Ferney Hough, H.W. v Westpac Banking Corporation

[1990] FCA 160

160   . / 9 s -

JUDGMENT No. ........ .... .....,

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C A T C H W O R D S

PRACTICE AND PROCEDURE - application for preliminary determination of issue - whether profit made by use of money lent should be taken into account in assessing damages - issue not academic or theoretical - consideration of when court will determine preliminary issue - factual points not easily defined.

Harry ~illiam Ferneyhough & Ors

1. Westpac Banking Corporation

Qld G105 of 1989

PItiCUS J. BRISBANE

12 APRIL 1990

2 6 APR 1990

IN THE FEDERAL COURT OF AUSTRALIA	1
QUEENSLAND DISTRICT REGISTRY	) QLD G105 of 1989
GENERAL DIVISION	)

BETWEEN: HAROLD WILLIAM FERNEYHOUGH, NON1 FERNEYHOUGH,

JOHN ANTHONY MCDONAGH and JILL ANNE MCDONAGH

Applicants

AND: WESTPAC BANKING CORPORATION

Respondent

MINUTES OF ORDER

JUDGE MAKING ORDER:	PINCUS J.
DATE OF ORDER:	12 APRIL 1990
WHERE MADE:	BRISBANE
THE COURT ORDERS THAT:

1.    the application for a preliminary determination of a question relating to damages be rejected.

&OTE :  Settlement and entry of orders is dealt wlth in
Order 36 of the Federal Court Rules.

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IN THE FEDERAL COURT OF AUSTRALIA	1
QUEENSLAND DISTRICT REGISTRY	) QLD G105 of 1989
GENERAL DIVISION	1

BETWEEN: HAROLD WILLIAM FERNEYHOUGH, NON[ FERNEYHOUGH,

JOHN ANTHONY McDONAGH and JILL ANNE MCDONAGH

Applicants

AND: WESTPAC BANKING CORPORATION

Respondent

PINCUS J.

REASONS FOR JUDGMENT

The respondent has applied for preliminary determination of questions said to arise in this case. The applicants borrowed money in Swiss francs in 1984 and repaid the loan in 1987. Because of the change in the relative value of Swiss francs and Australian dollars between those two dates, they had to pay a

great deal more to discharge the liability than they would have	done if the relative values had not changed. They claim about
$1.3 million.
The loan was used in a venture which was profitable, and according to a letter written on behalf of the appljcants dated 23 March 1987, they did not, when they were advised to borrow in Swiss francs, "have the ability to service a domestic loan necessary to purchase" the interest in question. Mr Sheahan for
the respondent has said, and it does not appear to be disputed, that if the respondent is entitled to take into account in reduction of any damages the profit the applicants made by use of the money lent, then the damages will not be eliminated, but will be reduced to a much lower sum. Mr Sheahan, of course, does not concede that the respondent is liable.
I am asked by the respondent to make an order to try, as a question of principle, the issue just alluded to, namely whether the profit made by use of the money should be taken into account in assessing damages and if so how.
The statement of claim says that misleading conduct on the respondent's part induced the applicants to borrow in Swiss francs and there is a list of statements by the respondent relied on; those statements are said to constitute warranties also, but as Mr Sheahan says, that aspect of the case does not seem very promising. It is perhaps likely that if the applicants succeed as to these statements, it will be on the basis of misleading conduct and not in contract. The importance of that tentative conclusion
is that ordinarily the measure of damages for misleading conduct is that adopted in deceit. In a case of this kind, use of that
measure may well involve a comparison between the financial results of the applicants acting as they did, induced by the alleged misleading conduct, on the one hand, and their having taken some other course, such as not borrowing at all, on the other. In view of the content of the letter to which I have referred, the question Mr Sheahan seeks to have determined in a preliminary way does not appear to be of an academic or theoretical kind; if the applicants succeed in showing they were induced by misleading conduct, then the question may well have to be determined at the trial. Some recent treatments of similar
issues are to be found in Hussey v. Eels I19901 2 WLR 234 and in - B B M B Finance (Hong Kong) Ltd v. E.D.A. Holdings Ltd - [l9901 1 WLR
409. I should stress, however, that I have f0rmt.d no view, of even a provisional kind, with respect to the correctness of the submission the respondent wishes to advance in the proposed preliminary hearing.
Mr P. Stephens, for the applicants, points to the fact that the statement of claim alleges, in addition to the initial wrongdoing just referred to, subsequent wrongful acts such as advice to the applicants to maintain the loan in Swiss francs rather than switching to another currency and advising them against hedging their exposure. If these allegations are held to be correct and to be a foundation of liability, then the damages which flow may be measured differently from those which would ensue from a finding of initial misleading conduct. An affidavit has been filed in which Mr Mangano, of the applicancs' solicitors,
deposes to some factual complexities which may arise if the proposed preliminary hearing is held.
The attraction of a preliminary determination of a point of this sort is that it can be achieved relatively simply and cheaply and may tend to produce a settlement. But the question whether determination of a preliminary issue should be ordered, whether by consent or otherwise, depends, in this case, on whether the point is reasonably able to be isolated. If I made such an

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order as that asked for by Mr Sheahan, it would presumably have to be on the assumption that there is some liability for misleading conduct; even that raises a problem, for it is conceivable that the damage flowing from one species of misleading conduct may be different from that flowing from another. l'hat point is illustrated by Henjo Investments Pty Ltd v. Collins Marrickville Pty Ltd (1988) 79 ALR 83. It will be noted that there an award of damages was made on a basis which attempted to idenCify the effect of a particular kind of misleading conduct, rather than merely deducting the true value of the property from its price. The question considered was not the true value of the property, but the value arrived at on an assumption of fact connected with the particular sort of misleading conduct found. The case went back for a further hearing, but the Full Court did 11ot reject the approach just mentioned.

More generally, it appears to me that the scope of the facts which may be relevant to an assessment of damages in a case of this sort is not easily defined in advance. As Mr Stephens pointed out, the state of the respondent's knowledge of the

applicants' affairs at the time of the loan might, for example, be	material.
In my opinion, there is no general rule for or against deciding points in a preliminary way; but cf. Allen -- v. Gulf Oil Refining Ltd [l9811 AC 1001 at 1010, 1011. I have found no guiding principle stated in the cases which is of lea1 assistance in determining such applications as that made by M C Sheahan, but having had time to reflect on the matter, I have come to the firm conclusion that there should be no such preliminary hearing as is asked for. I do so because of the consideration I have mentioned, namely that the scope or range of facts and circumstances which may be relevant to the assessment in question is difficult to define. In the absence of a rather detailed statement of the facts on which the proposed preliminary determination is to be based, nothing but confusion is likely to result from it.
The foregoing constitute the reasons for my having, as already stated, rejected the application for a preliminary determination of a question relating to damages.

I certify that this and the four

preceding pages are a true copy of the
reasons for judgment herein of His Honour

Mr. Justice Pincus.

A~sociate

Dated I2 e r ; / 1490 c

Counsel for the applicants:	Mr. P.C. Stephens
Solicitors for the applicants:	Gilshenan & Luton
Counsel for the respondent:	Mr J.C. Sheahan
Solicitors for the respondent:	Feez Ruthning
Date of Hearing:	12 April 1990