Dolphin Quay Pty Ltd v Appeal Holdings Pty Ltd
[2011] WASC 352
•16 DECEMBER 2011
DOLPHIN QUAY PTY LTD -v- APPEAL HOLDINGS PTY LTD [2011] WASC 352
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2011] WASC 352 | |
| Case No: | CIV:1693/2010 | 25 AUGUST 2011 | |
| Coram: | CORBOY J | 16/12/11 | |
| 16 | Judgment Part: | 1 of 1 | |
| Result: | Application to amend statement of claim allowed in part; application to join further parties dismissed | ||
| B | |||
| PDF Version |
| Parties: | DOLPHIN QUAY PTY LTD APPEAL HOLDINGS PTY LTD |
Catchwords: | Practice and procedure Application to amend statement of claim and join parties Whether reasonable cause of action disclosed Accessorial liability under the Trade Practices Act 1974 (Cth) and Competition and Consumer Act 2101 (Cth) Turns on own facts |
Legislation: | Nil |
Case References: | Concrete Constructions Group v Litevale Pty Ltd [2002] NSWSC 670 Coles Supermarket Australia Pty Ltd v FKP Ltd [2008] FCA 1915 Fairworld Holdings Pty Ltd v Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) [No 2] [2011] WASC 136 Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217 Kestrel Coal Pty Ltd v Longwall Roof Supports Ltd [2003] QSC 187 Mutual Life and Citizens' Assurance Co Ltd v Evatt [1971] AC 793 Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd [2011] WASCA 76 Quinlivan v ACCC [2004] FCAFC 175; (2004) 160 FCR 1 Stack v Coast Securities No 9 Pty Ltd (1983) 46 ALR 451 Wickstead v Browne (1992) 30 NSWLR 1 Williamson v Ah On (1926) 39 CLR 95 Yorke v Lucas (1985) 158 CLR 661 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
APPEAL HOLDINGS PTY LTD
Defendant
Catchwords:
Practice and procedure - Application to amend statement of claim and join parties - Whether reasonable cause of action disclosed - Accessorial liability under the Trade Practices Act 1974 (Cth) and Competition and Consumer Act 2101 (Cth) - Turns on own facts
Legislation:
Nil
Result:
Application to amend statement of claim allowed in part; application to join further parties dismissed
(Page 2)
Category: B
Representation:
Counsel:
Plaintiff : Mr M N Solomon
Defendant : Mr C G Colvin SC
Solicitors:
Plaintiff : Hotchkin Hanly
Defendant : Zilkens & Co
Case(s) referred to in judgment(s):
Concrete Constructions Group v Litevale Pty Ltd [2002] NSWSC 670
Coles Supermarket Australia Pty Ltd v FKP Ltd [2008] FCA 1915
Fairworld Holdings Pty Ltd v Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) [No 2] [2011] WASC 136
Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217
Kestrel Coal Pty Ltd v Longwall Roof Supports Ltd [2003] QSC 187
Mutual Life and Citizens' Assurance Co Ltd v Evatt [1971] AC 793
Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd [2011] WASCA 76
Quinlivan v ACCC [2004] FCAFC 175; (2004) 160 FCR 1
Stack v Coast Securities No 9 Pty Ltd (1983) 46 ALR 451
Wickstead v Browne (1992) 30 NSWLR 1
Williamson v Ah On (1926) 39 CLR 95
Yorke v Lucas (1985) 158 CLR 661
(Page 3)
- CORBOY J:
The application and the result
1 Dolphin Quay is the developer of an apartment complex in Mandurah. The development was strata titled on completion.
2 Dolphin Quay and Appeal Holdings entered into a contract in May 2006 for the sale and purchase of an apartment forming part of the development (the Sale Contract). The sale was 'off the plan', with settlement to occur following registration of the strata plan and the issuing of separate titles.
3 The Sale Contract was made by the parties using a standard form contract for the sale of land. It is accepted for the purpose of this application that the standard form document was amended by Appeal Holdings deleting provisions that would have made the Sale Contract conditional on finance approval being obtained and substituting the words 'cash offer' for those provisions.
4 Separate titles for the strata development were issued on 30 March 2010. On the following day, Appeal Holdings served a notice purporting to terminate the Sale Contract. It alleges that it was entitled to avoid the contract under s 69C and s 69D of the Strata Titles Act 1985 (WA) (defence, pars 3 and 4).
5 Dolphin Quay commenced this action in May 2010. It claimed a declaration that the Sale Contract remained in 'full force and effect'. It now applies to amend its writ and statement of claim and for leave to join Mr and Ms Wilbraham as defendants. Mr and Ms Wilbraham are the directors and shareholders of Appeal Holdings.
6 Dolphin Quay proposes by the amended pleading to abandon its claim for declaratory relief and to substitute a claim for damages allegedly caused by Appeal Holdings engaging in conduct in the making of the Sale Contract that was misleading or deceptive contrary to s 18 of the second schedule to the Competition and Consumer Act 2010 (Cth) (CCA) (formerly, s 52 of the Trade Practices Act 1974 (Cth) (TPA)). It also seeks to allege that Mr and Ms Wilbraham were knowingly concerned in the claimed contraventions of the TPA/CCA.
7 The parties were requested following oral argument to provide further written submissions on an aspect of the proposed amended statement of claim. Dolphin Quay responded to that request by serving a
(Page 4)
- further minute containing proposed amendments to its statement of claim. I will refer to the initial and further minutes as the first and second minutes.
8 Appeal Holdings consented to the writ and statement of claim being amended according to the first minute. It now opposes Dolphin Quay being given leave to amend to make certain allegations contained in the second minute. Mr and Ms Wilbraham oppose the joinder application, contending that the allegations made against them in the proposed amended statement of claim do not disclose a reasonable cause of action.
9 I have concluded that Dolphin Quay should not be given leave to amend its statement of claim according to the second minute and that the application to join Mr and Ms Wilbraham should be refused. Dolphin Quay is, however, given leave to amend its writ and statement of claim to the extent that the amendments are not opposed by Appeal Holdings.
The first minute
10 The first minute alleged that by amending the standard form contract, Appeal Holdings represented that:
(a) 'it had reasonable grounds to believe that it would have, at the time for completing the [Sale] Contract, the capacity to complete the [Sale] Contract';
(b) further or alternatively, 'it had reasonable grounds to believe that it would have at the time for completing the [Sale] Contract, the capacity to complete the [Sale] Contract irrespective of the capacity of [Appeal Holdings and Mr and Ms Wilbraham] to borrow funds in order for [Appeal Holdings] to complete the [Sale] Contract at that time'.
11 It was further alleged that at the time that the Sale Contract was made, Appeal Holdings:
(a) had granted a fixed and floating charge over all its assets and undertakings to Bank of Western Australia Ltd (BankWest);
(b) had a paid capital of $2 and had no assets in its own right, alternatively any assets that it possessed were the subject of the charge that it had granted to BankWest;
(c) had incurred liabilities to another financier in relation to two properties;
(Page 5)
- (d) claimed to have no equitable interest in those properties.
12 A reference in the reasons that follow to the financial circumstances of Appeal Holdings is a reference to those allegations.
13 The minute then pleaded that 'by reason of' its financial circumstances, Appeal Holdings:
(a) did not have reasonable grounds to believe that it would have, at the time for completing the Sale Contract, the capacity to complete the contract; further or alternatively, did not have reasonable grounds to believe that it would have the capacity to complete the contract irrespective of its ability or that of Mr and Ms Wilbraham to borrow funds in order for it to complete the contract;
(b) was recklessly indifferent as to whether it would have, at the time for completing the Sale Contract, the capacity to complete the contract; further or alternatively, was recklessly indifferent to whether it would have the capacity to complete the contract irrespective of its ability or that of Mr and Ms Wilbraham to borrow funds in order for it to complete the contract.
14 It was alleged that Appeal Holdings repudiated the Sale Contract by serving its notice of termination and by maintaining in these proceedings that the contract had been terminated. Dolphin Quay pleaded that it accepted the repudiation and terminated the Sale Contract by a notice served in August 2011.
15 Finally, it was alleged that it be could inferred that Mr and Ms Wilbraham knew of the alleged contraventions of the TPA/CCA as they were the only directors and shareholders of Appeal Holdings.
The submissions made by Mr and Ms Wilbraham on the first minute in opposition to their joinder
16 Mr and Ms Wilbraham contended that the first minute did not disclose a reasonably arguable claim that they were knowingly concerned in any contravention of the TPA/CCA by Appeal Holdings as:
(a) Section 4, sch 2 CCA (previously s 51A of the TPA) did not apply to a claim for accessorial liability: Quinlivan v Australian Competition and Consumer Commission [2004] FCAFC 175; (2004) 160 FCR 1.
(Page 6)
- (b) The plaintiff was required to plead and prove actual knowledge of the essential elements of a contravention of the TPA/CCA - in this instance, actual knowledge that the representation was misleading or deceptive: Yorke v Lucas (1985) 158 CLR 661.
(c) A contractual promise could only be misleading or deceptive if the party making the promise had no intention of fulfilling it or was incapable of doing so: Coles Supermarkets Australia Pty Ltd v FKP Ltd [2008] FCA 1915.
(d) The facts as alleged in the statement of claim, if established at trial, would be insufficient to lead the court to conclude by inference that Mr and Ms Wilbraham knew at the time that the Sale Contract was made that Appeal Holdings would be incapable of performing its obligation to settle on the purchase of the apartment. The sale was 'off the plan' and it was known that completion of the development would not occur for some time. The matters alleged were equally consistent with an inference that Mr and Ms Wilbraham expected at the time that the Sale Contract was made that they would provide Appeal Holdings with the funds required to complete the purchase of the apartment or that finance would be obtained from a third party.
The submissions of Dolphin Quay in support of the joinder
17 Dolphin Quay contended that:
(a) A statement of intention or a promise that something will be done in the future may amount to misleading or deceptive conduct on the basis that it will be treated as a statement of present ability; the promise will, therefore, be misleading if the party making the promise had no capacity or ability to perform it at the time that it was made: Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217; Coles Supermarkets.
(b) Further, a promise about a future matter may be misleading or deceptive if the party making the promise was recklessly indifferent to its capacity to fulfil the promise: Stack v Coast Securities No 9 Pty Ltd (1983) 46 ALR 451.
(c) It followed that a promise to perform a contract at some time in the future may carry with it a representation that the party making the promise had reasonable grounds to consider that it would have the ability to perform the contract when the time for performance
- fell due. A promise made without reasonable grounds or in reckless disregard of whether there were reasonable grounds for making the promise may constitute conduct that was misleading or deceptive.
- (d) It may be inferred from the matters alleged that Mr and Ms Wilbraham knew that Appeal Holdings did not have reasonable grounds to consider that it would have the capacity to perform its obligations under the Sale Contract when the time for settlement fell due. The question on an interlocutory application was not whether the court would draw an inference about their knowledge but rather, whether it was arguable that the inference could be drawn from evidence that might be led on the proposed pleading: Fairworld Holdings Pty Ltd v Burrup Fertilisers Pty Ltd (Receivers and Managers Appointed) [No 2] [2011] WASC 136 [23] (Allanson J).
An issue arising out of the first minute
18 It was common ground that a distinction may be drawn between a representation concerning the capacity of a party to fulfil a contractual promise and a representation concerning the intention of that party to fulfil the promise. The distinction was drawn by Ormiston J in Futuretronics International and was accepted by Gordon J in Coles Supermarkets.
19 The question of whether a party had misrepresented its financial capacity to fulfil its contractual obligations is a matter to be objectively determined. Its state of mind is irrelevant in determining whether it had engaged in conduct that was misleading or deceptive by making a representation about its contractual capacity. However, a representation concerning the intention of a party to fulfil its contractual obligations is a representation concerning the party's state of mind.
20 The first minute did not, in my view, make clear whether Dolphin Quay alleged that Appeal Holdings had engaged in misleading or deceptive conduct by misrepresenting its capacity to complete the Sale Contract or its intention to do so. For example, it was alleged that Appeal Holdings represented that 'it had reasonable grounds to believe', in effect, that it would have the capacity to fulfil its contractual obligations when the time for completion of the Sale Contract fell due. Did that alleged representation concern the capacity of Appeal Holdings to fulfil its contractual obligations or was it a representation about its state of mind?
(Page 8)
- The same query arose in relation to the allegation that Appeal Holdings was recklessly indifferent to its capacity to complete the contract.
21 Those questions were relevant to an understanding of the proposed amendment and also to the joinder application. Mr and Ms Wilbraham are the sole directors and shareholders of Appeal Holdings; they are the company's mind. Appeal Holdings had consented to the statement of claim being amended according to the first minute. It could be taken to have accepted that the minute disclosed a reasonable cause of action that it had misrepresented its contractual intentions if the allegations of misrepresentation concerned its state of mind rather than its financial capacity. If the first minute pleaded a reasonable cause that Appeal Holdings had misrepresented its contractual intentions, why did it not also disclose a reasonable cause of action against Mr and Ms Wilbraham that they knew of the misrepresentation since they were the mind of the company?
The second minute and Dolphin Quay's further submissions
22 The second minute alleges that Appeal Holdings represented to Dolphin Quay that:
(a) 'there were reasonable grounds to believe that it would have, at the time for completing the contract, the capacity to complete the contract' (par 6.1 of the second minute; referred to as the 'First Representation'; Dolphin Quay expressly relies on s 51A of the TPA, alternatively s 4 of sch 2 to the CCA to make the allegation);
(b) further or alternatively, 'there were reasonable grounds to believe that it would have, at the time for completing the contract, the capacity to complete the contract irrespective of the capacity of [Appeal Holdings and Mr and Ms Wilbraham] to borrow funds in order for [Appeal Holdings] to complete the contract at that time' (par 6.2 of the second minute; referred to as the 'Second Representation'); and
(c) 'it believed the First Representation and/or the Second Representation to be so' (par 6.3; referred to as the 'Third Representation').
23 It is further alleged that those representations were misleading and deceptive as:
(Page 9)
- (a) there were not reasonable grounds for believing that Appeal Holdings would be able to complete the contract or that it would be able to do so irrespective of its capacity or that of Mr and Ms Wilbraham to borrow funds (pars 9.1 and 10.1, referring to the First Representation and the Second Representation);
(b) Appeal Holdings did not believe that there were reasonable grounds for that belief or was recklessly indifferent to whether there were such grounds (pars 9.2 and 10.2, referring to the Third Representation).
24 The allegation that Appeal Holdings engaged in misleading or deceptive conduct by making the First and Second Representations requires a determination (made objectively) of whether there were reasonable grounds for believing that Appeal Holdings would be able to complete the Sale Contract. The Third Representation involves an allegation that Appeal Holdings misrepresented its actual state of mind (its subjective belief) about the existence of those grounds.
25 Dolphin Quay accepted in its supplementary submissions that the first minute did not clearly plead its allegations of misrepresentation. It also frankly acknowledged that its application to amend the statement of claim according to the first minute and to join Mr and Ms Wilbraham had been contested on the assumption that the pleaded representations concerned the capacity of Appeal Holdings to fulfil its contractual obligations and not its intention to do so. It volunteered that Appeal Holdings' consent to the proposed amendments to the statement of claim was on the understanding that Dolphin Quay had alleged that Appeal Holdings had engaged in conduct that was misleading or deceptive 'based on the absence of objective reasonable grounds' (plaintiff's supplementary submissions, par 14).
26 I acknowledge Dolphin Quay's candour in explaining its position.
The discretion to join parties
27 It is clear that the requirements of O 18 r 4 Rules of the Supreme Court 1971 (WA) would be satisfied if the second minute disclosed a reasonable cause of action that Mr and Ms Wilbraham were knowingly concerned in the alleged contraventions of the TPA/CCA by Appeal Holdings. Mr and Ms Wilbraham did not suggest otherwise and so it is unnecessary to further canvass the factors relevant to the exercise of the court's discretion to join them in Dolphin Quay's action.
(Page 10)
28 It is axiomatic that the court must reconcile competing considerations in determining applications to amend pleadings and join parties. It exercises its discretion in the context of the modern rules of pleading (as to which see the comments of the Privy Council in Mutual Life and Citizens' Assurance Co Ltd v Evatt [1971] AC 793, 801) and the case management objectives specified in O 1 r 4A and r 4B of the Rules.
29 It is not, in my view, consistent with the court's case management objectives to defer the question of whether a reasonable cause of action can be demonstrated against a proposed party until after that party has been joined to the action. Dolphin Quay did not suggest otherwise. However, I should indicate in order to fully explain the approach that has been taken to Dolphin Quay's application that, with respect, I disagree with the comments made by Muir J in Kestrel Coal Pty Ltd v Longwall Roof Supports Ltd [2003] QSC 187 [16] if those comments are understood as suggesting that the court should permit a joinder and later, 'if when pleaded [the statement of claim] discloses no cause of action or there is no evidence to support it, application can be brought for its summary dismissal'. As I have indicated, that approach is not consistent with my understanding of how the court's case management objectives would ordinarily be realised in an application of this kind. The court's approach should also reflect changes that have been made to the rules of court such as the availability of pre-action discovery.
The application to amend the statement of claim
30 Appeal Holdings opposes Dolphin Quay being given leave to amend its statement of claim to make the allegations pleaded in pars 6.3, 9.2 and 10.2 of the second minute (misleading or deceptive conduct by making the Third Representation) on the ground that the matters alleged do not disclose a reasonable cause of action. It otherwise consents to the application to amend the writ and statement of claim so far as they plead claims against it.
31 Dolphin Quay relied on four matters to contend that the allegations concerning the Third Representation disclose a reasonable cause of action:
(a) The facts alleged in the second minute concerning the financial circumstances of Appeal Holdings.
(b) The failure of Appeal Holdings to perform the Sale Contract, reference being made to Futuretronics at 238-9 and Concrete Constructions Group v Litevale Pty Ltd [2002] NSWSC 670; (2002) 170 FLR 290 [162] (Mason P).
(Page 11)
- (c) The proposition that it is not for the court to determine in an interlocutory application the competing inferences that might be drawn from the allegations that are made about the financial circumstances of Appeal Holdings. Mr and Ms Wilbraham referred in their submissions to matters such as a 'common commercial occurrence' and 'common experience'. Such matters ought to be pleaded and determined on evidence adduced in a trial.
(d) The possibility that Appeal Holdings would be able to complete the Sale Contract by obtaining funds from Mr and Ms Wilbraham or a third party was a matter peculiarly within the knowledge of Mr and Ms Wilbraham. It 'weighed against a summary dismissal' that any 'gaps' in Dolphin Quay's case related to facts that were peculiarly within the knowledge of Mr and Ms Wilbraham, reference being made to Wickstead v Browne (1992) 30 NSWLR 1 [11] (Handley JA and Cripps JA), Kestrel Coal [15] (Muir J) and Williamson v Ah On (1926) 39 CLR 95, 113 - 114 (Isaacs J).
32 As to the last of those matters, Muir J in Kestrel Coal accepted that the applicant in an application to join a party was entitled to the benefit of any reasonable inference open on the evidence about matters that were peculiarly within the proposed party's knowledge when determining whether there was a reasonable cause of action alleged against that party. His Honour cited the reasons of Isaacs J in Williamson (113 - 115) in support of that approach. In Williamson,Isaacs J observed that that there may be circumstances where 'the possession of peculiar means of knowledge by a party is a reasonable ground for casting to some extent and according to the circumstances a special responsibility with regard to proof' (114). That was so despite the 'broad primary principle guiding a court in the administration of justice … that he who substantially affirms an issue must prove it' (113).
33 The principle recognised in Williamson is a principle of evidence that may facilitate the proof of an allegation. It was applied as such by Muir J in Kestrel Coal, albeit in the context of whether a pleading disclosed a reasonable cause of action for the purpose of joining a party. The joinder was sought in that case on the basis of an allegation that the proposed party had made a contract with a party that was already a defendant in the action. The applicant produced to the court a letter written by the proposed party to substantiate its allegation. Muir J observed that the precise nature of the proposed party's contractual arrangements with the existing defendant was a matter that was peculiarly within the knowledge of those parties. However, an inference about those
(Page 12)
- arrangements might be drawn from the letter and the applicant was entitled to the benefit of any inference that was reasonably available according to the principle recognised by Isaacs J in Williamson.
34 Neither party tendered evidence at the hearing of Dolphin Quay's applications. Consequently, the question of whether the second minute disclosed reasonable causes of action against Appeal Holdings and Mr and Ms Wilbraham is to be determined on the allegations contained in the second minute. That question is to be decided on the assumption that Dolphin Quay establishes the matters alleged at trial. I also accept that the approach adopted by Muir J in Kestrel Coal indicates that Dolphin Quay is entitled to the benefit of any reasonable inference that arises from the facts pleaded so far as they concern matters peculiarly within the knowledge of Appeal Holdings and Mr and Ms Wilbraham.
35 Dolphin Quay apparently has the benefit of s 4 of sch 2 to the CCA and/or s 51A TPA in demonstrating that it has a reasonable cause of action against Appeal Holdings in respect of the First and Second Representations. However, the Third Representation is an allegation about Appeal Holdings' state of mind at the time that the Sale Contract was made. That is, it is an allegation about a present rather than future matter.
36 In my view, the second minute does not disclose a reasonable cause of action that Appeal Holdings engaged in misleading or deceptive conduct by making the Third Representation without the benefit of the deeming provision in s 4 of sch 2 CCA and/or s 51A TPA. I have reached that conclusion having regard to the following matters:
(a) The evidence that Dolphin Quay could adduce at trial on the capacity of Appeal Holdings to complete the Sale Contract is confined to the matters that are alleged about the financial circumstances of Appeal Holdings. Those matters are circumscribed; they only refer to the balance sheet of Appeal Holdings as at May 2006.
(b) I accept that it may be inferred that the capacity of Appeal Holdings to borrow funds from a third party was significantly affected by those matters - although, there may be some equivocation even about that inference. I note that it is alleged that Appeal Holdings had granted a fixed and floating charge over all of its assets and undertakings to BankWest, presumably to secure borrowings from that bank. However, it is alleged that
- Appeal Holdings also had 'liabilities … in relation to loans' made by another lender that were apparently unsecured.
- (c) Appeal Holdings and Mr and Ms Wilbraham emphasised the time between the making of the Sale Contract and the date on which settlement fell due. The Sale Contract was not produced at the hearing of the applications and I do not know whether it specified a date by which the strata plan was to be registered for the purpose of s 70(4) of the Strata Titles Act. However, it was not in issue that the parties contemplated that settlement of the sale of the apartment would occur some time well after the Sale Contract was made.
(d) The most that can be reasonably inferred from the financial circumstances pleaded is that Appeal Holdings knew, as at May 2006, that it would not be able to borrow from an arm's length third party when settlement of the Sale Contract fell due some time in the future unless there were changes in its balance sheet position. However, that does not provide a sufficiently arguable basis for inferring that Appeal Holdings believed that there were no reasonable grounds to anticipate that it would be able perform its obligations under the Sale Contract when required to do so as other possibilities are reasonably left open. At least two possibilities are reasonably left open - that Appeal Holdings may have believed that it could complete the Sale Contract from funds provided by Mr and Ms Wilbraham or that its financial circumstances would sufficiently change so that it would be able to borrow the funds from some other source by the time that it was obliged to settle on the sale of the apartment.
(e) A matter relied on by Dolphin Quay was the failure of Appeal Holdings to perform the Sale Contract when the time came for settlement. In Futuretronics, Ormiston J observed that, '[i]f one were to go to the breach to determine whether there has been misleading or deceptive conduct, the breach may, but only may, provide some evidence from which one could infer that the promisor never intended or never had the ability to fulfil his obligation' (238) (original emphasis). Here, the inference that is sought to be drawn is that Appeal Holdings failed to complete the Sale Contract because of its financial position (the allegations of misleading or deceptive conduct made in pars 9 and 10 of the second minute are prefaced with the plea 'by reason of' the financial circumstances of Appeal Holdings). However, Appeal
- Holdings alleges that it was entitled to avoid the Sale Contract under s 69C and s 69D of the Strata Titles Act. It pleads in its current defence that Dolphin Quay failed to comply with the requirements of s 69C in at least four ways entitling it to avoid the Sale Contract under s 69D. It was not suggested by Dolphin Quay that those allegations lacked merit or otherwise did not disclose a reasonable defence. In my view, those matters significantly undermine any inference to be derived about Appeal Holdings' actual beliefs from the fact that it issued a notice seeking to terminate the Sale Contract and did not settle on the sale of the apartment.
- (f) Accordingly, the allegation made by Dolphin Quay concerning Appeal Holdings' beliefs substantially rests on the matters pleaded in the second minute about the financial circumstances of Appeal Holdings. An inference that Appeal Holdings did not believe at the time that it made the Sale Contract that there were reasonable grounds to anticipate that it could complete the Sale Contract at some time in the future by paying the purchase price for the apartment cannot be reasonably drawn from those matters; they are too narrow and too equivocal even on an interlocutory application to amend. They leave open reasonable possibilities that are inconsistent with the allegation sought to be made.
(g) That is especially so in relation to the allegation that Appeal Holdings believed that there were no reasonable grounds to anticipate that it could complete the Sale Contract irrespective of the capacity of Mr and Ms Wilbraham to borrow funds. There is no allegation made about their financial capacity. However, the inference also cannot, in my view, be drawn in relation to the remaining allegations concerning Appeal Holdings' beliefs.
(h) This is not a matter of competing inferences to be resolved at trial. Rather, the matters alleged concerning Appeal Holdings' financial circumstances are not sufficiently compelling to permit the inference to be reasonably drawn. The principle identified by Allanson J in Fairworld Holdings (which I respectfully accept) does not assist Dolphin Quay. The evidence that might be led about the financial circumstances of Appeal Holdings would be confined to proof of the matters that have been alleged about those circumstances.
(Page 15)
- (i) Further resort to the principle identified by Isaacs J in Williamson beyond that which has already been recognised also does not assist Dolphin Quay. Care must obviously be exercised in applying that principle when the issue to be decided is whether there is an arguable basis for making an allegation about a party's state of mind; the principle could otherwise be applied in a way that was circular (by reference to the observation of Handley JA and Cripps JA in Wickstead cited earlier, the 'gap' cannot be the very subject matter of an allegation that a party must plead as a necessary element of a cause of action). Nor is it appropriate to let the plea concerning Appeal Holdings' subjective beliefs stand in the hope that it might be shored up by discovery if it falls short of disclosing a reasonable cause of action.
(j) It is not for Appeal Holdings to positively plead and prove its state of mind; it is for Dolphin Quay to allege sufficient matters to establish a reasonable cause of action.
The application to join Mr and Ms Wilbraham
37 McLure P noted in Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd [2011] WASCA 76 that there was conflicting authority on whether accessorial liability required knowledge of all of the material elements of the statutory prohibition on misleading or deceptive conduct, including the fact that the defendant's conduct was misleading or deceptive, and whether the accessory's knowledge must be actual or constructive. Her Honour considered that Yorke v Lucas (1985) 158 CLR 661 established that the defendant must have actual knowledge of all of the material elements for a contravention of s 52 TPA and similar provisions [136]. She also made reference to C Bannan, 'Accessorial Liability under the Trade Practices Act' (2009) 83 ALJ 407. Mr Bannan concluded in his article that an alleged participant in a contravention of s 52 TPA must actually know that the conduct in question was misleading or deceptive.
38 Dolphin Quay did not contend that it was open to argue that accessorial liability could be established against Mr and Ms Wilbraham by something less than actual knowledge of the misleading or deceptive character of conduct in which Appeal Holdings had allegedly engaged. Consequently, the question is whether the second minute discloses a reasonable cause of action that Mr and Ms Wilbraham actually knew that there were no reasonable grounds to believe that Appeal Holdings could complete the Sale Contract when the time for performance fell due. The allegation of knowledge rests on an inference sought to be drawn from the
(Page 16)
- matters pleaded about the financial circumstances of Appeal Holdings. Those matters are not, in my view, sufficient to establish a reasonable cause of action based on an allegation of actual knowledge for the same reason that they do not establish a reasonable cause of action that Appeal Holdings actually believed that there were no reasonable grounds to expect that it would be able to complete the Sale Contract.
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