Chase Manhattan Bank Australia Ltd v East [1995] QSC 340

..J+67 State Reporting~B~~au SC 95/<o).'1- TRANSCRIPT OF PROCEEDINGS (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Director. State Reporting Bureau.) SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION MACKENZIE J Application No 569 of 1995 /.\f-Ji.Jlication No 668 at 1995 THE CHASE MANHATTAN BANK AUSTRALIA LIMITED and WILLIAM JOHN EAST AS ADMINISTRATOR OF THE FAMILY SECURITY FRIENDLY SOCIETY BRISBANE .. DA'l'E 21 / 1 2 / 9 5 JUDGMENT REVISED COPiES lSSUE:J State Reporting Bu~ea:..i G.::te 10 / / · Applicant Respondent 4th Floor, The Law Courts, George Street, Brisbane. Q. 4000 Telephone: (07) 227 4360. Facsimile: (07) 227 5532 -- 1 of 14 -- 211295 at (Mackenzie J) HIS HONOUR: The order that I make in this matter is the following: I order that the applications in each case be stayed until final determination of proceedings in the Federal Court. Costs are reserved. [ μublish my reasons. JUDGMENT 2 10 20 30 50 60 -- 2 of 14 -- IN THE SUPREME COURT OF QUEENSLAND Brisbane Before the Hon. Mr Justice Mackenzie [Chase Manhattan Bank v. East] BETWEEN Apn No.569 of 1995 Apn No. 668 of 1995 THE CHASE MANHATTAN BANK AUSTRALIA LIMITED Applicant WILLIAM JOHN EAST as Administrator of the Family Security Friendly Society Respondent WDGMENT - MACKENZIE J. Judgment Delivered 21/12/1995 CATCHWORDS: PRACTICE - Application to stiike out judicial review applications - Federal Comt proceedings pending - whether stay should be granted until completion of those proceedings. Counsel: D.A. Mullins for applicant William John East J.E. Griffiths for respondent Chase Manhattan Bank Australia Limited Solicitors: KM. O'Shea, Crown Solicitor for applicant Mallesons Stephen Jaques for respondent Hearing date: 31 October 1995 -- 3 of 14 -- IN THE SUPREME COURT OF QUEENSLAND Brisbane Before the Hon. Mr Justice Mackenzie [Chase Manhattan Bank v. East] BETWEEN Apn No.569 of 1995 Apn No.668 of 1995 THE CHASE MANHATTAN BANK AUSTRALIA LIMITED Applicant WILLIAM JOHN EAST as Administrator of the Family Security Friendly Societv Respondent REASONS FOR JUDGMENT - MACKENZIE J. Judgment Delivered 21 December, 1995 These are applications to strike out applications for judicial review of two decisions by William John East as Administrator of the Family Security Friendly Society (FSFS). The "first decision" in each case is a decision to apply to be joined as an additional applicant in related Federal Court Actions No. SG29 of 1995 and SG30 of 1995 which at the time of hearing of the application had been proceeding for some weeks in the Federal Court in Adelaide before O'Loughlin J. In No. SG29 of 1995 certain investors in FSFS took action against the Chase Manhattan Bank Australia Limited ("Chase Manhattan") claiming damages and other relief in respect of events which occurred while the bank was banker to FSFS. In No. SG30 of 1995 investors took -- 4 of 14 -- 2 action against Horwath & Horwath the former auditors of FSFS for damages for negligence and other forms of relief arising from audits of FSFS. It was an element of the defences in each case that the investors had no standing to bring the action because the assets of FSFS had passed to the Administrator and any right to take action was vested in him. The Registrar of Friendly Societies, the original Administrator, had been asked to institute proceedings against Horwath & Horwath but had on the basis of information and advice then available to him declined to do so. The Administrator was joined as respondent in the proceedings which became No. SG30 of 1995. Following enactment of the Family Security Friendly Society (Distribution cif Moneys) A et 1991 and the appointment of Mr East as Administrator, Mr East was requested to reconsider the earlier decision. After making enquiries and being informed of transactions which were not known to him at the time of the original decision he was advised that the prospects of success had improved and decided to apply to be joined as an applicant. In respect of No. SG29 of 1995 the Administrator had originally been joined as a respondent because he had not reached a decision about whether to join as an applicant following a request by the investors. However he deposes that he became aware of events which according to his legal advice significantly improved the prospects of damages being recovered "in relation to the derivative claims brought by the applicants". He deposed that he also became aware that the derivative claims might be defeated by the applicants' lack of standing. The applications to be joined as plaintiff were successful. Prior to the application in No. SG30 of 1995 the bank's solicitors sent a letter requesting Mr East either not to proceed with the Notice of Motion or adjourn it pending reconsideration of a number of factors set out in the letter pertaining to the process of reaching his decision to participate as an applicant. In respect of -- 5 of 14 -- 3 No. SG29 of 1995 the application was granted on 29 August 1995. On 11 September 1995 the bank's solicitors wrote to the Administrator requesting that he cease to participate as an applicant in that action. Allegations of errors in the process of deciding to join the investors as an applicant were made in the letter. In respect of the "first decision" in each case the application for judicial review alleges error of law due to misconstruction of s.5 and s.7(c) of the Act and improper exercise of those powers. A number of alleged errors falling within those broad headings are particularised. The "second decision" of which review is sought is what is described as the decision of the respondent not to accede to the requests of the applicant's solicitors made in the letter sent, in the case of No. SG30 of 1995, on I O August 1995 and in the case of No. SG29 of 1995, on 11 September l 995. The matters alleged in the letters broadly fell under the categories of a failure to appreciate the non-delegability of the duty to conduct the actions, failure to get leave of the Supreme Court pursuant to Regulation 4.06 of the Friendly Society's (Duties and Functions of the Registrar) Regulations 1991 to commence proceedings, and failure to form his own considered and independent assessment of various aspects of the proceedings. The Administrator's application to have the applications for review dismissed are identical in each case. The grounds recited are- (a) That adequate provision is made by a law other than the J11dieial Review A et for review. (b) Provision is made by a law other than the J11dieial Review A et 1991 under which the applicant is entitled to seek a review of the matter by another court or a tribunal authority or person. (c) The application is futile. (d) No reasonable basis for the application is disclosed. (e) The application is an abuse of process of the court. -- 6 of 14 -- 4 (f) The decisions are not decisions to which the Judicial Review A cl applies in that they are not- (i) decisions of an administrative character and (ii) made under an enactment. The Family Security Friendly Society (Distribution of Moneys) A cl 1991 is an Act passed for the specific purpose of dealing with the problems of FSFS. The Friendly Societies (Duties and Functions of Registrar) Regulation 1991 is declared to have applied to the Society from 1 August 1991 and continue to apply to the Society, subject to the Act. Section 4 provides that the Act governs the duties and responsibilities of the Administrator and, except where a contrary intention appears, if there is an inconsistency between the Act and any other Act or law the Family Security Friendly Society (Distribution <~f Money:,) A cl prevails. Subject to s.5 the Administrator is empowered to bring defend continue or discontinue any legal proceeding in the name of the Registrar as trustee of the Society and appoint solicitors. Section 5 provides that it is the duty of the Administrator to collect the property of the Society and to convert it into money in the time and way that the Administrator alone considers is in the best interests of investors and creditors of the Society. Part 4 of the Friendly Societies (Duties and Functions of Registrar) Regulations 1991 is concerned with suspension and administration of Societies. Regulation 4.06 provides that while the Registrar is the Administrator of a Society, an action or proceedings may be commenced or proceeded with in any court only with the leave of the Supreme Court and, if the Supreme Court grants leave, in accordance with any conditions imposed by the Supreme Court. The failure of . the Administrator to obtain leave to apply to be joined as an applicant and to carry on the proceedings is relied on by the bank as one of the reasons why there should be a review of the Administrator's decision. Section 31 B of the Act applies the regulations to FSFS but s.4 gives -- 7 of 14 -- 5 primacy to the Act in the event of an inconsistency between it and any Act or law. There is a specific provision in s.7(4)(c), subject only to s.5, empowering the Administrator to bring any legal proceeding in the name of the Registrar as trustee of the Society. In my view this very specific provision which gives to the Administrator of FSFS power to bring and continue any legal proceeding, without any restriction apart from considering what is in the best interests of investors and creditors of the Society, is inconsistent with the notion that the Registrar can only bring and continue proceedings by leave of the Supreme Court. Regulation 4.06 is not applicable to the Administrator in the case of FSFS. The Administrator's notice of motion was, pnor to an application at the hearing for amendment limited to the applications for a statutory order of review and did not seek relief in respect of the two applications for review. An application to amend to cover both bases of review was made. I am satisfied that it is appropriate to allow that amendment. The grounds in the Administrator's application to strike out have been recited above. As to the ground that none of the decisions were decisions made under an enactment, it was submitted that each of the decisions to seek to join the Federal Court proceedings was not a reviewable decision because it was not one for which provision was made under an enactment. It was submitted that the decision was taken for the purpose of carrying out a duty imposed by s.5 of the Family 5:ecurity Friendly Society (Distribution (~f Money,1) A et 1991. The Administrator was empowered to make that decision by Regulation 4.04(3) and s.27(2) of the Act and the implementation of the decision was facilitated by s.7(c) of the Act. The decision was not required or authorised by the Act. With respect to the Administrator's unwillingness to reconsider that decision it was submitted that there was no express requirement or authority to do so under the Act and that the decision was therefore not reviewable. -- 8 of 14 -- 6 Chase Manhattan submitted firstly that the test to be applied was analogous to that in General Steel Industries Inc. v Commissionerfor Railways (N.S.W.) (1964) 112 C.L.R. 125, 128-9. Then it was submitted that having regard to s.7 of the Act and in the case of the second decision, s.23 of the Acts Inte17;retation A et it was plainly arguable that the decisions were decisions of an administrative character. Reliance was placed on the principle expressed by Thomas J. in Concord Data Solutions v Director-General(~/ Education (1994) 1 Qd.R. 343, 350 in this regard. It was submitted that the existence of express power in s.7(c) and the duty in s.5 distinguished this case from those where reliance had to be placed on a general power to be found in an Act, as for example in McLean v Gilliver (1995) 1 Qd.R. 637. It was submitted that the Administrator's decisions to seek to intervene and not to reconsider those decisions had, so far as that phase of the matter was concerned, the requisite degree of finality (Australian Broadcasting Tribunal v Bond (1990) 170 C.L.R. 321,337). I am satisfied that the first basis of the Administrator's application should fail. The reason for existence of the Family Security Friendly ,'-,'ociety (Distribution(~/ Money!>) A er is to enable the Administrator to finalise the affairs of the Society. There is specific authority to bring and to continue legal proceedings in aid of that objective. The power extends to making an ongoing reassessment of the prospects of success as well as a threshold decision to bring, defend, continue or discontinue actions in the name of the Registrar. The Judicial Review A et itself supports the view that, once the making of a decision with respect to the commencement of legal proceedings can, within a particular statutory context, be characterised as a decision of an administrative character made under an enactment, the Act applies to it (see e.g. Clauses l (a), 2 and 3(2) of Schedule 2). I am satisfied in the particular statutory context with which the present motions are -- 9 of 14 -- 7 concerned that Chase Manhattan's application should not be dismissed summarily on the basis that there is no decision of an administrative character made under an enactment. The next question raises issues of the utility and appropriateness of the order for statutory review or declaration or other relief under Part 5. The Administrator submits that such relief would not have any direct impact upon the Federal Court proceedings. As a result of the orders made by O'Loughlin J. on 14th and 29th August 1995, joinder was made and the actions are proceeding on that basis. There was no appeal against this decision, and not all of the questions of construction argued before me were argued in the Federal Court on the joinder application. Even if an order were made quashing or setting aside the Administrator's decision ,his removal as a party would not be automatic. Such a result could only be achieved under 0.6 r.9 of the Federal Court Rules. It was submitted that as Chase Manhattan's case was that the actions were incompetent without the Administrator as applicant and the Administrator's joinder as an applicant overcame that facet of Chase Manhattan's defence, it would be likely that any application that the Administrator be removed as a party would be strenuously opposed by other applicants and unlikely to succeed. The requirement of a party having been improperly or unnecessarily joined or ceasing to be a proper or necessary party could not be established. To consider more fully the application to strike out it is desirable to analyse what is relied on as the basis of Chase Manhattan's applications. Without setting them out in full two matters are raised about the first decision, improper exercise of powers and error of law. It is alleged that there was an improper exercise of powers in that: (a) there was a failure to take into account relevant considerations; (b) the Administrator purported to surrender or delegate personal duties cast on him by s.5 and s.7(c); -- 10 of 14 -- 8 (c) the Administrator sought relief in the Federal Court proceedings in his capacity as Administrator, not Registrar of Friendly Societies; and (d) the exercise of the powers was unreasonable (I was informed that this would not be relied on). The particulars of the failure to take into account relevant considerations may be summarised into the following: (i) failure to take into consideration or properly address the terms of ss. 5 and 7(c); (ii) failure to take into consideration or properly address Regulation 4.06; (iii) failure to make an independent personal assessment of the prospects and risks of the actions; and (iv) failure to take into consideration or properly address the non-delegability of the conduct of the action. Of these, a view of Regulation 4.06 adverse to Chase Manhattan has already been expressed. Further if the Administrator's application succeeds in other respects, the matter raised in particular (c) of the ground relating to improper exercise of powers, which raises the question of the right to sue in one capacity or the other, can be adequately, appropriately and conveniently litigated in the Federal Court proceedings. With regard to the issues of the process of making the decision to intervene and of non-delegability, the assumption in the way the matter was argued and in the relief sought is that a failure to appreciate matters complained of will entitle Chase Manhattan to an order that the Administrator take steps to withdraw from the action or to a declaration which will presumably result in such steps being taken. Two things may be said about this. Firstly, if the Administrator's claim is sufficiently identical to that of the other applicants there can be no reason in principle why he should not engage the same legal representatives in the proceedings as a matter of practical common sense. It does not appear to -- 11 of 14 -- 9 have been suggested in the Federal Court proceedings, so far as the information available to me extends, that the trial judge or any one on the side of the record adverse to Chase Manhattan has demonstrated any discomfort about the Administrator and the applicants being jointly represented. The second is that if a difficulty emerged about the propriety of the same legal representatives acting for both the Administrator and the applicants it would become apparent because of circumstances emerging in the Federal Court action. A determination of conflict of interest, which is inherent in the notion that the Administrator should be separately represented, is not conveniently dealt with in the abstract. It is most conveniently and appropriately dealt with in the context of the Federal Court proceedings. The grounds relied on are also concerned with an alleged failure to give personal consideration during the process of deciding to seek to be joined, to the prospects of success and the risks involved in becoming a party. Once again two things may be said about this. The first is that it can hardly be argued that the Administrator is precluded from considering material provided to him by the original applicants in the Federal Court proceedings as part of the process provided he ultimately formed his own opinion to seek to be joined. The second is that once he was joined as a party the Administrator became subject to the rights, obligations and liabilities of a party in the Federal Court and those can only be brought to an end in accordance with the Federal Court Rules. In that sense any orders made under the .Judicial Review A er that address only the issue of flawed decision making processes in the course of deciding to be joined as a party cannot affect the status acquired by the Administrator under the Rules. If an order were to be made under the .Judicial Review A et it is highly unlikely to be in the terms sought, which include orders restraining the Administrator from taking any steps pursuant to his decisions to become a party and to continue with the action and that he take all necessary steps to withdraw as a party to the proceedings. A far more likely outcome would be to refer the matter to the -- 12 of 14 -- 10 Administrator for further consideration. In other words, if it were to be found that he had failed to take into account relevant considerations or to have regard properly to the nature of his duty, it would seem to be an extreme result if he were not to be given the opportunity to reconsider what he should do, applying proper principles. In addition, what is sought by this group of grounds is that the Administrator's processes in deciding to intervene be examined with a view to seeing whether he properly understood the scope of the powers and whether he exercised the power personally. Even if it were found that the Administrator had erred in any of the respects alleged during the decision making process, the fact is that since he was joined the action has proceeded with him as a party. Any application to withdraw at this point would, having regard to his statutory obligations as Administrator, necessarily involve assessment of what those obligations required him to do in the present state of the action, not by reference solely to matters which he should have but did not address at the time when he became a party. Further, his application and the terms of any withdrawal would be subject to consideration by the Federal Court. So far as the "second decision" is concerned, the same considerations apply. It is assumed for present purposes that, even though the refusal of the request to reconsider the "first decision" is more indirectly linked to the statute than the "first decision", it is a reviewable decision. Even on that basis, there are similar reasons for thinking that it is inappropriate for the judicial review proceedings to run concurrently with the other proceedings, in the particular circumstances of this case. Applying the proper principles to the case, there are some aspects of the application which are not demonstrably without merit. It would therefore be inappropriate to dismiss the application finally. However, for the reasons given, I am of opinion that it would be inappropriate for these proceedings to be heard while the Federal Court proceedings are continuing. Section 48(1) of the -- 13 of 14 -- 11 .Judicial Review A et allows a stay to be granted and that option will be exercised. If once the Federal Court proceedings are finalised, Chase Manhattan believes that it has suffered a detriment by reason of anything wrongly done by the Administrator and it remains of the view that Judicial review proceedings rather than same other form of action are appropriate, the order will allow the proceedings to be revived. I order that the applications m each case be stayed until final determination of the proceedings in the Federal Court. Costs are reserved. -- 14 of 14 --