Clarendon Homes (Aust) Pty Ltd v Eagle Homes Pty Ltd

[1996] FCA 304

IN THE FEDERAL COURT OF AUSTRALIA  )
  )
NEW SOUTH WALES DISTRICT REGISTRY  )     No NG 898 of 1995
  )
GENERAL DIVISION                  )

BETWEEN:CLARENDON HOMES (AUST) PTY LTD

Applicant

AND:EAGLE HOMES PTY LTD and ULTRA MODERN DEVELOPMENTS PTY LTD trading as EAGLE HOMES

First Respondent

JIM DINIC

Second Respondent

JOHN RICHARDSON

Third Respondent

CORAM:    HILL J
PLACE:    SYDNEY
DATED:    27 MARCH 1996

REASONS FOR JUDGMENT

The respondents, Eagle Homes Pty Limited ("Eagle"), Mr Dinic and Mr Richardson move the Court to strike out the proceedings commenced by Clarendon Homes (Aust) Pty Limited ("Clarendon"), the applicant, on the basis that the proceedings are an abuse of process.

The statement of claim as filed alleges that Eagle, by its agents Mr Dinic and Mr Richardson, in November 1966 represented to three persons, Mr English, Ms Evans and Mr Foote, that Clarendon was insolvent, unable to continue trading and that a receiver had been appointed to its affairs.

It is said that the representations so made were false and misleading and that in consequence Clarendon has suffered damage. The proceedings are brought both under s52 of the Trade Practices Act 1974 (Cth) ("the Act") and in common law in defamation.  Affidavits have been filed by the three persons to whom the statements were said to have been made, swearing as to a conversation that took place on 18 November 1995.  In the course of that conversation, as deposed to by Mr Foote, Ms Evans engaged Mr Richardson in conversation about homes, mentioning that she had been looking at the Clarendon Signature Series and showing him a brochure of it.  Mr Richardson is then alleged to have said, "I am not going to say anything".  Ms Evans replied, "What do you mean?"  Mr Richardson then said:

"I'm not going to say anything about them but be careful and check whether companies you deal with are not in receivership.  Look at all the companies you deal with before you buy."

Later in the conversation Mr Richardson is alleged to have said, "Look I've heard that Clarendon went into receivership last week".  When asked whether that was just gossip, Mr Richardson replied, "No, I heard it from a reliable source.  I heard it from two sources.  One of them was a tiler."

A conversation with Mr Dinic is reported in an affidavit of Mr English.  In the course of the conversation Mr Dinic is alleged to have said:

"Clarendon are having financial difficulties and their quality was not very good.  Masterton and Huxley homes are also in financial trouble.  Huxley Homes have closed their exhibition homes here - they are kaput."

The present proceedings were commenced on 30 November 1995.  On 1 December 1995, Clarendon sent a letter which is alleged to have been sent to a number of competitors of the parties.  The letter was in the following terms:

"The purpose of this letter is to give you notice that Clarendon Homes has commenced proceedings in the Federal Court against four Project Building Companies and individuals associated with those Companies.

These Companies would be known to you and will become a matter for public record in due course.

The basis of these proceedings relates to defamatory comments made about Clarendon Homes.  The statements have been made in a reckless and calculated manner with the intention of damaging the business of the Company.

We have engaged the services of several Investigation Agencies who have been and will continue to engage your Sales Consultants in conversation related to the purchase of a house.

We wish to make it abundantly clear that any unsolicited defamatory comments about Clarendon Homes will immediately be referred to our Solicitors for legal remedy.

To our knowledge, your Company has not been involved in any such activities.  The purpose of this letter is to give you notice of our actions to date and our intentions to continue with a comprehensive monitoring program."

It is the case for the respondents that Clarendon commenced the proceedings for the purpose of providing examples to mount a public defence of itself.  It was said that it had gone out of its way to provoke the comments in question, so as to provide evidence of defamatory statements and thereby to make an example of Eagle and perhaps to deter others from making similar statements.

Finally, it was submitted that the statements were provoked and the proceedings commenced for the purpose of causing the letter, to which I have referred, being sent.  It was said that but for the ability to send the letter in question the proceedings would not have been commenced.  Thus the obtaining of the evidence by the inquiry agents is linked to the commencement of the proceedings and to the sending of the letter, that letter being an attempt to put up examples of how those who speak unfairly of Clarendon would be dealt with.

It is clear that the onus lies upon the applicant to a motion to have proceedings dismissed for an abuse of process, to show that there has been such an abuse.  There is a well-known distinction which is to be found enunciated in the judgment of Isaacs J in the High Court in Dowling v The Colonial Mutual Life Assurance Society Limited (1915) 20 CLR 509, between a case where proceedings have been instituted using a process, on the one hand, and proceedings instituted in abuse of the process, on the other. For present purposes I am prepared to accept, as an appropriate test, what was said by Clarke J, and affirmed by Samuel JA and Handley JA, in Rajski v Bainton (1990) 22 NSWLR 125 at 131, where the following quotation appears:

"... I do not think it is open to the courts to close out a litigant from proceeding in respect of a genuine cause of action merely because his dominant purpose is an ulterior one.  In my opinion the process of a plaintiff should not be struck out in a summary application of this nature unless, at the least, he would not have instituted the proceedings but for the possible collateral advantage...".

What I am asked to infer, in essence, is that the proceedings were commenced for an ulterior purpose, that being found, presumably, in the letter.  First, it must be said that there is nothing in the conversations, as recorded by the inquiry agents, which in any way suggested that they provoked or sought out, as a response, the words alleged to have been used by Mr Dinic or Mr Richardson.  No doubt it may be inferred that the inquiry agents engaged in the conversations in question so as to provide evidence for proceedings to be commenced against the respondents, particularly Eagle, but that of itself does not constitute an abuse of process.

If there were nothing more, the institution of proceedings, based on that evidence, would clearly be an abuse of the process itself and not have any possible collateral advantage for the respondent.  I do not think that there is anything in the letter from which I should infer that the only reason the proceedings were commenced was to enable the letter to be written.  Even if that were the case, I doubt if it would be proper to say that there would have been an abuse of process.  Be that as it may, the letter does no more than bring to the notice of companies, presumably competitors, that proceedings have been commenced.

The basis on which those proceedings have been commenced and the threat that if any unsolicited defamatory comments are made by those competitors, they may become the subject of legal proceedings.  I would neither infer that the proceedings would not have been commenced but for the possibility of the letter, nor would I infer that in any way Clarendon, either in engaging the inquiry agents or in commencing the proceedings, did so for some collateral purpose such as obtaining a collateral advantage that they would not have obtained otherwise.
         Counsel for the respondents submitted that the discrepancy that is apparent from the evidence of the inquiry agents, on the one hand, and the alleged statements in the statement of claim, on the other, indicated that Clarendon commenced these proceedings without caring whether or not they obtained relief as such against the respondents, but merely to use the threat of proceedings in terrorem against industry competitors.

With respect, again I would not draw that inference.  It is true there is some discrepancy between what is alleged in the statement of claim and what is said in the affidavits.  It may be when evidence is put on that there is other evidence to be deduced on the part of Clarendon as to what was actually said during the conversation, which may support the allegations in the statement of claim.  It may be that the failure to plead the correct words, if the correct words be those contained in the affidavits of conversation, will have consequences in due course for Clarendon.  No doubt Clarendon may consider whether it is appropriate to amend the statement of claim to accord with the allegations in the conversations, but that is a matter for a later time.

In my view, there is no evidence from which I would infer that the present proceedings have been commenced by Clarendon in abuse of process and I would accordingly dismiss the motion.
         I order that the applicants to the motion (ie Eagle, Mr Dinic and Mr Richardson) pay the costs of Clarendon.

I certify that this and the
preceding seven (7) pages
are a true copy of the Reasons
for Judgment herein of his Honour
Justice Hill.

Associate:

Date:  30 April 1996

Counsel and Solicitors           J F Burn instructed by

for Applicants to the Motion:        D Mosca

Counsel and Solicitors           N Cotman instructed by

for Respondent to the Motion:        Malcolm McDonald & Co

Date of Hearing:                 27 March 1996

Date Judgment Delivered:             27 March 1996