Arcadi, Peter Paul v Colonial Mutual Life Insurance

[1984] FCA 192

Re: PETER PAUL ARCADI and DOMENIC STALTARI
And: COLONIAL MUTUAL LIFE ASSURANCE SOCIETY LIMITED and JOSEPH CHARLES
LEARMONTH DUFFY PTY. LTD.
No. WA G6 of 1983
(1984) ATPR Para 40-473
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Toohey J.

CATCHWORDS

Trade Practices - representation of present intention by respondents to grant fresh lease to applicants - purchase of business in reliance - failure to grant fresh lease - allegation of loss and damage - when cause of action accrued - whether claim statute barred - applicants' claim not clearly untenable - motion to strike out paragraphs of respondents' defence - defence involving questions of fact as well as law - judgment on cross-claim by reason of admissions in defence thereto - stay of execution

Trade Practices Act 1974 ss. 52,82

Federal Court Rules 0.18 r.4

Property Law Act 1969 (W.A.) ss.34,36

HEARING

PERTH

#DATE 12:7:1984

ORDER

1. The respondents' motion that the applicants'

claim be dismissed be itself dismissed.

2. The applicants' motion that paragraph 13 and

14 of the respondents' defence be struck out be dismissed.

3. There be judgment for the first respondent

against the applicants on its cross-claim in the sum of $8172.97.

4. Execution on the judgment entered for the

first respondent against the applicants be stayed until trial of the application or until further order.

5. Liberty to the parties to apply as to the

costs of the applicants' motion and the respondents' motion.

JUDGE1

There are before the Court two motions. One, by the respondents, is to dismiss the application as disclosing no reasonable cause of action and to enter judgment for the first respondent on its cross claim, by reason of admissions made in the defence thereto. The other motion, by the applicants, is to strike out two paragraphs of the defence. One paragraph pleads that the applicant's claim is statute barred by reason of the provisions of sub-s.82(2) of the Trade Practices Act 1974; the other pleads non compliance with s.34 of the Property Law Act 1969 (W.A.).

2. As the basis of the respondents' motion to dismiss the application is failure to commence action within the time prescribed by sub-s.82(2) of the Trade Practices Act, it is appropriate to look first at that matter.

3. Sub-section 82(1) permits a person who suffers

loss or damage by conduct of another person, done in contravention inter alia of Part V of the Act, to recover the amount of the loss or damage by action. Sub-section 82(2) reads:

"An action under sub-section (1) may be commenced at any time within 3 years after the date on which the cause of action accrued".

1. The application was filed on 14 February 1983. It pleads that the first respondent is a trading or financial corporation and that the second respondent is a trading corporation carrying on the business of real estate agents and property managers. The first respondent is the registered proprietor of land comprising a shopping centre complex known as the Morley City Shopping Centre. The second respondent is the manager of the centre for the first respondent.

2. The applicants claim that in or about September 1979 they had discussions with the second respondent's employee Raymond Nardy with a view to entering into a lease for shop number 36 in the Centre in which they proposed to carry on the business of coffee lounge, take away food service and gourmet delicatessen.

3. At the time of these discussions shop 36 was leased to tenants under a lease dated 16 December 1973 granted by the first respondent's predecessor in title. The lease was for an initial term of 5 years, with an option to renew for a further term of 3 years expiring on 2 December 1981. The option had been exercised so that the additional term was current at the time of the discussions between the applicants and Mr. Nardy. The applicants told Nardy that, because the lease had only a short time to run, they would not accept an assignment but required a new lease for an initial term of 3 years, with an option to renew for a further 3 years.

4. The applicants allege that a number of statements were made by Mr. Nardy, all it would appear in or about September 1979. In effect, Nardy told the applicants that they would be able to obtain a new lease of shop 36 at the expiry of the original lease in December 1981. Relying upon those statements, the applicants entered into an agreement on 24 September 1979 to purchase the business carried on in shop 36 and took an assignment of the original lease. It is helpful to set out a paragraph of the statement of claim in which certain representations are sought to be inferred from the statements made by Nardy.
   
   

"17. The statements made by Nardy implied the following representations of fact:-

(i) That Nardy and the Second Respondent had authority from the First Respondent to make the statement;

(ii) That the First Respondent had a present intention of granting a fresh lease to the tenants of Shop 36 at the expiry of the term of the Original Lease;

(iii) That the First Respondent neither intended nor was considering any course of action in connection with the Centre inconsistent with an intention to grant a fresh lease at the expiry of the Original Lease."

1. The business was not a success and shortly before the end of February 1980 the applicants decided to sell it. They told the manager of the Centre, an employee of the second respondent, of their intention and were told that:
   
   

"(i) There was never any intention on the part of the First Respondent to grant a new lease of shop 36;

(ii) Pending extensions which had been planned well before the Applicants had occupied the premises involved the extension of a supermarket in the Centre to include the area occupied by Shop 36".

1. The applicants say that until Pollard, the Centre manager, made the statements he did, they were not aware of the true intentions of the respondents and believed the position to be as represented to them by Nardy. They say that, because they were not able to obtain a fresh lease, they were unable to find a purchaser for the business, they were forced to vacate the shop and in consequence they suffered loss and damage.

2. There are several dates of importance in this chronology of events.
   
   

1. September 1979 - when Nardy made statements to the applicants concerning the lease of the shop.

2. 24 September 1979 - when the applicants agreed to buy the business.

3. 28 February 1980 or thereabouts - when Pollard told the applicants that there was never any intention to grant a new lease.

4. Between 28 February 1980 and October 1981 - when a number of prospective purchasers of the business declined to proceed.

5. April 1982 - when the applicants gave up possession of the shop.

1. It is only if the applicants' cause of action accrued in September 1979 that sub-s.82(2) operates to bar their claim.

2. Counsel discussed at some length authorities concerned with the operation of Limitation Act provisions in the areas of contract and tort. Such authorities may offer guidance but the primary question is one of the construction of sub-s.82(2) and of other relevant provisions of the Trade Practices Act. While a claim for damages based on s.52 of the Act has some of the characteristics of an action in tort, characteristics which tend to be emphasised by the common practice of adding claims based on deceit or negligent misstatements, a cause of action under the Act is the creature of the Act itself. It is worth bearing in mind some remarks by Fox J. in Brown v. Jam Factory Pty. Ltd. (1981) 53 FLR 340 at pp.348-349. Discussing the meaning and scope of sub-s.52(1) of the Act, his Honour said:
   
   

"Section 52(1) is a comprehensive provision of wide impact, which does not adopt the language of any common law cause of action. It does not purport to create liability at all; rather does it establish a norm of conduct, failure to observe which has consequences provided for elsewhere in the same statute, or under the general law. ... In my view effect should be given to the ordinary meaning of the word used. They should not be qualified or (if it be possible) expanded, by reference to established common law principles of liability. At the same time, known concepts, such as those concerning the torts of deceit and passing off and the analyses made of them over the years, may prove helpful in deciding a case under s.52(1)".

1. Again, in Frith v. Gold Coast Mineral Springs Pty. Ltd. (1983) ATPR 40-339 at p.44,086 Fitzgerald J. commented:
   
   

"... whilst common law rules as to the measure of damages in tort may, in appropriate circumstances, provide a useful guide, no justification exists for confining the damages which are recoverable under sec.82 and 87 of the Act by reference to common law tests. The only limitations which exist in proceedings under the Act are those expressed or inherent in the statutory provisions themselves".

1. And so the task which should be carried out is to identify, in respect of the present application, the date on which the cause of action or causes of action accrued.

2. The statements made by Mr. Nardy are said, in para. 23 of the statement of claim, to have constituted "conduct in trade or commerce by either or both the Respondents which was misleading or deceptive or likely to mislead or deceive in contravention of s.52 of the Trade Practices Act 1974".

3. Thus the statutory cause of action is tied to s.52. Sub-section 82(1) confers a right of action on a person who suffers loss or damage by conduct in contravention of Part V (to which s.52 belongs), so that the applicants have a cause of action for loss or damage suffered by conduct of the respondents, or either of them, which was conduct in trade or commerce and misleading or deceptive or likely to mislead or deceive.

4. In Fenech v. Sterling (1983) 51 ALR 205 at p.221 Davies J. said:
   
   

"Ordinarily, a cause of action for tort accrues when loss is suffered as a result of the tort. This principle accords with the cause of action claimed in the present proceedings under both ss.82 and 87(1A) constituted by the suffering of loss as the result of conduct that was in contravention of Pt. V of the Trade Practices Act, in which contravention the respondent was involved. In the present case, the cause of action accrued when, in November 1975, the applicants signed the contract for the purchase of an interest in the Paradise Waters Estate and paid moneys to Robert Sterling Pty. Ltd. The applicants then suffered loss as the result of conduct of Robert Sterling Pty. Ltd. that was in contravention of s.52, in which contravention Robert Sterling was involved".

1. Fenech v. Sterling was concerned with a number of issues which do not arise in the present case. In particular, his Honour held that there was no room in the Trade Practices Act for the equitable principle that time does not run against a plaintiff ignorant of fraud. No such question arose in the present case. Fenech v. Sterling is an illustration of when, in a fairly typical situation, a cause of action arises under the Trade Practices Act.

2. Ordinarily then, one would say that the applicants' cause of action accrued on 24 September 1979 when they agreed to purchase the business and took an assignment of the lease. That event occurred more than 3 years before the application was lodged in the Federal Court. But the applicants submit that, in the particular circumstances of the present case, the statutory cause of action upon which they rely occurred at a later time. The basis of this submission may be summed up in the following way.

3. A cause of action means "every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the Court" Cooke v. Gill (1873) LR 8CP 107 at p.116; see also Read v. Brown (1888) 22 QBD 128 at p.131, Patterson v. Richards (1963) VR 179 at pp.186-187, Do Carmo v. Ford Excavations Pty. Ltd. (1984) 52 ALR 231 at p.240. The cause of action established by sub-s.82(1) has particular elements - conduct by a person in contravention of a provision of Part IV or V of the Act and the suffering of loss or damage by reason of that conduct. Therefore, a cause of action under s.82 accrues, not when there is a contravention of s.52, but when loss or damage is suffered in consequence. Loss or damage may not be suffered until some time after contravention. For instance the learned author of the Australian Trade Practices Reporter Vol. 1 p.13,453 comments:
   
   

"Clearly there may be cases where the applicant does not commence to suffer loss or damage, for instance in the case of anti-competitive contracts or exclusive dealing, until the effect of that conduct has worked its way through the market".

1. There may be several distinct losses, flowing from conduct in contravention of the Act and the cause of action is not complete until those losses have occurred. Thus, it was said, the sequence of refusals by prospective purchasers between February 1980 and October 1981 constitutes a loss which is an element in the cause of action. Furthermore, when the conduct complained of is promissory in character, the Court should not be constrained by analogies derived from tortious actions. Actions in contract provide a more apt analogy but in any event, as a matter of statutory construction, it is not until the promises have been broken and loss or damage has been suffered thereby that a cause of action based upon those promises can be said to be complete.

2. The respondents' motion seeks a dismissal of the application on the basis that it discloses no reasonable cause of action. The approach to be taken in such a case has been discussed in a number of decisions. Some are noted by Lockhart J. in Bill Acceptance Corporation Ltd. v. GWA Ltd. (1983) 50 ALR 242 at p.250-252. In General Steel Industries Inc. v. Commissioner for Railways (N.S.W.) (1964) 112 CLR 125 at p.130, Barwick C.J. expressed the relevant test whether "the case of the plaintiff is so clearly untenable that it cannot possibly succeed". His Honour recognised that argument, "perhaps even of an extensive kind", might be necessary to demonstrate that the plaintiff's case was clearly untenable.

3. I am not satisfied that, by reason of sub-s.82(2) of the Trade Practices Act, the applicants' claim against the respondents is so clearly untenable that it cannot succeed. The meaning, scope and operation of sub-s.82(2) have yet scarcely been explored. For that reason, particular care is called for in considering whether a reasonable cause of action has been disclosed or, perhaps more accurately, in determining that none has been disclosed. Furthermore, the question is not merely one of statutory construction; it involves the application of the sub-section, as construed, to the particular facts of the case. It may be that, when the evidence has been heard, it is apparent that any loss or damage suffered by the applicants was suffered no later than 28 February 1980. It was then that the applicants acquired the business and an interest under the lease. On the other hand, it is arguable that no loss or damage was suffered merely by purchasing the business and taking an assignment of the lease, for the crux of the applicants' case is that the statements made by Mr. Nardy evidenced an intention on the part of the first respondent to grant a fresh lease to the applicants and to do nothing inconsistent with that intention. It was only when Mr. Pollard said what he did that the lack of such an intention became manifest and loss was suffered.

4. The case pleaded does not depend, as did the applicants' case in Bill Acceptance Corporation Ltd. v. GWA Ltd., "upon the correctness of the proposition that a contravention of s.52 may occur merely if a representation by the respondent as to future conduct does not come to pass, notwithstanding that, at the time it made that representation, the respondent may have believed that it would come to pass or that it was not recklessly indifferent as to what it said" (Lockhart J. at p.243). That is not to say that there are not difficulties in the way of the applicants in establishing conduct that was misleading or deceptive or likely to mislead or deceive within s.52 of the Trade Practices Act. But these are all questions that depend for their answers, not only upon the view taken of s.82 and perhaps other provisions of the Act, but also upon the findings of fact. In the circumstances I am unable to say that the applicants' claim is clearly untenable; they should be permitted the opportunity to present it to the Court in the usual way.

5. Equally, I am not persuaded that para. 14 of the defence should be struck out. Nothing in these reasons is intended to suggest that the respondents may not be able to make good their contention that the claim is statute barred. They are entitled to pursue the defence raised in that paragraph.

6. As I have decided that the statement of claim does disclose a reasonable cause of action under the Trade Practices Act, it is unnecessary to consider a further submission made on behalf of the applicants. It was that, even if the cause of action under the Trade Practices Act was barred by sub-s.82(2), the claim based on negligent misstatements was part of the "matters" arising under sub-s.82(1). In counsel's submission, jurisdiction of the Federal Court to entertain the common law claim would remain and it would be a matter for the exercise of the Court's discretion whether it would hear a claim arising from its accrued or attached jurisdiction. Stack v. Coast Securities (No. 9) Pty. Ltd. (1983) 49 ALR 193. I express no view on those questions.

7. Paragraph 13 of the defence, which is attacked by the applicants, reads:
   
   

"13. Section 34 of the Property Law Act

(W.A.) has not been complied with".

1. The plea is hardly informative. Section 34 requires certain instruments relating to land to be in writing. Paragraph 34(1) provides that:
   
   

"(a) no interest in land is capable of being created or disposed of except by writing signed by the person creating or conveying the interest, or by his agent thereunto lawfully authorised in writing, or by will, or by operation of law".

1. Presumably the defence is aimed at the allegation that the first respondent intended to grant the applicants a fresh lease of shop 36. This alleged intention is pleaded in para.25 of the statement of claim as part of a collateral contract and in para.26 as contractual terms embodied in the assignment of the original lease. Whether s.34 of the Property Law Act has any application to an arrangement such as the statement of claim alleges is a matter of argument. Furthermore, s.36 of that Act provides that nothing in s.34 "affects the operation of the law relating to part performance". Through counsel, the applicants indicated their intention to rely upon the doctrine of part performance; if so, they should file a reply expressly raising this answer.

2. Clearly it is premature to deal with the defence under the Property Law Act. The defence itself lacks precision; there is no reply to define the issues between the parties; and the defence is closely tied to questions of fact, particularly in the area of part performance. I do not propose to strike out this paragraph.

3. There is a cross-claim in which it is said that at the expiration of the term of the original lease on 2 December 1981 the applicants held over as monthly tenants and that they have refused to pay rental, variable outgoings and electricity charges payable by them. The cross-claim particularises an amount due to 13 April 1982 of $8,172.97 with interest thereon at the rate of 12% a year. In their defence to counterclaim, the applicants admit holding over as monthly tenants and admit "that they failed to pay monies due to the first respondent". They claim to set off the damages to which they say they are entitled against any moneys owing to the first respondent.

4. The first respondent seeks a judgment on admissions made by the applicants in their defence to counterclaim, pursuant to O.18 r.4 of the Federal Court Rules.

5. Counsel for the applicants submitted that judgment should not be entered at this stage, that this matter should await the outcome of the hearing on the other issues raised by the pleadings. Counsel for the respondents submitted that judgment should be entered forthwith, the first respondent being content with a stay of execution until the determination of other issues. In my view, having regard to the admissions made in the defence to counterclaim, it would be proper to enter judgment for the first respondent on the pleadings. Any damages to which the applicants may be entitled are not truly a set-off against the amount claimed by the first respondent. In any event, there is, for all practical purposes, a set-off since the first respondent is content with a stay of execution.

6. I am prepared to enter judgment for the first respondent against the applicants on the pleadings in the sum of $8,172.97, being the liquidated amount claimed. If the first respondent wishes to bring that claim up to date or to claim interest, I shall need to hear further submissions from it. For whatever amount judgment is entered, execution will be stayed until trial of the application or until further order.

7. In summary then:
   
   

1. The respondents' motion for the dismissal of the applicants' claim is refused.

2. The applicants' motion to strike out paras 13 and 14 of the respondents' defence is refused.

3. There will be judgment for the first respondent against the applicants on its cross-claim, execution thereon to be stayed until trial of the application or until further order.

1. I shall hear from counsel on the question of costs and as to any other others thought appropriate in the circumstances.