The Colonial Hardware Co Pty Ltd v Seed F.

[1995] FCA 644

IN THE FEDERAL COURT OF AUSTRALIA )No. QG 162 of 1994
QUEENSLAND DISTRICT REGISTRY     )
GENERAL DIVISION                 )

BETWEEN:  THE COLONIAL HARDWARE COMPANY PTY. LTD.
                  (A.C.N. 010 854 074)

First Applicant

AND:FRANK SEED AND JANE SEED

Second Applicant

AND:     BANK OF MELBOURNE LIMITED

(A.C.N. 007 270 448)

Respondent

MINUTES OF ORDERS

JUDGE MAKING ORDER:         Drummond J
DATE OF ORDER:              18 August, 1995
WHERE MADE:                 Brisbane

THE COURT GRANTS LEAVE:

1. To the applicants to further amend their statement of claim in terms of exhibit 1.

THE COURT ORDERS THAT:

1. In relation to the applicants' further amended statement of claim:

(a)particulars of paragraph 10 be provided;

(b)paragraphs 31-42, 43(a), 44, 45(b), 49-54 be struck out;

(c)leave be granted to re-plead paragraphs 31-37, 42, 44, 45(b) and 54.

1. The applicants' amendments to their further amended statement of claim be filed and served by 1 September, 1995.

1. The applicants pay the respondent's costs of and incidental to the respondent's notice of motion filed 7 August, 1995, with leave to tax these costs.

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

IN THE FEDERAL COURT OF AUSTRALIA )    No. QG 162 of 1994
QUEENSLAND DISTRICT REGISTRY     )
GENERAL DIVISION                 )

BETWEEN:  THE COLONIAL HARDWARE COMPANY PTY. LTD.
                  (A.C.N. 010 854 074)

First Applicant

AND:FRANK SEED AND JANE SEED

Second Applicant

AND:     BANK OF MELBOURNE LIMITED

(A.C.N. 007 270 448)

Respondent

Coram:    Drummond J
Date:     18 August, 1995
Place:    Brisbane

REASONS FOR JUDGMENT

I had before me on Monday of this week an application by the respondent to strike out the third attempt by the applicants to plead a case seeking damages and other relief against the respondent.  On that occasion, in anticipation that the applicants wished to propose further amendments to the existing pleading, I adjourned the matter to today to give them that opportunity.  They have produced a fourth version of the statement of claim upon which they wish to rely, but the respondent maintains its attack upon the sufficiency of the pleading and, indeed, contends that against the background of the unsuccessful attempts made by the applicants to plead sustainable causes of action, the time has come to terminate the entire action.

It will be convenient to give leave to the applicants to amend their statement of claim in accordance with the document upon which discussion today centred, which I will make exhibit 1.

The case brought by the applicants arises out of a discussion in May 1990 between the applicants and people representing the respondent revolving around a decision taken by the applicants in reliance on what was said at those discussions to change the financier for the first applicant's business from Esanda Finance Limited ("Esanda") to the respondent.  At the time, although the pleading does not make the matter completely clear, the first applicant had borrowings of something of the order of $340,000 with Esanda over a period of five years at a variable interest rate which was then at a very high rate.  The arrangement the first applicant entered into with the respondent as a result of these discussions in May 1990 involved entry into two separate loan arrangements, one of which involved the payment of interest at a fixed rate considerably lower than the rate currently being paid under the Esanda arrangements, and the other of which involved paying the respondent interest at a variable rate.  The arrangement, of course, involved the paying out of the Esanda loan.

The case sought to be made by the applicants has three limbs.  The core of the first limb is conveniently set out in paragraph 12 of the further amended statement of claim.
The case sought to be made here is that not only was it represented in a way which was misleading to the applicants in May 1990 that if they switched financiers the respondent would offer them lower interest rates than those which they were then paying to Esanda, but also that they would be likely to enjoy the benefit of those lower rates for a substantial period.

The respondent says that the allegation in paragraph 8(f) of the statement of claim, to the effect that a representation was made in these discussions that interest rates would generally remain at the present market rates in the foreseeable future, cannot - even against the background of the discussions which involved the applicants making a decision at the behest of the respondent to change their long term financial arrangements - be read as a representation that there would be so little movement in market rates, and thus rates charged by Esanda and the respondent over such a substantial number of years, that the applicants would be much better off by changing financiers.  I disagree with that submission.  It seems to me that against the background of the discussions to change long term financiers, the allegation in paragraph 8(f) is sufficient to enable such a case to be run.

So far as the first limb of the case is concerned, therefore, which seeks damages for conduct infringing s. 52 the Trade Practices Act 1974 (Cth) in the regard I have outlined, I decline to strike out the relevant portions of the new pleading, but I will direct that, as to paragraph 10, full particulars be provided identifying the material provisions and the terms of the Esanda facility.  There is considerable confusion in the pleading where it attempts to plead damages.  It seems clear enough, something confirmed by a statement from the bar table, that the damages sought to be recovered is the differential between the interest that has, in fact, been paid over a lengthy period, apparently up till now, under the respondent's facility, and the interest that would have been paid if the first applicant had not changed its financier, and had continued to pay interest at the variable rate applicable from time to time under the Esanda facility.  I will therefore strike out paragraphs 49, 50, 51, and 54, but I will give the applicants leave to re-plead paragraph 54 to properly identify both the basis that I have indicated as the basis upon which they contend they are entitled to damages, and the amount of the damages claimed.

The second and third limbs of the case arise out of discussions in July 1991, the effect of which are summarised in paragraph 32.  The second limb contends that a binding contract was entered into in the course of these discussions which was breached by the respondent's failure to make available the sum of $105,000 which was produced by the sale of the second applicant's existing house property, and the purchase of a replacement house property of lesser value to the first applicant for use in its business.  However, it seems to me that there is no basis alleged in the pleading for thinking that there was any sufficiently certain agreement then reached in those discussions that the second applicant would be entitled to retain in the first applicant's business from the change over of houses a substantial sum of the order pleaded.  The applicants, by their counsel, do not suggest that they can make good what I regard is a fundamental defect in the case based on the contract allegation, if given an opportunity to do so.  The case insofar as it is also here based on these discussions as giving rise to representations which were misleading, contrary to s. 52 the Trade Practices Act 1974 (Cth), suffers from a similar defect.  Given what counsel had to say about not being able to make good what I regard as a fundamental deficiency in that case also, there is no point in allowing any further latitude to the applicants to try to put together a case in contract, or a case based on s. 52 the Trade Practices Act 1974 (Cth), so far as the second limb of the claims sought to be made against the respondent are concerned.

I should also mention that there are serious deficiencies in the way the damages sought to be recovered under the second limb are pleaded. The basis of the claim seems to be that the failure of the bank to allow $105,000 produced by the change over of house properties to be injected into the first applicant's business deprived it of the opportunity to earn about $60,000 in profits.  Yet the pleading in paragraph 44(2) asserts that, from other unidentified sources than the house change over transactions, the first applicant was able to inject that very same sum into the business.  How it could still have lost an opportunity to earn profits is not explained.  It is very difficult to see how there is any basis for damages given this inconsistency in the pleading.  The pleading insofar as it seeks to identify the damages said to flow from the breach of contract and s. 52 the Trade Practices Act 1974 (Cth) contravention is embarrassing.  It might in other circumstances be appropriate to give leave to amend, but since, for the reasons given, there is no justification for giving the applicants an opportunity to re-plead on liability in relation to the second limb of the case, there is no justification for any further latitude in the damages section of the pleading being given to the applicants either.  I will therefore strike out paragraphs 31 to 42, 43(a), 52 and 53, insofar as they seek to set up a claim in breach of contract, and a claim based upon conduct contravening s. 52 the Trade Practices Act 1974 (Cth). 

The final limb of the case raises allegations of unconscionable conduct.  These are set out in paragraph 44 of the pleading.  Little attempt has been made to identify the elements of a case where the cause of action is unconscionable conduct.  Moreover, there is no allegation that the respondent was aware of matters alleged in paragraphs 44(1) (c), (e) and (f) or in paragraph 44(2).  It is therefore appropriate to strike out paragraphs 44 and 45(b) as failing to disclose a cause of action.

However, the applicants allege that the respondent encouraged them to enter into the arrangements set out in paragraph 32 involving the changeover of house properties and that, once they had committed themselves to those transactions, it is alleged that the respondent then changed its position to insist on taking the whole of the funds generated by the changeover for the respondent's own benefit.  It is very likely, it seems to me, from what appears in the pleading as to the duration and nature of the relation between the applicants and the respondent that the respondent had knowledge of the applicants' financial position at least to the extent of knowing that the applicants were dependent upon continued support from the respondent.

I have already ordered that much of the proposed pleading relevant to the unconscionable conduct claim be struck out because it is also relevant to the second limb of the case.  However, since paragraphs 31, 32, 33, 34, 35, 36, 37, 42, 44 and 45(b) relate also to the unconscionable conduct claim, I will give leave to the applicants to re-plead those paragraphs in support of any claim in respect of unconscionable conduct which the applicants may wish to pursue. 

I will direct that the particulars and the re-pleading of paragraph 54 be filed and served by 1 September, 1995 and I will direct that if the applicants wish to pursue any claim in respect of alleged unconscionable conduct, they must file and serve the amended pleading in that respect also by 1 September, 1995.

I will order that the applicants pay the respondent's costs of and incidental to the respondent's notice of motion filed 7 August, 1995 save to the extent that those costs have already been covered by the order I made on Monday, 14 August, 1995.

It seems to me that, given the history of pleadings and the refusal of the applicants to acknowledge the responsibility they have to formulate a proper pleading, it is appropriate to give leave to the respondent to tax the costs which I have ordered to be paid by the order I have made today. 

I certify that this and the preceding
seven pages are a true copy of the
reasons for judgment herein of the
Honourable Justice Drummond.

Associate:

Date:        18 August, 1995