Whitemark P/L (ACN 008 966 121) v Cann Australia P/L (ACN 0101 814 365)

[1993] FCA 184

Re: WHITEMARK PTY LTD
And: CANN AUSTRALIA PTY LTD and ROBERT JOHN BUCKINGHAM CANN
No. WAG211 of 1992
FED No. 184
Number of pages - 11
Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
French J(1)

CATCHWORDS

Practice and Procedure - pleading - misleading or deceptive conduct - defence - plea of estoppel - based upon interlocutory judgment in winding up proceedings - no issue estoppel disclosed - plea struck out - future representations - adequacy of pleading - plea struck out.

Trade Practices Act 1974 s.51A, s.52

Fair Trading Act 1987 (WA)

Re QBS Pty Ltd (1976) Qd R 218

Offshore Oil NL v. Acron Pacific Ltd (1984) 2 ACLC 8

Brinds Ltd v. Offshore Oil NL (1985) 63 ALR 94

Bateman Television Ltd v. Coleridge Finance Co. Ltd (1971) NZLR 929

Avery v. World Wide Testing Services Pty Ltd (1990) 8 ACLC 1043

Gye v. McIntyre (unrep. Fed. Ct. 26/5/92 Beaumont J)

In Re Vitoria Ex parte Vitoria (1894) 2 QB 387

King v. Henderson (1898) AC 720

Dowling v. The Colonial Mutual Life Assurance Society Ltd (1915) 20 CLR 509

HEARING

PERTH, 12 March 1993

#DATE 31:3:1993

Counsel for the Applicant: Mr S. Standing

Solicitors for the Applicant: Freehill Hollingdale and Page

Counsel for the Respondent: Mr C. Slater

Solicitors for the Respondent: Mallesons Stephen Jaques

ORDER

The Court orders that:

1. Paragraphs 10, 33, 16(c) and (d), 17, 18, 22, 24, 25, 32, 35 and 38(c) and the words "if, which is denied, the Applicant is not estopped from denying that the sum of $299,000 is due and owing by the Applicant to the Company or from asserting that the sum of $299,000 is not due and owing by the Applicant to the

Company" in paragraphs 43, 44, 45 and 46 of the Defence herein be struck out.

2. Paragraph 82 of the cross-claim be struck out.

3. The respondents to pay the applicant's costs of the motion.

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

JUDGE1

FRENCH J By an application filed on 16 December 1992, Whitemark Pty Ltd claims against Cann Australia Pty Ltd an order declaring void a contract under which Cann Australia Pty Ltd was to provide it with architectural services. It seeks the repayment of $796,153 allegedly paid to Cann Australia, damages for breach of contract and/or damages under the Trade Practices Act 1974 and the Fair Trading Act 1987 (WA). It also claims damages against Robert Cann, who is a director of Cann Australia. A statement of claim was filed with the application and a defence and cross-claim filed on 27 January 1993. By a motion filed 11 February 1993, Whitemark moved for orders striking out various paragraphs of the defence. Before turning to the submissions made in relation to that motion, it is necessary to outline the case as pleaded.

The Pleadings
2. Whitemark owns the Geographe Bay Motel at Busselton. Cann Australia carries on business as an architect, planner and interior designer. Whitemark's directors are Messrs. Khoo, Hamilton and Siew. Robert Cann is a director of Cann Australia. In May 1991 Whitemark and Cann Australia discussed the possibility that Cann Australia might act as architect, planner and interior designers in respect of a proposal to redevelop the motel. At a meeting which is said to have taken place on 25 May 1991, those representing Whitemark told Cann that the development would involve the construction of ninety hotel rooms and eighteen chalets. It is also alleged that Whitemark told Cann Australia that its budget was $100,000 per room and chalet. Cann Australia, through Robert Cann, is said to have represented that the redevelopment could be carried out in accordance with the budget and that if the company were retained as architect it could and would proceed with the work in accordance with that budget. Implied representations as to the capacity of the company to do the work on that basis are also pleaded. It is said to have been intended by Cann Australia that the representations would be relied on. Whitemark says that in reliance upon the representations it entered into the contract with Cann Australia under which that company would act as its architect in respect of the redevelopment. It instructed Cann Australia to prepare plans and authorised the execution of a standard form contract. Paragraph 16 of the statement of claim alleges that the representations said to have been made at the meeting were misleading or deceptive in that Cann Australia did not have reasonable grounds for holding its represented opinion that the redevelopment could be carried out in accordance with Whitemark's budget. Cann Australia, it is alleged, failed to qualify its representations by saying that the redevelopment might not be able to be carried out in accordance with the budget. Further, it did not subsequently proceed with its work in accordance with the budget. Construction costs for the redevelopment work carried out by Cann Australia are said to have been about $19,000,000. Section 51A of the Trade Practices Act 1974 and s.9 of the Fair Trading Act 1987 are invoked in respect of certain of the representations. Cann Australia is said to have engaged in misleading or deceptive conduct in contravention of s.52 of the Trade Practices Act and Cann himself to have been involved in that conduct. In addition to the claim based on s.52 of the Trade Practices Act and corresponding provisions of the Fair Trading Act, there is a claim that Cann Australia breached an express term of the contract that it would be carried out in accordance with the budget. In the alternative, a collateral contract is pleaded. Express terms relating to standards of care and compliance with instructions are also pleaded.

1. A second cause of action for misleading or deceptive conduct is said to arise out of further representations made in August 1991 that Cann Australia would amend the relevant work so that the redevelopment would be in accordance with Whitemark's budget. In reliance upon this and associated representations, Whitemark says it agreed to continue with and not terminate the contract. The representations are alleged to have been misleading or deceptive on the same bases as those made in May. There is also a restitutionary claim based on total failure of consideration for repayment of fees totalling $796,153.

2. By their defence, Cann Australia and Cann admit that they engaged in discussions about the redevelopment of the Geographe Bay Motel in May 1991 but deny the alleged representations. In answer to the plea of misleading or deceptive conduct and the loss allegedly flowing from it and various of the causes of action based upon the same or related facts, they assert an estoppel flowing from a judgment of Master Bredmeyer in a company proceeding in the Supreme Court of Western Australia on 2 October 1992.

3. The principal attack upon the defence relates to that estoppel plea. The judgment relied upon was given in proceedings relating to a winding up petition brought by Cann Australia against Whitemark. Whitemark had moved for the dismissal of that application which was based on a failure to comply with a s.460 notice in relation to a sum of $299,000 owed to Cann Australia by Whitemark from September 1991. The attack upon the petition by Whitemark depended upon the proposition that the $299,000 claimed by Cann Australia was a bona fide disputed debt.

4. Whitemark contends that the dismissal of its motion to strike out the winding up petition did not fully determine the merits of the dispute which remain to be decided in the winding up proceedings. Further, it is said, the judgment of Master Bredmeyer was interlocutory rather than final and will therefore not support an estoppel. The latter characterisation was said to have been confirmed when leave was sought to appeal against the Master's decision and was refused.

5. At the outset it may be said that whatever estoppels were generated in favour of Cann Australia, there is no basis for any estoppel plea in relation to Mr Cann himself. He was not a party to the proceedings in the Supreme Court and although the estoppel pleas raised in the defence are raised in relation to allegations in the statement of claim directed to Whitemark, they are made by both respondents. The issue to be determined by the Master in the company proceedings was whether or not the winding up petition should be dismissed as an abuse of process on the ground that it was based upon a bona fide disputed debt. If so much can be established in a winding up petition, then the petition generally fails in limine because the petitioner is not a creditor within the meaning of s.460 of the Corporations Law. Although generally the Court does not embark upon a determination of the merits of the dispute, it is open to the trial judge in such a case to do so. Whether it is appropriate to do so, is a matter of discretion which will involve questions of convenience and case management - Re QBS Pty Ltd (1976) QdR 218 at 215 per Gibbs J; Offshore Oil NL v. Acron Pacific Ltd (1984) 2 ACLC 8; Brinds Ltd v. Offshore Oil NL (1985) 63 ALR 94 at 99; Bateman Television Ltd v. Coleridge Finance Co. Ltd (1971) NZLR 929 at 932; Avery v. World Wide Testing Services Pty Ltd (1990) 8 ACLC 1043. Where there is a determination by the Court that there is no bona fide dispute as to the existence of the disputed debt, the corollary is that the debt exists. In the present case Master Bredmeyer found that the relevant debt exists and that Whitemark had failed to raise any bona fide reasonable or substantial case that it had entered into its contract with Cann Australia as the result of misleading or deceptive conduct on the part of Cann.

6. It is not necessary or desirable to undertake any detailed analysis of the Master's reasons for judgment. It was based upon affidavit evidence, which the parties evidently did not seek to test by cross-examination. Findings of fact on conflicting accounts of what occurred in connection with the motel redevelopment were made. There was no pleading to define the issues and the ultimate question for determination was whether or not there existed a bona fide dispute as to the debt the subject of the petition.

7. In the disposition of a petition the possibility is open that the determination of the existence of a debt will give rise to an estoppel. In Gye v. McIntyre (unrep. Fed. Ct. 26/5/92 Beaumont J) Beaumont J observed that the dismissal of a creditor's petition does not create an estoppel on the issue whether the petitioner's claim is a good debt - In Re Vitoria Ex parte Vitoria (1894) 2 QB 387; King v. Henderson (1898) AC 720 at 729-730; Dowling v. The Colonial Mutual Life Assurance Society Ltd (1915) 20 CLR 509 at 518-9 per Isaacs J. The dismissal of a petition may turn on issues other than the question whether or not the existence of the debt has been proven. That judgment however leaves open the possibility that an issue of estoppel may be generated by a positive finding that the debt exits.

8. It is however, in my opinion, a fundamental objection to the estoppel plea that it is founded upon a determination which was not final but interlocutory in a motion to dismiss the winding up proceedings as an abuse of process. The final determination of the petition may turn on matters which do not depend critically upon the existence of the debt and the issues underlying its existence. Even if there be a finding that the debt exists the petition may yet be dismissed. Proceedings in the Supreme Court have not yet finally been determined and in my opinion, the findings made by Master Bredmeyer on the interlocutory motion not being final do not give rise to an issue estoppel in favour of Cann Australia. Those parts of the statement of claim which raise that issue estoppel should be struck out.

9. An objection is also taken that paras. 71 and 85 of the cross-claim fail to plead material facts. The form of allegation in each of those paragraphs is that the directors of Whitemark "encouraged" Cann Australia to believe that a legally binding agreement existed between Whitemark and Cann Australia on certain terms which are particularised. These pleas are evidently relied upon to support an allegation of promissory estoppel which would prevent Whitemark from denying its obligation to pay certain outstanding fees to Cann Australia. No material facts, it is said, are pleaded regarding the alleged "encouragement". Further, the particulars that are provided are said not to support the allegation that there was any encouragement. In my opinion the question whether the particulars relied upon will support the allegation is a matter which can be determined at trial. Further particulars are promised in the cross-claim and these should be provided in due course. I do not, however, see any reason why the applicant should not plead to these aspects of the cross-claim forthwith.

10. Paragraph 82 of the cross-claim refers to an implied representation by Whitemark to Cann Australia that Whitemark would pay the company in respect of the works a fee being .09% of the anticipated costs of the development. Paragraph 82 says:
    

"To the extent that the Implied Representation was with

respect to a future matter the Company relies upon

s.51A of the Trade Practices Act 1974 and s.9 of the

Fair Trading Act 1987."

As I have said on more than one occasion this form of pleading fails to disclose the future matter relied upon. If it is contended that the implied representation was with respect to a future matter, then that should be clearly stated. If there is some subsidiary representation contained within the implied representation which is said to have been with respect to a future matter, then that subsidiary representation should be pleaded. As it stands, para. 82 is embarrassing and will be struck out with leave to amend.