Francis C Mason Pty Ltd v Citicorp Australia Ltd

[1984] FCA 497

. Trade Practices - misleading and deceptive conduct - Federal

and State claims constituting one..-controveray- - interlocutory - .

orders seeking stay of Supreme Court proceedings - whether

Federal claim is genuine.

Trade Practices Act 1974 s .52

FRANCIS C. MASON PTY. LTD., v. CITICORP AUSTRALIA LTD.

FRANCIS CHARLES MASON and

JUDITH ASHLEY MASON

V. No. G 227 of 1984

Northrop J.

Melbourne

20 November 1984

JN THE FEDE.=RAL COURT OF AUSTRALIA

1

VICTORIA	DISTRICT	REGISTRY	1	V. No. G 227 of 1904
1

. GENERAL DIVISION 1

FRANCIS C. MASON P m . LTD.,

FRANCIS CHARLES MASON and

JUDITH ASHLEX MASON Applicants

and

CITICORP AUSTRALIA LTD. Respondent

c o w	:	Northrop J.
DATE :	20 November 1984

PLACE : Melbourne

ORDER

THE COURT ORDERS THAT the motion be refused with costs.

JN THE FEDERAL COURT OF AUSTRALIA	1
1
VICTORIA DISTRICT REGISTRY	1 V. No. G 227 of 1964
1

. GENERAL DIVISION 1

FRANCIS C. MASON FTY. LTD.,

FRANCIS CHARLES MASON and

JUDITH ASHLEY MASON Applicants

and

CITICORP AUSTRALIA LTD. Respondent

CORAM :	Northrop J.
DATE :	20 November 1984
FLACE :	Melbourne

REASONS FOR JUDGMENT

By their amended application, the Applicants are

seeking various orders under the Trade Practices Act 1974

( "the Act" 1 including damages under s.82 and orders pursuant

to s.87 with respect to an aureement in writinu dated 2

September 1981 between Francis Charles Mason ( "Mr. Mason")

and Judith Ashley Mason ( "Mrs. Mason" 1 of the one part and

the Respondent ( "Citicorp") of the other part ( "the loan

agreement") and an agreement in writinq dated 2 September

1981 between Francis C. Mason Pty. Ltd. ("the Company") and

Citicorp ( "the quarantee agreement" 1 . The application is

based upon conduct engaged in by Citicorp which the

Applicants allege was misleading or deceptive or likely to

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mislead or deceive contrary to 8 . 5 2 of the Act. Other claims

contained in the application based upon other causes - of

action are not relevant for present purposes. The

* application was filed on 15 August 1984. -By Notice of Motion

dated 3 September 1984 the Applicants are seeking interim

orders restraining Citicorp from proceeding further in Supreme Court of Victoria proceedings No. 2683 of 1984 issued on 22 June 1984 in which Citicorp is plaintiff and Mr. Mason

and Mrs. Mason are defendants. In the Supreme Court

proceedings, Citicorp is claiming payment	of moneys alleged
to be due under the loan agreement.

The motion for interim relief in the Federal Court

proceedings was heard on 7 and 19 September 1984. The

qeneral principies to be applied in determining the motion

have Lsen discussed in Denrjrc Ftv. Ltd. v. Centrepoint Freeholds Fty. Ltd. (1983) 48 A.L.R. 39. Since that decision

the High Court has given judgment in Coast Securities No. 3 Ptv. Ltd. v. L.E. Stack (1983) 49 A.L.R. 193 but the opinions

expressed in Denpro's case are consistent	with the opinions
expressed in Stack's case.

Before the Federal Court makes an order of the type

sought by the Applicants, the material before the Court must

satisfy it that the Federal claims and the State claims

constitute one controversy between the parties, that the

Federal claims are genuine and that they form a substantial

aspect of that controversy. Counsel for Citicorp has contended that the Federal claims made by the Applicants are

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not genuine and do not form	a substantial aspect of that
controversy.

The Court proposes to consider the contention that..

the Federal claim is not genuine and that accordingly the

motion should be refused. A number of affidavits were filed

on behalf of the Applicants and Citicorp. A number of

documents were exhibited to the affidavits. The findings

made in decidinq the motion do not depend upon the

credibility of deponents but are based upon the probabilities

arisinu from contemporaneous documents .and undisputed matters

of fact. In makina those findinus some of the evidence

contained in the affidavits of Mr. Mason is not accepted.

Citicorp is a corporation under the Act. Mr. Mason

and Mrs. Mason are directors of and control the Company which

carries on the business of purchasinu real estate and either

renovatinu any residence erected thereon for the purpose of

resellinu at a profit or demolishing the residence erected

thereon and constructing a new residence for the purpose of

selling at a profit. In April 1981 Mr. Mason became

interested in purchasing a property situated in Monomeath

Avenue, Canterbury ("the land") for the business of the

Company. For this purpose, through an agent, he approached

Citicorp to seek a loan facility. The initial application

was for the purpose of purchasing the land, renovating the

existing residence and constructinu a new residence on part

of the land and selling each residence	on a separate title.
This proposal is described as plan 1.

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On 6 April 1981 a loan facility for $570,000 was approved by Citicorp for the implementation of plan 1. The

land was purchased by the Company at auction on 11 April 1981

for $320,000. By letter dated 16 April 1981 Citicorp

notified Mr. Mason and the Company that Citicorp was prepared

to provide the loan facility. The maximum amount of the loan

was $570;000 spread over an 18 month term. Interest was

payable and security was required. The advance was based on

the cost components as follows:

"(a9 land and existing reaideme. S320,OOO

(b) renovations to existing residence	S 50,000
(c) construction of new residence	$230,000 --------
$600,000"
--------

The Company was to provide $30,000 towards the purchase price

of the land leavinu the sum of $570,000 to be advanced by

Citicorp. Citicorp was to provide this money by progressive

payments but at no time was more than $570,000 to be

advanced. Citicorp had to be satisfied that the total

project cost did not exceed $600,000. It is not necessary to

refer to the other terms set out in the letter, a copy of

which was signed by Mr. Mason as a director of the Company.

Sometime in June 1981 Mr. Mason informed Mr.

Burrows, an officer of Citicorp, that he had decided to

demolish the existing residence on the land and to build one

luxury dwelling. This proposal is described as plan 2. Mr.

Mason sought approval from Citicorp to proceed with plan 2.

in lieu of plan 1. and for that purpose requested that the

amount of the loan to be advanced by Citicorp be increased to

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$600,000. On 2 July 1981 Citicorp approved the cancellation

of the loan approved on 6 April 1981 and offered a new	loan
in the sum of $600,000.

The loan agreement which gave effect to the loan of

$600,000 approved by Citicorp on 2 July 1981, was executed on

2 September 1981. The Company commenced work on the land in October 1981 but the erection of the luxury dwelling did not

progress as planned. The $600,000 was fully advanced long

before the luxury residence was completed. The Company

. encountered financial difficulties and Mr. Mason requested

further advanc'es from Citicorp. It is not necessary to refer

to all of these matters. It is sufficient to say that in

February 1984 Citicorp sold the land f o r $451,000. On 22

June 1984 Citicorp issued the Supreme Court proceedings

claiming moneys due under the loan agreement. A summons for

final judgment has been taken out in thoss proceedings but

the hearing of that summons has been adjourned pending the

determination of the motion before the Federal Court.

The facts set out above have been taken primarily

from contemporaneous documents in the possession of Citicorp.

By their statement of claim the Applicants allege that on or

about 10 April 1981 and during the course of negotiations

with Mr. Burrows, Mr. Burrows represented to Mr. Mason that:

" ( i) Citicorp was prepared to advance the sum of

$600,000 to F.C. Mason and J.A. Mason on the

aforesaid ~ecurities, to enable F.C.M. P/L to

purchase the Canterbury property	and complete
plan 1;

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(ii) in the event that F.C. Mason decided to adopt

plan 2 Citicorp was prepared to advance

sufficient money to enable plan 2 to be -

completed even if the moneya required

exceeded Q600,OOO".

- The Applicants claim further that plan 1. and plan 2. were

both being considered in April.1981 but that the loan of

$600,000 was agreed to in relation to plan 1. The

contemporaneous documents are inconsistent with that claim. The Applicants claim further that in or about June 1981 Mr. Mason decided to implement plan 2. and told Burrows of that decision. Thereafter the loan agreement and the guarantee

agreement were entered into. The Applicants allege that the

representati0n.s set out constitute conduct which was

deceptive or misleading or was likely to deceive or mislead

contrary to s.52 of the Act since at the time the

representations were made Burrows did not believe that

Citicorp was prepared to advance the additional moneys or

alternatively Burrows made the representations recklessly

being indifferent as to whether he had the present belief or

not. In his affidavits Mr. Mason deposes to conversations

which in substance support the allegations made.

This case is a perfect illustration of the defect

in the judicial system of Australia arising from the

existence of s.86 of the Act. That defect is discussed by

the Chief Justice of the High Court in Stack's case, above,

at pp.206-7. In that passage His Honour illustrated the

problem that can arise where one party to a controversy is

able to commence proceedings in a State Court only while the

other party may be able to commence proceedings in the

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Federal Court and, if desired, seek to rely upon State claims

under the accrued jurisdiction of the Federal Court. At

p.207 His Honour continued:

"There will therefore be cases in which one party	. .
can commence proceedings only in the Supreme Court,

and the other party can commence proceedings only

in the Federal Court. In those circumstances a

defendant in proceedings in the Supreme Court may, for tactical reasons, delay making his application

-to the Federal Court until the eve of judgment - as

occurred in some, at least, of the present cases.

Even a defendant in the Supreme Court who wished to

dispose of the controversy as quickly as possible

would be compelled to begin litigation in the

Federal Court if he sought relief under Pt VI.	It
is inconsistent with the position of the Federal

Court that it should be used as a vehicle to

frustrate and delay proceedings in the Supreme

Court, and derogatory of the position of the

Supreme Court that its proceedings should be

capable of being impeded in this way. It is a

defect in the judicial system that in some cases

duplication of proceedings in inescapable, and a

multiplication of applications whose sole purpose

is to resolve jurisdictional conflicts is highly

likely. The only effective remedy for this overlap

of jurisdiction, which tends to place two superior

courts in unbecominu conflict, is to amend the

Trade Practices Act so as tcr provide that the

jurisdiction of the Federal Court, at least in

actions and other proceedings under Pt VI which

relate to an alleged contravention of a provision

of Pt V, should no longer be exclusive. The

question whether conduct is misleadinu or deceptive

does not require a specialist court to decide it -

.	the Supreme Courts decide such questions every day
- and the provisions of rjiv 2A of Ft V already

recognize that no specialist court is needed to

deal with the matters of consumer protection. Now

that the present cases have exposed the serious

inconvenience of the present situation, I hope that

the Parliament will provide the remedy."

With respect, I express the same hope as the Chief Justice.

In the present case there is no suggestion that the

Applicants, for tactical reasons, deliberately delayed making

their application to the Federal Court until the eve of

judgment in the Supreme Court proceedings. Nevertheless, it

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I s necessary for the Court to exercise its discretion on

whether to grant the interlocutory injunctions sought	by the
Applicants.

As has been said earlier in these reasons it is

necessary to be satisfied that the Federal claim is genuine.

The -contemporaneous documents are inconsistent with the

allegations made by the Applicants and are inconsistent with

the substance of the conversations set out in the affidavits

of Mr. Mason. In this motion it is neither necessary nor

desirable that the Court express any opinion on the liklihood

of the Applicants success in their Federal claims or other

claims made in the Federal Court in the exercise of its

accrued jurisdiction. The motion seeks orders restraining

Citicorp proceeding further in the Supreme Court action until

the hearing and determination of the Federal Court

proceedings or until further order.

The Federal Court proceedings were commenced long

after the sale of the land and after the Supreme Court

proceeding had been issued and served. Although there may be

inconvenience in having the two proceedings conducted

concurrently, the Federal Court should restrain a plaintiff

from proceeding with Supreme Court proceedings only when it

is satisfied that the Federal Court .proceedings are genuine

as discussed earlier in these reasons. Having regard to the

inconsistency between the contemporaneous documents and the

evidence of Mr. Mason, the Court is not satisfied, f o r the

purpose of this motion, that the Federal claims are genuine.

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The Court has formed the opinion that the Federal claims have

been made and the Federal Court proceedings instituted for

the purpoae of delaying the Supreme Court proceeding8 and

without any real. basis -to .support .the Federal claims. In

those circumstances it is neither necessary nor desirable

that the Court should express any opinion on the other

matters raised by counsel for Citicorp including the issue of

whether the Federal claims are substantial in relation to the

matters in controversy between Citicorp and the Applicants

and the matters discussed by Lockhart J. in Bill Acceptance

Corporation .Ltd. v. G . W . A . Ltd. (19.83.) '50 A.L.R. 242.

The motion is refused but directions will be given

on the basis that the Federal Court proceedings should be

heard at the earliest practical date.