Nella, J.B. v Kingia Pty Ltd

[1986] FCA 306

Re: JOHN BAPTIST NELLA; CLIFFORD SYDNEY BROWN; BARBARA SYBIL BROWN and IAN
WILLIAM BROWN
And: KINGIA PTY. LTD.; IAN DAVID ASPHAR; PETER ANTHONY McCORMISH; ROBERT
WILLIAM WATERS; HILLDODD PTY. LTD.; MAXWELL DODD; MAURICE HOWARD HILL; and
STANLEY RONALD LAYTON
Re: KINGIA PTY. LTD.
And: HILLDODD PTY. LTD.
No. WA G18 of 1983
Trade Practices - Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Toohey J.

CATCHWORDS

Trade Practices - misleading and deceptive conduct - claims under ss.82 and 87 of Trade Practices Act and accrued jurisdiction - allegation against fourth, fifth and sixth respondents of involvement in the contravention in terms of s.75B - whether the limitation in s.82 applies to persons liable pursuant to s.75B

Practice and Procedure - application for dismissal of s.82 claim as statute barred - plea of limitation in defence - whether limitation defence sufficient basis for dismissal of proceeding - need for clear case of abuse of process

Trade Practices Act 1974 ss.75B, 82, 87

Federal Court Rules O.11 r.16, O.20 r.2

HEARING

PERTH

#DATE 10:7:1986

ORDER

1. The motion by the fourth, fifth and sixth respondents filed 11 June 1986 be dismissed.

2. The costs of the motion be the applicants' costs in the cause.

Note: Settlement and entry of orders is dealt

with in Order 36 of the Federal Court Rules.

JUDGE1

This is a motion by the fourth, fifth and sixth respondents for an order that the proceeding against them be dismissed on the ground that no reasonable cause of action has been disclosed, alternatively that the claim against them under s.82 of the Trade Practices Act 1974 be dismissed. When the hearing began, counsel for the respondents abandoned the first contention. The basis of the second contention is that any action against the respondents under s.82 is statute barred.

1. The applicants' claim against the respondents arises from their purchase of the business of the Rosemount Hotel, in particular the balance of the lease held by the first respondent together with goodwill, fittings, plant and chattels.

2. The second respondents were directors of the first respondent. The third respondent was a hotel broker which acted as the first respondent's agent in the sale of the business. The fourth, fifth and sixth respondents were directors of the third respondent.

3. The applicants allege that, in the course of negotiations leading to the purchase of the business, statements were made about the profitability of the business based upon its trading results. These statements, the applicants say, were false and in the circumstances constituted misleading or deceptive conduct in contravention of s.52 of the Trade Practices Act. As so often happens, the applicants then plead the false statements as misrepresentations, negligent mis-statements and collateral contracts. The allegation against the fourth, fifth and sixth respondents is that they aided, abetted, counselled or procured the contravention of s.52 or alternatively were knowingly concerned in or were parties to the contravention. This of course is a reference to s.75B of the Act.

4. The applicants claim damages pursuant to s.82 of the Act and also damages at common law, together with orders under s.87 of the Act.

5. Although the application was filed on 29 April 1983, it was not until 5 May 1986 that the fourth, fifth and sixth respondents were joined in the action. On 6 August 1985 judgment was entered against the third respondent for damages to be assessed, by reason of that respondent's failure to file a defence.

6. There is one contention of the applicants that should be disposed of at the outset. It was suggested that since sub-s.82(1) creates a cause of action for conduct done in contravention of Part IV or V, and s.75B finds its place in Part VI, not in those parts, the limitation in sub-s.82(2) does not apply to persons whose liability derives from s.75B. I do not accept that submission. The limitation in sub-s.82(2) is related to an action under sub-s.(1). An action under sub-s.(1) is an action against a person whose conduct was in contravention of a provision of Part IV or V "or against any person involved in the contravention". The only function of s.75B is to define who is a person involved in a contravention of Part IV or V. It is misleading to speak of s.75B as a source of liability and (although it is commonly done) to claim damages under that section. A claim which needs to rely upon s.75B is nevertheless a claim under s.82 and should be so pleaded. The statement of claim should also plead facts to make it clear on what basis the person is said to have been involved in the contravention.

7. Each of the fourth, fifth and sixth respondents has filed a defence which includes a plea that the contravention of the Trade Practices Act pleaded in the statement of claim did not occur within three years before the action was commenced against that respondent. And, each defence continues, "the action is barred pursuant to Section 82 of the said Act". It is therefore clear that there is an issue joined between the applicants and these particular respondents on the question of limitation. No reply to these defences has been filed on behalf of the applicants and, nothing having been said to the contrary by their counsel, it may be inferred that the issue is whether the cause of action against the fourth, fifth and sixth respondents under s.82 of the Trade Practices Act accrued earlier than three years from 5 May 1986. In particular there is nothing to suggest an argument by the applicants that there are circumstances which might constitute an answer to a plea of limitation that would otherwise be successful.

8. The weight of authority is against dismissing a proceeding or striking out a statement of claim as disclosing no cause of action merely because the party sued may have a defence under the relevant limitation statute. See Donaldson L.J. in Ronex Properties Ltd. v. John Laing Construction Ltd. (1983) 1 QB 398, 404. Donaldson L.J. continued at 405:
   
   

"Where it is thought to be clear that there is a defence under the Limitation Act, the defendant can either

plead that defence and seek the trial of a preliminary issue or, in a very clear case, he can seek to strike out the claim on the ground that it is frivolous,

vexatious and an abuse of the process of the court and support his application with evidence. But in no

circumstances can he seek to strike out on the ground that no cause of action is disclosed".

1. The Court has not been asked to try a preliminary issue and, at this stage, there is no factual material before the Court to enable it to do so. On a motion such as this, it is only in a clear case of abuse of the process of the Court that the proceeding ought be dismissed (O.20 r.2) or the statement of claim struck out (O.11 r.16). Is this such a case?

2. To answer that question, it is necessary to bear in mind that the fourth, fifth and sixth respondents do not contend that the proceeding against them should be dismissed. They recognize that there is a claim made under s.87 of the Trade Practices Act and that there are also common law claims. It is only the claim under s.82 with which they are concerned.

3. I am not persuaded that this is such a clear case that the claim against the fourth, fifth and sixth respondents under s.82 should be dismissed. The lease under which the hotel business was operated did not expire until 8 May 1984. While, in para.15 of the statement of claim, the applicants particularize their loss and damage by reference to various accounting periods terminating on 30 June 1983, they claim that the totality of their loss is calculable only at the end of the lease. On that basis, they say, there is a period from 5 May 1983 until 8 May 1984 which, on any view of the matter, is within three years of the commencement of proceedings against the fourth, fifth and sixth respondents.

4. As to damages for a contravention of s.82 of the Trade Practices Act, the appropriate measure is that applicable in tort. Gates v. City Mutual Life Assurance Society Ltd. (1986) 60 ALJR 239. It follows that the damages to which the applicants are entitled, if they make good a contravention of s.52, is the difference between the value of the business at the time of purchase and the price paid for it, together with all consequential loss directly flowing from the applicants' reliance on the misleading or deceptive conduct.

5. That is not the way the applicants have pleaded their case but they do plead a continuing loss from the time they took possession. It may be that some of that loss can be shown to be a direct consequence of misleading or deceptive conduct on the part of the respondents or some of them. For this reason I do not think it appropriate to describe the claim as an abuse of process.

6. The motion will therefore be dismissed. It may be said that, by adroit pleading, an applicant may be able to pursue a claim under s.82 to litigation even though in the end he will not be able to demonstrate loss or damage accruing within a period of three years before the commencement of proceedings. That may be so but it must be remembered that dismissal of a claim under s.82 does not (as the authorities stand) preclude the Court from entertaining a claim under s.87; nor does it deprive this Court of jurisdiction to deal with a common law claim as part of its accrued jurisdiction. See James v. Australia and New Zealand Banking Group Ltd. (1986) 64 ALR 347 at 396. And it may be that in some cases it will be possible to try the limitation plea as a preliminary issue.

7. However, for the reasons given, the motion will be dismissed.