First Mineral Resources Pty Ltd v WMC Resources Ltd - [2000] WASC 309

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: FIRST MINERAL RESOURCES PTY LTD -v- WMC RESOURCES LTD [2000] WASC 309

CORAM: MASTER SANDERSON

HEARD: 13 DECEMBER 2000

DELIVERED : 15 DECEMBER 2000

FILE NO/S: CIV 2079 of 2000

BETWEEN: FIRST MINERAL RESOURCES PTY LTD (ACN 073 914 191)
Plaintiff
AND
WMC RESOURCES LTD (ACN 004 184 598)
Defendant

Catchwords:

Practice and procedure - Amendment of pleading - Turns on its own facts

Legislation:

Trade Practices Act, s 52

Result:

Leave to amend refused

Representation:

Counsel:

Plaintiff: Mr K J Martin & Ms J M Hill
Defendant: Mr M J McCusker QC & Mr N P Gentilli

Solicitors:

Plaintiff: Bennett & Co
Defendant: Jackson McDonald

Case(s) referred to in judgment(s):

Bell v Lever Bros Ltd [1932] AC 161
Breen v Williams (1995) 186 CLR 71
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
Hooker Corp Ltd v Commonwealth (1986) 65 ACTR 32
Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458
Sinclair v James (1894) 2 Ch 554
The Wik Peoples v The State of Queensland (1996) 187 CLR 1
United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1

Case(s) also cited:

Dalgety Australia Ltd v Rubin, unreported; Library No 5485; 24 August 1984
Fawcett v Whithouse [1929] 39 ER 51
Fraser Edmiston Pty Ltd v ACT (Qld) Pty Ltd [1988] 2 QdR 1
General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83
Hospital Contribution Fund of Australia v Hunt (1983) 44 ALR 365
Hospital Products Ltd v United States Surgical Corp (1984) 156 CLR 41
International Corona Resources Ltd v Lac Minerals Ltd (1987) 44 DLR (4th) 592
Lac Minerals Ltd v International Corona Resources Ltd (1989) 61 DLR (4th) 14
Noranda Australia Ltd v Lachlan Resources NL (1988) 14 NSWLR 1
Tito v Waddell [No 2] [1977] Ch 106
Winterton Construction Pty Ltd v Hambros Australia Ltd (1992) 39 FCR 97

MASTER SANDERSON: This is the return of two chamber summonses. The first in time is the plaintiff's chamber summons for leave to re‑amend its statement of claim. Leave was sought with respect to a minute of re‑amended statement of claim dated 23 October 2000. The defendant's chamber summons sought to strike out par 7 of the amended statement of claim served 21 September 2000. Annexed to the plaintiff's outline of submissions in relation to the defendant's strike‑out application was a further minute of re‑amended statement of claim, undated, but lodged 16 November 2000. The matter proceeded on the basis that the defendant objected to the plaintiff amending its statement of claim in terms of the minute of re‑amended statement of claim of 16 November 2000. In essence, the two chamber summonses merged and both parties dealt with the minute of re‑amended statement of claim.
The salient facts can be shortly stated. Both the plaintiff and the defendant are mining companies. Both companies are involved in the exploration and development of prospective mining areas in the State of Western Australia. In late 1998 the plaintiff applied for certain exploration licences pursuant to the Mining Act 1978 in the Warburton Mineral Field in the north of Western Australia. These exploration licences were granted in October 1999. The defendant is the holder of certain exploration licences which are contiguous with the exploration licences granted to the plaintiff. In April 2000 the defendant initiated discussions with the plaintiff, the aim being that the plaintiff would enter into a joint venture with the defendant to develop the plaintiff's exploration licences. The ultimate question at issue between the plaintiff and the defendant is whether or not there is a binding joint venture agreement between the plaintiff and the defendant with respect to the plaintiff's exploration licences. The plaintiff says there is not. The issue of whether there is a concluded contract between the plaintiff and the defendant is what counsel for the defendant described as the "primary issue" between the parties. Leaving that question to one side, the proposed amendment to the statement of claim raises certain other issues which the defendant says disclose no reasonable cause of action.
To understand the nature of the dispute between the parties it is necessary to quote in full par 7 of the amendment propounded by the plaintiff. It is in the following terms:
"7.In the alternative to paragraph 5 hereon, if, which is denied by the Plaintiff, the Defendant acquired an interest in the Exploration Licences as claimed by the Defendant in the applications for caveats referred to in paragraph 5 hereof then:
7.1at all material times, the Defendant was a corporation within the meaning of the Trade Practices Act 1974 (Commonwealth);
7.2between 24 December 1999 and 24 July 2000, at which date the Defendant claims to have acquired an interest in the Exploration Licences by virtue of an alleged agreement with the Plaintiff, in its correspondences and dealings with the Plaintiff, the Defendant was engaged in trade or commerce within the meaning of that expression in the Trade Practices Act 1974;
7.3at all material times the Defendant was the holder of Exploration Licences pursuant to the Mining Act 1978 being Exploration Licences 69/1155 and 6/1156 ('the WMC ELS');
7.4the WMC ELS were contiguous to and adjacent to the Plaintiff's Exploration Licences referred to at paragraphs 4.2 and 4.3 hereof;
7.5prior to 12 May 2000, the Defendant was aware of confidential information relevant to the geological nature and value of the Exploration Licences that to the Defendant's knowledge, was not known and could not be known to the Plaintiff in that:
7.5.1in or about May and June 1998 the Defendant carried out an airborne magnetic and radiometric survey which, inter alia, surveyed the Defendant's Exploration Licence 69/1155 and the Exploration Licences referred to in paragraphs 3.2 and 3.3 or part thereof and at dates and times not presently known to the Plaintiff and without the Plaintiff's permission or approval as and from 4 November 1998 utilised the geophysical data obtained from the survey to compile an assessment of the prospectivity of the Exploration Licences.
7.5.2at a date and time not known to the Plaintiff, but announced by the Defendant on 24 May 2000, the Defendant:
7.5.2.1carried out diamond drilling at 2 drill holes 4 kilometres apart within the WMC ELS (the Diamond Drilling);
7.5.2.2thereafter assayed the Diamond Drilling results which disclosed;
7.5.2.2.1in respect of the first hole which tested an electro magnetic anomaly at least 800 metres long, an apparent width of mineralisation of 26.55 metres at 2.45 per centum nickel, 1.78 per centum copper and 0.09 per centum cobalt;
7.5.2.2.2in respect of the second hole which tested an induced polarisation and a weak electro magnetic anomaly at least 1.5 kilometres long, an apparent width of mineralisation of 37.9 metres at 0.31 per centum nickel, 0.45 per centum copper and 0.01 per centum cobalt;
7.6by letter from the Defendant to the Plaintiff dated 20 April 2000, the Defendant proposed to the Plaintiff that the Plaintiff enter into an agreement with the Defendant in the form of a document entitled 'Heads of Agreement' which provided, inter alia:
7.6.1that the Plaintiff and Defendant would constitute a joint venture for the exploration and, if warranted, development mining and processing of minerals within the Exploration Licences;
7.6.2the Defendant would be entitled to earn an 80 per centum interest in the Exploration Licences by spending within a period of 6 years $1,000,000 on exploration and development of the Exploration Licences;
7.6.3the Defendant would be the Manager of the Joint Venture for and on behalf of the Plaintiff;
7.6.4all information in relation to the Joint Venture would be treated by each of the Plaintiff and Defendant as confidential to the Plaintiff and Defendant as joint venturers.
7.6Aat a meeting between Craig McGown and Greg MacMillan on behalf of the Plaintiff and David Berrie and Charles Wilkinson on behalf of the Defendant on 25 January 2000 at the Defendant's premises at 191 Great Eastern Highway, McGown on behalf of the Plaintiff informed Berrie and Wilkinson of the Defendant that the Plaintiff was concerned with dealing with the Defendant given that McGown was aware of the Ernest Henry litigation between the Defendant and Savage Resources Ltd which occurred at the time McGown was a Director of Resource Finance Corporation Ltd, the corporate adviser and underwriter for Savage Resources Ltd and the Plaintiff wished to be assured that its dealings with the Defendant were open and frank. Berrie on behalf of the Defendant in the presence of Wilkinson of the Defendant assured McGown of the Plaintiff in the presence of Greg MacMillan that the dealings between the Defendant and the Plaintiff would be conducted on that basis;
7.7the Defendant failed between 20 April 2000 and 12 May 2000 to disclose to the Plaintiff that the Defendant was aware of the matters referred to in paragraph 7.5 hereof;
7.8the Defendant's conduct referred to in paragraph 7.6 and 7.7 hereof amounted to a representation, arising and to be implied from the matters referred to in paragraphs 7.6 and 7.7 hereof, that the Defendant did not possess or was not aware of the information and matters referred to in paragraph 7.5 hereof;
7.9the representation by the Defendant referred to in paragraph 7.8 hereof was misleading and deceptive contrary to the terms of Section 52 of the Trade Practices Act 1974 in that the Defendant was aware of the matters referred to in paragraph 7.5 hereof or became aware of them and each of them prior to 12 May 2000;
7.10further and in the alternative, by reason of terms of the Heads of Agreement, referred to in paragraph 7.6 hereof the Defendant as at 20 April 2000 as a proposed manager of the Joint Venture on the terms proposed by the Defendant was a fiduciary of the Plaintiff;
7.11by reason of the matters referred to in paragraph 7.10 hereof the Defendant was under a duty as at 20 April 2000 and thereafter up to and including 12 May 2000 to disclose to the Plaintiff the matters referred to in paragraph 7.5 hereof;
7.12by reason of the representation referred to in paragraph 7.8 hereof on 12 May 2000, the Plaintiff signed the Heads of Agreement referred to in paragraph 7.6 hereof and transmitted the executed document to the Defendant by facsimile;
7.13further and in the alternative, had the Defendant prior to 12 May 2000 disclosed to the Plaintiff the matters referred to in paragraph 7.5 hereof, the Plaintiff would have refused to sign the document referred to in paragraph 7.6 hereof;
7.14by reason of the matters referred to in paragraphs 7.7, 7.8, 7.9 and 7.12 hereof if, which the Plaintiff denies, by the matters referred to in paragraph 7.12 hereof the Plaintiff entered into an agreement with the Defendant or alternatively executed and delivered a Deed at law which the Defendant purported to accept on 24 July 2000, the Plaintiff suffered loss and damage or is likely to suffer loss and damage;
Particulars
The Plaintiff's loss and damage was the disposition of an 80 per centum interest in the Exploration Licence at a significant under value full particulars of which will be supplied prior to trial.
7.15if, which is denied by the Plaintiff, by the matters referred to in paragraph 7.12 hereof, the Plaintiff entered into an agreement with the Defendant or alternatively executed and delivered to the Defendant a Deed at law which the Defendant purported to accept upon 24 July 2000, by reason of the matters referred to in paragraphs 7.10, 7.11 and 7.13 hereof, the Plaintiff is and was entitled to rescind any such agreement or Deed, which the Plaintiff did by letter dated 14 July 2000 alternatively the issue of the within proceedings."
(The whole of this paragraph differs from par 7 as it stands in the present pleading. However, some of the amendments differ from the minute which was attached to the chamber summons dated 23 October 2000. In particular, par 7.6A did not appear in the earlier minute. As I have indicated above, both parties proceeded on the basis that the plaintiff sought leave to amend in terms of the minute of 16 November 2000.)
It is apparent from the proposed cl 7 that the plaintiff seeks to introduce two causes of action. The first alleges a breach of a fiduciary duty. It is said that the defendant owed a fiduciary duty to the plaintiff which required the defendant to disclose to the plaintiff prior to the conclusion of a joint venture agreement the aeromagnetic data obtained on the tenements prior to their coming into the possession of the plaintiff and the drill hole results conducted on the defendant's own tenements. Further, it is said that as a consequence of the discussions which took place between the plaintiff and the defendant and detailed in par 7.6A, the failure to disclose the aeromagnetic information and the drill hole results was misleading and deceptive conduct pursuant to s 52 of the Trade Practices Act. The defendant says that the pleaded facts disclose no cause of action. They say leave should not be given to amend a statement of claim in a form which discloses no reasonable cause of action: See Hooker Corp Ltd v Commonwealth (1986) 65 ACTR 32 at 38; Sinclair v James (1894) 2 Ch 554 at 557.
Dealing first with the claim for breach of fiduciary duty, essentially the defendant submits that it is not reasonably arguable that in the circumstances pleaded there was, as between the plaintiff and the defendant, a fiduciary duty which required the defendant to disclose to the plaintiff the information it had both with respect to its tenements and the plaintiff's tenements. In dealing with this submission it is first necessary to analyse what the plaintiff says are the elements of the relationship which gave rise to the fiduciary duty. As I understand the pleading there are two elements relied upon by the plaintiff. First, the fact that the plaintiff and the defendant were negotiating with respect to a joint venture agreement. The plaintiff emphasises that the negotiations were with respect to a joint venture agreement - that is to say an agreement which when concluded would undoubtedly embody a fiduciary relationship. In this sense it stands apart from a simple contract such as a sale and purchase agreement. Secondly, there are the matters pleaded in par 7.6A. In essence the plaintiff says that it was assured by the defendant that there would be full and frank disclosure in the negotiations between the parties.
The defendant says that the case pleaded by the plaintiff cannot give rise to any fiduciary duties as between the plaintiff and the defendant. The defendant says that the plaintiff and the defendant were two commercial corporations engaged in arms‑length negotiations, each of whom were seeking a commercial advantage and neither of whom, on the pleaded case of the plaintiff, owed the other fiduciary duties. The defendants concede that in certain circumstances parties who are negotiating a joint venture might, by virtue of the way in which the negotiations are conducted, or the way in which the parties conduct themselves, give rise to fiduciary duties. They say that there are no circumstances pleaded which could possibly give rise to fiduciary duties by the defendant to the plaintiff in this case.
Before dealing with that specific submission it is necessary to consider more generally the nature of fiduciary duties and when they arise.
In Breen v Williams (1995) 186 CLR 71 the High Court considered the nature of the fiduciary relationship between a patient and a specialist medical practitioner. The question at issue was whether the patient had the right to obtain copies of the medical practitioner's patient notes. It was said by the patient that pursuant to the fiduciary duty owed by the medical practitioner to the patient, the medical notes should be made available to the patient. In the course of their judgments the court considered the nature of fiduciary duties. Various members of the court characterised these duties in different ways. Brennan CJ put the position as follows (at 82):
"Fiduciary duties arise from either of two sources, which may be distinguished one from the other but which frequently overlap. One source is agency; the other is a relationship of ascendancy or influence by one party over another, or dependence or trust on the part of that other. Whichever be the source of the duty, it is necessary to identify 'the subject matter over which the fiduciary obligations extend'. It is erroneous to regard the duty owed by a fiduciary to his beneficiary as attaching to every aspect of the fiduciary's conduct, however irrelevant that conduct may be to the agency or relationship that is the source of the fiduciary duty."
Dawson and Toohey JJ put the position slightly differently. Their Honours said (at 92 ‑93):
"Whilst duties of fiduciary nature may be imposed upon a doctor, they are confined and do not cover the entire doctor‑patient relationship. Thus a doctor is under a duty to protect the confidentiality of information given by a patient. And the doctor‑patient relationship is such that any substantial benefit received by the doctor from a patient (other than proper renumeration) is presumed to be the result of undue influence with a doctor bearing the onus of rebutting the presumption …
The difficulty in dealing with the appellant's contention is that the law has not, as yet, been able to formulate any precise or comprehensive definition of the circumstances in which a person is constituted a fiduciary in his or her relations with another. There are accepted fiduciary relationships such as a trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners which may be characterised as relations of trust and confidence. In Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 96‑97 Mason J said:
'The crucial feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions "for", "on behalf of", and "in the interests of" signify that the fiduciary acts in a "representative" character in the exercise of his responsibility.' "
Gaudron and McHugh JJ take a slightly different view again of the nature of the fiduciary relationship. Their Honours say (at 107):
"However, the categories of fiduciary relationship are not closed, and the courts have identified various circumstances that, if present, point towards, but do not determine, the existence of a fiduciary relationship. These circumstances, which are not exhaustive and may overlap, have included: the existence of a relation of confidence; inequality of bargaining power; an undertaking by one party to perform a task or fulfil a duty in the interests of another party; the scope for one party to unilaterally exercise a discretion or power which may affect the rights of interests of another; and the dependency or vulnerability on the part of one party that causes that party to rely on another."
What emerges from these judgments and from the judgment of Justice Gummow (at 135) is that it is the nature of the relationship between the parties which gives rise to a fiduciary duty. It may be that it is convenient to say that as between a principal and agent, or a trustee and beneficiary, there is a fiduciary relationship. But that is a conclusion of law which arises from the nature of the relationship between the parties. In every case it is necessary to analyse the nature of the relationship between the parties to determine first whether or not there is a fiduciary relationship and if there is, what is the nature of the fiduciary duties as between those two parties. The need to examine the nature of the relationship between the parties and to then consider whether this relationship gives rise to fiduciary duties was considered by Brennan CJ in TheWik Peoples v The State of Queensland (1996) 187 CLR 1 at 95 ‑ 96. His Honour said:
"The Wik and Thayorre submissions assert the existence of a fiduciary duty owed by the Crown to indigenous inhabitants of the leased areas. The duty is said to arise from the vulnerability of native title, the Crown's power to extinguish it and the position occupied for many years by the indigenous inhabitants vis‑a‑vis the Government of the State. These factors do not by themselves create some freestanding fiduciary duty. It is necessary to identify some action or function the doing or performance of which attracts the supposed fiduciary duty to be observed. The doing of the action or the performance of the function must be capable of affecting the interests of the beneficiary and the fiduciary must have so acted that it is reasonable for the beneficiary to believe and expect that the fiduciary will act in the interests of the beneficiary (or, in the case of a partnership or joint venture, in the common interest of the beneficiary and fiduciary) to the exclusion of the interest of any other person or the separate interest of the beneficiary.
In the present case the only relevant function performed by the Crown is the exercise of the power of alienation. That is the only power the exercise of which relevantly affects native title. With all respect for the opposing view, I am unable to accept that a fiduciary duty can be owed by the Crown to the holders of native title in the exercise of a statutory power to alienate land whereby their native title in or over that land is liable to be extinguished without their consent and contrary to their interests."

It is important to remember in the context of this case that the plaintiff and the defendant are two commercial organisations which have entered into negotiations with respect to certain mining tenements. It has not been suggested that there is any imbalance of power between the two parties. What was being negotiated was a commercial arrangement pursuant to which each party expected to obtain some commercial benefit. Why then should any fiduciary duty be imposed upon the defendant? Can it be argued that the discussions between the plaintiff's and the defendant's representatives as pleaded in par 7.6A were sufficient to give rise to some fiduciary duty on the part of the defendant to disclose the information that it had in its possession? In other words, was that discussion sufficient to put the plaintiff and the defendant in the positions of beneficiary and trustee? I think not. Furthermore, it seems to me that the position is not even arguable. Undoubtedly the situation would be different if there had been a misrepresentation by the defendant to the plaintiff subsequent to the discussions pleaded in par 7.6A. Then there may have been some cause of action under the Trade Practices Act. But even then I have some doubt that there would be an action for breach of fiduciary duty. In short, I am not satisfied that the circumstances of this case can arguably give rise to a fiduciary relationship between the plaintiff and the defendant.
Counsel for the plaintiff relied on the decision of the High Court in United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1. In their judgment the majority (Mason, Brennan and Deane JJ) said (at 11 ‑ 12):
"It was submitted on behalf of UDC that no fiduciary relationship existed and no fiduciary duties arose between the prospective participants in the joint venture until the joint venture agreement was actually executed in July 1974. To the extent that that submission involves a general legal proposition that the relationship between prospective partners or joint venturers cannot be a fiduciary one until a formed agreement is executed, it is clearly wrong. A fiduciary relationship can arise and fiduciary duties can exist between parties who have not reached, and who may never reach, agreement on the consensual terms which are to govern the arrangement between them. In particular, a fiduciary relationship with attendant fiduciary obligations may, and ordinarily will, exist between prospective partners who have embarked upon the conduct of the partnership business or venture before the precise terms of any partnership agreement have been settled. Indeed, in such circumstances, the mutual confidence and trust which underlie most consensual fiduciary relationships are likely to be more readily apparent that in the case where mutual rights and obligations have been expressly defined in some formal agreement. Likewise, the relationship between prospective partners or participants in a proposed partnership to carry out a single joint undertaking or endeavour will ordinarily be fiduciary if the prospective partners have reached an informal agreement to assume such a relationship and have proceeded to take such steps involved in its establishment or implementation."
The facts in this case are altogether different from the facts in the UDC decision. Counsel for the defendant accepted that there were certain circumstances in which fiduciary duties could arise as between two parties who were negotiating an agreement but had not yet concluded that agreement. For instance, if as part of the negotiation process between the plaintiff and the defendant the defendant had supplied to the plaintiff information which was confidential but relevant to the negotiations, then whether or not an agreement was concluded, the plaintiff would have a fiduciary duty to retain the confidentiality of the information. Fiduciary duties would have arisen independent of any agreement. But that situation stands apart from this case. Here it is said by virtue of the negotiations intending to lead to a joint venture agreement and the discussions pleaded in par 7.6A, a fiduciary duty has arisen. The principles underlying the decision in the UDC case cannot, in my view, be extended to apply to such a circumstance.
There remains the question of whether or not in circumstances where negotiations between two parties are leading towards an agreement which give rise to fiduciary obligations, fiduciary obligations arise during the course of the negotiations. What support there is for this proposition is to be found in the judgment of Lord Atkin in Bell v Lever Bros Ltd [1932] AC 161 where his Lordship said (at 227):
"Ordinarily the failure to disclose a material fact which might influence the mind of a prudent contractor does not give the right to avoid the contract. The principle of caveat emptor applies outside contracts of sale. There are certain contracts expressed by law to be contracts of the utmost good faith, where material facts must be disclosed; if not, the contract is voidable. Apart from special fiduciary relationships, contracts for partnership and contracts of insurance are the leading instances. In such cases the duty does not arise out of contract; the duty of a person proposing an insurance arises before a contract is made, so of an intending partner. (Emphasis supplied)"
His Lordship's words have been picked up by various of the text writers, including Lindley on the Law of Partnership, 15th ed, (1984). It is clear, however, that his Lordship's words were obiter. Consideration of the decision in Bell v Lever Bros Ltd makes that plain. Furthermore, there is no support for this proposition in the decided cases in Australia. Indeed, in Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458, Gleeson CJ (Chief Justice of New South Wales as he then was) said (at 475):
"Even so, a question arises as to how these matters should now be regarded. Where parties are dealing at arms' length in a commercial situation in which they have conflicting interests it will often be the case that one party will be aware of information which, if known to the other, would or might cause that other party to take a different negotiating stance. This does not in itself impose any obligation on the first party to bring the information to the attention of the other party, and failure to do so would not, without more, ordinarily be regarded as dishonesty or even sharp practice. It would normally only be if there were an obligation of full disclosure that a different result would follow. That could occur, for example, by reason of some feature of the relationship between the parties, or because previous communication between them gave rise to a duty to add to or correct earlier information."
In my view, that statement represents the law in Australia. I am of the view that there is nothing in the case pleaded by the plaintiff which could give rise to a fiduciary duty on the part of the defendant to disclose what information it had about its exploration licences and the plaintiff's exploration licences to the plaintiff. I am not satisfied that the amendments proposed by the plaintiff should be allowed.
The further question is whether or not the plaintiff's claim under the Trade Practices Act should be allowed. To establish a cause of action under s 52 of the Trade Practices Act it is necessary for the plaintiff to prove that there was a representation made by the defendant which was misleading and deceptive. If, for instance, it was alleged that the defendant had told the plaintiff that no drilling had been undertaken by the defendant on its tenements, then that would amount to a representation. But in this case there is no direct representation. What the plaintiff says is that it was told by the defendant that there would be open and frank disclosure of all relevant matters: par 7.6A of the minute of re‑amended statement of claim. It is then said that the silence of the defendant and its failure to disclose the information it had about its tenements and the plaintiff's tenements itself amounted to a representation which was actionable under s 52.
The question of when silence can amount to a representation has been the subject of a number of decisions over the years. In recent times the position is perhaps best expressed by the decision of Black CJ in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31. His Honour said (at 32):
"Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead and deceive. To speak of 'mere silence' or of a duty of disclosure can divert attention from the primary question. Although 'mere silence' is a convenient way of describing some fact situations, there is in truth no such thing as 'mere silence' because the significance of silence always falls to be considered in the context of which it occurs. That context may or may not include: facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed."
The question in this case must be whether or not in the circumstances pleaded, there was a reasonable expectation that the defendant's knowledge about its tenements and the plaintiff's tenements would be disclosed so that in the absence of such disclosure there was a representation which was misleading or deceptive.
In my view, there is nothing in the pleaded case which could lead to a view that silence amounted to a misrepresentation. As Black CJ said in Demagogue, there can be no suggestion that there is any general duty of disclosure in commercial, arms' length negotiations. That leaves the plaintiff with par 7.6A. In my view there is nothing contained in that paragraph which would render silence on the part of the defendant a representation which was misleading and deceptive. In my view the plaintiff's case on this question is not arguable.
In dealing with all the questions raised by this application I am mindful of the prospect of stifling the development of the law by striking out the plaintiff's pleading. Both with respect to the trade practices plea and, more particularly, with respect to the claim based in breach of fiduciary duty, there are matters raised which are at the cutting edge of commercial jurisprudence. Even bearing that in mind I am not satisfied that either cause of action is arguable. Perhaps to put the position another way, if such matters were pleaded they would, in my view, be liable to be struck out under O 20 r 19(1)(a) as disclosing no reasonable cause of action. On that basis I would not be prepared to allow the amendment to the statement of claim.
I will hear the parties as to the precise form of orders.