Citation: Chapel Road v ASIC (No 2) [2007] NSWSC 975
Court: Supreme Court of New South Wales, Common Law Division
Date: 31 August 2007
Judge(s): Howie J
Background
The appellant, Chapel Road Pty Limited, held a securities dealer's licence subject to conditions. In late 2000, the respondent regulator, the Australian Securities and Investments Commission (ASIC), gave notice under the then-current Corporations Law that it was concerned the company had breached its licence conditions, and convened a hearing before a delegate. Following a procedural misunderstanding in which Chapel Road submitted written submissions without reconvening the hearing, the delegate revoked the licence in April 2001.
Chapel Road appealed to the Administrative Appeals Tribunal, which returned the licence but imposed further conditions. The company then commenced proceedings in the Supreme Court against ASIC, alleging malicious prosecution and misfeasance in public office, claiming the delegate had predetermined the outcome and intended to harm the company by stripping it of its licence.
On an application by ASIC, Associate Justice Harrison struck out the statement of claim and dismissed the proceedings in September 2006, finding the claims were hopeless. Chapel Road appealed to a single judge of the Supreme Court.
Legal Issues
- Whether the tort of malicious prosecution can extend to administrative or regulatory proceedings, as opposed to strictly legal proceedings.
- Whether the relevant proceedings were terminated "favourably" to Chapel Road for the purposes of a malicious prosecution claim.
- Whether Chapel Road's pleadings adequately disclosed a cause of action in misfeasance in public office.
- Whether the Associate Justice had correctly assumed the pleaded facts to be true when determining the strike-out application.
Decision
Malicious prosecution: Howie J upheld ASIC's notice of contention on this point. The tort of malicious prosecution does not extend to administrative or disciplinary proceedings of the kind conducted by ASIC under the Corporations Law. The proceedings before the delegate were regulatory and administrative in character, not legal proceedings of the type to which the tort applies. This ground of appeal therefore failed.
Termination in favour of the plaintiff: Even if the tort could have applied, the court found that the AAT outcome, which returned the licence but imposed further conditions, did not constitute a termination of proceedings favourably to Chapel Road in the sense required to sustain a malicious prosecution claim.
Misfeasance in public office: Howie J found that the Associate Justice had not dealt appropriately with the pleadings on this cause of action. The pleadings, though poorly drafted, disclosed an arguable allegation that ASIC's delegate had predetermined the revocation before the hearing, depriving Chapel Road of a meaningful opportunity to respond, and had done so with an intention to harm the company. Drawing on Northern Territory v Mengel (1994) 185 CLR 307, the court held this was sufficient to constitute an arguable, if difficult, case of misfeasance in public office. The claim was not so hopeless as to be struck out without an opportunity to replead.
Repleading: Howie J emphasised that he was not expressing any view on the ultimate prospects of success, describing the evidentiary difficulties as real. The court's role at this stage was limited to assessing whether the claim was entirely unarguable, not whether it was likely to succeed.
Orders Made
- The appeal is allowed in part.
- The order of Associate Justice Harrison dismissing the proceedings and the consequential costs order are quashed.
- The statement of claim is struck out.
- Chapel Road has leave to replead the cause of action in misfeasance in public office within 21 days of the date of judgment.
- No costs order made; parties given leave to make written submissions on costs within 14 days.
Key Takeaways
- The tort of malicious prosecution does not apply to administrative or regulatory proceedings, such as licence revocation proceedings conducted before a regulator's delegate. The proceedings must be legal in character.
- An AAT outcome that restored a licence but imposed additional conditions was not a termination "favourably" to the plaintiff for the purposes of malicious prosecution.
- A pleading alleging that a public officer predetermined a regulatory outcome with the intention of harming the plaintiff can, if sufficiently articulated, give rise to an arguable cause of action in misfeasance in public office, even where the proceedings were administrative rather than curial.
- On strike-out applications, courts at first instance should be cautious about summarily dismissing claims in developing areas of law, consistent with the principle stated in Hospitals Contribution Fund of Australia v Hunt and Gibson v Parkes District Hospital.
- Poor pleading that obscures an otherwise arguable cause of action will not necessarily result in final dismissal. Leave to replead remains available where an arguable claim can be discerned, even with difficulty, from the existing document.
Legislation and Cases Referenced
Legislation:
- Uniform Civil Procedure Rules 2005 (NSW), Parts 13.4(1) and 14.28(1)
- Corporations Law (repealed), s 837
- Civil Liability Act
Cases:
- Northern Territory v Mengel (1994) 185 CLR 307
- A v State of New South Wales (2007) 81 ALJR 763
- Gregory v Portsmouth City Council [2000] 1 AC 419
- Gibson v Parkes District Hospital (1991) 26 NSWLR 9
- Hospitals Contribution Fund of Australia v Hunt (1982) 44 ALR 365
- Rich v Australian Investment Commission (2004) 220 CLR 129
- Little v Law Institute of Victoria [1990] VR 257
- Beach Club Port Douglas Pty Ltd v Page [2005] QCA 475
- Noye v Robbins [2007] WASC 98
- Commonwealth Life Assurance v Smith (1938) 59 CLR 527
- Herbert Berry Associates Limited v Inland Revenue Commission [1978] 1 All ER 161
- Cheney v Spooner (1929) 41 CLR 532
- Forrest v Kelly (1991) 32 FCR 558
- Cameron v James [1945] VLR 113
- Boaler v Holder (1887) 52 LT 298