Allstate Life Insurance Company & Ors v Australia & New Zealand Banking Group Ltd & Ors
[1994] FCA 822
•08 NOVEMBER 1994
ALLSTATE LIFE INSURANCE CO AND OTHERS v AUSTRALIA AND NEW ZEALAND BANKING
GROUP LIMITED AND OTHERS
No. G381 of 1994
FED No. 822/94
Number of pages - 5
Trade Practices - Fraud
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
BEAUMONT J
CATCHWORDS
Trade Practices - consumer protection - whether allegation of failure to speak could constitute a cause of action of misleading conduct or aiding and abetting under s.52 or s.75B of the Trade Practices Act 1974
Fraud - whether allegation of failure to speak could constitute a cause of action in fraud
Trade Practices Act 1974 (Cth), s52, s75B
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31, considered
HEARING
SYDNEY, 4 November 1994
#DATE 8:11:1994
Counsel and Solicitors Mr. A.R. Emmett QC
for Applicants: instructed by Sly and Weigall
Counsel and Solicitors Mr. M.A. Pembroke
for First, Seventh, instructed by Allen Allen and Hemsley
Eighth, Ninth and Eleventh respondents:
JUDGE1
BEAUMONT J Before the Court are notices of motion seeking to strike out certain paragraphs of the amended statement of claim dated 11 October 1994. For present purposes, it will be convenient to group the claims in question into several categories by reference to the various causes of action alleged to exist and to deal with each challenge in turn. It should be noted that here also, the complaint made by the present respondents is not that there are mere deficiencies of pleading. Rather, they contend that, relevantly, the facts pleaded fail to disclose, even on an arguable basis, the existence of the causes of action claimed. The introductory allegations in the statement of claim are sufficiently summarised in Reasons (No. 1) and need not be repeated for present purposes.
TRADE PRACTICES ACT CLAIMS
(a) The relevant case pleaded
2. In respect of "All Claims" the applicants make the following material allegations:
Under the heading "Trade Practices Act 1974 (Cth)", the following, relevantly, is alleged: The first challenge now made is to paras. 74(e) and 75 which, it is said, disclose no reasonable cause of action.
(b) Conclusions on the application to strike out paras. 74(e) and 75
3. It will be convenient to deal with para.75 first.
(i) Para. 75
4. This claim proceeds by reference to "the premises" in which, it is said, there was a "failure to speak" with the consequence that the banks thereby engaged in misleading conduct contrary to s.52. The "premises" there pleaded are, it appears, relevantly, a reference to the allegations pleaded in the paragraphs in the statement of claim set out above (that is, paras.20, 31-34, 37-40, 43, 51, 53, 55-57). In my opinion, none of those allegations could even arguably give rise to the existence of a duty to speak at common law or, more to the present point, to the existence of circumstances by reason of which the banks would be likely to mislead if they did not speak (see, generally, Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31). On behalf of the applicants, it is said that the allegations in para.20 and following are capable of being read to this effect: That the banks put Linter in the position of it (i.e. Linter) having the capacity to mislead others. However, although such conduct might, arguably at least, constitute misleading conduct on the part of the banks, I do not think that it is even arguable that the allegations in para.20 and following purport to make such a case. On the contrary, those allegations make the different case that Linter was the moving party (as para.20 alleges) and that the banks were prepared to co-operate to give effect to what Linter proposed. Such a case may constitute a claim of aiding or abetting, or being involved in, a contravention within s.75B of the Trade Practices Act (and this will arise in the application to strike out para.74(e), to be dealt with below); but it is not, in my opinion, arguable that the present pleading makes the case that the banks put Linter in the position of having the capacity to mislead.
As has been said, para.75 seeks to allege that in "the premises" and "by the failure to speak" the banks, as principals (i.e. not as accessories) engaged in conduct that was likely to mislead. In my opinion, nothing in the material allegations introducing para.75 could, even arguably, constitute circumstances from which it would be possible to conclude that the banks engaged in conduct that was likely to mislead. It follows that para.75 should be struck out.
(ii) Para.74(e)
6. As noted in Reasons (No. 1) (at 23-4) under the modern system of pleading, on an application to strike out a statement of claim as disclosing no cause of action, "the question is whether it would be open to the (applicants) upon the pleadings to prove facts at the trial which would constitute a cause of action" (see The Mutual Life and Citizens' Assurance Co Ltd v Evatt (1970) 122 CLR 628 at 631). As the Privy Council there pointed out (at 631), it is a different question (and one that would arise under the earlier system of pleading) whether, if the facts alleged and no other facts were proved at the trial, the law will deduce a cause of action.
On behalf of some respondents, Mr. Pembroke contended that because the pleading failed to allege the degree of involvement required by the authorities in this area, especially Giorgianni v R (1985) 156 CLR 473 at 488, 500 and 506 and Yorke v Lucas (1985) 158 CLR 661 at 668-77, para.74(e) should be struck out. Whilst there may be force in Mr. Pembroke's argument if the old rules of pleading were to be applied, under the modern system the position is, as has been stated, otherwise. In my opinion, it would be open to the applicants, on the pleading, essentially for the reasons earlier given, to prove facts at the trial which would constitute the cause of action of "involvement" in Linter's alleged contravention within the meaning of s.75B. Although, as has been said, para.20 alleges that Linter initiated the proposal, it is there and elsewhere alleged that the banks participated in the plan of action alleged. This is material from which it would be possible to conclude, on the evidence at the trial, that the banks were "involved" in Linter's alleged contravention.
I refuse to strike out para.74(e).
(ii) Proposed para.75A
9. In the course of argument, the applicants sought leave to make a further amendment to their pleading (Ex. 8) as follows:
"PROPOSED AMENDMENTS TO STATEMENT OF CLAIM 75A
(1) Further and in the alternative, with knowledge of the intention of Linter Textiles to make the representations, each of the initial participant banks, by the conduct referred to in paragraphs 32, 33 and 34, placed Linter Textiles in a position where it was able to make the representations.
(2) By reason of the matter referred to in subparagraph
(1) and of the matters referred to in paragraphs 37, 38, 39, 40, 43-49, 51, 53 and 55-57 each of the initial participant banks:
(a) has aided, abetted, counselled or procured the contravention of section 52 of the Act by Linter Textiles or alternatively were directly or indirectly knowingly concerned in or a party to the contravention; and
(b) has, in trade or commerce, engaged in conduct which was misleading or deceptive or likely to mislead or deceive in contravention of section 52 of the Act."
Leave to amend was opposed. In my opinion, it should be refused. The proposed amendment seeks in sub-paras.(1) and (2)(b) to assert again the argument I have already rejected as untenable. In sub-para.(2)(a), the aiding and abetting contention is again stated but this is already pleaded in para.74(e).
DECEIT AND COMMON LAW FRAUD CLAIMS
11. These claims are pleaded in these terms:
Mr. Pembroke submitted that paras. 130-131, 134-135 and 140 should be struck out as disclosing no reasonable cause of action.
In the first place, Mr. Pembroke argued that:
(a) To make a party liable in deceit or common law fraud for concealment it must be established that:
(i) there is an obligation on the party to disclose information to another; and
(ii) An intentional failure to make such disclosure.
(b) The applicants do not allege any matters from which it could be said that the respondents were under an obligation to disclose the alleged misrepresentations to the applicants.
(c) Mere knowledge of facts which may suggest that representations made in a prospectus are false is not sufficient to impose an obligation on the respondents to disclose such matters to the applicants.
(In relation to para.130, Mr. Pembroke also repeated his submission with respect to para.74(e) which I have already rejected.)
In my opinion, the allegation in para.131 suffers from the same vice as para.75 and should be struck out for essentially the same reasons (cf. Demagogue, above, and see George Spencer Bower, The Law Relating to Actionable Non-Disclosure (2nd ed., 1990) Ch. 1). In other words, since no misrepresentation by the banks is alleged and since it cannot be argued that the law imposes, in the circumstances alleged, any duty of disclosure (see Bower, above, at 5-6), no reasonable cause of action is pleaded in para.131 and it will be struck out.
Mr. Pembroke also challenges para.135 which, it will be recalled, pleads a tort of fraud committed in New York of which the governing law is said to be the law of New York.
In this connection, Mr. Pembroke submitted (with the support of Mr. Karkar QC) that the role of the lex loci in the present kind of case does no more than provide the means of determining whether the relevant facts give rise to civil liability "of the kind which the plaintiff seeks to enforce in the forum." Once that question has been addressed, the paramount application of the lex fori continues to be recognised as determining the entitlement of a plaintiff to relief. Mr. Pembroke referred to Breavington v Godleman (1988) 169 CLR 41; Stevens v Head (1993) 176 CLR 433; McKain v R W Miller and Co. (South Australia) Pty. Limited (1991) 174 CLR 1. He submitted that, insofar as it might contradict his argument, the recent decision of the Privy Council in Red Sea Insurance Co. v Bouygues S.A. (1994) 3 WLR 926 was wrongly decided.
On the assumption (which I am asked to make) that no purely "pleading" point is taken, in my opinion, para. 135 does not fail to disclose a cause of action under the modern system of pleading in the sense described by the Privy Council in MLC v Evatt.
For present purposes, the relevant Australian conflicts law may be summarised as follows (see Halsbury's Laws of Australia Vol. 4 (P.E. Nygh)):
(1) Generally, a tort is committed in the place where the wrongful act occurred rather than in the place where the resultant damage was suffered (see para.85-1440).
(2) A plaintiff may sue in the forum to enforce a liability in respect of a tort occurring outside the forum if:
(i) the claim arose out of circumstances of such a character that, if they had occurred within the territory of the forum, a cause of action would have arisen entitling the plaintiff to enforce against the defendant a civil liability of a kind which the plaintiff claims to enforce; and
(ii) by the law of the place in which the wrong occurred, the circumstances of the occurrence gave rise to a civil liability of the kind which the plaintiff claims to enforce.
Provided a civil liability of the kind described above exists under the law of the place of wrong, the court will determine the extent of that liability according to the law of the forum (see para.85-1400).
(3) The cause of action on which the plaintiff proceeds must be one which is available against the defendant according to the law of the forum. Consequently a defendant can defeat the plaintiff's action by relying on a defence arising under the law of the forum which will bar the cause of action, even though that defence is not available under the law of the place of wrong. Similarly, no head of damages may be recovered in the forum if it is not recoverable under the law of the forum (see para.85-1410).
(4) This requirement has been interpreted to mean that the plaintiff can only recover in the forum such heads of damages as he or she would have recovered had an action been brought in the place of wrong. The defendant may raise any defence of substance which would have defeated the cause of action in the place of wrong, or would have limited recovery to certain heads of damages (see para.85-1415).
(5) The cause of action arises under the law of the forum but incorporates as an element the existence of a civil liability under the law of the place of wrong. Once that liability is found to exist under the law of the place of wrong, the law of the forum determines the liability of the defendant (see para.85-1425).
(6) In the view of the majority of the High Court, there is no "flexible" exception to the general rule stated above as regards intra-Australian torts. There is no authority to determine the position as regards torts committed outside Australia (see 85-1430).
Although not a decision of the High Court, the last sentence in (6) above must now be read in the light of the Red Sea case, above. But this hardly assists Mr. Pembroke's argument. In Red Sea, it was held that, exceptionally, in an appropriate case, a plaintiff could rely upon the lex loci even if under the lex fori the claim would not be actionable.
The position then is that whilst Australian conflicts law with respect to interstate torts may be settled, the same cannot be said of international torts. In my view, since para.135 raises an arguable issue, it should not be struck out. COSTS
Costs of the motion will be reserved.
ORDERS
21. I will hear the parties on the form of the orders to be made in the light of these reasons.
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