Searle v Kearns & Ors [2001] NSWSC 679 | Case summary

1 HIS HONOUR: Hilton George Searle has issued a statement of claim against a number of defendants. The statement of claim is dated 10 November 2000. The third defendant is Mr Gordon Finlay, who was appointed as a receiver of the mortgaged assets of a company, Nambucca Investments Pty Limited. The fourth defendants are described as partners of a firm of solicitors trading as Garrett Walmsley Madgwick, Lawyers. They are named, respectively, as John Garrett, Andrew Walmsley, Warren Madgwick and Linda Madgwick. The fifth defendant is the National Australia Bank Limited. 2 A notice of motion was issued on behalf of the third and fourth defendants to strike out the statement of claim so far as it related to them. A further notice of motion was issued on behalf of the bank, a fifth defendant, to strike out the paragraphs in the statement of claim so far as it related to it. The matter came before the Court today and there has been no appearance, however, for Mr Searle. Though various documents have been tendered, there has been correspondence between the solicitors for the various defendants and Finlaysons, solicitors, acting for Mr Searle, which indicated that the solicitors were certainly well aware of the proceedings. Today is the return day, in any event of the various notices of motion. They have proceeded ex parte. 3 The background is complicated. It is enough to say that Mr Searle was, until 30 September 1994, a trustee of certain debenture holders of Nambucca Investments Pty Limited. Apparently, the trustee imposed certain limitations upon the ability of the company to raise monies beyond the sum of $2 million. The short point is that, apparently, debenture holders complained that the company did ultimately raise a sum in excess of that limitation, thereby jeopardising the security of debenture holders. It is suggested that this was done with the complicity of the bank who was well aware of the limitation and that it was in breach of the trust deed. 4 The Court appointed the third defendant, Mr Finlay, as the receiver of the assets of the trust. He, thereafter, entrusted the firm, Garret Walmsley Madgwick, to commence an action in this Court against, amongst others, the bank, on behalf of debenture holders. That action, as I understand the material, was indeed preceded by a number of other actions in which debenture holders sought to ventilate their grievances against, amongst others, the bank, and, indeed, against Mr Searle. Ultimately, however, the matters were settled upon the basis that there was judgment entered in respect of each of these actions including the action by Mr Finlay against the bank, for the bank. Payment was apparently made on some basis to Mr Finlay for distribution to debenture holders. One gathers underlying the present action is some form of grievance against the arrangement which was ultimately entered into. However that may be, the ordinary statement of claim issued against the bank, that is the fifth defendant, purports to simply incorporate by reference in paragraph 5.1, the proceedings commenced in this Court by the receiver, Mr Finlay, against the bank. It purports to rely upon causes of action in those proceedings as though they were, "Incorporated in the pleadings of this action". 5 The bank, in such circumstances, makes a number of complaints: The first is that there has been no attempt to plead a cause of action by Mr Searle against the bank. A cause of action was vested by the debenture trustee in Mr Finlay, appointed as receiver on behalf of debenture holders, and pursued by Mr Finlay in this Court. It is impermissible to plead in that shorthand way that appears in paragraphs 5.1 and 5.2. Secondly, Mr Finlay, as mentioned, brought the action in this Court which was then settled and judgment entered for the bank. Thirdly, a deed of release was executed at that time which was signed, amongst others, by Mr Searle. Accordingly, quite apart from pleading deficiencies, there is simply no cause of action against the bank. 6 This aspect was drawn to the attention of the solicitors appearing for Mr Searle, the plaintiff, on a number of occasions after the statement of claim was issued. The solicitors were given the opportunity to withdraw the proceedings and thereby avoid the accumulation of costs. They failed to take advantage of that suggestion; instead the action was allowed to remain and notices of motion were then issued. 7 Again, the matter was not discontinued. They have not appeared today on behalf of the plaintiff. In these circumstances, the fifth defendant seeks orders, first, that the cause of action be struck out and, second, that there be indemnity costs. 8 It appears to me that such orders are appropriate in the circumstances that I have described. 9 Turning to the position of the third defendant, the receiver, Mr Finlay, and the firm of solicitors, it is perhaps easiest to deal with the position of the solicitors first: I am told that neither Warren Madgwick nor Linda Madgwick was ever a partner of the firm of solicitors instructed by the receiver. They are, therefore, not appropriately named as defendants. That fact has been drawn to the attention of the plaintiff's solicitors but, notwithstanding, there has been no application to remove them from the proceedings or amend the names of those who are properly named as defendants. It is manifest that there is no cause of action against them. 10 Secondly, as to the partners who remain, again, my attention is drawn to the way in which the statement of claim has been pleaded. There is no attempt to identify any facts which may give Mr Searle a basis to bring the present claim. He was the trustee appointed on behalf of the debenture holders. However, he ceased to hold that office on 30 September 1994. Thereafter, Mr Finlay was the person appointed by the Court to pursue any cause of action which the debenture holders may have arising out of the actions of the bank. That cause of action was pursued and resolved in the way that I have outlined. No attempt has been made to indicate how Mr Searle, as a former trustee, not as a person who even was a debenture holder, might have some standing to bring a representative action on behalf of debenture holders or on his own behalf. I am told that a representative action was brought in previous proceedings which themselves were settled in terms where judgment was entered for the bank. That is the first complaint. 11 The second complaint is that the pleading does not suggest that, or assert that, Mr Searle in any way relied upon anything which was said or done by the solicitors and does not address the issue of causation. Indeed, it purports to describe a cause of action that the solicitors did not act in good conscience on behalf of the debenture holders. It appears to me that the complaints of the third defendant are well founded, the pleading is defective, there is no apparent cause of action and in respect of those allegations against the third defendant, those paragraphs are struck out. 12 Turning to the position of the third defendant, Mr Finlay, my attention has been drawn to a number of authorities. In Re Sirinoth Pty Limited (1991) 9 ACLC 1580, a decision of McLelland J, former Chief Judge in Equity, and a further decision in Re Sirinoth No. 3 handed down in November 1991 and reported in (1991) 9 ACLC 1587 as well as in Re Maidstone Palace (1909) 2 Chancery 283, whereby an action, if it is to be brought against a receiver appointed by a Court, can only be taken with the leave of that Court. No leave was sought or given in respect of an action against Mr Finlay. The proceedings are, therefore, defective. 13 I have raised with counsel the possibility that there may be a cause of action though not properly pleaded which may be lost were I to strike out the pleading. However, I am told that the payments which were made pursuant to the various arrangements entered into as a result of the proceedings undertaken by Mr Finlay did not take place until 1999. The matter is well within time if anyone is minded to bring an action against Mr Finlay in respect of his action. 14 No cause of action is obvious or manifest by the facts disclosed and the pleading, such as it is, and it seems to me that the appropriate order in that case is also that the pleading, so far as it relates to Mr Finlay, should be struck out. (Submissions on costs) 15 This matter came before the Court on 15 June 2001 and on that day counsel appeared for the plaintiff and acknowledged that no cause of action had been disclosed. Upon that basis, the third and fourth defendants seek indemnity costs. It does appear to me that the plaintiff, through his solicitor, has been on notice of the problems in relation to the statement of claim for some time and has done nothing to either remedy those problems or withdraw the proceedings and thereby minimise costs. It is not inappropriate to likewise award indemnity costs to the third and fourth defendants. 16 The orders I therefore make are these:

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Searle v Kearns & Ors

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