Tomlinex Pty Ltd v Candoura Pty Ltd

[1992] FCA 156

NOT FOR CIRC~JIJLTION JUGS[I!!~N~- 1 l /

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IN THE FEDERAL COURT OF AUSTRALIA	)	I	'
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SOUTH AUSTRALIAN DISTRICT REGISTRY	! 1
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GENERAL DIVISION
BETWEEN:
TOMTJNEX PTY LTD	I
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Applicant

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W O U R A PTY LTD.

RECEIVED	BULLOCK MOUNTAIN MINING PTY LTD.
JOHN CLIVB: COLLINS,
FEDERAL COURT OF	IRIS MIY COLLINS and

AUSTRALIA MARGARET IRENE HOWELL
Respondents

EX TEMPORE REASONS FOR JUDGbENT

Coram: von Doussa J.

Date : 5 March 1992	! .
The applicant claims damages from each of the respondents alleging that it was induced to enter into an option agreement	I
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on 18 June 1988 by reason of false and misleading statements	1
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made by the respondents through their agent the third	!
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respondent, John Clive Collins. The causes of action pleaded I

of the Misre~resentation Act 1971-1972 (S.A.). That section

include a claim under s.82 of the Trade Practices Act 1974 against the first and second respondents in respect of an alleged contravention of s.52 of the Trade Practices Act, and a claim under s.75B of the Trade Practices Act against the third respondent on the ground that he was a party involved in the contravention of s.52 by the first two respondents. There is also a claim made against all respondents pursuant to s.7

gives a cause of action for damages to a contracting party induced to enter into a contract by innocent misrepresentations made by or on behalf of the other contracting party.

The application was issued on 7 June 1989. Thereafter the proceedings progressed slowly. By consent, on 22 September 1989 (the day on which the respondents filed an appearance), lengthy orders giving directions for the future conduct of the case were made. Paragraph 7 of those directions included provision for the trial of the action in due course to be held primarily upon af fidavit. A time-table was set for all procedural steps including the filing of affidavits by both sides. The time-table was at no stage met. There were initial delays during the latter part of 1989 which culminated in the filing of an amended statement of claim in December 1989. A defence was not filed until June 1990. Revised directions were given for the filing of the applicant's affidavits. Time was extended on several occasions

thereafter to enable that exercise to be completed. It is	fair to say that the applicant ran into a number of
difficulties which were not of the making of the applicant's solicitors.
The applicant's affidavits were not completed until September 1991. Directions were then made for the respondents to file their affidavits by 22 November 1991. That time limit was not met. No affidavits had been filed by the respondents

when the matter came on again for directions on 27 November 1991. An order was made further extending time for the respondents to comply with the direction to file affidavits to 3 February 1992. On 3 February 1992 the solicitors who had hitherto acted for the respondents filed a notice that they were no longer acting.

Since then the respondents have taken no active part in the proceedings. On 7 February 1992 I ordered that the trial take place on affidavit material and I gave liberty to the applicant to read as evidence the affidavits which had previously been filed by it. I directed that the order be served upon each of the respondents by pre-paid post. The order also indicated that the trial had been fiked for today. The order was duly served. There has been no appearance by the respondents at trial. The matter has proceeded today in default of appearance of anyone on behalf of the respondents. The applicant has therefore embarked on the exercise of proving the case pleaded and establishing its damage. I am

satisfied that it has done so.

The misrepresentations on which the applicant relies were made at a meeting which occurred in the office of a firm of solicitors in Adelaide on Saturday, 18 June 1988. At that time the respondents were between them the holders of interests in some 16 mining tenements in northern New South Wales. In about March 1988 the respondents had entered into an option agreement ("the original option") with Barkuna Pty

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Limited ("Barkuna") under which Barkuna had the right to carry out exploratory work on the mining tenements and upon the exercise of the original option to enter into a joint venture to mine the mining tenements with the respondents.

Under that original option Barkuna had the right to earn a 90 per cent interest in the joint venture. The original option was to expire on 18 June 1988, but there was provision in its terms for an extension to 18 December 1988 upon the payment of a further option fee. Prior to 18 June 1988 Barkuna had approached a director of the applicant inquiring whether the director or investors with whom he was associated would be interested in acquiring a share of the joint venture available under the original option. In the result the applicant expressed interest in doing so and sought advice as to the quality of the mining tenements as gold prospects from a Mr Hopwood who was a director of another company called Sedimentary Holdings Limited ("Sedimentary").

It appears there had been a proposal mooted primarily by Sedimentary that Sedimentary and the applicant would each acquire a share of the potential interest of Barkuna in the original option. They would do so by providing the money necessary to secure an extension of the original option agreement to 18 December 1988. The purpose of the meeting on 18 June 1988 was to further those discussions. The meeting commenced about lunch time. Sedimentary was represented by its solicitor and M r Hopwood. The respondents were

represented by John Clive Collins. Barkuna was represented by a geologist, Mr Grasso, and Mr Robertson. The officers representing Tomlinex initially were directors, Mr Zappia and

Mr Di Maggio. They were the directors present at the time

when the misrepresentation was made.

The parties present at the meeting had available to them reports by geologists regarding the mining tenements, including a report from a Professor Wilson. It was apparent from that report that whilst there were some 16 mining tenements involved, certain of them were of greater potential than others. In particular there was a mining lease already issued and numbered 1063, and there were mining lease applications numbered 473 and 474. Mining lease applications numbered 473 and 474 were said to have particularly important potential.

There was a discussion as to the extent of the interests

that might be taken up by the parties. After a period of

discussion those representing Sedimentary left the meeting to

attend a board meeting of their own company. They returned

after an absence of an hour or two. Upon their return Mr Hopwood advised the meeting that Sedimentary would only be involved if it were to receive a substantially greater share of the proposed joint venture than had previously been discussed. The greater share was sought as his company considered there was uncertainty whether or not exploration would be successful. 14r Hopwood expressed concern that mining

lease applications had not been granted and for that reason initial exploration would be limited to investigation of mining lease numbered 1063.

The right to investigate mining lease application numbered 473 in particular was of importance to Sedimentary and the applicant. It was the intention of all parties if the original option agreement were extended that investigative work on the most promising mining tenement areas would be completed prior to 18 December 1988 so that a decision could then be made whether the option should be exercised. The ability to carry out the proposed investigative work was therefore of crucial importance to the discussions that were then taking place. When Mr Hopwood suggested to those present that investigation would be restricted because the mining lease applications had not been granted and might not be granted for some time, in particular in relation to mining lease application numbered 473, M r Collins expressed his disagreement with those views. He drew attention to a map

mining lease applications numbered 470 and 473. He said words present in the room and pointed to the areas covered by the	to the effect that "these two mining lease applications will
be available to us within 30 days".
Mr Hopwood disputed that statement and said that in his opinion it would be several months at least before the mining lease applications could be converted into mining leases and it would not happen before Christmas, that is, would not happen before the expiry date of the proposed extension of the option. The disputation between these two men continued. Mr Collins asserted his confidence that the leases would be issued and entered into a bet with Mr Hopwood that that would happen.
After the bet was made Mr Collins again reiterated his opinion that the two mining lease applications that had been discussed would be issued within 30 days, but on this occasion he pointed to the areas the subject of mining lease applications numbered 473 and 471. Mr Di Maggio who, it seems, was able to follow the import of the discussion well, pointed out the error. Mr Collins then said words to the effect: "I cannot now remember exactly which two it is. One of them is definitely 473. I don't remember the other one. It's one of these", and then pointed to the areas of mining lease applications numbered 470, 471 and 472.
Shortly after that discussion the representatives of Sedimentary left the meeting. Barkuna was not prepared to
being exercised on the terms required by Sedimentary. After share the proposed joint venture in the event of the option
the representatives of Sedimentary left the meeting, Mr Collins said words to the effect: "Hopwood doesn't know what hers talking about. He does not know the Mines Department and the other government departments in New South Wales as well as I do. I have been working with them for years and years.
Without a question of a doubt those U s will be converted to
mining leases within 30 days", and he went on to make a number of other statements as to the prospects of investigating the mining tenements in the immediate future.
The account of the discussion I have given comes primarily from the af fidavit of Mr Di Maggio. However, that there were statements by Mr Collins to the effect that a mining lease would issue for the important area covered by mining lease- application numbered 473 within 30 days is borne out by the affidavit evidence of Mr Hopwood, Mr Robertson and Mr Zappia. I find that the conversation occurred as I have outlined it.
It is the evidence of MI Zappia and Mr Di Maggio that they, as directors of the applicant, were induced by the statements of filr Collins to enter into an arrangement on behalf of the applicant with Barkuna, at the meeting shortly after the statements were made. The agreement entered into, whilst it was in many respects an extension of the original
new agreement set out in a lengthy document drawn and executed option agreement between the respondents and Barcoona, was a
on 18 June 1988, to which the applicant is also a party.
By its terms the applicant was to pay forthwith $250,000 to Barkuna. Barkuna was required forthwith to pay that money to the respondents as the consideration for the extension of the joint venture option to 18 December 1988.

The extended option was exercisable not later than 18 December 1988 and upon it being exercised a joint venture to mine the tenements would come into being wherein the respondents would have a 10 per cent interest, Barkuna a 65 per cent interest and the applicant a 25 per cent interest.

The clear purpose of the extension of the option to 18 December 1988 was to enable the parties to the agreement, in particular, Berkuna and the applicant, to investigate the gold mining potential of the mining tenements.

The sum of $250,000 was paid on 22 June 1988 to Berkuna by the applicant, and a further sum of $940 was paid on 7 July 1988 by the applicant to Mr Collins to compensate for four days interest as the payment of $250,000 was made late.

As envisaged by the terms of the extended option agreement, Berkuna then sought to embark on the investigative	'
work anticipated by the parties.	It became apparent at an
were not likely to be issued and that no investigative work	early stage that the mining leases had not been issued and
could be carried out on the areas covered by the mining lease applications until mining leases were issued. Equipment was taken on to the site of mining lease numbered 1063. Investigative work carried out on that lease finished in October 1988. The plant was there. The ability was there to carry out work on the other areas but that work could not be undertaken because of the legal restrictions attaching to

mining lease applications:

I am satisfied by the evidence, and in particular that available through the affidavit of M r Hockey, and also from the Mines Department officer in New South Wales, that there could not have been any reasonable basis for the assertion of belief, if that is what it was, by M r Collins on 18 June 1988, that the mining lease application numbered 473, and the one for an adjoining allotment, would issue within 30 days or thereabouts. I am satisfied that the representation to that effect was false. I am satisfied that the false representation induced the applicant to enter into the extended option agreement.

Section 52 of the Trade Practices Act provides:

"That a corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptiJe or is likely to mislead or deceive."

It is admitted in the pleadings that the first and second

respondents are corporations within the meaning of the Act. I

have found that the representations made on 18 June, 1988 were misleading or deceptive. A question remains whether the conduct of the companies was in trade or commerce. I find on the evidence that the conduct engaged in by the corporations was conduct in trade and commerce. It appears that the companies were the holders of many mining tenements and made it: their business to exploit them, including by entering into agreements of a kind like the extended option agreement in question.

Section 82 of the Trade Practices Act gives a party who suffers loss or damage by conduct in contravention of s.52 a cause of action in damages. By the defence it is admitted that Mr Collins was at all material times acting in the negotiations on 18 June 1988 as agent for the first and second respondent. I am satisfied that he was a party involved in the contraventions of S. 52 by the corporations and, accordingly, he too is liable pursuant to s.75B for the loss and damage suffered by the applicant in consequence of the contravention of s.52.

I am satisfied that the applicant has made out its cause of action under s.7 of the Misre~resentation Act 1971-1972 against each of the respondents on whose behalf M r Collins made the misrepresentations.

I agree with the submission made by counsel for the applicant that the damages should be assessed on the footing that the applicant should be returned to the position that it would have been in had it not been induced to enter into the extended option agreement. I am satisfied that had the true position in relation to mining lease application numbered 473 been made known to the applicant through its representatives at the meeting on 18 June 1988, the applicant would not have entered into the agreement. Accordingly the applicant should be returned to its pre-contract position and that requires the repayment to it of $250,000 paid on 22 June 1988 and also the $940 subsequently paid.

It seems to me in the circumstances outlined in the affidavits that the applicant would probably have been justified in pursuing a claim for compound interest under the Hunaerfords & Others v Walker & Others (1990) 171 CLR 125 principle. It has not done so however, but has limited its claim to interest under s.51A of the Federal Court of Australia Act 1976.

In my opinion it is appropriate that interest under that section be awarded from the day on which the cause of action arose, that is, at the latest, from the day on which the payments were made. It is arguable that the cause of action accrued when the original option agreement was signed but for the purposes of this exercise I shall assume the later date.

Interest rates have for most of the period since then been high. I have had regard to the rates of interest prescribed in schedule J to the New South Wales Supreme Court

rules. I note that for the period from 1 September 1989 to 31 August 199'0 the prescribed rate was 21 per cent, and from 1 September 1990 to 28 February 1991 the prescribed rate was 19 per cent. On either side of those periods the rates have been somewhat less. Counsel for the applicant suggests that interest should be assessed in a lump sum calculated broadly

on 16 per cent simple interest. On that footing he seeks the inclusion in the judgment of $150,000. In my view that is an entirely reasonable claim and I allow $150,000 in the judgment that I propose to enter.

For these reasons there will be judgment for the applicant in the sum of $400,940 plus costs.

I certify that this and the

fZ preceding pages are - a

true copy of the Reasons for Judgment of M r Justice

von Doussa - -

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Associate : L' J/LdldL&

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Dated: 5/2/9 L

Counsel for the applicant	: M r R W Evans
Solicitor for the applicant	: Peter Scragg
No appearance for the respondents
Date of hearing	: 5 March 1992