| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : DI GIOVANNI -v- DARK HORSE DEVELOPMENTS PTY LTD [2011] WADC 176 CORAM : DEPUTY REGISTRAR HEWITT HEARD : 19 OCTOBER 2011 DELIVERED : 3 NOVEMBER 2011 FILE NO/S : CIV 120 of 2010 BETWEEN : PIERO DI GIOVANNI Plaintiff
AND
DARK HORSE DEVELOPMENTS PTY LTD
First Defendant
BRENDAN MICHAEL AITKEN
Second Defendant
Catchwords: Practice and Procedure WA - Strike out application - Principles - Misleading and deceptive conduct - Measure of damages - Adequacy of pleadings Legislation: Fair Trading Act 1987 (WA)
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Result: Defence and counterclaim found defective Representation: Counsel:
Plaintiff : Mr D R Kilpatrick
First Defendant : Mr D Ellis
Second Defendant : Mr D Ellis
Solicitors:
Plaintiff : Williams & Hughes
First Defendant : Vogt Graham Lawyers
Second Defendant : Vogt Graham Lawyers
Case(s) referred to in judgment(s):
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494
Warwick Entertainment Centre Pty Ltd v Alpine Holdings Pty Ltd [2005] WASCA 174
Youlden Enterprises Pty Ltd v Health Solutions WA Pty Ltd (2006) 33 WAR 1
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1 DEPUTY REGISTRAR HEWITT: By chamber summons filed 31 August 2010 the plaintiff to these proceedings applied to strike out certain of the paragraphs included in the defence to the action. The application raises three issues:
2 I will start with the first of these matters. Both parties have filed extensive affidavits dealing with the question of delay. There has been a great deal of finger pointing and accusations by each side of the other. The plaintiff for its part contends that the defendant was dilatory in providing particulars of loss and damage, without which it was not possible to properly formulate and argue the present application. The defendant for its part disputes those allegations and cites incidences which it alleges demonstrate delay on the part of the plaintiff. From my perspective there is nothing to be gained by attempting to reach some conclusion as to which of these contradictory propositions might be more accurate and should find favour. In my view the appropriate method to analyse the situation is to look at the pleading itself, and bearing in mind the comments of Chief Justice Martin in Youlden Enterprises Pty Ltd v Health Solutions WA Pty Ltd (2006) 33 WAR 1 in which a general dissatisfaction with disputes of this kind was expressed, and only intervene where I consider the pleading is so defective as to potentially threaten the prospect of a fair trial. 3 In order to analyse the remaining points raised by the chamber summons, it is necessary to explain a little of the circumstances which gave rise to the present action. The plaintiff is a builder who sues the first defendant under the terms of a costs plus contract for the refurbishment of a premises on Scarborough Beach Road for use by the first defendant as a restaurant. The defendant pleads that there were a number of misrepresentations made to it as follows: on 1 May or thereabouts it was represented that the cost of the contract would be $250,000; on 18 June it was represented to be $343,882; and on 24 November 2008 it was represented to be $258,000. (Page 4)
4 The defendant alleges that by virtue of those representations it applied for finance in the amount of $350,000 and proceeded with the works the subject of the contract. The defendant pleads that the plaintiff lacked a reasonable basis for making the representations to which I have referred and such conduct was misleading and deceptive and contrary to s 10 of the Act. The plaintiff contends that in order to have an action pursuant to the Act it is necessary to have suffered loss and damage. It further says that the loss and damage must flow from the reliance on the representations in the sense that decisions were made by the defendant which were to its detriment such that had the conduct not occurred the defendant would have been in a position to make other decisions which would have led to a more favourable result. In the present circumstances, for instance, one possibility might have been that the defendant would reduce the scope of the work or alternatively engage another builder or something of that kind. The plaintiff contends that the proper measure of damages which can be recovered under an action under the Fair Trading Act is to be ascertained by the comparison of the position in which the defendant found itself and that in which it would have been had it adopted the most favourable of the alternatives with which it was presented. In the present case the defendant calculates its loss and damages simply being the difference between the estimated cost of the works and the actual costs of the works. 5 It is contended by the plaintiff that that is not a proper measure of loss and in advancing that proposition the plaintiff relies on the High Court decision in Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; and the Western Australian Supreme Court decision of Warwick Entertainment Centre Pty Ltd v Alpine Holdings Pty Ltd [2005] WASCA 174. I find that contention to be convincing. The process of calculation of damage which has been adopted by the defendant elevates the estimate which they characterise as misleading and deceptive conduct to a contractual term. In other words it changes the contract which was entered between the parties from a costs plus contract to a fixed price contract. That does not seem to me to be an appropriate way in which to calculate the loss which the defendant alleges it has suffered by virtue of that conduct. More importantly it is necessary for the plaintiff, if it is to adduce evidence in opposition to the counterclaim, to have a thorough understanding of the manner in which the defendant intends to run its case. Since the method of formulation of the quantum of damages is not legally sustainable, in my view, if the defendant is to pursue such a claim it must identify a proper basis upon which it contends it has suffered loss and damage. Some of the materials which have been filed would suggest (Page 5)
that the true value of the work which was undertaken was considerably less than the amount charged by the plaintiff. That could be a proper basis for calculation of loss. There may well be others but it would be open to this defendant to contend that by virtue of the misleading and deceptive conduct of the plaintiff it gave instructions to proceed and as a consequence of the execution of the contract received a benefit considerably less than the charges which were levied against him. On that aspect of matters I merely speculate because it is not for me to tell the defendant what is the appropriate basis of calculation of loss if indeed the conduct complained of is properly characterised as misleading and deceptive conduct. What I am confident of is that the pleading is not adequately expressed and that the calculation of loss which is contained in the particulars is not a legally sustainable basis of an award of damages. 6 The matter however does not end there because the defendant contends that certain aspects of its counterclaim do not rely on the proposition that it suffered loss and are available to it irrespective of whether loss was sustained. In particular it is contended by the defendant that s 74 and s 77 under which it seeks relief are available to it whether or not loss was sustained. Effectively those sections refer to injunctions and orders to prevent expectant loss. The relief provided by s 74 appears to me to be directed to the issue of the court restraining parties from acting in contravention of the Act. In the present circumstances the defendant asks the court to grant an injunction restraining the plaintiff from exercising its contractual rights under the terms of the costs plus contract to which I have referred. 7 Insofar as the defendant relies on s 77, the relief is available to a party which has instituted proceedings under the relevant part of the Act. The relevant part of the Act on my analysis is s 79 which is an action for damages and it is a prerequisite in order for a person to be entitled to relief under that section to have suffered loss and damage by virtue of a contravention of the Act. 8 I find the proposition that a court would be prepared to provide injunctive relief of the kind which is sought by the defendant in this action as remote to say the least. 9 In summary therefore I consider that the manner in which the defendant has pleaded its claim for damages is defective and that defect leads to a significant risk that the proceedings were miscarry in some way or another. Insofar as the defendant seeks to pursue claims for injunctions under the Act, they rely on the facts which are pleaded and are simply (Page 6)
propositions of law. Notwithstanding the fact that I am highly sceptical that such relief would be available in the circumstances of the case, bearing in mind the general attitudes of the court to applications of this kind, and the fact that this application has been brought late in what I would describe as fairly controversial circumstances, I intend to confine my attack on the defence to those parts of it which have as their lynchpin the particulars of loss and damage. It is my intention to strike out those parts of the pleading but I am cognisant of the fact that although I consider the pleading to be defective, there is material before me which suggests that an adequate pleading could be advanced by the defendant which, at the superficial level at which one must judge pleadings, would appear to have some prospect of success. Accordingly I propose to adjourn the hearing of the application for a period to enable the defendant to present a fresh minute of proposed amended defence which would properly set out its cause of action for damages under the Fair Trading Act. |