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

[1977] FCA 91

IN THE FEDERAL COURT	No. VG 62 of 1977
OF AUSTRALIA
B E T W E E N :

L. GROLLO DARWIN MANAGEMENT PTY . LTD. Plaintiffs

and L. GROLLO h CO. PTY. LTD.

and

VICTOR PLASTER PRODUCTS PTY. LTD. Defendants

'!	and AUSTRALIAN GYPSUM LIMITED
,
l
J
I

Courts - Practice and procedure - Application

to strike out statement of claim - stay action

- grounds - frivolous and vexatlous -

vexatious and oppresslve - High Court Rules

0.20 r.29, 0 . 2 6 r.18, 0 . 6 3 , r . 2 .

i

I N THE FEDEXAL COURT No . VG 62 of 1977

OF AUSTRALIA

B E T W E E N :

L. GROLLO DARWIN MANAGEMENT PTY . LTD. P l a i n t l f f s

and L. GROLLO & CO. PTY. LTD.

and

VICTOR PLASTER PRODUCTS PTY. LTD. Defendants

and AUSTRALIAN GYPSUM LIMITED

ORDER

JUDGE MAKING ORDER : Northrop J. ( i n C h a m b e r s )

DATE OF ORDER - 1 5 t h November, 1 9 7 7

WHERE MADE Melbourne

THE COURT ORDERS:

1. T h a t t h e actlon be stayed u n t i l f u r t h e r order.

I

1	2.	That the defendants' costs of t h i s summons be
taxed and paid by the p l a i n t i f f s and I
cer t i fy f o r C o u n s e l .
3 .	That t h e defendants' costs of obtaining t h e
order made on the 4 t h October, 1977 be taxed
and pa id by the p l a i n t l f f s .

I N THE FEDEPdL COURT	No. VG 62 of	1977
OF AUSTRALIA
B E T W E E N :

L. GROLLO DARWIN MANAGEMENT PTY. LTD. P l a i n t i f f s

and L. GROLLO & CO. PTY. LTD.

and

VICTOR PLASTER PRODUCTS PTY. LTD.

and AUST-RALIAN GYOSUN LIMITED Defendants

NORTHROP J . FOR REASONS JUDGMENT 1977

I

This i s t h e r e t u r n of a summons taken o u t by t h e

de fendan t s s eek ing o rde r s t ha t t he statement of claim del ivered

I by t h e p l a m t i f f s b e s t r u c k o u t and t h a t t h e action be dismissed

or s tayed . f o r t h e d e f e n d a n t s , r e l i e d In suppor t o f the summons D r . G r i f f i t h , who appeared

upon High Cour t Rules 0 .20 , r . 2 9 ,

0 .26, r.18 and 0 .63 , r .2 . M r . Hercules, who appea red fo r t he

p l a i n t i f f s , opposed the making of the orders sought .

The p r i n c i p l e s t o b e a p p l i e d t o app l i ca t ions of t h i s

kind are v Commissioner f o r Railways (N.S.W.) s t a t e d by Barwick C . J . i n General S t e e l I n d u s t r i e s Inc .

and Others ( 1 9 6 9 ) 1 1 2 C.L.R.

125 a t pp. 128-130. Recent ly , these p r inc ip les were discussed

and appl ied i n the Federal Court i n L. Grol lo & Co. Pty. Ltd. v

Permacon Plocrs Pty. Ltd. and Others, unreported, 18th May, 1977.

Although an appeal was taken aga ins t tha t dec is ion , no th ing was

s a i d by the Fu l l Cour t con t r a ry t o t h e p r i n c i p l e s o f law s t a t e d

i n t he r easons fo r dec l s ion and I r e f e r t o and apply these

p r i n c i p l e s t o the p re sen t app l i ca t ion .

By a general ly endorsed w r l t of summons i ssued on

24th Augusc,	1977,	t h e p l a i n t l f f s s o u g h t r e l i e f e x p r e s s e d	as
follows :

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“The p l a i n t l f f s claims are for -

1. A d e c l a r a t i o n t h a t - t h e d e f e n d a n t s and each of

:hem by, i n t e r a l i a , t h e f i r s t named defendant commencing proceedmgs i n t h e Supreme Cour t of

the Nor thern Ter r i to ry Case N o . 349 of 1977

- 2 -

aga ins t the flrst named p l a i n t i f f , h a v e i n

trade or commerce engaged i n p r a c t i c e t h a t

is mis leading and decept lve wi th in the

meaning of s.52 of the Trade Practices A c t

1974 ( a s amended) of Aus t r a l l a and tha t bo th

such defendants have violated s.52 of such

A c t .

2. Damages sus ta ined and be ing sus ta ined by t h e

p l a i n t i f f s and each of them as a result of

the de fendan t s ' s a id v io l a t ion o f	s.52	of
such A c t . "

The p l a i n t l f f s gave n o t i c e t h a t t h e y r e q u i r e d p l e a d i n g s

and f i led a s ta tement of claim dated 20th September, 1977.

Paragraphs 1 t o 4 of the s ta tement of claim dea l wi th formal

mat ters . They allege facts upon which it is c l a imed tha t t he

matter is Court and that each par ty one w i t h i n t h e o r i g i n a l j u r i s d i c t i o n of t h e F e d e r a l

i s incorporated and i s a corpora t ion

w i t h i n t h e meaning of t h e Trade Practices A c t 1 9 7 4 ( t h e A c t ) .

Paragraph 5 a l l e g e s t h a t t h e s e c o n d named p l a i n t i f f ( h e r e i n a f t e r

c a l l e d "Grollo") and a company named Wincope (Austral ia) Pty. Ltd.

i n May 1975 e n t e r e d i n t o a c o n t r a c t w i t h t h e Darwin Reconstructlon

Commission for the des igning and cons t ruc t ion of houses a t Darwin.

Paragraph 6 alleges tha t Grol lo engaged a company, Reign Plumbing

Pty. Ltd., to do plumbing work i n v o l v e d i n t h e c o n s t r u c t i o n of t h e

houses. Paragraph 7 alleges t h a t i n or about June or J u l y 1975

the defendants or one or o ther of them entered into an agreement

with Reign Plumbing Pty. Ltd. t o s u p p l y goods t o t h a t company.

Paragraph 8 a l l e g e s t h a t a b o u t t h e e n d of June 1976 " t h e p l a i n t i f f s

a l t e rna t ive ly one of them entered in to an a r rangement wi th the

defendants a l te rna t ive ly one of them" whereby t h e f i r s t named

p l a i n t i f f ( h e r e i n a f t e r called "Grollo Darwin") would pay t h e

J u l y 1976 account of Reign Plumblng Pty. Ltd. for goods supplied

du r ing the month of J u l y 1976 t o Reign Plumbing Pty. Ltd. by the

defendants or one or o t h e r o f them pursuant t o the agreement

r e f e r r e d t o i n p a r a g r a p h 7. The arrangement was a l l eged t o have

i b e e n s u b j e c t t o c e r t a i n terms and condi t ions namely:

" (i) That -the Defendants acknowledged that

n e i t h e r P l a i n t i f f s were under any legal

o b l i g a t i o n t o do so.

(ii) That such arrangement i n no way va r i ed o r

modl f i ed the sa id con t r ac t .

. / 3 . . .

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(iii) That by so ar ranging there was no agree-

ment by t h e P l a l n t i f f s o r e i t h e r o f them

t o t a k e o v e r o r assume t h e ob l iga t ions

l i a b i l i t i e s o r d e b t s o f Reign Plumbing.

( iv) That - upon payment of the sa id Ju ly account

of Reign Plumbing with the Defendants and

each of them they and each of them had no

cause of act ion whatsoever against the

P l a i n t i f f s o r e i t h e r o f them.

(v) The P l a i n t l f f s would not be invoiced or

- charged for any o t h e r goods suppl ied by

the Defendants or e i ther of	them	t o Reign
Plumbing."

I *

Paragraph 9 a l l eges tha t t he a r r angemen t a l l eged in pa rag raph 8

was carr ied out . Paragraph 10 a l l e g e s t h a t t h e r e a f t e r t h e

defendants and each of them wrongful ly sought to charge the

p l a i n t i f f s f o r goods supplied to Reign Plumbing Pty. Ltd. and

have taken proceedmgs aga ins t the p la ln t i f f s for payment the reo f .

Par t icu lars g iven inc lude the de l ivery of invoices and s ta tements

by the defendants, and giving of two n o t i c e s t o G r o l l o Darwin

under s . 2 2 2 ( 2 ) of the Companles Ordicance 1963-73 of the Northern

Te r r i t o ry inc ludmg one dated 7th June, 1 9 7 7 c la iming the amount

of $59,778.22, each of which claimed moneys owing f o r goods so ld

and delivered and each of which notices has been withdrawn, and

t h e i s s u e by t h e f i r s t named de fendan t (he re ina f t e r ca l l ed Vlc to r

Plaster) of a writ i n t h e Supreme Court of the Nor thern Ter r i to ry

(hereinaf ter cal led " the Northern Terr i tory proceedings"j in whlch

Vic to r P la s t e r claims aga ins t Grol lo Darwin t h e sum of $59,778.22

f o r goods del ivered over var ious per iods of time up to Janua ry

1977. Paragraph 11 is as follows:

"The Defendants a l ternat ively one of them d i d , i n

t r a d e and commerce, engage In conduct which was

mis leading and decept lve wi th in the meanlng of

Sect ion 5 2 of P a r t 5 o f t he sa ld A c t i n t h a t it

en te red in to the sa id a r r angemen t wi th the P la in t i f f s

o r one of them when a t a l l times t h e y o r a l t e r n a t i v e l y

one of them had no intent ion whatsoever of observing

or keeping the said arrangement so made."

Paragraph 1 2 a l l e g e s t h a t as a r e s u l t of t h e matters set o u t i n

paragraph 11, t h e p l a i n t i f f s o r one o r o t h e r o f them have suffered

loss and damage by an act of the defendants or one or other of them

which was a n a c t done in cont ravent ion of s .52 of the A c t . I n t h e

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I I .

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Statement of claim t h e p l a i n t i f f s c l a i m a declarat ion " thaL the

defendants or one of them have violated s .52 of the said A c t "

and damages.

'I It is necessary to make b r i e f r e fe rence to the Nor the rn

Terr i tory proceedings. They were i n s t i t u t e d by writ numbered 349

of 1977 i n which Victor P l a s t e r i s c la iming aga ins t Grol lo Darwin

t h e sum of $59,778.22 being the balance due for goods so ld and

de l ivered by V i c t o r P l a s t e r t o Grol lo Darwln a t the reques t o f 8 1

Grollo Darwin. An appea rance to the w r i t was en tered on behalf

of Grollo Darwin and Vlctor Plaster de l ive red a statement of claim

i n which it a l l e g e s t h a t on o r abou t t he 5 th Ju ly , 1976 Grol lo

Darwin entered into an agreement with Victor Plaster for the purpose I

of t h e sale by Victor Plaster t o Grollo Darwin of 3 , 0 0 0 r o l l s o f

i n su lwoo l a t t he rate of $ 1 . 7 5 ~ per square meter net F.I .S. Darwln,

t h a t Victor Plaster de l ive red t o Grol lo Darwin i n Darwin t h e s a i d

3 ,000 r o l l s of insulwool and that Grollo Darwin has negl, acted or

refused t o pay f o r t h e goods so so ld and de l ivered . Grol lo Darwin

then issued a summons seek ing o rde r s t ha t it have leave to withdraw

i ts appearance and enter a condi t iona l appearance , tha t the ac t lon

b e t r a n s f e r r e d t o t h e Supreme Cour t o f Vic tor ia , tha t the hear ing

of the act ion be s tayed pending the hear ing of t h e a c t i o n VG 62 of

1977 in the Fede ra l Cour t o f Aus t r a l i a (he re ina f t e r ca l l ed the

"Federal Court proceedings") and certain consequential orders.

From the ma te r i a l f i l ed in the Nor the rn Te r r l t o ry p roceed ings , it

is c l e a r t h a t G r o l l o P l a s t e r i n Darwin denies the agreement a l leged by Victor

i t s s ta tement of c la im and al leges that the insulwool

which was i n f a c t d e l i v e r e d t o Darwin was ordered from Australian

Gypsum Limited by Reign Plumbing Pty. L t d . and a l leges the a r range-

ment o r Federa l Cour t p roceedings . Aff idavi t s agreement re fer red to in the s ta tement of c la im in the

f i l ed on behal f of Victor

Plaster deny the c la ims made by Grol lo Darwin. Before m e , n e i t h e r

p a r t y o b j e c t e d t o t h i s m a t e r i a l b e i n g r e f e r r e d t o smce it cons t i tu ted par t o f the Norhtern Ter r i to ry proceedings be ing the

proceedings re fer red t o in the s t a t emen t o f claim i n t h e F e d e r a l

Court proceedings. On the 11th October , 1977 , the Northern

T e r r i t o r y Supreme Cour t o rdered tha t Grol lo Darwin have l eave to

withdraw its appearance and enter a condi t ional appearance and that

thereaf te r the ac t ion , bemg the Nor thern Ter r i to ry proceedings ,

be s t ayed un t i l fu r the r o rde r . The reasons f o r t h e o r d e r so made

. /5 . . .

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are not available to me but Mr. Hercules stated that the order

was not based upon the existence of the Federal Court proceedlngs.

In considering applications for orders under 0.26, r.18

the Jcfige or Court is limited to a consideration of information

contained in the statement of claim, includmg documentary material

referred to therein, while affidavit material may be used to

support applications for orders based on the inherent power of the

Court to stay actions which are frivolous and vexatious and an

abuse of the process of the Court as also in applications made	I ,
!

under 0.63, r.2. Generally see General Steel Industries Inc. v

Commissioner for Railways (N.S.W.), supra, at p.130. The parties

before me agreed that I was entitled to look at affidavits filed

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in the Federal Court proceedings which exhibited copies of documents filed in the Northern Territory proceedings, see Day v Nilliam Hill

(Park Lane) Ltd. (1949) 1 K.B. 632. No affidavlt material was

placed before me for any other purpose.

The claim endorsed upon the writ in the Federal Court

proceedings is, to say the least, somewhat startling. The state-

ment of claim modifies that claim and pursuant to 0.21, r.3 I am

prepared to proceed on the basis that the clalm is that contained

in the statement of claim. The substance of that claim is the

allegation of the arrangement between the plaintiffs or one of them

and the defendants or one of them, the allegation that the defendants

or one of them entered into that arrangement with the plaintiffs or

one of them when at all times the defendants or one of them had no

intention of observing the arrangement and the allegation that

thereafter the defendants have sought to charge the plaintiffs for

goods supplied to Reign Plumbing Pty. Ltd. The plaintlffs then

alleged that the defendants or one of them by entering into the

arrangement when at all times the defendants or one of them had

no intention of observing or keeping the terms of the arrangements

so made thereby arein breach of the provisions of s.52 Trade

Practices Act 1974.

At the time of the making of the alleged arrangement

s.52(1) of the Act was follows:

"A corporation shall not, in trade or commerce,

engage in conduct hat is misleading or deceptive. "

./6.. . i

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i	By the Trade Practices Amendment Act 1977, s.29, the following
words were added to the end of s.52(1) of the Act: "or is likely
to mislead or deceive". At the time of the makmg of the alleged
arrangement the word "conduct" was given an extended meaning by
the definition of that word as contained in s.4(1) of tke Act but
the amending Act of 1977 deleted that definition and inserted a
new sub-section, s.4(2), into the Act, see s.5 of the amending Act

The plaintiffs bring the Federal Court proceedings

pursuant to s.82 of the Act and the Federal Court has exclusive

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I jurisdiction to hear and determine such a claim, s . 8 6 of the Act.

4           "

m: Section 52 of the Act is contained in Part V of the Act

i	and that Part is headed "Consumer Protection". It is the first
section in Division 1 of that Part and that Division s headed
"Unfair Practlces". In considering the meaning of s.52 of the Act,
1	Mason J. in Re Credit Tribunal: Ex parte General Motors Acceptance
i	Corporation (Australia) 1977 14 A.L.R. 257 said at p.268:
1

"Its meaning therefore is apt to be influenced,

f I indeed cisively influenced, context the by in

which it is €ound. Here the setting in which

I S. 52 (1) appears is shown by the headings "Part V

- Consumer Protection" and "Dlvision 1 - Unfair

Practices". In this context the prohibition

contained in the sub-section emerges a an

important general prohlbition against a corpor-

l	i	ation in the course of trade or commerce engaged
in a form of conduct, a trade practice, which is
unfair. "
The submission by Mr. Hercules that a corporation engages
l

I in conduct that is misleading or deceptive within the meaning of

s.52 of the Act if it enters into an arrangement or agreement and

at that time has no intention of bserving or keeplng the terms of

1 i the arrangement or agreement is very far reaching. If the

submission be correct it follows wherever a person, being a

i corporation, in trade or commerce enters into a contract and fails

! to observe a term of that contract not only is he liable to be sued

1 in a Common Law Court for breach of contract but also, if that

l	person had, at the time of entering into the contract, no intention
i	of observing or kee2ing the contract, he is liable to be sued 111
l	the Federal Court of Australia for damages pursuant to the Trade
l	Practices Act. I have grave doubts as to the correctness of the

./ 7... ~

- -_ - .. ... - ~ ~. , - . -. _I - . . - - - - - G - - - - - -

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submission but I am n o t s a t i s f i e d t h a t I have received the

necessary ass i s tance from t h e p l a i n t i f f s t o enable m e t o reach

such a d e f i n i t e and c e r t a i n c o n c l u s i o n t o j u s t i f y t h e summary

s t r ik ing ou t o f t he s t a t emen t o f c l a im as n o t d i s c l o s i n g a

reasonable cause of act ion and to dismiss the act ion thzreby

d e p r i v i n g t h e p l a i n t i f f s f rom submit t ing their case f o r

determinatlon i n t h i s C o u r t .

The con t r ac t a l l eged by V i c t o r P l a s t e r i n t h e N o r t h e r n

Terr i tory proceedings i s d i f f e r e n t from the arrangement a l leged

I

by t h e p l a i n t i f f s i n t h e F e d e r a l C o u r t p r o c e e d i n g s . The Supreme

Court of the Northern Terr i tory, or the Supreme Cour t o f t he S ta t e ,

i s the appropr ia te Cour t t o t r y t h e i s s u e s r a i s e d i n t h e a c t i o n

commenced by Victor P l a s t e r . Victor P l a s t e r i s n o t a l l e g i n g o r

p u r p o r t i n g t o r e l y upon the a r rangement re fer red t o i n t h e s t a t e -

ment of claim in the Federa l Cour t p roceedings and i f Victor P l a s t e r

succeeds in i t s claim it would no t be ac t ing in b reach o f t he

alleged arrangement. I have formed the clear op in ion tha t t he

p l a i n t i f f s comnenced the Federal Court proceedings as a b a s i s

fo r an a t t empt to s t ay o r de l ay the hea r ing o f t he c l a im by Victor

P la s t e r i n the Nor the rn Te r r i t o ry p roceed ings . I r r e spec t ive o f

1	t h e	outcome	of the Nor thern Ter r i to ry proceedings , the p la in t i f f s
1

I 1 in the Federa l Cour t p roceedings will b e a b l e , i f so a d v i s e d , t o

p r o s e c u t e t h e i r claim aga ins t t he de fendan t s a f t e r t he conc lus ion . .

of the Northern Terr i tory proceedings or proceedings In the

appropr ia te Supreme Court. I t is my op in ion tha t a t the presenc

time t h e a c t l o n vexatious within the meaning of commenced in the Fede ra l Cour t i s f r ivo lous and

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0 . 2 6 , r .18 and that it is vexat ious

and oppress ive wi th in the meaning of 0 . 6 3 , r . 2 . Accordmgly I

p ropose to o rde r t ha t t h i s ac t ion , be ing No. VG 62 of 1977, be

l s tayed t o enable V i c t o r P las te r Products P ty . L td . t o prosecute

i t s c la im t o o r d e r t h a t t h e p l a i n t i f f s aga ins t L. Grol lo Darwin Management Pty. Ltd. I propose I.

pay the de fendan t s ' cos t s o f t h l s

i

summons.

The defendants issued and served their summons before

t h e time l imi t ed fo r t he de l ive ry o f t he i r de fence . The r e t u r n

da t e on t h e summons was s h o r t l y a f t e r t h e time l i m i t e d f o r

de l ivery of defence . Af te r rece ip t of the summons and with

knowledge of it, t h e p l a i n t i f f s ' s o l i c i t o r s wrote t o the defendants '

. / a - . .

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s o l i c i t o r s t o t h e e f f e c t t h a t u n l e s s a defence was de l ive red ,

judgment would be e n t e r e d a n d t h e r e a f t e r t h e p l a i n t i f f s '

s o l i c i t o r s f a i l e d t o r e t u r n t e l e p h o n e calls t o t h e d e f e n d a n t s '

s o l i c i t o r s . By an ex par te order made on 4th October, 1977,

the Ccurt extended the time for de l ivery of defence by t h e

defendants and reserved the cos ts of tha t ex par te appl ica t ion .

After hearing argument, I propose now t o o r d e r t h a t t h e p l a i r , t l f f s

pay the cos t s r e se rved by the order of the 4 th October , 1977.

1. That he ac t ion be s tayed until f u r t h e r o r d e r .

2 . Tha t he de fendan t s ' cos t s o f t h i s summons be taxed

and paid by t h e p l a i n t i f f s and I ce r t i fy fo r Counse l .

3. That he defendants ' cos t s of ob ta in ing t he o rde r

made on the 4th October, 1377 be taxed and paid by

t h e p l a m t i f f s .

. ..

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I N THE F E D E a COURT	No. VG 62 of 1977
O F AUSTRALIA

i	B E T W E E N :
4
I
f

L. GROLLO DARWIN HA AGEMENT PTY. LTD. P l a i n t i f f s

and L. GROLLO & CO. PTY. LTD.

i

I

l and !

VICTOR PLASTER PRODUCTS PTY. LTD. Defendants

and AUSTRALIAN GYPSUM LIMITED

.

C o u r t s - Practice and procedure - A p p l i c a t i o n

t o s t r ike o u t statement of claim - s tay actior.

- grounds - frivolous and vexat ious -

vexatious and oppressive - H i g h C o u r t R u l e s

0.20 r . 2 9 , 0.26 r.18, 0.63, r .2 .

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I N THE FEDERAL COURT	No . VG 62 of 1977
OF AUSTRALIA
B E T W E E N :

L. GROLLO DARWIN MANAGEMENT PTY . LTD. P l a i n t i f f s

and L. GROLLO & CO. PTY. LTD.

and

VICTOR PLASTER PRODUCTS PTY. LTD. Defendants

and AUSTR9LIAN GYPSUM LIMITED

ORDER

JUDGE MAKING ORDER : Northrop J. ( i n C h a m b e r s )

DATE OF ORDER 15th November, 1 9 7 7

WHERE MADE Melbourne

THE COURT ORDERS:

1. T h a t t he act ion be s tayed u n t i l fu r ther order.

2. That t he defendants ' costs of t h i s summons be

taxed and paid by the p l a i n t i f f s and I

cer t i fy f o r C o u n s e l .

3 . That t h e defendants ' costs of obta in ing the

order made on the 4 t h October, 1977 be taxed

and paid by the p l a i n t i f f s .

: I

It? THE FEDEIWL COURT	No.	VG 62 of 1 9 7 7
OF AUSTRALIA
B E T W E E N :

L. GROLLO DA3WIN MANAGEMENT PTY - LTD. P l a i n t i f f s

. and L. GROLLO & CO. PTY. LTD.

and

VICTOR PLASTER PRODUCTS PTY. LTD.

and AUSTRALIAN GYPSUM LIMITED Defendants

NORTHROP J. REASONS FOR JUDGMENT 1977

This i s t h e re turn of a summons taken o u t by t h e

de fendan t s s eek ing o rde r s t ha t t he statement of claim del ivered

by t h e p l a i n t i f f s b e s t r u c k o u t and t h a t t h e action be dismissed

or stayed. I n support of the summons D r . G r i f f i t h , who appeared

f o r t h e d e f e n d a n t s , r e l i e d upon H q h Court Rules 0 . 2 0 , r . 2 9 ,

0 .26, r.18 and 0.63, r . 2 . M r . Hercules, who appeared for t h e

p l a i n t i f f s , opposed the making of the orders sought .

The p r i n c i p l e s t o be appl ied t o app l i ca t ions of t h i s

kind are s t a t e d by Barwick C . J . i n General S t e e l I n d u s t r i e s Inc .

v Commissioner for Railways (N.S.W.) and Others ( 1 9 6 9 ) 112 C.L.R.

125 a t pp. 128-130. Recent ly , these p r inc ip les were discussed

and applied i n t h e Federal Cour t i n L. Grollo & Co. Pty. Ltd. v

Permacon Floors Pty. Ltd. and Others, unreported, 1 8 t n May, 1977.

Although an appeal vas taken aga ins t tha t dec is ion , no th ing was

s a i d by i n t he r easons fo r dec i s ion t h e F u l l C o u r t c o n t r a r y t o t h e p r i n c i p l e s o f law s t a t e d

and I r e f e r t o and apply these

p r i n c i p l e s t o t h e p r e s e n t a p p l i c a t i o n .

By a general ly endorsed writ of summons i ssued on

24th Auqus t , 1977, the p la in t l f f s sought re l ie f expressed	as
follows :

!

“The p l a i n t i f f s claims are f o r -

1. A dec la ra t ion tha t t he de fendan t s and each of

them hy, l n t e r a l i a , t h e f i r s t named defendant

ccjmmencing p roceed ings in the Supreme Court of

the Nor thern Ter r i to ry Case N o . 349 of 1977

. /2 . . .

- 2 -

a g a i n s t t h e f i r s t named p l a i n t i f f , h a v e i n

t r a d e o r commerce engaged i n p r a c t i c e t h a t

i s misleading and decept ive wi th in the

meaning of s.52 of the Trade Practices A c t

1 9 7 4 (as amended) of Aus t ra l ia and tha t bo th

such defendants have violated	s.52 of such
A c t .

2. Damages sustained and being sustained by t h e

p l a in t i f f s and each o f them as a r e s u l t of

the defendants ' sa id v io la t ion of s .52 of

such A c t . "

I

The p l a i n t i f f s gave not ice tha t they requi red p leadings

! and f i l e d a statement of claim dated 20th September, 1977.

Paragraphs 1 t o 4 of t h e statement of c la im deal with formal

matters. They a l l e g e f a c t s upon which it is c l a i m e d t h a t t h e

matter	i s	one wi th in the o r ig ina l j u r i sd i c t ion o f t he Fede ra l
Court and	t h a t e a c h p a r t y is incorporated and i s a corporat ion

wi th in the meaning of t h e Trade Practices A c t 1 9 7 4 ( t h e A c t ) .

Paragraph 5 a l l e g e s t h a t t h e s e c o n d named p l a i n t i f f ( h e r e i n a f t e r

c a l l e d "Grollo") and a company named Wincope (Austral ia) Pty. Ltd.

:

i n May 1975 entered into a con t r ac t w i th the Darwin Reconstruction

Commission f o r the designing and construct ion of houses a t Darwln.

Paragraph 6 a l l eges tha t Gro l lo engaged a company, Reign Plumbing

Pty. Ltd. , t o do plumbing work invo lved in the cons t ruc t ion o f tine

houses. Paragraph 7 a l l e g e s t h a t i n or about June or Ju ly 1975

the defendants or one or o ther of them entered into an agreement

with Reign Plumbing Pty. Ltd. t o s u p p l y goods t o t h a t company.

Paragraph 8 a l l e g e s t h a t a b o u t t h e end of June 1 9 7 6 " t h e p l a i n t i f f s

a l t e r n a t i v e l y one of them entered into an arrangement with the

defendants a l te rna t ive ly one of them" whereby t h e f irst named

p l a i n t i f f ( h e r e i n a f t e r called "Grollo Darwm") Mould pay t h e

Ju ly 1 9 7 6 account of Reign Plumbing Pty. Ltd. for goods supplied

dur ing the month of July 1976 t o Reign Plumblng Pty. Ltd. by t h e

defendants or one o r other of them pursuant t o the agreement

r e fe r r ed t o in paragraph 7. The arrangement was a l l eged t o have

been subject t o c e r t a i n terms and conditlons namely:

" (i) That the Defendants acknowledged that

n e i t h e r P l a i n t i f f s were under any legal

ob l iga t lon t o do so .

( i i j T h a t such arrangement i n no way v a r i e d o r

modl f i ed the sa id con t r ac t .

. / 3 . . .

- 3 -

(iii) That by so ar ranging there was no agree-

ment by t h e P l a i n t l f f s o r e i t h e r o f them

t o t a k e o v e r o r assume the obl iga t ions

L a b i l l t i e s o r d e b t s o f Reign Plumblng.

( i v ) - That upon payment of the sa id Ju ly account

of Relgn Plumbing with the Defendants and

each of them they and each of them had no

cause of act ion whatsoever against the

P l a i n t i f f s or e l t h e r o f them.

(v) The -P l a i n t i f f s would not be invoiced or

charged for any o t h e r goods supplied by

the Defendants	o r e i t h e r of	them t o Reign
Plumbing."

Paragraph 9 a l l eges tha t t he a r r angemen t a l l eged in pa rag raph 8

was car r ied out . Paragraph 10 a l l e g e s t h a t t h e r e a f t e r t h e

defendants and each of them wrongfully sought t o charge the

p l a i n t i f f s f o r goods supplied to Reign Plumbing Pty. Ltd. and

have taken proceedings aga ins t the p la in t l f f s for payment thereof .

Par t icu lars g iven inc lude the de l ivery of invoices and s ta tements

by the defendants, and giving of two n o t i c e s t o G r o l l o Darwin

under s.222(2) of t h e Companies Ordinance 1963-73 of the Northern

Terr i tory including one dated 7th June, 1 9 7 7 c la iming the amount

of $59,778.22, each of which claimed moneys owing f o r goods so ld

and de l ive red and each of which notices has been withdrawn, and

t h e i s s u e by t h e f i r s t named de fendan t (he re ina f t e r ca l l ed Vic to r

P l a s t e r ) of a writ i n t h e Supreme Court of the Northern Terr i tory

(he re ina f t e r ca l l ed " the Nor the rn Te r r i t o ry p roceed ings" ) i n which

Victor Plaster claims aga ins t Gro l lo Darwin t h e sum of $59,778.22

f o r goods delivered over various periods of time up to January

1977. Paragraph 11 i s as fol lows:

"The Defendants a l ternat ively one of them d i d , i n

t r a d e and commerce, engage In conduct which was

mis leading and decept ive wl th ln the meanlng of

Sect ion 52 of Part 5 o f t he sa id A c t m t h a t it

en te red in to the sa ld a r r angemen t wi th the P la in t i f f s

or one of them when a t a l l times t h e y o r a l t e r n a t i v e l y

one of them had no intention whatsoever of observing

o r keeping the said arrangement so made."

Paragraph 1 2 a l l e g e s t h a t as a r e s u l t o f t h e matters set o u t i n

paragraph 11, t h e p l a i n t i f f s or one or o ther of them have suffered

l o s s and damage by an ac t o f t he de fendan t s o r one o r o the r o f them

which was a n a c t done in con t r aven t ion of s .52 of the A c t . I n t h e

. / 4 . . .

- 4 -

s t a t emen t o f c l a im thc p l a in t l f f s c l a i m a d e c l a r a t i o n " t h a t t h e

defendants or one of them have v io la ted s .52 of the sa id A c t "

and damages.

It is necessa ry to make b r i e f r e fe rence t o the Northern

Terr i tory proceedings. They were i n s t i t u t e d by w r i t numbered 349

of 1977 i n which V i c t o r P l a s t e r i s claiming against Grol lo Dani ln

t h e sum of $59,778.22 being the balance due for goods sold and

de l ivered	by	V i c t o r	P l a s t e r	t o	G r o l l o	Darwin	a t the	r eques t	of	;-
i

Grollo Darwin. An appea rance to the w r i t was en tered on behalf

I

of Grollo Darwin and Victor Plaster de l ive red a statement of claim

i n which it a l l e g e s t h a t on or abou t t he 5 th Ju ly , 1976 Grol lo

Darwin entered into an agreement with Victor P l a s t e r f o r t h e p u r p o s e

o f t h e s a l e by Victor P l a s t e r t o Grol lo Darwin of 3,000 ro l l s of ,I

insulwool a t t h e r a t e o f $ 1 . 7 5 ~ per square meter net F.I.S. Darwin,

t h a t Vic tor Plaster d e l i v e r e d t o G r o l l o Darwin i n Darwin t h e s a i d

3,000 r o l l s of insulwool and that Grol lo Darwin has neglected o r

refused t o pay f o r t h e goods so so ld and de l ivered . Grol lo Darwin

then issued a summons seek ing o rde r s t ha t it have leave to withdraw

its appearance and enter b e t r a n s f e r r e d t o t h e a condi t iona l appearance , tha t the ac t ion

Supreme Cour t o f V ic to r i a , t ha t t he hea r ing

of the ac t ion be s tayed pending the hear ing of the ac t ion VG 62 of

1 9 7 7 i n the Fede ra l Cour t of A u s t r a l i a ( h e r e i n a f t e r c a l l e d t h e

"Federal Court proceedings") and certain consequential orders.

From the ma te r i a l f i l ed in the Nor the rn Te r r i t o ry p roceed ings , i t

is clear that Grol lo Danrin denies the agreement a l leged by Victor

Plaster i n i t s statement of c la lm and al leges that the insulwool

which was i n f a c t d e l l v e r e d t o Darwin was ordered from Aust ra l ian

Gypsum Limited by Reign Plumbing Pty. Ltd. and alleges the arrange-

ment o r Federa l Cour t p roceedings . Aff idavi t s ag reemen t r e fe r r ed to in the s t a t emen t o f c l a im in the

f i l ed on behal f o f Vic tor

P l a s t e r deny t h e claims made by Grol lo Darwin. Before m e , n e i t h e r

p a r t y o b j e c t e d t o t h i s m a t e r i a l b e i n g r e f e r r e d t o s l n c e it cons t i tu ted par t o f the Norhtern Ter r i to ry proceedings be ing the

p roceed ings r e fe r r ed to i n the s ta tement of c la im in the Federa l

Court proceedings. On tha 11th October , 1 9 7 7 , the Northern

T e r r i t o r y Supreme Cour t o rdered tha t Grol lo Darwin have leave to

withdrav i t s sppearance and enter a condi t lonal appearance and t h a t

thereaf ter the act ion, belng the Northern Terr i tory proceedings,

be s t ayed un t i l fu r the r o rde r . The r easons fo r t he o rde r S O made

./5.. .

t * . "

- 5 -

l

! are not available to me but Mr. Hercules stated that the order

was not based upon the existence of the Federal Court proceedings.

t

In considering applxations for orders under 0.26, r.18

the Judge or Court is limited to a consideration of infxmation

I contained m the statement of claim, including documentary material

referred to therein, while affidavit material may be used to support applications for orders based on the inherent power of the

Court to stay actions which are frivolous and vexatious and an

abuse of the process of the Court as also in applications made

under 0.63, r.2. Generally see General Steel Industries Inc. v

i !

Commissioner for Railways (N.S.N.), supra, at p.130. The parties

before me agreed that I was entitled to look at affidavits filed I

in the Federal Court proceedings which exhibited copies of documents

filed in the Northern Territory proceedings, see Day - v William Hill

(Park Lane) Ltd. (1949) 1 K.B. 632. No affidavit material was

placed before me for any other purpose.

The claim endorsed upon tine writ in the Federal Court ~

proceedings is, to say	the least, somewhat startling. The state-	I I
I

ment of claim modifies that claim and pursuant to 0.21, r.3 I am

prepared to proceed on the basis that the claim is that contained

in the statement of claim. The substance of that claim is the

allegation of the arrangement between the plaintiffs or one of them

and the defendants or one of them, the allegation that the defendants

or one of them entered into that arrangement with the plaintiffs or

one of them when at all times the defendants or one of them had no

intention of observing rhe arrangement and the allegation that

thereafter the defendants have sought to charge the plaintiffs for

goods supphed to Reign Plumbing Pty. Ltd. The plaintiffs then

alleged that the defendants or one of them by entering into the

i arrangement when at all times the defendants or one of them had

i	no intention of observing or keeping the terms of the arrangements
so made thereby arein breach of the provisions of s.52 Trade
Practices Act 1974.

At the time of the making of the alleged arrangement

S. 52 (1) of the Act was as follows:

"A corporation shall not, in trade or commerce,

engage In conduct that is misleading or deceptive."

./6.. .

I

. ,. - 6 -

By the Trade Practices Amendment Act 1977, s.29, the following

words were added to the end of S. 52 (1) of the Act; "or is likely

to mislead or deceive". At the time of the making of the alleged

arrangement the word "conduct" was given an extended meaning by

the definition of that word as contained in s .4(1) of the Act but

the amending Act	of 1977 deleted that definition and inserted a
new sub-section,	s .4 (2 ) , into the Act, see s.5 of the amending Act ..

The plaintiffs bring the Federal Court proceedings

pursuant to s.82 of the Act and the Federal Court has exclusive

jurisdiction to hear and determine such a clalm, s . 8 6 of the ACE.

Section 52 of the Act is contained in Part V of the Act

and that Part is headed "Consumer Protection". It is the first

section in Division 1 of that Part and that Division is headed

"Unfair Practlces". In considering the meanlng of s.52 of the Act,

Mason 3. in Re Credit Tribunal: Ex parte General Motors Acceptance

Corporatlon (Australia) 1977 14 A.L.R. 257 said at p.268:

"Its meaning therefore is apt to be influenced,

indeed decisively influenced, by the context in

which It is found. Here the setting in which

S. 52 (1) appears is shown by the headings "Part V

- Consumer Protection" and "Division 1 - Unfalr

Practices". In this context the prohibltion

contained in the sub-section emerges as an

important general prohibition against a corpor-

ation in the course of trade or commerce engaged

in a form o f conduct, a trade practlce, which is

unfair. "

The submisslon by Mr. Hercules that a corporation engages

in conduct that is misleadmg or deceptive within the meaning of

s.52 of the Act if it enters into an arrangement or agreement and

at that time has no intention of observing or keeping the terms of

the arrangement or agreement is very far reaching. If the

submission be correct It follows wherever a person, belng a

corporation, in trade or commerce enters into a contract and fails

to observe a term of that contract not only is he liable to be sued

in a Common Law Court for breach of contract but also, if that person had, at the time of entering into the contract, no intention

of observing or keeping the contract, he is liable to be sued in

the Federal Court of Australia for damages pursuant to the Trade

Practices Act. I have grave doubts as to the correctness of the

./ 7. ..

- _- _-- - -. . - - . I . . F - - -

I* ' - 7 -

submission but I a m n o t s a t i s f i e d t h a t I have received the

necessary ass i s tance from t h e p l a i n t i f f s t o e n a b l e m e t o r e a c h

such a d e f i n i t e and c e r t a i n c o n c l u s i o n t o j u s t i f y t h e summary

s t r i k i n g o u t o f the statement of clalm as n o t d i s c l o s i n g a

reasonable cause of action and to dismiss the ac t ion thereby

d e p r i v i n g t h e p l a i n t i f f s	f rom submi t t ing the i r case for
de te rmina t ion In th i s Cour t .

The con t r ac t a l l eged by V i c t o r P l a s t e r i n t h e N o r t h e r n

Terr i tory proceedlngs i s d i f f e r e n t from the arrangement a l leged

by t h e p l a i n t i f f s I n t h e F e d e r a l C o u r t p r o c e e d i n g s . The Supreme

Court of the Northern Terr i tory, or the Supreme Court of the State ,

is the appropr i a t e Cour t t o t ry the i s sues r a i sed in the ac t i cn

commenced by Vic tor Plaster. Victor Plaster i s n o t a l l e g i n g o r

p u r p o r t i n g t o r e l y upon the a r r angemen t r e fe r r ed to in t h e s t a t e -

ment of claim in the Fede ra l Cour t p roceed ings and i f V ic to r P la s t e r

succeeds in i t s claim it would no t be ac t ing in b reach o f t he

alleged arrangement. I have formed the clear o p i n i o n t h a t t h e

p l a i n t i f f s commenced the Federal Court proceedings as a b a s i s

fo r an a t t empt to s t ay o r de l ay the hea r ing o f t he c l a im by Victor

P la s t e r i n the Nor the rn Te r r i t o ry p roceed ings . I r r e spec t lve o f

t h e outcome of the Nor thern Ter r i to ry proceedings , the p la in t i f f s

in the Federa l Cour t p roceedings w i l l b e a b l e , i f so a d v i s e d , t o

p rosecu te the i r claim aga lns t t he de fendan t s a f t e r t he conc lus ion

of the Nor thern Ter r i to ry proceedings or proceedings in tine

appropr ia te Supreme Court. It is my opinion t h a t a t t h e p r e s e n t

time t h e a c t i o n commenced in the Fede ra l Cour t i s f r ivo lous and

vexat ious wi th in the meaning of 0 . 2 6 , r .18 and that it is vexatious

and oppresslve within the meaning of 0.63, r.2. Accordingly I

propose t o o r d e r t h a t t h i s a c t i o n , b e i n g No. VG 62 of 1977 , be

s t ayed to enab le Vic to r P la s t e r P roduc t s P ty . L td . t o p rosecu te

i t s claim aga ins t L. Grol lo Darwin Management Pty. Ltd. I propose

t o o r d e r t h a t t h e p l a i n t i f f s	pay	the de fendan t s ' cos t s o f t h i s
summons.

The defendants issued and served their summons before

t h e time l imi t ed fo r t he de l ive ry o f t he i r de fence . The r e t u r n

da te on del ivery of defence. t h e summons was s h o r t l y a f t e r t h e time l i m i t e d f o r

A f t e r r e c e i p t o f t h e summons and with

knowledge	of	it,	t h e p l a i n t i f f s ' s o l i c i t o r s w r o t e t o t h e d e f e n d a n t s '
./8. -.

. " . ? e . - 8 -

s o l i c i t o r s t o t h e e f f e c t t h a t u n l e s s a defence was de l ivered ,

judgment would be entered and t h e r e a f t e r t h e p l a i n t i f f s '

s o l i c i t o r s f a i l e d t o r e t u r n t e l e p h o n e calls t o the defendants ' I

I I

s o l i c i t o r s . By an ex par te order made on 4th October, 1977, I ' ,

the Court extended the time for de l ivery of defence by t h e

defendants and reserved the cos ts of t h a t e x p a r t e a p p l i c a t i o n .

After hearing argument, I propose now t o o r d e r t h a t t h e p l a i n t i f f s

!

pay the cos t s r e se rved by the order of the 4 th October , 1977.

!

!

ORDER

i

1. Tha t he ac t ion be s t ayed un t i l f u r the r o rde r .

I	I
I

2. Tha t the defendants ' cos t s of t h i s summons taxed be I

!

and paid by t h e p l a i n t i f f s and I ce r t i fy fo r Counse l . I

3. That he defendants ' cos t s o f ob ta in ing the o rder

made on the 4th October , 1 9 7 7 be taxed and paid by

t h e p l a i n t i f f s .

I

I