Great Southern Mussel Company Pty Ltd v Tan Yam Nominees Pty Ltd
[1991] FCA 227
•23 Apr 1991
JUDCfLlENT No. / !?) ..... NOT FOE ~;STRLGUTLON
| IN THE FEDERAL COURT OF AUSTRALIA | ) | ||
| 1 | |||
| VICTORIA DISTRICT REGISTRY |
| ||
| 1 | |||
| GENERAL DIVISION | 1 | ||
| BETWEEN: |
GREAT SOUTHERN MUSSEL COMPANY PTY LIMITED,
PETER DE BONO AND EVE DE BONO
Applicants
- and -
TAN YAM NOMINEES PTY LIMITED AND JUDY GUAT HUA FAN
Respondents
| -- | JUDGE | - | Heerey J. |
RECE\\IED
| PLACE | : | Melbourne | ||
| -- | DATE |
|
AUSTRALIA
EX TEMPORE REASONS FOR JUDGMENT
This case arises out of the purchase of the Greenways Nursing Home at 6 Bastings Street, Northcote. Negotiations took place in about September 1985 in which it is alleged the second respondent told the second applicant that the business made a profit of $110,000 per year.
A. As against the first-named Respondent:
(i) Damages pursuant to s.82 of the Trade
Practices Act.
A sale note was signed on 19 September 1985 and a formal contract entered into on 20 December 1985. The sale was completed on 18 April 1986. These proceedings were commenced by an application issued on 24 April 1987. The application states as follows:
"On the grounds appearing in the accompanying Statement
of Claim the Applicants claim:(ii) Interest.
(iii) Costs.(iv) Such further or other orders that the Court may deem meet.
B. As against the second-named Respondent:
(i) An order that the agreement made by the second- and third-named Applicants referred to in paragraph 9(b) of the Statement of Claim be declared void as from 20th December 1985. (ii) Damages.
(iii) Interest.
(iv) Costs.(V) Such further or other orders that the
Court may deem meet."
A statement of claim was filed at the same time. Paragraph 1 alleges the incorporation of the first applicant. Paragraph 2 alleges that the second and third applicants were at all material times directors of the first applicant.
Paragraph 4 alleges that the first respondent is incorporated. Paragraph 5 alleges that the second respondent is and was at all material times a director of the first respondent. Paragraph 6 alleges that at all material times up to and including 20 December 1985, the first respondent owned the business of Greenways Private Nursing Home. Paragraph 7 alleges the agreement in writing, dated 29 (sic) December
to the first applicant for $345,000. 1985, and the sale of the business from the first respondent Paragraph 8 is as follows: "In consideration of the first-named Applicant entering into the agreement aforesaid and as warranties collateral thereto, the first- and second-named Respondents warranted and/or represented to the Applicants :
(a)
that the business generated profits of $110,000.00 per annum.
PARTICULARS
The warranty and representation was oral and was made in conversations between the second-named Applicant and the second-named Respondent shortly prior to 20th December, 1985.
(b)
that all the chattels and stock-in-trade of the business would be delivered to the first-named Applicant as purchaser in the same condition as they were when inspected by the second- and third-named Applicants on behalf of the first- named Applicant.
PARTICULARS
The warranty and representation was in writing and was contained in answers by letter dated 5th February 1986 from the first-named Respondent's solicitors to Requisitions by letter dated the 20th December, 1985 from the first-named Applicant's solicitors."
Paragraph 9 alleges that:
"Acting in reliance upon such warranties and/or
representations and/or induced thereby:
(a)
the first-named Applicant entered into the agreement, and
(b)
the second- and third-named Applicants agreed to mortgage in favour of the second-named Respondent all their right title and interest in the land so as to secure repayment of the sum of $25,000.00 payable by the first-named Applicant
to the first-named Respondent under the agreement referred to in paragraph 7 hereof."
Paragraph 10 alleges certain tens of the agreement relating to the stock in trade and chattels and the conduct of the business.
Paragraph 11 alleges:
"In breach of the said collateral warranties and contrary to the representations which in the premises were untrue false and misleading, the fact is that:
(a)
the business does not now and did not then generate profits of $110,000.00 per annum, and
(b)
all of the chattels and stock-in-trade were not delivered in the same condition as when inspected and the first- and second-named Respondents never had any intention of delivering and made no attempt to deliver the chattels and stock-in-trade in the same condition as inspected.
(C)
all of the chattels and stock-in-trade delivered with the business were not in conformity with the list of chattels set out in Schedule 1 of the agreement, and the first- and second-named Respondents never had any intention of delivering and made no attempt to deliver the chattels and stock-in-trade in conformity with the said list."
Paragraph 12 is as follows:
"Further and alternatively to paragraph 11 hereof, the first- and second-named respondents made the said warranties and/or representations fraudulently and either well knowing they were false untrue or misleading or recklessly not caring whether they were false untrue or misleading.''
Paragraph 13 alleges certain failures to comply with the agreement in relation to the chattels. Paragraph 14 alleges the applicants have suffered and continue to suffer loss and damage and that is particularised. The statement of claim concludes with these words:
Federal Court of Australia Act 1976, and s.86 of the "And the Applicants seek pursuant to s.19 of the Trade Practices Act 1974, the relief set out in the accompanying application"
The trial of this matter commenced before me yesterday,
22 April 1991. After the applicants' counsel had opened his
case, counsel for the respondent pointed out that there was no allegation in the statement of claim of a contravention of s.52 of the Trade Practices Act.
In the course fo the discussion which followed, I pointed out to counsel for the applicants that no mention had been made in his opening of any case of fraud against the respondents, notwithstanding that such a case had been pleaded in paragraph 12 of the statement of claim. At my suggestion the case was stood down for some 15 minutes and, upon resuming, the applicants' counsel sought leave to amend the statement of claim by deleting paragraph 12. That request was granted.
He also indicated that application would be made for further amendments to deal with the question of a claim under s.52. As it seemed likely that this would engender some argument and that the amendment should in any event be carefully formulated, I directed that the trial proceed for the rest of the day. The second applicant gave evidence and was in the course of being cross-examined when proceedings adjourned.
This morning counsel for the applicants commenced by seeking leave to make two amendments to the statement of claim. These were in the following terms:
12A. The making of the said representations which
were misleading and/or deceptive, constituted
Act") by the Respondents. of s.52 of the Trade Practices Act 1974 ("the conduct in trade and commerce in contravention 12B. Further, by reason of the said conduct
(a)
the Secondnamed Respondent was a person involved in the aforesaid contravention of Section 52 of the Act; and
(b)
is liable to pay the Applicants the amount of loss and damage suffered by reason of the aforesaid contravention.
In the course of debate, I pointed out that the High Court had decided in Yorke v Lucas (1985) 158 CLR 661, that knowledge of the person sought to be made liable was an essential element of a claim under s.75B(l) (c) of the Trade Practices Act. The matter was then stood down for a short time and on resuming, counsel for the applicants produced a further amendment which he sought leave to make. This took the form of a replacement of the former paragraph 12 but with some words omitted. It was in the following form:
"Further and alternatively to paragraph 11 hereof, the first- and second-named Respondents made the said warranties and/or representations .... knowing they were false untrue or misleading."
It was common ground that leave to amend will normally not be granted to raise a fresh claim which is statute barred at the date of amendment. This principle was established in Weldon v Neal (1887) 19 QBD 394 which has been frequently followed and was followed recently in this court in an application made under 0.13 r.2 - see Zoneff v Elcom Credit Union Ltd (1990) 94 ALR 445 (at p.465).
It was also accepted by both counsel that a claim under the Trade Practices Act would now be statute barred under s.82(2),
Court Cor~oration Ltd (1989) 91 ALR 314 (at p.316-317) and since any claim must have arisen in 1986 - see Jobbins v Cave1 Keen Mar Cor~oration Ptv Ltd v Labrador Park ShoDDinu Centre
PtV Ltd (1988) ATPR 40,853.I decide as follows. I allow the amendment sought in the new paragraph 12A because a claim under s.52 has, in my opinion, already been commenced and the amendment does no more than spell out and make clear that claim. I say that because the application and the statement of claim together indicate that a claim for damages is being made under S. 82, that is to say, that it is alleged there has been a contravention of a provision of Part 4 or Part 5 of the Trade Practices Act.
The facts alleged in the statement of claim, at least in relation to the alleged profitability representation, could not sustain a claim for a contravention of any provision of Part 4 or Part 5 other than s.52. The essential facts of a contravention of s.52 can be picked out of the statement of claim, even though that pleading bears at first blush, and probably at second and third blush also, the appearance of a common law claim for fraudulent misrepresentation.
There is an allegation that the first respondent is a corporation, and that it owned a business which it sold, and that in the course of that sale it made misrepresentations which were misleading in that they were untrue. If those factual allegations were made out there would be a contravention of s.52.
However, I do not allow the amendment sought to be raised by the new paragraph 12 and paragraph 12B.
The application which was filed on 24 April 1987 in respect of the second respondent makes no claim for damages under the Trade Practices Act, in contrast with the claim that is made against the firstnamed respondent under part A of that application. The actual meaning conveyed by the contrast between part A and part B therefore is that the claim for
damages that is being made against the secondnamed respondent
is a claim for damages at common law.
As I have noted, knowledge is an essential element of claim under s.75B(l)(c). Insofar as there was any allegation of relevant knowledge of the secondnamed respondent which might be caught up in the pleading of fraud in paragraph 12 of the statement of claim as it stood prior to yesterday's amendment, that allegation was abandoned yesterday in the circumstances I have mentioned.
I bear in mind here the long delay in commencing these proceedings, and the further delay in bringing them to a hearing. Through this latter period the applicants have left on the record a formal charge of fraud against the second respondent, but finally abandoned it at the hearing, and then only when it was pointed out that the opening omitted any such allegation. Allegations of fraud should not be made without careful and responsible consideration by the legal practitioners acting for those making the allegation. When such an allegation subsequently appears to be untenable, it should be clearly and promptly abandoned.
I think it would be most unfair to the second respondent to
allow an allegation of knowledge of breach of s.52, which in the circumstances of the present case, comes very close to an allegation of fraud, if not overlapping therewith, to be resurrected simply to plug a gap in the applicants' pleading. Because this case is proceeding, it is undesirable that I make any further comment, other than to record my concern that a case which is of a kind frequently encountered in this court, and which should not raise any particular complexity of pleading more than the average running down case, should have been delayed for over half a day while this argument took place.
I certify that this and the preceding 7 (seven) pages are a true copy of the Reasons for Judgment of the Honourable Mr Justice Heerey
Dated: 23 1991
AuDearances
Counsel for the Applicants: M r T J Margetts Solicitors for the Applicants: Swersky McPhee and Velos Counsel for the Respondents: M r J D Loewenstein Solicitors for the Respondents: Rigby and Fielding
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