` CATCHWORDS
PRACTICE AND PROCEDURE - summary dismissal - previous proceedings by applicants against respondent Bank the subject of arbitration pursuant to Arbitration Agreement which provided that arbitrator's award to be final and binding and that proceedings to be discontinued by applicants if arbitrator's award unfavourable to them - arbitration hearing proceeded on liability only before retired Federal Court judge over six days at which both parties represented by solicitors and counsel, followed by written submissions by both parties - two months and 13 days after conclusion of hearing, applicants acting for themselves commenced these proceedings against Bank, directors and former directors of Bank and employees and former employees of Bank, yet still did not seek setting aside of Arbitration Agreement - subsequently on 24 May 1995 arbitration award delivered wholly favourable to Bank - on 13 June 1995 applicants filed amended statement of claim seeking setting aside of Arbitration Award - further amendment in August 1995 to seek setting aside of both Arbitration Agreement and Arbitration Award on basis that applicants induced to enter into Arbitration Agreement by misrepresentation by Bank officers that Bank would not contest liability as vigorously in arbitration as in litigation - election by applicants, after they knew hearing to be on liability, in favour of continuing with arbitration - estoppel - whether applicants suffered any loss by reason of having arbitrated rather than litigated - no reasonable cause of action for setting aside because of election or estoppel - no reasonable cause of action for damages because no loss or injury.
Federal Court Rules, O 20, r 2.
IAN ANDERSON AND GERALDINE ANDERSON v COMMONWEALTH BANK OF AUSTRALIA
No NG 559 of 1993
IAN ANDERSON AND GERALDINE ANDERSON v MORRISH A BESLEY & ORS
No AG 12 of 1995
Lindgren J
Sydney
29 September 1995
IN THE FEDERAL COURT OF AUSTRALIA)
NEW SOUTH WALES DISTRICT REGISTRY) No NG 559 of 1993
GENERAL DIVISION )
BETWEEN:
IAN ANDERSON AND GERALDINE ANDERSON
Applicants/Cross Respondents
AND:
COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)
Respondent/Cross Claimant
No AG 12 of 1995
BETWEEN:
IAN ANDERSON AND GERALDINE ANDERSON
Applicants
AND:
MORRISH A BESLEY & ORS
First Respondent
AND:
COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)
Second Respondent
CORAM: Lindgren J
PLACE: Sydney
DATE: 29 September 1995
MINUTE OF ORDERS
THE COURT IN PROCEEDINGS NO:
NG 559 of 1993
Ian Anderson and Geraldine Anderson v Commonwealth Bank of Australia
1. ORDERS that the application be dismissed.
2. ORDERS that the applicants/cross respondents pay the costs of the respondent/cross claimant.
No AG 12 of 1995
Ian Anderson and Geraldine Anderson v Morrish A Besley & ors
1. ORDERS that the application be dismissed.
2. ORDERS that the applicants pay, on an indemnity basis, the costs of the first respondents Peter A Dray, David Anderson, Peter Keating and Richard A Perkins and of the second respondent Bank, thrown away by the filing in Court on 24 August 1995 of the further amended statement of claim.
3. ORDERS that otherwise the applicants pay, on the usual party and party basis, the costs of the first respondents, Peter A Dray, David Anderson, Peter Keating and Richard A Perkins and of the second respondent Bank.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA)
NEW SOUTH WALES DISTRICT REGISTRY) No NG 559 of 1993
GENERAL DIVISION )
BETWEEN:
IAN ANDERSON AND GERALDINE ANDERSON
Applicants/Cross Respondents
AND:
COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)
Respondent/Cross Claimant
No AG 12 of 1995
BETWEEN:
IAN ANDERSON AND GERALDINE ANDERSON
Applicants
AND:
MORRISH A BESLEY & ORS
First Respondent
AND:
COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)
Second Respondent
CORAM: Lindgren J
PLACE: Sydney
DATE: 29 September 1995
REASONS FOR JUDGMENT
NATURE OF PROCEEDINGS:
By motion brought by notice of motion filed on 30 June 1995, the respondents in proceedings No AG 12 of 1995 seek the following relief:
"1. That the application be dismissed or permanently stayed.
2. That the Amended Statement of Claim filed by the applicants be dismissed or permanently stayed.
3. Alternatively, that the whole of the application and amended statement of claim be struck out.
4. Such further orders as the court thinks fit.
5. Costs."
The notice of motion was filed by reference to an amended statement of claim which had been filed on 13 June 1995. After developments which do not matter for present purposes, pursuant to leave a further amended application and a further amended statement of claim were filed in Court on the hearing on 24 August 1995. The parties treated the motion as relating to the further amended application and further amended statement of claim so filed.
BACKGROUND:
At all material times the applicants ("Mr and Mrs Anderson") were the sole directors and shareholders of a company called Lasobook Pty Limited ("Lasobook"). Its principal business activity was that of construction. The second respondent ("the Bank") was its banker. The Bank provided financial accommodation to Lasobook. Mr and Mrs Anderson guaranteed payment and mortgaged their home at Lot 82 Fernleigh Park, Queanbeyan to the Bank as security. Lasobook defaulted. In or about July 1991 an order was made that Lasobook be wound up and William Rangott ("Mr Rangott") was appointed liquidator.
On 10 November 1992 Mr and Mrs Anderson became bankrupt. Richard Campbell Brien ("Mr Brien") of Richard Brien & Co was appointed trustee in bankruptcy of their respective estates. On 28 July 1993 Mr and Mrs Anderson, by their then solicitors, Cedric R Symonds solicitors, commenced in this Court proceedings No NG 559 of 1993 against the Bank ("the first Federal Court proceedings"). They sought declarations that the guarantees and the mortgage were void or had been discharged or rendered unenforceable by the Bank's conduct. They also sought an order that the Bank deliver up the certificate of title to their home together with a discharge of mortgage in registrable form. As well, they sought "damages including aggravated compensatory damages", interest and costs. The factual basis for the relief sought consisted in alleged representations and advice by the Bank.
On 15 September 1993, Mr Brien as first applicant in his capacity as trustee of the bankrupt estates of Mr and Mrs Anderson and Lasobook (in liquidation) as second applicant, through the same solicitors, filed in the Court application No NG 711 of 1993 against the Bank ("the second Federal Court proceedings"). The relief which Mr Brien sought in the second Federal Court proceedings was, subject to minor differences not presently relevant, identical to that which Mr and Mrs Anderson were seeking in the first Federal Court proceedings. Lasobook (in liquidation) sought a declaration that all securities given to the Bank in respect of Lasobook's undertaking were void or had been discharged or rendered unenforceable by the Bank's conduct. As well, it sought damages, interest and costs. Accompanying the application in the second Federal Court proceedings was a statement of claim expressed similar in terms to that which had accompanied the application in the first Federal Court proceedings.
On 26 October 1993 the Bank commenced proceedings No 18692 in the Common Law Division of the Supreme Court of New South Wales against Mr and Mrs Anderson seeking an order for possession of their home at Lot 82 Fernleigh Park, Queanbeyan and ancillary orders ("the Supreme Court proceedings").
On 15 December 1993 the Bank, through its internal solicitor, Mr L E Taylor, conveyed to Mr and Mrs Anderson through their solicitors, an offer to agree that the claims be heard by an arbitrator acceptable to both parties whose decision was to be final and binding. It will be necessary for me to refer in more detail later to the events surrounding acceptance of the offer and the formalisation of the parties' agreement in an Arbitration Agreement dated 14 June 1994 shortly to be noted. On 31 January 1994 the creditors of Mr and Mrs Anderson, excluding the Bank which, by agreement, did not vote, accepted a proposal under s 73 of the Bankruptcy Act 1966 (Cth) and their bankruptcies were annulled pursuant to sub-s 74 (5) of that Act.
By an Arbitration Agreement dated 14 June 1994 made between the Bank, Mr and Mrs Anderson and Mr Rangott, as varied by letters dated 25 July 1994 and 29 July 1994, it was agreed that Mr T R Morling QC be appointed as arbitrator to conduct a private arbitration hearing of the disputes between the Bank and Mr and Mrs Anderson (see below). By the Arbitration Agreement it was further agreed that the Bank would pay the arbitrator's fees, the cost of hiring (if necessary) premises for the purpose of the hearing and the cost of transcription services for the hearing; that otherwise the Bank, Mr and Mrs Anderson and Mr Rangott would bear their own costs of preparing for and attending the arbitration hearing; and that the arbitrator would not award costs against Mr and Mrs Anderson or Mr Rangott.
The Arbitration Agreement provided for the conduct of the arbitration. Clause 1.1 defined "Disputes" to mean "all causes of action and claims arising out of or relating to the matters pleaded or referred to in the Proceedings" and "the Proceedings" to mean the first Federal Court proceedings and the second Federal Court proceedings.
Clause 5 was as follows:
"5.1The parties agree that:
5.1.1 prior to the conclusion of the
arbitration hearing no further steps will be taken in the Proceedings and the
Supreme Court Proceedings other than to
adjourn those proceedings;
5.1.2 the award of the Arbitrator will be binding and will finalise the Disputes;
5.1.3 they are forever waiving any right to appeal from the Arbitrator's award;
5.1.4 they are forever waiving the right to bring any further proceedings in respect of the Disputes;
5.1.5 they will cause the Proceedings to be discontinued as soon as practicable following the Arbitrator's award.
5.2 Nothing in 5.1 prevents:
5.2.1 a party from taking any action to enforce the terms of an award made by the Arbitrator or the terms of this document;
5.2.2 the Bank, provided Mr and Mrs Anderson fail to obtain an award from the Arbitrator setting aside mortgage registered no. Y990489, from proceeding with the Supreme Court Proceedings and proceeding with a claim for the indebtedness of Mr and Mrs Anderson to the Bank, following the delivery of the Arbitrator's award."
The arbitration hearing pursuant to the Arbitration Agreement took place before Mr T R Morling QC on 21, 22, 23, 24, 25 and 28 November 1994. The Bank was represented by Mr J J Spigelman QC with Mr M T McCulloch of counsel. Mr and Mrs Anderson were represented by Mr P Strasser of counsel. The learned arbitrator reserved his decision.
On 9 February 1995 Mr and Mrs Anderson's written submissions in the arbitration proceedings were delivered. On the next day, 10 February 1995, Mr and Mrs Anderson commenced proceedings No AG 12 of 1995 by filing in the Australian Capital Territory District Registry of this Court an application naming 27 individuals as first respondents and the Bank as second respondent ("the third Federal Court proceedings"). In launching the third Federal Court proceedings Mr and Mrs Anderson acted in person. The first named 16 of the first respondents were persons who were or had been directors of the Bank. The remaining 11 of the first respondents were persons who were or had been members of the staff of the Bank. The application did not seek an order setting aside the Arbitration Agreement.
On 9 March 1995 the Bank's written submissions in the arbitration proceedings were delivered.
The third Federal Court proceedings came before me in Sydney on 22 February 1995 on a motion by the Bank for the transfer of the proceedings to the New South Wales District Registry and for summary dismissal. The motion was then stood over to 17 March 1995 when it was again stood over to 12 April 1995. On that occasion, by consent, I dismissed the proceedings as against all of the first respondents except four of them, namely, Peter A Dray, David Anderson, Peter Keating and Richard A Perkins, ordered that the whole of the statement of claim be struck out, the whole of the application with the exception of sub-para 13(h) be struck out, and gave leave to Mr and Mrs Anderson to file an amended application and an amended statement of claim.
On 24 May 1995 Mr T R Morling QC delivered a 33 page award which was wholly in favour of the Bank. Henry Davis York, as solicitors for the Bank, wrote on 8 June 1995 to Milne, Berry & Berger, the solicitors for Mr and Mrs Anderson (apparently the practice of Cedric R Symonds, solicitors, had merged with that of Milne Berry & Berger) and on 4 July 1995 to Mr Brien and to Phillips Fox as solicitors for Mr Rangott, calling for a discontinuance of the first and second Federal Court proceedings. In relation to the first Federal Court proceedings, Mr and Mrs Anderson did not agree to discontinue. In relation to the second Federal Court proceeding, Mr Brien and Mr Rangott subsequently agreed to discontinue (see later).
On 13 June 1995, Mr and Mrs Anderson, still acting in person in the third Federal Court proceedings, filed an amended application and an amended statement of claim. The amended application sought, inter alia, an order setting aside the Arbitration Award.
On 30 June 1995, the Bank filed cross claims in the first and second Federal Court proceedings, seeking orders that the respective applicants in those proceedings sign and file notices of discontinuance.
As noted earlier, on 30 June 1995, the Bank filed in Court its notice of motion in the third Federal Court proceedings for summary dismissal. On that day I fixed the Bank's motion for hearing before me on 24 August 1995.
On 17 August 1995, Mr and Mrs Anderson, now represented by new solicitors and counsel, served forms of a proposed "further amended application" and "further amended statement of claim" together with an affidavit of Mr Anderson sworn 15 August 1995. The proposed further amended application and further amended statement of claim were not filed.
On the evening of 23 August 1995, that is to say, the evening prior to the date fixed for the hearing of the Bank's motion, a form of a fresh "further amended statement of claim" was supplied by Mr and Mrs Anderson's legal representatives to the legal representatives of the respondents. In the event, this was the form of further amended statement of claim for the filing of which leave was sought on the hearing on 24 August. I granted that leave. The main difference between this document and the form of the amended statement of claim which had been supplied about a week earlier was that the one filed and relied upon on the hearing was said to be a better pleading, in terms of form, of the conversations said to give rise to the representations on which Mr and Mrs Anderson wished to rely, and which had been deposed to by Mr Anderson in his affidavit sworn 15 August 1995 referred to earlier.
POSITIONS IN FIRST, SECOND AND THIRD FEDERAL COURT PROCEEDINGS AS AT 24 AUGUST 1995
In the second Federal Court proceedings, on the respondent Bank's application and with the consent of the applicants in those proceedings, Mr Brien and Lasobook (in liquidation), I granted leave to those applicants to discontinue and to file in Court of a notice of discontinuance, granted leave to the Bank to discontinue its cross claim, noted certain undertakings, and noted the parties' agreement that there was to be no order as to costs. It followed that it was only the first and third Federal Court proceedings which remained on foot.
By their further amended application filed in Court on 24 August 1995, Mr and Mrs Anderson seek the following relief in the third Federal Court proceedings:
"(i) An order setting aside the arbitration agreement dated 14 June 1994 entered into by the Applicants and the First Respondent [sic - second respondent].
(ii) An order setting aside the arbitration award of Mr TR Morling QC dated 24 May 1995.
(iii) Damages
(iv) Costs
(v) Such further or other order as the Court considers appropriate."
The further amended application in the third Federal Court proceedings is directed to enabling Mr and Mrs Anderson to pursue the first Federal Court proceedings, notwithstanding the Arbitration Agreement and the adverse award of the arbitrator pursuant to it. It is common ground that while the Arbitration Agreement and that award remain on foot, the Bank is entitled to have Mr and Mrs Anderson discontinue the first Federal Court proceedings.
On the hearing before me, Mr and Mrs Anderson asked that I note that they "discontinued" the third Federal Court proceedings against Peter Keating and Richard A Perkins, two of the remaining four first respondents. I will dismiss the proceedings as against them. This leaves only Peter A Dray and David Anderson of the first respondents remaining. The relief sought against them in the further amended application is "damages" for contravention of s 42 of the Fair Trading Act 1987 (NSW) ("Fair Trading Act") and for negligence.
THE FURTHER AMENDED STATEMENT OF CLAIM
Because so much turns on them, it is desirable that I set out paras 18-24 of the further amended statement of claim. They are as follows:
"18.(a)By letter dated 15 December, 1993 the bank offered to agree to the applicant's claims being heard by an arbitrator (who was acceptable to both parties) ('the arbitration offer').
(b)The claims made by the Applicants against the bank were comprised in the aforesaid Federal Court proceeding G559 of 1993.
19. The Applicants did not immediately accept the arbitration offer.
20. On 16 December, 1993 the Applicant Ian Anderson had a telephone conversation with Mr David Anderson, company secretary of the Bank.
21. On 21 December, 1993 the Applicant Ian Anderson had a telephone conversation with Mr David Anderson, company secretary of the Bank.
22. On 22 December, 1993 the Applicant Ian Anderson met with the Bank's representatives David Anderson and Peter Dray.
23. During the course of a meeting between the First Applicant, and David Anderson and Peter Dray of the Bank on 22 December, 1993 the following representations were made (the second representations).
23.1They were not authorised to make any offer other than the debt forgiveness on the company (Lasobook) and the return of the Applicant's assets but they knew the First Applicant would not accept that offer and there were probably good reasons why he should not accept that.
23.2It would be more than their jobs were worth to come to some agreement with the First Applicant that night that would result in the bank paying out any money over and above the return of the Applicants' assets.
23.3That if the Applicant elected to go on in the Supreme Court [sic - Federal Court] the Bank would be required to pursue that process as vigorously as possible in the interest of its shareholders. But then on the other hand if the proceedings were to go ahead with a private arbitration the Bank could elect not to pursue certain issues as vigorously as it otherwise might do.
23.4The Bank and the Applicant were poles apart in that they were only authorised to offer the First Applicant a debt forgiveness on Lasobook and a return of the Applicants' assets and the First Applicant had asked for a figure of $9,700,000 but somewhere between those two figures was the reasonable ground.
23.5That if the proceedings were heard in a public court the Bank would pursue its perceived rights as vigorously as possible and in the arbitration it would vigorously work to minimise any damages pay out but there was a big difference between the two positions.
23A. (a) At the time of each of those events pleaded in paragraphs 19 to 23 hereof the aforesaid David Anderson and Peter Dray and each of them were acting on behalf of the Bank as servants and/or agents thereof and furthermore acting within the scope of their actual or apparent authority.
(b) Alternatively, the aforesaid Respondents (Messrs Anderson and Dray) were acting outside of the scope of their actual or apparent authority.
24. At the time of making the aforesaid representations the Bank, Anderson and Dray and each of them intended and knew or ought to have known that the Applicants could rely on the representations and would be induced thereby to accept the arbitration offer and the consequent arbitration agreement as varied (referred to in paragraph 25 hereof)."
On the hearing, Mr and Mrs Anderson indicated that they did not rely on "the first representation" which is pleaded in para 17 of the further amended statement of claim. For that reason I have not set it out above and need say no more of it. However, for convenience, I will refer to the second representations pleaded in para 23 simply as "the representations".
The further amended
statement of claim continues by pleading
that in reliance on the representations, Mr and Mrs Anderson accepted the
Bank's offer of arbitration and executed the Arbitration Agreement and agreed
to amendments of it. It pleads the
arbitration hearing and the handing down of the Arbitration Award in favour of
the Bank. In para 29, it is pleaded that
the representations were false or misleading, and "particulars" of
their false or misleading character are given.
Paragraph 30 is as follows:
"30. The representations were:
30.1made with respect to future matters pursuant to s.51A of the Trade Practices Act 1974 ... ; and
30.2made by the Bank and/or the aforesaid Second Respondents (Anderson and Dray) and when it and/or they did not have reasonable grounds for the making thereof."
(David Anderson and Peter Dray were two of the first respondents, not second respondents as stated in para 30.2).
The further amended statement of claim also pleads that the Bank and/or David Anderson or Peter Dray owed a duty of care to Mr and Mrs Anderson and had a duty to take care in the making of the representations but breached that duty and were negligent, and that but for the representations Mr and Mrs Anderson would not have agreed to submit the disputes to arbitration.
Paragraph 36 is as follows:
"36. In the premises, the Bank's conduct and/or the conduct of Anderson and Dray has caused the Applicants loss and damage.
Particulars
(a) The expense of the arbitration agreement thrown away in the event of the agreement and award being set aside.
(b) Alternatively the loss to the Applicants in having foregone their rights to have proceedings G559 of 1993 heard in the Federal Court and their right to obtain the relief sought in those proceedings."
Paragraph 37 pleads that further and in the alternative the representations constituted conduct by the Bank and/or by Peter Dray and David Anderson in trade or commerce which was misleading or deceptive or likely to mislead or deceive in contravention of s 52 of the Trade Practices Act 1974 (Cth) ("Trade Practices Act") and/or s 42 of the Fair Trading Act. As particulars, the particulars in para 29 are repeated and the same loss and damage is relied upon.
REASONS:
The motion is for summary dismissal and so it must be very clear, in the face of judicial caution, that there is no issue deserving of a hearing: Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91 (Dixon J); General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129 (Barwick CJ); Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 93 (Mason, Murphy, Wilson, Deane and Dawson JJ); Webster v Lampard (1993) 177 CLR 598 at 602 (Mason CJ, Deane and Dawson JJ), 618-9 (Toohey J).
It is convenient to deal with the motion by reference to the eight submissions made in support of it and to refer to "the Bank" rather than to "the Bank and Messrs Anderson and Dray" although the following submissions were made on behalf of all three. I deal with the special positions of Messrs Anderson and Dray later.
(a) "the representations were not made in trade or commerce"
This submission is directed to para 37 of the further amended statement of claim. If it were to be upheld, it would lead to dismissal of the proceedings in so far as they depend upon causes of action pleaded under s 52 of the Trade Practices Act and s 42 of the Fair Trading Act. But acceptance of the submission would not lead to dismissal of the proceedings as a whole.
The proceedings would remain on foot in so far as they assert a claim for damages dependent upon the making by Peter Dray and David Anderson as agents for the Bank of the representations on 22 December 1993 in breach of a duty of care. If I were to accede to the Bank's submission, the case would nonetheless proceed to a hearing on the same evidence and there would be no saving of time or cost. For this reason alone, I would not grant summary relief based on this, the Bank's first submission.
I do not find it necessary to deal with other matters. One is whether, in the absence of the statutory causes of action, the further amended application would need to be further amended so as to include a declaration that Mr and Mrs Anderson had "rescinded" the Arbitration Agreement in exercise of their general law remedy for misrepresentation (the distinction to which I refer is between rescission as the act of a party and an order of the Court under s 87 of the Trade Practices Act or s 72 of the Fair Trading Act). Another is whether it would be appropriate, without a final hearing, to accede to the Bank's first submission having regard to its dependency upon the factual context in which the conversation on 22 December 1993 took place.
(b) "the representations relied upon were promissory in nature only and do not give rise to a cause of action"
It is well established that the making of a promise and failure to perform it do not, without more, constitute misleading or deceptive conduct: see, for example, James v ANZ Banking Group Ltd (1986) 64 ALR 347 (FCA/Toohey J) at 372; Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 (FCA/FC) at 88. But it is as well established, both under the general law and for the purposes of the Trade Practices Act and the Fair Trading Act, that a promise or other statement with respect to the future may involve an implied representation as to past or present fact, for example, as to the state of mind of the maker of the statement: Edgington v Fitzmaurice (1885) 29 Ch D 459 esp at 483 (Bowen LJ); Ritter v North Side Enterprises Pty Ltd (1975) 132 CLR 301; Thompson v Mastertouch TV Services Pty Ltd (1977) 15 ALR 487 (FCA/Franki J); Australian Ocean Line Pty Ltd v West Australian Newspapers Ltd (1985) 47 ALR 497 (FCA/Toohey J). Indeed, s 51A of the Trade Practices Act and s 41 of the Fair Trading Act provide that where a representation is made with respect to any future matter (including doing or refusing to do any act) and the maker of the statement does not have reasonable grounds for making it, it is taken to be misleading. Section 51A of the Trade Practices Act is invoked in para 30 of the further amended statement of claim.
Sub-paragraphs 23.1 and 23.4 of the further amended statement of claim clearly plead representations of fact or of mixed fact and law. Although sub-para 23.2 uses the language "would be", I think that properly construed it also pleads a representation of fact.
The representations pleaded in sub-paras 23.3 and 23.5 are less clear. In my view that pleaded in sub-para 23.3 is again, notwithstanding the use of the words "would be" and "could", a representation of fact. What is pleaded is that it was represented that curial and arbitral proceedings differed in that because the former took place in the public eye, the Bank felt compelled to litigate as vigorously as possible in the interests of its shareholders, whereas because the latter took place in private, the Bank had the option of not pursuing certain issues as vigorously as it might do in court. In its terms, sub-para 23.3 does not plead that the Bank was promising Mr Anderson that in this particular case it would not pursue certain issues as vigorously as it would do in court proceedings. In the result, I would not uphold the submission that sub-para 23.3 should be struck out on the ground that it pleads a "pure promise".
The express terms of sub-para 23.5 are purely promissory. They are such that what was said cannot have been true or false or even misleading: it can only have been not performed. Yet sub-para 29.5 is as follows:
"29.5It was not a big difference between the two positions of the dispute being litigated in a public court where the Bank would pursue its perceived rights as vigorously as possible as opposed to an arbitration where it would vigorously work to minimise any damages payout."
Sub-paragraph 29.5 assumes that sub-para 23.5 pleads, similarly to sub-para 23.3, the representation of fact that there was a big difference between litigation and arbitration. But sub-para 23.5 does not plead this: it pleads a promise. Clearly, there is discordance between paras 23.5 and 29.5. Sub-paragraphs 23.5 and 29.5 should be struck out. Absent other considerations, I would grant liberty to re-plead.
I have dealt with the
precise submission made by the Bank in
relation to sub-para 23, namely that the representations as pleaded are only
promises, and have upheld that submission in relation to sub-para 23.5
alone. I have not addressed the question
whether para 29 truly pleads falsification of the various representations of
fact which I have found pleaded in sub-paras 23.1-23.4. In the course of the hearing I referred to a
disconformity between various sub paragraphs of paras 23 and 29.
Another matter not of present concern is whether Mr and Mrs Anderson wish to adhere to the representations of fact which I have held are to be found in the various sub paragraphs of para 23.
For all the foregoing reasons, I would, in the absence of other considerations, grant Mr and Mrs Anderson leave to amend paras 23 and 29 within a limited period.
(c) "the representations cannot be said to have been conveyed in the conversations deposed to by Mr Anderson"
The Bank submitted that the representations as pleaded are not capable of being conveyed by the conversations deposed to by Mr Anderson in paras 25, 27 and 29 of his affidavit sworn 15 August 1995. In dealing with this submission it is necessary for me to take into account Mr Anderson's affidavit. I will deal with the pleaded representations in turn:
(i) "23.1They were not
authorised to make any offer other
than the debt forgiveness on the company (Lasobook) and the return of the
Applicant's assets but they knew the First Applicant would not accept that
offer and there were probably good reasons why he should not accept that."
The form of this alleged representation conforms almost verbatim to the following words which Mr Anderson attributes to Mr David Anderson in para 29 of Mr Anderson's affidavit:
"DA: We are not authorised to make any offer other than a debt forgiveness on the company and the return of your assets, but we know you won't accept that, and there are probably good reasons why you should not accept that. We are poles apart with our figures so that will have to be arbitrated upon."
In my view, the representation pleaded in sub-para 23.1 is supported by Mr Anderson's affidavit.
(ii) "23.2It would be more than their jobs were worth to come to some agreement with the First Applicant that night that would result in the bank paying out any money over and above the return of the Applicants' assets."
According to para 29 of Mr Anderson's affidavit, Peter Dray said,
" ... it would be more than our job is worth to come to some agreement with you tonight that would result in the Bank paying out any money over and above a return of your assets."
Clearly, there is
evidence in Mr Anderson's affidavit
supporting the representation pleaded in sub-para 23.2.
(iii) "23.3That if the Applicant elected to go on in the Supreme Court [sic - Federal Court] the Bank would be required to pursue that process as vigorously as possible in the interest of its shareholders. But then on the other hand if the proceedings were to go ahead with a private arbitration the Bank could elect not to pursue certain issues as vigorously as it otherwise might do."
According to para 29 of Mr Anderson's affidavit, Mr David Anderson said this:
"If you elect to go on in the Supreme Court [sic - Federal Court] we would be required to pursue that process as vigorously as possible in the interests of our shareholders. It is not you we are concerned about, but the Court is a public place and there are thousands out there like you. If we were seen to let one through the gate lightly, then we would be concerned they all might try. Now even if you have the most deserving case we would be obliged to refute that as vigorously as possible. On the other hand if we were to go ahead with the private arbitration the bank can elect to not pursue certain issues as vigorously as it otherwise might do."
In my view this passage gives rise, or arguably gives rise, to the representation pleaded in sub-para 23.3.
(iv) "23.4The Bank and the Applicant were poles apart in that they were only authorised to offer the First Applicant a debt forgiveness on Lasobook and a return of the Applicants' assets and the First Applicant had asked for a figure of $9,700,000 but somewhere between those two figures was the reasonable ground."
Paragraph 29 of Mr Anderson's affidavit attributes to Mr David Anderson the following conversation:
"Now as we have already said we are poles apart in that we are only authorised to offer you a debt forgiveness on your company and a return of your assets, but you have asked for a figure of $9,700,000. Somewhere between those two figures is the reasonable ground, and we are prepared to get you out of bankruptcy and go straight on with the private arbitration to find that."
I think that the affidavit evidence quoted supports, or arguably supports, the representation pleaded in sub-para 23.4.
(v) "23.5That if the proceedings were heard in a public court the Bank would pursue its perceived rights as vigorously as possible and in the arbitration it would vigorously work to minimise any damages pay out but there was a big difference between the two positions."
According to para 29 of Mr Anderson's affidavit, Mr David Anderson said this:
"The bank may not withdraw its offer to not vote at a future s 73 meeting - I don't know. But I do know that if its [sic - it's] in a public Court, the Bank will pursue its perceived rights as vigorously as possible, and in the arbitration it will vigorously work to minimise any damages pay out. There is a big difference between the two positions."
In my view it is clear that the promissory terms of sub-para 23.5 are supported by the evidence quoted.
(d) "the representations were not made with actual or ostensible authority"
The Bank submits that regardless of what view was expressed to Mr Anderson by Mr David Anderson and Mr Peter Dray of the Bank on 22 December 1993, Mr Anderson's own affidavit makes it clear that they had no authority to bind the Bank.
In para 27 of his affidavit, Mr Anderson says that on 21 December 1993 David Anderson said to him:
"Peter Dray and I are responsible to others so we are not able to make a decision but it is worthwhile talking. Any discussions we will have will be 'on the record' discussions."
Further, according to para 29 of his affidavit, Mr David Anderson said to Mr Anderson,
"We are not yet authorised to conduct any negotiation session but it would be helpful to know what your bottom line would be. Are you prepared to talk about that?"
and
"We are not authorised to make any offer other than a debt forgiveness on the company and the return of your assets, ... "
It is important, however, to distinguish between liability for an employee's representations on the one hand and authority to contract on the other. It is common that persons, particularly large corporations, are represented by others such as members of staff, in the dealings and negotiations which inevitably precede the making of a contract, in circumstances in which, as everyone understands, only some person more highly placed in the corporate hierarchy or even only the board of directors has authority to contract. But it is not only the misrepresentations or misleading or deceptive conduct of those with actual or apparent authority to contract for which the person or corporation is liable. Indeed, a consequence of the contrary view would be that there would be a substantial opportunity to escape responsibility for the pre-contract conduct of agents and other representatives.
In my view, the passages quoted above do not establish that the Bank is not answerable for the alleged statements by Peter Dray and David Anderson deposed to and pleaded by Mr and Mrs Anderson.
(e) "the Agreement was wholly in writing and the discussions leading up to its creation are not justiciable"
Even if the Arbitration Agreement contained an exclusion clause in the nature of an "entire contract" clause, this would not be conclusive of the question whether Mr and Mrs Anderson had been induced to enter into it by misleading or deceptive conduct, the question being the factual one of reliance: many cases could be cited, such as Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83 (FCA/FC) at 98-99 (Lockhart J with whom Burchett and Foster JJ relevantly agreed); Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR 535 (FC) at 556-557 (Burchett J); Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 (FC) at 37-38 (Gummow J with whom Black CJ relevantly agreed), 47-48 (Cooper J). The position is a fortiori where, as here, the Arbitration Agreement did not contain such a provision.
(f) "the Applicants elected to have a hearing on liability only it is nonsense to suggest that the Bank agreed not to contest liability when all of the surrounding facts point to the opposite conclusion"
The Bank took me to
evidence of the negotiations which led to the making of the Arbitration
Agreement dated 14 June 1994, and in particular, to the communications in that
respect between the Andersons' solicitor at the time, Mr Mark Symonds of Cedric
R Symonds, solicitors, and the Bank's solicitor, Mr Stephen Purcell of Henry
Davis York. The evidence shows that on
31 January 1994, pursuant to sub-s 74 (5) of the Bankruptcy Act 1966,
the Andersons' bankruptcy was annulled and this was made possible by the Bank's
not voting against the annulment as part of the agreement that the disputes
between the parties be arbitrated; that the content of the Arbitration
Agreement was the subject of close attention and negotiation in which Mr and
Mrs Anderson had the advice of both solicitors and counsel; and that there were
references to the fact that liability was in issue. For example, a diary note of Mr Stephen
Purcell shows that on 16 May 1994 Mr Mark Symonds raised the possibility that
the Bank was accepting that it was
liable and that it was only quantum that was to be in issue in the arbitration,
to which, according to the diary note, Mr Purcell replied that he "should
make it clear that liability is definitely in issue".
On 17 May 1994 Mr Mark Symonds advised Mr Purcell that as of 1.00 pm - 2.00 pm on the preceding day, 16 May, he had "formally pulled out of the case" and that he did not know what Mr and Mrs Anderson wished to do regarding the arbitration. From this time for the time being Mr Anderson conducted negotiations for himself and his wife.
On 19 May 1994 Mr Anderson wrote to Henry Davis York acknowledging that if the arbitrator made an award in favour of the Bank, the Bank would be entitled to enforce the terms of the award. Negotiations continued until 9 June 1994 when Harry Freedman of Milne Berry & Berger advised Mr Purcell that his firm was now representing the Andersons. In a letter dated 16 June 1994 from Henry Davis York to Milne Berry & Berger, the former solicitors mentioned that the Bank would be represented by senior counsel in the arbitration.
On 29 July 1994, Milne Berry & Berger wrote to Henry Davis York advising that the Andersons would apply, either formally or with the Bank's consent, "that the proposed hearing in November 1994 address solely the question of liability." The letter continued as follows:
"The reason for the application and the suggestion made to you is primarily so as to avoid incurring unnecessary costs by either party in the event that the question of liability is determined against our client. It is our belief that the time of a hearing to address the issue of liability alone should take only two to three days whereas the question of damages sustained by our client appears to be an extremely complicated one and one likely to take two weeks of hearing at a minimum."
The Bank agreed to the suggestion.
Of course, it could not be other than common ground that the arbitration hearing was to be on the question of liability and not damages, and I have given the above account only to show how this came about. It is not, and could not properly be, pleaded that the Andersons relied on an assurance that the Bank would not contest liability.
For the purpose of the
Bank's application for summary dismissal, it is important to understand the
case which Mr and Mrs Anderson seek to make, without undue emphasis on pleading
deficiencies. For this purpose, it is
necessary to read both Mr Anderson's affidavit and paras 23 and 29 of the
further amended statement of claim. Mr
an Mrs Anderson clearly wish to say that on 22 December 1993, Peter Dray and
David Anderson caused them to believe that the Bank would conduct itself in an
arbitration in a way which was more favourable to their interests than the way
in which the Bank would conduct itself in litigation, and, as events
transpired, than the way in which the Bank in fact conducted itself in the
arbitration
before Mr T R Morling QC. Since it is
common ground that liability was to be determined by the arbitrator, it is
common ground that there might be, as it transpired that there was, a
determination wholly for the Bank and wholly against Mr and Mrs Anderson. What then is the way in which it is said that
the Bank misled the Andersons into believing that it would conduct itself which
was consistent with the Bank's contesting liability and obtaining the result
wholly favourable to itself which the arbitrator awarded?
The starting point is the alleged statements that the Bank officers were authorised to offer a forgiveness of the company's debt and a return of its assets but not a payment of money as was being insisted upon by Mr Anderson; that there were probably good grounds why Mr Anderson should not accept that offer; that a reasonable resolution lay somewhere between the Bank's offer of a "mere" forgiveness of the company's debt and return of its assets on the one hand, and this coupled with a payment of $9,700,000 by the Bank on the other hand; and that in an arbitration the Bank would "vigorously work to minimise any damages payout".
The case sought to be made seems to be that this led Mr Anderson to assume that what separated the parties was the amount which the Bank was to pay over and above a forgiveness of the debt and return of assets, and that because of the way in which the Bank would conduct itself in the arbitration, the Andersons would finish up no worse off than they would be if they accepted the offer of a debt forgiveness and return of assets.
On the basis of the pleading and the evidence of the conversation in Mr Anderson's affidavit to which I have referred, I can understand that Mr Anderson may have expected that the arbitration would result in an award for some amount in his favour, and that the things allegedly said by Peter Dray and David Anderson may have contributed to or strengthened that expectation. For example, let it be assumed that the opinion was expressed by either of them that a reasonable settlement lay somewhere between the parties' respective positions: this might have been apt to contribute to or reinforce an expectation by Mr Anderson that he would do no worse in an arbitration than if he accepted the Bank's offer. But the Andersons do not, and could not, suggest that this somehow gives rise to an entitlement to relief.
From at least 29 July 1994 down to the commencement of the arbitration hearing on 21 November 1994, the Andersons knew that the Bank was contesting liability. They knew that the Bank was represented by solicitors and counsel, and at least their solicitors knew that senior counsel would be representing the Bank. They knew that the arbitrator would hear evidence and decide whether the Andersons were entitled to any relief at all, and if so, what relief. In the light of this, I have the greatest difficulty, as I indicated to counsel for Mr and Mrs Anderson on the hearing, in understanding what any assurance given that the Bank would not contest liability as vigorously as it would do in a court hearing could possibly have signified to the Andersons, at least as from 29 July 1994 when their solicitors wrote to the Bank's solicitors. From that date at least, the Andersons knew that the Bank would be pressing for the result that the Andersons were not entitled to any relief whatever.
A contest on liability normally means that both parties will, according to the means and expertise available to them, press their respective cases to the maximum extent possible. It seems a nonsense to say that the Bank did not adhere to its statement because it briefed senior counsel while a less "vigorous" approach would have led it to brief junior counsel only or to lead less evidence than it might do.
In any event, Mr and Mrs Anderson do not plead that in any particular respect the Bank did not adhere to the representations by Peter Dray and David Anderson by contesting liability more vigorously than it should have done consistently with their representations.
Mr Higgs of counsel for Mr and Mrs Anderson, in his usual way, has put everything that could be put on behalf of his clients. He submits that notwithstanding the difficulties to which I have referred, all that matters is that Peter Dray and David Anderson said things to Mr Anderson which were intended to have a significance and which were intended to, and did in fact, induce the Andersons to execute the Arbitration Agreement. I see the force of this submission. But by at least 29 July 1994, and certainly well prior to the beginning of the arbitration hearing, Mr and Mrs Anderson knew either in person or through their then solicitors, that the Bank would, through senior and junior counsel, be contending that it had no liability whatever to them and that they were not entitled to any relief whatever against it. Yet they elected to proceed with the arbitration rather than to exercise any right which they may have had of rescinding the Arbitration Agreement: cf Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 646 (Stephen J), 656 (Mason J); Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) (1993) 182 CLR 26 at 30 (Brennan J), 41-42 (Deane, Toohey, Gaudron and McHugh JJ).
Other electing conduct by Mr and Mrs Anderson was their continued participation in the arbitration hearing after it began on 21 November 1994 until it concluded on 28 November 1994. It was not until 10 February 1995, two months and 13 days after the end of the arbitration hearing, that Mr and Mrs Anderson launched the third Federal Court proceedings and even then they did not attack the Arbitration Agreement. The preceding day, 9 February, there was further electing conduct by them in the form of the making of their written submissions to the Arbitrator. Mr and Mrs Anderson did not apply to have the Arbitration Agreement set aside until August 1995, more than a year after its date and more than a year after they knew that the purpose of the arbitration hearing was to be to determine liability. However, I should record that on 22 February 1995 Mr Anderson told me that he and his wife had been misled and deceived "into going down that track [of arbitration]", that he repeated this on 12 April 1995 and that the Amended Application filed on 13 June 1995 sought the setting aside of the Arbitration Award. Notwithstanding these matters, it is clear beyond question that Mr and Mrs Anderson were not willing to apply to set aside the Arbitration Agreement until they knew that the result of the arbitration was unsatisfactory to them. Until then they preferred to take their chance.
In my view there is no triable issue that they had not elected in favour of the Arbitration Agreement and against its being rescinded or set aside.
In the alternative to having made an effective election, Mr and Mrs Anderson are estopped from asserting the case which they propound for the setting aside of the Arbitration Agreement and the Arbitration Award. By their conduct from 14 June 1994 down to the filing of their Amended Application on 13 June 1995 at the earliest, they led the Bank to assume that they were treating themselves as bound by the arbitration process and its result. To the Andersons' knowledge, the Bank acted on that assumption to its detriment by incurring the substantial costs associated with the arbitration (fees of solicitors and senior and junior counsel of a six day hearing and of written submissions down to 9 March 1995, the arbitrator's fees and cost of transcription services which the Arbitration Agreement required the Bank to bear, and the time of the Bank's staff) and it would be unconscionable for Mr and Mrs Anderson now to renege. For the proposition that an estoppel arises in such circumstances many authorities could be cited, but it suffices to refer to Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387.
For the foregoing reasons, I think that no reasonable cause of action exists for the setting aside of the Arbitration Agreement or the Arbitration Award.
(g) "the representations, if made, did not cause any loss"
The Bank points out that the proceedings were heard over six days before Mr T R Morling QC, a retired Judge of this Court of great eminence and experience when Mr and Mrs Anderson were represented by solicitors and counsel and given every opportunity to adduce whatever evidence they thought appropriate. The Bank submits that the Court should be satisfied that there was no prospect of the Andersons' succeeding if the proceedings had gone to a hearing before this Court (it referred to Malec v J C Hutton Pty Ltd (1990) 169 CLR 638).
For Mr and Mrs Anderson it is submitted that all that matters is that they lost the chance of success in a court hearing.
One should not close one's eyes to the obvious: according to the Arbitrator's Award, the Bank succeeded and Mr Anderson failed on every issue. Mr and Mrs Anderson did not submit before me that there was any particular reason why they would be more likely to have succeeded before a court than before the learned arbitrator. The parties were legally represented, evidence was heard over a period of six days and the parties made written submissions. In my view there is no triable issue that Mr and Mrs Anderson suffered any loss or damage.
For this further reason, there is no reasonable cause of action of which the suffering of loss or damage is an essential element and so the proceedings should be dismissed in so far as the further amended application seeks damages.
(h) "for reasons of public policy the Applicants cannot now seek to have the Arbitration Agreement set aside"
The Bank submits that quite simply the case is one in which Mr and Mrs Anderson, being dissatisfied with the outcome of the arbitration, seek now to go behind the Arbitration Agreement and to have their claims re-litigated. The Bank referred me to Baltic Shipping Company v Dillon ("Mikhail Lermontov") (1991) 22 NSWLR 1 (CA) at 9C,D (Gleeson CJ) and Hobartville Stud Pty Ltd v Union Insurance Co Ltd (1991) 25 NSWLR 358 (Giles J) at 368C,D. The passages referred to relate to the law's policy of encouraging settlement by compromise. For example, in the case first cited, Gleeson CJ said this:
"... there is a particular policy of the law to encourage resolution of litigation by settlement, and that particular policy is not advanced by encouraging plaintiffs who settle litigation and later repent of their bargains to seek to avoid their contracts on the basis that they were made in circumstances of emotional vulnerability." (at 9C)
In the present case, the parties gave up their rights to litigate in favour of arbitration. It is common ground that while they stand, the Arbitration Agreement and the Arbitration Award conclude against Mr and Mrs Anderson the claims which they advance in the first Federal Court proceedings. A key purpose of the Arbitration Agreement was to prevent the carrying on of the first Federal Court proceedings. Although the passages in the authorities referred to by the Bank are not expressed in terms directly applicable to an agreement to forego litigation in favour of arbitration, they point in the same direction. Although the parties did not by the Arbitration Agreement then and there settle their differences, they did agree that those differences would be finally resolved by the arbitrator's decision.
The fact that the Arbitration Agreement was entered into cannot, however, be allowed to exclude the possibility that it resulted from operative misrepresentation or misleading or deceptive conduct in respect of which the Andersons should have relief. What then is the effect, if any, in the circumstances of this case, of the law's policy to which I referred? The answer, it seems to me, is that it provides some reason for caution in considering the case sought to be made by Mr Anderson. However, I emphasise that I have accepted the Bank's submissions (f) and (g) above as a result of the application of the test for summary dismissal in its full rigour.
DAVID ANDERSON AND PETER A DRAY
As against David Anderson and Peter A Dray, Mr and Mrs Anderson seek to recover damages for negligence and under the Fair Trading Act arising in each case out of their statement to Mr Anderson on 22 December 1993. My acceptance of the Bank's submission (f) above signifies that any loss was caused not by the statements but by Mr and Mrs Anderson's choice to continue with the arbitration, with the result that no reasonable cause of action for damages exists. My acceptance of the Bank's submission (g) above signifies that no loss was caused in any event, with the result again that no reasonable cause of action for damages exists.
CONCLUSION:
For all the above reasons, I think that proceedings No AG 12 of 1995 should be dismissed. There is no point in my ordering Mr and Mrs Anderson to file a notice of discontinuance in proceedings No NG 559 of 1993 which I will order be dismissed also.
COSTS:
It was argued that whatever the result in proceedings No AG 12 of 1995, Mr and Mrs Anderson should be ordered to pay, on an indemnity basis, the costs thrown away by the amendment for which I gave leave on the hearing. The Bank and the other respondents also sought indemnity costs in the event that they should be successful generally in those proceedings and in proceedings No NG 559 of 1993.
In relation to the first of these matters, it should be noted that the further amended statement of claim filed in Court on 24 August 1995 was in fact the fourth pleading by Mr and Mrs Anderson. As well, the amended application and amended statement of claim filed by Mr and Mrs Anderson on 13 June 1995 to which the Bank's notice of motion filed on 30 June 1995 related, were voluminous documents which the Bank had to prepare to answer. I take into account the fact that Mr and Mrs Anderson were not legally represented at that time but think that justice can be done only by an order for indemnity costs in respect of the costs thrown away by the further amendment.
On 12 April 1995, by consent the proceedings were dismissed as against all first respondents except four on the basis that there be no order as to costs. Since 12 April 1995 Mr and Mrs Anderson have proceeded against four of the first respondents only and against the second respondent Bank. They have been ably represented on the hearing by Messrs D J Higgs and R Cheney of counsel. Although I have concluded that Mr and Mrs Anderson do not have a reasonable cause of action, I do not think that there should be an order for indemnity costs generally. It is not suggested that any of the four individual first respondents incurred costs different from the costs incurred by the Bank. It would be artificial and productive of unwarranted difficulty and disputation to distinguish between Messrs Peter Keating and Richard A Perkins on the one hand, and Messrs Peter A Dray and David Anderson on the other hand. The order will be that apart from the order for costs thrown away by the amendment with which I have dealt above, Mr and Mrs Anderson pay the costs of the Bank and of the four individual first respondents on the usual party and party basis.
In relation to proceedings No NG 559 of 1993, there will be an order that Mr and Mrs Anderson as applicants/cross respondents pay the costs of the Bank as respondent/cross claimant on
the usual party and party basis.
I certify that this and the preceding 39 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren.
Associate:
Dated: 29 September 1995
Heard: 24 August 1995
Date of Receipt
of Last Written
Submission: 25 August 1995
Place: Sydney
Decision: 29 September 1995
Appearances: Mr D J Higgs with Mr R Cheney of counsel instructed by Walsh James, solicitors, appeared for the applicants in proceedings No AG 12 of 1995 and the applicants/ cross respondents in proceedings No NG 559 of 1993.
Mr M T McCulloch of counsel instructed by Mr L E Taylor, solicitor, appeared for the respondents in proceedings No AG 12 of 1995 and for the respondent/cross claimant in proceedings No NG 559 of 1993.
