Case: Bray v F Hoffman-La Roche Ltd [2003] FCAFC 153 ; (2003) 130 FCR 317
Outcome: followed
As against the Fifth, Sixth and Seventh Respondents as directors: 5.1 Declaration that each of them have contravened section 588G of the Corporations Law and/or Corporations Act ; 5.2 An Order pursuant to section 588J of the Corporations Law and/or Corporations Act requiring each of them to compensate the First Applicant for the loss and damage suffered by it as a consequence of such contravention; 5.3 Declarations that each of them have contravened Sections 180 , 181 and 182 of the Corporations Law and/or Corporations Act ; 5.4 Orders pursuant to Section 1317H of the Corporations Law and/or Corporations Act requiring them to compensate the First Applicant in respect of damage resulting from such contraventions; 5.5 Declarations that each of them have breached their fiduciary duties to the First Applicant; 5.6 Orders requiring each of them to pay equitable compensation to the First Applicant for the damage suffered by it as a consequence of such breaches; 5.7 Interest; 5.8 Costs.' 3 The fifth, sixth and seventh respondents have not been served. The first and third respondents challenge service generally, whereas the second respondent objects to service in relation to paragraphs 2 and 3 of the Details of Claim. The second respondent does not now challenge service in relation to paragraphs 1 or 4 of the Details of Claim. The fourth respondent does not seek relief on the motion. 4 This is a review of the original decision to grant leave by way of rehearing ( Bray v F Hoffman-La Roche Ltd [2003] FCAFC 153 ; (2003) 130 FCR 317 at [53] ). Evidence has been tendered which was not before the judge who made the original order and I have had the benefit of detailed submissions from both sides. The substance of the motion requires the application of O 8 r 2 and, in particular, O 8 r 2(2). The applicants on the motion do not raise any issue as to compliance with to O 8 r 2(2)(a) or (b). It is submitted that the applicants in the proceeding (together called Akai) do not have a prima facie case for the relief sought within the meaning of O 8 r (2)(c). The burden of establishing a prima facie case lies upon Akai who obtained leave to serve out of the jurisdiction. 5 Akai initially took a preliminary point based upon lack of evidence which was overtaken by events, but which, in any case, did not take account of the nature of the proceeding on the motion. 6 It is necessary to bear in mind that the requirement of a prima facie case has to be met at the outset of proceedings, usually on an ex parte basis. A prima facie case in this sense does not amount to a prediction of an outcome or a conclusion that a finding for the applicant is the likely ultimate result of a case. It is necessary that there be a foundation established for an arguable case ( WSGAL Pty Ltd v Trade Practices Commission (1992) 39 FCR 472 per Beaumont J at 476; Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) 68 FCR 539 at 549). It has been said that 'a prima facie case is made out if, on the material before the court, inferences are open which if translated into findings of fact, would support the relief claimed' ( Western Australia v Vetter Trittler Pty Ltd (In liq) (Receiver and Manager appointed) (1991) 30 FCR 102 at 110; Bray v F Hoffman-La Roche Ltd (above) per Carr J at [17]; and Humane Society International Inc v Kyodo Senpaku Kaisha Ltd (2005) 212 ALR 551 at [23]. See also Merpro Montassa Ltd v Conoco Specialty Products Inc (1991) 28 FCR 387 per Heerey J at 390.) In Costa Vraca Pty Ltd v Bell Regal Pty Ltd [2003] FCAFC 305 at [25] the Full Court cited with approval the following passage from Lee J in Century Insurance Ltd (in provisional liquidation) v New Zealand Guardian Trust Ltd [1996] FCA 376: 'What the Court must determine is whether the case made out on the material presented shows that a controversy exists between the parties that warrants the use of the Court's processes to resolve it and whether causing a proposed respondent to be involved in litigation in the Court in Australia is justified.' 14 Counsel for Akai submits that there is a body of evidence which points to the inference that Messrs Binney, Yuen and Lam were each, in fact, acting upon instructions given to them by Ho on behalf of Grande Holdings. There is a sound factual basis for the submissions by counsel for Akai bearing in mind the interlocutory nature of this proceeding and the admissibility of hearsay evidence ( Bray v F Hoffman-La Roche Ltd (above) at [58]). 15 Binney made it clear at his public examination that he acted upon the instructions of, and reported to, Ho in connection with the affairs of Akai Australia. There is documentary evidence of the direct involvement of Ho in decision making in relation to the Silver Phoenix transaction. There is also documentary evidence that Ho was effectively in charge of negotiations concerning the refinancing and restructuring of the whole Akai group, including Akai Australia. Paragraph 26 of the Statement of Claim particularises a number of actions of officers connected with the Grande companies other than Binney related to the giving of instructions to officers of Akai Australia. Although there appears to be an error in describing Mr Tony Lam as a director of Grande Holdings, there is material in the evidence to support the contention that each of the parties particularised (including Mr Tony Lam) was acting as an officer of Grande Holdings or upon the instructions of Grande Holdings in relation to the affairs of Akai Australia. In particular, this applies to Yuen. 16 Nonetheless, the point remains that the Agreement underpinned the dealings and can be seen as the legal foundation for giving and receiving the instructions. Counsel for Ho and Grande Holdings makes the point that the involvement of Ho and Grande Holdings in negotiations concerning the overall restructure of the worldwide Akai Group, including the relevance of that restructure to Australia, is a different subject from, and should not be confused with, the day to day administration of the Agreement which it is submitted formed the basis of the dealings with Akai Australia. 30 A prima facie case of one sort or another has been found against each of Ho, Grande Group and Grande Holdings. It is submitted for Akai that this is sufficient to lead to dismissal of the motion as a whole in view of the decision of the Full Court in Bray v F Hoffman-La Roche Ltd (above) . Counsel for the Grande parties accepts that I am bound by that decision, although the formal submission was made that the dissenting judgment of Finkelstein J is to be preferred. Carr J said (at [47] [55]): 'Accordingly, once the court is satisfied that it has jurisdiction in the proceeding and that one or other of the various cases referred to in O 8 r 1 apply, then, in my opinion, the party seeking leave or resisting a revocation of such leave, need only show a prima facie case for the relief sought in the proceeding. ... As the primary judge noted at [11] of his reasons, the applicant's proceeding is founded on breaches in Australia of s 45 of the TPA (in summary, giving effect to the Cartel Arrangement by making agreements containing price-fixing and market-sharing provisions and giving effect to those provisions) and is brought in respect of, and for the recovery of, damage suffered by the group members in the Commonwealth. Senior counsel for the Aventis Foreign Respondents submitted that the causes of action against those respondents were disparate. One set of claims was based on a series of communications between them and the Australian Aventis Respondents. The other was put on the basis that the Aventis Foreign Respondents were at all times active in Australia. But there was no submission that the applicant was seeking to litigate matters which had no real connection with Australia, or that the applicant had joined a trifling claim having merit and falling within r 1, with other claims without substance which did not fall within r 1. ... In my view, the primary judge did not err in holding that it was sufficient, for the purposes of O 8 r 2(2)(c), to be satisfied that the applicant had a prima face case for relief on the basis of any of the causes of action relied upon by her against each of the Foreign Respondents.' Branson J said (at [176] [191]): 'It was argued on the appeal that before the court can have the satisfaction required by O 8 r 2(2)(c), it is necessary for the court to be satisfied that the party seeking leave has a prima facie case for the relief sought pursuant to each of the causes of action relied upon. The alternative possibility is that it is sufficient that a prima facie case for the relief sought is made out on one of the causes of action relied upon. ... In my view, at least where the relevant originating process is an application, the inference is strong that the expression "the relief sought by the party in the proceeding" in O 8 r 2(2)(c) is intended to carry the same meaning as the expression "the relief claimed by the applicant" in O 4 r 3(1)(a). As is mentioned above, that meaning is the remedy sought by the applicant in the proceeding rather than the relief sought pursuant to each cause of action to be relied upon. ... It is significant, in my view, that O 8 r 2(2) does not give rise to an entitlement to serve originating process outside the Commonwealth; it gives the court a discretion to give leave which may only be exercised if the court is satisfied as to the matters identified in the subrule. The court might be satisfied of those matters but nonetheless decide, in the exercise of its discretion, to refuse leave to serve outside of the Commonwealth. Alternatively, the court could give leave to serve outside the Commonwealth but make such leave subject to terms and conditions which the court considered appropriate. I am not presently able to think of any reason why a condition imposed on the leave to serve could not, in an appropriate case, limit the causes of action which the applicant was entitled to plead in the statement of claim or rely upon in the affidavit should a statement of claim not be appropriate (O 4 r 6). ... I conclude that it is not necessary, before the court can have the satisfaction required by O 8 r 2(2)(c), that the court be satisfied that the party seeking leave to serve originating process outside the Commonwealth has a prima facie case for the relief sought pursuant to each of the causes of action relied upon. In my view, O 8 r 2(2)(c) requires the court to be satisfied that the party has a prima facie case for the remedy sought by the applicant in the proceeding. The relief sought by the applicant in this proceeding is identified by para 4 of the second amended application. That relief is declaratory relief pursuant to s 163A of the TPA, damages pursuant to s 82(1) of the TPA, injunctions under s 80(1) and possibly, relief under s 87(1) of the TPA. I agree, for the reasons given by Carr J, that it was open to the primary judge to be satisfied that the applicant has a prima facie case for the relief sought by her in the proceeding within the meaning of O 8 r 2(2)(c) of the Rules.' Finkelstein J, having held that the conditions in r 2 must be satisfied in respect of each cause of action raised in the proceeding, went on to say (at [229]): 'A different construction has been placed on O 8 r 2(2)(c) by the other judges. In their opinion, if an applicant makes out a prima facie case for the relief (that is, the remedy) he seeks the condition will be satisfied, whether or not that relief is based on more than one cause of action. I accept, of course, that this construction of the rule is open, though it is not the construction which I prefer. Moreover, it is a construction which has the potential to bring about some unusual results. Let it be assumed that three plaintiffs each bring an action for two causes, one in contract and the other in tort, and that each cause of action arises out of the same facts. In one case the plaintiff seeks specific performance of the contract and damages for the tort. This plaintiff will be required to establish a prima facie case in respect of each cause of action because each gives rise to different relief. The second plaintiff claims damages for breach of contract and tort and, let it be assumed, when properly assessed the measure of those damages will be the same for each cause. This plaintiff will only be required to establish a prima facie case for one cause of action. The third plaintiff is in the same situation as the second save that the measure of damages for each cause is different. It is not clear what this plaintiff must prove to satisfy the condition. He may be required to establish a prima facie case for each cause of action because the measure of damages is different. On the other hand, the answer may depend upon the manner in which this plaintiff has formulated his relief; for example, he may only seek "Damages" or he may describe the nature of those damages in a way which indicates they are different. Whatever be the position, I see no reason in principle why any one of these plaintiffs should be treated differently from the others. On the construction of O 8 r 2(2)(c) which I prefer each will be treated in the same way.' 31 The application of that decision to this proceeding is not crystal clear. That question can be illustrated by considering the position of Ho. The only relief sought against him is in the first paragraph of the Details of Claim. I have held that there is no prima facie case against him in relation to paragraphs 1.1 and 1.2. I have found that there is a prima facie case against him in relation to part of paragraph 1.3. It can be concluded that a case against Ho has been made in relation to the relief identified in paragraph 1.5, namely, orders pursuant to s 1317H of the Act requiring him to compensate the first applicant in respect of damages resulting from such contraventions. When the Statement of Claim is considered (as it should be in view of its incorporation in the Details of Claim) it is clear that those orders relate to the three heads of loss earlier identified, namely, general insolvent trading, the Capetronics transaction and the Silver Phoenix transaction. Indeed, that relief, in substance, is also sought in paragraph 1.2. 32 If, in substance, the one form of monetary compensation is sought by way of relief based upon various causes of action, then the case is on all fours with Bray v F Hoffman-La Roche Ltd (above) . If not, then it seems to me that Bray v F Hoffman-La Roche Ltd (above) should be applied as if the principle related to each separate and independent form of relief. As pointed out by Branson J in Bray v F Hoffman-La Roche Ltd (above), the same practical result can be achieved by imposing terms. 33 I am satisfied that the relief sought in paragraphs 1.2 and 1.5, when understood in the light of the Statement of Claim, is, in substance, the same and can be regarded as the same relief for present purposes. Thus, Ho is not entitled to have service upon him set aside in any respect. I am not disposed to impose terms at this stage limiting the effect of service by excluding the shadow director allegations. The underlying facts are likely to be similar in relation to all aspects of paragraph 1 of the Details of Claim and a decision as to whether that part of the claim should be struck out is best made in the context of the overall management of the case. Consideration will also need to be given to paragraphs 1.4 and 1.6. 34 I take a different view in relation to paragraphs 2 and 3. It is questionable whether the relief sought is the same relief as that involved in paragraphs 1 and 4 and, in my opinion, is sufficiently distinct from it to make it unnecessary and undesirable that an overseas party should be put to the trouble and expense of coming to Australia to defend. 35 I have found that there is no prima facie case against Grande Group pursuant to paragraphs 2 or 3 of the Details of Claim. Grande Group does not challenge service in relation to paragraphs 1 and 4 of the Details of Claim. On one view, the substance of the relief sought in paragraphs 1, 2, 3 and 4 of the Details of Claim is the same designed to recoup the identified losses. If that were so, Bray v F Hoffman-La Roche Ltd (above) would indicate that Grande Group is not entitled to relief on the motion otherwise then pursuant to the general discretion. I am not satisfied that the relief sought in paragraphs 2 and 3 of the Details of Claim is identical to that sought in paragraphs 1 and 4. I am prepared to set aside service in relation to paragraphs 2 and 3. Even if I am wrong in that, I would achieve the same result by imposing terms. 36 Grande Holdings is implicated in relation to more of paragraph 1 of the Details of Claim than Ho and is in the same position as Grande Group in relation to paragraphs 2 and 3. 37 The Application and service of the Application upon each of Grande Group and Grande Holdings will be set aside in so far as paragraphs 2 and 3 of the Details of Claim are concerned. Subject to submissions to the contrary, the Application should be amended to delete paragraphs 2 and 3 of the Details of Claim and the Statement of Claim should be amended accordingly. As the major relief sought in the motion has not been granted, but there has been a measure of success, 50 per cent of the costs of the respondents to the motion (the applicants in the proceeding) will be the applicants' costs in the cause. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles. Associate: Dated: 5 May 2006 Counsel for the Applicants: JC Kelly SC, G Lucarelli Solicitor for the Applicants: DMAW Lawyers Counsel for the First, Second and Third Respondents: JRJ Lockhart Solicitor for the First, Second and Third Respondents: Freehills Date of Hearing: 6 December 2005 Date of Judgment: 5 May 2006 AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2006/511.html