph 121 pleads a liability of the Citibank agents, by reason of s 68F of the SIC, to pay damages in respect of loss or damage particularised in the same way, mutatis mutandis, to those Citibank Applicants listed in schedule 7.

65. Paragraphs 122-124 are headed "Breach of Duty of Care by Citibank" and in view of the particular criticisms levelled against them I set them out in full as follows:

"122 Further or in the alternative, in all the

circumstances of the case as referred to above,

Citibank owed a duty to each of the Citibank

Applicants to take reasonable care to ensure that the

Citibank Applicants understood the risks associated

with the Mortgage Power Loan and were able properly to

consider whether to take up a Mortgage Power Loan.

123 Citibank breached that duty of care to each of the

Citibank Applicants.

Particulars

(a) Citibank failed to examine, adequately or at

all, the asset and liability or income and

expense position of the Citibank Applicants;

(b) Citibank failed to investigate, adequately or

at all, the suitability of the Mortgage Power

Product for the Citibank Applicants;

(c) Citibank failed to take any or any reasonable

steps to ensure that the Citibank Applicants

understood the risks associated from the use of

the Mortgage Power Product and the suitability or

otherwise of the product to them;

(d) Citibank failed to take any or reasonable

steps to ensure that the Citibank Applicants had

obtained independent advice in relation to the

Mortgage Power Product.

124 By reason of the breach of a duty of care by

Citibank, the Citibank Applicants have suffered loss

or damage.

Particulars

The particulars to paragraph 120 are repeated."

66. Paragraphs 125 to 127 plead an assignment by the Citibank Applicants to the National Mutual companies of their rights to recover damages or compensation against Citibank, the relevant assignments being contained in the deeds particularised in column 8 of schedule 2 (Jones Applicants) and of schedule 4 (Kelly Applicants). Paragraph 126 pleads a right, as a result of the assignment, of the National Mutual companies to recover judgment in their own names against Citibank, while para 127 pleads, in the alternative, that the Citibank Applicants are so entitled but must, as a result of the deeds of assignment, hold any amount recovered from Citibank on trust for the National Mutual companies.

67. Paragraphs 128 to 132 plead a right of the National Mutual companies to recover from Citibank, based on coordinate liability, equitable contribution, or in the alternative, contribution or indemnity under para 5 (1) (c) of the LR(MP) Act or its Victorian counterpart, in respect of the settlement moneys paid or to be paid by the National Mutual companies to the Citibank Applicants.

68. Finally, there is a special pleading in paras 133 to 137 in relation to the Borrowers' Acknowledgments of the kind noted earlier. But as these paragraphs were the subject of particular attention, I set them out in full as follows:

"133 Further, or in the alternative, Citibank

knew, or ought to have known, of the matters referred

to in paragraphs 65, 66, 68 and 69 prior to entering

into its mortgage with the Citibank Applicants.

134 Citibank knew, or ought to have known, that NMPS

would rely on the matters referred to in paragraph 69

in approving a loan from the Mortgage Trust to the

Citibank Applicants.

135 Citibank's entry into a Mortgage Power Loan

falsely represented to NMPS, NMAM and NMLA that;

(a) the Citibank Applicants were able to fund the

acquisition of the initial units in the Property

Trust independent of a loan from NMPS;

(b) The Citibank Applicants were able to provide

the initial units in the Property Trust as

security to NMPS for its loans to the Citibank

Applicants.

136 In the premises Citibank:

(a) engaged in misleading and deceptive conduct

in breach of Section 52 of the Trade Practices

Act, 1974 (Commonwealth); and

(b) breached the duty of care it owed to NMPS and

NMAM.

137 By reason of these breaches the First, Second and

Third Applicants have suffered loss or damage namely

the amounts which they have paid or will pay in

settlement to the Citibank Applicants."

LEGAL PRINCIPLES IN RELATION TO SUMMARY DISMISSAL AND STRIKING OUT

69. In relation to summary dismissal, O 20 sub-r 2 (1) of the Federal Court Rules provides:

"Where in any proceeding it appears to the Court that

in relation to the proceeding generally or in relation to

any claim for relief in the proceeding -

(a) no reasonable cause of action is disclosed;

(b) ...................

(c) ......................

the Court may order that the proceeding be stayed or

dismissed generally or in relation to any claim for relief

in the proceeding."

70. On an application for summary dismissal, it must be very clear, in the face of judicial caution, that there is no issue deserving of a hearing in relation to the relevant relief sought: Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 at 91 (Dixon J); General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; (1964) 112 CLR 125 at 129 (Barwick CJ); Fancourt v Mercantile Credits Ltd [1983] HCA 25; (1983) 154 CLR 87 at 93 (Mason, Murphy, Wilson, Deane and Dawson JJ); Webster v Lampard [1993] HCA 57; (1993) 177 CLR 598 at 602 (Mason CJ, Deane and Dawson JJ), 618-9 (Toohey J).

71. In relation to the striking out of pleadings, O 11 r 16 of the Federal Court Rules provides:

"16 Where a pleading -

(a) discloses no reasonable cause of action ...;

(b) has a tendency to cause prejudice,

embarrassment or delay in the proceedings; or

(c) is otherwise an abuse of the process of the

Court,

the Court may at any stage of the proceeding order

that the whole or any part of the pleading be struck

out."

72. In Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd, unreported, 13 September 1994, FCA/Beaumont J quoted with approval the following summary of the general principles governing strike-out applications:

"(1) A 'reasonable cause of action' means one with

some chance of success if regard be had only to the

allegations in the pleadings relied upon by the

claimant; in such a case, the claim cannot be struck

out (Davey v Bentinck ((1893) 1 QB 185)).

(2) The mere fact that the case appears to be a weak

one is not of itself sufficient to justify the

striking out of the action (cf Wenlock v Moloney

((1965) 1 WLR 1238)).

(3) Normally, the power to strike out should be

exercised only in plain and obvious cases, where no

reasonable amendment could cure the alleged defect (cf

Hodson v Pare ((1899) 1 QB 455)).

(4) It goes without saying that if a substantial case

is involved in the claim, the power to strike out

cannot be exercised.

(5) Where a point of law has to be decided, and the

judge is satisfied that this can be done by him

appropriately, thereby avoiding the necessity of, and

expense in going to trial, he is entitled to determine

the point (cf Williams v Humbert ((1986) AC 368))."

(at p 24, from the editorial note at (1992) 66 ALJ 47 on Lonrho plc v Tebbitt, "The Times", 24 September 1991). For recent House of Lords authority for proposition (3) above see Lonrho plc v Fayed (1992) AC 448 (HL) at 469 (Lord Bridge, with whom all other members of the House agreed).

73. I accept that this statement summarises some of the general principles applicable.

OUTLINE OF PARTIES' SUBMISSIONS ON MOTION OF CITIBANK AND MOTION OF LKFM AND KELLY

74. Citibank's submissions proceeded along the following lines. The case pleaded against Citibank can be analysed as follows:

(a) the assignment by the Citibank Applicants of their right,

title and interest in the claims for damages and compensation

against Citibank;

(b) the right to recover from Citibank contribution or indemnity

in respect of damages for which the National Mutual companies

were liable in the amounts which they have paid to the Citibank

Applicants, based on Citibank's coordinate liability with that

liability of the National Mutual companies;

(c) the "direct" cause of action against Citibank pleaded in

paras 133-137 of the amended statement of claim.

75. Citibank's submissions begin with the agency issue. With one exception, the bases of liability referred to in paras (a) and (b) above raise the agency issue. The exception is Citibank's negligent failure to ensure that the Citibank Applicants understood the risks associated with the Mortgage Power Loan pleaded in paras 122-124.

76. Citibank submits that the amended statement of claim is defective in its pleading of a liability of Citibank for the conduct of the Citibank agents. It submits that there should be a summary dismissal of the proceedings against Citibank in so far as the relief sought depends on Citibank's liability to the Citibank Applicants, or in the alternative, that the amended statement of claim should be struck out in so far as it purports to plead that liability, or in the alternative, that there should be an order under O 29 r 2 of the Federal Court Rules for the separate trial of the question of agency in relation to the claims of all Citibank Applicants.

77. Citibank submits that the pleaded case based on its liability to the Citibank Applicants depends upon LKFM's engagement of the Citibank agents being within its express authority from Citibank in LKFM's written agency agreement referred to in para 102. It refers to the familiar principle embodied in the Latin maxim, delegatus non potest delegare, refers to Bowstead on Agency, (15th ed) art 35 at p 127 and says that a reading of LKFM's agency agreement (which was tendered in evidence) does not permit of a conclusion that LKFM had authority to delegate. Further, Citibank submits that the representations referred to in the fourth column of each of schedules 2 and 4 are representations about the units or NMLA's life policies. It says that LKFM itself did not have authority from Citibank to make such representations about the products of another company and so could not delegate authority to do so to the Citibank agents.

78. According to the submission, para 116 (referred to in paras 117 and 118) does not meet the point because the words in para 116 "in his or their capacity as an agent of Citibank" show that that paragraph also "tracks back" to para 102.

2. The National Mutual companies' "direct" cause of action against Citibank pleaded in paras 133-137

79. Paragraphs 133-137 were set out earlier. Citibank submits that para 135 is defective in that Citibank's entry into a Mortgage Power Loan cannot constitute a representation to the National Mutual companies that the Citibank Applicants were able to fund the acquisition of the initial units independently of the loan from NMPS or that they were able to provide the initial units as security to NMPS. Further, Citibank submits that sub-para 136 (b) is defective in that it assumes a duty of care owed by Citibank to NMPS and NMAM, without pleading it or any material facts giving rise to it.

80. The remaining submissions of Citibank are, again in outline, as follows:

The Citibank Applicants no longer have a cause of action against Citibank because they have been compensated by the National Mutual companies for all the loss or damage which they claim to have suffered from the very wrongdoing for which Citibank is said to be answerable. In support of this "double satisfaction" point, Citibank refers to Castellan v Electric Power Transmission Pty Ltd (1967) 69 SR (NSW) 159 ("Castellan") at 181.

The assignments to the National Mutual companies are impermissible assignments of bare causes of action. In this respect, Citibank refers to Monk v Australia and New Zealand Banking Group Ltd (1994) 34 NSWLR 148 (Cohen J) ("Monk").

Further, it is submitted that in the case of the two statutory causes of action under ss 52 and 82 of the TP Act and ss 68E and 68F of the SIC, the National Mutual companies do not satisfy the language of those provisions. That language requires that the person seeking to recover has suffered loss or damage respectively "by" or "as a result of" the conduct described in those statutes, and on the facts pleaded it is only the Claimants who could possibly be said to have satisfied such descriptions.

The National Mutual companies' claim to contribution or indemnity also depends on the existence of a liability of Citibank to the Citibank Applicants which, in turn, depends upon the agency issue. Citibank accepts that if it fails on the agency issue, this claim of the National Mutual companies would have to be tried. One of the alternative claims of Citibank is for proper particularisation of the agency arrangements.

3.4 Applicants' "direct" cause of action against Citibank pleaded in paras 122-124

In relation to the cause of action pleaded against Citibank in paras 122-124 set out in full earlier, namely, and in summary, that Citibank breached a duty to take reasonable care to ensure that the Citibank Applicants understood the risks associated with the Mortgage Power Loan, Citibank submits that no cause of action known to the law is pleaded in those paragraphs and refers to David Securities Pty Ltd v Commonwealth Bank of Australia [1990] FCA 148; (1990) 23 FCR 1 (FC).

81. On the strike-out issues, LKFM and Kelly join cause with Citibank in respect of its submissions 3.1 and 3.2. As to 3.2, the non- assignability of the causes of action, they refer to Park v Allied Mortgage Corporation Ltd [1993] FCA 286; (1993) ATPR 46-105 (FCA/Davies J) ("Park") at 53,469 and Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 2), unreported, FCA/Beaumont J, 7 November 1994 ("Allstate (No 2)".

82. In relation to the National Mutual companies' claim for contribution or indemnity (Citibank's submission 3.3 above) LKFM and Kelly say that paras 58-61 and 94-98 of the amended statement of claim correctly recognise that the basis of the claim is a coordinate liability (they refer to Albion Insurance Co Ltd v GIO (NSW) [1969] HCA 55; (1969) 121 CLR 342 at 349-352 (Kitto J)). LKFM and Kelly submit that there is no coordinate liability as between the National Mutual companies on the one hand and LKFM and Kelly on the other hand. They submit that the pleaded liability of the National Mutual companies to the Claimants is contractual and is found in the various deeds of assignment whereas the pleaded liability of LKFM and Kelly is tortious and statutory.

1. Applicants' submissions in reply to Citibank's submissions on the agency issue

83. The applicants say that the agency of the Citibank agents does not rest on para 102 alone. They refer to paras 116-118 set out earlier, and in particular, para 116. They submit that para 102 pleads no more than the point of departure for the basis of Citibank's liability on which they rely. They point out that paras 117 and 118 which plead the liability of Citibank say "by reason of the matters referred to in para 116". They submit that the matters set out in para 116 at least arguably plead a basis for saying that Citibank is answerable at law for the acts of the Citibank agents.

2. Applicants' response to Citibank's submission on the National Mutual companies' "direct" cause of action against Citibank pleaded in paras 133-137

84. The National Mutual companies emphasise that para 133 pleads that Citibank knew or ought to have known the matters referred to in paras 65, 66, 68 and 69. They say that when this is taken into account the pleading of the representations in para 135 is seen to be adequate.

3. Applicants' response to other submissions of Citibank

85. The applicants submit that the payments which were made by the National Mutual companies to the Claimants were made "collaterally" and "in a manner which preserves the causes of action". They say that whether one dollar or one million dollars had been paid, the payment was characterised in the deeds of assignment as the consideration for the assignment and had no effect on the underlying cause of action. They say that the deeds purport to achieve this effect and that the Court should not, on a strike-out basis, rule otherwise.

3.2 Assignment. 86. In relation to the assignments, the applicants submit that Citibank, LKFM and Kelly bear the onus of proving the negative proposition that the National Mutual companies could not establish a "commercial interest" in the enforcement of the causes of action of the kind referred to in Trendtex Trading Corporation v Credit Suisse (1982) AC 679 (HL) ("Trendtex") as being capable of supporting an assignment, and that they have not discharged that onus.

87. They further submit that even if the deeds of assignment were ineffective to vest a title to sue in the National Mutual companies, paras 93 and 127 plead, in the alternative, that the Kelly Applicants and the Citibank Applicants respectively, would be required to hold any damages recovered on trust for the National Mutual companies. They contend that Park and Allstate (No 2) did not deal with the interaction of statutory provisions and equitable principles. They refer to Munchies Management Pty Ltd v Belperio [1988] FCA 413; (1988) 84 ALR 700 (FCA/FC) as illustrating "the depth of regard which must be paid to equitable principle when considering the remedies which may be available under s 87".

3.3 Contribution or indemnity. 88. Citibank's submission 3.2 above does not call for an independent or further response from the applicants.

89. 3.4 Applicants' "direct" cause of action against Citibank pleaded in paras 122-124. In relation to the cause of action pleaded against Citibank in paras 122-124, the applicants say that they are entitled to plead a duty of care without pleading the facts giving rise to it. They refer to motor car running-down cases as everyday instances of bare pleadings of a duty of care.

90. Further, the applicants refer to the words in para 122, "in all the circumstances of the case as referred to above" and say that all the circumstances pleaded prior to para 122 itself are invoked by those words to supply the material facts supporting the existence of the duty of care referred to.

91. The written agency agreement between Citibank and LKFM recited that Citibank desired to appoint LKFM to act on its behalf "as agent for the promotion and sale of its various products". By cl 1, Citibank appointed LKFM "to act on its behalf in respect of the promotion and sale of its range of products, particularised in writing from time to time by CITIBANK to (LKFM)". Clause 2 was as follows:

"2 CITIBANK shall remunerate the AGENT in respect of

the services performed by the AGENT under the Agreement in

accordance with the Commission Plan annexed hereto and

initialled by the parties."

92. There was annexed a document by which Citibank promised to pay LKFM in respect of each mortgage loan proposal/application submitted by LKFM to Citibank and accepted by Citibank a fee in accordance with a scale. Included in the scale was $175.00 in respect of "Mortgage Power Type". By cl 3, LKFM agreed:

"(ii) To comply with all applicable State, Territory

and Federal laws and regulations and not do or omit to do

anything which would breach such laws and regulations

whereby CITIBANK could be rendered liable to legal

proceedings, prosecutions or governmental intervention.

(iii) Not to engage in misleading or deceptive conduct or

practices in relation to the promotion and sale of CITIBANK

products but to always act in an ethical honest and proper

manner."

93. By cl 10 the parties agreed that the written agreement contained the entire agreement between them and might be amended only by a further written agreement of the parties.

94. Citibank submits that all the representations alleged in column 4 of schedules 2 and 4 relate to products of the National Mutual companies, as distinct from products of Citibank, and to the effect which investing in them might have. Citibank sought to make good this submission by reference to a summary which it prepared of the representations alleged in column 4 of schedules 2 and 4.

95. The agency issue raised involves questions as to the extent of the authority of LKFM and the relationship between "authority" and vicarious liability for the tortious acts of others. In discussions of agency, "authority", actual or apparent, is most commonly referred to in the context of a suggested contractual liability of the supposed principal. But the question here is not whether the Citibank agents had authority actual or apparent, to commit Citibank contractually to the Citibank applicants.

96. No doubt, if P actually authorises A to do an act which is wrongful and which injures TP, that authority will provide a basis for holding P liable to TP in the same way as A, that is to say, for holding that P is vicariously liable to TP. This is authority of a kind different from authority to contract. The scope of any actual or apparent authority of A to contract may, however, be relevant to a determination of the scope of the conduct of A for which P will be vicariously liable.

97. The distinction to which I have referred is expressed in Bowstead on Agency (15th ed, 1985) as follows:

"Vicarious liability in the law of tort seems also to

have a different basis from agency in contract. In

contract the agent is not normally liable, and the effect

of agency rules is in the majority of cases to establish

the primary liability of the person with whom the third

party intended to deal. But in tort the actual tortfeasor

is in principle liable, and the effect of vicarious

liability is to add a defendant, often unknown to and

uncontemplated by the victim; on one view its purpose is

simply to find a defendant who can pay." (at p 386)

98. Bowstead continues by noting that although it might seem to follow that agency is excluded in tort altogether, there are various ways in which there is considerable interrelation with the law of agency and that these "prevent a total separation between agency in contract and vicarious liability in tort" (also at 386).

99. In my view it is arguable that Citibank would be vicariously liable for the acts of the Citibank agents if all the facts alleged in the amended statement of claim were proved. In other words, the pleaded basis of Citibank's vicarious liability is not clearly untenable.

100. The appointment of LKFM to act on Citibank's behalf "in respect of the promotion and sale of", inter alia, the Mortgage Power Loan is an appointment expressed in general terms and capable of conferring authority to make a wide range of representations directed towards the promotion of the Mortgage Power Loan "product". A wide discretion is accorded to LKFM. I would not be prepared to say on motions such as the present ones that lawful representations about products of the National Mutual companies which were not misleading or deceptive and which were calculated to promote Citibank's Mortgage Power Loan necessarily lay outside the scope of LKFM's authority to promote and sell that product. Of course vicarious liability may exist where an agent does an authorised act or an act of an authorised class, in an unauthorised way.

101. In any event, it is an inadequate and limited account of the representations to say that they related to the products of another company, since this suggests that they did not relate to the Mortgage Power Loan at all. In fact, they related to the Negative Gearing Package as a whole and for the Citibank Applicants the Mortgage Power Loan formed part of this "package" (see para 18 particular (e)).

102. I have discussed above only the position under the terms of LKFM's written authority to "promote". Paragraph 116, quoted earlier, seems to be addressed to both the scope of things said for which Citibank should be vicariously liable and the delegation question. The pleading within para 116 comprises only two lines of typing. It is not clear whether the paragraph is intended to plead granting of authority by Citibank directly to the Citibank agents, quite independent of para 102. A straightforward reading of it suggests that the applicants rely on para 116 to the exclusion of para 102 as the basis for the proposition that in making the representations and giving the advice, the Citibank agents were acting as agents of Citibank. But when I search para 116 for a pleading of material facts constituting that agency of the Citibank agents, I find none. Only a legal proposition without supporting material facts is pleaded. For this reason alone para 116 should be struck out.

103. "Particulars" are a different matter. If para 116 is to be relied upon as supplying a factual basis or the factual basis for the legal conclusion that the Citibank agents made the representations and gave the advice as agents of Citibank, this should be made clear, by the pleading, as distinct from the particularisation, of the material facts relied on.

104. The material facts in relation to each transaction must be pleaded. According to para (a) of the existing Particulars, Citibank knew of the proposed appointment of "various of" certain persons by LKFM to assist it. Ultimately, this will not be good enough. The use of the expression "various of" in paras (b), (c) and (d) involve the same defect.

105. Prima facie, any amended para 116 should include particulars relating to Citibank's "knowledge"; cf paras (a), (e), (f) and (h) of the existing Particulars.

106. The facts referred to in the Particulars in para 116 are, in my view, relevant to the issue of Citibank's vicarious liability for the conduct of the Citibank agents. But the words "in his or their capacity as an agent for Citibank" do little to elucidate the basis on which vicarious liability will be contended for. If it is intended to plead that the material facts give rise to a conclusion that the Citibank agents had actual authority from Citibank to do certain things or that Citibank made it appear to the Citibank Applicants that they had such authority, and that by reason of these matters, Citibank should be held vicariously liable, this should be made clear. Again, if ratification of a tortious act by a Citibank agent is to be relied on, this should be made clear.

107. In my view, Citibank has not made out a case for summary dismissal in relation to the agency issue, but para 116 should be struck out with leave to re-plead.

2. The National Mutual companies' direct cause of action against Citibank pleaded in paras 133-137

108. Paragraphs 133-137 were set out earlier. They plead the only cause of action against Citibank which does not depend upon its alleged liability to the Citibank Applicants. Prima facie, Citibank's entry into a Mortgage Power Loan does not give rise to either of the representations pleaded in para 135. No additional background facts are pleaded which would enable Citibank's entry into the Mortgage Power Loan to constitute such an extraordinary communication from Citibank to NMPS, NMAM and NMLA.

109. It is not pleaded that the National Mutual companies understood that by Citibank's entry into the Mortgage Power Loans, Citibank was making to them the representations in sub-paras (a) and (b) of para 135. Nor is it pleaded that Citibank knew or intended that its entry into the Mortgage Power Loans would be understood by the National Mutual companies as constituting such representations. It is an altogether different thing to say that Citibank knew that NMAM would issue the further units to the Citibank Applicants and that NMPS would approve of the loans from the Mortgage Trust to the Citibank Applicants, in reliance on the fact of Citibank's entry into the Mortgage Power Loans, but this leads nowhere.

110. For the foregoing reasons paras 133-137 will be struck out. There is a further reason why they must be struck out in so far as they plead negligence: neither a duty of care nor any material facts giving rise to a duty of care are pleaded.

111. The National Mutual companies' "analogy" of the pleading practice in running down cases is not persuasive. The facts (such as foreseeability) which give rise to a driver's duty of care to avoid injury to the person or damage to property of other road users are usually, but only as a matter of concession, taken for granted because of their universality. These considerations have no application to the multifarious situations, all different from each other, in which a duty to take care directed to the avoidance of the suffering of financial loss by another is said to arise.

112. It is difficult to see how there can be an effective re-pleading but I will grant leave to re-plead in case the applicants think that they can overcome the difficulties to which I have referred and wish to attempt to do so.

113. This question is relevant to the allegedly assigned causes of action and to the Claimants' right to recover damages in their own right. The rule against double satisfaction is a well established part of the common law: Windham v Wither (1723) 1 Strange 515 (93 ER 671); Midland Montagu Australia Ltd v Harkness (1994) 35 NSWLR 150 (McLelland CJ in Eq) at 159. In Castellan Asprey JA expressed the view that the common law doctrine against double satisfaction survived the LR(MP) Act. His Honour said that once there was satisfaction of the liability of one tortfeasor, the satisfied injured party could not recover against another tortfeasor who would otherwise have been liable in respect of the same loss or damage (at 181). Holmes JA agreed (at 188). Walsh JA (at 175-176) said that he was prepared to assume that it was a rule of the common law that if an injured person obtained judgment against one tortfeasor and the judgment was satisfied, the liability of another concurrent tortfeasor to the injured person was thereby discharged.

114. It is necessary to refer to the terms of the deeds of assignment. Five of these are in evidence. In the following account, I will, for convenience, refer only to the assignments in so far as they relate to Citibank. In fact they differ in respect of the claims to which they refer and one of them, being relevant to the Kelly Applicants and not the Citibank Applicants, refers only to LKFM and not to Citibank at all.

115. The deeds recite the approach made to the particular Claimant, the Claimant's allegation that the National Mutual companies and Citibank are liable for the actions of the person who made the approach ("the Agent") and that the Claimant is entitled to damages and compensation from the National Mutual companies, Citibank and/or the Agent; that the National Mutual companies make no admission of their liability, or in the alternative, say that to the extent that they may be liable to the Claimant, Citibank and the Agent are also liable and are liable to contribute to any damages or compensation payable by the National Mutual companies to the Claimant; and that the National Mutual companies and the Claimant have reached an accommodation under which the former have agreed to pay an amount to the Claimant for which the Claimant maintains that the National Mutual companies are "jointly and severally liable with Citibank and the Agent."

116. The operative clauses of the deeds contain provisions to the effect that the Claimant is to transfer and assign to the National Mutual companies all his right, title and interest in the units and that the National Mutual companies are to cancel and terminate the life assurance policies entered into by the Claimant as part of the Negative Gearing Package. The assignment clause is to the effect that in consideration of a certain payment to be made by the National Mutual companies to the Claimant, the Claimant undertakes that he shall (1) transfer and assign to the National Mutual companies their (sic - "his") right, title and interest in his claim "to an entitlement (inter alia) to damages and compensation from Citibank and/or the Agent", and (2) give the release referred to in the deed. That release is expressed in the following terms:

"As and from the date of Settlement the (Claimant) hereby

releases and forever discharges (the National Mutual

companies) ... from any demand, obligation, liability or

claim whatsoever which the (Claimant) may have against (the

National Mutual companies) ... or any one or more of them

in connection with the Negative Gearing Package and/or the

Unit Mortgage."

117. The consideration is not apportioned - so much for the release and so much for the assignment. It could not be, since the amount paid represents the total amount of the loss or damage suffered. The assignment is apparently intended to achieve, in general terms, the result which the law gives where one tortfeasor pays in full the amount of damages for which it and another tortfeasor are liable in circumstances where the paying tortfeasor is held to be entitled to full indemnity as distinct from mere contribution from that other.

118. The coordinate liabilities of the National Mutual companies and Citibank arise, according to the pleading, out of the same conduct of the same persons, namely the Citibank agents (the material facts founding the vicarious liability of the National Mutual companies and Citibank respectively are not identical but this is not presently relevant). Paragraph 128 of the amended statement of claim makes this clear. In other words, there is no pleaded liability of Citibank to the Citibank Applicants otherwise than through a person whose conduct which gave rise to that liability also gave rise to an identical liability in the National Mutual companies. The same particulars of loss or damage are given as against the National Mutual companies and Citibank.

119. In the result, the payment made by the National Mutual companies to the Citibank Applicants were not "collateral" and a recovery by the Citibank Claimants would give them "double satisfaction". The Citibank Applicants are not entitled to recover against Citibank any more than the amount of their loss or damage suffered less the amount of the payment made to them by the National Mutual companies. But the amount of that payment is equal to the total amount of the loss or damage claimed to have been suffered. It follows that since the making of that payment, there has been no continuing loss or damage suffered by the Citibank Applicants and they no longer have a cause of action against Citibank under s 52 of the TP Act or s 68F of the SIC or for negligence at common law.

120. The above line of reasoning applies, mutatis mutandis, to the Jones Applicants' and Kelly Applicants' causes of action against LKFM and Kelly.

121. In Park, Davies J held (at 53,469) that a right to claim damages under ss 82 and 87 of the TP Act is a right of action which cannot be the subject of a voluntary assignment. His Honour referred both to the language of the statute and to the general principle relating to the assignment of causes of action in tort enunciated in such cases as Dawson v Great Northern and City Railway Co (1905) 1 KB 260 at 270-271; Defries v Milne (1913) 1 Ch 98 and Poulton v The Commonwealth (1953) 89 CLR 540 ("Poulton") at 602.

122. In Allstate (No 2), Beaumont J held similarly in relation to purported assignments of common law causes of action for fraud and negligence and the right of action under ss 52 and 82 of the TP Act. His Honour referred to developments in England according to which assignments of contractual causes of action have been recognised in particular circumstances (see below) but distinguished claims in tort and claims like that under ss 52 and 82 of the TP Act which are analogous to claims in tort.

123. Sections 68E and 68F of the SIC were introduced by s 57 of the Co-operative Scheme Legislation Amendment Act 1989 (Act No 92, 1989). Section 68E provides that a "securities adviser" who makes a "securities recommendation" to a person (the "client") where the securities adviser does not have a reasonable basis for making the recommendation contravenes the section. Section 68F provides that in such a case if the client "suffers loss or damage as a result" of his acting or omitting to do a particular act in reliance on the recommendation, the securities adviser is liable to pay damages to the client in respect of that loss or damage. Accordingly, the reference to the suffering of loss or damage in s 68F is similar to the reference in ss 82 and 87 of the TP Act to a person's suffering of loss or damage "by" conduct done in contravention of that Act.

124. The amended statement of claim pleads three kinds of cause of action in the Claimants: an action for damages in respect of tortious negligence; a statutory cause of action under ss 52 and 82 of the TP Act (and State equivalents) and a statutory cause of action under ss 68E and 68F of the SIC. These causes of action are tort claims or are analogous to tort claims. Prima facie the rights of action are incapable of assignment either at law or in equity; Poulton, at 602.

125. Trendtex has marked a new point of departure, at least in relation to the assignment of causes of action of a non-tortious kind. In that case, Lord Roskill (with whom three other members of the House of Lords agreed) said this (at 703):

"But it is today true to say that in English law an

assignee who can show that he has a genuine commercial

interest in the enforcement of the claim of another and to

that extent takes an assignment of that claim to himself is

entitled to enforce that assignment unless by the terms of

that assignment he falls foul of our law of champerty,

which, as has often been said, is a branch of our law of

maintenance. ...

The court should look at the totality of the transaction.

If the assignment is of a property right or interest and

the cause of action is ancillary to that right or interest,

or if the assignee has a genuine commercial interest in

taking the assignment and in enforcing it for his own

benefit, I see no reason why the assignment should be

struck down as an assignment of a bare cause of action or

as savouring of maintenance."

126. The case has been followed in Australia: Re Timothy's Pty Ltd and the Companies Act (1981) 2 NSWLR 706 (Needham J) ("Re Timothy's"); Re Daley; Ex parte National Australia Bank Ltd [1992] FCA 395; (1992) 37 FCR 390 (Heerey J) ("Daley") at 394-395; Commonwealth of Australia v Ling (1993) 44 FCR 397 (Beaumont J) at 432; and see Meagher, Gummow and Lehane, Equity; Doctrines and Remedies (3rd ed, 1992) paras (693)-(696) esp at pp 204-205. I was not, however, referred to any Australian case in which an assignment of a tortious cause of action has been held valid by reference to the Trendtex test, although the speeches in that case do not refer to the distinction.

127. A right to sue for tort, has long been described as an unassignable "bare right of action": cf Prosser v Edmonds (1835) 1 Y and C Ex 481 [1835] EngR 1073; (160 ER 196); Defries v Milne (1913) 1 Ch 98; Poulton, at 602. But in Monk, Cohen J expressed the view that there seemed no logic in making a distinction in the present context between a cause of action in tort and on one in contract, if the basis of the claim was a commercial one (at 152). His Honour applied the Trendtex test to an assignment of all choses in action which the assignor in the case before him might have had with respect to the conversion of certain cheques, but held, in the event, that the test was not satisfied because the assignment was not ancillary to an assignment of any proprietary right or interest and the assignee did not have any "genuine commercial interest" which could support the assignment.

128. In relation to the passage in the joint judgment of Williams, Webb and Kitto JJ in Poulton at 602 to the effect that a right of action for tort is incapable of assignment either at law or in equity, Cohen J observed that the assignability of a cause of action for tort was not one of the principal matters of dispute in that case and that apparently there was no argument or discussion as to the effect on assignability of the assignee's having a commercial interest in enforcing the cause of action for his own benefit. His Honour then referred to the consideration of this question by the House of Lords in Trendtex and to the application of the Trendtex test in Re Timothy's, in Daley and, in particular, by Gault J in the New Zealand case, First City Corporation Ltd v Downsview Nominees Ltd [1989] NZHC 566; (1989) 3 NZLR 710 ("First City") (on appeal sub nom Downsview Nominees Ltd v First City Corporation Ltd (1993) AC 295 (PC)).

129. In First City Gault J, after discussing authorities, held valid an assignment by a debenture holder of its right of action in tort to an assignee of the debenture. His Honour said that "The actions in tort were ancillary to the assignment of the debenture itself" and that "The actions in tort (were) subsidiary matters, assigned with the debenture so that the assignee (could) protect the property it (had) received" (both at 757).

130. In Allstate (No 2) Beaumont J referred to Gault J's judgment in First City but was apparently not referred to Cohen J's judgment in Monk.

131. With respect, I think that there is force in what has been said by Gault J in First City and by Cohen J in Monk but do not find it necessary to pursue the question raised to the point of decision. I have come to conclusions which can be conveniently stated in summary form as follows.

1. The causes of action under the TP Act and the SIC are not assignable, if for no other reason, because it is relevantly only the Claimants who could possibly satisfy the statutory descriptions of being persons who suffered loss or damage caused by the conduct described in the statutes: Park; Allstate (No 2). This leaves outstanding only the Claimants' general law claims for damages for negligence.

2. If I were free to depart from the High Court's statement of the position in Poulton, I would follow Beaumont J's expression of opinion in Allstate (No 2) in preference to that of Cohen J in Monk unless satisfied that Beaumont J was clearly wrong. Allstate (No 2) is a more recent decision of this Court in which his Honour, although not referred to Monk, dealt with the discussion of the present issue by Gault J in First City which was itself referred to and shared by Cohen J in Monk, that tort claims should be treated as assignable if they satisfy the Trendtex test. With respect, I do not think that Beaumont J was clearly wrong. It may be noted that neither Cohen J's nor Beaumont J's treatment of the point formed part of the ratio decidendi of the judgment in question: in Monk, Cohen J held that Trendtex test was not satisfied and in Allstate (No 2) Beaumont J held that the assignments might be sustained by reference to foreign law.

3. In my view the causes of action in the present case do not satisfy the Trendtex test. They are not ancillary to a proprietary right or interest which is being assigned.

The question whether the National Mutual companies have a genuine commercial interest in taking the assignments and enforcing the causes of action for their own benefit is interesting. Confronted with say 146 (or 156) claims against them, it may be seen to have been in their commercial interest for them to settle with the Claimants, thereby avoiding adverse publicity, and to pursue parties such as Citibank, LKFM and Kelly, said to be subject to a coordinate liability with them.

By reference to three matters, however, I do not think that the "genuine commercial interest" limb of the Trendtex test is satisfied. First, the genuine commercial interest referred to in Trendtex is not a nebulous notion of the general commercial advantage of the assignee but something more specific and limited. In particular, it does not embrace an interest arising from an arrangement voluntarily entered into by the assignee of which the impugned assignment is an essential part, like the arrangement in the present case. Rather, the expression refers to a commercial interest which exists already or by reason of other matters, and which receives ancillary support from the assignment.

Secondly, it is clear that the assignments have been taken because the National Mutual companies believe that they offer them an advantage not available under para 5 (1) (c) of the LR(MP) Act or its Victorian equivalent. The former provision is as follows:

"5.(1) Where damage is suffered by any

person as a result of a tort (whether a

crime or not)--

(a) .... (b) ...

(c) any tort-feasor liable in respect of

that damage may recover contribution from

any other tort-feasor who is, or would if

sued have been, liable in respect of the

same damage, whether as a joint

tort-feasor or otherwise, so, however,

that no person shall be entitled to

recover contribution under this section

from any person entitled to be indemnified

by him in respect of the liability in

respect of which the contribution is

sought."

Under the assignments, the National Mutual companies would not need to prove their own liability, but more importantly, subject to any claim by Citibank under the LR(MP) Act they would be entitled as of right to indemnity. While it is readily understandable that the National Mutual companies might have wished to be assured of this if they were to pay the Claimants' claims in full, one need only consider a hypothetical "other tort-feasor" which, pursuant to para 5 (1) (c) might be held liable to contribute to the extent of say only 10%, to appreciate that the kind of commercial interest relied on by the National Mutual companies may not be the kind of "genuine commercial interest" contemplated by their Lordships in Trendtex. Although not seeking by the assignments, to make a profit by recovering from Citibank more than the amounts they have paid to the Claimants, they are seeking to ensure that they recover the whole of those amounts irrespective of whether Citibank should be held liable to contribute at all or, if so, in what proportions.

Thirdly, it may well be that without the making of the payments by the National Mutual companies to the Claimants, they or most of them would not have sued because of the relative modesty of the individual amounts at stake. In the light of this, in paying out all claims in full and taking assignments, the National Mutual companies might be seen to have behaved commendably. But the fact remains that their conduct is, on the above hypothesis, directed to the encouragement of litigation the proceeds of which will go to themselves, where otherwise there may have been no litigation at all. Thus, there are present the twin evils of maintenance and champerty at which the rule against the assignment of bare causes of action is directed; see, for example, Trendtex, at 702-703 (Lord Roskill); Monk, at 151B. (The Maintenance and Champerty Abolition Act 1993 (NSW) which commenced on 12 May 1995 does not affect any rule of law relating to maintenance or champerty as to cases in which contracts, whether made before or after the commencement, are to be treated as contrary to public policy or as otherwise illegal: s 6.) It was, of course, always open to the National Mutual companies to meet the claims in full and to seek contribution or indemnity from Citibank without taking assignments.

In the result, I do not think that the National Mutual companies had a genuine commercial interest in taking the assignments of, and enforcing for their own benefit, the respective Claimants' causes of action.

132. For all these reasons, the assignments are ineffective to vest in the National Mutual companies the right to enforce in their own names the causes of action pleaded against Citibank.

133. The foregoing reasoning applies, mutatis mutandis, to the assignments of the causes of action against LKFM and Kelly to the National Mutual companies.

134. Citibank accepts that if it fails on the agency issue, the National Mutual companies have pleaded a case for indemnity or contribution as to which there is a triable issue. LKFM and Kelly do not press to have paras 58-61 struck out. As noted earlier, however, they submit that the National Mutual companies' liability is not tortious but is contractual by reason of the deeds of assignment. The submission is that the National Mutual companies do not satisfy the description in para 5 (1) (c) of the LR(MP) Act of "any tort-feasor liable" in respect of damage suffered by the Claimants.

135. The amended statement of claim pleads that the National Mutual companies are vicariously liable for the conduct of those who induced the Jones Applicants and the Kelly Applicants (and therefore the Citibank Applicants) to enter into the Negative Gearing Package. The expression "any tort-feasor liable" in counterparts of para 5 (1) (c) has been construed to signify "any person responsible at law" and not to be limited to "any person held liable by judgment": Stott v West Yorkshire Road Car Co Ltd (1971) 2 QB 651 (CA); Bakker v Joppich and Bitumax Pty Ltd (1980) 25 SASR 468. It has been said that "This rule is necessary so as not to discourage settlement of as many cases as possible without recourse to litigation"; Trindade and Cane, The Law of Torts in Australia (OUP, 1985) at 642, fn 20.

National Mutual Property Services (Australia) Pty Ltd and Ors v Citibank Savings Limited and Ors

At a glance

Court

Decision date

Before

Source

Judgment (216 paragraphs)

National Mutual Property Services (Australia) Pty Ltd and Ors v Citibank Savings Limited and Ors (No 1) [1995] FCA 1628 (1 November 1995)

Parties

Legislation Cited (6)

Cases Cited (17)