CATCHWORDS
PRACTICE AND PROCEDURE - defence - respondents seek leave to file further amended defence and cross-claim - and cross-claim against a non-party - whether leave necessary - claim for deceit and negligent misrepresentation - claim under Fair Trading Act 1989 (Qld) - whether claims time barred - when damage becomes "apparent" - whether new claim arises substantially out of the same facts as earlier pleaded - whether claims clearly unarguable
STATUTES - interpretation - Fair Trading Act 1989 (Qld) - claim for damages - need for a "consumer" - goods to be less than $40,000 - time limitation - application of statute to corporations
DAMAGES - measure of - causation - value of business and land obtained under contract less than contract price - subsequent sale at undervalue - alleged negligent advice by solicitors - whether solicitors may be joined as joint tortfeasors - whether the same damage caused
Fair Trading Act 1989 (Qld) s5,6,37,38,40,99
Trade Practices Act 1974 s52,53,82
Property Law Act 1974 (Qld) s85
Federal Court Rules O1 r8, O5 r1,5,7,8,9,11, O11 r5, O13 r2(3)(7),3(2),4,6
Acts Interpretation Act 1954 (Qld) s32D(1)
Law Reform (Tortfeasors Contribution, Contributory Negligence, and Division of Chattels) Act 1952 (Qld)
National Mutual Holdings Pty Ltd & Ors v The Sentry Corporation & Anor (1989) 22 FCR 209 Refd
Wardley Australia Limited & Anor v The State of Western Australia (1992) 175 CLR 514 Cons
Jobbins v Capel Court Corporation Limited (1989) 25 FCR 226Refd
Gould v Vaggelas (1985) 157 CLR 215Refd
Karedis Enterprises Pty Limited v Antoniou (1995) ATPR ¶41-427Refd
Weldon v Neal (1887) 19 QBD 394Refd
Hawkins v Clayton (1988) 164 CLR 539Cons
State of New South Wales v McCloy Hutcherson Pty Limited & Ors (1993) ATPR ¶41-261Refd
R v McNeil (1922) 31 CLR 76Refd
Fenech v Sterling (1983) 79 FLR 244Refd
Keen Mar Corporation Pty Ltd v. Labrador Park Shopping Centre Pty Ltd (1988) ATPR ¶40-853Refd
Mahony v J Kruschich (Demolitions) Pty Ltd (1985) 156 CLR 522Cons
Dillingham Constructions Pty Ltd v Steel Mains Pty Ltd (1975) 132 CLR 323Refd
Arthur Henry Grundy and Rita Nell Grundy v John Bertram Lewis Headship Pty Ltd Chamberg Pty Ltd and Graeme Arthur Schmidt and Peter Thomas Maker
No QG 168 of 1993
Kiefel J Brisbane 24 November 1995
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION No. QG 168 of 1993
BETWEEN:
ARTHUR HENRY GRUNDY AND RITA NELL GRUNDY
Applicants
AND:
JOHN BERTRAM LEWIS
First Respondent
AND:
HEADSHIP PTY LTD
Second Respondent
AND:
CHAMBERG PTY LTD
Third Respondent
AND:
GRAEME ARTHUR SCHMIDT AND PETER THOMAS MAKER
Fourth Respondents
JUDGE MAKING ORDER: Kiefel J.
DATE OF ORDER: 24 November 1995
WHERE MADE: Brisbane
MINUTES OF ORDERS
THE COURT ORDERS THAT:
1. The applicants have leave to amend their statement of claim in terms of the document filed on 11 October 1994.
2. The document filed by the first, second and third respondents on 24 October 1994 be struck out.
3. The first, second and third respondents have leave to file and serve an amended defence and cross-claim in terms of the document filed on 24 October 1994 save for the claims based upon contravention of s.38 Fair
Trading Act 1989 (Qld); the claim against Earle Grundy for contravention of s.40 Fair Trading Act 1989 (Qld); the cross-claims for contribution against each of the third, fourth and fifth cross-respondents and the claim against the State of Queensland, within twenty one days from the date hereof.
4. The first, second and third respondents have leave to join Earle Grundy as a second cross-respondent to the proceedings.
5. The first, second and third respondents have leave within the said period of twenty one days to further amend paragraphs 17 to 23 and paragraphs 25 and 26 of the defence and paragraphs 52 to 58 and paragraphs 60 and 61 of the cross-claim contained in the document filed 24 October 1994.
6. The first, second and third respondents file and serve full particulars of their loss and damage claimed within twenty one days from the date hereof.
7. The fourth respondents have leave to file and serve an amended defence to the applicants' further amended statement of claim in terms of paragraph 1 of their motion filed on 7 December 1994.
8. The first, second and third respondents pay the costs of each of the respondents to their motion, save the costs of the fourth respondent.
9. The first, second and third respondents further pay the costs of the sixth respondent on its motion and the costs incurred in the proceedings and that the sixth respondent be at liberty to tax forthwith.
10. The fourth respondent pay any costs thrown away by its further amendment.
11. That two-thirds of the applicants' costs on the first, second and third respondents' motion be taxed on a solicitor and client basis.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION No. QG 168 of 1993
BETWEEN:
ARTHUR HENRY GRUNDY AND RITA NELL GRUNDY
Applicants
AND:
JOHN BERTRAM LEWIS
First Respondent
AND:
HEADSHIP PTY LTD
Second Respondent
AND:
CHAMBERG PTY LTD
Third Respondent
AND:
GRAEME ARTHUR SCHMIDT AND PETER THOMAS MAKER
Fourth Respondents
CORAM: Kiefel J.
DATE: 24 November 1995
PLACE: Brisbane
REASONS FOR JUDGMENT
The Applications
The first, second and third respondents, Lewis, Headship and Chamberg (whom I shall refer to as "the respondents" but which is not to be taken as including the fourth respondent) seek leave, if leave be necessary, to file and serve a further amended defence and cross-claim in terms of the document filed on 20 October 1994. The amendments contained in that document further particularise representations made by the
male applicant and specify conduct or inaction relied upon as causative of the applicants' loss. A claim for deceit is also sought to be raised against the applicants and against their son Earle Grundy, not previously a party. An alternative claim for damages for negligent misrepresentation is also sought to be raised against him. Some of the representations are also relied upon as contraventions, by the applicants or their son, of provisions of the Fair Trading Act 1989 (Qld). Cross-claims are also added against not only the fourth respondents and their firm Greenhow & Yeates but two other firms of solicitors who subsequently acted for the applicants. They include the applicants' present solicitors. These claims seek contribution with respect to the damage said to have been caused to the applicants by reason of the solicitors' failures to advise. The State of Queensland is also sought to be joined as sixth respondent to the cross-claims, this claim being based upon advices given by officers of a government department to Mr Lewis which, it is said, were relied upon by him or one of the respondent companies. The fourth respondents seek leave to amend their defence in one respect, but this was not in contention.
The Subject and History of the Action
On
19 October 1993 the applicants filed an application and statement of claim
seeking damages against the respondents under s.82 Trade Practices Act 1974 for breach of s.52 and in the
alternative for damages for deceit or for negligent misstatement; and as against the fourth respondents, the
applicants' then solicitors, for damages for breach of contract or
negligence. It was alleged that the
first respondent Mr Lewis was the director and agent of each of the two
companies Headship and Chamberg. The applicants' claim concerns the sale of
their piggery. This involved both the
sale of the business associated
with the piggery to Headship and the sale of the land upon which
it was conducted to Chamberg.
This was effected by contracts dated 30 August 1991. The prices to be paid were $125,000 for the
business and $650,000 for the land. The
amount of $500,000 of the total consideration of $775,000 was agreed to be paid
by way of assignment of a mortgage dated 19 March 1991 then held by Headship from a company Arnokaz
Pty Ltd and securing
the sum of $500,000; and by an
assignment of a guarantee by persons associated with that company. Arnokaz had purchased a timbered property
and a sawmill business conducted upon it from Headship in
March 1991. Headship had owned the land and business from about 1987 or 1988. It was alleged that the contracts were
entered into by the applicants as a result of misrepresentations by Mr
Lewis. The fourth respondents, it is
alleged, failed to properly advise the applicants to obtain valuations of the
property the subject of the mortgage, to advise them as to the need for
mortgage insurance and otherwise failed to investigate the underlying worth of
the property and milling business and advise of the commercial risk in taking
the mortgage.
By 11 October 1994 the amended statement of claim detailed a series of misrepresentations made by Mr Lewis in July and August 1991 which included:
- that the timbered property and sawmill had been sold for $1,000,000 and that it was worth that sum. It would follow that the mortgage accounted for only part of the value of the property and mill;
- that there was an abundance of millable timber on the land and that the licence to mill meant that there was seven years of standing timber to be utilised;
- as to the amount of timber presently being cut and the rate at which timber could be cut;
- that the mill was realising profits which enabled the new owners to meet their commitment under the mortgage;
- that the property was newly fenced;
- that the sawmill equipment was covered by the mortgage.
The mortgagors went into default under the terms of the mortgage and this led to the applicants exercising their power of sale as mortgagees. The principal loss particularised was that which resulted when only $143,693.86 was realised on the sale of the property and saw mill.
In
their defence filed on 10 June 1994, in dealing with the representations, the
respondents added, with respect to the capacity of the mill, that Mr Lewis had
simply passed on to the male applicant advices of the officers of the
Department of Forestry to the effect that there was sufficient to sustain a
mill of a capacity for which the licence was granted (5 years) and that that
source was made known to the male applicant.
This assumes relevance with respect to the application to join the State
of Queensland. In the alternative to the
matters of defence concerning the representations pleaded, it was alleged by
the respondents that any loss suffered by the applicants did not result from
those representations, but arose from other factors, or was suffered because
the applicants failed "to
act reasonably in the protection of their own interests as mortgagees", particularly with respect to the
sale of the property. This was followed
by allegations that the
applicants failed to realise the full worth of the property on sale, that they
failed to take steps to ascertain the true value of the property, failed to
advertise and to reinstate equipment and that they allowed the property to be
sold at an undervalue. The respondents
then cross-claimed for losses associated with the piggery purchased from the
applicants, alleging that a series of false representations made by the male
applicant to Mr Lewis induced the companies to enter into the contracts for
purchase. The representations were as to
the value of the land and business; as
to the potential for subdivision of the land;
as to the number of pigs which were currently being sold and the number
which could be expected to be ready for sale by Christmas of that year; as to the profits then being made; as to the availability of water on the
property and as to the herd being in good condition. Apart from damages for misrepresentation it
was also alleged that the applicants were guilty of breach of duty or of
warranty.
The applicants, in reply, denied that they failed to comply with their obligations as mortgagees under s.85 of the Property Law Act 1974 (Qld) or that any failures on their part caused loss.
The Proposed Amended Defence and Cross-Claim of the First, Second and Third Respondents
The proposed pleading seeks to expand the question of responsibility for causation of loss or mitigation of damage in the following respects:
- a failure to ensure that the property was insured against accidental loss and damage so as to protect their interests as mortgagees;
- a failure to ensure that the licence was maintained or renewed;
- a failure to take steps when they knew that property or chattels had been removed and then to recover them;
- a failure to raise an allegation against the fourth respondent of a failure to advise the applicants to take mortgage insurance and to take advice;
- a failure to take steps to ascertain the proper value of the property;
- selling the property at a gross undervalue.
It is now specifically alleged that the applicants were under a duty pursuant to s.85 Property Law Act to take reasonable care to ensure a sale at market value and that in breach of that duty they failed to take care in a number of respects.
Further express and implied representations are alleged to have been made either by the male applicant or his son Earle Grundy, who, as I have mentioned, is sought to be joined to the proceedings. These additional representations are to the effect that the piggery breeding herd had no major health problems and that the feed mix then being used contained nothing out of the ordinary and other statements which explained the condition of the animals and apparent defects. It is now sought to be alleged that the herd suffered numerous defects or illnesses and that the applicants had used massive doses of a drug in the animals' food which masked or smothered their symptoms. These representations, in whole or in part, are the foundation for the new claims under the Fair Trading Act and in deceit and for the joinder of Earle Grundy. I shall detail other aspects of the pleading relevant to the cross-claims proposed against the firms of solicitors and the State of Queensland later in these reasons.
Whether Leave to Amend the Cross-claim is necessary
The application and statement of claim were filed on 19 October 1993. No cross-claim was filed by the respondents within the time limited for the defence, as may have been done: Federal Court Rules O.5 r.5(1). A cross-claim was first filed on 10 June 1994, but the question as to whether leave should have first been granted is no longer relevant. On 15 July 1994 Drummond J. directed that an amended statement of claim be filed by 5 September 1994 and an amended defence and cross-claim of the respondents by 19 September 1994. An amended statement of claim was filed within the time limited by the order, but further particulars provided of it foreshadowed a further amended statement of claim, and the respondents say they withheld filing their pleading until then. The further amended statement of claim was filed on 11 October 1994 and the amended defence and cross-claim on 20 October 1994. By reason of O.13 r.6, neither pleading could be said to have been amended pursuant to the order of Drummond J. No order extending the times specified in his Honour's directions (O.3 r.3(2)), or dispensing with compliance under the rules (O.1 r.8), was sought.
There
is no objection taken to the grant of leave to amend the statement of claim in
the terms of the document filed on 11 October 1994. It then follows that the respondents may
amend their defence: O.13 r.4(1). That rule does not however extend the
permission to an amendment of the cross-claim.
Although it may be added to a defence, at least where it is brought
against the party claiming against the cross-claimant (O.5 r.5(3)), it is a
separate pleading. The respondents
submitted that O.13 r.4, read with O.5 r.11, is to be taken to authorise
amendment of the cross-claim at the same time as the
defence. Order 5 rule 11(1) provides
that a proceeding on the cross-claim shall follow, as nearly as may be, the
course of the proceeding on the originating process in respect of which the
cross-claim is filed, and sub-rule (2) provides that the rules apply to a
cross-claim and the proceeding arising from it as they apply to the originating
process in respect of which the cross-claim is filed and the proceeding arising
from it. The cross-claim is then treated
as an originating process (see sub-rule (3)) for the purpose of pleadings and
directions which follow. The time for
filing a defence to the cross-claim is therefore the time fixed at the
directions hearing, as it is for the defence to the statement of claim. Order 5 rule 11(4) dispenses with the
necessity for an appearance to be entered.
It would also follow that the applicant may in turn cross-claim as may
other parties joined to it. Similarly,
then, if a cross-claim were amended, O.13 r.4 would permit the defence to it to
be amended. Order 5 rule 5 read with
that rule does not however mean that where the statement of claim is amended
the proceeding initiated by the cross-claim may also be amended without
leave. Reliance was also placed by the
respondents on National Mutual Holdings Pty Ltd & Ors v. The
Sentry Corporation & Anor (1989) 22 FCR 209, 217-8. To the contrary however of the respondents'
submissions, Gummow J. there held that a direction permitting an amended
defence to be filed by a certain date did not have the result that that party
could cross-claim in the same period as of right. In my view the respondents required leave to
amend their defence and cross-claim.
The
applicants also submitted that, in any event, leave was required to cross-claim
against Earle Grundy who was not already a party and referred to O.5 r.8(1)
which provides that a respondent may cross-claim against an applicant or any
other party to the
proceedings without leave, but may not do so against a person not a party. This may be contrasted with O.5 r.1(2) which
provides that a respondent may cross-claim against "any person whether another party or a third
party for any relief which is related to or connected with the subject of the
proceedings". The apparent inconsistency between the two
rules is I think answered by O.5 r.7 which provides that rules 8 and 9 apply
where a proceeding is commenced by affidavit and is continuing as such when the
cross-claim is filed. Those rules would
not then apply to proceedings in which pleadings were first filed. Order 5 rule 1(2) would apply to them. The reason why leave to add a third party is
necessary in the case of proceedings so far conducted upon affidavit may be
because, whilst in particular cases it is more expeditious or cost-effective to
simply have the evidence to support the application brought forward without
pleadings, the addition of another party and claim may render the proceedings
too complex for that process to continue.
At the least the Court would then need to consider whether it is
practicable to continue the proceedings by this method. But in any event the respondents require
leave to amend their pleading and it would follow, to join Earle Grundy.
The Fair Trading Act Claim
Two claims are proposed to be brought under this Act:
(1) By
paragraph 24(a) the representations in sub-paras 17(a), (b) (and also (c) which
it was said was inadvertently omitted from the pleading), (d) (e), (f), (g),
(h), (i) and (p) (ii) are relied upon as contravening s.40 which is in terms
similar to s.53 Trade Practices Act.
Those representations are to the effect that the pig herd was in a good
condition; that the feed mix contained
nothing
out of the ordinary and other explanations as to the condition of the
pigs; together with representations as
to the number of pigs sold on a weekly basis;
that the shed and piggery would be full by Christmas and as to the rate
which pigs could be sold, and that the piggery would be very profitable. Section 40 provides that a person shall not,
in trade or commerce, in connection relevantly with the supply of goods make
false and misleading representation.
(2) By paragraph 24(b) the representations in paragraph 17(h), (i), (l), (o) and (p) being those as to the rates of sale and which affected the profitability of the piggery together with the representation as to the potential for subdivision of the land, are relied upon as representations as to future matters within s.37 of the Act which are then alleged to contravene s.38 in that they were misleading and deceptive.
The express representations in paragraph 17 are said to have been by the male applicant. Alternatively, it is alleged that if they were made by his son they were nevertheless made in the presence of the male applicant who did not correct or qualify them. It is the male applicant only against whom the allegations relevant to deceit are raised in paragraph 23. The position of the representor and the party whom it is sought to be made liable in deceit are reversed when these paragraphs are in substance repeated in the cross-claims. I shall take up the need to clarify this later. For present purposes I need only refer to the content of what is alleged to have been said.
It will be recalled that the amended defence and cross-claim filed on 10 June 1994 included allegations as to the rate of sale of the pigs and that the respondents would have a substantial number of them to sell by Christmas 1991, that the piggery was very profitable and making a good return after paying the applicants' two sons and that concerning the potential for subdivision. So far as the health of the herd was concerned, the representation that they were "in good condition" and consisted mainly of new sows, had been raised in this earlier pleading. The further matters now sought to be raised are the specific representations as to the state of health of the herd. That the land was readily capable of subdivision similar to a development nearby, had also been earlier pleaded. No claim was earlier brought under either the Trade Practices Act or the Fair Trading Act. The representations were then said to have been false and negligently made.
It is convenient to deal firstly with the claim proposed under s.38.
The
section which provides for an award of damages for contravention of Part 3 (in
which both ss.38 and 40 are contained) is s.99(1). Such an action may be brought within three
years "after the date on which
the cause of action accrued" (s.99(2)). However, by sub-s.3,
sub-s.1 does not apply with respect to a contravention of s.38 "unless the loss or damage is suffered by a
consumer". I do not accept the submission that in a case
where the particular representations are of the kind referred to in s.37, s.99
will not apply to it. It remains an
application founded upon or contravention of s.38. Whether or not the respondents have pleaded
or are able to plead facts which bring themselves within the definition of "consumer" is the critical question which may
determine whether leave ought to be granted.
A "consumer" by s.6(1) is a person who, in a
particular transaction, whether a separate transaction or a separate
transaction within a contract, relevantly acquires goods or an interest in land
as a consumer. "Goods", by s.5, includes animals. But
the acquisition of goods in paragraph (b) of sub-s.2 (sub-paragraph (a) not
being relied upon) is limited to the circumstance where the price of the goods
or the interest in land is no more than $40,000. In answer to the applicants' submission that
they have not pleaded any facts which disclose that they were consumers, the
respondents pointed to O.11 r.5, which provides that a party need not plead a
fact if it is presumed by law to be true or if the burden of disproving the
fact lies on the other party and to s.6(5) Fair Trading Act which provides that "if it is claimed" in a proceeding that a person is a
consumer of goods, it must be presumed unless the contrary is proved that the
person is.
The
presumption relied upon by the respondents however, arises only where a claim
is made that the person is a consumer, and one could then debate whether that
has arisen where it is not expressly asserted but might be inferred from the
nature of the claim and in particular by a reference to the section which is
said to be contravened. But even were I
to accept that to be the case the claims appear to me to be untenable. Taking the representation as to the
profitable use to which the land might be put as a separate claim, the price
paid for it was $650,000 and the respondents point to no other factor which
would have the effect of reducing its true value to under $40,000. A similar conclusion must be drawn with
respect to the price paid for the "herd", as the pigs are collectively
referred to in the respondents' pleading.
No separate price was stated for the pigs in the contract for sale of
the piggery at $125,000. Section 6(4) of
the Act provides that where
the price cannot be so ascertained it is to be taken as a reasonable cash price
paid for the goods having regard to the circumstances of the case. A declaration completed and signed by the
first respondent himself, for the purpose of enabling an assessment of stamp
duty on the purchase, attributes $95,000 to the pigs as livestock purchased
under the contract. The only basis upon
which the respondents contended for a figure of less than $40,000 was by
dividing the price paid for the whole herd by the number of pigs. It was then submitted that s.6 could be
satisfied if one treated the "goods" acquired by treating each animal as
the subject of an individual contract.
The submission has no basis in reality.
If I had considered the matter to be at least arguable, I would have
been inclined to grant leave to amend, but I do not think the respondents'
claim can be regarded as reaching that point.
I decline leave to amend the cross-claim to add the cause of action based upon a contravention of s.38 Fair Trading Act against the applicants and against the proposed second cross-respondent, Earle Grundy.
Section 99(3) does not however limit a claim for damages following contravention of s.40 to one suffered by a consumer. The principal ground raised by the applicants for refusing to add this claim is because the period limited by s.99(2) for the bringing of such an action, three years, has expired. It was also submitted that the claim was not open to the respondent companies but "person" in s.99 is to be read as including corporations: s.32D(1) Acts Interpretation Act 1954 (Qld).
The applicants submitted that damage, which is to be taken as the gist of such an action, on an analogy to the Trade Practices Act (as to which see Wardley Australia Limited & Anor v. The State of Western Australia (1992) 175 CLR 514, 525), occurs the moment when the contract for property worth less than the contract price is entered into as a result of misrepresentation. The reasoning of the majority in Wardley is however against such a contention: see 528 and the discussion there concerning Jobbins v. Capel Court Corporation Limited (1989) 25 FCR 226. Nor does that decision support the respondents' contention that the damage occurred successively when each item of consequential loss was incurred and paid by Lewis or the companies.
The usual measure of damage where a contract is entered into as a result of a misrepresentation is the difference between the price paid for the land and goods and its true value: Gould v Vaggelas (1985) 157 CLR 215. It is not clear from paragraphs 26 and 61 of the proposed pleading which of the damages particularised in paragraph 26 are said to flow from the contraventions of s.40 of the Fair Trading Act. But, since no other facts are pleaded to connect those representations as to the piggery and profits with the others pleaded and which relate to the quality of the house, of the availability of water which may ground other damage, I take it that the relevant damage is that referred to in paragraphs 26(a) and (c) namely that the piggery was worth less than was paid for.
The
facts present in Wardley required the majority to point to the distinction between "actual" damage and that damage which is only contingent or
potential and which
will not be regarded by the law as damage suffered. But the reasoning of their Honours in Wardley, as the Full Court of this Court
explained in Karedis Enterprises Pty Limited v. Antoniou (1995) ATPR ¶41-427, discloses that when damage has been occasioned
is a question of fact in each case, but it may be generally be said to arise
when it is "apparent". Here there is no real dispute that by
Christmas 1991 damage was apparent and it had been so a month or so
before. By November the condition of the
pigs was so obvious that a programme had been put in place to remedy it, and by
Christmas, were it not already sufficiently obvious that the herd and therefore
the business could not be as valuable as had been represented, the number of
pigs available for sale was much less. This further claim based upon s.40 was I
consider statute-barred at the time the motion for leave to amend was filed, 23
December 1994. Sub-rules 7 and 3 of O.13
r.2 and which came into effect on 1 August 1994, however provide:
(7) [Amendments which add or substitute new claims] An amendment may be made notwithstanding that the effect of the amendment will be to add or substitute a new claim for relief or another foundation in law for a claim for relief if the new claim for relief or foundation in law for that claim arises out of the same facts or substantially the same facts as those already pleaded to support existing claims for relief by the party applying for leave to make the amendment.
(3) [Application where period of limitation has expired] Where an application to the Court for leave to make the amendment mentioned in subrules (4), (5), (6) or (7) is made after any relevant period of limitation current at the date of commencement of the proceeding has expired, the Court may, nevertheless, grant such leave in the circumstances mentioned in that subrule if it thinks it is just to do so."
The
claim under s.40 relies partly upon further and specific representations
concerning the health of the pigs, matters put forward by way of explanation as
to what
appeared to be physical defects and the assurance as to the normality of the
feed mix. I say "partly" because many of the allegations relied upon in
support of the claim simply restate what had been earlier pleaded. The pleading filed in June 1994 had alleged
reliance on representations as to the condition of the herd (being
"good") and as to the numbers being sold. Clearly enough in my view the new claim
arises substantially out of the same facts as had been earlier pleaded and
pleaded within the period of limitation, and an explanation is offered for the
late amendment. The use of the
particular drug used in the feed mix and which, it will be said, masks symptoms
of serious illnesses, was not discovered until inspection of documents in the
discovery process in mid-1994. I take it
that the additional statements as to the condition of the pigs may not have
been thought to add anything more to the earlier general representation as to
the condition of the herd until this discovery.
With respect to the cross-claim against the applicants based on s.40 I
consider that leave should be granted under O.13 r.2(3).
There
remains however the claim insofar as it is sought to be brought against Earle
Grundy. Sub-rules (3)-(7) of O.13 cannot
be availed of with respect to this claim.
The claim cannot be said to be based upon substantially the same facts
as those already pleaded to bring it within sub-rule (7), if there is no such
prior claim. No reliance is placed by
the respondents on sub-rules (4) and (5), nor does it seem to me that it could
be. And, it is relevant that there
appears to be no explanation as to why a claim was not earlier made against
Earle Grundy if it is said he made some of the representations. The confusion in the pleading as to who was
the maker of them, a matter to which I shall later return, does not assist the
respondents now. Mr Lewis must always
have known at the
least that both Mr Grundy and his son were present at the time some of the
statements were made. If there is some
residual discretion to add a claim which is statute barred by the same
legislation which gives the cause of action and other than by the specific
rules of Court, and therefore to overcome the rule in Weldon v.
Neal (1887) 19 QBD 394 (a matter about which
I have considerable doubt), I would be disinclined to permit the amendment in
the absence of an explanation as to how such a claim was omitted in the first
place.
Whilst it has not been necessary thus far to deal with the respondents' other contentions concerning the expiration of the limitation period, it is now necessary to do so. It was submitted that it was not until July 1994 that Mr Lewis realised the falsity of the particular additional representations and therefore the means by which the true state of affairs had been concealed from him. It was then submitted that the equitable doctrine of fraudulent concealment would prevent Mr Grundy from relying on the period of limitation and reliance was placed upon the reasons of Deane J. in Hawkins v. Clayton (1988) 164 CLR 539, 590. The argument proceeds that, even though there are authorities which hold that the doctrine cannot apply to limitations periods provided for in legislation such as the Trade Practices Act (and likewise then the Fair Trading Act) nevertheless it could not be said that the matter was unarguable. Further, since a conclusion would depend in part upon a resolution of questions of fact it is not appropriate to conclude the question at an interlocutory level and leave should not therefore be declined: State of New South Wales v. McCloy Hutcherson Pty Limited & Ors (1993) ATPR ¶41-261, 41,521. In Hawkins v. Clayton Deane J. said (590):
"... Likewise, it would be a travesty of justice and common sense if the law imposed a duty upon a solicitor to take positive steps to inform a third person of the contents of a document of which the solicitor was alone aware and then provided that any cause of action against the solicitor for damage caused by a negligent failure to perform that duty would be lost if the negligence continued for six years. It is arguable that the notion of unconscionable reliance upon the provision of a statute of limitations which provides the foundation of the long-established equitable jurisdiction to grant relief in a case of concealment of a cause of action until after the limitation period has expired... should, by analogy, be extended to cover cases such as these where the wrongful act at the one time inflicts the injury and, while its effect remains, precludes the bringing of an action for damages. It seems to me, however, that the preferable approach is to recognise that it could not have been the legislative intent that the effect of provisions such as s.14(1) of the Limitation Actshould be that a cause of action for a wrongful act should be barred by lapse of time during a period in which the wrongful act itself effectively precluded the bringing of proceedings. On that approach, the reference in s.14(1) of the Act to the cause of action first accruing should be construed as excluding any period during which the wrongful act itself effectively precluded the institution of the proceedings."
There is however authority that the
Courts may not give effect to an equitable doctrine where the terms of a
statute are clear as to the time within which action shall be brought: R v. McNeil (1922) 31
CLR 76; and in the context of s.82(2) Trade
Practices Act 1974 see Fenech v.
Sterling (1983) 79 FLR 244, 260-2 and Keen Mar
Corporation Pty Ltd v. Labrador Park Shopping Centre Pty Ltd (1988)
ATPR ¶40-853, 49,195-6. Nor does it
seem to me that if the cause of action accrues only when damage is apparent, as
I take Wardley's case to have later held, that there would be a need for such equitable
intervention in cases such as this. In
cases where it is apparent that something has not the qualities it was represented
to have it and is not then earning the income it was supposed to, the
significance of what was said or not said about it will also be obvious. But, accepting for the moment that the
doctrine of fraudulent concealment was able to be
applied it seems to me that they could hardly be said to bring themselves
within it. The facts which it is said
were not known to them and which were concealed did not "effectively preclude" the institution of proceedings for
misrepresentation as Deane J's words suggest is necessary before any equity in
the respondents arises. So much follows
from my finding that the cross-claim earlier pleaded against the applicants was
based upon substantially the same facts as are now sought to be raised. The features which were not known of until
July 1994 may have prevented a plea of fraud being earlier raised, but that
lack of knowledge did not prevent the bringing of this claim even if some
particularity was later provided.
Reliance upon the equitable doctrine is I consider misplaced. I decline leave to raise the claim against
Earle Grundy.
Cross-claims for Contribution against the Solicitors
In their amended statement of claim the applicants alleged that, as a result of the respondents' misrepresentations, they suffered damage in that they entered into all of the agreements, although the actual loss sought to be obtained from the Court is the difference between the value of the piggery business which they parted with and what was received on the sale of the mortgaged property, together with consequential losses. As against their then solicitors, the fourth respondents, the applicants alleged a failure to advise them fully concerning matters which would have affected their entry into the transaction and indeed a failure to warn them against doing so. The same losses are sought to be recovered against them.
The respondents in their submissions rightly pointed to the distinction between damage suffered, which forms the basis for a claim in contribution, and damages, being the measure awarded by the Court: see Mahony v. J. Kruschich (Demolitions) Pty Ltd (1985) 156 CLR 522, 527. In the latter respect the loss would be the loss of value of the piggery (but which might have been stated as the acquisition of a mortgage which was less valuable than represented) less the true value of what was received, but which may not of course be the amount actually received on sale. The damage however suffered equates with the "injury" inflicted and other foreseeable consequences (Mahony 527), here to the applicants' property interests upon entry into the agreements.
At no time have the respondents in question claimed that the damage the solicitors caused was that produced by entry into those agreements. For questions which later arise, it is relevant to review the defence originally raised and the claims now sought to be added. In their pleading filed on 10 June 1994, it was alleged by the respondents that (in summary):
- the applicants did not rely upon representations but upon their own advices from the fourth respondents and their own investigations;
- alternatively, if the applicants suffered loss it was brought about by the applicants' own failure to protect their position and in particular to take action with respect to some fixtures later removed, to ensure licences were reinstated and by their selling the property at an undervalue.
These allegations raise issues as to causation of damage. At paragraph 8 of that pleading, putting aside the confusing preface to it, it was alleged that at the time of the transfer of the mortgage it was worth $500,000 and that:
"It is not competent for the applicants to now claim from the respondents damages not relevant or foreseeable as at the date of the transfer".
The importance of this shall shortly become clear.
It is now sought to raise claims for contribution against the fourth respondents (who together made up the firm Greenhow & Yeates, the proposed fifth cross-respondent) and also against Bernays & Bernays which firm acted for the applicants for a period of about one month in mid-1992 and which firm included a Mr Flehr who now belongs to the applicants' present firm of solicitors Flehr & Walker. The claim is based upon the provisions of the Law Reform (Tortfeasors Contribution, Contributory Negligence, and Division of Chattels) Act 1952 (Qld).
As against Greenhow & Yeates, which firm acted for the applicants both at the time of the sale and at the time of exercise of the applicants' power of sale as mortgagees, it is said that it failed to advise the applicants to ensure that there was mortgage insurance; to ensure there was insurance cover against accidental loss and damage; to recover fixtures later severed and to take steps to fulfil their duties under s.85 of the Property Law Act which is to say to ensure that it was not sold at an under-value. The claim includes, as do those against each of the other firms, an assertion that the solicitors did not advise the applicants:
"...that if they did not act reasonably in mitigating their losses (if any) suffered as a result of the conduct pleaded in the amended statement of claim, they could not recover the shortfall from the respondents (if they were otherwise liable)."
Putting aside that assertion, which may be thought to be inconsistent with the possibility of recovery upon which the cross-claim is framed, it is then alleged that (paragraph 33):
"Had the Grundys been advised as to the matters set out in the preceding paragraph they would have acted in accordance with that advice and thereby reduced their loss claimed in this action".
It may be noted at this point that what is spoken of are steps which could have been taken and which may have avoided losses on realisation of the security, when default and other breaches of covenant under the mortgage had occurred. And it may also be observed that paragraphs 8, 13 and 15 of the defence, much as before, plead that the applicants themselves cannot recover such losses, caused as they were by their own negligence and inaction. As against Bernays & Bernays and Flehr & Walker similar allegations of breach of duty were raised except for those concerning the need for insurance. Paragraphs 42 and 43 then set up the plea for contribution against the solicitors. The loss and damage identified in paragraph 42 as having been suffered by the applicants (and, then, that with respect to which the claim for contribution is said to relate) is said to include "that claimed against the respondents". The particulars which follow however are in these terms:
(a) it will now be either impossible or substantially more difficult for the Grundys to recover the fixtures severed from the timbered land;
(b) it will now be more costly for the Grundys to recover the fixtures severed from the timbered land;
(c) the timbered property was sold at a gross undervalue;
(d) they have thrown away their costs or a substantial proportion of their costs, incurred in instituting and prosecuting this action.
One must accept, as the respondents
submit, that a subsequent tortfeasor may be held to be liable with respect to
the same damage as that originally occasioned, although not always to the full
extent of it Mahony, 527. One may compare the
facts of that case, which involved a claim for negligence against a doctor who
treated the plaintiff's injuries suffered in the course of his employment and
in respect of which contribution was held to arise, with the facts in Dillingham
Constructions Pty Ltd v. Steel Mains Pty Ltd (1975) 132 CLR 323, set out at 526
and 527 in Mahony.
The inquiry in the first instance is as to whether the "damage" for which the respondents here are sought to be made
liable by the applicants is the same as that which is said to arise from the
solicitors' breach of duty, even if the latter are responsible only for part of
the overall loss. In my view, this is
clearly not the case and the respondents' own defence and part of the
cross-claim to which I have set out above acknowledges this. The damage which is said to have been caused
by the solicitors is not that which was suffered upon entry into the contracts,
but that which was caused when the mortgagors went into default and the
applicants were left without adequate insurance and adequate information or
advice as to how to recover properly upon the security. If there were steps that should have been
taken by them, in the way in which the matter is pleaded, the applicants will
simply not recover for that damage for it will be held not have been caused by
these respondents. The only connection
between the two sets of damage or injury to the applicants' property interests
is that, without having entered into the contracts in the first place the
latter would not
have arisen. Whilst it is possible in
some cases that therefore the respondents as original tortfeasors might be
liable for what follows so long as it was reasonably foreseeable, this is not
such a case. The applicants' statement
of claim does not allege that the "damage" referred to included all that would
subsequently occur save in its reference to the measure or amount of damages
sought to be obtained, which of course is not the same thing as the "damage" of which the tortfeasors' legislation speaks. If the
respondents are right about the real value of the mortgage, the applicants will
not recover damages based upon a lesser sum.
When causation was first raised by the respondents the applicants denied
those allegations and that they breached their obligations under the Property
Law Act, but
did not seek to hold those respondents liable for what may in consequence be
found to have been caused by the solicitors.
It seems to me that the cross-claims are based upon a false
premise. To maintain them it is
necessary to accept that it is at least alleged that these respondents are
liable for what the solicitors did or did not do. This was adverted to in part in written
submissions for those respondents where it was said:
"As in Mahony, it must be regarded, at this stage of the action, as at least possible that the original economic loss can be regarded as carrying some risk that legal advice and assistance in the exercise of the power of sale might be negligently given..."
It is not usual of course to have
respondents themselves claim that something may be held to be foreseeable when
the issue has not been raised. Sometimes
out of an abundance of caution steps might be taken to ascertain whether the
applicants will contend that this is so, but I do not see how this could
possibly arise on the applicants' pleading and I did not understand them to
assert this during submissions. Of
course, whilst I expect there to be no further amendments, if at any point the
applicants did raise a case of co-ordinate liability for the later damage, the
respondents would be entitled to seek leave to raise
these cross-claims. It was urged in
argument that I allow the cross-claims to proceed and to leave the question as
to what "damage" has been suffered and as to whether
the negligence of the solicitors was reasonably foreseeable, for determination
at the hearing. There is however no good
reason in permitting an amendment which is not even arguably responsive to a
matter asserted. It was also submitted
by the applicants that there was a special need to determine the validity of
the proposed cross-claims now, since the grant of leave would require the
applicants' solicitors to withdraw and take up their position as parties to the
litigation. Given my conclusion that the
claims are untenable, it is not necessary for me to advert to the consequences
for the applicants as a reason for the need for an early resolution of this
issue. I add however that if issues of
causation already raised will necessitate the solicitors being called as
witnesses, it may be necessary for them to take such steps in any event. No doubt they and the applicants' counsel
will consider this.
The Proposed Sixth Cross-Respondent
This
claim relates to representations said to have been made by officers of the
Department of Forestry to Mr Lewis at the time the original application for a
sawmill licence was sought in late 1989 by Headship. They were to the effect that there was more
than enough millable timber to maintain milling at 950 cubic metres per quarter
for at least five years. A rate of about
79.16 cubic metres (in fact somewhat lower, 75 cubic metres) was the rate which
the applicants allege Mr Lewis told them could be achieved. Any claim by Mr Lewis personally is now
disavowed. Further, the claim for an
indemnity or contribution against the State of Queensland is also disavowed. That claim followed this allegation:
"51. In the event it is determined that the timbered property did not have enough millable timber to maintain milling at 950 cubic metres per quarter for at least five years, and that any of the respondents are thereby liable to the Grundys:- ..."
The question then is what damage otherwise follows from the claim as pleaded. Nothing is further particularised and in my view no further opportunity should be given to make good such a claim in the face of refusals to a detailed request for particulars from the Crown Solicitor and lack of explanation during argument. Any damage must necessarily flow from the reliance which it is alleged the officers knew that Mr Lewis or the company for whom he acted would place upon the advice. In this respect it is alleged that known reliance arose in the context of Mr Lewis or Headship being an applicant for a licence and intending to establish a commercial saw milling operation. But no damage is said to arise regarding the saw milling operation which was then established and which was, as earlier pleaded, sold to the company Arnokaz. The cause of action is incomplete on the face of the pleadings and leave to amend is inappropriate.
Allegations and Fraud/Joinder of E. Grundy
Explanation
has been given as to why the amendment is now required. The matters sought to be raised are serious
and of some importance to the respondents' case. Whilst some complaint had earlier been made
of the lack of particularity of the claim, this was not further pursued in
argument. There remains however
uncertainty as to who it is
alleged made the representations and as to whether it is was the male applicant
or his son, or both, who were guilty of deceit.
This arises, as I have earlier mentioned, because in paragraphs 17 to 23
and 25 and 26 of the defence it is alleged that the misrepresentations were
made by the male applicant, or if they were made by his son, they were
nevertheless said in the former's presence and he did not correct them. Consistent with those allegations it is
specifically alleged that only the male applicant made them knowing them to be
false or made them recklessly. In what I
take to have been intended as a repetition of these allegations, paragraphs 52
to 58 and 60 and 61 of the cross-claim, the position is reversed, it now being
alleged that the son, Earle Grundy made them or if he did not, they were made
by his father in the son's presence and the latter did not correct them. In addition to converting primary
responsibility to the son, the further allegations relevant to the claim for
deceit and concerning his state of mind are raised with respect to Earle Grundy
and not his father. The matter obviously
needs to be clarified. I have considered
whether leave should in these circumstances be given to add Earle Grundy to the
proceedings and to raise a claim of this nature against him when it is
unclear. In the result I have determined
that, whatever be later made of the confusion apparent in the pleading now,
leave should be given to raise the claim against either or both of the Messrs
Grundy and to allow the respondents' solicitors to take fresh instructions.
The Pleading Otherwise
Were
a claim in fraud to be raised against Earle Grundy, that would provide a strong
basis for permitting the alternative claim for damages for negligent
misrepresentation to be raised since they rely upon the same representations. Were that
not the case, the case for amendment is not as strong, given the lack of
explanation as to why it was not earlier alleged that he was a
representor. These matters can however
be tested at the hearing. If the
respondents have now instructed their solicitors that he was a representor,
they ought be permitted the opportunity of presenting a factually correct case
and giving an explanation if one is called for.
Other aspects of the pleading, and which were not in dispute, amount
substantially to a recast of the earlier pleading with particulars of steps not
taken or misrepresentations pleaded in fuller terms. The appropriate order then, it seems to me,
is to grant leave to amend in terms of the document filed on 24 October 1994
except with respect to those claims which have been specifically refused and to
grant further leave to amend to clarify the position of the representors and
against whom the claim in deceit is brought.
It also seems to me that the respondents ought to particularise the
damages claimed and I will direct that they do so within twenty one days from
the date of this order.
The Fourth Respondent's Motion
No objection is taken to the fourth respondent's request for leave to amend their amended defence to the applicants' further amended statement of claim for which leave has already been granted, by deleting the first paragraph of paragraph 14 and inserting the following paragraph in its place:
"Further, if the fourth respondents have breached their duty of care or any implied term/duty in their contract of retainer (which is denied) the applicants have suffered no loss or damage as a consequence of any such breach".
The other orders sought in that motion are not necessary given that leave to cross-claim against the fourth respondents has been refused.
Costs
The only orders for costs which occur to me as appropriate are that the first, second and third respondents pay the costs of each of the respondents to their motion; and that the first, second and third respondents also pay the costs of the motions brought by the proposed third and fourth cross-respondents and the sixth respondent. I shall however hear submissions.
I certify that this and the preceding twenty eight pages are a true copy of the reasons for judgment herein of the Honourable Justice Kiefel.
Associate
Date: 24 November 1995
Counsel for the applicant: Mr D Jackson QC and Mr D Logan
Solicitors for the applicants: Flehr & Walker
Counsel for the first, second
and third respondents: Mr S Doyle
Solicitors for the first, second
and third respondents: Russell & Co
Solicitors for the fourth respondents: Clayton Utz
Counsel for the proposed third
and fourth cross-respondents: Mr J Bond
Solicitors for the proposed third
and fourth cross-respondents: Feez Ruthning
Counsel for the proposed sixth cross-
respondent: Mr R Derrington
Solicitors for the proposed sixth cross-
respondent: Crown Solicitor
Date of Hearing: 6, 7 March 1995
Place of Hearing: Brisbane
Date of Judgment: 24 November 1995
