Purton-Smith v Telstra Corporation Limited
[2006] VSC 197
•8 June 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 7220 of 2002
| BRIAN PURTON-SMITH and SUE PURTON-SMITH | First Plaintiff Second Plaintiff |
| v | |
| TELSTRA CORPORATION LIMITED (ACN 051 775 556) | Defendant |
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JUDGE: | GILLARD J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 12, 19-21, 24 and 26 April, 24-26 May 2006 | |
DATE OF JUDGMENT: | 8 June 2006 | |
CASE MAY BE CITED AS: | Purton-Smith v Telstra | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 197 | |
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Alleged oral contract to mediate or arbitrate – Claim for damages for personal injuries – Plaintiffs to prove – Alternative claim for negligent misrepresentation – Plaintiffs fail to prove contract or misrepresentation.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr G.J. Grabau | Brett R.E. Ryan |
| For the Defendant | Mr S.J. Sharpley | Arnold Bloch Leibler |
TABLE OF CONTENTS
The Parties
The Dispute
The Issues
A. Contract Claim
B. Negligent Misrepresentation
Facts
Contract Claim
Tort claim – negligent misrepresentation
Conclusion
HIS HONOUR:
This is a claim by a former married couple seeking damages for personal injuries allegedly caused by a breach of contract and/or negligent misrepresentation. The events go back in excess of 14 years.
The Parties
The first plaintiff, Brian Purton-Smith (“Mr Purton-Smith”), is a man in his mid‑sixties, a pensioner, who was formerly married to the second plaintiff. The second plaintiff, Sue Purton-Smith (“Mrs Purton‑Smith”), is his former wife and is employed as a disability worker. Many years ago the couple operated a hire and catering business through a company and a firm registered in the name of Mr Purton-Smith.
The defendant, Telstra Corporation Limited (“Telstra”), is a well‑known Australian public company carrying on the business of, inter alia, telecommunications. It has for many years provided telephone services to Australians and Australian businesses.
The Dispute
The dispute which brought the parties to court can be briefly stated. In late 1989, the plaintiffs established a company called Enfield Peak Proprietary Limited (“the company”). Mr Purton‑Smith owned 51.92% and Mrs Purton‑Smith owned 9.62% of the issued share capital of the company. The company purchased the assets of a company previously operated by the plaintiffs over many years, which failed in 1989 owing a substantial amount of money to its creditors. The earlier company was the proprietor of a variety of businesses known as Salome Party Hire, Salome Dance Floors and HTS Juke Box Hire. The business activities included hiring equipment such as marquees, tables and chairs and the like, hiring and installing dance floors, hiring juke boxes, and catering. In addition, Mr Purton‑Smith was the proprietor of a catering business known as Salome Catering, which was a firm. His wife and children conducted the business. The businesses were run from premises in South Melbourne. Enfield Peak continued the businesses. In about June 1993 the businesses moved to premises at Campbellfield.
In or about March 1992, Telstra sold to the company a telecommunications system known as Telecom Easi Call, the function of which was to divert calls from the company’s business premises to the home of Mr and Mrs Purton‑Smith. In May 1992, the plaintiffs moved to a country property at Flowerdale. The system was to operate after hours not only in respect to new business, but also to answer and handle any problems that were associated with any hired equipment. The Purton‑Smiths allege that from about mid-1992, and for a period of approximately 12 months, the Easi Call system suffered from problems which resulted in the calls being diverted to another telephone number. Later enquiries established that calls were diverted to a woman in Caulfield. It was not until about June 1993 that the Purton‑Smiths found out about the diversions. This is despite the fact that Mr Purton‑Smith received a number of complaints from disgruntled customers who had hired juke boxes which broke down, and who had been unable to obtain after hours service.
By mid 1993, the company was suffering from liquidity problems and the business was declining. The debts increased and eventually Mast International brought a proceeding seeking to wind up the company for failing to pay its debts. On 23 May 1994, the company was wound up by an order of the Federal Court. Mr Robert Morton, of Morton’s Accountants, was appointed the liquidator of the company. Some time in early 1994, Mr Purton‑Smith lodged a claim with the Telecommunications Industry Ombudsman. The claim included a personal claim on behalf of the plaintiffs, as well as a claim by the company. After appointment, the liquidator pursued a claim against Telstra. The Ombudsman was involved in the dispute between the company and Telstra. During this time, Mr Purton‑Smith was maintaining that he and his wife and family had personal claims against Telstra. This is despite the fact that the contracts to provide telecommunications services were between Telstra and the company. Mr Purton‑Smith took the view that because Telstra had caused damage to the company, he and his wife’s shares were devalued to a point where they were worthless and hence they had lost their livelihood and their assets. Mr Purton‑Smith claimed that he and his wife were owed about $60,000 by the company for wages, and a sum of $40,000 by way of loans provided to the company early on, when it was experiencing financial difficulties after its acquisition of the former business.
It is necessary to say something briefly about the Telecommunications Industry Ombudsman (“TIO”). The body provides a free and independent alternative dispute resolution scheme for consumers in Australia who have a complaint about their telephone services. Section 63(4)(n) of the Telecommunications Act 1991 empowered the Commonwealth Government to impose a condition on a telecommunication licence, whereby the carrier was obliged to enter into an Ombudsman scheme in association with other carriers. The imposition of conditions in respect to three carriers resulted in the establishment, on 10 June 1993, of the Telecommunications Industry Ombudsman. The three carriers were Telstra Corporation Ltd, Optus Networks Pty Ltd and Vodafone Pty Ltd. A company limited by guarantee was registered and its objects included the establishment of the Ombudsman scheme. A Constitution was adopted and this set out the functions of the Ombudsman, his jurisdiction, procedures and powers. The Ombudsman’s powers were limited. He or she could make a binding decision in relation to compensation not exceeding in value $10,000. However, by reason of clause 6.1 of the Constitution, a complainant had the option of electing whether or not to accept the decision of the Ombudsman. In respect of compensation sought in excess of $10,000, the TIO could make recommendations up to a total value of $50,000 compensation. It was then a matter for the particular carrier whether it would accept the recommendation. In relation to a complaint involving compensation in excess of $50,000, if the complainant, the carrier and the Ombudsman agreed, the Ombudsman could exercise arbitration powers in respect of the complaint. The Ombudsman had a discretion not to investigate a complaint, and one of the bases for refusing to deal with the complaint was if the Ombudsman came to the view that the courts, inter alia, could more conveniently or effectively deal with the complaint. The TIO is independent of industry, government and consumer organisations. The Ombudsman provides a service seeking to settle disputes in a fair way, having regard to the law and to good industry practice. Later, a Commonwealth Act was passed which set out the role and powers of the Ombudsman, namely, the Telecommunications (Consumer Protection and Service Standards) Act 1999. However, during the course of the dispute between Mr and Mrs Purton‑Smith and Telstra, the powers, duties, rights and obligations of the Ombudsman were to be found in the Memorandum and Articles of Association and Constitution of Telecommunications Industry Ombudsman Limited.
In the latter part of 1994, the liquidator was pursuing a claim against Telstra through the Ombudsman, seeking compensation for the company. The liquidator was not handling any personal claims made by Mr and Mrs Purton‑Smith. On the other hand, Mr Purton‑Smith was corresponding with the Ombudsman and Telstra, seeking to make a claim on behalf of his wife and himself in relation to their lost wages and the loans made to the company, and the general loss of their business. In addition, the Purton‑Smiths claimed that they had suffered mental injuries resulting from Telstra’s conduct.
In early 1995, a meeting was arranged by the Ombudsman involving Mr Purton‑Smith, his brother‑in‑law Charles Logan‑Bell, Telstra staff and the liquidator and his staff, to discuss the claims. The meeting was held on 20 January 1995 and was organised and conducted by a Deputy Ombudsman, Mr Walley Rothwell, assisted by a Ms Searby. A second meeting was held on 25 January 1995, and was also conducted by Mr Rothwell, assisted by Ms Searby. It is the contention of Mr Purton‑Smith that an agreement was reached at the first meeting, between he and Telstra. Mr Purton‑Smith stated that at the first meeting, the Deputy Ombudsman, Mr Rothwell, informed the meeting that they would deal with the liquidator’s claim and that any personal claims would be considered and determined later. It is the contention of Mr Purton‑Smith that the Telstra representatives at the meeting on 20 January 1995 assented to the proposition being put by Mr Rothwell, that the claim that the liquidator would be dealt with first “and then mediate and arbitrate the personal claim”. Mr Purton‑Smith’s brother‑in‑law, Mr Logan‑Bell, was present at the meeting and his evidence was that there was an assent by the Telstra representatives to the proposition made by Mr Rothwell, that in respect of any personal claim by the Purton‑Smiths, there would be mediation available and if it was not available “then there would be formal arbitration in preference to court proceedings.” In his final address, counsel for the plaintiffs submitted that the agreement between the plaintiffs and Telstra was that if the personal claim was not compromised, there would be a formal arbitration in preference to a court proceeding. The evidence of both Mr Purton‑Smith and Mr Logan-Bell during the trial is somewhat at variance with the way the case has been pleaded in the past. Four witnesses were called by Telstra and the effect of their evidence was that there was no such agreement.
I interpolate to observe that in the various amended statements of claim filed in this matter, a number of claims have been made, but plaintiffs’ counsel, Mr Grabau, informed the Court at the outset of the hearing that there were only two causes of action relied upon. First, an alleged agreement that Telstra would consider any personal claims by Mr and Mrs Purton‑Smith and would either mediate or arbitrate them. It was alleged that Telstra breached the agreement, causing personal injuries to Mr and Mrs Purton‑Smith, in the nature of psychiatric or psychological injury. The other claim, which is in the alternative, alleges that Telstra made a representation to the effect that it would agree to mediate or arbitrate the personal claims, that the representation was false, and that the misrepresentation was negligently made. It is alleged that as a result of Mr and Mrs Purton‑Smith relying upon the negligent misrepresentation, which was not honoured, they suffered personal injuries of a mental kind. It will be necessary to consider in detail the way the claims have been pleaded.
In December 1994, Telstra informed Mr Purton‑Smith that it was not liable by reason of exclusion clauses but if he and Mrs Purton‑Smith wished to make a claim they could complete a claim form. At that stage, Telstra was unaware of the claims made by the Purton‑Smiths, even though Mr Purton‑Smith had forwarded a long letter making a claim to the office of the Ombudsman in March 1994. At this stage, namely, December 1994, the Purton‑Smiths had retained a firm of solicitors and a claim was completed and submitted by their solicitors on 18 April 1995. On 2 May 1995, Telstra informed the plaintiffs’ solicitors that it was not liable.
Mr Purton‑Smith further agitated with Telstra and on 17 July 1995, a meeting took place at Telstra’s office, during which it was made very clear to the Purton‑Smiths and their lawyer that Telstra was not liable to the Purton‑Smiths. I interpolate to observe that at the meetings held on 20 January and 25 January 1995, the claim made by the liquidator of the company was compromised and Telstra paid the liquidator the sum of $22,500 without any admission of liability. In later correspondence, it was made clear by Telstra to the Purton‑Smiths that any claim was the claim of the company and not their personal claim, and since the company’s claim had been finalised, there was no question of any liability to the Purton‑Smiths. Having had their claim refused, it was a matter for the Purton‑Smiths to make the next move. The retainer with their then solicitors ceased and it is clear that the Purton‑Smiths did not have any funds to commence a legal proceeding. Later, Mr Purton‑Smith approached a firm, Howie and Maher, who in September 1996 wrote a letter to Telstra repeating the claim that had been made in 1995. This was also rejected by Telstra.
On 21 May 2000, Mr and Mrs Purton‑Smith and their three children issued a proceeding in the County Court at Melbourne against Telstra. At the beginning of the present hearing, the claim made by the three children was abandoned. The claims have been the subject of amendment a number of times and the factual bases for the claims substantially changed over the years. This reflects upon the credibility of the Purton‑Smiths’ causes of action.
Mr and Mrs Purton‑Smith maintain that they did have an agreement with Telstra to the effect that Telstra would mediate and, failing that, arbitrate their personal claims, and that Telstra breached the terms of the agreement, causing them mental‑type injuries. No claim has been made on their behalf for any economic loss. In the alternative, it is alleged that Telstra owed the Purton‑Smiths a duty of care in discussions concerning their personal claims, that Telstra made a negligent misrepresentation to them, which they relied upon, and as a result suffered mental‑type injuries.
Telstra denies that there was any agreement and that it made any negligent misrepresentation, and submits that any cause of action relied upon by the Purton‑Smiths is misconceived and without any basis in law.
The Issues
As stated, since the commencement of the proceeding, the statement of claim has been amended a number of times. The various statements of claim have pleaded a number of claims, but at the outset of the hearing, the plaintiffs’ counsel stated that there were only two causes of action relied upon, namely, breach of contract and negligent misrepresentation, and that the claim was for damages for personal injuries in the nature of mental injury. There was no claim for economic loss.
It is necessary to state the claims made in accordance with the second further amended statement of claim.
The first claim is a claim for damages for breach of contract. The claim is pleaded in paragraphs 3 – 8 (inclusive) of the latest amended statement of claim, dated 12 October 2005 and filed on 12 April 2006.
The second claim is a claim for damages arising out of negligent misrepresentations and is pleaded in paragraphs 19 – 21 (inclusive).
A. Contract Claim
The agreement is alleged in paragraph 3 of the latest claim. It is asserted that on or about 20 January 1995, an agreement was entered into between Telstra, the company and the plaintiffs “to compromise claims of the company and the plaintiffs against Telstra”. It is noted that the pleading asserts that Telstra agreed to compromise the plaintiffs’ claims. This was not the way the case was presented at trial. Indeed, it had been the assertion of the Purton‑Smiths over some years that Telstra had in effect made an admission of liability to them for their personal claims. But at trial this was not the way the case was conducted, nor was it the effect of the evidence.
It is alleged that the agreement was oral. The plaintiffs pleaded a number of terms of the alleged agreement. It is alleged in paragraph 4 of the amended statement of claim that it was a term of the agreement that Telstra “agreed that the only issue to be determined between the parties was the quantum of the claims”, and further that the quantum of the damage would be assessed in the future, when all material supporting the same had been submitted to Telstra. It was alleged that there was a further term that if the parties could not agree on quantum, the damages would be “assessed by an arbitrator instead of court in such sum as the plaintiffs could prove they had lost, both as to economic loss and as to personal injury.” It is further asserted that Telstra “agreed to be bound by the arbitrator’s assessment as to quantum and the plaintiffs agree to accept the arbitrator’s assessment as final.” In particulars sub‑joined to paragraph 4, it is pleaded that the terms were agreed at the meetings held on 20 and 25 January 1995.
It is then asserted that Telstra breached the terms of the agreement in that it failed to arbitrate the plaintiffs’ personal claims, and that as a result, the plaintiffs have suffered loss and damage. The particulars state that they suffered severe chronic adjustment disorder, complex post‑traumatic stress disorder, prolonged duress stress disorder, chronic fatigue syndrome and depression.
Telstra denied any such agreement. It further denied that there was any consideration for such an agreement. It also denied that the plaintiffs suffered any injury as a result of the events of 1995.
B. Negligent Misrepresentation
In paragraph 19 of the amended statement of claim, it is alleged that Telstra owed a duty of care to the plaintiffs to exercise reasonable care in making the representations, namely, that the plaintiffs and the company had claims against Telstra, that the quantum of damage suffered by the plaintiffs would be assessed in the future when all material supporting the same had been submitted, and that if the parties could not agree on quantum, the damages would be assessed by an arbitrator instead of the Court. It was asserted that Telstra negligently and falsely made the representations and that as a result, the plaintiffs have suffered damage in reliance on the representations. It is asserted that if Telstra had not made the representations, the Purton‑Smiths would not have fought the proceeding brought by a mortgagee against them in respect to their farm at Flowerdale, and would have sold the farm earlier. It is further asserted that as a result of their engagement in the legal proceeding and the subsequent sale of the farm, the plaintiffs suffered the same injuries which are set out in relation to the alleged breach of contract.
Telstra denies any duty of care, denies making any such representations, denies that it was negligent and further denies that the plaintiffs suffered any injuries as a result of Telstra refusing their claim.
I reiterate that the way the claims have been pleaded differ from the way the case was presented at trial. The variance between the pleadings and the way the case was conducted at trial reflects adversely on the credibility of the claims made. A perusal of correspondence and documents prepared in the years 1994-1996, the reports of the various expert witnesses called in respect of the injuries, and the changes to the statement of claim, together with the way the case was conducted at trial, leads to the conclusion that there was considerable doubt in the minds of the Purton‑Smiths as to what was the true basis of their complaint, and that it was only last year that lawyers worked out what may have been an arguable cause of action. The latter observation is supported by the fact that two of the injury experts, namely, Mr Rosenweg and Dr Cole, were alerted, not by the Purton‑Smiths, but by the lawyers, as to what was the alleged stressful act which allegedly brought about the mental complaints observed by the said practitioners in 2005. Mr Rosenweg amended his report to focus on the issues which were litigated at trial.
Facts
Before I state the facts, it is necessary to identify and state the way the plaintiffs’ case was presented. I have set out the final pleading above. However, the evidence did not support that pleading. Central to the two causes of action are the statements of fact which, it is alleged, were agreed to by Telstra. The alleged agreement was central to the breach of contract case, and also central to the allegation of negligent misrepresentation. Mr Purton‑Smith gave evidence of what occurred at the meetings on 20 and 25 January 1995, when, it is alleged, the agreement was reached and the misrepresentation was made. His brother‑in‑law, Mr Logan‑Bell, also gave evidence of what occurred at the meetings. As against their evidence, the defendant, Telstra, called four witnesses, two of whom were employed at the relevant time by Telstra and two of whom were independent. The effect of their evidence was that there was no agreement reached by Telstra at those meetings concerning the personal claims of the Purton‑Smiths and, further, that Telstra did not make any representations as to what it would do with respect to the personal claims.
I turn first to how the first plaintiff, Mr Purton‑Smith, now puts the claim in respect of the two causes of action.
Mr Purton‑Smith attended both meetings. His evidence was that at the outset of the meeting on 20 January 1995, Mr Wally Rothwell, the Deputy Ombudsman, said, after Mr Purton‑Smith and his brother‑in‑law had expressed concerns about their personal claims, “that he felt that the best way to handle the issue was to separate the liquidator’s claim from the personal claim and settle the liquidator – his wording was I think, ‘To expedite settlement of the claim for the liquidator and to assist him we would settle the liquidator’s claim first and then mediate and arbitrate the personal claim’.” Mr Purton‑Smith stated that he could not expand on the statement. He asserted that Mr Rothwell then went round the table seeking the assent of those present to the course he had proposed. Mr Purton‑Smith said that there was assent by reason of no objection to the course proposed.
It is noted that the alleged agreement was to the effect that the personal claim would be mediated and, if necessary, arbitrated.
Mr Logan‑Bell gave evidence. He had also attended both meetings, and had taken notes at the meetings. His version of events is different. He said that at the outset of the first meeting, Mr Rothwell stated that he wished to address the issue of the personal matter first, and that in order to do so, there were options that he would recommend that should be followed. Mr Logan‑Bell then gave evidence that Mr Rothwell had indicated: “And that was that, that if there could not be a future settlement of the claim, there would therefore be mediation available and if mediation was not available, then there would be formal arbitration in preference to court proceedings.” Mr Logan-Bell stated that the reference to the claim was to the personal claim. Mr Logan‑Bell produced his notes of the meetings.
It is clear, from all the evidence, that any reference to the personal claims of the Purton‑Smiths was no more than a passing reference made by Mr Rothwell at the beginning of the first meeting, and that the meeting then concentrated on the liquidator’s claim. At the first meeting, there were discussions and, as it turned out, the claims made by the liquidator exceeded the authority of any Telstra representative to compromise. The liquidator’s claims were in the order of some $33,000. At the second meeting, another Telstra employee attended who had the necessary authority, and the liquidator’s claims were settled in the sum of $22,500. These claims were made on behalf of the company and were made against Telstra on the basis that because of the faulty service provided by Telstra, the company had suffered loss and damage. The claims were settled on the basis of no admission of fault and were the subject of a release executed on 21 February 1995.
In Mr Logan‑Bell’s notes there is a reference to mediation and arbitration instead of going to court. The Ombudsman was seized with the issue with respect to the company’s claim and it was agreed by all that the Ombudsman would hold a formal mediation in an endeavour to settle the company’s claim. Whilst initially Mr Logan‑Bell thought that the reference in his notes to formal mediation and, if necessary, formal arbitration rather than court proceeding, in the event that an agreement was not reached, was to the personal claim, after further consideration of his notes and as the result of cross‑examination, he later conceded and accepted that the reference in his notes was most likely to the company’s claim. Indeed, earlier in his notes there is a note that Mr Rothwell said that the issue for the meeting was the claim made by the liquidator and that the claim did not include the personal claim of the directors and shareholders. Mr Logan‑Bell, not surprisingly, accepted that his memory of the events was poor and that he was relying upon his notes. He did in the end accept that the reference in his notes was a reference to the company claim. In my opinion, the overall evidence leads to that conclusion.
The Purton‑Smiths start out with a heavy burden of persuading the Court that the version of events given by Mr Purton‑Smith is correct and accurate. There is no document which supports the version given by and on behalf of the plaintiffs. The documents which came into existence in 1994 and 1995 do not provide any support for the plaintiffs’ version. One adds to that the different versions in the various amended statements of claim, the contents of affidavits sworn by Mr Purton‑Smith and Mr Logan‑Bell, the answers to interrogatories of Mr Purton‑Smith, and the contemporaneous documents, all of which lead to considerable doubts about any agreement binding in law. Further, the fact that the case presented at trial does not accord with the latest amendment to the statement of claim, leads to the conclusion that the version given by and on behalf of the plaintiffs is not accurate, and does not establish any cause of action on their behalf. I interpolate to observe that Mrs Purton‑Smith was not present at either meeting in January 1995 and hence was unable to give any evidence in respect to an alleged agreement or alleged negligent misrepresentation.
There is a substantial body of evidence which raises substantial and numerous question marks as to the credibility of Mr Purton‑Smith. In 1994, he forwarded a long letter making a claim to the Ombudsman’s office. The document was not forwarded to Telstra. In the latter part of 1994, Telstra was aware that Mr Purton‑Smith wished to make what he described as a personal claim over and above the claim made by the liquidator. The meeting convened by the Ombudsman was to deal with the liquidator’s claim. Mr Purton‑Smith was told prior to the meeting by the Ombudsman’s assistant that the meeting was not to deal with the personal claim. Telstra wrote a letter in December 1994 informing Mr Purton‑Smith that it denied any liability to him. Reference was made to exclusion clauses, and he was given a claim form in respect to his personal claims to complete and send to Telstra. By this time, he had engaged Richmond and Bennison Solicitors to act on his behalf. At no stage prior to the meetings in January 1995 had Telstra any information of the personal claims foreshadowed by Mr Purton‑Smith. Indeed, it was not until 18 April 1995 that his solicitors forwarded a detailed claim to Telstra. Documentary evidence supported by the evidence of Mr Rothwell, the Deputy Ombudsman, was to the effect that the Ombudsman took the view that he did not have the jurisdiction to entertain any personal claim to be brought by the Purton‑Smiths, and that Mr Purton‑Smith was told this prior to the first meeting. In addition, when the Purton‑Smiths were seen by a psychologist in 2001 and 2002, no reference was made to any alleged agreement which caused them disappointment thereby leading to some mental injury. Indeed, when the Purton‑Smiths saw two other experts, Mr Rosenweg and Dr Cole, again no reference was made to any alleged agreement. All these facts lead to the conclusion that the claim made at the hearing was very much an afterthought and was not consistent with the events which occurred in 1995. There was no document which came into existence prior to the institution of the County Court proceeding which provides any evidence of an alleged agreement to arbitrate.
I do not accept Mr Purton‑Smith as a credible witness. It is clear from the history of his involvement with Telstra and the litigation that he is obsessed with the claim against Telstra. He has convinced himself that his losses in life and misfortunes are all attributable to Telstra failing to provide a proper call diversion system for his businesses. There is some evidence to support a finding that at times the Telstra system failed to deliver a proper service. The liquidator made a claim which was compensated on a no-admission basis. Mr Purton‑Smith believes that it was Telstra that brought down his business empire, which had the flow-on effect of destroying his livelihood. However, whilst the Telstra problem may have played some part, I do not accept that Telstra brought Enfield Peak to its knees. The liquidation documents prepared by the company secretary show that it had a deficit well in excess of $200,000 in June 1994. The amount of compensation agreed to by the liquidator was in the order of $22,500. Despite Mr Purton‑Smith’s contention that his businesses were successful, the evidence revealed that both his former company Purton Electronics Pty Ltd and the later company were failures from at least 1985. He and his wife injected capital into the new company but it failed just as the earlier business had failed, leaving creditors lamenting.
Mr Purton‑Smith, like many shareholders of failed private companies, suffered a substantial loss when his shares in the company became valueless. He had claims, as did his wife, in the order of $60,000 for wages not paid and $40,000 in loans made to prop up the business. However, as a general rule, the loss in value of the shares and the inability of the company to pay its debts to the employees and lenders do not give those persons a right of action against a party which was liable to the company. This was pointed out to Mr Purton‑Smith at an early stage of the hearing. He said that he did not appreciate that. I do not believe him. He had legal representation in late 1994 through to the end of 1995. He consulted with a barrister in this period. The many statements of claim delivered show a variety of versions resulting in this hearing, being a claim for personal injuries. There is no claim for economic loss. He obviously gave consideration to the matter raised by the Court, because thereafter in the trial he focussed in his evidence on a personal claim that he said he had through a business called Salome Catering, which was registered in his name. Reference to the documentation passing between the parties in 1994‑5 shows that Mr Purton‑Smith initially did not seek to make a personal claim on the basis of his proprietorship in Salome Catering, and that the thrust of the early claims made by him and on his behalf were the losses suffered by him as a shareholder and an employee of the company. The fact was that Telstra had contracts with the company and accordingly had certain obligations pursuant to the contracts. Whilst Telstra had a contract with the Purton‑Smiths in respect of their home telephone number, the complaint against Telstra related to the business numbers.
After he had been apprised that he did not have a personal claim arising out of the failure of the company’s business, he changed tack in the course of his case, and during his cross‑examination thereafter emphasised the claim through Salome Catering. He was asked whether there was any documentation which supported such a claim, that is, a personal claim arising out of his proprietorship of Salome Catering, and he was unable to refer to any. In my opinion, he deliberately changed the basis of his claim after being apprised of the fact that his claims in relation to the company’s business could not be sustained, and he was prepared to falsely assert a claim which he had not ever stated in any form, documentary or otherwise, in the years 1994‑5.
In addition to these matters, Mr Purton‑Smith has in fact given a number of versions of the alleged agreement made on 20 January 1995. When Mr Purton‑Smith gave his evidence, he stated that the agreement was that at a meeting held on 20 January 1995, the Deputy Ombudsman, Mr Rothwell, had said words to the effect:
“To expedite settlement of the claim for the liquidator and to assist him we would settle the liquidator’s claim first and then mediate and arbitrate the personal claim.”
Mr Purton‑Smith stated that the Telstra representatives had agreed to this course at the meeting. When asked by the Court, Mr Purton‑Smith reiterated that that was the basis of the agreement reached at that meeting.
However, there have been number of versions of events which are different to that given by Mr Purton‑Smith at trial. Putting aside evidence given by Messrs Rothwell, Morton, Soosai and Fredericks, and the Telstra representatives, the different versions put forward by Mr Purton‑Smith in various documents show an ever‑changing story and clearly demonstrate that he is unreliable and lacks credibility.
First of all, reference is made to the present amended statement of claim. I have already summarised the way the claim has been pleaded.
The pleading was drawn to the attention of Mr Purton‑Smith during the trial and he accepted that the sworn evidence given by him was inconsistent with the way the claim had been pleaded. Further, his attention was drawn to the particulars which are sub‑joined to paragraph 4, and in relation to this alleged agreement the following appears:
“The meeting was held up while this issue was dealt with. (The personal claims). Wally Rothwell then suggested to break the deadlock that the parties could agree that the claims for the first plaintiff and the second plaintiff could be mediated, later, and if necessary arbitrated instead of court.”
This version contradicts the agreement pleaded earlier in the amended statement of claim, although it is similar to his sworn evidence. Again, Mr Purton‑Smith was unable to explain the discrepancy, other than to repeat that the sworn evidence was the evidence of the agreement. Mr Purton‑Smith was then taken to a number of documents filed in the proceeding. The first was the County Court writ, which was filed on his behalf on 22 May 2000. In the general endorsement there is no reference at all to any claim arising out of a breach of any contract. Indeed, no contract of compromise was pleaded. Secondly, attention was then drawn to a document called an amended statement of claim, dated 4 June 2001. Reference to the Court file shows that it was never filed, although it is clear that it was forwarded by the plaintiffs’ then solicitor to Telstra’s solicitors as a proposed amended statement of claim. Mr Purton‑Smith accepted that he had read the document when it was prepared. In paragraph 20 of the said document is alleged an agreement made on 25 January 1995. The case at trial was that the agreement was made on 20 January 1995. It is asserted that in so far as it was oral, Telstra acknowledged and agreed that the plaintiffs had and would continue to have rights to recover against Telstra, separate from any claim by the company, and that Telstra acknowledged that the quantum and complexity of the personal claims was greater than the claim by the company, and further that the claims by the plaintiffs would be the subject of continuing negotiations. This is contrary to the claim presented to the Court by Mr Purton‑Smith.
The third document is an affidavit sworn by Mr Purton‑Smith on 28 November 2001, filed in an interlocutory application. In the affidavit, Mr Purton‑Smith asserted that there was an agreement with Telstra. He swore that on 25 January 1995 “Telstra accepted liability and on that occasion it was made very clear to Telstra by both of us [Mr Purton‑Smith and his brother‑in‑law Mr Logan‑Bell] that we were prepared to agree to the settlement of the company’s claim with Telstra subject to and conditional upon our retaining our personal rights to seek damages from Telstra.” He further deposed: “In view of Telstra’s acceptance of liability any further damages to be paid to us personally was a matter of quantification.” This version is contrary to the way the case was presented at trial. It is clear that the two versions cannot stand together. According to the affidavit, Telstra had accepted liability and it was only a question of quantification. This affidavit was sworn at a time when it was foreshadowed by the Purton‑Smiths’ then lawyer that a further amended statement of claim would be filed.
The further amended statement of claim was filed on 13 December 2001. The statement of claim was settled by counsel. The amended statement of claim pleaded, in paragraph 3, that an agreement was entered into on 25 January 1995 between Telstra and the plaintiffs. It pleaded that there were terms of the agreement to the effect that Telstra had admitted liability for the damage, and that the damages would be assessed in such sum as the plaintiffs could prove they had lost “both as to economic loss and as to personal injury”, and that if the parties were unable to agree on the amount to be assessed, “the plaintiffs, at their option, would be entitled to proceed to arbitration or to a court for the purpose of obtaining an assessment of such damages.” It was further pleaded that the defendant would pay the damages assessed. This claim bears no resemblance to the case presented at trial.
The next document tendered in evidence was interrogatory 25 of the defendant’s interrogatories for the examination of Mr Purton‑Smith, and three answers by him to the said interrogatory sworn on a date in October 2002, on 28 November 2002, and on 16 March 2003 respectively. In the first answer, which was in response to an interrogatory as to the material substance of the agreement, Mr Purton‑Smith swore that he was unable to recall the precise words used, but that they were to the effect “we will retain our individual rights against Telecom”. The second answer was in these terms – “The material substance of the statements was that Mr Soosai and Mr Munro agreed that the personal claims of the plaintiffs would be postponed.” The third answer was in these terms – “Mr Rothwell said that it was practical to settle the company claims separately to the individuals’ claims to be pursued by agreement with Telstra or by the arbitration process set up by the TIO. Mr Morton said he held Telstra liable for seventy per cent of the company’s losses. Both myself and Jim Logan‑Bell expressed concern about the amount of the individual’s claims not being recognised in the quantification of losses processed by the company and our concern to obtain compensation. Mr Soosai, Mr Fredericks and Mr Morton agreed that we would be separately compensated for those losses at a later time.” The latter observation is contrary to the way the case was presented at trial.
The next document, dated 10 February 2005, which was delivered to Telstra’s solicitors by the plaintiffs’ present solicitor, asserted that the agreement took place on 20 January 1995. This was the first time that such an allegation had been made, and it was pleaded in paragraph 4 that the defendant accepted liability for, inter alia, the plaintiffs’ damage and that in the event the parties were unable to agree on a sum, “the plaintiffs, at their option, would be entitled to proceed to arbitration instead of court for the purposes of obtaining an assessment of such damages.” Very soon thereafter, a further revised proposed amended statement of claim was delivered, dated 23 March 2005, and again it was asserted that Telstra had accepted liability for damage suffered by the Purton‑Smiths. Finally, I refer to the latest further amended statement of claim and the way the case has been pleaded.
The history of the assertions made by and on behalf of Mr Purton‑Smith shows a changing story, and uncertainty and vagueness as to the alleged agreement. The changes in the story over the years reflect on the credibility of Mr Purton‑Smith and raise substantial doubts concerning his evidence. One adds to the court documents the correspondence written by Mr Purton‑Smith after January 1995 and the letters of demand sent by his then solicitors, Richmond and Bennison, and Howie and Maher. These letters covered a period from 1 February 1995 to 18 September 1996 and there is no reference in any of them to the alleged agreement made on 20 January 1995. The first letter, dated 1 February 1995, was written to Mr J. Bourke of counsel by Mr Purton‑Smith, and clearly demonstrates a realisation that the liquidator settling the company’s claims may compromise any personal claim that he may have. On the last page of the letter, Mr Purton‑Smith wrote – “I firmly required (sic) that you apply to the court seeking injunctive relief preventing Telecom and the arbitrator wrongfully entering into a settlement that denies myself and other unsecured creditors a right to claim against Telecom.” No reference is made to any alleged agreement. The next letter, dated 13 February 1995, was sent by Mr Purton‑Smith to a firm of solicitors in Benalla seeking finance with respect to the farm property at Flowerdale, and referred to the claim made by the liquidator. Mr Purton‑Smith wrote – “Telecom have agreed to pay $22,500 to the liquidator as compensation for a loss of $36,000 in profits and the door has been left open for us to claim loss of business, loss of income etcetera. This matter is currently in the hands of Richmond and Bennison who have briefed Justin Bourke. This claim will be made under the Trade Practices Act and Telecom are waiting on our assessment of the claim.” This version is at complete odds with the way the case has been presented in this Court.
On 17 February 1995, Mr Purton‑Smith wrote to a lender in Benalla and again repeated many of the same observations. On 29 March 1995, a letter was sent to Telecom in Bendigo concerning a disconnection notice which had been forwarded to the Purton‑Smiths. Reference again was made to a personal claim, but no mention was made of any agreement. The letter concludes – “Sir, the bottom line is that we want to pay our phone bill, however as my livelihood has been taken from us and my family are suffering extreme emotional and financial stress due to the proven technical incompetence of some Telecom employees, my solicitors Richmond and Bennison have obtained Legal Aid to pursue our claim.”
On 18 April 1995, Richmond and Bennison sent a letter of demand to Telstra. It was a detailed six page letter of demand and nowhere in the letter is there any reference to any alleged agreement concerning liability, admission of liability or agreeing to arbitrate any personal claims. One might have thought that if this was the position, the solicitors would have relied upon the alleged agreement, whether it be an agreement or an assurance to that effect.
On 1 May 1995, Mr Purton‑Smith wrote to Telstra and, again made no reference to any alleged agreement. On 21 June 1995, Mr Purton‑Smith wrote another letter to Richmond and Bennison and, again, made no reference to any agreement. In the letter of demand from a new firm of solicitors, Howie and Maher, dated 18 September 1996, there was also no reference to any alleged agreement.
The Purton‑Smiths saw a psychologist in July 2001 for a medico‑legal report. The psychologist diagnosed that both were then suffering from anxiety and depression and that Mr Purton‑Smith was suffering from a severe chronic adjustment disorder. The possible cause of the condition of both, inter alia, was the failure of their business. There is no reference to any agreement causing mental injury.
The correspondence and reports do not support the case put by the plaintiffs and indeed are contrary to it.
I now turn to the facts. Mr Purton‑Smith was born on 4 February 1940 and is now aged 66 years. He commenced the hire business with his wife some time in late 1969. It hired juke boxes and dance floors. The business then moved into party hire in 1974. The business was run through a company called Purton Electronics Pty Ltd. By late 1989 the business was in financial trouble. It was unable to pay its debts as they fell due. Whilst Mr Purton‑Smith attempted to lay some blame at the door of Telstra, in my opinion, on the evidence before the Court, the real causes were poor management, poor records, undercapitalisation and indiscriminate borrowing, and excessive reliance on trade credit. The company had a deficiency of approximately $186,824 when it failed at the end of 1989. In order to continue the business, Enfield Peak was incorporated on 22 November 1989 and it acquired, at a bargain basement price, the value of the business. Mr Logan-Bell, a director of the company and brother‑in‑law of Mr Purton‑Smith, described the changeover as a reconstruction, but conceded it could have been viewed as simply a fraud on the creditors. Thereafter Enfield Peak operated the business of juke box and party hire. The Purton‑Smiths also operated a catering business known as Salome Catering. The proprietor of the business was Mr Purton‑Smith. The business was conducted at premises in South Melbourne. The Purton‑Smiths injected capital into the new company but from the outset it was bedevilled by financial problems.
In March 1992, Telstra sold to the company a Telecom Easi Call system. Its main purpose was to direct calls from the business premises to the plaintiffs’ home. The plaintiffs moved to their farm property at Flowerdale in May 1992. They purchased the property for $160,000 with a mortgage of $114,000. The interest rate, according to Mr Purton‑Smith, was in the order of 8%. I have little doubt that this placed a heavy financial burden on the plaintiffs. Between June 1992 and June 1993, problems were experienced with the Easi Call system and instead of the calls being diverted to the plaintiffs’ home at Flowerdale, they were diverted elsewhere. Just how many calls were diverted was not the subject of credible evidence. Mr Purton‑Smith said he did not know, but believed there were a lot. He believes that the ultimate demise of the business was due to the failure of the system. However, he admitted that during that period, he became aware that there were problems because irate hirers of juke boxes could not get through to the Purton‑Smiths by telephone when breakdowns occurred, and they berated Mr Purton‑Smith when he went to collect the juke boxes. Despite this, Mr Purton‑Smith did not take any steps to provide an after hours number. In June 1993, the business was moved from South Melbourne to Campbellfield. This involved further expense, although Mr Purton‑Smith asserted in evidence that a lot of their business was in the Campbellfield area. I query that evidence.
By late 1993, Enfield Peak was in financial trouble. The directors of the company were Mr Purton‑Smith, his brother-in-law Charles Logan-Bell, and his former wife, the second plaintiff. Mr Purton‑Smith owned 54% of the shares, Mr Logan-Bell owned 19.2% of the shares, and Mrs Purton‑Smith owned 19.2% of the shares. Demands were made upon the company in the latter part of 1993 and it was unable to pay its creditors. In addition, the mortgagee of the Flowerdale property was pressing for interest payments and the Purton‑Smiths were having trouble meeting their financial obligations.
On 23 May 1994, a creditor, Mast International Ltd, trading as Australian Directory Services, obtained a winding up order in the Federal Court and Mr Robert Morton was appointed liquidator. The liquidation brought the business to an end. The estimated deficiency was in the order of $133,310. The creditors of Enfield Peak were in the main the same creditors who were left lamenting on the liquidation of Purton Electronics Pty Ltd, that is, the Australian Tax Office, and the State Revenue Office. According to the report prepared by the Australian Securities Commission, the reasons for the failure of the company were poor accounting, lack of information for decision –making and poor management, and also faulty Telstra diversion services.
Another matter that cannot be overlooked, and which reflects upon the credibility of both Mr Purton‑Smith and Mr Logan‑Bell, was that Enfield Peak was incorporated to purchase the juke box and party hire business of Purton Electronics Pty Ltd prior to the appointment of the liquidator. Whilst both sought to rely upon the advice of the liquidator as the reason for doing what occurred, the fact was that both appreciated that they were seeking to wipe the creditors’ slate clean by selling the assets to another company and hence defrauding the creditors.
Whilst the Telstra diversion services problems may have contributed to some of the liquidity problems, the fact is that the management by Mr Purton‑Smith, and to a lesser degree his brother-in-law, was found wanting. The company Enfield Peak appears to have been undercapitalised, and was not deriving sufficient income.
Both Mr and Mrs Purton‑Smith gave evidence that the business operated by the new company was successful and, but for the Telstra problems, would have continued. I do not accept their evidence. The accounts for the years ending 30 June 1990 and 1991 show a company barely able to survive. The balance sheet for 30 June 1991 showed net assets of $71,302. The profit was $1,826.
In October 1994, Mr Purton‑Smith retained a firm of solicitors, Bennison and Richmond, to investigate any possible claim against Telstra arising out of the demise of the company’s business. As outlined above, Mr Purton‑Smith had earlier approached the Ombudsman (“TIO”) and forwarded to his office a claim against Telstra. In the meantime, the liquidator had made a claim against Telstra. In January 1995, a meeting was arranged for the purpose of considering the claims against Telstra.
As stated earlier, the written claim forwarded by Mr Purton‑Smith to the TIO was not sent to Telstra. On 22 December 1994, Telstra informed Mr Purton‑Smith by letter that it was entitled to rely upon an exclusion clause. By a letter dated the same date, Telstra forwarded to Mr Purton‑Smith a standard form to make a compensation claim. The letter provided – “In relation to your claim for compensation you will need to support your claim with concise support documentation to substantiate that all business losses incurred, were a direct result of a Telecom act or omission.” At this stage, Telstra was unaware of the nature of the personal claim made by the Purton‑Smiths. In a letter dated 21 December 1994, Mr Rothwell, the Deputy Ombudsman, had informed Telstra of the liquidator’s claim and noted that it did not include a personal claim on behalf of the Purton‑Smiths. I accept the evidence of Mr Rothwell that he discussed the question of whether the TIO would be involved in any personal claim with the Ombudsman, and that a decision was made prior to the meeting of 20 January 1995 that the TIO would not be involved in any personal claims made by the Purton‑Smiths.
The Purton‑Smiths were of the view that they had personal claims against Telstra. The claims comprised $60,000 for lost wages, $40,000 for loans made to the company, and compensation for the loss of their business. These claims were, on proper analysis, against the company and not Telstra. Enfield Peak had contracts with Telstra and if there was any failure of the Telstra Easi Call system, then the proper claimant was the company.
It was apparent prior to the first meeting, which was held on 20 January 1995, that the Purton‑Smiths wished to make a personal claim. This was known to Telstra but no details had been provided to it. The TIO had limited jurisdiction. A decision was made by the TIO that it would not be involved in any personal claim made by the Purton‑Smiths and this was conveyed to Mr Purton‑Smith prior to the meeting on 20 January 1995. He was told by the Deputy Ombudsman, Mr Rothwell, on 19 January 1995 and by his assistant on 13 January 1995.
On 19 January 1995, an important telephone conversation took place between the Deputy Ombudsman, Mr Rothwell, and Mr Purton‑Smith. Mr Purton‑Smith accepted that he did have such a conversation but that his memory of it was lacking. Mr Rothwell gave evidence of the telephone conversation. His notes of the conversation were tendered in evidence. The notes of the conversation were put to Mr Purton‑Smith and he stated that he thought they were an accurate report of the conversation. Mr Rothwell spoke to Mr Purton‑Smith three times on 19 January 1995 to set up the meeting for 10.00am the following day to consider the liquidator’s claim. Mr Rothwell made it clear to Mr Purton‑Smith that any claim that he and his wife had for wages and loans to the company were matters between them and the liquidator. It was pointed out that if the liquidator settled the claim, the Purton‑Smiths would have to look to him for any payment. Mr Rothwell went on to observe that any claim by the Purton‑Smiths for personal damage in the nature of trauma, depression et cetera, was a separate issue which the Purton‑Smiths could take up separately. I accept the evidence of Mr Rothwell. I find that when Mr Purton‑Smith attended the meeting on 20 January 1995, he was aware that the TIO would not be involved in any personal claim made by him and his wife.
A meeting took place at the office of the TIO on 20 January 1995. Present were Mr Rothwell and his assistant Ms Rose Searby, Mr Purton‑Smith and Mr Logan‑Bell, the liquidator Mr Robert Morton and his assistant, Chris O’Farrell, and two representatives of Telstra, namely, Edwin Soosai and Quentin Fredericks. Ms Rose Searby was an experienced employee of the TIO and was in charge of investigations. Mr Rothwell requested her assistance to deal with the matter as it was his first mediation.
Telstra called four witnesses, namely, the Deputy Ombudsman Mr Rothwell, Mr Morton, Mr Soosai and Mr Fredericks as to what took place at the meeting. As outlined above, Mr Purton‑Smith and Mr Logan-Bell also gave evidence of what took place at the meeting.
I have already stated my opinion of the credibility of Mr Purton‑Smith. I do not accept him as a credible, reliable, honest and accurate witness. Mr Logan-Bell, I am satisfied, was doing his best to honestly remember what took place in excess of ten years ago. I am satisfied that he has given much thought to his evidence and that because of his partiality to the Purton‑Smiths’ claim, his relationship with them and the passage of time, in certain respects his evidence was inaccurate. He was cross‑examined as to certain matters based upon his notes and an affidavit he made, and it is clear that he has made prior inconsistent statements which reflect upon his overall credibility.
The other witnesses gave evidence of what occurred at the meeting and I accept their evidence. Mr Rothwell’s evidence was to some extent supported by his notes of 19 January 1995 and notes of the meeting prepared by his assistant, Ms Searby, who was not called as a witness. However, he gave evidence that he had checked her notes and was satisfied that they were a true and accurate record of what occurred at the meeting. He had amended the notes. They were tendered in evidence. They provide support for his version and that of the other witnesses called by Telstra.
Mr Rothwell made a statement at the meeting as to what was going to be discussed at the meeting. He made it clear to those present that any personal claim by the Purton‑Smiths was not going to be the subject of any discussion and that if the Purton‑Smiths wished to pursue any personal claim against Telstra, it had to be dealt with separately. Mr Rothwell gave evidence to that effect and his evidence was supported by the others.
The evidence of Mr Purton‑Smith given at trial bears little resemblance to what is in the statements of claim, including the present statement of claim. The various amended statements of claim, the contents of the affidavit sworn by Mr Purton‑Smith on 28 November 2001, and the correspondence both before and after the meeting of 20 January 1995, show that Mr Purton‑Smith’s version is an afterthought. I reject it.
Mr Logan‑Bell’s version of the meeting and what was agreed is a slight variation to Mr Purton‑Smith’s version. I have discussed his evidence. I do not accept Mr Logan‑Bell’s version either.
The thrust of the evidence of the four persons called by Telstra was that it was made clear that the personal claim would not be the subject of any discussion at the meetings and that if the Purton‑Smiths wished to pursue any personal claims, they would have to do so separately. I accept the evidence of the other persons present. There was no agreement to mediate and arbitrate and no agreement that Telstra accepted any liability to pay compensation to the Purton‑Smiths.
All that occurred at the meeting on 20 January 1995 was an acceptance by all that the liquidator’s claim would be considered and, if possible, compromised, and that any personal claim by the Purton‑Smiths was to be a separate matter to be pursued by the Purton‑Smiths separately from the liquidator’s claim.
What occurred at that first meeting, after the reference to the personal claim, was discussion of the liquidator’s claims, with the liquidator stating what he was prepared to accept. Those present at the meeting on behalf of Telstra were not authorised to compromise any matter above $10,000 and accordingly the meeting was adjourned to enable a Telstra officer who had the necessary authority to be present. The meeting was adjourned to 25 January 1995, and on that day a meeting occurred, commencing at 7.30am at the office of the TIO. Eventually, Telstra and the liquidator settled Enfield Peak’s claims in the sum of $22,500 and on 21 February 1995, the liquidator signed a release. It was a term of the release that Telstra did not admit any liability.
In the meantime, the Purton‑Smiths were attempting to stall the mortgagee’s claim against them in respect to their home property. In April 1995, a proceeding was instituted by the mortgagee against the Purton‑Smiths, seeking possession of the property. Richmond and Bennison, on behalf of the Purton‑Smiths, were preparing a claim against Telstra and on 18 April 1995, they sent the claim to Telstra. It was asserted in the letter of claim that the liquidation of the company caused the collapse of the family business, that this was the direct result of faulty telephone services and that “our clients seek compensation from Telecom in respect of their loss of livelihood and associated damages.” The letter went on to state what was described as “a brief history of relevant matters”.
The letter referred to the Purton‑Smiths’ claim and it was alleged that there was negligence on the part of Telecom which resulted in the loss suffered by the Purton‑Smiths, that the Purton‑Smiths relied upon advice given to them by Telecom and this was negligent, and that Telecom in trade and commerce had engaged in conduct that was misleading and deceptive. At no stage did the letter refer to any alleged agreement made in January 1995. The damages were said to be loss of livelihood, which led to severe consequences, namely, the inability to pay mortgage payments, and health problems suffered by Mrs Purton‑Smith. The damages were then set out. There was a claim for damages for pain and suffering. There was also a claim for loss of livelihood and income, and consequential losses in respect of the inability to meet the mortgage commitments.
The Purton‑Smiths claimed the sum of $349,950 in compensation and the letter concluded that unless there was a response in the near future, the clients would have “no option but to commence proceedings against Telecom”. Nothing was said about Telstra agreeing to mediate or arbitrate the claims.
Mr Grabau was unable to refer to any case which held that where one party makes a claim on another, a duty of care was imposed upon that party in considering and determining its approach to the claim made. It has been recognised that advice or information provided during the course of pre‑contract negotiations may impose a duty of care, and would be actionable if damages are suffered, if given negligently. See Esso Petroleum Co Ltd v Mardon.[14] However a duty of care would only arise if it was clear that one of the parties to the proposed contract had expertise in relation to a particular subject matter, and provided the information relied upon by the other contracting party leading to the contract. That is not the case here. On the other hand, a solicitor acting for a party in hostile litigation owes a duty to his client and the Court, but does not normally owe a duty to his client’s opponent. See Business Computers International Ltd v Registrar of Companies[15] and Al‑Kendari v J.R. Brown and Co.[16] Further, applying the basic principles established in Donoghue v Stevenson,[17] in my opinion it is strongly arguable that it is not reasonably foreseeable that the disappointment brought about by a refusal to honour a contract would cause mental injury over and above disappointment, distress, anxiety and indeed devastation. In my opinion, it is strongly arguable in the circumstances that Telstra did not owe a duty of care when making statements at the meetings held on 20 and 25 January 1995.
[14][1976] QB 801.
[15][1988] Ch 229.
[16][1987] QB 514.
[17][1932] AC 562.
But in any event, assuming there was a duty of care, I find that Telstra did not make any statements to the effect that it would join in an arbitration of the personal claims made by the plaintiffs. I reach that conclusion for the same reasons which led to my conclusion that there was no contract made between the plaintiffs and Telstra at the meetings held in January 1995. Specifically, the plaintiffs have failed to prove that Telstra made any representation that it would arbitrate the personal claims of the plaintiffs. In addition, I find that if there was a duty of care and if there was a representation made, I am not persuaded on the evidence that the representation, when made, was false. In other words, the plaintiffs have failed to prove that the representation made, if indeed it was made, was false. Finally, for reasons which I have already stated, there is no evidence that the plaintiffs suffered personal injuries of a mental nature as a result of any alleged negligent misrepresentation. The claim in tort also fails.
Conclusion
The plaintiffs’ two causes of action have not been proven. The proceeding must be dismissed. Subject to any submissions made by counsel, I propose to make orders that the proceeding be dismissed and that the plaintiffs pay the defendant’s costs, including reserved costs.
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