Colleen Ann Gilbert v Tripstar Pty Ltd

[1991] FCA 877

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JUDGMENT No. 8?5) /q.l...-

THE FEDE- COURT OF AUS 1

I R ) NO. NG 107 of 1991

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m:  W E E N ANN GILBERT. BARRY JOHN GILBERT AND

Applicants

Am!:  mIPSTAR PTY.LIMITED

First Respondent

Aka!, -TAR PTY. LIMITED

Second Respondent

A&:  JUSTIN BAILEY LAMONT CRAIG

Third Respondent

&B21 PICHAEL JAMES CRAIG

Fourth Respondent

&m1 POWER JEFFREY h CO. PTY. LIMITED

Fifth Respondent

MINUTES OF ORDER

:	-	Drummond J
DATE OF ORDER:	19 December, 1991
WHERE:	Brisbane

hQZ!$t	Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.

COURT ORDERS THqTt

i .    The application to strike out paragraphs 10(d); 10(e); ll(c)(i) a, b; ll(c)(ii) a, b, c, d; ll(c)(v) a, b, c; 13(c); and 13(d) (i), (ii), (iii) of the Defence of the First, Second, Third and Fourth Reapondent8 filed 28 November, 1991 is dismissed.

2.    The Applicants pay the Respondents' costs of and incidental to the application.

a THE FEDERAb C m OF AUS- )

GISTRY ) NO. NG 4b7 of 1991

MERAZI DIVISION 1

BETWEEN% n E E N ANN W E R T . BARRY JOHN GILBERT AND

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Applicants

D:  TRIPSTAR PTY-LIMITED

First Respondent

&iQt PEXSTAR PTY. LIMITED

Second Respondent

m3 JUSTIN BAILEY LAMONT CRAIF

Third Respondent

At@; MICHAEL JAMES CRAIG

Fourth Respondent

m:  POWER JEFFREY h CO. PTY. LIMITED

Fifth Respondent

!lk?Zmt	Drummond J
RCLtSt	19 December, 1991
L U G Q t	Brisbane

EX TEMPORB REASONS FOR JUDGMENT

The applicants apply to strike out those paragraphs

of the defence of the first, second, third and fourth

respondents which are listed in paragraph 1 of their Notice of

Motion filed 18 December, 1991. The applicants' counsel

relies on Order 11 rule 16(b) and (c), rule 2(a) and rule 3 of
the Federal Court Rules. The applicants claim damages for a
breach of 8 .52 of The Trade Practices Act 1974 in respect of
the respondents' (or their agents) conduct in connection with

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2

the purchase by the applicants of the hotel budiness referred to in paragraph 12 of the amended Statement of Claim filed 15 November, 1991.

It is clear from the pleading, and it was confirmed

by the dpplicantsr senior counsel in the course of
bubmibsions, that the applicants' claim for damages is

calculated on two basest

(1) by reference to the prima facie measure of

damages applicable to this sort of claim,
namely, the difference between what they paid
for the business and its real value at the date

of purchase: and

(2) the consequential losses incurred in the period

during which they ran the business, up to the

time a receiver And manager was appointed.

The cases indicate that for such a claim under 8.52

of m e Trade Practices Act, the measure of damages is that

applicable to claims in deceit* See Gates v Citv Mutual Life

ce Societv Limited (1986) 160 C.L.R. 1 at 6 and 14.

So fdr aa the actual meaaure of damages is concerned, see page
12 of the joint judgment in Gatesf case where the following

passage appedrst

"In deceit the measure of damages is the difference
at the time of purchase between the real value of

the goods, and the price paid: Potts v Miller
(1940) 64 C.L.R. 282 at 289, 297: mteff v Antonas
(1952) 87 C.L.R. 647 at 650-651, 654; and W u l d v
ypaaelm (1984) 157 C.L.R. 215 at 220. But this has
been treated as a prima facie measure only, the true
measure being reflected in the proposition stated by

Dixon J in Toteff v Antonas at page 650 in these

terms	r
"In an action of deceit a plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage he has suffered in consequence of his altering hie position under the inducement of the fraudulent misrepresentations made by the defendant."

As his Honour then pointed out, it is a question of
determining how much worse off the plaintiff is as a
result of entering into the transaction which the
representation induced him to enter than he would
have been had the transaction not taken place.
This entitles the plaintiff to all the consequential
loss flowing directly from his reliance on the

representation (Potts v Milley at pp. 297-298;

y Olbv lIronmonaersl Ltd. [l9691 2 Q.B. 158), at

least if the loss is foreseeable: See Gould v

Vaaaelas at pp. 223-224."

The respondents' counsel relies on Order 11 rule

iO(b), and submits that the challenged passages in the

pleading do not infringe the rule against pleading evidence.

Paragraphs 10(d) and (e) of the defence are

attacked. After the respondents deny, in sub-paragraph (c) of
that paragraph, the allegation that the applicants acted in
reliance on representations for which the respondents are
responsible in deciding to enter into the purchase, the
subsequent two sub-paragraphs of paragraph 10 allege that the
applicantsp decision to make the purchase was made in reliance
upon epecifically identified asaeasments of their own, that

ia, assessments for which the respondents have no

responsibility.

The rule against pleading evidence is found in Order

11 rule 2 and is expressed to be stibject to "these rules".
That, of course, includes Order 11 rule 10(b), i.e., the anti-
surprise rule. Even though a pleading may set out the facts
necessary to identify the defences that will be raised, there
may be issues raised by the respondents in making out their
defences which, if they are not specifically identified in the
pleading, will take the applicants by surprise, in the sense

that the term is used in Order 11 rule 10(b).

As I understand the applicants' counsel, he says

that it would be enough for the respondents to deny the
allegation in the Statement of Claim alleging reliance by the
applicants on representation@ for which the respondents bear

reeponsibility, and he referred in that context to Order 11

rule 1 3 ( 3 ) .	But if the respondents' positive case of non-
relidnce, that is, that not only did the applicants not rely

on representations which will be the responsibility of the
respondents, but that they relied on specifically identified

aseessments of their own, had not been set out in paragraphs

iO(d) and (e) of the defence, it is likely that the applicants

would have taken objection at the trial to matters being
raised without notice which require further instructions to be
obtained and a possible ddjournment.

Rule 10(b) is, in my view, designed to ensure that

such disruptions do not take place and that a party pleads (as
has properly been done here in paragraphs 10(d) and (e))
matters of the kind that are necessary to put the other side
on notice as to the investigations and preparation they will
need to make to answer those issues in the course of a

smoothly running trial.

As to those parts of paragraphs 11 and 13 which are

attacked, the statements by Gibbs CJ in Gould v Vaaaelas

(1984) 157 C.L.R. 215 at 220-222 seem to me to be in point.

As to the application of the rule governing the

prima facie measure of damages in a case of misrepresentation
such as this, the Chief Justice, in Gould v Vaaaelas at page

220, said:

"Events that happen after the time of the purchase
may throw light on the real value of the property at
that timer Potts v Millex (1940) 64 C.L.R. 282 at

289-290, 299. Where the property has depreciated

in value after the purchase, and the depreciation

was due to some cause inherent in the property itself, the depreciation must be considered in determining the real value of the property at the

relevant time, but where the cause of the
depreciation was "independent", "extrinsic",
"supervening" or "accidental", the additional loss
is not the consequence of the inducement and it
should not be taken into account in arriving at the
value of the property at the time of the purchase:
potte v Miller at p. 298."

As to the claim for consequential damages in a case

such as this, the Chief Justice, in Gould v Vaaaelas at pp.

221-222, said:

"There is no reason in principle why the defrauded
purchaser should not recover damages for all the
loss that flowed directly from the fraudulent
inducement (unless, possibly, the loss was not
foreseeable). If the purchaser, besides paying more
for the business than it was worth, has suffered
additional losses which resulted directly from the
fraud he ought to be compensated for them. Of
course, the court must be satisfied that the loss
did result directly from the fraud and not from some
supervening cause such as the folly, error, or
misfortune of the purchaser himself, and must ensure
that no additional compensation is given for losses
when those losses, or the probability of their
occurrence, has already been taken into account in

determining the value of the business."

Paragraphs 11 and 13 of the defence put the

applicants on notice, that the respondents are going to
aseert, firstly, that there are specific supervening events
inherent in the nature of the business purchased that have

caused diminution in the value of the business, and that

losees due to those events must be left out of account in

calculating the damages the applicants are entitled to

recover, even if they can establish an entitlement to damages.
I refer in this regard particularly to paragraphs 13(d)(ii)

and (iii) as amended, by leave of the Court on 19 December,

Secondly, they put the applicants on notice that

there are other specific supervening events flowing from (to
use the words of Gibbs CJ) the "folly, error or misfortune" of

the applicants that have caused the whole or part of the
losses the applicants suffered and that these, too, have to be
left out of account in any damages calculation. I refer
particularly in this regard to paragraph 13(c)(i) to (xvii)

and (xix) and (xx).

The applicants' counsel was unable to offer any

convincing ground for objecting to such matters if they were
opened up in cross-examination at a trial. They seem to me to
be clearly relevant to the issues of whether there was
operative inducement and, if so, whether any losses flowing
from operative inducement are chargeable to the respondents,
or are losses that are due to the applicants' own activities
or are losses which, while not due to either respondent or

applicant, are at the risk of the applicants.

It is for these reasons that the application to

strike out certain portions of the Defence should be refused.

I certify that this and the six

preceding pages are a true copy
of the reasons for judgment
herein of the Honourable Mr.

Justice Drummond.

Associate:

Date r 19 December, 1991