L Grollo Darwin Management Pty Ltd v Victor Plaster Products Pty Ltd

[1978] FCA 36

L. GROLLO DARWIN MANAGEMENT PTY. LTD. v. VICTOR PLASTER PRODUCTS PTY. LTD.
(1978) 33 FLR 170
Trade Practices

COURT

FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
Smithers(1), St. John(1) and Fisher(1) JJ.

CATCHWORDS

Trade Practices - Practice and procedure - Application to stay action - Vexatious or frivolous proceedings - Vexatious and oppressive proceedings - Supreme Court proceeding raising similar issues - Costs of ex parte application - Trade Practices Act 1974, s. 52 (1) - High Court Rules. O. 26, r 18, O. 60, rr. 6 (3), 7, O. 71, rr. 1, 69 (1), (3).

HEADNOTE

The respondents applied for orders that the appellants' statement of claim be struck out and that the action be dismissed or stayed. It was held at first instance that the action was frivolous and vexatious within the meaning of O. 26, r. 18, and vexatious and oppressive within the meaning of O. 63, r. 2, of the High Court Rules. Accordingly, orders were made staying the action and awarding costs against the appellants. A further order was made that the appellants pay the respondents' costs of an earlier ex parte application for an extension of time within which to deliver a defence. The appellants appealed against each of those orders.

Held: (1) Although the statement of claim failed to allege facts essential to give to the defendants' conduct the quality of being misleading or deceptive as required by s. 52 of the Trade Practices Act 1974 such failure was not fatal to the action as the defect could be cured by amendment of the statement of claim at an interlocutory stage before a defence was delivered.

(2) The conduct of the appellants in using the proceedings in the Federal Court as a ground for seeking to stay an action against them in the Supreme Court of the Northern Territory did not give rise to the inference that the proceedings in the Federal Court were not instituted so as to be genuinely pursued. Consequently their action did not come within O. 26, r. 18 or O. 63, r. 2 of the High Court Rules.

(3) Where a duplicity of court proceedings exists in relation to similar issues then the Federal Court has jurisdiction and a discretion to grant a stay of the action before it, so that the other proceedings may be determined first in the interests of justice. In the present case it was appropriate to grant a stay of the proceedings in the Federal Court.

(4) The combined effect of O. 60, r. 6 (3), and O. 71, r. 69 (3) of the High Court Rules is that the costs of an order obtained ex parte for an extension of time for delivery of a pleading should not be directed to be paid by the opposite party where there has not been any request by the applicant to the opposite party to consent to the order sought and where the opposite party has not rebuffed the applicant's request for consent.

General Steel Industries Inc. v. Commissioner for Railways (N.S.W.) (1964), 112 CLR 125; Hornsby Building Information Centre Pty. Ltd. v. Sydney Building Information Centre Ltd. (1978), 52 ALJR 392; Driller v. Smail (1968), 12 FLR 326; L. Grollo & Co. Pty. Ltd. v. Swanson Bros. Pty. Ltd. Unreported (Australian Industrial Court, 15th October, 1976), applied.

HEARING

Melbourne, 1978, March 14, 15; May 29. #DATE 29:5:1978

APPEAL.

The facts are sufficiently stated in the judgment of the court.

A. Hercules, for the appellants.

B. Coles, for the respondents.

Cur. adv. vult.

Solicitors for the appellants: Keith Hercules and Son.

Solicitors for the respondents: Blake and Riggall.

JUDGE1

May 29.

THE COURT delivered the following judgment.

This is an appeal against certain orders which were made by Northrop J. on 15th November, 1977, upon an application by the respondents, by summons dated 29th September, 1977, seeking orders that the statement of claim delivered by the appellants be struck out and that the action be dismissed or stayed. The learned judge took the view that the action was frivolous and vexatious within the meaning of O. 26, r. 18 of the High Court Rules and vexatious and oppressive within the meaning of O. 63, r. 2 and thereupon made orders as follows: (1) that the action be stayed until further order; (2) that the defendants' costs of the summons dated 29th September, 1977, be taxed and paid by the plaintiffs; (3) that the defendants' costs of obtaining an order made on 4th October, 1977, be taxed and paid by the plaintiffs. The appellants (plaintiffs) appealed against each of those orders. The respondents (defendants) did not cross-appeal, but submitted that this Court should be satisfied that the statement of claim disclosed no cause of action. (at p171)

1. It was correctly contended that if the court were so satisfied that factor would materially support the orders of the learned judge. But we are not satisfied that it is clearly demonstrated not only that the statement of claim is defective in the sense that in its present form the respondents should not be required to plead to it, but that it also fails to disclose a cause of action in a fundamental sense namely, that it is apparent on its face that the claim made is insupportable in law and not curable by amendment. Unless it is so disclosed the plaintiff ought not be denied access to the customary tribunal which deals with actions of the kind he brings: cf. per Barwick C.J. in General Steel Industries Inc. v. Commissioner for Railways (N.S.W.) (1964) 112 CLR 125, at p 129 . Although it would be safe to say that the appellants' action is one of the first, if not the first, of its kind to be brought, it is clear that this Court is the "customary tribunal" to deal with such actions. The action is brought pursuant to s. 82 of the Trade Practices Act 1974 in respect of an alleged contravention of s. 52 of that Act. The critical provisions of the statement of claim are:
   
   "5. In May 1975, the plaintiff L. Grollo & Co. Pty. Ltd. (hereinafter called 'Grollo') and a company styled Wincope (Australia) Pty. Ltd. entered into a contract with the Darwin Reconstruction Commission for the design, construction and completion of 400 houses in Darwin, Australia (hereinafter called 'the said site').
   "6. Grollo engaged a company styled Reign Plumbing Pty. Ltd. (hereinafter called 'Reign Plumbing') to do certain of the plumbing work for and in respect of the said site (hereinafter called 'the said sub-contract').
   "7. In or about the months of June or July 1975 the defendants, alternatively one or other of them entered into a contract with Reign Plumbing to supply it with certain quantities of goods necessary for its use in its performance of works the subject of the said sub-contract (hereinafter called 'the said contract').
   "8. In or about the end of June 1976 the plaintiffs alternatively one or other of them entered into an arrangement with the defendants alternatively one or other of them whereby the first-named plaintiff would pay the July 1976 account of Reign Plumbing but being only for goods supplied during the month of July 1976, by the defendants or one of them to Reign Plumbing for its use at the said site but in any event not in an amount in excess of $35,000 on certain terms and conditions (i) that the defendants acknowledged that neither plaintiffs were under any legal obligation to do so; (ii) that such arrangement in no way varied or modified the said contract; (iii) that by so arranging there was no agreement by the plaintiffs or either of them to take over or assume the obligations, liabilities or debts of Reign Plumbing; (iv) that upon payment of the said July account of Reign Plumbing with the defendants and each of them they and each of them had no cause of action whatsoever against the plaintiffs or either of them; (v) the plaintiffs would not be invoiced or charged for any other goods supplied by the defendants or either of them to Reign Plumbing.
   "9. Pursuant to the said arrangement the first-named plaintiff paid to the defendants alternatively one or other of them the sum of $34,938.49 which was the amount of Reign Plumbing's July 1976 account with the defendants alternatively one or other of them.
   "10. Thereafter the defendants and each of them have wrongfully sought to charge the plaintiffs for goods supplied to Reign Plumbing other than in the month of July 1976, and have taken proceedings against the plaintiffs for recovery thereof.
   
   

Particulars.

"(a) Various invoices and statements of the defendants may be inspected at the office of the plaintiffs' solicitors upon prior appointment.

"(b) On or about 22nd December, 1976, the second-named defendant purported to serve a notice under s. 222 (2) of the Companies Ordinance 1963-1973 of the Northern Territory against the first-named plaintiff claiming payment of $25,411.67 'being the amount due for goods sold, supplied and delivered during the months of September and October 1976', but same was withdrawn after the first-named plaintiff commenced proceedings in the Supreme Court of Victoria being proceedings No. 133 of 1977 seeking an injunction and an undertaking by the solicitors for the second-named defendant was accepted in the terms of that undertaking.

"(c) On or about 7th June, 1977, the first-named defendant purported to serve a notice against the first-named plaintiff claiming payment of $59,778.22 being the amount allegedly 'now due' but its solicitors by letter dated 21st July, 1977, confirmed that such notice was not being proceeded with by the first-named defendant.

"(d) On 7th June, 1977, the first-named defendant issued a writ out of the Supreme Court of the Northern Territory against the first-named plaintiff claiming payment of the sum of $59,778.22 for goods delivered 'over various periods of time up to January 1977.'

"11. The defendants alternatively one or other of them did, in trade and commerce, engage in conduct which was misleading and deceptive within the meaning of s.52 of Pt5 of the said Act in that it entered into the said arrangement with the plaintiffs or one of them when at all times they or alternatively one of them had no intention whatsoever of observing or keeping the said arrangement so made.

"12. As a result of the matters alleged in par. 11 hereof the plaintiffs alternatively one or other of them have suffered loss and damage by an act of the defendants alternatively one or other of them which was done in contravention of the said s. 52 of the said Act.

Particulars of Loss and Damage.

These will be supplied prior to trial.

AND THE PLAINTIFF CLAIMS (1) that the court adjudge and declare that the defendants or one of them have violated s. 52 of the said Act; (2) damages; (3) interest." (at p174)

1. It is said that it is a startling proposition that it is a breach of s. 52 to enter into an arrangement in trade and commerce having no intention whatsoever of observing or keeping that arrangement. It is also said that loss or damage could not be said to flow from conduct of the kind alleged unless it were damage in excess of or in some special way of a different nature from damage flowing from mere breach of the arrangement in question. (at p174)

2. There is force in these comments, but for present purposes the question is not whether the statement of claim discloses a cause of action with good prospects of success but whether it is of such a nature that it can be said of it, for instance, that it is: "'so obviously untenable that it cannot possibly succeed'; 'manifestly groundless'; 'so manifestly faulty that it does not admit of argument'; 'discloses a case which the court is satisfied cannot succeed'; 'under no possibility can there be a good cause of action'; 'be manifest that to allow them' (the pleadings) 'to stand would involve useless expense'. At times the test has been put as high as saying that the case must be so plain and obvious that the court can say at once that the statement of claim, even if proved, cannot succeed; or 'so manifest on the view of the pleadings, merely reading through them that it is a case that does not admit of reasonable argument': 'so to speak apparent at a glance'": per Barwick C.J. in General Steel Industries Inc. v. Commissioner for Railways (N.S.W.) (1964) 112 CLR, at p 129 . (at p174)

3. It may well be within the range of misleading and deceptive conduct, in certain circumstances, to enter into an arrangement having no intention to observe the obligations undertaken therein. Whether misleading or deceptive communication of the relevant intention or the factor of reliance upon some implied representation of such intention or some other factors would be essential elements in any cause of action based upon s. 52 are questions to be determined. However, the general allegation in par. 11 is that the conduct described was misleading and deceptive and committed in trade and commerce, and that in par. 12 is that the plaintiff suffered damage as the result of that conduct. Thus the statement of claim is in terms wide enough to comprehend every element reasonably necessary to constitute an arguable cause of action under s. 52 (cf. the High Court decision Hornsby Building Information Centre Pty. Ltd. v. Sydney Building Information Centre Ltd. (1978) 52 ALJR 392 ). (at p174)

4. Accordingly we are of the same opinion as the learned judge that it is not appropriate to dismiss or stay the action on the ground that the statement of claim discloses no reasonable cause of action. But that does not mean that the statement of claim is such that the respondents should have been required to plead to it. In this respect it is enough to say that it is not for the appellants to require the respondents to speculate as to what is comprehended within the general allegations made in the statement of claim or what are the circumstances alleged to give to the facts alleged the quality of being misleading or deceptive. Merely to enter into an arrangement which creates legal obligations, which it is seen from other parts of the statement of claim the arrangement sued on is alleged to do, whilst having no intention to carry out such obligations is not per se misleading or deceptive conduct. So far as appears from those bare facts each or either party may have been satisfied to do business on the ground that the other undertook the legal obligations which were created without reference to the intention of the other in relation to the performance of those obligations. Moreover a party is not necessarily misled or deceived if legal obligations are undertaken by another in circumstances that that party does not intend to perform them. But this is all that the statement of claim does allege. It says merely that the conduct alleged was misleading or deceptive within the meaning of s. 52 of the Act "in that" the defendants entered into the arrangement when they or one of them had no intention of observing or keeping it. There is no allegation of facts essential to give to that conduct the alleged quality of being misleading or deceptive. In the absence thereof the statement of claim is defective and the respondents cannot reasonably be required to deliver a defence. (at p175)

5. The defect, however, is not the kind of defect which gives rise to the exercise of the court's jurisdiction under O. 26, r. 18 and O. 63, r. 2. It is the kind of defect which unless cured by amendment could be fatal to the statement of claim, but at the interlocutory stage before defence is delivered an amendment or leave to amend on terms would seem appropriate. But this step was not taken on the hearing of the respondents' application under appeal because the action was stayed for the reason that the learned judge formed the conclusion that this action in the Federal Court was commenced as a basis for an attempt to stay or delay the hearing of the action instituted in the Northern Territory in June 1977 whereby the respondent Victor Plaster Products Pty. Ltd. claimed against the first appellant the price of goods alleged to have been sold and delivered to that appellant. (at p175)

6. The first appellant's initial response to the Northern Territory action was to enter an unconditional appearance in the Supreme Court of the Northern Territory. However, on 11th October, 1977, that appellant applied successfully in that Supreme Court for leave to withdraw that appearance and to enter a conditional appearance. By that time the appellants' action in this Court had been commenced. Relying upon that circumstance the first appellant on 11th October, 1977, applied also for a stay of the proceedings in the Northern Territory and was successful in that. (at p176)

7. The ground of this latter application was that the goods in respect of which the action in the Northern Territory was brought were goods supplied not to the appellants or either of them but were goods supplied by the respondent Victor Plaster Products Pty. Ltd. to Reign Plumbing Pty. Ltd. after July 1976, and accordingly were goods in respect of which the respondents had agreed to make no claim against the appellants. It was contended that in view of the institution of the action in this Court the relevant issues could and should be determined in that action and that the action in the Supreme Court of the Northern Territory should be stayed for this purpose. (at p176)

8. It is to be observed that it was equally clear that if the respondent Victor Plaster Products Pty. Ltd. succeeded in the action in the Northern Territory that would have had a decisive effect on the appellants' proceedings in this Court so far at any rate as they concern their claim against Victor Plaster Products Pty. Ltd. But nevertheless an order was made that the action in the Northern Territory be stayed. (at p176)

9. It was a reasonable inference that the appellants were alert to the fact that by taking proceedings in this Court it might be possible to induce the Supreme Court of the Northern Territory to stay the action in that court. (at p176)

10. His Honour did not expressly so state but it would seem that he was not satisfied that the action in this Court was so brought as an action to be genuinely pursued. It was on this basis that his Honour concluded that the action was frivolous and vexatious and vexatious and oppressive within the meaning of O. 26, r. 18 and O. 63, r. 2 respectively. He took the view that if the action in this Court were stayed it was likely that the stay in the Northern Territory would be lifted and the action in that court would proceed. He said: "(I) propose to order that this action being No. VG.62 of 1977 be stayed to enable Victor Plaster Products Pty. Ltd. to prosecute its claim against L. Grollo Darwin Management Pty. Ltd." (at p176)

11. It seems that his Honour's intentions and expectations in this respect were realized because the stay of the action in the Northern Territory was lifted and that action is now proceeding. It is our view that the conduct of the appellants in using the proceedings in this Court as a ground for seeking to stay the action in the Supreme Court of the Northern Territory did not give rise to the inference that the proceedings in this Court were not instituted as proceedings intended to be genuinely pursued. Accordingly it is difficult to conclude that those proceedings were frivolous and vexatious or vexatious and oppressive within the meaning of the Rules of Court referred to above. But it was clear in the proceedings before the learned judge that a central issue in this action and in the action in the Northern Territory is whether the goods in question were sold and delivered to the first appellant or to Reign Plumbing Pty. Ltd. It was only if the first appellant succeeded on this issue that its claim under s. 52 of the Trade Practices Act would arise. As matters stood therefore there was a duplicity of proceedings in relation to the question whether the goods in question were supplied to the first appellant. In these circumstances a discretion arose in the learned judge to decide whether it was in the interests of justice that one of the actions should proceed before the other and if he considered that the action in the Northern Territory should proceed before the action in this Court and that a stay of this action was appropriate for that purpose, then he had jurisdiction so to order. See Driller v. Smail (1968) 12 FLR 326, at p 335 and L.Grollo & Co. Pty. Ltd. v. Swanson Bros. Pty. Ltd. (B. No. 144 of 1976) Unreported. (Australian Industrial Court, 15th October, 1976.) . (at p177)

1. This was the view that the learned judge took. He said: "Irrespective of the outcome of the Northern Territory proceedings the plaintiffs in the Federal Court proceedings will be able, if so advised, to prosecute their claim against the defendants at the conclusion of the Northern Territory proceedings. . ." (at p177)

2. It is our view that these considerations adequately justified a stay of the hearing of the action in this Court and it is our view that the stay in this respect should be continued. We agree that it is entirely desirable that the hearing of the action in the Northern Territory should precede the hearing of the action in this Court. It was commenced before the action in this Court, it is based upon an uncomplicated cause of action with clear issues and its termination is likely to have a decisive effect on the total litigation. There is no certainty that the appellants will succeed in effectively amending the statement of claim and if they do the proceedings will be of complicated nature possibly involving considerable delay. (at p177)

3. However, we do not think it necessary to stay the proceedings in this Court other than the hearing. In so deciding we take into account the principles enunciated by Barwick C.J. in General Steel Industries Inc. v. Commissioner for Railways (N.S.W.) (1964) 112 CLR, at pp 128-130 . (at p177)

4. The appellants also appeal against the order of Northrop J. that they pay the costs of an order obtained ex parte on 4th October, 1977, upon the application of the respondents to extend the time for filing a defence. The circumstances in which the application was made are set out in the affidavit of John Dale Collins of 4th October, 1977. He deposes to the fact that a letter had on the previous day been received from the appellants' solicitors drawing attention to the fact that the defences were overdue and indicating that if they were not received by noon on 4th October, 1977, they had instructions to proceed in default. Subsequent to receipt of the letter Mr. Collins made a number of unsuccessful attempts to contact the appellants' solicitors by telephone for the purpose of requesting that the threat to proceed by default be deferred pending hearing of the respondents' summons seeking dismissal or a stay of proceedings. A summons seeking an extension and supported by the abovementioned affidavit was heard on that day in chambers. The order sought extending the time was made and the question of costs of the application reserved. At the time of hearing argument on the respondents' summons for dismissal or stay the trial judge heard argument on the question of costs of the earlier application. He ordered that the appellants pay the costs reserved by the earlier order. (at p178)

5. The learned judge did not indicate the arguments which were put before him or the reasons which prompted him to make the order. Nor is there any indication that the relevant Rules of Court were drawn to his attention. It is a reasonable assumption that they were not referred to because neither party directed our attention to these rules on the hearing of the appeal. We are of the opinion that an application of the relevant rules can in the circumstances only lead to the conclusion that the respondents should not have their costs of the application. (at p178)

6. We turn to the relevant rules of the court which are the High Court Rules. Order 71, r. 1 to the extent relevant provides that "Subject . . . to these Rules, the costs of and incidental to all proceedings . . . are in the discretion of the Court or a Justice". This discretion, however, is expressly restricted in the case of the applications to enlarge or abridge time. Order 60, r. 6 (3) as relevant provides that: "When the time for delivering a pleading . . . is or has been fixed or limited by these Rules . . . the costs of an application to extend that time . . . shall be borne by the party making the application, unless the Court or a Justice otherwise orders". (at p178)

7. In so far as that rule enables the court or a justice to order otherwise, i.e. to order that the party making an application be awarded his costs, a further restriction is to be found in O. 71, r. 69 (3). This provides as follows: "The cost of a summons to extend time shall not be allowed unless the party taking out the summons has previously applied to the opposite party to consent to a sufficient extension of time and the opposite party has not consented, or the taxing officer considers there was a good reason for not making the application". The concept of obtaining a consent to an extension obviously relates back to O. 60, r. 7 which provides that time may be enlarged by consent without application to a court or justice. (at p179)

8. There are thus a number of difficulties which stand in the way of upholding the learned judge's order for costs. In the first instance there is a prima facie rule that costs of an application for extension of time shall be borne by the party making the application (O. 60, r. 6 (3)). The costs of the application to be borne by the applicants in these circumstances would be not only their own costs but also of the other party to the application. In the present circumstances the application being ex parte there was no party whose costs the applicants should pay. They are thus left prima facie with the obligation to pay their own costs unless the court otherwise orders. (at p179)

9. Not only is it extremely unlikely, that in the circumstance of the other party not being before the court to oppose the application, that the court would "otherwise order", but there does appear to be a positive bar to an order to be found in O. 71, r. 69 (3). This bar exists if the applicant has not first applied to the other side to consent to an extension. The only evidence before the court is contained in the abovementioned affidavit and does not sufficiently establish an application for consent and a failure by the opposite party to consent. (at p179)

10. The other provision which permits the awarding of costs in favour of the applicant and against the opposite party in circumstances where no application for consent has been made is if "the taxing officer considers there was good reason for not making the application". This reference to the taxing officer is curious in that it appears to remove this circumstance as a relevant matter for consideration by the judge. It is doubly curious when it is noted that under O. 71, r. 69 (1), it is the costs of an application for consent to an extension and not the costs of an application for an extension (as in O. 71, r. 69 (3)) which is left to the discretion of the taxing officer. This contrasts with the provision in counterpart rules elsewhere which provides that the costs of the application for an extension and not merely of the application for consent to an extension is in the discretion of the taxing officer. (at p179)

11. It thus appears at least probable that the rules contemplated that a judge shall not direct payment of costs of an application for extension unless there has been an attempt to obtain the extension by consent which has been rebuffed. Alternatively such an application and rebuff would be a very relevant matter in determining whether to depart from the prima facie situation in O. 60, r. 6 (3). A fortiori the costs of an order obtained ex parte should not be directed to be paid by the opposite party where there has been no request and rebuff. We would therefore allow the appeal against this order for costs. (at p179)

12. So far as costs of the hearing before Northrop J. are concerned it should be observed that the relevant application was launched by the respondents in circumstances in which the appellants were pressing for a defence. It was clear on examination of the statement of claim that the respondents should not have been required to deliver a defence, the statement of claim being in a defective form. Having regard to the view that the defects in the statement of claim might be curable the appropriate course was to give leave to the appellants to make amendments if they were so advised. In view of the fact that the learned judge regarded it as appropriate to stay the whole action such leave was not granted. The application of the respondents was provoked by the unsatisfactory nature of the statement of claim. Had the matter been dealt with along the lines suggested and the sufficiency of the statement of claim been the only matter in issue it would have been appropriate that the appellants should bear the costs of the proceedings before the learned judge. But the issue as to whether the proceedings should be stayed on other grounds led to a determination of the application with reference thereto. We are satisfied that a stay of the hearing was and is appropriate although matters preliminary thereto may be permitted to proceed. On the whole however we think that the order made by the learned judge that the appellants should pay the costs of the proceedings before him was fair and reasonable. (at p180)

13. So far as costs of this appeal are concerned it is to be observed that the appellants have achieved a partial lifting of the stay, leave to amend the statement of claim and relief from the order for costs in respect of the application made by the respondents for an extension of the time for filing a defence. The partial relief in respect of the stay is rather of a machinery nature than something going to the substance of the order staying the action. The appellants also have the satisfaction of being relieved from what was in substance a finding that this action appeared to be an abuse of the processes of this Court. Nevertheless the situation of this litigation is in substance not changed by the orders made in this appeal. It is our view therefore that the appellants should have half of the costs of the appeal. Leave to amend the statement of claim is not strictly necessary as the appellants as such have leave under the Rules of the Court. The relief against the order for costs is a substantial relief however. (at p180)

14. This Court orders (1) The appeal be allowed, the order of Northrop J. to be varied as follows: (a) to provide that the stay of this action applies to the hearing of the action and not the proceedings including pleadings preliminary to the hearing; (b) by discharging the order that the appellants pay to the respondents the costs of obtaining the ex parte order dated 4th October, 1977. (2) The appellants be at liberty to file and deliver an amended statement of claim within fourteen days of this date. (3) Whether or not the appellants file an amended statement of claim the respondents be at liberty to take steps under the rules either to apply to strike out the statement of claim or to demur otherwise in accordance with the rules. (4) The respondents shall pay to the appellants one-half of their costs of and incidental to this appeal. (5) Both parties to have liberty to apply on seven days' notice to a single judge of the court as they may be advised. (at p181)

ORDER

Order accordingly.