JOHN ERIC STOWE (plaintiff) v MARGARET DORIS JOHNSON
(defendant)
FILE NO:
BS 7911 of 2014
DIVISION:
Trial Division
PROCEEDING:
Trial
ORIGINATING COURT:
Supreme Court of Queensland at Brisbane
DELIVERED ON:
3 December 2018
DELIVERED AT:
Brisbane
HEARING DATE:
16 July and 24 October 2018
JUDGE:
Ryan J
ORDER:
The plaintiff has not established an entitlement to judgment. The claim is dismissed.
CATCHWORDS:
TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – CONSUMER PROTECTION – UNCONSCIONABLE CONDUCT – where the plaintiff invested in a property management business and lent money to the business – where the plaintiff lost the money he invested, and failed to recover it as an unsecured creditor – where the plaintiff now claims damages under s1041I of the Corporations Act 2001 (Cth) for misleading or deceptive conduct; s 12GF of the Australian Securities and Investment Commission Act 2001 (Cth) for misleading or deceptive conduct; s 82 of the Trade Practices Act 1974 (Cth) for misleading or deceptive conduct/false or misleading representations or for negligent misstatement – whether the defendant made false or misleading representations to the plaintiff which induced him to invest in the business
TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER PROTECTION LEGISLATION – CONSUMER PROTECTION – UNCONSCIONABLE CONDUCT – where the plaintiff claimed damages for unconscionable conduct under section 12GF of the ASIC Act – whether the defendant’s dealings with “the funding of the Cameo business” constituted unconscionable conduct
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE BREACH AND DEFENCES TO ACTIONS FOR BREACH – PERFORMANCE – where the plaintiff claimed damages for breach of contract – whether the defendant breached a term that she be “just and faithful” in her dealings with the plaintiff – whether the defendant breached a term that she would “ensure” that the trust would pay its debts and meet its obligations
COUNSEL:
N J Shaw for the Plaintiff No appearance for the Defendant
SOLICITORS:
Porter Davies Lawyers for the Plaintiff
No appearance for the Defendant
Overview
On the strength of an Offer Document, the plaintiff invested in the establishment of a property management business known as Cameo Property Services. Cameo Property Services operated by way of a unit trust. Polox Pty Ltd[1] was the trustee of the trust. The defendant was Polox’s sole director. Polox owned the assets of the trust, the most valuable of which were its rent rolls.
[1] Also called Cameo Property Services Pty Ltd.
According to the plaintiff, in pursuance of his investment he paid a “bond” of $250,000 (which was returned to him); he subscribed for 500,000 units in the CPS Unit Trust[2] for $500,000 and he lent Polox $300,000 by way of a short-term loan.
[2] The name of the trust through which the business operated.
Cameo was not a successful business. It was struggling by the end of 2010. Liquidators were appointed on 3 February 2012. The plaintiff lost the money he invested in Cameo and…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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Details
AGLC
Stowe v Johnson [2018] QSC 278
Case
[2018] QSC 278
Decision Date
CaseChat Overview and Summary
In the case of Stowe v Johnson, the plaintiff, Mr. Stowe, sought damages from the defendant, Mrs. Johnson, for losses he incurred from investments in the Cameo business. The plaintiff claimed damages for misleading or deceptive conduct under various sections of the Corporations Act 2001, the ASIC Act 2001, and the Trade Practices Act 1974. Additionally, he sought damages for breach of contract and unconscionable conduct under the ASIC Act. The court was required to determine whether the defendant made any false or misleading representations that induced the plaintiff to invest in the business, and if so, whether those representations constituted unconscionable conduct. The court also needed to decide if the defendant breached any contractual obligations, such as being "just and faithful" in her dealings with the plaintiff and ensuring the trust met its financial obligations.
The court found that the plaintiff's evidence was insufficient to establish that the defendant made any specific representations regarding the Cameo business's capacity to meet its financial obligations. The plaintiff's claims under the Corporations Act 2001, ASIC Act 2001, and Trade Practices Act 1974 were dismissed due to the lack of evidence supporting the allegations of misleading or deceptive conduct. Regarding the unconscionable conduct claim, the court held that the plaintiff had not provided sufficient evidence to establish that the defendant's conduct was unconscionable within the meaning of the ASIC Act. The court found that the plaintiff's investment decisions were made without undue influence or pressure from the defendant, and there was no evidence of any unfair tactics used against the plaintiff. Consequently, the plaintiff's claims for breach of contract and unconscionable conduct were also dismissed.
The court concluded that the plaintiff had not established an entitlement to judgment on any of the claims. Therefore, the entire claim was dismissed, and the plaintiff was not awarded any damages against the defendant. The court found no evidence to support the plaintiff's allegations of misleading or deceptive conduct, breach of contract, or unconscionable conduct on the part of the defendant.
Orders
Orders of the court
The plaintiff has not established an entitlement to judgment. The claim is dismissed.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
In this matter, in the defendant’s absence, it seemed to me that the correct approach was for the court to determine whether, on the plaintiff’s case, unconscionable conduct as contemplated by the relevant provisions of the ASIC Act was established. If it was, then in the absence of evidence from the defendant, the claim could not be defeated. However, the plaintiff must do more than raise an issue of unconscionability. He must establish by evidence, on the balance of probabilities, that the defendant “engaged in conduct”, as relevantly defined, which was unconscionable in all of the circumstances.The plaintiff’s evidence The plaintiff, Mr Stowe, is a retired man. He had a very good employment history in the electricity industry which commenced in 1969 and concluded in July 2017, after a “retirement” break for almost three years starting in 2008. In terms of his investment experience, the plaintiff “started” in rentals in 1974 and “maintained that all the way through”. He had “done a little on shares”. He was not impressed with the work he had to put into shares for the return he got. Property had been good to him. His property investments involved his purchasing residential properties and letting them out. He also invested in industrial property through share trusts. He branched out into property trusts including one that had been “really good” to him about 30 years ago and invested in another one which did very well. He was inclined to property trusts rather than direct investment in residential properties. He did not use a financial adviser, but discussed his investments with his accountant. He came to know the defendant after responding to an advertisement in the newspaper by Locksley Barrington. He understood the defendant to be the executive secretary of Locksley who handled the communications to do with investment. He understood she was “part of the business” of Locksley and that her husband was one of the owners and shareholders. He understood Locksley to be acting as a broker for a number of companies. He made inquiries and invested in about four of those companies. All of his dealings with Locksley were through the defendant. He met the defendant in person in the later part of 2007. He went to an office at Robina. He received an email from Locksley about investment in Cameo. He explained that he was on the Locksley email distribution list, but his first information about Cameo came from a “PDS” (a public disclosure statement) – that is the Offer Document – which he said he received in the mail in early 2008. That Offer Document[53] has been referred to above. An investment warning is on its front page. The plaintiff said he read the Offer Document after he received it, including the investment warning. When he read it he thought –[54]… well, every investment does carry some risk, but in my due diligence, it wouldn’t have mattered how much due diligence I did I could not have foretold the money that was drained out of the Cameo accounts and put into a private account …”[53]Exhibit 60.[54]Transcript 1-28, 34-40.
Decision
Reasons for decision
In my view, and bearing in mind the statements in Watson v Foxman, the plaintiff’s evidence falls very short of that which is required to enable me to conclude, on the balance of probabilities, that a representation was made to the plaintiff by the defendant about Cameo’s capacity to pay the interest charges on the loan when they fell due. Short Term Loan Representations - conclusion The evidence tendered in the plaintiff’s case does not satisfy me that the defendant made a representation to the plaintiff that his $300,000 loan would be repaid by CBA (or other) loan funds as soon as they were available. The plaintiff’s evidence about interest repayments fell well short of satisfying me that the defendant made representations to him about Cameo’s business income being sufficient to meet its interest obligations under the loan.Negligence misstatement Because of the conclusions I have reached about the plaintiff’s case on the alleged misrepresentations, I do not need to consider the case based on negligent misstatement. Unconscionable conduct The conduct said to be unconscionable occurred between 8 January 2009 and December 2010. The plaintiff originally brought his unconscionable conduct case under sections 12CB and 12CC of the ASIC Act, before its amendments in 2011. In later oral submissions, the plaintiff confined his case to section 12CB on the basis that an investment for the purposes of the plaintiff’s superannuation fulfilled the requirements of section 12CB(5) as at the relevant time: 12CB Unconscionable conduct (1) A person must not, in trade or commerce, in connection with the supply or possible supply of financial services to a person, engage in conduct that is, in all the circumstances, unconscionable.(2) Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier) has contravened subsection (1) in connection with the supply or possible supply of services to a person (the consumer), the court may have regard to:(a) the relative strengths of the bargaining positions of the supplier and the consumer; and(b) whether, as a result of conduct engaged in by the supplier, the consumer was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and(c) whether the consumer was able to understand any documents relating to the supply or possible supply of the services; and (d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the consumer or a person acting on behalf of the consumer by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the services; and(e) the amount for which, and the circumstances under which, the consumer could have acquired identical or equivalent services from a person other than the supplier.(3) A person is not taken for the purposes of this section to engage in unconscionable conduct in connection with the supply or possible supply of financial services to another person merely because the person: (a) institutes legal proceedings in relation to that supply or possible supply; or(b) refers a dispute or claim in relation to that supply or possible supply to arbitration.(4) For the purpose of determining whether a person has contravened subsection (1) in connection with the supply or possible supply of financial services to another person:(a) the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and(b) the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section.(5) A reference in this section to financial services is a reference to financial services of a kind ordinarily acquired for personal, domestic or household use.