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Federal Court judgments

Federal Court judgments

By Dan Star QC

Courts Judgment 

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Practice and procedure

Mandatory interlocutory injunction granted

In Australian Competition and Consumer Commission v Pacific National Pty Ltd [2018] FCA 1221 (13 August 2018) Beach J granted a mandatory interlocutory injunction sought by the Australian Competition and Consumer Commission (ACCC) that required certain companies (the Aurizon parties) to carry on Queensland’s intermodal business (QIB). (Note: “Intermodal” refers to the carriage of general freight usually in a container using two or more modes of transportation, such as truck and rail.)

The injunction application was in the context of proceedings instituted by the ACCC for alleged contraventions of ss45 and 50 of the Competition and Consumer Act 2010 (Cth) (CCA) (at [18]-[20]). The impugned conduct arose from the sale and purchase the Aurizon parties’ QIB.

The ACCC sought interlocutory injunctive relief against the Aurizon parties requiring them to carry on Aurizon’s QIB until the hearing and determination of the proceedings. Beach J summarised why he granted a mandatory injunction at [2]: “The mandatory injunction sought against the Aurizon parties is exceptional. Nevertheless, given that I have determined to bring on the main trial of these proceedings on 19 November 2018, and to deliver a final judgment before Christmas of this year, I propose to grant the injunction sought. The injunction will operate for a relatively short period, even though I accept that there will be significant prejudice to the Aurizon parties in the interim. The injunction is necessary to preserve the status quo. In this regard the Aurizon parties have not yet commenced to shut down the QIB. Moreover, the injunction is necessary to preserve the competitive framework in Queensland concerning the relevant markets dealing with intermodal and steel rail linehaul services. If no injunction is granted, Pacific National may achieve a monopoly position in Queensland which to say the least is likely to produce a substantial lessening of competition. Now I accept that I ought only grant a mandatory injunction of the type sought in exceptional circumstances. Moreover, the present context also involves no undertaking as to damages being given by the ACCC, which is a point in favour of the Aurizon parties on the balance of convenience. But the period of the restraint is short. The status quo is preserved by the restraint. And the adverse consequences for competition are too severe if I do not impose the restraint . . .”

The Court discussed the test for an interloctory injunction as it applies in relation to a mandatory injunction (at [5]-[15]). There is no separate test for a mandatory interlocutory injunction compared to that for a prohibitive injunction (at [8]).

Practice and procedure

Res judicata – whether final judgment must be decided “on the merits”

Zetta Jet Pte Ltd v The Ship “Dragon Pearl” (No 2) [2018] FCAFC 132 (16 August 2018) concerned a claim from Zetta Jet Pte Ltd and Mr King (a trustee appointed to Zetta Jet under the insolvency law of the United States) that Zetta Jet was the owner in equity of a vessel, “Dragon Pearl”, which was in the custody of the Admiralty Marshal pending the outcome of the proceedings. When the matter was to be heard, Zetta Jet failed in a late application to adjourn the proceedings. Counsel for Zetta Jet was then invited to open and lead evidence and, after he indicated that he was not in a position to do so, the proceedings were dismissed. An appeal against the decision to dismiss the proceedings was unsuccessful.

Half an hour after the appeal was dismissed, the vessel was sold by the registered owner. After second proceedings were dismissed, Zetta Jet and Mr King then commenced third proceedings including an application for an interlocutory injunction to restrain the new owner from removing the vessel from Australian waters. Claims to proprietary relief of the same kind as those that had been advanced against the previous owner of the vessel in the first proceedings were advanced in support of the application for an injunction. There was also a new proprietary claim based upon an alleged alienation to defraud creditors of Zetta Jet and, in addition, a proposed claim for relief for an uncommercial transaction under s588FF of the Corporations Act 2001 (Cth).

The primary judge refused the interlocutory injunction on the basis that a res judicata arose in respect of claims in rem by Zetta Jet or Mr King against the vessel by reason of the dimissal of the original proceedings. Zetta Jet and Mr King sought leave to appeal from that refusal and the orders for the summary dismissal of a second in rem claim against the vessel.

The Full Court held that the primary judge was correct in refusing the claim to injunctive relief based upon principles of res judicata insofar as those claims depended upon a Barnes v Addy claim to ownership in equity by Zetta Jet of the vessel or the other proprietary claim based on an alleged alienation to defraud creditors. However, leave to appeal was granted and orders made to allow Mr King to pursue his application for urgent provisional relief based upon the claim to orders under s588FF of the Corporations Act which were not considered by the primary judge (at [11]-[13]). Whether Anshun estoppel or abuse of processs apply in respect of this claim was remitted to the primary judge (at [59]).

The Full Court analysed the state of the law on res judicata (at [14]-[51]). The key question in this case was whether there needed to be a final judgment “on the merits” of a claim in order for res judicata to apply. Based on an examination of Australian authority, the Full Court held there is no such requirement. English cases which suggest otherwise are founded on a different use of terminology (that is, an English practice of using the term res judicata to apply to both a cause of action estoppel and an issue estoppel) (at [36] & [45]).

Allsop CJ and Moshinsky and Colvin JJ explained at [33]: “It is an important principle. A party who is commanded to attend a trial or final hearing to answer a claim based upon a cause of action would face the same injustice if the claim could be reagitated after final judgment was given dismissing the claim irrespective of the circumstances in which the judgment was given. Whether a claim is allowed or dismissed by consent, default or after a contested hearing, the need for finality is the same in each instance. A party who wishes to preserve the right to bring further proceedings should seek leave to discontinue. The need for finality is one reason why an application for such leave may be refused if brought late in the day and without explanation beyond inability to proceed with the case.”

As the judgment in the original proceedings brought by Zetta Jet and Mr King was final in respect of all causes of action then raised, the principles of res judicata applied (at [52]-[54]).

Practice and procedure

Strike out of pleading of the tort of misfeasance in public office

 

The central issue was whether the pleading disclosed a reasonable cause of action against the Commissioner for the tort of misfeasance. The Court undertook a summary of the elements of the cause of action for misfeasance (at [97]-[111]). In relation to the state of mind requirements, these relevantly include that liability cannot be established by aggregating the acts and knowledge of various officers (at [108]) and the tort cannot be established by simply attributing the knowledge held by one person in an organisation to another person in a different position, or at a different level, in the organisation (at [111]).

The applicant’s pleading (which was highly criticised by the Court) concerned, inter alia, knowledge on the part of various tax officers of frauds perpetuated by the applicant’s former tax agent, and the shortcomings of the subsequent investigation, as well as the payment of tax refunds somewhere other than to the applicant’s nominated account.There were various fundamental problems with the misfeasance allegations (at [112]). Among other things, it was impermissible to plead a case of misfeasance against the Commissioner personally based on a composite or aggregate of the conduct and states of mind of a number of individual officers (at [144]-[147]). There were also flaws with the allegations of vicarious liability for misfeasance (at [132]-[135]).

Wigney J made orders striking out the paragraphs relating to misfeasance and the Barnes v Addy claims. The Court held it would be inappropriate to simply grant leave to re-plead, and should the applicant wish to reformulate these causes of action it should be made to file an application for leave to amend (at [179]).

Dan Star QC is a Senior Counsel at the Victorian Bar, ph 9225 8757 or email danstar@vicbar.com.au.

The full version of these judgments can be found at www.austlii.edu.au. Numbers in square brackets refer to paragraph numbers in the judgment.


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