INP Consortium Ltd v Tourang Ltd
[1992] FCA 578
•31 JULY 1992
Re: INP CONSORTIUM LIMITED
And: TOURANG LIMITED; D.L. NICHOLL; K.W. SKINNER; ORD MINNETT SECURITIES
LIMITED and AUSTRALIAN BROADCASTING TRIBUNAL
No. N G812 of 1991
FED No. 578
Trade Practices
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Foster J.(1) $NCWDS Trade Practices - matters of procedure - application to strike out pleadings on the basis that no reasonable cause of action disclosed - whether public acceptance of certain facts amounted to representations made by implications - whether that amounts to misrepresentation by silence - whether facts as pleaded support claim of misrepresentation by silence.Broadcasting Act 1942 (Cth)
Trade Practices Act 1974 (Cth) - s 52
Federal Court Rules - O 11, r 16.
Rhone-Poulenc Agrochimie SA and Anor v UIM Chemical Services Pty Ltd (1986) 12 FLR 477
HEARING
SYDNEY
#DATE 31:7:1992
Counsel for the applicant: C.A.S. Sweeney QC
(respondent to this motion) with A. Dowdy
Instructed by: Landerer and Co
Counsel for the 2nd respondents: T.F. Bathurst QC
(applicants on the motion) with S. Finch
Instructed by: Mallesons Stephen Jaques
ORDER
The Court orders that:
1. paragraph 29 of the further amended statement of claim in these proceedings be struck out;
2. the applicant re-plead generally against the second respondents within 14 days;
3. liberty to apply be granted to the second respondents without the necessity of taking out a formal motion should they desire to contest the sufficiency of any additional pleadings;
4. the applicant (respondent to this motion) pay the second respondents' (applicants on this motion) costs.
Note: Settlement and entry of orders is dealt with by Order 36 of the Federal Court Rules.
JUDGE1
I have before me a notice of motion brought by the second respondents in these proceedings. The notice of motion is brought pursuant to O 11, r 16 of the Federal Court Rules. It seeks that paragraph 29 of the Further Amended Statement of Claim filed by the applicant be struck out on the ground that it discloses no reasonable cause of action against the second respondents.
I have been referred in argument to particulars which have been sought of that paragraph and provided by the applicant. Insofar as it may be appropriate for me to have regard to such particulars I think I should indicate that I have considered them but do not find that they provide any assistance in the decision which I am required to make on this notice of motion.
The further amended statement of claim is apparently the third statement of claim that has been issued by the applicant in these proceedings. The second respondents, as appears from the statement of claim, are receivers who were appointed in December 1990 to the John Fairfax Group Pty Limited ("Fairfax"). The statement of claim sets out, as of course is well known, that Fairfax was the publisher of prominent newspapers in Sydney and in Melbourne. The statement of claim goes on to assert that in December 1990 the receivers of Fairfax made a general announcement that the company was to be sold and invited offers to purchase. Paragraph 4 of the statement of claim discloses that the applicant company was, in fact, a company formed specifically for the purpose of making an offer to purchase.
The first respondent, Tourang Limited, ("Tourang") also made an offer to purchase the shares in Fairfax. A very large portion of the statement of claim deals with that particular offer. Paragraph 7 refers to the fact that it was a term of the offer that Tourang would offer 338.75 million shares and 73.25 million debentures to institutions pursuant to an Offering Memorandum, such offer to be underwritten by the third respondent. The third respondent is Ord Minnett Securities Limited ("Ord Minnett"), a company of stockbrokers which at all material times, as is set out in the statement of claim, was a wholly owned subsidiary of Westpac Banking Corporation Limited. That corporation, as asserted in the statement of claim, was the holder of television licences in Sydney and Melbourne.
By paragraph 8 of the statement of claim it is alleged that Tourang and Ord Minnett represented to the receivers, certain bond holders and alleged institutions that the Tourang bid would in all respects comply with the Broadcasting Act 1942 (Cth) (the "Broadcasting Act"). It is alleged that the representation was made in a press release. Similarly, it is alleged that the same representations were made in the Offering Memorandum to the same persons. Paragraphs 13 to 25 of the statement of claim set out in not inconsiderable detail sections of the underwriting agreement entered into between the first and third respondents.
I am not called upon in this notice of motion to consider those aspects of the statement of claim. They are pleaded for the purpose, obviously enough, of founding paragraph 26 of the statement of claim which reads as follows:
"By reason of the foregoing matters the Tourang bid did not comply with the Broadcasting Act 1942."
The compendious phrase "foregoing matters" appears to refer not only to actual portions of the underwriting agreement which are set out as I have already indicated, but to certain allegations of the effect of those portions as a matter of construction. In particular, they allege that by reason of some of the terms that Ord Minnett was able to exercise certain powers and restraints over Tourang. As I have already indicated, it is not necessary to go into those matters as they did not form the basis of the submissions before me. By that I mean I was not called upon to determine, even at a prima facie level, whether those allegations are established as a matter of construction or of law.
So far as the receivers are concerned, the causes of action pleaded are to be found in paragraphs 27 to 29. The significant paragraph is 29 and it is conceded, and properly conceded, that if that paragraph falls certain subsidiary or alternative causes of action pleaded in paragraph 32 also fall.
Paragraph 27 reads:
"On a date unknown to the applicant the Receivers accepted the Tourang bid and publicised the fact of the acceptance of the Tourang bid by means of post or telegraphic and telephonic services." (emphasis original)
I pause merely to note that the allegation of the publication in this form is sufficient under the Trade Practices Act 1974 (Cth) (the "Act") to create a personal liability in respect of a breach of the Act in the receivers, notwithstanding the fact that they are not corporations.
Paragraph 28 reads:
"At the time that the Receivers accepted and publicised their acceptance of the Tourang bid, they were aware of the matters herein alleged. The acceptance of the Tourang bid was unlawful." (emphasis original)
I pause again to indicate that in my view the last sentence of paragraph 28 can be regarded as surplusage, as it cannot go toward the establishment of cause of action. It merely repeats what was said in earlier portions of the statement of claim.
Paragraph 29 reads:
"By accepting the Tourang bid and by publicising their acceptance of it, the receivers represented to the applicant and to institutions that the Tourang bid was lawful and was a bid which complied with the Broadcasting act, 1942." (emphasis original)
It is said in paragraph 32 that:
"The representations ... were false and the making of them constituted:-
(i) misleading and deceptive conduct by them and each of them;" (emphasis original)
The making of those allegations clearly constitutes an allegation of breach of s 52 of the Act.
The submission made on behalf of the receivers in support of the claim in the notice of motion can be summarised by saying that when paragraphs 27, 28 and 29 are read against the background of the rest of the allegations of fact that are made in the statement of claim, they cannot support the breach of s 52 that is alleged. In other words, the circumstances alleged in relation to the publication of the fact of acceptance of the Tourang bid cannot carry with it the impugned representation that the bid was lawful and was a bid which complied with the Broadcasting Act.
It is not suggested in the pleadings, and it has been no part of any submission put to me, that the representation as to the lawfulness of the Tourang bid and its compliance with the Broadcasting Act was the subject of any express statement to that effect made at the time of the publication of the acceptance. This appears from particulars, but indeed if any such allegation were being relied upon, obviously that would be pleaded in the statement of claim. Therefore, in relation to the narrow question which I have to decide here, namely whether a cause of action is disclosed in the pleading as presently framed, I must approach that question on the basis that paragraph 29 does no more than allege that the mere publicising of the acceptance of the bid carried with it an implied representation to the applicant and to institutions that the bid was a lawful one and complied with the provisions of the Broadcasting Act.
The receivers assert that the mere publication, even when read against the background of the other matters referred to, simply could not carry with it these representations. Conversely, if such representations were to arise, it would require the pleading of other matters which might give rise to them. The bare pleading of the publication is insufficient. I should add, of course, that the publication, by virtue of paragraph 28 of the Statement of Claim is alleged to have taken place in circumstances where the receivers were "aware of the matters herein alleged".
It is further submitted on behalf of the receivers that that statement of fact does not take the applicant any further. It is clear, in my view, from the statement of claim itself, and it has been made completely clear by a very proper concession on behalf of counsel for the applicant, that that allegation of awareness is not intended to convey that the receivers were relevantly aware of any actual illegality, if indeed there was any. What it is intended to convey is that they were aware of the multiplicity of other matters referred to in the paragraphs leading up to paragraph 26.
What I have to decide really amounts to this: is there any arguable prospect that from the fact that the receivers merely indicated publicly their acceptance of the bid in circumstances where they were aware of those other matters, that could they be taken to be impliedly making the representations relied upon?
The case falls into that area of the law which has evolved under s 52 of the Act concerning the making of representations by silence. The simple fact is that so far as the pleading indicates nothing was said, other than that the bid was accepted. If any representation were to arise from that circumstance, it could only arise from the circumstance that the receivers, being aware of the matters relating to Westpac's television interests and the structuring of the underwriting agreement were, in the circumstances, under a duty to make known facts at the time of their announcement of the acceptance consistent with that knowledge.
I repeat that this is not a case where it is suggested that they had knowledge of any illegality, or no knowledge that the bid had unlawful characteristics, or that it failed to comply with the Broadcasting Act. That is not suggested. All that is suggested is that they had knowledge of the extremely involved set of facts set out in the statement of claim.
The situation in which misrepresentation by silence can occur has, as I have said, had the attention of this Court in a number of reported decisions. One which has been cited to me and been the subject of debate in these proceedings is the decision in Rhone-Poulenc Agrochimie SA and Anor v UIM Chemical Services Pty Ltd (1986) 12 FCR 477. In that case the misrepresentation alleged was founded upon a failure on the part of the respondent to disclose to the applicant certain matters of illegality relating to the product that was being sold. In fact its sale was in contravention of relevant state law.
It seems quite clear from the facts as recited in the judgments that this matter of illegality was well known to the respondent. However, he made no disclosure as to that and the question was whether that failure to disclose, that adoption of silence in the circumstances amounted to a misrepresentation in relation to the legality of the sale. One might be pardoned for thinking that it was a strong case and one where the facts were certainly stronger in favour of the applicant than are the facts as pleaded in the present case.
Lockhart J., at 504 ff dealt with the situation in these terms. He says:
"It is difficult to conceive how mere silence by an alleged contravener could be sufficient to attract the operation of s 52, but when all the relevant circumstances of a case are analysed silence of the alleged contravener may be the critical matter upon which reliance is placed to establish misleading or deceptive conduct."
He goes on:
"The real question, so far as the Trade Practices Act (1974) is concerned, is whether it was misleading or deceptive for UIM to sell (the product) to purchasers in New South Wales and Queensland without informing them that the sale was unlawful and that the product might be seized from them and forfeited and, so far as sales in New South Wales were concerned, that the product might not lawfully be used in that State..."
His Honour continues:
"The mere absence of some communication from the respondents to the effect that the product is sold by them in contravention of State law cannot in my view constitute a misrepresentation or other conduct falling within the prohibition of s 52. It is not a case of incorrect information having been given by UIM which it was bound to correct. Nor can I discern from the evidence any material leading to the conclusion that UIM represented that (the product) was registered."
He further says, at 505-506:
"I do not accept the correctness of the proposition that the unlawful sale of such goods, with or without knowledge of their prospective use, constitutes a contravention of s 52 when not coupled with notification of the illegality and its consequences. If the sale and use of (the product) is unlawful under State law then the State can enforce its own law and stop unlawful sale and use. Similarly in the case of unlawful sale or use under Commonwealth law; courts of competent jurisdiction may enforce Commonwealth law to prohibit such sale or use. I am not persuaded that the facts of this case enter the prohibited domain of misleading or deceptive conduct. When stripped of its cladding all that the argument of the appellants leaves exposed is the proposition that the sale by a manufacturer of a product which he knows is bought for the purpose for which it was made, in circumstances where its sale and use is unlawful, where the product is liable to forfeiture and where the illegality is not made known to purchasers by the manufacturer, constitutes misleading or deceptive conduct under s 52. I reject that proposition."
It is no doubt true that each case must be determined on its own facts. However, it is not possible to fail to have regard to the facts of other cases as providing analogous assistance in determining the facts of any instant case. Rhone-Poulenc was a case determined by the Full Court of this Court. It was a case where the respondent not only knew of facts which, if analysed, might point to illegality. It was a case where illegality was in fact fully known and appreciated and not disclosed. In such circumstances the Court held that a breach of s 52 had not occurred because no duty of disclosure was relevantly enlivened.
I experience no doubt when I consider the facts as pleaded in the statement of claim that they do not establish, on the assumption that they can be proved, a situation where these receivers would fall under a duty to make disclosure at the time when they were simply publicising their acceptance of a bid that had been made.
In circumstances where they had no knowledge of such illegality, if in fact illegality existed, one might wonder what it was that they could reasonably have been expected to disclose. For the purposes of my decision the pleadings must be taken to establish that they knew the matters referred to in the earlier paragraphs relating to the provisions of the underwriting agreement, the situation as to television licenses held by Westpac and indeed the effect as a matter of construction of the provisions alleged.
What, one might ask rhetorically, were they supposed to do to fulfil a duty if such a duty existed? Were they to announce at the time when they gave a press conference informing interested parties that the Tourang bid had been accepted to qualify that simple statement by a disquisition upon the various portions of the underwriting agreement and their possible legal effect as set out in the statement of claim? Such a situation could not reasonably be expected to have occurred or such a qualification or exposition could not reasonably have been expected of them. In my view, they came under no duty in the circumstances pleaded in this statement of claim to have anything to say at all about the lawfulness or otherwise of the bid or its compliance with the Broadcasting Act. Conversely their failure to say anything about those matters could not, in my opinion, amount to the misrepresentation which is pleaded and relied upon.
In my opinion this notice of motion should succeed. The only order sought is that paragraph 29 of the further amended statement of claim be struck out. I will make that order but it would seem to me that it would be appropriate to strike out paragraph 32 as well, as one depends on the other.
I have been asked to give effect to the second paragraph of the notice of motion, namely, that the application now be dismissed as far as it relates to the second respondents. After some hesitation I have come to the view that it would be inappropriate to take that step at this point of time. The statement of claim may possibly be further amended to disclose a cause of action. On the other hand it is not unlikely that it may not be able to be so amended. I think in all the circumstances I should allow a reasonable period of time for the applicant to consider its position as to whether it wishes to make any amendment. I consider that I can also protect the position of the second respondents by appropriate orders.
In addition to the order that I have already made I will make the order that the applicant re-plead against the second respondents generally within 14 days of today's date. In the event that re-pleading does not occur within that period I reserve to the second respondents liberty to apply for judgment in their favour in this action.
I also reserve liberty to apply to the second respondents without the necessity of taking out a formal motion should they desire to contest the sufficiency of any additional pleading.
So far as costs are concerned, I think it appropriate in the circumstances that I order the applicant (respondent to the motion) to pay the respondents' (applicants on this motion) costs.
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