Citigroup Pty Limited v Hoocass Pty Limited

[2016] NSWSC 656

Supreme Court

New South Wales

Medium Neutral Citation:	Citigroup Pty Limited v Hoocass Pty Limited [2016] NSWSC 656
Hearing dates:	20 May 2016
Date of orders:	20 May 2016
Decision date:	20 May 2016
Jurisdiction:	Equity
Before:	Lindsay J
Decision:	Orders for dismissal of a notice of motion for summary disposal of a cross claim, subject to a grant of leave to amend the cross claim to clarify a particular aspect of the cross claimant’s case.
Catchwords:	PROCEDURE – Civil Proceedings – Motions, interlocutory applications and other pre-trial matters - Strike Out Motion   TRADE PRACTICES – Misleading and deceptive conduct – Damages – Causation – Indirect causation – Direct reliance on contravening conduct not required
Legislation Cited:	Uniform Civil Procedure Rules 2005 NSW
Cases Cited:	Brimson v Rocla Concrete Pipes Pty Limited [1982] 2 NSWLR 937 Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91 General Steel Industries Inc v Commissioner for Railways (NSW) 1964 112 CLR 125 at 129-130 Hampic Pty Limited v Adams [1999] NSWCA 455 at [35] and [38]-[40] Janssen-Gilag Pty Limited v Pfizer Pty Limited (1992) 37 FCR 526 Re HIH Insurance Ltd (In Liq) [2016] NSWSC 482
Texts Cited:	-
Category:	Procedural and other rulings
Parties:	Second Defendant/Cross Claimant: Anthony Bruce Hooper Second Cross Defendant: Mark O’Neill Valuations Pty Ltd ACN 003 308923 Third Cross Defendant: Mark O’Neill
Representation:	Counsel: Second Defendant/Cross Claimant: DD Knoll Second and Third Cross Defendants: MT McCulloch SC   Solicitors: Second Defendant/Cross Claimant: Dib Lawyers Second and Third Cross Defendants: Wotton & Kearney
File Number(s):	2014/00029543

Judgment – EX TEMPORE

1. By notice of motion filed on 11 April 2016, the second and third cross-defendants ("the cross-defendants") challenge the case sought to be made against them by the cross-claimant (the second defendant in the principal proceedings) on an amended statement of cross-claim filed 11 December 2015.

2. The relief sought, in the alternative, is:

1. an order (under the Uniform Civil Procedure Rules 2005 NSW, r 13.4) that the cross-claim be dismissed; and

2. an order (under Uniform Civil Procedure Rules, r 14.28) that the statement of cross-claim be struck out.

3. In slightly different language, those rules respectively authorise a grant of the relief sought if the case sought to be advanced by the cross-claimant is not attended by a "reasonable cause of action". The ambit of both rules is broader than that, directed as they are to combatting abuses of the process of the Court; but, in the circumstances of the present proceedings, the focus for attention is on whether the cross-claimant has, by the statement of cross-claim, articulated a reasonable cause of action.

4. UCPR r 14.28 is directed to the question whether a pleading is defective; UCPR r 13.4 is directed to the question whether, albeit properly pleaded, a case is weak: Brimson v Rocla Concrete Pipes Pty Limited [1982] 2 NSWLR 937.

5. On the hearing of the current motion, the parties agreed that there is no practical difference in the operation of the two rules in the present circumstances.

6. That agreement was underpinned by two formal notations made by the Court, with the concurrence of the parties, to this effect:

1. note that, for the purpose only of the hearing of the notice of motion, and for no other purpose, the cross-defendants accept that allegations of fact made in the amended statement of cross-claim filed on 11 December 2015 are to be taken, as on a demurrer, to be correct;

2. note that, on the hearing of the notice of motion, it is agreed that the pleadings in the principal proceedings, which may be incorporated by reference in the amended statement of cross-claim filed on 11 December 2015, are: (i) the further amended statement of claim filed    by the plaintiff on 11 December 2015; and (ii) the amended defence filed on 11 December 2015 by the second defendant (the cross-claimant).

7. It is also agreed between the parties that the motion before the Court attracts the principles, requiring caution in the grant of summary relief, articulated in General Steel Industries Inc v Commissioner for Railways(NSW) 1964 112 CLR 125 at 129-130 and Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91.

8. By his cross-claim, the cross-claimant seeks, in substance, to be indemnified by the cross-defendants against a claim in debt made against him, by the plaintiff, in the principal proceedings, on a guarantee allegedly executed by him, in favour of the plaintiff, in support of a loan advanced by the plaintiff to the first defendant.

9. The cross-claimant denies that he executed the guarantee; but, for present purposes, it must be assumed that he did execute it, and that he is liable to the plaintiff on it, in circumstances in which the first defendant (as borrower) has subsequently defaulted in repayment of the loan.

10. In a process culminating in the making of a loan advance to the first defendant, the plaintiff sought and obtained from the second cross-defendant a valuation of land offered as a mortgage security by the first defendant, which valuation was prepared by the third cross-defendant, a registered valuer.

11. On the pleadings, presently assumed to be factually correct:

1. on or about 13 August 2007, the cross-defendants provided their valuation to the plaintiff. It valued the land at $2,750,000.

2. the loan agreement between the plaintiff (as lender) and the first defendant (as borrower) was executed on or about 17 August 2007. It provided for a loan advance of $2,062,500.

3. the cross-claimant signed a guarantee in favour of the plaintiff on or about 6 September 2007, upon which date the first defendant also executed a mortgage over the land the subject of the cross-defendants' valuation.

4. on 24 June 2008, the first defendant first defaulted under the loan and mortgage, and continued thereafter in default.

5. upon an exercise of its power of sale under the mortgage, the plaintiff sold the mortgaged land on or about 23 September 2013 for $1,250,000.

6. in the principal proceedings, the plaintiff makes a claim against the cross-claimant for a shortfall in excess of $1.1 million.

7. the cross-claimant first saw the cross-defendants' valuation when the plaintiff provided him with a copy of it, on or about 1 July 2015, in the course of the proceedings.

12. On these facts, it is common ground that the cross-claimant did not see the cross-defendants' valuation before he (as it must be assumed, for present purposes) executed the guarantee or before the plaintiff advanced to the first defendant the loan in respect of which the plaintiff sues on a guarantee.

13. The case sought to be advanced by the cross-claimant, on the cross-claim, is predicated upon an allegation (the correctness of which must also be assumed for present purposes) that the second cross-defendant had no reasonable basis for its opinion that the subject land was worth $2,750,000 at or about the time of the loan advance.

14. The cross-claimant sues the second cross-defendant on various statutory causes of action (of which ss 52, 82 and 87 of the Trade Practices Act 1974 (Cth) may be taken as representative) seeking, under the legislation, damages for misleading and deceptive conduct in contravention of the legislation.

15. The third cross-defendant is sued on the basis of an allegation (premised on s 75B of the Trade Practices Act 1974 and its equivalents) that he was knowingly involved in the second cross-defendant's contravention of the legislation.

16. For present purposes, there is no need to distinguish between the cross-defendants. The point taken by them, on their motion, is common to them both.

17. By an argument formulated in different ways, they contend that the cross-claim is bound to fail for a want of any causal connection between the misleading and deceptive conduct alleged against them (namely, the provision of a valuation opinion to the plaintiff for which there was no reasonable foundation) and any "loss or damage" suffered by the cross-claimant (namely, a liability to the plaintiff under the guarantee). They contend that the cross-claimant's voluntary execution of the guarantee (which, for present purposes, is assumed) must be held to have been the sole cause of any loss or damage suffered by the cross-claimant.

18. In articulation of this case, the cross defendants point to the fact that the cross-claimant entered into the guarantee without any knowledge of, and accordingly without any reliance upon, their valuation. They contend, further, that the fact, or possibility, that the decision of the plaintiff to make a loan advance to the first defendant may have been informed by the valuation is irrelevant. That is because nothing in the valuation operated directly on the mind of the cross claimant so as to cause him to sign the guarantee.

19. Although the cross-defendants seek to distinguish "indirect causation" cases upon which the cross-claimant relies, in my opinion the cross-defendants' arguments are, at this stage of the proceeding, sufficiently answered by the analysis of such cases by Brereton J in Re HIH Insurance Ltd (In Liq) [2016] NSWSC 482 at [37]-[78], with particular reference to paragraphs [37], [42] and [56].

20. It is not necessary, for success on the cross-claim, for the cross-claimant to prove that he relied upon contravening conduct of the second cross-defendant. It is sufficient that he establish (as he alleges) that the plaintiff relied on that conduct, as a consequence of which it advanced money to the first defendant and, upon a shortfall in the mortgage security, sued him, the cross-claimant.

21. In advancing this case, the cross-claimant relies not only on Brereton J's analysis but, also and to similar effect, in particular, on Janssen-Gilag Pty Limited v Pfizer Pty Limited (1992) 37 FCR 526 and Hampic Pty Limited v Adams [1999] NSWCA 455 at [35] and [38]-[40].

22. A causal connection between the contravening conduct alleged against the cross-defendants and the loss or damage suffered by the cross-claimant can be established without proof (or, indeed, without any allegation) that the cross-claimant entered into a guarantee, in favour of the plaintiff, personally relying upon the cross-defendants' valuation.

23. It is uncontroversial that an applicant for relief under ss 82 and 87 of the Trade Practices Act (or their equivalents) does not have to establish that contravening conduct was the "sole" cause of any relevant loss or damage. It is sufficient that such conduct was "a" cause of the loss or damage, in the sense that it materially contributed to the loss or damage: Re HIH Insurance Ltd (In Liq) [2016] NSWSC 482 at [37]; Henville v Walker (2001) 206 CLR 459 at [14], [59]-[61], [106]-[109] and [163].

24. Whether, in fact, any contravening conduct found against the cross-defendants was or was not a cause of loss or damage suffered by the cross-claimant is a question for determination at a trial.

25. The case sought to be advanced by the cross-claimant, on the cross-claim, is attended by a reasonable cause of action. The statement of cross-claim discloses a reasonable cause of action for the purposes of UCPR r 14.28.

26. Upon the basis that the statements of fact alleged in the statement of cross-claim are assumed to be correct, there is no basis for a summary disposal of the cross-claim under UCPR r 13.4.

27. Proceedings on the cross-claim are not frivolous or vexatious. It cannot be said that no reasonable cause of action is disclosed by the cross-claim. The cross-claim cannot be characterised otherwise as an abuse of the process of the Court.

28. For these reasons, subject to one qualification, I propose to order that the cross-defendants' notice of motion be dismissed.

29. The qualification attaches to a reasonable apprehension on the part of the cross-defendants that the case pleaded against the third cross-defendant (in paragraphs 47-49 of the statement of cross-claim, read with the claim for "damages" made in paragraph 53) includes an unarticulated claim for damages, at Common Law, on a cause of action in deceit (fraud).

30. In the course of argument on the motion the cross-claimant readily disclaimed such a case (acknowledging that no misrepresentation, such as necessary for him to sustain an action in deceit, had been made to him by the cross-defendants), and he applied orally for leave to amend the statement of cross-claim to confirm that the only case advanced against either cross-defendant is a case based upon the statutes specifically pleaded.

31. I propose to order that the cross-claimant be granted leave to amend as sought.

32. I have yet to hear submissions from the parties on costs. On the whole, prima facie, costs should follow the event. That said, any order for costs made against the cross-defendants should recognise, at least to some degree, that one of their complaints about the cross-claimant's pleading led to an application for amendment to overcome an apprehension about the existence of an unarticulated claim in deceit.

33. [The parties addressed on costs after the orders set out hereunder had been foreshadowed in draft].

34. I make the following orders:

1. ORDER that the cross-claimant be granted leave to amend the amended statement of cross-claim (filed on 11 December 2015) for the purpose of confirming that the cross-claimant makes no claim for damages, at Common Law, on an action in deceit.

2. ORDER that the cross-claimant file and serve, no later than 10 June 2016, any amended pleading filed pursuant to that grant of leave.

3. ORDER that the cross-claimant pay any costs thrown away by the amendment.

4. ORDER that the notice of motion filed by the second and third cross-defendants on 11 April 2016 otherwise be dismissed.

5. ORDER that the second and third cross-defendants pay two thirds of the cross-claimant's costs on the motion.

6. ORDER that the proceedings be listed before the registrar on 26 May 2016 for directions.

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Decision last updated: 24 May 2016