23 It will be appreciated that, quite apart from their constituting grounds upon which, in accordance with their submissions, the applicant Defendants have not been properly joined as Defendants to the proceedings, the second of the foregoing grounds (abuse of process and certainty of failure) also, so it is submitted, constitute independent grounds upon which the Court should decline jurisdiction in the proceedings against the applicant Defendants (even if those Defendants be treated as having been otherwise properly joined), and upon which, in consequence, the proceedings against the applicant Defendants should, in any event, be dismissed.
24 As I understand it, the applicant Defendants no longer seek to rely upon the argument which may be compendiously described as the argument grounded upon the principle of "most convenient forum" or "forum non conveniens" as a ground in support of their submission that they were not properly joined (although such an argument in support of that submission was foreshadowed by Senior Counsel for the applicant Defendants in his opening address). Such an argument, however, is still (as I understand it) relied upon by the applicant Defendants in support of the alternative relief sought in paragraphs 2 and 3 in the further amended notice of motion (that the proceedings be permanently stayed on the basis that the Court is not the proper forum to entertain the proceedings; and a declaration that the Court is an inappropriate forum for the trial of the proceedings).
25 The Plaintiff asserts that the requirements of paragraph (i) of the foregoing subrule have been fulfilled by reason of the joinder of the Second and Fifth Defendants, it being asserted on behalf of the Plaintiff that each of those Defendants is a person against whom the proceedings "are properly brought", and that each of those Defendants is a person "served or to be served in the State". (It should be noted that the Plaintiff does not assert that the First Defendant falls within the foregoing category, since he was not served within New South Wales.)
26 The Second Defendant was deregistered on 24 April 1996. That Defendant was reinstated on 24 September 1998, upon the application of the Plaintiff (in proceedings 2804 of 1988, in which the present Plaintiff was the Defendant). In support of that application for reinstatement the Plaintiff relied upon an affidavit of Barbara Elisjones dated 17 August 1998, in which the deponent stated, in paragraph 3, "the Plaintiff wishes that the Second Defendant be reinstated for the purposes of this litigation".
27 Since its reinstatement the Second Defendant has not entered an appearance. Neither, according to the applicant Defendants, has the Plaintiff filed an affidavit of service upon the Second Defendant or sought any judgment against it. According to the submission of the applicant Defendants, there is no evidence that the Second Defendant has any assets or that its joinder was for any purpose other than enabling a claim to be made against the applicant Defendants.
28 It is submitted on behalf of the applicant Defendants that the requirement contained in paragraph (i) of Part 10 rule 1A(1) that "the proceedings are properly brought" against a person in the situation of the Second Defendant is not satisfied if it appears that the proceedings have been commenced merely for the purpose of facilitating or enabling proceedings against a foreign Defendant. In this regard the applicant Defendants rely upon the decision of the English Court of Appeal (constituted by Lindley and Kay L.JJ) in Witted v Galbraith [1893] 1 QB 577; the decision of the English Court of Appeal (constituted by Pollock MR and Warrington and Sargent L.JJ) in Rosler v Hilbery [1925] 1 Ch. 250; and the decision of the House of Lords (constituted by Lord Porter, Lord Simonds, Lord du Parcq, Lord Normand and Lord MacDermott) in Tyne Improvement Commissioners v Armement Anversois S/A (The Brabo) [1949] A.C. 326.
29 The effect of paragraph (i) of rule 1A(1) is to authorise service on, and in consequence to confer jurisdiction over, the person to be served outside the State ("the Foreign Defendant"), where proceedings are regularly brought against a person served or to be served in the State ("the Local Defendant") and the Foreign Defendant is, under the rules relating to joinder, properly joined as a Defendant. It will be seen that paragraph (i) contains two requirements: firstly, that the proceedings be properly brought against the Local Defendant; and, secondly, that the Foreign Defendant is properly joined as a party.
30 As to the first of the requirements of paragraph (i), proceedings are properly brought against the Local Defendant so long as the claim against the Local Defendant is genuine and not doomed to failure. A claim is "genuine" in the relevant sense if brought with the intention that it be prosecuted to finality in order to effect an object within the scope of the remedy claimed, regardless of the circumstance that the Defendant might be completely unable to satisfy any ultimate judgment. (See Williams v Spautz (1992) 174 CLR 509 (especially per Mason CJ, Dawson, Toohey and McHugh JJ at 518f); but see, also, Dowling v Colonial Mutual Life Assurance Society Limited (1915) 20 CLR 509 at 521 per Isaacs J.)
31 The three authorities (Witted, Rosler and Tyne Improvement Commissioners) relied upon by the applicant Defendants do not in absolute terms support the proposition for which they are cited, that the proceedings against the Local Defendant are not properly brought if commenced solely for the purpose of facilitating or enabling an application against the Foreign Defendant, if that submission is taken to mean that the proceedings against the Local Defendant would not otherwise have been commenced. Those three authorities relied upon by the applicant Defendants do, however, support the proposition that proceedings against a Foreign Defendant cannot be supported by a claim against a Local Defendant which is not a genuine claim or which is doomed to failure.
32 The assertion by the applicant Defendants that the Second Defendant is not going to be actively involved in the litigation - even if such assertion can be established as a fact - does not appear to me to be determinative of the question of whether the proceedings are properly brought against that Defendant. I am in agreement with the response by the Plaintiff in this regard that there is nothing in the Supreme Court Rules or in the relevant judicial authorities which requires that the Local Defendant be "worth powder and shot" or otherwise be of substance. The relevant rule is concerned with the viability of the cause of action against the Local Defendant, not with the capacity of the Local Defendant to satisfy any judgment against it.
33 The cases relied upon by the applicant Defendants make is clear, however, that the requirement that the proceedings be properly brought against the Local Defendant is fulfilled so long as the claim against that Defendant is genuine and not doomed to failure.
34 As I have already observed, none of the decided authorities relied upon by the applicant Defendants in this regard, supports the proposition that the requirement that the proceedings be properly brought against the Local Defendant is not satisfied in circumstances where those proceedings have been commenced for the purpose of facilitating or enabling the joinder of the Foreign Defendant, unless it also be established that the claim against the Local Defendant is not genuine or is doomed to failure.
35 The Plaintiff submits that there is plainly a cause of action against the Second Defendant, and relies in this regard upon the following matters. It was to the Second Defendant that the First Defendant diverted the relevant corporate Opportunity from the Plaintiff, and the appropriate inference is that the Second Defendant was incorporated for that very purpose (the Plaintiffs refer to the proximity of the date of incorporation of the Second Defendant, 16 March 1988, and the date of the agreement between the Second Defendant and the Fifth Defendant, 26 April 1988); it was the Second Defendant (in place of the Plaintiff) that contracted with the Fifth Defendant for the credit facility; the Second Defendant was a party to the Californian proceedings in which, as one of the successful plaintiffs it was entitled to its share of the settlement moneys. The evidence relied upon by the Plaintiff in respect to the present application supports the allegations in the amended statement of claim made by the Plaintiff against the Second Defendant.
36 The applicant Defendants point to the circumstance that the Second Defendant has not entered an appearance. That fact would seem, if anything, to support a conclusion that the claim of the Plaintiff against the Second Defendant will succeed, rather than a conclusion that the claim of the Plaintiff against that Defendant is bound to fail. But whether or not the Second Defendant chooses to appear or to defend the proceedings is not determinative of whether the proceedings are properly brought against the Second Defendant, and, indeed, does not illuminate that issue.
37 The applicant Defendants submit that no affidavit in respect to service upon the Second Defendant has been filed by the Plaintiff and that the Plaintiff has not sought judgment against that Defendant. However, that submission overlooks not only the affidavit of John Wooldridge sworn 26 October 1998 in respect to service by that deponent on the Second Defendant on 11 September 1998, but also the notice of motion filed by the Plaintiff on 4 May 2000 which seeks, in paragraph 3 thereof, an order that, pursuant to Part 17 rule 3, judgment be given against, inter alia, the Second Defendant for $US5 million and interest. That notice of motion has been stood over, pending the disposition of the present application by the applicant Defendants.
38 The applicant Defendants suggest that the Second Defendant has been joined only to enable a claim against the applicant Defendants to be made, in the sense that there is no other purpose in suing the Second Defendant.
39 The Plaintiff offers two answers to that suggestion. The first is that the suggestion is wrong in fact, because there is a sound forensic reason and need for joining the Second Defendant as well as for joining the First Defendant and the applicant Defendants. That is, that all four of those Defendants were entitled to a share of the Californian Settlement, the proceeds of which the Plaintiff in the present proceedings seeks to recover. If the Plaintiff succeeds against the Second Defendant, that Defendant (or, ultimately, its liquidator) may have remedies against its directors or against third parties which would enable it to satisfy, in whole or in part, its liability to the Plaintiff. In circumstances where other Defendants are overseas and practical difficulties in enforcement may be expected, it is important, so it is submitted by the Plaintiff, that all potential courses for recovery be pursued.
40 The second answer offered by the Plaintiff is that, even if it be the case that the Second Defendant has been joined only in order to enable a claim against the applicant Defendants to be made, that fact is irrelevant in law, so long as the claim against the Second Defendant is genuine and not doomed to failure, because all that is required by paragraph (i) is that the proceedings be properly brought against the Second Defendant. It is submitted that if there is a viable cause of action and an intention to prosecute it for a purpose within the scope of the remedy claimed, then the proceedings are properly brought.
41 In this regard it should be observed that Barbara Elisjones a director of the Plaintiff, was cross-examined during the hearing of the present application. It was not suggested to her in cross-examination that the Plaintiff did not intend to prosecute to finality its claim against the Second Defendant.
42 The Plaintiff responds as follows to the suggestion that because the Second Defendant "is not going to be actively involved", the basis for joining the applicant Defendants disappears. Often when proceedings are commenced, submits the Plaintiff, it may not be known what attitude the Defendants or any of them will take. Jurisdiction in this sense is determined at the time of service, not at the time of trial. Jurisdiction is asserted by service of the Court's process. The circumstance that after service the Local Defendant does not actively defend the proceedings cannot impact upon whether service upon the Foreign Defendant was authorised at the time of service and thus whether the Court has jurisdiction over the Foreign Defendant.
43 The applicant Defendants submit that in respect to the Fifth Defendant the Plaintiff has failed to show that the claim is genuine and not doomed to failure, and therefore properly brought. In this regard the applicant Defendants point to the fact that the claim against the Fifth Defendant is pleaded in paragraphs 69-77 of the amended statement of claim, where it is grounded upon fiduciary duties said to be owed by the Fifth Defendant to the Plaintiff.
44 The applicant Defendants submit that in the instant case the relevant paragraphs of the amended statement of claim do not disclose a valid cause of action against the Fifth Defendant, and, further, that the evidence does not suggest that a valid claim could, indeed, be pleaded against the Fifth Defendant.
45 In respect to the assertion of the existence of a cause of action in the Plaintiff against the Fifth Defendant the applicant Defendants rely upon the nature of a fiduciary relationship, and the fact that the critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense (see Hospital Products Limited v United States Surgical Corporation (1985) 156 CLR 41 at 96-97 per Mason J (as he then was)).
46 The applicant Defendants also rely upon the statement in Meagher, Gummow and Lehane, Equity Doctrines and Remedies, 3 ed., 130 that "the distinguishing characteristic of a fiduciary relationship is that its essence, or purpose, is to serve exclusively the interests of a person or group of persons"; or, to put it negatively, that it is a relationship in which the parties are not free to pursue their separate interests.
47 The applicant Defendants point to the clear distinction drawn in Hospital Products (at 67-75 per Gibbs CJ, at 118 per Wilson J and at 137-143 per Dawson J) between a fiduciary relationship and the association between companies and entities for a common purpose or for the participation in a venture for their common good. (See also, P.D. Finn, "The Fiduciary Principle" in T.G. Youdan (ed.).) Equity, Fiduciaries and Trusts (1989), 31f.)
48 The applicant Defendants point to the response under cross-examination by Miss Elisjones that the relationship of the Fifth Defendant to the Plaintiff was only that of a proposed financier.
49 The applicant Defendants respond to the alternative basis for the claim against the Fifth Defendant, being that it "assisted [the First Defendant] in a dishonest and fraudulent design" and/or induced a breach of a fiduciary duty. The applicant Defendants in this regard proceed in their submissions upon the assumption that the Plaintiff is claiming that the Fifth Defendant participated with knowledge in the alleged breach of the First Defendant's fiduciary duty, within the meaning of that principle as enunciated in Barnes v Addy (at 251-252).
50 The applicant Defendants observe that there are no particulars furnished in the amended statement of claim of this alleged participation in the fraud of another, of a nature to satisfy the requirement of Part 16 rule 2 of the Supreme Court Rules ("A party pleading shall give particulars of any fraud, misrepresentation, breach of trust, wilful default or undue influence on which he relies"), which requires a fraudulent breach of trust to be clearly particularised (see Banque Commerciale SA (in liquidation) v Akhil Holdings Limited (1990) 169 CLR 279.)
51 Further, the applicant Defendants point to the absence of any particulars as to the alleged knowledge of the Fifth Defendant, except that that knowledge is said to be "actual". The applicant Defendants submit that the surrounding circumstances from which this "knowledge" is said to arise have not been pleaded, and that, as the decision of the High Court of Australia in Counsel Development Pty Limited v DPC Estates Pty Limited (1975) 132 CLR 373 at 398 demonstrates, mere knowledge by an employee of the actions of a party which are held to be a breach of fiduciary duty is not "actual knowledge" of the breach of fiduciary duty unless the third party also knew of the existence of the fiduciary duty that was being breached.
52 However, it should be recognised that there is no need to particularise an allegation of actual knowledge, Part 16 rule 3 (especially subrule (2) thereof) making express provision in this regard.
53 The foregoing submission of the applicant Defendants appears also to overlook paragraphs 73 and 75 of the amended statement of claim, which have the effect of expressly pleading that the Fifth Defendant knew of the fiduciary duty which was being breached, as well as of the actions of the First Defendant in breach of that duty.
54 It is submitted on behalf of the applicant Defendants that the relief sought against the Fifth Defendant demonstrates the artificiality of the claim brought against that Defendant. The relief sought is that the Fifth Defendant pay "the settlement moneys", or an equivalent amount, to the Plaintiff. That is to say (according to the submission of the applicant Defendants) that the Plaintiff is claiming that the Fifth Defendant, having already paid these moneys to the other Defendants, is somehow liable to pay this amount for a second time, but now to pay it to the Plaintiff. The applicant Defendants submit that such relief clearly is neither an amount representing the Plaintiff's damages nor an amount representing the Fifth Defendant's profits. Further, that the Plaintiff also claims that the Fifth Defendant is somehow liable to it for the fees it received, although the Plaintiff has not pleaded that any fees were in fact received.
55 The applicant Defendants rely upon the advice given by former Counsel for the Plaintiff that the Plaintiff had no sustainable claim against the Fifth Defendant. In this regard, the applicant Defendants point to the fact that it was not until after the filing of their present application that the claim against the Fifth Defendant was made, some four years after the proceedings were commenced. The Plaintiff, in response, supports the existence of a reasonable cause of action against the Fifth Defendant by relying upon an advice from its present Counsel (Exhibit E).
56 The applicant Defendants submit that Exhibit E does not explain why the claim against the Fifth Defendant was commenced so late, and also construe that advice as being equivocal in its terms ("there are grounds warranting an application to join Sanwa"), that advice not stating expressly that any such claim against Sanwa has any prospects of success.
57 I find it somewhat curious that in the present application it is the applicant Defendants which are asserting that there exists no reasonable cause of action in the Plaintiff against the Fifth Defendant. The Fifth Defendant itself has not ever made such an assertion. It has entered an appearance. There has been no attempt on the part of the Fifth Defendant to strike out or to have dismissed the claim against it. Any deficiencies in the pleading against the Fifth Defendant, as set forth in the amended statement of claim (for example, in respect to particulars of fraud), are matters which should be raised by the Fifth Defendant, and it has not yet seen fit to do so.
58 As to the complaints of the applicant Defendants concerning the nature of the relief sought by the Plaintiff against the Fifth Defendant, it should be recognised that prayers for relief do not technically constitute part of a pleading. Thus any perceived defects in those prayers for relief cannot be determinative of whether the pleading is liable to be struck out, or whether it discloses a cause of action. In all cases a Court of Equity will mould the form of its relief to the nature of the entitlement which has been established before it.
59 But, in any event, the relief sought against the Fifth Defendant is, consistent with the principle in Barnes v Addy, the amount of the profit received by the other four Defendants, the liability of the Fifth Defendant in respect to that profit being a liability as an accessory jointly with the liability in respect thereto of the other four Defendants, who actually received the profit. The profit consisted of the Californian Settlement moneys. It should be recognised that the claim of the Plaintiff is not for damages or for profits made by the Fifth Defendant, but is for profits made by the first four Defendants, for which profits the Fifth Defendant is liable as an accessory under the principle in Barnes v Addy.
60 Neither do I consider that the reliance by either party upon what was contained in an advice by previous Counsel for the Plaintiff or is contained in an advice by present Counsel for the Plaintiff is determinative of the existence of a cause of action in the Plaintiff against the Fifth Defendant. On 26 April 2000 Justice Windeyer made an order, pursuant to Part 8 rule 8 of the Supreme Court Rules, for the joinder of Sanwa Australia Limited as Fifth Defendant to the proceedings. Unless and until, upon application by a party having the standing to do so, the amended statement of claim against that Defendant is struck out or the proceedings against that Defendant are dismissed, it seems to me that the Court should, at least prima facie, proceed upon the basis that that Defendant has been properly joined and that the Plaintiff has a cause of action against that Defendant.
61 Further, I am of the view that it is for the present applicant Defendants to establish that there is no cause of action disclosed against either the Second Defendant or the Fifth Defendant; that is, that it is for the applicant Defendants to establish that the claims of the Plaintiff against those Defendants are hopeless or are doomed to failure. It is not for the Plaintiff to establish that it must necessarily succeed in its claims against those Defendants; it is for the applicant Defendants to establish that the Plaintiff will not succeed against either the Second Defendant or the Fifth Defendant (see General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 at 128-130 per Barwick CJ; see, also, Tyne Improvement Commissioners, at 341 per Lord Porter, at 358-360 per Lord MacDermott.)
62 In this regard, it will be appreciated that, for the purposes of the present application, it must be assumed that the Plaintiff at a final hearing will be able to establish the factual matters asserted in the amended statement of claim.
63 The present application is not an appropriate vehicle by which to determine whether or not the Plaintiff will ultimately succeed against the Fifth Defendant. It is not necessary for me to express any concluded views concerning the precise nature of the relationship between the Plaintiff and the Fifth Defendant, and the assertion on the part of the Plaintiff that the conduct of the Fifth Defendant constituted a breach of fiduciary duty owed by that Defendant to the Plaintiff arising out of their relationship in the pursuit of the Opportunity, or the assertion that the Fifth Defendant was liable as an accessory under the second limb of the principle in Barnes v Addy for giving knowing assistance to the breaches by the other Defendants of their fiduciary obligations to the Plaintiff.
64 It is sufficient for me merely to say that the claims of the Plaintiff against the Fifth Defendant are certainly arguable, and are not in my view necessarily doomed to failure.
65 The applicant Defendants submit that, even if the Plaintiff be successful in establishing fulfilment of the requirements of the first limb of paragraph (a) of Rule 1A(1) ("where the proceedings are properly brought against a person served or to be served in the State"), nevertheless, in any event, the Plaintiff cannot establish fulfilment of the requirement of the second limb of that paragraph ("the person to be served outside the State is properly joined as a party to the proceedings"). In this latter regard the applicant Defendants submit that they are not properly joined as parties to the proceedings. Firstly, they submit that the proceedings constitute an abuse of process. Secondly, that the proceedings against the applicant Defendants are bound to fail.
66 It should at the outset be recognised that the present is plainly a case in respect of which the provisions of Part 8 rule 2 of the Supreme Court Rules have application, to authorise the joinder of each Defendant in the one proceedings. The applicant Defendants do not submit otherwise.
67 I shall now proceed first to consider the submissions relating to abuse of process.
68 It has already been observed that the proceedings were instituted by statement of claim filed by the Plaintiff on 9 September 1997. At that time the Plaintiff was deregistered and had purportedly been dissolved under section 474(1) of the Corporations Law.
69 In proceedings 2804 of 1988 Dahozo Pty Limited v OZ-US Film Productions Pty Limited application was made on behalf of the present Plaintiff for its reinstatement. That application came before Bryson J on two occasions. Firstly, on 3 September 1997, in respect of which His Honour gave reasons dated 4 September 1997; and on 5 September 1997, in respect of which His Honour gave reasons dated 12 September 1997. On the first occasion His Honour declined to make the orders sought by the applicants in those proceedings. On the second occasion His Honour stood the application over to 13 October 1997. Subsequently the application came on for hearing before Hodgson CJ in Eq., who on 15 December 1997 made orders for the reinstatement of the present Plaintiff.
70 It will be appreciated that if the Plaintiff had, in fact, been validly dissolved, the institution of the present proceedings some three months before the reinstatement of the Plaintiff was, until that reinstatement, irregular. However, upon the making of the order for reinstatement, which was made by Hodgson CJ in Eq. on 15 December 1997 pursuant to section 574(3) of the Corporations Law, the effect of that order was (by virtue of subsection (4) of the foregoing section) that the company is deemed to have continued in existence as if its registration had not been cancelled.
71 Accordingly, the Plaintiff, having been reinstated, must since 15 December 1997 be deemed to have continued in existence throughout the entire time during which it was deregistered, including the time when the present proceedings were instituted. Thus the order of 15 December 1997 has the effect of retrospectively validating any proceedings or activity initiated or performed by the Plaintiff between dissolution and reinstatement. (See Silverstone Holdings Pty Limited v American Home Assurance Company (1997) 18 WAR 516). In particular, and in the circumstances of the instant case (where, as here, a company is deregistered whilst being a party to court proceedings, but achieves re-registration before it is removed from those proceedings), the proceedings continue unaffected, even if they were temporarily irregular during the period while the company was deregistered (see Jekos Holdings Pty Limited v Australian Horticultural Finance Pty Limited (1994) 121 FLR 362; Lidio Excellence Pty Limited v Cincotta (1998) 28 ACSR 389).
72 As I understand it, the complaint of the applicant Defendants upon which they ground their submission that the joinder of them constitutes an abuse of process is, not the fact that at the time of the filing of the statement of claim the Plaintiff was deregistered - the applicant Defendants concede the foregoing effect of subsection (4) of section 574 of the Corporations Law - but the fact that, so it is submitted on behalf of the applicant Defendants, Hodgson CJ in Eq. was somehow misled at the time when he made the order of 15 December 1997.
73 If that be the complaint of the applicant Defendants, that the order of 15 December 1997 was made in circumstances where the Court was deliberately misled by or in respect to the present Plaintiff, then it must be obvious that the present application is not an appropriate procedure for the challenging of the order of 15 December 1997. That order has force and effect as an order of the Court until it is set aside or varied (either upon appeal or in accordance with the provisions of Part 40 rule 9 of the Supreme Court Rules). It is not for me in the course of the present application to determine whether or not the order made by the Chief Judge in Equity on 15 December 1997 was made in circumstances where His Honour was misled and where, if His Honour had been apprised of what are referred to by the applicant Defendants as the true facts (for example, relating to the present proceedings having been instituted, rather that merely proposed to be instituted), His Honour would not have made the order.
74 In any event, it has been submitted on behalf of the Plaintiff that there is no evidence before the Court that His Honour was misled, actively or deliberately or materially or at all, during the reinstatement proceedings. The Plaintiff further submits that there is no basis for assuming that the result of the reinstatement proceedings would have differed in the slightest had His Honour known that the present proceedings had already been instituted.
75 So long as the order of 15 December 1997 remains in force, I do not consider it appropriate for me to treat the making of that order as in any way a ground upon which I could conclude that the present proceedings, or the institution of the present proceedings before the reinstatement of the Plaintiff, constitute an abuse of the process of the Court.
76 In the light of the conclusion which I have just expressed, it is not necessary for me to proceed to a detailed consideration of the submission on behalf of the Plaintiff that the purported dissolution of the Plaintiff pursuant to subsection (1) of section 574 was irregular and unauthorised. I record however that that submission was grounded upon the fact that, whilst the Australian Securities Commission (as that entity was then named) ("ASC") purported to act pursuant to section 572(3) of the Corporations Law, it was not entitled to do so, since the Plaintiff was never "being wound up", but was at the time merely in provisional liquidation. The statutory precondition of the purported exercise of the power of the ASC to deregister was absent. Although I express no concluded view in this regard, the foregoing submission appears to me certainly to be arguable. If that be so, then, of course, the order for reinstatement made on 15 December 1997 was unnecessary, and the invocation of the deeming provision contained in subsection (4) of section 574 of the Corporations Law need never be or have been called into operation.
77 The other ground upon which the applicant Defendants submit that they have not been properly joined as parties to the proceedings is that the proceedings against the applicant Defendants are bound to fail.
78 The submission of the applicant Defendants in this regard is that the Plaintiff founds its case against those Defendants on a breach of fiduciary duty. The applicant Defendants submit that although the relationship of principal and agent is ordinarily one which arises from a contract, fiduciary obligations arise out of status or relationship, rather than out of any contract.
79 It is the submission on behalf of the applicant Defendants that the proper law of any contract of agency that might exist between the Plaintiff and the applicant Defendants was the law of California. Further, that in any event, the Plaintiff has not pleaded any contract at all or has not pleaded that the proper law of the contract was the law of New South Wales - merely that the Third Defendant was the "duly authorised agent" of the Plaintiff.
80 As I understand it, the submission of the applicant Defendants in this regard is that if the cause of action against those Defendants is a cause of action in contract, the proper law of that contract is that of California; if, however, the cause of action is grounded upon the equitable principles of fiduciary duty asserted to repose in the applicant Defendants for the benefit of the Plaintiff, then the Court is being required to exercise its powers in personam against the applicant Defendants.
81 In this latter regard the applicant Defendants rely upon the passage from the judgment of McLelland J (as he then was) in US Surgical Corporation v Hospital Products International Pty Limited [1982] 2 NSWLR 766 at 796. The applicant Defendants submit that it would be inconsistent with the exercise by the Court of a jurisdiction in personam where the persons against whom that jurisdiction is being invoked are not resident within New South Wales, but, in the case of the Third Defendant, is and has been resident in California in the United States of America, and, in the case of the Fourth Defendant, is a company incorporated in California.
82 The applicant Defendants say that this is particularly so when there is no doubt that the law of California recognises and vindicates fiduciary obligations, and, further, when the Plaintiff's right to sue in respect of those obligations is statute barred by the law of the place where the relevant conduct occurred, being California.
83 At the outset of the hearing of the present application an attempt appeared to be being made on behalf of the applicant Defendants to have the Court in some way assume judicial notice of the law of California.
84 Presumably in consequence of comments made by me (that the basal principle underlying the administration of justice is that the law being applied is assumed to be secreted in the bosom of the judge, whilst foreign law (in the instant case, the law of California) is a matter of fact, which must be proved by expert evidence), there was subsequently tendered by the applicant Defendants evidence concerning the law of California. That evidence consisted of a report dated 25 January 2001 from Robert Tunick Talbot-Stern (Exhibit 5). Mr Talbot-Stern was cross-examined during the hearing of the application.
85 Mr Talbot-Stern has been qualified to practice law in the United States of America since 1967, having been admitted to practice in the States of Connecticut, New York and Michigan and in Washington D.C., and before various Federal District Courts, the Federal Circuit Court of Appeal and the United States Supreme Court. His legal practice has included many matters under California law. Although he has not been admitted as a practitioner by the State of California he has been admitted to practice in that State pro hac vice for specific cases (for example, when he was an official prosecutor for the United States Department of Justice). His involvement with California Law has been both as litigation Counsel admitted pro hac vice before State or Federal Courts in California and in rendering advice on California law (which he has been entitled to do).
86 The effect of Mr Talbot-Stern's report is that the causes of action pleaded against the Third and Fourth Defendants would, if brought against those Defendants in the State of California, fall within the provisions of the Code of Civil Procedure of the State of California ("the Code") (the relevant provisions whereof were admitted into evidence as Exhibit 1), and in particular sections 335-349.4. That a cause of action against the applicant Defendants in contract would come within section 337 of the Code, whilst a cause of action against those Defendants grounded on breach of fiduciary duty would come within the general provision of section 343 of the Code (applicable to an action for relief not otherwise covered in a preceding section), since the Code contains no specific provision for a limitation period in respect to breach of a fiduciary duty. Each of sections 343 and 337 requires that the action be brought within four years of the date at which the cause of action arises.
87 Mr Talbot-Stern was cross-examined concerning the professional requirements for admission as a legal practitioner in the State of California (where he had not sought to be admitted as a practitioner, except in the specific instances to which reference has already been made). He was also cross-examined concerning what was described as the "doctrine of equitable tolling". He said that tolling means a situation where a limitation period is not running, either because it has not started to run or because it has started to run and has stopped - that is, tolling means the non-running of the statute of limitations.
88 Mr Talbot-Stern agreed that the State Courts in California apply the doctrine of tolling, at least in some circumstances. He agreed that it was at least arguable that in California equitable tolling would apply and that the statute of limitations would not run during the period whilst the Plaintiff was deregistered. Although he gave evidence of most statutes of limitation in the United States being deemed procedural rather than substantive, he said that the limitation to be applied in California would be the law of the place of substantive law, but agreed that that was what he described as an arguable conclusion, and said that he could not state definitively his opinion on the foregoing matters.
89 In a dispute between a principal and agent Mr Talbot-Stern said that the Courts of California would decide first what was the proper law of the agency, and that an important consideration in that regard would be the place where the agency was created. He said that it was arguable in the circumstances of the instant case that the proper law of the agency was New South Wales.
90 In respect to a cause of action for breach of fiduciary duty in relation to a claim for profits Mr Talbot-Stern said that the cause of action did not arise until the profits were made. He also said that the question of whether or not the limitation period under the California statute began to run against the Plaintiff in the circumstances of the instant case would depend upon when the Plaintiff became aware of the existence of its cause of action.
91 The final conclusion expressed by Mr Talbot-Stern on the question of equitable tolling was that, on balance, a California Court would not allow the deregistration of a company in Australia to cause a tolling of the limitation statute.
92 In response to the foregoing submissions on the part of the applicant Defendants, that the proceedings against them are bound to fail, the Plaintiff relies upon the following matters.
93 It is submitted on behalf of the Plaintiff that it is strongly arguable that the applicable substantive law is that of New South Wales, not of California. Further, that even if the applicable substantive law is that of California, the limitation law of the forum (that is, New South Wales) nevertheless remains applicable; and that, even if the limitation law of California were applicable, it would not bar the proceedings.
94 For the applicant Defendants to succeed upon their submission that the proceedings against them are hopeless, they must establish, firstly, that the substantive law applicable to the liability of the applicant Defendants to the Plaintiff is the law of the State of California. Then, to establish that the Supreme Court of New South Wales would apply the law of California not only in respect to matters which have been traditionally regarded as substantive, but also in respect to limitation provisions. Further, that under the law of California the claim of the Plaintiff against the applicant Defendants would be statute barred.
95 The Plaintiff responds by submitting, firstly, that as a matter of choice, the law of New South Wales and not that of California governs the potential liability of the applicant Defendants to the Plaintiff. Further, that even if the law of California is applied, this Court applies that foreign law only to substantive matters, and not to procedural matters, which (so it is submitted on behalf of the Plaintiff) include limitation provisions, those being governed by the lex fori.
96 Further, that even if the Court were to apply the limitation provisions of California, the evidence does not support (at least to the standard required upon this kind of argument) the conclusion that the Plaintiff's claim would be statute barred in California.
97 The Plaintiff submits that the law applicable to the potential liability of the applicant Defendants to the Plaintiff as a matter of substance is that of New South Wales and not that of California. Firstly, because questions relating to the constitution of corporations are decided according to the law of the place where the corporation is incorporated (see Banco de Bilbao v Sancha (1938) 2 KB 176 at 194-195; Re Anglo Austrian Bank (1920) 1 Ch. 69; Karl Zeiss Stiftiung v Rayner & Keeler Limited (No. 2) [1967] 1 AC 853).
98 Further, because the relationship between the Plaintiff and the applicants was one of agency, the inquiry, therefore, is as to the proper law of the contract of agency (see US Surgical Corporation v Hospital Products International [1983] 2 NSWLR 157 at 187-192). The proper law of such a contract is usually determined by the location of the principal (see Dicey and Morris, The Conflict of Laws (12 ed.), Vol 2, p 1453, and authorities there cited); other relevant considerations involve the place where the contract of agency was made (Dicey and Morris, op cit, 1453). Ultimately, the search is for that "system of law...with which the transaction has the closest and most real connection" (P.E. Nygh, Conflict of Laws in Australia (4 ed.), p 227; as to the application of the foregoing principle, see Re United Railways of the Havana and Regla Warehouses Limited [1960] Ch. 52 at 91 per Jenkins LJ).
99 In this regard the Plaintiff relies upon the letter of authority constituting the agency between the Plaintiff and the applicant Defendants (or at least the Third Defendant) dated 2 January 1987 (Exhibit A). The Plaintiff also relies upon the following matters as supporting the submission that it is the law of New South Wales with which the agency asserted to exist between the Plaintiff and the applicant Defendants has the closest connection.
· The parties are overwhelmingly Australian nationals or Australian corporations.
· The contract was made in New South Wales, where the relevant resolution by the directors of the Plaintiff was adopted (accepting the offer of the Third Defendant to act as agent for the Plaintiff) and the relevant instrument of authority was executed.
· The Plaintiff - the principal - is incorporated in New South Wales.
· The main transaction involved a venture to be undertaken primarily in Australia, and the primary place for performance was Australia.
· Various of the agreements and draft agreements prepared in respect of the venture selected New South Wales law as the governing law of the contract, and provided for the Courts of New South Wales to have (non-exclusive) jurisdiction (see, for example, Exhibit BEJ2).
100 It is submitted on behalf of the Plaintiff that, alternatively, even if the relationship between the Plaintiff and the applicant Defendants is otherwise governed by foreign law (that is, in the circumstances of the instant case, by the law of California), there is a considerable body of judicial authority that a local Court of Equity would apply equitable principles administered by itself to found relief against a defendant subject to its jurisdiction. This situation is not limited to a case where the Defendant resides within the jurisdiction (see US Surgical Corporation v Hospital Products International Pty Limited at 796, where McLelland CJ in Eq stated that residence was a sufficient basis, not that it was a necessary basis).
101 It is in my view arguable that the true position is no more than that, once a defendant is amenable to the in personam jurisdiction of the Court, that Defendant is subject to the equitable principles of the lex fori. That conclusion is supported by, for example, the express provision of the Supreme Court Rules, where Part 10 rule 1A(1) allows service outside Australia in the case
(c) where the subject matter of the proceedings is a contract and the contract -