Szabo v Dasford Holdings Pty Ltd [2002] FCA 1438 | Case summary

REASONS FOR JUDGMENT 1 The applicant applies for an extension of time in which to file and serve a notice of appeal from portions of a judgment given by French J on 10 September 2002. An extension of time is sought because the notice of appeal was not filed and served within the time limited by O 52 r 15 of the Federal Court Rules. That rule reads: "15(1)The notice of appeal shall be filed and served- (a) within 21 days after- (i) the date when the judgment appealed from was pronounced; (ii) the date when leave to appeal was granted; and (iii) any later date fixed for the purpose by the court appealed from; or (b) within such further time as is allowed by the Court or a Judge upon application made by motion upon notice filed within the period of 21 days referred to in the last preceding paragraph. 15(2) Notwithstanding anything in the preceding sub-rule, the Court or a Judge for special reasons may at any time give leave to file and serve a notice of appeal." 2 It is common ground that any notice of appeal was required to be filed and served as of right by 1 October 2002. It was in fact filed and served on 2 October 2002, the date on which the application for extension of time was also filed and served. Factual background 3 The factual circumstances in which the application comes to be made appears from the affidavits of Mr Macpherson an employee of the solicitors for the applicant (the proposed appellant). His evidence is that the applicant for leave instructed the solicitors to lodge an appeal following the handing down of the judgment by French J. A notice of appeal was thereupon prepared. It was ready to file and serve around 5.00pm on Friday, 27 September 2002 but, as the Registry of the Court was then closed, it could not be filed that day. The following Monday, 30 September 2002 was a public holiday so that the notice of appeal could not be filed that day. Due to an administrative oversight by the solicitors for the applicant, the notice of appeal was not filed and served on 1 October 2002. The circumstances giving rise to the administrative oversight were that the responsible solicitor (Mr Macpherson) was engaged with another urgent matter in circumstances where his secretary was out of the office all day due to serious illness. Contentions for applicant 4 The following arguments are relied upon as constituting circumstances which provides "special reasons" for the Court to grant leave in accordance with the provisions of O 52 r 15(2) of the Federal Court Rules. (1) Nature of delay: The length of delay was less than a day; it was not due to any act or omission by the applicant nor any defect in the notice of appeal. (2) Absence of prejudice: There is no prejudice to the respondents. (3) Nature and subject matter of the litigation: The claims in the litigation are for damages in relation to misleading and deceptive conduct and unconscionable conduct in relation to leases and tenancies within a shopping centre. These circumstances are relevant circumstances: Boomalli Ltd v Hake [1985] WAR 7. (4) Absence of any lack of bona fides: There is no evidence of lack of bona fides on the part of the applicant or the solicitors of the applicant: cf Hallman v Distribution Group Ltd [2002] FCA 219 at [24]. This is not a case where the notice of appeal has been drafted simply by way of protection of the applicant's interest, leaving the question of whether the appeal was to be pursued to later determination: cf Tillman's Butchery Pty Ltd (in liq) v Huntingford (Neaves J, 24 December 1990, unreported). (5) Reasonable prospects of success: It is said that even in the absence of special circumstances arising from the delay the Court, if satisfied there are reasonable prospects of success, should grant the leave: Hallman at [25]. It is submitted that the issues of fact and law raised in the draft notice of appeal are significant and fundamental to the outcome of the action. If some or all of the grounds of appeal are correct but the appeal is not permitted to proceed the applicant and group members will suffer substantial injustice. Nature of the action 5 The general nature of the action was described by French J in his reasons for judgment as follows: "On 6 April 2001, Kandy Lee Revian commenced representative proceedings in this Court on behalf of herself and a number of other tenants of the Clarkson Neighbourhood Shopping Centre at the corner of Renshaw Boulevard and Ainsbury Parade, Clarkson. Between February 1998 and December 1998, she and her father, Grant William Thompson, operated a video business there known as Leading Edge Video Clarkson. They operated their business as trustees of the GKDK Trust. Their action was brought against Dasford Holdings Pty Ltd ("Dasford"), owner of the shopping centre and against Penman Holdings Pty Ltd ("Penman") which carried on a real estate agency under the name Perth Residential Investments. According to the statement of claim, Penman was employed at all material times as Dasford's leasing agent for the shopping centre. Thurston Saulsman, a director of Dasford and Penman, Kevin Pownall, who was a director of Dasford from 11 March 1991 to 28 January 2000 and Brian Bowler, who was a director of Dasford from 11 March 1991 until 28 April 1999 and its secretary from 11 March 1991 to 16 March 2001, were also joined. The statement of claim complains of misleading or deceptive conduct, negligent mis-statement and deceit on the part of or attributable to Dasford and Penman inducing the tenants to enter into leases for shops at the shopping centre. The directors are said to have been accessorially involved." 6 On 28 May 2002 French J made orders striking out the statement of claim filed on 9 April 2001 and granting leave for filing of the substituted application and statement of claim. These were filed on 16 July 2002. On 31 July the fourth respondent brought a motion seeking further striking out orders. As a result of the hearing before him and the reasons for judgment given on 10 September 2002 French J ordered: "1. The applicant be removed as representative of the Group Members. 2. So much of the substituted statement of claim as relates to the causes of action asserted by the First Group Members be struck out. 3. So much of the substituted statement of claim as alleges the accessorial involvement of the third, fourth and fifth respondents be struck out. 4. The proceedings be dismissed as against the third, fourth and fifth respondents. 5. The applicant pay the third, fourth and fifth respondents' costs of the application. 6. There be liberty to apply to substitute another Group Member or Group Members for the applicant. 7. The action as a whole will stand dismissed unless on or before 24 September 2002 a motion be filed which seeks to substitute another person or persons as applicant and proposes further directions for the progress of the action." 7 In the course of his reasons French J addressed the viability of the claims for accessorial liability in the statement of claim. The fourth respondent in his arguments before French J directed attention to the claimed basis of his accessorial involvement in the alleged contraventions by Dasford and Penman. The pleading made common allegations against the third, fourth and fifth respondents. French J considered it sufficient for his purposes to set out the plea of accessorial involvement in respect of representations to the first group members as set out in par 68 (while referring to other paragraphs which were relevant). The pleadings at par 68 read (subject to added markings, referred to later in these reasons): "At all material times, the Third Respondent and/or the Fourth Respondent and/or the Fifth Respondent (as well as the First and Second Respondents) were directly or indirectly, knowingly concerned in, or party to, the contraventions of the Trade Practices Act by the First and Second Respondents pursuant to section 75B of the Trade Practices Act, in that:- PARTICULARS OF INVOLVEMENT (a) The First Group Members repeat the matters pleaded in paragraphs 4 to 8 above. (b) At all material times, all of the Respondents had access to the plans, management policies and information in relation to the existing and proposed tenancies in the Shopping Centre, including the brochure and the facsimile. (c) The First Respondent, by the Third and/or Fourth and/or Fifth Respondents, engaged the Second respondent as its agent and supplied it with information, from time to time, which the Second Respondent, by Wright, used in making the (1GM) Representations pleaded. (d) Wright was reporting to the Respondents his representations to, and negotiations with prospective tenants, including the First Group Members. (e) The Respondents knew the representations were made to the First Group Members or ought reasonably to have so known. (f) [The Respondents took no steps, or insufficient step, to correct, or prevent the misrepresentations made by Wright to the First Group Members or to ensure that the representations made were accurate.] (g) Further the First Group Members rely upon the provisions of section 84 of the Trade Practices Act and section 82 of the Fair Trading Act (WA). (h) It was within the knowledge of the Third Respondent and/or the Fourth Respondent and/or the Fifth Respondent who were well aware, [alternatively who elected to remain purposely ignorant of the fact by not making any inquiries or any sufficient inquiries,] that it would not be possible to have a newsagency tenancy in the Shopping Centre, in light of the policy of the Newsagency Council of Western Australia not to permit the establishment of another newsagency in competition with the newsagency at the nearby Quinns Rock Shopping Centre. (i) It was within the knowledge of the Third Respondent and/or the Fourth respondent and/or the Fifth Respondent who were well aware, [alternatively who elected to remain purposely ignorant of the fact by not making any inquiries or any sufficient inquiries,] that it would not be possible to have a pharmacy within the Shopping Centre by reason of the existence of the pharmacy located at Quinns Rock Shopping Centre and the restriction placed by the Federal Government upon the establishment of another pharmacy within a radius of 5 km which ruled out the establishment of the pharmacy at the Shopping Centre. (j) It was within the knowledge of the Third Respondent and/or the Fourth Respondent and/or the Fifth Respondent who were well aware, [alternatively who elected to remain purposely ignorant of the fact by not making any enquiries or any sufficient enquiries (sic),] that no adequate demand existed for the establishment for a retail shopping facility on the site that the First Respondent had purchased from Landcorp, and that there were no reasonable grounds for the representations made to both mortgagees and prospective tenants regarding the strong demand for the establishment of a retail Shopping Centre facility on the undeveloped land, when in truth and in fact no such demand ever existed. (k) The Third Respondent and/or the Fourth Respondent and/or the Fifth Respondent were well aware, or ought reasonably to have been aware, that the development of the retail shopping facility on the undeveloped land which had been zoned for use as a Medical Centre by Landcorp was unlikely to succeed, but the Third Respondent and/or the Fourth Respondent and/or the Fifth Respondent nonetheless elected to insist upon the rezoning of the undeveloped land by the City of Wanneroo to permit the erection of seventeen retail tenancies on the undeveloped land, so as to enable the First Respondent to obtain an increased valuation of the undeveloped land for mortgage finance purposes and thereby obtain an increased mortgage facility from Blackburne and Dixon Pty Ltd and thereby defraud Blackburne and Dixon Pty Ltd, and/or the individual investors who provided the mortgagee funds to Blackburne and Dixon Pty Ltd, into providing mortgagee finance in circumstances where had Blackburne and Dixon Pty Ltd and/or the individual investors who provided that mortgage funds known of the true situation a far lesser amount would have been lent against the Shopping Centre or no mortgage funds would have been advanced at all. (l) Further and better particulars will be supplied after discovery and/or the administration of interrogatories." 8 French J's reasoning in relation to this pleading was based on the fact that constructive knowledge does not establish knowing concern or participation in contraventions of the Trade Practices Act 1974 (Cth) and was insufficient for accessorial liability: Compaq Computer Australia Pty Ltd v Merry (unreported, Federal Court, 14 August 1998). He said at par [20]: "Suspicious circumstances together with want of inquiry may support an inference of actual knowledge but particulars to support such an inference are not set out in the pleading. But actual knowledge, while a necessary element of accessorial involvement under s 75B, is not sufficient to establish that involvement. The assertions of actual knowledge in this case are made baldly." His Honour continued at par [21]: "In this case the knowing concern in the contraventions on the part of the directors, as particularised, appears to derive from a combination of actual or constructive knowledge with a failure to take steps "to correct or prevent the misrepresentations made by Wright … or to ensure that the representations made were accurate". There is no suggestion that any of the directors was involved in any way in the actual making of the representations complained of. Nor is there any plea that they gave instructions which led to the making of the representations. The case appears to be entirely based on the failure of the directors to take preventive activity. In my opinion the plea of accessorial involvement is a speculative construct. In so far as it relies upon constructive knowledge or the oxymoron "purposely ignorant", it is not sustainable. In my opinion the allegations of accessorial involvement do not disclose a reasonable cause of action and should be struck out." Draft notice of appeal 9 The draft notice of appeal (being the form in which the notice is to be filed if leave is granted) seeks to appeal against the striking out of the claims of the first group members and in respect of the issue of accessorial liability. The grounds are tailored accordingly. 10 The first proposed ground of appeal is that the learned primary judge ought to have decided that the trustees of the GKDK Trust could remain in the action as the first group members but that M/s Revian and Mr Thompson would need to be replaced as trustees. 11 The second proposed ground addresses the issue of accessorial involvement and provides: "…having regard to the pleadings as to: 3.4 the representations made by the third respondent to some of the group members as pleaded at paragraphs 75, 81, 88, 93, 99, 105, 113, 117, 322, 327, 352, 359 and 364 of the substituted statement of claim; 3.5 the relationship of the third and fifth respondents, to the first and second respondents, as set out in paragraphs 4 and 8 (inclusive) of the substituted statement of claim; 3.6 the relationship between the third and fifth respondents and Wright, the first respondent and the second respondent, pleaded at particulars (b), (c), and (d) to paragraph 68* of the substituted statement of claim; 3.7 the third to fifth respondents' actual knowledge of the representations made to the respective group members, pleaded at particulars (b), (d) and (e) to paragraph 68* of the substituted statement of claim; and 3.8 the plea at particulars (h), (i), and (k) to paragraph 68*, and paragraph 402 of the substituted statement of claim, which support a set of suspicious circumstances combined with a failure to make enquiry, by which it may be possible to infer actual knowledge of the representations; [his Honour] ought properly to have found that a reasonable cause of action for accessorial liability had been made out against the third to fifth respondents." 12 The proposed third ground contends that his Honour should have decided that the second, eighth and ninth group members had a reasonable cause of action against the third respondent for actual misrepresentation. 13 The next proposed ground is to the effect that his Honour erred in deciding that in the event the claim for accessorial liability should be struck out, it was appropriate to dismiss the proceedings against the third to fifth respondents when he should have given the applicant an opportunity to re-plead its case against the third to fifth respondents. 14 Another proposed ground contends that there was error of law in the primary judgment in a failure to find that a reasonable cause of action had been disclosed against the third to fifth respondents for unconscionable conduct under s 51AC of the Trade Practices Act as pleaded in pars 381 - 395 (inclusive) of the substituted statement of claim. This is also expressed in other ways including the fact that the primary judge erred in failing to find that a reasonable cause of action had been disclosed against the third to fifth respondents for accessorial liability for the first respondent's contraventions of s 51AC as pleaded in the pars 396 - 402 (inclusive) of the substituted statement of claim. 15 Finally, there is a proposed ground that there was error of law by the primary judge in striking out the accessorial involvement claims and dismissing the proceedings against the third and fifth respondents when there was no application before him for such orders. Submissions for the third respondent 16 Counsel for the third respondent did not seek to support or oppose the application. Rather he sought to draw the attention of the Court to the following matters. Non-compliance with the Act 17 For the third respondent it is submitted that the notice of appeal is not brought in accordance with the Federal Court of Australia Act 1976 (Cth) ("the Act"). Reference was made to the provisions in the Act relating to appeals in respect of representative proceedings and to s 33ZC(1) which relevantly provides: "33ZC(1) The following appeals under Division 2 of Pt III from a judgment of the Court in a representative proceeding may themselves be brought as representative proceedings. (a) … (b) an appeal by a sub-group representative party on behalf of sub-group members in respect of the judgment to the extent that it relates to issues common to the claims of sub-group members. 33ZC(2) … 33ZC(3) The parties to an appeal referred to in paragraph (1)(b) are the sub-group representative party, as the representative of the sub-group members, and the respondent." 18 Section 33A provides that (subject to contrary intention, of which there is none) "representative proceeding" means a proceeding commenced under s 33C. Relevantly that section provides: "33C(1) Subject to this Part, where: (a) 7 or more persons have claims against the same person; and (b) the claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances; and (c) the claims of all those persons give rise to a substantial common issue of fact; a proceeding may be commenced by one or more of those persons as representing or all of them." 19 Against this statutory background the argument refers to the orders made by French J on 8 October 2002. Prior to that on 10 September 2002 French J had, among the orders which he then made, removed the then applicant (Kandi Lee Ann Revian) as representative of the Group Members. Opportunity was provided by the orders for a motion to be filed seeking to substitute another person or persons as applicant. As a consequence, on 8 October 2002 M/s Szabo and M/s Rawlinson-Shelton were joined as the ninth group member and M/s Szabo was substituted as the applicant for M/s Revian. Additionally, in the orders of 10 September 2002 so much of the substituted statement of claim as related to the causes of action asserted by the first group members was struck out. 20 With reference to this latter circumstance it is contended by the third respondent that the notice of appeal cannot carry forward the appeal in respect of the first group members. It is contended that the Court should consider whether this voids the whole notice of appeal. 21 It is apparent from the orders of French J made on 10 September 2002 that the first group members were not themselves removed from the action. It was their causes of action which were struck out. It was only the applicant who was removed and in relation to whom liberty to apply to substitute was granted. 22 In my opinion the matters referred to by the third respondent do not vitiate the notice of appeal for non-compliance with the requirements of the Act. Untenable propositions in draft statement of claim 23 Here, counsel for the third respondent contended that starting from the proposition as stated by French J that mere knowledge is not sufficient to establish accessorial liability, what remains in the pleading in par 68 does not raise any circumstance other than mere knowledge. 24 For the applicant it is contended that examination of par 68 shows that much remains after deletions of the matters covered by the previously quoted paragraphs of the reasons of French J dealing with the issue of knowledge in relation to accessorial liability. The matters which the applicant says are excluded by the reasoning of French J have a line placed through them in the previous quotation of par 68. The matters there appearing in brackets are said for the applicant to be matters which opportunity should have been given to the applicant to re-plead. 25 What was contended was that in the circumstances his Honour was in error in not having given leave to the applicant to re-plead after striking out of the accessorial claims. I will return to that issue. Strike out as an abuse 26 Counsel for the third respondent raised the question whether the strike out in the exercise of the discretion was an abuse of process in the circumstances. In his conclusion, French J said that "it is questionable now whether the action is viable at all having regard to the history of difficulty with the pleading, the time that has elapsed and the obviously constructed nature of the allegations against the directors". He then stated that he proposed to dismiss the proceedings as against them. That occurred in circumstances, as pressed for the applicant, where the respondents had not moved for such a strike out. It is on those circumstances that the third respondent raises the issue of whether there is an abuse of process.

Applicable principles 34 The expression "for special reasons" had been explained as requiring the establishment of grounds sufficient in the particular circumstances to justify departure from the time period for an appeal as prescribed by O 52 r 15(1)(a): see Jess v Scott (1986) 12 FCR 187 at 195 per Lockhart, Sheppard and Burchett JJ. Their Honours said: "… the expression 'special reasons' is intended to distinguish the case from the usual course according to which the time is twenty-one days. But it may be so distinguished (not necessarily will, for the rule gives a discretion) wherever the Court sees a ground which does justify departure from the general rule in the particular case. Such a ground is a special reason because it takes the case out of the ordinary." Their Honours also pointed out that the power contained in O 52 r 15(2) is a discretionary one. 35 However, as Carr J has recently pointed out in WABX v Minister for Immigration & Multicultural & Indigenous Affairs [2002] FCA 300 the Full Court in Jess at 196 was at pains to point out that a discretion to relax the requirements of general rules should not itself become entangled in a web of rules spun out of the court's discretionary decisions. It is the facts of each particular case which must decide the matter. 36 One issue which is relevant is the question of the likelihood of success in the appeal. If it is the case that the applicant would have no real prospect of succeeding in his appeal in any event, an exercise of the discretion adverse to the extension of time would be appropriate: Atkinson v Commissioner of Taxation [2000] FCR 1621, Tydeman v Deputy Registrar of Child Support Agency [1999] FCA 936, Brehoi v Minister for Immigration & Multicultural Affairs [1999] FCA 772; and Howard v Australian Electoral Commission [2000] FCA 1767. That is, in deciding whether or not to exercise the discretion, the Court is generally required to consider whether an applicant has demonstrated that his or her appeal may have sufficient prospect of success to make it just that he or she should now be allowed to proceed with it: see Kalaba v The Queen (Finn J, 13 September 1996, unreported) at [12] and Howard at [7]. However, as Carr J has also pointed out in WABX, in Palata Investments Ltd v Burt & Sinfield Ltd [1985] 2 All ER 517 Ackner LJ (with the concurrence of Robert Goff LJ and Browne-Wilkinson LJ) said (at 21): "There is no question of any prejudice arising to the plaintiffs in the circumstances which I have described, and in that situation there was in my judgment absolutely no need to go into the complex and time consuming question whether or not there was a good arguable case on the appeal. There is no invariable rule which requires that consideration and it would obviously involve the very reverse to what the new procedure is designed to achieve if on every application to extend time for leave to appeal there was a pre-appeal hearing in order to consider what were the prospects of success." As Carr J said, that passage (apart from the last sentence) was part of a passage set out by the Full Court in Jess and later referred to (at 195) with approval when the Full Court indicated that O 52 r 15(2) was not to be construed as if the discretion of this Court to waive the rules was itself fettered by further rules. 37 Here, the circumstances are that there is a very short delay indeed. That was the case in Palata Investments where the then applicant's legal advisors had overlooked an alteration of time permitted for the appeal. Both there and in WABX in similar circumstances the view was that the applicant should not be obliged to show a reasonable prospect of success or a good arguable case before being granted an extension of time in which lodge the notice of appeal. 38 If that is not the correct view, it seems to me that the issue of whether the applicant should have been given the opportunity to re-plead the case of accessorial liability is arguable. Furthermore, it is arguable on whether or not par 68 as amended in the light of the reasons of the primary judge can still assist the applicant in that respect. In addition, there are the further paragraphs not considered in detail by the primary judge to which argument may be addressed. 39 A further factor weighing in favour of the grant of leave is the absence of any cognisable prejudice (in terms of ability to defend the appeal) against the respondent parties concerned. I say that without any lack of sympathy to the submissions made for the fourth and fifth respondents concerning the inconvenience and delay inherent in any appeal. The fact is that it was only by a matter of hours that the exercise as of right did not occur.

Szabo v Dasford Holdings Pty Ltd

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Judgment (17 paragraphs)

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Cases Cited (6)