THsf Constortium Ltd v TAYMACCA Pty Ltd

[2004] QDC 463

DISTRICT COURT OF QUEENSLAND

CITATION:	THsf Constortium Ltd –v- TAYMACCA Pty Ltd & Ors [2004] QDC 463
PARTIES:	THsf CONSORTIOM LTD

Plaintiff

Against

TAYMACCA PTY LTD

First Defendant

And
HENRY RENATUS VUJICA and

TRACEY LEE McCARRON

Second Defendants

And

HONEYCOMBES TOWNSVILLE PTY LTD

First Defendant by Counterclaim

And

HONEYCOMBES PROPERTY GROUP PTY LTD

Second Defendant by Counterclaim

And

JOHN ROSEL

Third Defendant by Counterclaim

FILE NO:	95 of 2003
PROCEEDINGS:	Application to strike out paragraphs in the defendants’ counterclaim.
DELIVERED ON:	22 October 2004
DELIVERED AT:	Townsville
HEARING	4, 14 & 22 October 2004
DATES:
JUDGE:	CF Wall QC
ORDERS:	Applicants’ claim in respect of paras 45 & 46 of the counterclaim dismissed. Paras 47, 53(b) 61, 62, 63 & 69 of the counterclaim struck out. Leave given to the respondents to replead.
CATCHWORDS:	NEGLIGENCE – DUTY OF CARE – pre-contractual negotiations for sub- lease in shopping centre – representations, advice, information by real estate agents, property managers, developers, landlords – circumstances giving rise to duty of care on the part of the person giving the advice and information and making the representations.

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NEGLIGENCE – DAMAGES – actual losses only not loss of expected net profits and expected goodwill.

Cases referred to:
MLC v Evatt (1970) 122 CLR 628 (FAA)
Shaddock and Associates Pty Ltd v Parramatta City Council (No.1) (1981) 150
CLR 225 (FAA)
San Sebastian Pty Ltd v The Minister (1986) 162 CLR 340 (FAA)

Esso Petroleum Co Ltd v Mardon [1976] QB 801 (FAA)

COUNSEL:	Mr A.J. Moon for the Applicants – Plaintiff and 1 & 2 Defendants by counterclaim Mr R. Quirk for the Respondents – 1 & 2 Defendants
SOLICITORS:	Connolly Suthers for the Applicants – Plaintiff and 1 & 2 Defendants by counterclaim Wilson, Ryan and Grose for the Respondents – 1 & 2 Defendants

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HIS HONOUR: This is an application to strike out certain paragraphs in the counterclaim of the defendants.

relationship between the representor and the representee". The Privy Council in MLC v. Evatt (1970), 122 C.L.R. 628 held that it is a necessary characteristic of a relationship giving rise to a duty of care in the giving of advice or information that the party giving the same either carries on the business of giving advice or information or lets it be known in some other way that he claims to possess skill and competence in the field in question. 22102004 T1/CLM M/T TSVDC1/2004 (Wall DCJ)	Carter and Harland concede that "the duty of care will arise if there existed a special such a duty of care.
In Shaddock and Associates Pty Ltd v. Parramatta City Council (No. 1) (1981), 150 C.L.R. 225 Mr Justice Mason at pages 250 - 251 adopted Chief Justice Barwick's statement in the MLC case in the High Court of the conditions which give rise to a duty of care in the provision
of advice or information namely:

I will deal with the issues involved in the order in which they were argued. The applicants are the plaintiff and the first, second, and third defendants by counterclaim. The respondents are the first and second defendants to the primary claim.

1. Pre-contractual negotiations

The applicants argued that these could not give rise to a duty of care in negligence.

The representations relied upon by the respondents are set out in paragraphs 29, 35, 36 and
37 of the further amended defence, set off and counterclaim. Paragraphs 45 and 46 plead
the claim in negligence.

The applicants argue that "there is nothing in the relationship of negotiating parties to a proposed lease which at law would give rise to any such duty". They further argue that there is no suggestion that they "held themselves out as possessing any particular skill in the relevant sense" to found any such duty.

The applicants rely upon statements in paragraph 1132 of Carter and Harland 'Contract Law in Australia' (second edition) to the effect that "no Court has yet held that the relationship between parties negotiating a contract is itself enough to give rise to a duty of care".

"Whenever a person gives information or advice to another upon a serious matter in
circumstances where the speaker realizes, or ought to realize, that he is being trusted
to give the best of his information or advice as a basis for action on the part of the
other party and it is reasonable in the circumstances for the other party to act on that
information or advice, the speaker comes under a duty to exercise reasonable care in

the provision of the information or advice he chooses to give."

Mr Justice Aickin agreed and Mr Justice Murphy seems to have adopted a similar approach.

In San Sebastian Pty Ltd v. The Minister (1986), 162 C.L.R. 340 Chief Justice Gibbs and

Justices Mason, Wilson and Dawson said at pages 354-355:

"The correct view is that, just as liability for negligent misstatement is but an instance
of liability for negligent acts and omissions generally, so the treatment of the duty of
care in the context of misstatements is but an instance of the application of the
principles governing the duty of care in negligence generally. The special
complications which arise in connexion with the imposition of a duty of care on the
author of a statement can only be unravelled in a variety of factual situations.
Decisions such as Hedley Byrne, Mutual Life & Citizens' Assurance Co. Ltd. v. Evatt
(1968) 122 CLR 556, on appeal (1970) 122 CLR 628; (1971) AC 793, and Shaddock
& Associates Pty. Ltd. v. Parramatta City Council (No. 1) (1981) 150 CLR 225 are
therefore to be seen as illustrations of the general duty of care in its application to

particular instances of negligent misstatement."

At page 357 their Honours said, after referring to two American decisions:

"The two decisions provide support for the proposition that, where a statement is
made for the purpose of inducing the plaintiff, or the members of a limited class
including the plaintiff, to commit themselves financially upon the basis that the
statement is true, and the plaintiff acts in reliance on the statement, the law will
impose a duty of care on the maker of the statement."

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At page 358 they said:

"It follows then that if the appellants' case is to succeed they must establish at least, amongst other things, (1) that the alleged representation was made, and (2) that the Authority and the Council made the representation with the intention of inducing

members of the class of developers to act in reliance on the representation."

Mr Justice Brennan, in a separate judgment put the matter this way at page 372:

"Where a representor gives information or advice on a serious or business matter, intending thereby to induce the representee to act on it, the representor is under a duty of care in giving that advice or information if three conditions are satisfied. First

(corresponding with the first condition expressed by Barwick C.J.), if the representor realizes or ought to realize that the representee will trust in his especial competence to give that information or advice; second (corresponding with the third condition), if it would be reasonable for the representee to accept and rely on that information or
advice; and third (applying the underlying principle of the law of negligence), if it is
reasonably foreseeable that the representee is likely to suffer loss should the

information turn out to be incorrect or the advice turn out to be unsound."

Esso Petroleum Co. Ltd v. Mardon [1976], QB 801 a decision referred to in Shaddock is cited
by Carter and Harland (paragraphs 1132 and 1133) as one of the cases where "a duty has
been imposed where the only person qualified (or at least the person best qualified) to make
a reliable statement was the representor" and as being "typical in that usually
representations by a contacting party will be made because of the representor's greater
familiarity with or access to information concerning the subject matter of the contract".

It is clear from this brief examination of the authorities that in the present case the following are relevant considerations as to whether a duty of care could be found in a case such as the present-

1.          The sub-lease was a serious matter for both sides.

2.          Were the second, third and fourth applicants in the business of giving advice and information about the shopping centre to prospective tenants?

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3.          Did the second, third and fourth applicants make it known to the respondents that they possessed skill and competence in retail shopping centres and tenancies in them?

4.          Were the second, third and fourth applicants best qualified to make statements about the shopping centre?

5.          Did the second, third and fourth applicants have greater familiarity with and access to information concerning the shopping centre?

6.          Did the second, third and fourth applicants realise or ought they to have realised that they were being trusted to give their best information or advice as a basis for action on the part of the respondents?

7.          Was it reasonable in the circumstances for the respondents to act on that information?

8.          Were the statements made by the second, third and fourth applicants made for the purpose of inducing the respondents to commit themselves financially upon the basis that the statements were true, and did the respondents act in reliance on these statements?

9.          Did the second, third and fourth applicants realise or ought they to have realised that the respondents would trust their especial competence to give the information and advice which they did?

10.        Was it reasonably foreseeable that the respondents would be likely to suffer loss should the information turn out to be incorrect or the advice turn out to be unsound?

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The resolution of these issues depends on the facts. The second, third and fourth applicants
are variously described as real estate agents, property managers, developers and landlords
intimately involved in the subject premises and tenancies for those premises and are alleged
to have made the representations in one or all of those capacities with a view to securing the
respondents as a tenant. In my view it could not be said that the respondents' claim in
negligence is unarguable, clearly or obviously untenable or bound to fail. I therefore refuse
to strike out paragraphs 45 and 46 of the counterclaim.
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1. Claim for damages - paragraph 47

The applicants argued that the damages claimed here are calculated by reference to contractual not tortious principles whereas the claim made in paragraphs 45 and 46 is based on negligence.

The respondents claim damages calculated by reference to lost net profits plus actual losses plus loss of expected goodwill.

In negligence damages are calculated by reference to what it would cost to put the respondents back in the same position they would have been in had the offending conduct not occurred, namely actual losses.

Profits which the respondents contend should have been made or which they could have expected or hoped to have been made cannot be claimed for negligent misstatements or representations.

Mr Quirk, for the respondents, contended that paragraph 47(a) claimed an actual loss. I cannot agree. Paragraphs 47(a) and (b) are expressed to be part of the calculation of damages claimed in paragraph 47(c).

It follows that there is no legal basis for the damages claimed in paragraph 47 related as they are to the alleged negligent misstatements and representations. The claim is therefore clearly untenable or bound to fail at trial. Paragraph 47 should therefore be struck out but the respondents will be granted leave to replead their claim for damages for negligent misstatements and representations.

1. Collateral contract

The applicants argue that the claim in paragraphs 61, 62 and 63 of the counterclaim is ambiguous and embarrassing and the paragraphs do not plead the facts necessary to 22102004 T1/CLM M/T TSVDC1/2004 (Wall DCJ)

establish an oral contract, rather they contain no more than a bland assertion that there is
one.

Mr Quirk relied on paragraphs 33 - 36 of the applicants' reply and answer but I do not think they really assist him because they plead no more than what the applicants argue under this heading.

The counterclaim is I think unnecessarily confusing and unclear to the extent that it is ambiguous or embarrassing. Paragraph 29 pleads "information", paragraphs 33, 34 and 36 plead "statements" and paragraph 35 pleads "representations". Paragraph 39 then alleges that "all the representations" made by the fourth applicant to the second respondents were pre-contractual representations made to induce the respondents to enter into the sub-lease. Paragraphs 40 and 41 follow on from that allegation. Paragraph 61 pleads that "the aforesaid representations are collateral warranties given by the plaintiff to the first defendant". Paragraphs 23 and 24 plead that the fourth applicant was the servant or agent of the second and third applicants and paragraph 28(b) pleads that the second, third and fourth applicants were acting as agents for the plaintiff.

Paragraph 61 should identify precisely what representations are relied upon and what the respondents did relying on those representations. In their present form paragraphs 61, 62 and 63 will be struck out but the respondents will be granted leave to replead their claim

based on oral terms and/or collateral warranties and/or collateral contract.

1. Indemnity claim - paragraph 69

In this paragraph the second respondents claim against the "Defendant by Election"
(whoever that is) "an indemnity against any claim brought against them herein by the plaintiff
such indemnity arising by reason of the misleading and/or deceptive conduct of the second,
third and fourth applicants which induced the second respondents to execute the
guarantees."
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Presumably the "Defendant by Election" is meant to be the "Defendants by Counterclaim".

The applicants argue that no basis for an indemnity is pleaded. That is not entirely correct. paragraphs 51 and 55. See also paragraph 64.

Mr Quirk submitted that the words in paragraph 69, "an indemnity against", should read, "an amount equivalent to any claim...", and that what was being sought was not a common law indemnity but one under section 87 of the Trade Practices Act.

In all of the circumstances the claim as pleaded is not correct and is ambiguous and embarrassing and should be struck out. The respondents will be granted leave to replead the claim.

5. Consequential matters

The respondents concede that paragraph 53(b) should be struck out and it will be.

The respondents will have to replead their claims for damages and/or compensation to reflect the orders that I will make and these reasons. The claim for damages for negligent misstatements or representations will have to be pleaded separately to other claims for damages or compensation which claims themselves will also have to be separately pleaded and this will require consequential amendments to the balance of the counterclaim. It is unnecessary for me to identify particular paragraphs.

For present purposes it is sufficient to make the following orders:

1.          The applicants' claim in respect of paragraphs 45 and 46 of the counterclaim is dismissed.

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2.          The applicants' claim in respect of paragraphs 47, 61, 62, 63 and 69 of the counterclaim is granted and those paragraphs will be struck out but the respondents will be granted leave to replead.

3.          The applicants' claim in respect of paragraph 53(b) of the counterclaim is granted and that paragraph will be struck out.

4.          The respondents are granted leave to make all necessary consequential amendments to the counterclaim consequent upon the striking out of paragraphs 47, 61, 62, 63 and 69.

...

HIS HONOUR: Order number 5 will be:

5.          The respondents are to pay three-quarters of the applicants' costs of and incidental to the application to be assessed on the standard basis if not agreed.

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