Thannhauser, J. v Westpac Banking Corporation

[1991] FCA 98

Re: JOHANNA THANNHAUSER
And: WESTPAC BANKING CORPORATION
No. Q G29 of 1989
FED No. 98
Limitation of Actions

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Pincus J.(1)

CATCHWORDS

Limitation of Actions - foreign exchange loans - s.52, trade practices Act - when does cause of action accrue.

Trade Practices Act 1974

HEARING

BRISBANE

#DATE 19:3:1991

Counsel for the applicant: Mr P.D. McMurdo

Solicitors for the applicant: Morris Fletcher and Cross

Counsel for the respondent: Mr P. Morrison and

Mr A.J.H. Morris

Solicitors for the respondent: Feez Ruthning

ORDER

1. Paragraphs 1(b), 14(i), 21(a) and the words "said misleading

conduct, or alternatively by reason of the" in paragraph 24 be struck out of the statement of claim.

2. The applicant pay the respondent's costs of and incidental to

this application to strike out.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

In the principal proceedings, the applicant sues the respondent bank in negligence, as well as for misleading conduct within the meaning of s.52 of the Trade Practices Act 1974. The applicant's case is that the respondent acted unlawfully in relation to a loan she took in Swiss francs.

1. The respondent has applied to strike out those paragraphs of the statement of claim which set up the claim under the Trade Practices Act. The ground of the application is that the Trade Practices Act claim is time-barred. Mr McMurdo, for the applicant, says the claim is not time-barred and that, in any event, the Court should, in its discretion, simply let the matter go to trial since there is no suggestion that the negligence claim is time-barred. I would not be inclined to strike out the paragraphs attacked unless the claim is plainly time-barred. The principal application was filed on 14 April 1989.

2. By her pleading, the applicant complains that about April 1984 the bank made misleading statements relevant to the advantages of borrowing in Swiss francs and that (paragraph 9) acting on the faith of those statements, she entered into an agreement about 3 October 1984 for a loan by the respondent in Swiss francs. Paragraph 10 asserts that the agreement of loan required repayment of the principal five years from the "draw down date", 9 October 1984. Paragraph 10 pleads various other provisions of the agreement which may be sufficiently summarised by saying that at six-monthly intervals the applicant could change the loan to another currency or prepay the loan in full.

3. What I have explained constitutes the first branch of the applicant's case, namely that, based on misleading statements made in April 1984, a Swiss franc loan was taken out in October 1984, repayable in October 1989.

4. The second branch of the pleaded case sets up that the respondent misled the applicant again, about March 1985, by telling her, amongst other things, "that it was not then necessary or appropriate to hedge the loan" - paragraph 17(c). The applicant alleges in paragraph 20 that on the faith of that she did not do certain things, one of which was that she "did not hedge the loan" - paragraph 20(c).

5. It is then alleged that the Australian dollar depreciated against the franc after the loan was made.

6. Section 82(1) of the Trade Practices Act gives a right of action in damages for breach of provisions of Part IV or Part V of the Act and s.82(2) says:
   

"An action under sub-section (1) may be commenced at any time within three years after the date on which the cause of action accrued".

It is also possible to sue for damages under s.87(1) and (1A); the latter provision but not the former has an express three-year time limit: s.87(1CA). The matter was argued before me on the assumption, the correctness of which is examined in Calmao Pty. Ltd. v. Stradbroke Waters Co-owners Co-operative Society Ltd. (1989) 89 ALR 507 at 508, that this quirk of drafting does not assist the applicant. The same assumption underlies the decision in Jobbins v. Capel Court Corporation Ltd. (1989) 91 ALR 314, and I am content to act upon it.

1. In Jobbins' case, the applicant, in April 1986, invested money in a film venture which was alleged to be not as represented. He sued under s.52 of the Trade Practices Act in September 1989, and the proceedings were held to be out of time insofar as they relied on the Trade Practices Act. The Full Court's reasons establish that in suits claiming damages for breach of s.52 of the Trade Practices Act:
   

1. The suffering of some damage (the other elements of the cause of action having occurred) will, in general, start time running even though the damage continues to grow.

2. A fresh loss from the same basic wrong does not give a new cause of action.

3. If the injured party, having acted on the faith of a representation and incurred loss, so acts again "so that there is a distinct and separate act of reliance", a new cause of action arises.

1. Mr McMurdo argued on behalf of the applicant that, as to the April 1984 conduct, there was no loss until 1989 and the institution of the proceedings was therefore premature, not late. 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.

2. This argument would seek to distinguish Jobbins' case, in which the Court said:
   

"According to the pleading, the investment lacked the

represented qualities; as a consequence it was from the outset less valuable than it should have been". (319)

1. Where it is alleged that a misrepresentation or misleading conduct brought about entry into some transaction, it must commonly happen that the extent of the loss varies as time passes. It can happen that subsequent events eliminate the loss or, on the other hand, it can grow with time.

2. In the law of deceit, this problem was dealt with by treating the quantum of loss as fixed when the relevant transaction was entered into: Waddell v. Blockey (1879) 4 QBD 678, Potts v. Miller (1940) 64 CLR 282 at 289, 297. But the law has developed in the direction of taking a broader view of the assessment of loss: Gould v. Vaggelas (1984) 157 CLR 215 at 220, 221 per Gibbs C.J. This broader view has been applied to assessment of s.52 damages, which are not necessarily treated as fixed at the date of the relevant transaction, but may include subsequent losses: e.g., Henjo Investments Pty. Ltd. v. Collins Marrickville Pty. Ltd. (1989) 89 ALR 539.

3. Suppose that the applicant had come before the Court in late 1985 and proved that she had been induced to enter into the loan transaction by wrongful acts on the part of the respondent. If she had shown that, the Australian dollar having fallen sharply, her obligation had then become substantially more onerous, could she have been defeated because of the chance that the dollar might ultimately return to the value it had in relation to the Swiss franc at the date the loan was made? I do not think so; a plaintiff tricked into buying property could at common law recover, prima facie, the difference between the price paid and the true value of the property at the time of the transaction: Potts v. Miller (above). Such a plaintiff would not be precluded from suing until it was clear that the apparent loss value could not be restored.

4. Mr McMurdo said that if there is a mere chance of a loss, no cause of action accrues. In my opinion, if the applicant could have shown when her proceedings began that her then financial position had substantially worsened as a result of the respondent's wrongful acts - or more precisely, that the value, in Australian dollars, of her then obligation to the respondent had increased - that would have been enough. No doubt, if by the date of trial the applicant's loss had disappeared, the cause of action would have gone with it.

5. The applicant had an obligation, capable of being valued, at all times after she borrowed from the respondent.

6. I was referred to a number of relevant unreported decisions, amongst them Magman International Pty. Limited v. Westpac Banking Corporation 20 February 1991 (Federal Court), Ralik Pty. Ltd. v. Commonwealth Bank of Australia 14 August 1990 (Supreme Court of New South Wales), and Country Properties Pty. Ltd. v. Australia and New Zealand Banking Group Ltd. 21 November 1990 (Supreme Court of New South Wales). In Magman, the Judge had to deal with a similar problem. His Honour remarked that he was in many ways:
   

"... attracted to the proposition that, although hindsight shows that the Australian dollar never recovered its

former value after the second rollover date, one could

not have known at that time that the trend which had set in was irreversible. There is much to be said for the

view that it was only when it was time to repay the loan in 1989 that one could say that losses had in fact been suffered".

1. His Honour felt constrained by Jobbins' case not to apply that view. In my respectful opinion, it is not only Jobbins' case which supports the proposition that the wronged party may sue as soon as it can be shown that his or her financial position has worsened as a result of the wrong. Listed shares fluctuate in value from day to day, but the possibility that such fluctuations may eliminate a present loss does not prevent suit founded on a present difference between price paid and realisable value. A person who is induced to buy a piece of land by misleading conduct does not have to wait until his loss is crystallised by sale before issuing proceedings. Similarly, a borrower (or lender) misled into entering into a loan transaction may sue when it can be seen that the borrower's (or lender's) financial position has deteriorated as a result of the loan. Here, that could be shown more than four years before proceedings began, and the chance that by the date when repayment of the loan was required the position might have improved would not have constituted an answer to the claim.

2. A second point taken by Mr McMurdo may be epitomized as follows. The complaint that the applicant was misled in March 1985 gave rise to a cause of action which did not mature until the date when the applicant would (but for the misleading conduct) have hedged; the applicant might have hedged within the limitation period.

3. That is no answer in my view. The general complaint made in the pleading is that the applicant did not hedge the loan, acting on the faith of statements made in March 1985. She did not hedge on the day the statements were made nor on the next day nor on any later day, but there was not a fresh cause of action each day; there was not on each day a "distinct and separate act of reliance", to use the expression in Jobbins' case. There was a continuing failure to hedge, as I read the pleading, and the right to sue in respect of it, if any, accrued when the applicant first acted on the allegedly misleading statement. It is not alleged in the pleading, nor could it sensibly be alleged, that the applicant was not induced to act, or fail to act, by the allegedly misleading statement until three years before the proceedings were begun.

4. Mr McMurdo contended that the Court should not decide the point raised now, but leave it to trial. Were the relevant law as to time limitation in some doubt, I would agree. But there is now a considerable volume of consistent authority, as well as Jobbins' case, pointing in the same direction; see, for example, Gillespie v. Elliott (1987) 2 QdR 509, Deputy Commissioner of Taxation v. Zimmerlie (1988) 2 QdR 500, Bell v. Peter Browne and Co. (1990) 3 WLR 510. In my opinion, the applicant cannot succeed in this Court on the time limitation point.

5. The respondent's application therefore succeeds, and paragraphs 1(b), 14(i), and 21(a) must be struck out, as well as the words "said misleading conduct, or alternatively by reason of the" in paragraph 24. It will be ordered that the applicant pay the respondent's costs of and incidental to the application to strike out. I point out that under Order 62 Rule 3(3), the order for costs "shall not, unless the Court otherwise orders" entitle the respondent to have the bill of costs taxed "until the principal proceeding ... is concluded or further order". I do not propose to order taxation now and contemplate that these costs will be taxed when the principal proceeding is concluded.