Tawilla Pty Ltd, Summitco Pty Ltd, Quinn and Panjan Pty Ltd v Farrow Mortgage Services Pty Ltd (in liq)

[1994] QCA 183

IN THE COURT OF APPEAL	[1994] QCA 183
SUPREME COURT OF QUEENSLAND

Appeal No. 172 of 1993. Appeal No. 183 of 1993.

Brisbane

[Tawilla v. Farrow]

Before	Pincus J.A. McPherson J.A. Byrne J.
BETWEEN:

TAWILLA PTY LIMITED, SUMMITCO PTY LTD JOHN WATSON QUINN and PANJAN PTY LTD

(Plaintiffs) Appellants

AND:

FARROW MORTGAGE SERVICES PTY LIMITED
(IN LIQUIDATION)

(Defendant) Respondent

____________________________________________________________

_____

Pincus J.A.
McPherson J.A.

Byrne J.

____________________________________________________________

_____

Judgment delivered 07/06/1994.

Judgment of the Court
____________________________________________________________

_____

APPEAL NO. 172 OF 1993 DISMISSED WITH COSTS, TO BE TAXED.

APPEAL NO. 183 OF 1993 ALLOWED TO THE EXTENT OF REPLACING THE DIRECTION MADE BY DE JERSEY J. ON 8 SEPTEMBER 1993 BEGINNING "IT IS DIRECTED THAT..." WITH THE FOLLOWING ORDER:

"IT IS ORDERED THAT: the plaintiffs be refused leave to deliver the proposed further amended statement of claim, being a document a copy of which was served on 6 September 1993, without prejudice to the plaintiffs' right to apply to amend their statement of claim to raise such a case of illegality as is therein mentioned".

APPEAL OTHERWISE DISMISSED WITH COSTS, TO BE TAXED.
____________________________________________________________
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CATCHWORDS: PRACTICE - Procedure - Appellants sought to overturn striking out of allegations of existence of a claim based on a contract, which claim had been first indicated in writ of summons but not mentioned in statement of claim - nearly 2 years later amended statement of claim sought to raise the claim - second appeal in relation to proposed further amended statement of claim, also with additions - whether action should proceed on basis of proposed further amended statement of claim.

Counsel:	Mr C E K Hampson Q.C. with him Mr D Savage for the appellants. Mr D J S Jackson Q.C. for the respondent.
Solicitors:	Quinn & Co. for the appellants. Corrs Chambers Westgarth for the respondent.

Hearing date: 27 April 1994.
IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND

Appeal No. 172 of 1993. Appeal No. 183 of 1993.

Brisbane

[Tawilla v. Farrow]

Before	Pincus J.A. McPherson J.A. Byrne J.
BETWEEN:

TAWILLA PTY LIMITED, SUMMITCO PTY LTD JOHN WATSON QUINN and PANJAN PTY LTD

(Plaintiffs) Appellants

AND:

FARROW MORTGAGE SERVICES PTY LIMITED
(IN LIQUIDATION)

(Defendant) Respondent

JUDGMENT OF THE COURT

Judgment delivered 07/06/1994.

These reasons relate to two appeals, heard together, each being brought from an order of de Jersey J. By the first order, dated 1 September 1993, his Honour struck out paras. 9 to 22 of a statement of claim in an action delivered on 25 March 1993; that is referred to in some of the material as "SC5". The second appeal relates to an order his Honour made on 8 September 1993 to the effect that the trial of the action proceed on the basis of SC5, subject to the deletions consequent upon the striking out order made on 1 September 1993. Both appeals are from orders of a discretionary kind.

The case is one in which the allegations made in the various statements of claim and proposed statements of claim are rather numerous and complex; to enable the points raised for the appellants and the respondent to be comprehended without making these reasons of excessive length, it is necessary, to some extent, to summarise and paraphrase the allegations.

The list which follows sets out the issues or

categories of issues which require to be discussed.
1. The pre-February 1990 misrepresentations.
2. The February 1990 contract.
3. The February 1990 misrepresentations.
4. The November 1990 contract.

1. The pre-February 1990 Misrepresentations
In category 1 there is a group of claims which may be

conveniently exemplified by setting out, in full, the one which is first, in the sense that it relates to the dealings which were first in time; it also happens to be that in the group which is pleaded first. This group of claims is pleaded in Schedule "A" of the proposed pleading dealt with in the second order under appeal.

"The 64 Thomas Drive, Chevron Island Facility

4. In or about 1987 the plaintiffs were desirous of raising money by way of mortgage security to acquire premises located at 53 Thomas Drive, Chevron Island, Gold Coast Queensland.

5. In or about May 1987 the plaintiffs' desires
in that regard were communicated to Scott.

6. In or about May 1987 the defendant, by Scott, represented to the plaintiffs, by Quinn, that the defendants would advance funds sufficient to allow the plaintiffs to purchase a property located at 53 Thomas Drive, Chevron Island, Gold Coast, Queensland, at the price of $416,000.00 on condition that the plaintiffs purchase from the defendant a property located at Mudgee in the state of New South Wales ("the Mudgee property").

7. The defendant, by Scott, orally represented
to the plaintiffs, by Quinn:

(a)  that the defendants were mortgagees in respect of the Mudgee property;

(b)  that the mortgagor of the Mudgee property Ceeque No. 22 Pty Ltd was in default under the mortgage;

(c)  that the mortgagor was indebted to the defendant in the sum of $410,000.00;

(d)  that the real value of the property at Mudgee was less than $410,000.00;

(e)  that the real value of the property at Mudgee was in [ex]cess of $200,000.00;

(f)  that the defendants held a valuation which recommended the property be offered for sale at a price of $200,000.00;

(g)  that the recommendation of a price of $200,000.00 was based upon an estimate of the value of the Mudgee property upon a mortgagee sale;

(h)  that in consideration of the plaintiffs' purchasing the Mudgee property for the sum of $410,000.00 the defendants would offer favourable interest rates on the terms of the mortgage advance necessary for the plaintiffs to purchase the property located at 53 Thomas Drive;

(i)  that the favourable terms of the 53 Thomas Drive advance would be:

(i) finance for 100% of the purchase price of that property and the Mudgee property (together with an advance of such other funds as to enable the plaintiffs to pay legal fees and stamp duty in respect of both purchases);

(ii) at a rate of interest of 12.5% per annum fixed over a term of three years (the then prevailing rate of interest on loans of similar types being no less than 17.5% per annum fixed over a term of three years).

8. The plaintiffs were unable to purchase the
property located at 53 Thomas Drive aforesaid.
9. On 24 July 1987 the second named plaintiff,
Summitco offered to purchase property located at
64 Thomas Drive, Chevron Island, for a price of
$450,000.00.

10. On or about 4 August 1987 the defendant, by Scott, represented to the plaintiffs, by Quinn, that the defendant would lend to the second named plaintiff the sum of $450,000.00 inter alia on the conditions set out in paragraph 7(i) herein.

11. On or about 6 August 1987 one Toswell represented to the plaintiffs, by Quinn, that the plaintiffs could purchase property at New Farm valued at $1.6 million for the sum of $800,000.00 ("the New Farm property").

12. On or about 10 August 1987 the defendant, by Scott, represented to the plaintiffs, by Quinn, that:

(a)  the defendants held a valuation of the New Farm property by Messrs Herron Todd White valuers in the sum of $1.6 million;

(b)  the defendants would lend to the plaintiff sufficient funds to enable the first named plaintiff, Tawilla, to purchase the New Farm property for $800,000 if Herron Todd White valuers affirmed the value of the New Farm property at no less than $1,350,000.00 and if the plaintiffs would purchase the Mudgee property for no less than $410,000.00;

(c)  that the defendants would transfer to a company Benzcourt, (which company was associated with the said Toswell), the Mudgee land.

13. On or about 11 August 1987 the defendant, by
Scott, represented to the plaintiffs, by Quinn:

(a)  that the defendant would lend to the first named plaintiff the sum of $1.24 million at 13.75% interest fixed for a period of three years;

(b)  that the further valuation referred to in paragraph 12(b) herein had been given in the sum of $1.35 million.

14. On or about 11 August 1987, in accordance with the representations referred to at paragraph 10 herein, the defendant, in writing, offered to enter into an agreement to lend to the first named plaintiff money.

15.  The terms of the written offer were:

(a)	the defendants would advance to the first named plaintiff a sum of money being 100% of the purchase price of both the New Farm property and the Mudgee property together with money necessary to meet the costs of legal fees and stamp duty incidental thereto;
(b)	the first named plaintiff would, as a condition of the advance of money in respect of the New Farm property, purchase the Mudgee property for a sum no less than $410,000.00;
(c)	the performance of the loan agreement to loan the said money were subject to confirmation by Herron Todd White valuers of all the details contained within its valuation of 10 February 1987 in which it ascertained the property at New Farm to be worth $1,350,000.00;
(d)	the interest rate applicable on the loan would be 13.75% per annum fixed over a term of three years.

16. Relying upon the representation set out in paragraphs 7 to 13 herein the first named plaintiff, by Quinn, entered into a loan agreement with the defendant. Collateral with the said loan agreement the plaintiffs executed the following other security documents:

PARTICULARS

(a)  first registered bill of mortgage number B248527L between Tawilla Pty Ltd as mortgagor and Combined Mortgage Services Pty Ltd (the defendant) as mortgagee;

(b)  deed of guarantee and indemnity dated 2 September 1987 between John Watson Quinn, Barranbali Pty Ltd and Summitco Pty Ltd as Guarantors and Combined Mortgage Services Pty Ltd as lender;

(c)  deed of loan dated 2 September 1987 between Tawilla Pty Ltd as borrower and Combined Mortgage Services Pty Ltd as lender;

17. In further reliance upon the representations
aforesaid the first named plaintiff entered into:

(a)  a contract for the purchase of the New Farm property for a price of $800,000.00;

(b)  a guarantee of a contract with the defendant and Benzcourt Pty Ltd for the purchase by Benzcourt Pty Ltd of the Mudgee property for a price of $410,000.00;

(c)  a contract with the defendant for the defendant to advance money to the first named plaintiff in the sum of $1.21 million together with stamp duty and legal costs of .03 million, viz, $1.24 million.

18.  As the defendant well knew and the fact is:

(a)	the New Farm property was not worth $1.35 million;
(b)	it had not obtained a valuation from Messrs Herron Todd White to the effect that the value of the property was $1.35 million;
(c)	the real value of the New Farm property was considerably less than $1.35 million and was no more than $800,000.00.

19. The conduct of the defendant in making the
representations was:

(a)  conduct engaged in by it in trade or commerce;

(b) misleading and deceptive within the meaning of those terms contained in s. 52 of the Trade Practices Act 1974.

20. Further, the making of the representations were (and each was) false or misleading representations concerning the price payable for land within the meaning of these terms as they appear in s 53A of the Trade Practices Act (1974).

21. As a consequence of the defendants conduct referred to in paragraph 19 and 20 herein the plaintiffs suffered loss and damage.

PARTICULARS

The plaintiffs acquired property for the sum of $1.24 million which was worth no more than $800,000.00.

22. But for the defendants aforesaid representations the plaintiffs would not have entered into the agreements referred to in paragraph 16 herein."

The allegations which are quoted above will not, unless the appeal succeeds, be allowed to be litigated in these proceedings. It will be noted that many representations are pleaded in paras. 6, 7, 10, 11, 12 and 13, that it is said that the making of each of those representations was misleading and deceptive within the meaning of s. 52 of the Trade Practices Act 1974, and that each of them was false or misleading - paras. 19 and 20. Among the representations said to be false (para. 7(i)) is that an advance then proposed to be made in respect of the purchase of property at 53 Thomas Drive, Chevron Island would be on certain terms. The allegation appears to be irrelevant, because that property was never purchased; nevertheless, it is relied on as false and as having induced certain other transactions. It is, one may

suppose, conceivable that the case which will eventually be put forward is that loans relating to the purchase which is alleged to have been made were to be on the terms represented as being available for the proposed purchase of 53 Thomas Drive. But that would make little sense, for it must have been evident to the plaintiffs at the time the advance was made whether or not it represented 100% of the purchase price; similarly, the rate of interest offered must have been evident.

If, contrary to our view, the allegations just discussed relating to a once-proposed loan to purchase a property at 53 Thomas Drive are in some way material, it must at least be clear that the falsity was evident in or about September 1987; yet the case desired to be pleaded is that, again and again, representations of this and other kinds were later made which were false but nevertheless effective to induce the taking of disadvantageous steps by the plaintiffs.

A possible view of this part of the pleading - i.e. that quoted above - is that all the allegations of representation made in it should for practical purposes be treated as irrelevant, other than those in respect of which the plaintiffs have made particularised allegations of falsity - i.e. in para. 18; on that view, allegations which, on the face of it, lead nowhere - para. 12(c) is an example - may simply be treated as narrative. But it is by no means clear that those allegations are merely narrative.

Nor are the matters to which we have drawn attention by any means the whole of the difficulties, in this segment of the first category of claims.

In our view, one of the consequences of the enactment of the relevant provisions of the Trade Practices Act 1974 has been that it has created the temptation to draw pleadings of which the segment we have set out is an example; a whole collection of statements is, without very close consideration, alleged to be misleading, and to have induced the plaintiff to enter into certain transactions.

It is not unknown for parties in the position of these appellants, who have entered into a series of transactions involving the borrowing of money, to set up that numbers of the transactions were induced by misleading conduct on the part of the financier, over a period of years. But a court exercising discretion, or reviewing an exercise of discretion, in relation to pleadings of this kind may be pardoned for harbouring a degree of scepticism about the probability of business people allowing themselves to be repeatedly misled, in rather similar circumstances, by the same parties. Such scepticism cannot in itself justify refusal of an amendment, but may properly influence the court's order.

It will be necessary to discuss the relevance of these claims of misrepresentation further. That discussion will be found below, under "Other Questions".

2. The February 1990 Contract
The events relied on as pre-February 1990

misrepresentations, discussed in section 1 of these reasons, concluded in November 1988. The next allegation which requires to be noticed is that of a February 1990 contract.

The writ, issued on 3 May 1991, sought relief relating to an agreement made between the plaintiffs and the defendant on or about 14 February 1990; the plaintiffs asked for a declaration that the defendant was bound by that agreement, a declaration that the plaintiffs were not in breach of it, a declaration that the defendant was not entitled to appoint a receiver or agent or to call up any moneys under the agreement, and other relief. But in the first statement of claim delivered, dated 19 July 1991, nothing was said on those subjects; the pleading did not mention a February 1990 contract. The omission meant the appellants were deemed to have abandoned that cause of action (Renowden v. McMullin (1970) 123 C.L.R. 584) and that must make it more difficult to re-introduce it. A proposed amended statement of claim of 7 September 1992 - some 16 months after the writ - also omitted any reference to the February 1990 contract.

That contract was first sought to be pleaded in March 1993. Paragraph 11 of a proposed amended statement of claim of 5

March 1993 set out that on or about 14 February 1990 the appellants and the respondent made an agreement in rather complex terms, some of which should be mentioned. It was alleged that it was agreed that an additional facility of $500,000.00 would be made available (para. (d)), that the respondent would buy a certain property for $3M (para. (e)), that the first appellant would settle a certain sale on or before 2 March 1990 (para. (f)), that a sum of $300,000.00 would be advanced for a specified purpose (para. (g)), and by para. (h):

"The defendant assist Tawilla [first appellant] in selling the properties by offering mortgage finance to purchasers (as a guide only finance at 12%)".

The agreement was made by the third appellant Quinn, a solicitor, on behalf of the appellants. It was one which, if made orally, would have been expected to be promptly reduced to writing. In this first version of the February contract pleading, there is no suggestion of a relevant writing.

When a second attempt was made to plead it, in a document which became Exhibit 1 at a hearing before Dowsett J in March 1993, allegations of a somewhat similar character were made; the variances do not require to be analysed, except that para. (h) became rather different:

"The defendant assist Tawilla in selling the properties by offering mortgage finance to purchasers at a rate of interest well below the market rate".

There was no mention of 12%. As will appear, this paragraph (h) was regarded by de Jersey J. as a matter of importance.

The third version of the paragraph, in an amended statement of claim of 25 March 1993, also alleged that finance would be offered at interest well below the market rate, making no mention of 12%.

In a further amended defence and counter-claim delivered by the respondent on 1 April 1993, it was admitted that there was an agreement of 14 February 1990. It was then alleged to be evidenced in writing and to be contained in four letters, two of which were dated 14 February 1990.

By a second further amended reply, the appellants admitted "that the letters dated 14 February, 1990 constituted the agreement between the parties but deny the further correspondence therein referred to constituted the 14th February 1990 agreement".

It was that admission which induced de Jersey J, on 1 September 1993, to strike out much of the appellants' statement of claim; his Honour took the view that the letters which, it appeared from the further amended reply, were relied on to establish the para. (h) promise, could not be regarded as promising such an interest rate as the appellants' pleaded. It appears to be desirable to discuss those two letters, as well as the other two which were alleged by the defendant, but denied by the plaintiffs, to evidence the agreement.

On 6 February 1990 the third appellant, Quinn wrote to the respondent's solicitors offering to "resolve matters outstanding between our respective clients" on certain terms which included the acquisition of certain land at $3M (mentioned above), an advance of $300,000.00 (mentioned above), other terms and that:

"FMS look favourably towards financing bona fide purchasers of properties within the existing portfolios on interest terms as discussed, namely 12% for 2 years".

On 8 February 1990 Quinn wrote again, in terms which call for no discussion, amending the offer. On 14 February 1990, the respondent's solicitors wrote to Quinn setting out various proposals, including an additional facility to the extent of $500,000.00, acquisition of land at $3M, another further advance of $300,000.00 and, by clause 8:

"That our client will assist your client in reduction of the portfolio by offering Mortgage finance terms to purchasers. The terms of any Mortgage finance offered will of course depend upon the property concerned and the worth to the purchaser. As a guide only finance at 12% interest only for a 2 year term was considered in the case of the Maryborough property".

By a letter of the same date written to the respondent's solicitors, Quinn, on behalf of the appellants, accepted that offer. So if there was (as the further amended reply said) a contract constituted by the two letters of 14 February 1990, it included as a term clause 8, just quoted.

It seems plain enough that the view de Jersey J took of clause 8 was correct. His Honour held on 1 September 1993 that the paragraphs attacked must be struck out because the two letters the appellants relied on could not support their pleaded case. It is not possible to read the letters said by the appellants to constitute the February 1990 agreement as containing, on their proper construction, a promise to offer mortgage finance to purchasers at a rate of interest well below the market rate. If such a promise was made, it would be of doubtful validity; but clause 8 does not commit the respondent to any particular course, as regards interest rates. De Jersey J. also took the view that the promise to supply finance at a rate of interest well below the market rate was "central to this particular part of the plaintiffs' case".

We agree with that conclusion also; to demonstrate its correctness, it is unnecessary to analyse, in detail, the rest of the paragraphs which were struck out. The crux of the matter is that para. 19A alleged that on certain dates, in respect of certain transactions there listed, the appellants requested the respondent to grant or agree to grant "below market rate interest loans to enable purchase".

Paragraph 19B said the defendant did not grant any loans.

It is nowhere alleged that the transactions the subject of the unsuccessful requests for loans from the respondent were of such a character that loans from sources other than the respondent would have been unavailable. But, apart from that, when one turns back to the correspondence it seems clear that there was no promise in it to lend money on any particular terms. It was, rather faintly, argued that if evidence were available that the figure of 12% was below the market rate then one could construe the correspondence as embodying a promise to lend well under the market rate; but there appears to us to be nothing in that.

We therefore conclude that the first appeal must fail;
de Jersey J. was right to strike out the claim based on the

February 1990 contract and the allegations which supported

and depended upon that claim.

It should be added that during the hearing before us, counsel for the appellants attempted to argue that at the time when de Jersey J. made his striking out order there had already been delivered (but not placed before de Jersey J.) a third amended reply, making a rather different allegation concerning the February 1990 contract. There is no satisfactory evidence that the third amended reply was delivered before 1 September 1993, when the order was made, and nothing more need be said on that subject.

In a practical sense, the striking out order of 1 September 1993 just dealt with is not the primary question raised by the appellants, who desire that the action proceed to trial on the basis of the proposed further amended pleading placed before de Jersey J. that his Honour refused to allow, by his order of 8 September 1993. The appellants wish to pursue the allegations made in that pleading, rather than those put forward in the pleading part of which was struck out on 1 September 1993. It is convenient, in the circumstances, to mention at this stage how the February 1990 contract was proposed to be pleaded, when de Jersey J. made his second order. In the pleadings there under consideration, it was alleged that the February 1990 agreement was evidenced in writing by all the four letters discussed above, and the relevant term was pleaded as follows:

"...the defendant would assist the plaintiffs to reduce their property portfolio...by offering mortgage finance to prospective purchasers".

The pleading goes on to say that the defendant was asked to finance certain purchases, but did not do so, nor offer to do so; the pleading does not suggest that the prospective purchasers would have, or would probably have, accepted such an offer as the respondent would have been likely to make.

A promise to supply finance, with no agreement even in broad terms as to interest rate or period of repayment, appears to us a rather hopeless basis for a suit in contract.

Apart from that, one can understand a reluctance, on the judge's part, to let the February 1990 contract back into the action, where it has always borne the appearance of a half-hearted alternative, of uncertain shape. The primary case in contract, being the only one which was pleaded in the first two versions of the statement of claim, was that a contract settling differences between the parties was made some months later, namely in November 1990. If so, that must have put an end to any contract in February 1990, as the November 1990 contract was if made intended to be a comprehensive settlement.

3. The February 1990 Misrepresentations
It has not been overlooked that among the paragraphs

struck out by the order of de Jersey J dated 1 September 1993 are allegations of misrepresentation relating to the February 1990 agreement. They were of no use unless there was a good claim in contract on the lines alleged and nothing more need be said about them. But in the next proposed pleading, the subject of the order of de Jersey J of 8 September 1993, further allegations of misrepresentation were made having independent force; that is, if they constituted a possible basis of action, they did so whether or not the appellant's contractual claim was good. In substance, what was pleaded in paras. 11 and 12 of the proposed statement of claim dealt with by the primary judge on 8 September 1993 was that the respondent represented that it would provide finance "for 2 year terms at an interest rate of 12% per annum", or alternatively that it would provide finance for 2 year terms at an interest rate below the market and in addition that the respondent would be able to supply the finance it promised.

It appears to us that the judge was right not to allow any of these allegations to go to trial. Their function in the pleading was to provide an alternative basis on which the appellants might succeed with respect to the failure to provide low interest loans - i.e. an alternative to para. (h) discussed above. The difficulty in pursuing a claim on this basis is exemplified by examining paras. 11(a) and 12(a) which, read together, amount to this: that shortly before the 14 February 1990 contract the respondent promised to provide finance "for 2 year terms at an interest rate of 12% per annum". But, if any such promise was made it is plain that it was overtaken by events; the letter of 14 February 1990 from the respondent's solicitors, discussed above, sets out just how far the respondent was prepared to commit itself in respect of providing finance to purchasers and is inconsistent with the existence of any such obligation as might otherwise have been thought to flow from the matters pleaded in paras. 11(a) and 12(a). As has already been mentioned, Quinn accepted the respondent's proposal, without qualification, by his letter of 14 February 1990.

The next batch of allegations in the same category - i.e. representations related to the contract of February 1990 - is based upon para. 13 which begins:

"Further after 14 February 1990 and until at least 22 June 1990 the defendant by O'Connor and/or Molomby & Molomby continued by their conduct to affirm the representations pleaded in paragraph 11".

There follow particulars of various conversations intended to make out this continued affirmation. Since, for the reasons we have given, the judge was right not to let para. 11 be pleaded, para. 13 was also rightly kept out; paras. 14 to 21 were dependent upon paras. 11 and 13. In short, the proposed amendments sought to set up a case which was, on the face of the pleading, untenable.

4. The November 1990 contract.
Some reference has been made to this part of the

pleading in the discussion above; the appellants' case based on it is, under the terms of the second order under appeal, allowed to go to trial. The appellants' plead that there was an agreement in terms set out in para. 3 of the appellants' statement of claim SC5. Those terms included a covenant by the respondent not to sue the appellants, a promise by the respondent to lend the appellants $1,688,000.00 and other terms of considerable importance which were, on the face of it, intended to constitute a comprehensive settlement of matters outstanding between the parties. In the alternative, it was pleaded that the respondent is estopped from asserting that it is entitled "not to bring into existence the deed of settlement and to execute same", the reference to a "deed of settlement" being to a document formally setting out the full terms of the 7 November 1990 agreement.

Other Questions

The pre-February 1990 misrepresentations, which have been discussed in section 1 above, are related to the February 1990 misrepresentations, discussed in section 3 of these reasons. In para. 15 of the proposed further amended statement of claim, the subject of the second order under appeal, it is alleged that:

"The plaintiffs in reliance on the representations in paragraph 11 hereof entered the 14 February agreement and thereby compromised and surrendered their rights arising from the matters contained in schedule A which otherwise became progressively statue barred from in or about May 1990."

Paragraph 11 contains the allegations of misrepresentation on which the case discussed in section 3 is based. In para. 20 of this proposed statement of claim it is alleged that:

"By reason of the defendant's said conduct the
plaintiffs have suffered loss and damage".

The "said conduct" consists in the misrepresentations. The nature of the loss and damage is particularised in a separate document which was delivered with, or shortly after, the proposed amended statement of claim. So far as is relevant to the pre-February 1990 misrepresentations, that says:

"Since in or about May 1990 the Plaintiffs have become progressively statute barred under the provisions of the Trade Practices Act in respect of their rights of action arising from the matters particularised in Schedule A."

Schedule A contains the allegations under the heading "The 64 Thomas Drive, Chevron Island Facility", quoted near the beginning of section 1 of these reasons and also contains four other batches of allegations of misrepresentation, under various headings.

It seems clear that schedule A sets up a complex case, or rather series of cases. Starting with misrepresentations in May 1987 and finishing with misrepresentations in the latter half of 1988, the schedule sets forth numerous separate acts of wrong-doing in relation to a variety of transactions, some of them complicated transactions.

But all this depends upon a single point, namely that since in or about May 1990 the appellants became progressively statute barred; the case desired to be put forward apparently is that the loss of rights was due to the appellants contracting away their causes of action.

For a number of reasons, it seems to us clear that the allegations in schedule A should not go to trial.

First, they are so pleaded as to depend entirely upon success in one or both of the causes of actions, or groups of causes of action, based on the February 1990 contract and on the February 1990 representations; for the reasons we have expressed above, those parts of the action should not be permitted to proceed further.

Secondly, it is not alleged by the appellants that they refrained from bringing any of the potential suits mentioned in schedule A because they believed that the respondent would carry out its obligations under the February 1990 contract or the associated representations. The omission is, we think, of importance; it would be odd to set up such a reliance, because it does not appear that any other provision of the alleged February 1990 contract was carried out; in particular, before March 1990, according to the appellant's allegation, requests for low interest loans had been made to the respondent and not met. Further, according to schedule C to the proposed pleading, in May 1990 there was a run on the Farrow group, of which the respondent formed part, over $22M being withdrawn from one of the companies in the group on that day. On 22 June 1990 the State of Victoria took control of two of the companies in the group and administrators were appointed; para. 18 of the proposed statement of claim says that on that date it became impossible for the respondent to perform the February 1990 contract or to comply with the relevant representations.

Although the point could be clearer if the pleading were more specific, the only sensible meaning one can attribute to the allegation in para. 15, quoted above, is that the February 1990 contract, although on the face of the appellants' pleading not carried out at all by the respondent, nevertheless caused the appellants to lose their rights to bring the suits pleaded in schedule A. That appears to have no substance; the appellants could surely have treated the respondent's complete non-performance as a repudiation.

Thirdly, as was pointed out by Mr D J S Jackson Q.C. for the respondent, the earliest relevant representation in schedule A appears to be that mentioned in para. 10 of the first segment, quoted in full above, and that took place on 4 August 1987. There are earlier representations set up, but as we have explained in section 1, nothing is pleaded to flow from them. There was ample opportunity for the appellants to preserve their position by issuing proceedings in respect of any of the matters mentioned in schedule A between 22 June 1990, by which time it was on the pleading manifest that the Farrow group was in deep financial trouble, and 4 August 1990, which is the earliest date on which it could rationally be argued that a time limit affected a schedule A claim.

Fourthly, in the writ issued on 3 May 1991, provision was made for putting forward claims of the kind eventually pleaded in schedule A, but when a pleading was ultimately delivered that was not done; like the claims relating to the February 1990 contract, the schedule A claims were then abandoned. When they were first pleaded, nearly 2 years later, their relevance was limited. It was not sought to allege that the right to bring the claims had been lost because of the respondent's conduct with respect to the February 1990 contract; they were pleaded, it appears, simply to fill out the allegation that the February 1990 contract was made partly in consideration of the appellants abandoning the schedule A actions - see paras. 10 and 11 of SC5. The pleading presently being considered constitutes an attempt to obtain, for the first time, relief in respect of all the schedule A matters, as contemplated by the writ. It should be added that the judge had placed before him no explanation for the course taken, which was to drop the schedule A claims and resurrect them 2 years later.

It should be added that it was argued for the appellants that a great deal of discovery had been done under SC5, a version of the pleading which was, as has been mentioned, delivered on 25 March 1993; the contention appeared to be that not much more discovery would have to be done, if the new version of the pleading considered in de Jersey J's second order were allowed. As to the discovery so far engaged in, the affidavit of R J Edge of 1 September 1993 gives an indication of the difficulties encountered in making discovery, up to that point; in brief, the respondent is in liquidation, the documents so far discovered are extremely voluminous and the relevant documents are to be found at various locations, partly because they are in use in other litigation. It appears to us that if de Jersey J had allowed the proposed amendments, on 8 September 1993, discovery would have had to be entirely revised.

The course these proceedings have taken illustrates the practical difficulty courts are likely to encounter in controlling and keeping within reasonable bounds the scope of the allegations made in cases of this sort. It used once be thought that the proper approach is to leave the shape and content of the pleadings largely to the parties and not to resist considerable additions or deletions, if made well before the trial and able to be compensated for by costs orders. On that theory, problems thought to arise from the pleadings and questions such as whether complex allegations which are made support any reasonably arguable case are left to trial. There are disadvantages in doing so: the task of the trial judge may be made unreasonably difficult; a party against whom numerous allegations of misrepresentation and the like are made may waste time and money preparing in respect of issues which, in the end, are seen to have no substance; discovery may be unnecessarily lengthy and expensive. The strategy of pleading voluminous and complex allegations, without care to ensure that they lead to a case of other than a most tenuous kind, may flourish; in sum, this sort of litigation may be allowed to be unnecessarily and unreasonably burdensome.

Our reference to "strategy" is to some extent justified by the appellants' case based on the events of February 1990; on the appellants' present pleading, the loss and damage due to the respondents' conduct is that since the appointment of an administrator (mentioned above), on 22 June 1990, the appellants have been unable to enter into any contract for the sale of certain real property and have suffered other disadvantages. We understood Mr Hampson Q.C. to say for the appellants that these allegations of loss were in part a slip on the part of the drafter; read literally they make little sense. Further, if one ignores the particulars of loss given, said to contain a slip, it is still difficult to see that any great adverse consequence could have ensued from what was perhaps intended to be pleaded -namely, that there was a period from February to June 1990 during which the appellants suffered some delay in selling property. It is difficult to see that such a delay could have been of any real moment in the context of the present litigation where as we understand it, a debt of some $16M is alleged to be due by the appellants to the respondent which, as seems to be common ground, lent them various large sums of money over a period of years.

We have noted that this case was certified for a speedy trial in 1991 and that the case was to be placed on a callover list in early 1993, when it was said to be substantially ready.

For this Court to review the position established by the orders of de Jersey J, has required reference to a record, and written and oral submissions, some 800 pages in length; the hearing took the best part of a day. Were available judicial time unlimited, and the resources which the community can sensibly devote to litigation also unlimited, one could perhaps regard the proposed pleading dealt with by de Jersey J on 8 September last with equanimity. But if the Supreme Court is to fulfil its functions properly, it is necessary that the judges, on suitable occasions, exercise their discretion to keep out allegations the contesting of which is likely to involve a great deal of trouble and expense, but which do not appear to have any substance. In United Motors Retail Limited v. Australian Guarantee Corporation Limited (1991) 58 S.A.S.R. 156 at 158, an amendment case, King C.J. with whom the other members of the Court agreed remarked:

"It is now well recognised throughout the judicial system that courts owe it to the community to adopt and apply effective procedures in order to make maximum use of the resources committed to them and to contain, so far as possible, the escalation of costs and delay." (158)

"It cannot be overemphasised that the capacity of courts to provide expeditious justice in the face of heavy workloads, depends upon the maximum utilisation of the court's resources." (160).

We refer also to the discussion by French J. in Bomanite Pty Ltd v. Slatex Corporation Aust. Pty Ltd (1991) 104 A.L.R. 165 at 177, 178. In exercising the relevant discretion it is proper for judges to notice, as de Jersey J here did, that much of what was to be put forward had been covered by the writ but was then dropped, presumably being thought to be of no real merit. The examination of the position which has been conducted in this Court has ranged rather wider than the considerations mentioned in the reasons of de Jersey J, but it has confirmed that the result of the exercise of his Honour's discretion was, as to each order, sound.

Counsel were agreed that a question of illegality, not argued before de Jersey J, was intended by his Honour to be left for further consideration, if necessary. To accommodate this, we propose to allow the appeal to the extent of replacing the direction given by de Jersey J on 8 September 1993, being that part of the order beginning "IT IS DIRECTED THAT:", by:

"IT IS ORDERED THAT: the plaintiffs be refused leave to deliver the proposed further amended statement of claim, being a document a copy of which was served on 6 September 1993, without prejudice to the plaintiffs' right to apply to amend their statement of claim to raise such a case of illegality as is therein mentioned".

Otherwise the appeals must be dismissed with costs.