Arktos Pty Ltd v Idyllic Nominees Pty Ltd

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FEDERAL COURT OF AUSTRALIA
Arktos Pty Ltd v Idyllic Nominees Pty Ltd [2004] FCAFC 119

PRACTICE AND PROCEDURE –appellants sued respondents in respect of misleading or deceptive conduct – claims made in the alternative under the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (WA) – first respondent a trading corporation – second and third respondents directors of the first respondent – judgment recovered against first respondent – trial judge declined to enter judgment against second and third respondents because no pleading that either of them engaged in trade or commerce “on his own account” – whether necessary so to plead in relation to the Fair Trading Act claim – whether in any event the appellants were entitled to judgment against the third respondent on the facts pleaded and proved.

Fair Trading Act 1987 (WA), s 79

Trade Practices Act 1974 (Cth), s 52

Cleary v Australian Co-operative Foods Ltd (1999) 32 ACSR 701 referred to
Lauriana Pty Ltd v Corfield Food Warehouse Pty Ltd, unreported, Supreme Court of Western Australia, Wallwork J, 28 April 1995 referred to
Citibank Ltd v Liu [2003] NSWSC 569 referred to
Miba Pty Ltd v Nescor Industries Group Pty Ltd (1996) 141 ALR 525 referred to
Ravinder Rohini Pty Ltd v Krizaic (1991) 30 FCR 300 followed
Cubillo v The Commonwealth (2001) 112 FCR 455 followed

ARKTOS PTY LTD and LINDA DAVIES v IDYLLIC NOMINEES PTY LTD, DONALD GEORGE MOORE, DAVID IAN PRICE and SKYCORP INVESTMENTS PTY LTD

W89 OF 2003

CARR, TAMBERLIN & RD NICHOLSON JJ
10 MAY 2004
PERTH


IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

W89 OF 2003

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

ARKTOS PTY LTD (ACN 093 410 247)
FIRST APPELLANT

LINDA DAVIES
SECOND APPELLANT

AND:

IDYLLIC NOMINEES PTY LTD (ACN 085 028 057)
FIRST RESPONDENT

DONALD GEORGE MOORE
SECOND RESPONDENT

DAVID IAN PRICE
THIRD RESPONDENT

SKYCORP INVESTMENTS PTY LTD
(ACN 078 131 534)
FOURTH RESPONDENT

JUDGES:

CARR, TAMBERLIN & RD NICHOLSON JJ

DATE OF ORDER:

10 MAY 2004

WHERE MADE:

PERTH

THE COURT ORDERS THAT:

1.        The appeal be allowed.

2.Each of the orders made on 11 April 2003 be varied by adding the words “and the Third Respondent” immediately after the reference to “The First Respondent”. 

3.The third respondent pay the appellants’ costs of the appeal.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.


IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

W89 OF 2003

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

ARKTOS PTY LTD (ACN 093 410 247)
FIRST APPELLANT

LINDA DAVIES
SECOND APPELLANT

AND:

IDYLLIC NOMINEES PTY LTD (ACN 085 028 057)
FIRST RESPONDENT

DONALD GEORGE MOORE
SECOND RESPONDENT

DAVID IAN PRICE
THIRD RESPONDENT

SKYCORP INVESTMENTS PTY LTD (ACN 078 131 534)
FOURTH RESPONDENT

JUDGES:

CARR, TAMBERLIN & RD NICHOLSON JJ

DATE:

10 MAY 2004

PLACE:

PERTH

REASONS FOR JUDGMENT

THE COURT:

INTRODUCTION

  1. This is an…

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Details
Case
[2004] FCAFC 119
Decision Date

CaseChat Overview and Summary

In the case of Arktos Pty Ltd v Idyllic Nominees Pty Ltd, the appellants, Arktos Pty Ltd and Ms Davies, sought to appeal a decision by a judge of the Supreme Court of Western Australia. The appeal centred on the dismissal of the appellants' claims against the third respondent, Mr Price, regarding damages under section 79 of the Fair Trading Act 1987 (WA) and an order under section 77 of the same act. The appellants argued that Mr Price, as a director or agent of Idyllic Nominees Pty Ltd, made misleading pre-contract representations concerning the profitability and value of a bakery and delicatessen business they purchased from Idyllic. The primary judge had found that Idyllic engaged in misleading conduct in trade or commerce under section 52 of the Trade Practices Act 1974 (Cth) and ordered Idyllic to pay damages. However, the judge did not hold Mr Price liable for damages or make any orders against him under the Fair Trading Act.

The legal issues in this case involved whether Mr Price could be held liable for the misleading conduct under the Fair Trading Act, specifically if he could be considered a person involved in the contravention as defined in the relevant sections of the Act. The appellants argued that Mr Price should be held liable for the conduct as he acted within the scope of his authority as a director or agent of Idyllic. However, the primary judge did not find Mr Price liable for damages or make any orders against him under the Fair Trading Act.

The court considered whether the pleadings were sufficient to hold Mr Price liable under the Fair Trading Act. The pleadings did not allege that Mr Price was a person involved in the contravention by Idyllic. The court held that the pleadings did not address the issue of Mr Price's knowledge of the facts giving Idyllic's conduct the character of a contravention. The court concluded that no derivative liability under the Act, or the Fair Trading Act, was made out against Mr Price in respect of conduct by Idyllic held to contravene section 52 of the Trade Practices Act or section 10 of the Fair Trading Act.

The court allowed the appeal, varying the orders made on 11 April 2003 to include Mr Price as a party to the orders. The third respondent, Mr Price, was ordered to pay the appellants' costs of the appeal.

ORDERS:

1. The appeal be allowed.
2. Each of the orders made on 11 April 2003 be varied by adding the words "and the Third Respondent" immediately after the reference to "The First Respondent".
3. The third respondent pay the appellants' costs of the appeal.

Orders

Orders of the court

1. The appeal be allowed.

2. Each of the orders made on 11 April 2003 be varied by adding the words “and the Third Respondent” immediately after the reference to “The First Respondent”.

3. The third respondent pay the appellants’ costs of the appeal.

Background

Background to the litigation

This is an appeal against what is said to be part of the judgment of a judge of this Court, given on 11 April 2003, to dismiss the appellants’ claims against the third respondent. Alternatively (and we think this is probably more accurate), the appellants appeal against his Honour’s decision not to enter judgment in their favour against the third respondent for damages under s 79 of the Fair Trading Act 1987 (WA) (“the FTA”), or not to make an order against the third respondent under s 77 of the FTA. FACTUAL AND PROCEDURAL BACKGROUND The second appellant (“Ms Davies”) is the sole director and shareholder of the first appellant (“Arktos”). Arktos purchased a bakery and delicatessen business (“the Business”) from the first respondent (“Idyllic”) on 30 June 2000. Ms Davies guaranteed obligations undertaken by Arktos as purchaser of the Business. The learned primary judge found that the third respondent (“Mr Price”) made misleading pre-contract representations, within the scope of his authority as a director or as an agent of Idyllic, and held that Idyllic thereby engaged in misleading conduct in trade or commerce, contrary to s 52 of the Trade Practices Act 1974 (Cth) (“the TPA”). The misleading representations which caused the relevant conduct to be found to be misleading related, essentially, to the profitability and value of the Business. His Honour found that Ms Davies relied on the misleading conduct engaged in by Idyllic when she decided on behalf of Arktos to enter into the agreement to purchase the Business. His Honour ordered, relevantly, that Idyllic pay to the appellants certain assessed sums by way of damages. In relation to the conduct of Mr Price and a Mr Moore (another director of Idyllic), the primary judge said this: ‘75. In respect of that part of the conduct by Idyllic in trade or commerce done on behalf of Idyllic by Price or Moore, it was pleaded that Price and Moore acted within the scope of their actual or apparent authority as directors of Idyllic or, alternatively, as agents for Idyllic. That pleading did not allege that either Price or Moore engaged in conduct in trade or commerce on his own account. The conduct described as the conduct of Idyllic was pleaded as conduct which contravened s 52 of the Act, and s 10 of the Fair Trading Act 1987 (WA), and the applicants sought damages and orders pursuant to ss 82 and 87 of the Act, and ss 79 and 77 of the Fair Trading Act. Although such a pleading raises the issue whether the Fair Trading Act applies to conduct of a corporation that is conduct to which the Act applies, it is unnecessary for the outcome of this case to decide that question.76. Section 82 of the Act (or s 79 of the Fair Trading Act) permits a person who suffers loss or damage by the conduct of a corporation done in contravention of s 52 of the Act (or s 10 of the Fair Trading Act) to recover the amount of loss or damage from “a person involved in that contravention” as that expression is defined in s 75B of the Act (or s 68 of the Fair Trading Act). It was not pleaded against Moore or Price that either was a person involved in a contravention by Idyllic of s 52 of the Act (or s 10 of the Fair Trading Act). Accordingly, it was not pleaded how Price or Moore came to be “a person involved in such a contravention” as defined in s 75B (or s 68 of the Fair Trading Act). If it were contended that each was “knowingly concerned” in the contravention of s 52 of the Act by Idyllic, there was no pleading of that contention nor of any material facts relied upon by the applicants to prove knowledge was held by Moore, or Price, of the facts which gave Idyllic’s conduct the character of a contravention of s 52 of the Act. (See: Wheeler Grace & Pierucci Pty Ltd v Wright (1989) 16 IPR 189 at 209). In particular, no assertion was made that Moore or Price, severally, had knowledge that Idyllic had no reasonable grounds for any representation made by Idyllic as to future matters. (See: ACCC v Michigan Group Pty Ltd [2002] FCA 1439 per Dowsett J at [303]).77. In addition to the absence of any pleading of the foregoing issue, no submissions were made on the point. It follows that no derivative liability under the Act, or the Fair Trading Act, was made out against Price or Moore in respect of conduct by Idyllic held to contravene s 52 of the Act, or s 10 of the Fair Trading Act.’

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Nor is it the position that the third respondent’s case suffered from any prejudice as a consequence of the view we have taken of his liability at law. When asked the question whether he would have conducted that case in any different way counsel for the third respondent identified a possible need to have investigated the question of capacity. However, on the view we consider we are required to take of the pleadings by the authorities, no issue of capacity arose. The only pleaded capacities of director or agent were admitted on behalf of the third respondent.CONCLUSION For the foregoing reasons we would allow the appeal and in each of the orders made at first instance add the words “and the Third Respondent” immediately after the reference to the first respondent. The third respondent should pay the appellants’ costs of the appeal.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.