Thannhauser, J. v Westpac Banking Corporation
[1991] FCA 460
•09 AUGUST 1991
Re: JOHANNA THANNHAUSER
And: WESTPAC BANKING CORPORATION
No. Q G29 of 1989
FED No. 460
Trade Practices
(1991) 13 ATPR 41-136
COURT
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Pincus J.(1)
CATCHWORDS
Trade Practices - s.52 claim - limitation of actions - conflict between two Full Court decisions.
Trade Practices Act 1974, s.52
Jobbins v Capel Court Corporation Limited (1989) 25 FCR 226
State of Western Australia v Wardley Australia Limited (unreported, Full Court of the Federal Court of Australia, 17 July 1991)
HEARING
BRISBANE
#DATE 9:8:1991
Counsel for the applicant: Mr P.D. McMurdo
Solicitors for the applicant: Morris Fletcher and Cross
Counsel for the respondent: Mr R.N. Chesterman QC
with Mr A.J.H. Morris
Solicitors for the respondent: Feez Ruthning
ORDER
The orders made by the Court on 19 March 1991, numbers 1 and 2, be set aside.
The application to strike out paragraphs of the statement of claim be dismissed.
The costs of and incidental to the application to strike out be reserved.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
On 19 March 1991, I granted an application to strike out certain paragraphs of the statement of claim. The basis of that order was that the statement of claim set up a cause of action under the Trade Practices Act 1974 which, as it seemed to me, was time-barred. The principal decision relied on was that of the Full Court in Jobbins v Capel Court Corporation Limited (1989) 25 FCR 226. I made an order yesterday restoring the paragraphs I struck out and these are my reasons for having done so.
The parts of the pleading struck out contained a complaint that the respondent bank made misleading statements causing the applicant to enter into an agreement to borrow money denominated in Swiss francs. The loan agreement required that the money, borrowed in October 1984, be repaid in 1989. The application was instituted in April 1989. The Australian dollar had fallen sharply against the Swiss franc in 1985.
That is, from a date more than three years before the institution of the proceedings, the applicant was able to show a loss consisting in the increase in the extent of her obligation measured in Australian dollars. I referred in my reasons of 19 March to an argument advanced by counsel on behalf of the applicant in these terms:
"He suggested that although the dollar fell sharply against the Swiss franc in 1985, it was not then by any means certain that the applicant had lost money; the Australian dollar might have risen again to its former level by the time the obligation to repay arose".
I held, in effect, that the applicant would have been entitled to sue in 1985 on the basis of a present loss and would not have been obliged to wait until the loss became certain at the date of repayment.
The Full Court has recently reconsidered the question of the time limit set by s.82 of the Trade Practices Act and made a new analysis of the problem. The basis of Jobbins' case was acceptance of the principles which had been worked out with respect to other statutory provisions limiting the time for commencement of actions: see especially the report at pp 228 and 229. The more recent judgment of the Full Court, in State of Western Australia v Wardley Australia Limited (unreported, 17 July 1991), rejects this approach: see p 18 of the reasons.
To my mind, the difference between the two views may be illustrated by considering two transactions which commonly occur: firstly, acquisition of a mortgagee's interest and, secondly, assumption of a mortgagor's obligation. If the transaction is alleged to have been brought about by misleading conduct, then the applicant would acquire a right of action, on one view, as soon as he could show an apparent loss - e.g. that because the worth of the security was misrepresented, the mortgage was worth less than was paid for it. But in such a case the loss might not become certain, as long as the interest was paid, until the date for repayment of the principal which, of course, might be years ahead. Similarly, an assumption of liability under a mortgage, induced by misleading statements, might show a prima facie loss well before the due date of repayment, as in this case, and on one view the applicant could sue at that early stage.
The reasons in the Wardley case seem to suggest that these two transactions - acquisition of the mortgagee's interest and assumption of the mortgagor's obligation - might in some instances receive different treatment. It appears to be recognised that "where an applicant has been misled into purchasing property, the true value of which at the time of the transaction was less than the price paid" (p 32), the cause of action accrues immediately. Presumably this is so although (as very commonly happens) the value may thenceforth fluctuate and may even ultimately rise above the price paid. But the reasons imply that the "mere assumption of an executory and contingent legal obligation" is subject to a different rule. Such obligations are, of course, capable of being valued at any stage, but the reasons appear to say that no cause of action accrues as long as "the suffering of the loss or damage remains a likelihood rather than a reality" (p 33). Whether, in truth, it should be inferred that assumption of an obligation other than one of a "mere ... executory and contingent" kind is subject to a rule different from that applicable to acquisition of property is unclear.
Another complexity is that, as I understand the reasons in Wardley, the time limit for actions to recover damages under s.87 of the Act may have quite a different operation from the limit under s.82 - see p 31 of the reasons. Their Honours pointed to the significance of the words "or likely to be suffered" in s.87(1A) which do not appear in s.82. It may be that, in a case like Thannhauser, where a liability has been assumed, there will be an early accrual of a cause of action under s.87 and a later accrual of a second cause of action under s.82 in respect of the same loss - perhaps with a gap of years during which there is no cause of action.
The problem of losses changing with time is, of course, a familiar one with which Courts having jurisdiction to award damages have had to contend long before the Trade Practices Act was passed. The traditional approach seems to have been to hold that the wronged party who has been induced to enter into a transaction may sue if it can be shown that what has been acquired is of less value than the consideration given, although the process of valuation may involve much uncertainty; that would be so, for example, if the property purchased consisted of speculative mining shares.
It appears to me that although those Judges who comprised the Full Court in Wardley's case found it "unnecessary to consider whether the result in the case was in error" (p 12) (i.e. their Honours found it unnecessary to consider whether they agreed with the result) it is not a practicable course to assume that Jobbins' case retains any authority, or to assume the contrary.
I was not addressed by Mr Chesterman QC or Mr McMurdo as to what should be the proper approach of the Court when confronted with two conflicting decisions of the Full Court; it appears to be, and I respectfully express the hope that it may be in the future, a very unusual situation. It seems to me, however, that a single Judge should make no attempt at an interlocutory stage to speculate as to what may be the ultimate outcome of this conflict of authority.
The foregoing are the reasons why I yesterday restored to the applicant's pleading those parts of it which I had struck out.
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