Australian Building Industries Pty Ltd v Stramit Corp Ltd & Anor [1997] FCA 1318

FEDERAL COURT OF AUSTRALIA

PRACTICE AND PROCEDURE - summary dismissal - test to be applied - inference to be drawn from filing of affidavit by applicant resisting motion for summary dismissal, upon return date and hearing of the motion, where no directions previously given for the filing of affidavits.

Federal Court Rules O 20 subr 2 (1) (b), (c)

Dey v Victorian Railways Commissioners (1949) 78 CLR 62 (applied)

General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 (applied)

Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 (applied)

Webster v Lampard (1993) 177 CLR 598 (applied)

Munnings v Australian Government Solicitor (1994) 68 ALJR 169 (applied)

Lonrho Plc v Fayed (No 2) [1992] 1 WLR 1 (considered)

Kew Cottage & St Nicholas Parents Association Inc v Minister for Health & Community Services (unreported, SC Vic, No 5269 of 1995, 18 August 1995) (considered)

AUSTRALIAN BUILDING INDUSTRIES PTY LIMITED v STRAMIT CORPORATION LIMITED & ANOR

No QG 122 of 1997

NORTHROP, LINDGREN, LEHANE JJ

1 DECEMBER 1997

SYDNEY (HEARD IN BRISBANE)

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 122 of 1997

On appeal from The federal court of australia CONSTITUTED BY A SINGLE JUDGE

BETWEEN:	AUSTRALIAN BUILDING INDUSTRIES PTY LIMITED (ACN 009 340 952) AppELLANT
AND:	STRAMIT CORPORATION LIMITED (acn 005 010 195) First Respondent DAVID THOMSON Second Respondent
JUDGES:		NORTHROP, LINDGREN, LEHANE Jj
DATE OF ORDER:		1 DECEMBER 1997
WHERE MADE:		SYDNEY (HEARD IN BRISBANE)

THE COURT ORDERS THAT:

1. The appeal be allowed.

2. The orders made on 1 August 1997 in proceeding QG 70 of 1997 be set aside, and in lieu thereof, it be ordered that the motion brought by the respondents in that proceeding by notice of motion filed on 27 June 1997 be dismissed and that the respondents in that proceeding pay the costs of the applicant in that proceeding of that motion.

3. The respondents pay the appellant’s costs of the appeal.

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	QG 122 of 1997

On appeal from The federal court of australia CONSTITUTED BY A SINGLE JUDGE

BETWEEN:

AUSTRALIAN BUILDING INDUSTRIES PTY LIMITED (ACN 009 340 952)

AppELLANT

AND:

STRAMIT CORPORATION LIMITED (acn 005 010 195)

First Respondent

DAVID THOMSON

Second Respondent

JUDGES:	NORTHROP, LINDGREN, LEHANE Jj
DATE:	1 DECEMBER 1997
PLACE:	SYDNEY (HEARD IN BRISBANE)

REASONS FOR JUDGMENT

THE COURT:

INTRODUCTION

The appellant (“ABI”) appeals from a summary dismissal of its application against the respondents (“Stramit” and “Mr Thomson”). The trial Judge dismissed ABI’s application in reliance on pars (b) and (c) of O 20 subr 2 (1) of the Federal Court Rules. It is convenient to set out the whole of O 20 subr 2 (1):

“2(1) Where in any proceeding it appears to the Court that in relation to the proceeding generally or in relation to any claim for relief in the proceeding -

(a) no reasonable cause of action is disclosed;

(b) the proceeding is frivolous or vexatious; or

the Court may order that the proceeding be stayed or dismissed generally or in relation to any claim for relief in the proceeding.”

At the time when, on 13 June 1997, ABI filed its application which launched the proceeding below, it was refusing to pay to Stramit $431,130.94 which was to fall due for payment on 14 June 1997 for roofing materials supplied. ABI justifies that refusal only by reference to its claim for damages against Stramit made in the proceeding below. His Honour held that ABI’s claims against Stramit and Mr Thomson had no prospect of success and that there were grounds for thinking that the proceeding had been brought by ABI

“for the purpose of delay, ie, for the purpose of keeping [Stramit] out of moneys to which it [had], save for the damages claim, raised in [the] action, an unchallenged entitlement and in circumstances, moreover, in which [ABI did] not have the capacity to pay the amounts owing to [Stramit]”. (Reasons for Judgment at 15)

ABI’s STATEMENT OF CLAIM

In 1996 when most of the background events occurred, ABI was called “The Roofing Centre Pty Ltd”. In some of the correspondence, it was referred to by the abbreviation “TRC”. It changed its name to its present name in about January, 1997. We shall refer to it consistently as “ABI”, but it must be remembered that references to “The Roofing Centre”, “The Roofing Centre Pty Ltd” and “TRC” are all references to ABI.

Richard Alexander Roberts and Rade Dudurovic were directors of ABI and Ronald Webb was its Chief Executive Officer. Mr Thomson, the second respondent, was the Queensland State Manager of Stramit and Neville Weller was its “Manager, Roofing”.

Stramit manufactured metal building products, including roll-formed steel roofing. Prior to the events the subject of the proceeding, ABI both manufactured roll-formed steel roofing and installed it. ABI was minded to cease its manufacturing activity and to become a

“dedicated contracting or fixing house, sourcing roll-formed roofing and rainwater products from a dedicated and larger manufacturer in Australia who was able to obtain better volume rebates and payment terms from BHP.” (affidavit of Mr Roberts sworn 30 July 1997, par 3).

Broadly, ABI’s case is that it came to an arrangement with Stramit under which ABI would cease the manufacturing side of its business, buy its roofing materials requirements from Stramit, and refrain from selling its manufacturing plant and equipment to anyone but Stramit or an overseas buyer, in return for which Stramit would take over certain obligations of ABI which would be irrelevant to its more limited role as a roofing contractor.

Against the above background, we turn to consider ABI’s statement of claim which was filed with its application on 13 June 1997. Paragraphs 6 and 7 of that document are as follows:

“6. On or about 25 and 29 October, 1996, 4 and 7 November, 1996, the First Respondent represented to the Applicant that if the Applicant:-

(a) entered into a written agreement with the First Respondent whereby the Applicant was obliged to purchase its stocks of roofing building materials from the First Respondent;

(b) ceased its then existing business activity of the manufacture of roofing building materials;

(c) refrained from selling the plant and equipment utilised by the Applicant in its manufacturing activities to anyone but the Applicant or to an overseas buyer;

The First Respondent would by 1 January, 1997:-

(d) enter into occupation of the premises tenanted by the Applicant in Rockhampton, the Sunshine Coast, Brisbane, the Gold Coast, Toowoomba and Lismore;

(e) indemnify the Applicant with respect to the Applicant’s obligations to pay rent to the landlords of the premises referred to in paragraph 6(d) hereof from 1 January, 1997 until termination of the said tenancy by the effluxion of the unexpired portion of such tenancies;.

(f) purchase the plant and equipment owned by the Applicant and located in the premises referred to in paragraph 6(d) hereof and other premises of the Applicant located at Cairns, Townsville and Bundaberg for its market value, or at the option of the First Respondent procure a sale of the said plant and equipment to an overseas purchaser.

P A R T I C U L A R S

The representations were oral and were made in conversations between the Applicant, by Roberts and Dudurovic, and the First Respondent, by the Second Respondent, at the following meetings:-

Date of

Meeting

Place of

Meeting

Time of

Meeting

Persons

Present

24.10.96

121 Ingham Road

Acacia Ridge

12:00 noon

Roberts

Dudurovic

Weller

David Thomson

29.10.96

121 Ingham Road

Acacia Ridge

1:00 p.m.

Roberts

Dudurovic

Weller

David Thomson

04.11.96

121 Ingham Road

Acacia Ridge

3:00 p.m.

Roberts

Dudurovic

Weller

David Thomson

7. Acting in reliance upon the truth of the representations referred to in paragraph 6 hereof and induced thereby the Applicant:-

(a) entered into a written agreement with the First Respondent whereby the Applicant was obliged to purchase stocks of roofing building material from the First Respondent.

P A R T I C U L A R S

The written agreement is constituted by a letter from the First Respondent addressed to Farnell & Thomas Limited dated 5 November, 1996, signed by the Second Respondent on behalf of the First Respondent, and a letter from the Applicant to the First Respondent dated 5 November, 1996 signed by Roberts on behalf of the Applicant.

(b) ceased the manufacture or roofing building products at its distribution centres in Cairns, Townsville, Bundaberg, Rockhampton, the Sunshine Coast, Brisbane and the Gold Coast;

(c) dismissed its factory and administrative staff located at its distribution centres referred to in sub-paragraph (b) hereof;

(d) sold its existing press shop manufacturing unit;

(e) sold its existing stocks of broken coil to the First Respondent;

(f) refrained from sub-letting any of its distribution centres referred [to] in sub-paragraph 6(d) hereof;

(g) employed a consultant senior management executive to implement the agreement reached between the Applicant and the First Respondent referred to in paragraph 6 hereof;

(h) employed temporary staff to implement the agreement reached between the Applicant and the First Respondent referred to in paragraph 6 hereof;

(i) incurred travel expenses for senior executives in order to implement the agreement reached between the Applicant and the First Respondent referred to in paragraph 6 hereof;

(j) refrained from selling its plant and equipment located at the distribution centres referred to in paragraph (b) herein and incurred relocation and transportation of costs with respect to such plant and equipment;

(k) sold its existing stocks of broken coil at its Darwin distribution centre.”

By par 8 of the statement of claim, ABI alleges that the representations pleaded in par 6 were “false” in that Stramit refused to perform the three promises mentioned. Paragraph 9 pleads that the making of the representations by Stramit took place in trade and commerce, constituted misleading and deceptive conduct, and therefore contravened s 52 of the Trade Practices Act 1974 (Cth) (“the TP Act”).

Paragraph 10 of the statement of claim pleads a claim in contract further or in the alternative to the claim under the TP Act. It alleges that it was orally agreed between ABI and Stramit that in consideration of ABI’s entering into a written agreement with Stramit to purchase its stocks of roofing building materials from Stramit, ceasing its activity of manufacturing roofing building materials, and refraining from selling its manufacturing plant and equipment to anyone other than Stramit or an overseas buyer, Stramit would, by 1 January 1997, enter into occupation of the premises identified in the passage set out above, indemnify ABI in relation to its rental obligations in respect of them, and purchase ABI’s manufacturing plant and equipment located in the premises referred to in par 6 (f), set out above. ABI pleads in par 11 that pursuant to the oral agreement, it did the things described in subpars 7 (a) to (k) set out above, and in par 12, that Stramit breached the oral agreement by refusing to enter into occupation of the premises, to indemnify ABI and to purchase the plant and equipment.

Paragraph 13 of the statement of claim pleads a case against Mr Thomson of accessory liability in respect of Stramit’s contravention of s 52 of the TP Act.

Paragraph 14 pleads that in consequence of the conduct of Stramit and Mr Thomson, ABI has suffered loss and damage. The loss and damage is particularised. The amounts assigned to the various heads of loss and damage total $917,548.00.

Before his Honour and before us, counsel for ABI acknowledged that there were deficiencies in the statement of claim. ABI acknowledged that the representations pleaded in par 6 were representations in relation to future matters, yet the statement of claim did not plead either a lack of intention or belief that they would be fulfilled or an absence of reasonable grounds for the making of representations (as to the latter, see s 51A of the TP Act). Related to this problem is the fact that the pleaded representations are alleged to be “false” in that Stramit subsequently refused to fulfil them.

The learned trial Judge referred to the failure of the statement of claim to plead a good cause of action under the TP Act. While he noted that Stramit and Mr Thomson were not concerned with pleading points (cf par (a) of O 20 subr 2 (1)), he observed that they relied on the obvious deficiency in the statement of claim and ABI’s failure to remedy it notwithstanding that it had, by the time of the hearing of the motion for summary dismissal on 30 and 31 July 1997, been in possession of the notice of motion “for a month”, as “evidence of the insubstantial nature of the applicant’s case” (Reasons for Judgment at 3). As will shortly appear, however, although the notice of motion for summary dismissal had been filed on 27 June 1997, it was not served until 11 July 1997. It referred expressly only to pars (b) and (c) of O 20 subr 2 (1). With respect, notwithstanding their obviousness, we would attach little weight to ABI’s failure to remedy the deficiencies in its statement of claim in the context of the application for summary dismissal. There had been no complaint about deficiencies by the respondents. There had been no directions hearing in the course of which the adequacy of the statement of claim might have been canvassed. The motion did not direct attention to the adequacy of the statement of claim to disclose a reasonable cause of action and, indeed, directed attention away from mere pleading matters.

CONTEXT IN WHICH THE APPLICATION FOR SUMMARY DISMISSAL WAS HEARD

In early June 1997, Stramit and Mr Thomson learned that ABI might not pay its June account of $431.130.94. On 13 June 1997, ABI filed its application and accompanying statement of claim which, as noted above, particularised its alleged loss and damage at $917,548.00. ABI faxed copies, to Stramit and Mr Thomas the same day. The application was returnable at 9.30 am on 14 July 1997 and notified the respondents that a directions hearing would be heard at that time.

Stramit’s first response was to demand payment of a larger amount than that of the June account, namely, $930,862.03 which included sales subsequent to the June bill.

On 27 June 1997, Stramit and Mr Thomson entered an appearance and, as noted above, filed their notice of motion for summary dismissal. At the same time, they filed lengthy supporting affidavits of Mr Thomson, Mr Weller and Shirley Frances Pederson, the Credit Manager, Northern Region, of Stramit. Importantly, however, the motion was not given a return date by the Registry and neither the notice of motion nor the supporting affidavits were served at that time.

Also on 27 June, Stramit issued in the Supreme Court of Queensland a writ against ABI and its parent company, Farnell & Thomas Limited (“Farnell”) as guarantor, in respect of ABI’s indebtedness to Stramit for roofing materials supplied in the sum of $431,130.94.

On 30 June 1997, the Queensland District Registry of the Court advised Clayton Utz, the solicitors for Stramit and Mr Thomson, that a review of listing arrangements was being undertaken and that when it was completed, their clients’ notice of motion would be listed and they would be contacted so that they could collect the service copies of the notice of motion. On 11 July, the Registry advised Clayton Utz that the directions hearing on the substantive application, then listed for 14 July, had been vacated and relisted for 30 July “in conjunction with the hearing of the respondents’ notice of motion (scheduled to commence at 10.15 am)”. On the same day, 11 July, Lynch & Co, the then solicitors for ABI and Farnell wrote to Clayton Utz noting Clayton Utz’s advice that they had not yet received from the Court “service copies” of the notice of motion. Although Lynch & Co’s letter of 11 July shows that they were aware of the existence of a motion for summary dismissal, they were, at the time of the writing of the letter, unaware of any return date for it. The letter shows that they were also unaware at that time that the return date of 14 July for the substantive application had, on or about that very day (11 July), been vacated by the Queensland District Registry. Indeed, their letter expressed concern that Clayton Utz might seek to have the motion for summary dismissal dealt with on the return date of the substantive application, 14 July. Lynch & Co’s letter included the following:

“In any event, having regard to the Federal Court Rules as to service of Notices of Motion and having regard to the proximity of the return date of 14 July, 1997 it appears unlikely that your client’s Notice of Motion will be heard either prior to or before 14 July, 1997. Certainly if we were served with material our client would be unlikely to be able to respond properly to the Notice of Motion in the time remaining.

In these circumstances we propose that the Notice of Motion be mentioned on 14 July, 1997, when the principal action is before the Court and that directions in the Notice of Motion be made in terms of the enclosed draft Order. These directions are in accordance with the practise [sic] adopted by the Federal Court in dealing with Notices of Motion with respect to pleading matters and are designed to deal with such matters efficaciously.

Please indicate if your client will consent to the making of these directions on the return date.”

On the hearing of the appeal, we were told by senior counsel for Stramit and Mr Thomson, that the notice of motion and supporting affidavits were served on 11 July. Clearly, they must have been served after Lynch & Co wrote their letter set out above. Thus, on 11 July but after writing their letter of that date, Lynch & Co must have learned that the Court had vacated the return date of the substantive application, 14 July, and stood it over to 30 July and that the motion for summary dismissal was also returnable on that date. In the present respect, the trial Judge laboured under a misapprehension as to what the correct factual position was.

On 14 July, Clayton Utz filed (and we presume served) a further affidavit of Mr Thomson in support of the motion. They did likewise on 22 July (and we make same presumption). In the meanwhile, Stramit filed an application for summary judgment, dated 18 July 1997, in the Supreme Court proceeding for $431,130.94.

On 29 July, that is to say, the day prior to the return of the motion, Lynch & Co filed and served an affidavit of Mr Roberts dated 29 July annexing correspondence. The affidavit was apparently served on Clayton Utz at 3.11 pm the same day. More importantly, however, at the commencement of the hearing of the motion on 30 July, ABI sought to file in Court and read a second and lengthier affidavit sworn by Mr Roberts on that day in response to the affidavits of Mr Thomson, Mr Weller and Ms Pederson filed 27 June and the further affidavits of Mr Thomson filed 14 July and 22 July.

At the commencement of the hearing of the motion for summary dismissal at 10.20 am on Wednesday 30 July, Stramit and Mr Thomson were granted leave to file in Court and read an affidavit of David Murdoch Hensler, a solicitor employed by Clayton Utz, in response to Mr Roberts’ “correspondence affidavit” of the preceding day. Senior Counsel for Stramit and Mr Thomson objected to the reading of Mr Roberts’ lengthier affidavit of 30 July which had been served after 9.00 am that morning. The following exchange took place:

“HIS HONOUR: - - it is obviously only in an extraordinarily clear case, I would have thought, that a person in your client’s position could hope to succeed in terminating the action. One would have thought there would have to be something in the nature of very convincing documentary proof which would blow out of the water the case based on oral representations and oral agreements. Have you got that sort of evidence?

MR BAIN: Yes, in my submission.

HIS HONOUR: Yes; all right. Well, we will come to that in due course. But I really think your objection is one that goes to the question of adjournment more than to excluding the applicant in the action from relying upon the material, given the nature of your application.

MR BAIN: I appreciate that the application, as your Honour says, is not a common one, and I appreciate also that there is an ordinary reluctance in the Court not to allow a respondent to a motion to put material before the Court which seeks to raise - it is obviously directed to raise - triable matters of fact. However, there is a discretion, which is an important one to be exercised, in my respectful submission, where - and I put it with no apologies - a respondent as part of an obvious tactical manoeuvre, and without explanation as to the lateness of the material in any respect, delays its material in that regard until the morning of the hearing of a motion of this type when, as Mr Roberts appreciates, the claim against the applicant includes the notion that this whole proceeding is simply a device to avoid a trade - - -

HIS HONOUR: Well, Mr Bain, I am not convinced that your arguments go against admitting giving leave to Mr McMurdo [Mr McMurdo QC, with Mr Quinn of counsel, appeared for ABI] to receive the material. It seems to me that if there is anything in your arguments about the applicant in the action being engaged in desperate last minute tactics to buy off, or to ward off the spear, you can make those points just as effectively with the affidavit in as you can with it not in.”

Senior Counsel for Stramit and Mr Thomson requested a short adjournment in order to take instructions as to whether to proceed with the hearing or to apply for an adjournment - clearly, his clients had not had any opportunity to respond to Mr Roberts’ second affidavit. After a short adjournment, he announced that his instructions were to proceed on the motion for summary dismissal. In the result, as will be seen later, in relation to certain critical conversations, his Honour had before him almost no evidence from Mr Thomson and lengthy evidence, albeit not in a form admissible on a final hearing, from Mr Roberts.

In the learned trial Judge’s Reasons for Judgment, he criticises ABI in respect of the late filing and service of Mr Roberts’ affidavit sworn 30 July. His Honour observed that there was no explanation for “the eleventh hour emergence of Mr Roberts’ affidavit”; that there was “no apparent reason why the respondents could not have been given a little notice of it in time to consider their response”; that ABI had had Mr Thomson’s main affidavit for a month; and that:

“It can be inferred that the late emergence of Mr Roberts’ affidavit was a deliberate ploy on the applicant’s part to deprive the respondents of the opportunity to respond to what he has to say, in the absence of any explanation for why it was only produced on the morning of the hearing.” (Reasons for Judgment at 15)

His Honour clearly, but wrongly, thought that the notice of motion and at least the initial affidavit of Mr Thomson in support had been served on or about 27 June. But in fact, the notice of motion, returnable on 30 July, was not served until 11 July and the affidavits in support of it were served progressively on 11 July (three affidavits), 14 July (one affidavit) and 22 July (one affidavit).

Prior to the hearing of the motion for summary dismissal on 30 July, neither the substantive application nor the motion for summary dismissal had been before the Court. No directions had been given. No time for the filing of affidavits by ABI had been fixed. While we think that ABI should have understood from the time of service on 11 July, that Stramit and Mr Thomson were intending to have the motion heard on 30 July, in the absence of directions relating to the filing of affidavits on either the substantive application or the motion, we do not think it was incumbent on ABI to file and serve Mr Roberts’ affidavit responding to the affidavits which had been progressively served on it, within any particular time prior to 30 July. Stramit and Mr Thomson were seeking, on the return date of the motion and in the absence of directions, to prevent ABI from having its day in court by “stopping it in its tracks”. They should have understood that the strategy was a high risk one in that ABI might file affidavit evidence on the hearing with a view to preventing them from circumventing its prima facie right to a trial.

In summary, it seems to us reasonable in the circumstances that ABI should have taken the course of filing in Court on the return date of the motion, one affidavit showing that there was a factual basis for the claim that it was making, with a view to persuading the Court that there were triable issues of fact. Indeed, this approach is reflected in what his Honour said at the beginning of the hearing of the motion in the passage set out earlier. We think that the “deliberate ploy” inference which his Honour drew was not available in the circumstances.

OUTLINE OF UNDERLYING FACTS

The following outline of the underlying facts is based on the findings made by the learned trial Judge and other uncontroversial material which was before his Honour.

On 1 October 1996 ABI (Webb) wrote to Stramit proposing a long-term agreement between the two companies. On 3 October, Stramit (Noel Doyle, General Manager) replied. On 14 October, there was a meeting between Thomson and Weller representing Stramit and Roberts and Webb representing ABI at Stramit’s offices. According to the second affidavit of Mr Roberts (he was not cross-examined and, as noted earlier, Stramit and Mr Thomson did not seek an adjournment to enable them to file an affidavit in reply), Mr Roberts advised Mr Thomson that for any contracting arrangement to be viable for ABI, it would need to come to an arrangement for its manufacturing plant and equipment to be sold and for a substantial number of its lease commitments to be taken over. If it were to be accepted on a final hearing that Mr Roberts did speak to that effect and that what he said reflected his state of belief, the evidence would favour the case sought to be made by ABI.

The next day, 15 October, Mr Roberts forwarded to Mr Thomson two copies of a “Confidentiality Agreement” signed by him on behalf of ABI, directed to enabling discussions to continue with the protection of confidentiality.

On 17 October, Mr Thomson forwarded to Mr Roberts certain information requirements which Stramit would need to enable it to “put together a Supply Agreement for The Roofing Centre.” The letter also included this paragraph:

“Without completely understanding our growth plans in the short to medium term, I think we should have a discussion about the future of the Roofing Centre equipment to see if we can put together an innovative win-win solution to this Roofing Centre asset.”

On 18 October, ABI (Webb) wrote to Stramit (Thomson) enclosing “volume indicators as requested”. The letter also set out a proposed progressive programme for the change to “out sourcing manufactured product” in its various branches.

On 22 October, Stramit (Thomson) wrote to ABI (Webb). The letter was, relevantly, as follows:

“re: Supply Agreement

Thank you for your information concerning manufacturing volumes in your various centres. We have looked at the requirements and would propose a Supply Agreement with the following characteristics:

Pricing

[There followed material relating to pricing not presently relevant]

Equipment

Our growth plans may require additional equipment and as part of your proposed exit from manufacture we are willing to look at solutions to your manufacturing equipment disposal and we can explore this in the not too distant future.

Thank you for the opportunity to discuss your future arrangements and I look forward to your response.” (emphasis supplied)

The first conversation particularised by ABI in its statement of claim occurred on 24 October 1996. Mr Thomson does not mention this meeting in his affidavits. Present were Messrs Roberts and Webb of ABI and Mr Thomson of Stramit. Prior to the meeting, Mr Webb had prepared a draft letter to be sent by Farnell to Mr Eric Young, Chief Executive, BTR Industrial & Commercial Group, BTR Nylex Ltd (the parent company of Stramit). The draft letter included the following:

“As you may be aware, discussions at a Queensland State level are underway between Mr David Thomson of Stramit as instructed by Mr Noel Doyle, and TRC Executives, regarding possible terms for an initial supply arrangement whereby Stramit would commence to supply roll formed product to TRC operations on a selective basis. It would be Farnell’s intent that these supply arrangements proceed on a stand-alone basis at the Queensland level. In the event that the initial supply terms can be agreed on a satisfactory basis, Farnell and BTR will be able to develop the terms for the longer term strategic partnership within an existing, practical working framework at the local level.”

According to Mr Roberts’ second affidavit, Mr Thomson was told in the meeting that in the case of ABI’s operation in Darwin, the supply arrangement would have no application because “the Darwin operation was operated by TRC under a form of joint venture.” This uncontradicted evidence of Mr Roberts is important in view of a submission by Stramit and Mr Thomson, which the learned trial Judge accepted, that ABI’s disposal of its manufacturing equipment at its Darwin premises was inconsistent with the existence of a concluded arrangement of the kind propounded by ABI.

On 24 October, ABI (Webb) wrote to Stramit (Thomson). In the letter, Mr Webb referred to the “Supply Agreement” as “a stand-alone arrangement” and to several issues, which might be addressed as part of a longer term strategic partnership between the two corporate groups. The primary Judge said that the letter was inconsistent with Mr Roberts’ account of what had been said at the meeting on 14 October, and, in particular, with his having emphasised at that meeting the takeover of ABI’s leases and the sale of its manufacturing equipment.

On 25 October Stramit (Thomson) wrote to ABI (Webb). The letter referred to the meeting on 24 October and to ABI’s letter of 24 October. The letter advised that Stramit would require Farnell “to indemnify the debt of” ABI. The letter included the following two passages which are important for present purposes:

“Locations

We are presently looking at lifting our presence in Lismore, Toowoomba, the Gold Coast and Rockhampton, and when you understand your future requirements in these centres, we could explore the option of taking over The Roofing Centre leases in those areas.”

“Equipment

On 25 October there was a meeting of Messrs Roberts and Dudurovic representing ABI and Messrs Thomson and Weller representing Stramit. Of this meeting, Mr Thomson’s affidavit sworn 26 June 1997 said no more than this:

“12. On 25 October 1996 Mr Neville Weller and I again met with Mr Roberts and a Mr Dudurovic (Mr Dudurovic is also a director of the Applicant).”

Mr Roberts’ account is more detailed and is found in pars 18-26 of his second affidavit, sworn 30 July, occupying five pages of the affidavit. Relevantly, for present purposes, his affidavit included the following:

“19. ...

I put forward the proposal that Stramit should take over TRC’s current manufacturing role and supply all TRC’s manufacturing requirements leaving TRC to provide a dedicated contracting capability. However, I further stated that for this proposal to be workable from the point of view of TRC the following matters had to be attended to:-

(a) a supply deal had to be agreed between TRC and Stramit which allowed TRC to obtain manufactured product from Stramit which was competitively priced as against other fixers in the marketplace and which took account of the volume orders which TRC would be able to place with Stramit. I indicated that TRC believed that further substantial progress needed to be made in this regard having regard to the letter which TRC had just received from Stramit dated 25 October, 1996;

(b) As the proposal called for TRC to exit or at least substantially scale down its manufacturing, staff numbers would have to fall, largely by way of retrenchment;

(c) TRC would have to find means to exit the leases of premises which it currently held on the basis that those premises were substantially in excess of the requirements of a service or contracting only business as contemplated;

(d) the plant and equipment currently utilised by TRC to manufacture products would have to be substantially reduced by way of scale [sic - sale].

I asked Mr Thomson to consider providing assistance to TRC to exit the leases and to sell the plant and equipment. I stated that on the basis that TRC was offered assistance with regard to these two items it would have the resources necessary to meet the staff retrenchment costs which would be a part of exiting manufacturing. I again stated quite clearly to Mr Thomson that unless these two items were addressed the establishment of a manufactured supply arrangement alone with Stramit was not financially viable for TRC for it would leave TRC as a ‘camel’, i.e. the cost structure of a manufacturer earning only the more limited margins of a service or contracting business.

20. Mr Thomson responded by stating that the proposal had a number of significant attractions from Stramit’s point of view.

...

22. Specifically with regard to TRC’s plant and equipment, Mr Thomson stated that he could see that if TRC were to sell the equipment in a way that would see that equipment remain in the Australian steel roofing industry and perhaps widely dispersed into a range of smaller operators in the Australian steel roofing industry, that would not be of benefit to Stramit in that it would simply result in a continuance of the manufacturing over-capacity problem in the steel roofing industry. He stated that he could therefore see the advantages to Stramit if the TRC equipment was sold offshore and would therefore consider the issue of the role that Stramit could play in the disposal of the TRC equipment.

23. I recall that at this meeting the issue of Stramit taking over specific TRC premises leases was discussed. Each of the TRC premises was discussed and I was able to outline the most relevant provisions of those leases for such a commercial discussion, e.g. rental and unexpired term of the leases. Mr Thomson confirmed that Stramit had no manufacturing presence at the time in Toowoomba, Lismore and at the Gold Coast and that Stramit’s lease in Rockhampton was about to expire and Stramit was interested in upgrading its premises in that city. He stated that Stramit was willing to undertake expansion in these areas to service the housing market because Stramit believed that the housing market was the only market which was likely to show any growth over the next three (3) years compared to the other two markets which Stramit serviced, namely the industrial shed market and the purlin market.

24. I stated that whilst TRC was appreciative of Stramit’s stated intent with regard to the Toowoomba, Lismore, Gold Coast and Rockhampton leases, TRC still had leasing commitments in Cairns, Townsville, Bundaberg, Sunshine Coast and Brisbane which it would like Stramit to consider taking over. At this meeting, Mr Thomson quite clearly stated that Stramit was not prepared to assist TRC with regard to taking over the TRC leases in Townsville and Cairns. He stated that Stramit already had adequate premises in those cities under long term leases. He undertook to consider the possibility of Stramit taking over TRC’s leasing obligations in Bundaberg, Sunshine Coast and Brisbane for discussion at a later meeting.”

Mr Roberts also stated that at the meeting he handed to Mr Thomson the draft of the letter proposed to be sent by Mr Laurie, the Deputy Chairman of Farnell, to senior executives of BTR in Sydney.

The second conversation particularised by ABI in its statement of claim occurred on 29 October 1996. Of the content of this meeting, Mr Thomson in par 13 of his affidavit sworn 26 June 1997, said no more than that on 29 October there was a further meeting involving the same four individuals at Stramit’s offices. Mr Roberts, on the other hand, in pars 27-30 of his affidavit sworn 30 July 1997, gives an account extending over one and a half pages. This conversation did not, however, even according to Mr Roberts’ account of it, relate directly to the premises or equipment issues.

On 30 October, Stramit (Thomson) wrote to Farnell (Roberts) a further letter headed “Supply Agreement”. The letter referred to the meeting of the preceding day, 29 October. In relation to the issues of premises and equipment, the letter again stated:

“Locations

Equipment

On 4 November, there occurred a critical meeting on which ABI relies. The evidentiary position relating to this meeting is interesting. Mr Thomson had annexed to his initial affidavit sworn 26 June 1997 in support of the motion for summary dismissal, a copy of a letter dated 5 November from Stramit (Thomson) to Farnell (Roberts) which began:

“Thank you for your time yesterday with Rade and as agreed, we submit hereunder the revised Supply Agreement.” (emphasis supplied)

Mr Thomson swore an affidavit dated 21 July (filed 22 July) elaborating upon his earlier affidavit. It is important to note that this affidavit preceded the availability to Mr Thomson of the substantial affidavit of Mr Roberts. In his affidavit of 21 July, Mr Thomson said, in reference to the opening sentence of his letter dated 5 November set out above, that he had no recollection of any meeting on 4 November. He pointed out that the opening sentence was in identical terms to the opening sentence of Stramit’s earlier letter of 30 October which had also been annexed to his earlier affidavit. He suggested that the opening sentence in the letter dated 4 November appeared to have been inadvertently reproduced from the earlier letter.

Another curiosity touching Stramit’s letter of 5 November is that while it contained paragraphs under most of the headings which had appeared in its earlier letters, including a paragraph under the heading “Locations”, it did not have a paragraph under the heading “Equipment”.

For his part, Mr Roberts, who, it will be recalled, was not cross-examined, gave in his second affidavit, sworn 30 July 1997, a detailed account of a meeting on 4 November. He said that it occurred at 3.00 pm; that Messrs Thomson and Weller of Stramit, and he and Mr Dudurovic representing ABI were present; and that the meeting was held at Stramit’s offices. Mr Roberts’ account is given in pars 31-41 of his affidavit of 30 July and occupies nearly four pages. Of immediate relevance, are the following passages:

“36. Mr Thomson then addressed the issue of the TRC manufacturing plant and equipment. He stated that both Stramit and BHP were determined that such plant and equipment should not ‘re-enter’ the Australian steel roofing industry if TRC ceased to be engaged in manufacturing. He stated that as far as Stramit and BHP were concerned the equipment had to be sold offshore. He stated that Stramit had substantial operations offshore and particularly referred to the Singapore operations of Stramit. Mr Thomson stated that given these offshore operations of Stramit would be able to effect a sale of the equipment in offshore markets. In this regard, Mr Thomson commented that as he was aware that certain of the TRC equipment had been in service for a considerable period of time this was not necessarily a drawback to its sale offshore, particularly in Asia, as it was quite common practice for Asian operations to purchase equipment that had been in operation for a considerable period of time.

37. Mr Thomson then went on to state that if the TRC equipment could not be sold offshore for some reason then Stramit would purchase the equipment on market terms. At this point, Mr Thomson made the comment that if Stramit was unable to use the TRC equipment in its own operations, Stramit was prepared to ‘dump the equipment in the Pacific Ocean’ rather than have it re-enter the Australian market through its sale to a number of smaller diverse manufacturers. Mr Thomson advised that BHP shared a similar view regarding this matter and he indicated that BHP and Stramit would be working together in some way (he did not say how) to ensure that the equipment was acquired from TRC.

38. I can recall stating that TRC shared the view that it was preferable that the equipment be sold offshore and that TRC welcomed the assistance which Stramit could obviously bring in this regard in that TRC was only a small group and had no operations or contacts offshore whatsoever which could facilitate a sale outside Australia. I stated that it would be certainly be [sic] most preferable if the sale of the plant and equipment could be undertaken in one line. I also stated that TRC would like to see the sale take place as soon as possible and referred to the end of December 1996, as a date by which TRC would be expecting real progress in this regard otherwise the simile of TRC becoming a financial ‘camel’ would become a reality. At the same time I acknowledged that the sale of the plant and equipment was something which would take some time to work through in terms of Stramit assessing it and making its contacts etc. Also, I stated that in disposing of the plant and equipment, Farnell, as a public company would need to ensure that the sale prices to Stramit nominees or Stramit were indeed market prices and accordingly the possibility of TRC undertaking sales on its own behalf had to be contemplated.” (emphasis supplied)

On the subject of ABI’s premises, pars 39 and 40 gave the following account of what was said:

“39. The subject of the TRC premises leases was also discussed at the meeting. I stated that based on a TRC financial assessment it would not be possible for TRC to continue to carry the obligations of the leased premises in Cairns, Townsville, Bundaberg, Sunshine Coast and Brisbane whilst operating as a contracting group. I knew from previous discussions with Mr Thomson that he was not prepared to take on the obligations of the leases in Cairns and Townsville. I pointed out to him the relatively long unexpired terms of the leases in Bundaberg, Sunshine Coast and Brisbane. He stated that he had considered the Bundaberg situation and advised that Stramit was not prepared to take over the TRC lease obligations in Bundaberg as he stated that Stramit already had a manufacturing operation in nearby Maryborough and Stramit simply did not consider it would be financially viable to also have a manufacturing operation in Bundaberg. Mr Thomson stated that he was prepared to include Sunshine Coast as a location were Stramit was [sic] prepared to take over the TRC lease obligations. Discussions then centred around the Brisbane leases which TRC had at 145 Ingram Road, Acacia Ridge which property was located in the same street in which Stramit had its Brisbane manufacturing operations. In particular, we discussed Shed 1 at 145 Ingram Road, Acacia Ridge which contained the Brisbane manufacturing operation of TRC. I can recall Mr Thomson stating that Shed 1 did not represent ideal premises in that it did not have overhead cranes but I can also recall him stating that he believed that they were likely to be able to arrange their affairs in the current Ingram Road such that a sub-operation that did not need access to overhead cranes could utilise Shed 1 at 145 Ingram Road.

40. Mr Thomson said that Stramit was prepared to take over TRL’s [sic - TRC’s] premises in Lismore, Toowoomba, Gold Coast, Rockhampton, Sunshine Coast and Shed 1 at 145 Ingram Road, Acacia Ridge, Brisbane.” (emphasis supplied)

Mr Roberts deposed that the meeting concluded with Mr Thomson’s stating that he would send a further letter to ABI.

Mr Roberts exhibited a copy of some notes which he described as notes taken by him at the meeting. The trial Judge was critical of the note on the basis that it did not record many matters which Mr Roberts said were important. His Honour referred to the fact that there was no reference to the issue of a takeover by Stramit of ABI’s leases. As his Honour observed, the note did, however, refer to the question of disposal of ABI’s manufacturing plant and equipment in the following comment:

“Equipment - mechanism of exit - out of Australia or into Stramit.”

His Honour observed that in this respect the note was consistent with Mr Roberts’ evidence about the conversation which he claimed took place.

We have referred earlier to Stramit’s letter dated 5 November. As then noted, the subject of ABI’s equipment was not referred to. The issue of the premises leased by it was addressed in the following paragraph:

“Locations

We are presently looking at lifting our presence in Lismore, Toowoomba, Sunshine Coast, the Gold Coast and Rockhampton, and when we understand our future requirements in these centres, we could explore the option of taking over The Roofing Centre leases in those areas.”

According to Mr Roberts, after receiving Thomson’s letter of 5 November he telephoned Mr Thomson and said that Farnell, as a small public company with plant and equipment forming a significant portion of its assets, had a duty to ensure that a fair price was obtained for the disposal of ABI’s plant and equipment and that therefore Farnell could not accept that Stramit should have a right to veto the sale of it. He said that according to his recollection, Thomson accepted Farnell’s position on this issue and that it was agreed that he (Roberts) should write to Stramit confirming these matters.

He in fact wrote a letter to Thomson on 5 November. It began by referring to Stramit’s earlier letter of the same date and said that subject to two matters, ABI accepted Stramit’s supply terms and indemnity arrangement. The first matter addressed was as follows:

“1. Farnell & Thomas Limited, as a publicly listed company cannot agree to The Roofing Centre Pty Ltd accepting that Stramit have a right of veto on the sale of The Roofing Centre equipment. I can confirm that The Roofing Centre is committed to selling its equipment under sensible commercial arrangements. The Roofing Centre would very much prefer to sell the equipment domestically or offshore in one lot.

We would welcome an offer from Stramit for the equipment or any assistance in locating offshore buyers. As you would appreciate with a 31 December half yearly reporting date, our Board’s preference is that the move to a supply & fix business and our exit from manufacturing, be completely finalised by 31 December 1996. Your assistance to enable the disposal of the plant & equipment within that time frame would be welcome.”

Apparently there was a further meeting on Thursday 7 November 1996 to which neither Thomson nor Roberts refers in his affidavit. However, a letter dated 8 November 1996 from ABI to Stramit began by referring to that meeting and included the following:

“2. Attached are schedules for The Roofing Centre’s operations at Lismore, Toowoomba, Gold Coast, Brisbane, Sunshine Coast and Rockhampton including details of lease terms and lettable areas, staffing, plant and equipment and revenues for the last two financial years.

I understand that Stramit will commence an assessment of the plant and equipment in these centres next week.

3. I also attach an Indemnity in duplicate in favour of Stramit Corporation Limited duly signed by me on behalf of Farnell & Thomas Limited. Would you please sign on behalf of Stramit Corporation Limited and return a copy to me at your earliest convenience.” (emphasis supplied)

According to Mr Roberts’ affidavit, on 14 November at about 4.30 pm a further meeting was held attended by Messrs Thomson and Weller of Stramit, and himself and Mr Dudurovic of ABI. Paragraph 46 of Mr Roberts’ affidavit included the following:

“At the meeting, Mr Thomson advised that he was now having trouble justifying within Stramit the taking over of the manufacturing premises of TRC at the Gold Coast as he now found that Stramit could quite easily manufacture product for TRC Gold Coast customers at Acacia Ridge in Brisbane and simply adding one or two more delivery trucks to deliver to the Gold Coast. I stated that I was very disappointed to learn of this as it had only been on 4 November, 1996 that we had concluded that Stramit would take over this lease in order to make the arrangements financially viable for TRC.” (emphasis supplied)

An internal Stramit memorandum dated Friday, 15 November 1996 from Mr Thomson to other officers of the company, headed “Roofing Centre (TRC) Takeover”, was as follows:

“As discussed, as part of the Stramit supply agreement with TRC, we have the opportunity to purchase or assist in the disposal of, the manufacturing equipment.

Please find attached schedules supplied by TRC detailing equipment located in each of the Queensland businesses. The values are a combination of book values, management valuations and best guesses.

At a meeting last night I agreed on behalf of Stramit that we would undertake inspections to form our own opinion and inspections would commence on Monday next. I would be grateful if you could coordinate the inspections with the following objectives:

. Inspect and photograph the equipment

. Note scope of work and estimated cost to bring the gear up to Stramit product and quality specifications.

. Comment on the value given by TRC on the understanding that if we did purchase the gear we would pay a ‘fair price’.

Apologies for the haste, however the owners of TRC are looking for an early resolution of the issues and I have committed that Stramit will undertake a timely professional and accurate evaluation to enable both companies to understand the next steps”

On 19 November, in a facsimile from Farnell (Roberts) to Stramit (Thomson), Roberts again addressed the question of Stramit’s claim to a power of veto over the sale of ABI’s plant and equipment. The memo included the following:

“Firstly, we felt that the inclusion of any such veto requirement in the supply arrangements was inappropriate given that those arrangements were to be stand-alone arrangements. Other issues were to be handled on an independent commercial basis. ...

... we note your advices that Stramit is now unlikely to be interested in TRC’s leases at Gold Coast and Sunshine Coast. ...

As arranged, we will provide you with further details of plant and equipment and coil stocks at our operations at Toowoomba, Lismore and Bundaberg.”

REASONING OF THE TRIAL JUDGE

His Honour referred to the heavy burden incumbent upon an applicant for summary dismissal as explained in Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91-2 per Dixon J and Tresize v National Australia Bank Ltd (1994) 50 FCR 134 (FC) at 145. He distinguished from the test applicable in Australia, the formulation in the recent English decision of Lonrho Plc v Fayed (No 2) [1992] 1 WLR 1 (at 5):

“A plaintiff is entitled to pursue a claim ... however implausible and however improbable his chances of success. Unless the defendant can demonstrate shortly and conclusively that the plaintiff’s claim is bound to fail or is otherwise objectionable as an abuse of process of the court, it must be allowed to proceed to trial.” (emphasis supplied)

His Honour also referred to Caterpillar Inc v Sun Forward Pty Ltd (1996) 36 IPR 410 (FCA/Drummond J) at 413-4.

His Honour referred to the evidence at length. The evidence which we have recounted in some detail above obviously raises considerable difficulties for the case which ABI seeks to make out. His Honour referred to terms of the correspondence which supported and which were inconsistent with the proposition that agreement had been reached or that Thomson had made representations that Stramit would definitely do the things pleaded. He also referred to the fact that certain matters were not addressed by particular deponents.

He further said that on the case pleaded by ABI, Stramit was bound only if ABI ceased its then existing business activity of manufacturing roofing materials and refrained from selling its plant and equipment used in that activity to anyone other than Stramit or an overseas buyer. He noted that ABI had, however, itself sold the plant and equipment used in its Darwin operation. His Honour treated this as a failure of a condition precedent to Stramit’s becoming bound.

The trial Judge also referred to a lack of documentary support for ABI’s case and to the lack of any protest by ABI that it had been misled by Stramit and Thomson until it filed its originating process on 13 June 1997. He referred to ABI’s case as one which was:

“ ... such as to cry out for production of any evidence available to the applicant which might confirm what Mr Roberts says was the dealings he had with the first respondent’s representatives in making its answer to the respondents’ motion to strike out the action.” (Reasons for Judgment at 15)

In this respect, he observed that ABI had not led evidence from either Mr Dudurovic or Mr Webb. We have referred earlier to the fact that his Honour also relied on the “eleventh hour emergence” of Roberts’ affidavit.

REASONING ON THE APPEAL

Legal principles

It is appropriate to repeat at the outset the two passages from the judgment of Dixon J in Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91 and 92 which were set out by the learned trial Judge:

“The principles upon which that jurisdiction is exercisable are well settled. A case must be very clear indeed to justify the summary intervention of the court to prevent a plaintiff submitting his case for determination in the appointed manner by the court with or without a jury. The fact that a transaction is intricate may not disentitle the court to examine a cause of action alleged to grow out of it for the purpose of seeing whether the proceeding amounts to an abuse of process or is vexatious. But once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process.” (at 91)

...

“It is in my opinion of more importance to maintain the integrity of the principle that under cover of the inherent jurisdiction to stop abuse of process litigants are not to be deprived of the right to submit real and genuine controversies to the determination of the courts by the due procedure appropriate for the purpose ....” (at 92)

Barwick CJ referred to the first of these passages in General Steel Industries Inc v Commissioner for Railways(NSW) (1964) 112 CLR 125 as follows:

“ ..., in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand, I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff’s claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed.” (at 130)

In a different context, an application by a plaintiff for summary judgment, all five members of the High Court who sat said this in Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87:

“ ... the appellants ought, we think, to have been given leave to defend. The power to order summary or final judgment is one that should be exercised with great care and should never be exercised unless it is clear that there is no real question to be tried: ... . In our view, it is not possible to say without doubt, on the whole of the material, that there is no question to be tried concerning the payment of the deposits by the appellants. The facts which are established are inconclusive, but the respondent, as well as the appellants, was in a position to establish conclusively the payment of the deposits if that fact could be established and, given the opportunity, it did not do so. That leaves, we think, a question to be tried and, although the appellants have not succeeded in positively establishing a defence, they should not in the circumstances be debarred from defending the action.” (at 99)

A fourth High Court authority to which we would refer is Webster v Lampard (1993) 177 CLR 598. In that case, one Sergeant Lampard had succeeded in having a proceeding brought against him by Mr and Mrs Webster in the Supreme Court of Western Australia dismissed summarily on the basis of statutory defences found in s 47A of the Limitation Act 1935 (WA) and s 138 of the Police Act 1892 (WA). Sergeant Lampard said that the action was brought against him in respect of acts done by him “in pursuance or execution or intended execution of any Act, or of any public duty or authority” (s 47A of the Limitation Act) and “in carrying the provisions of [the Police] Act into effect again[st] any parties offending or suspected of offending against the same, unless there is direct proof of corruption or malice” (Police Act, s 138 par H). Their Honours noted that the issue on the application for summary dismissal had not been whether Mr and Mrs Webster would probably succeed in their action against Sergeant Lampard, but was whether it was demonstrated that the action should not be permitted to go to trial in the ordinary way because it was “apparent that it must fail”. Their Honours referred to statements in the three cases mentioned above and added:

“Nowhere is that need for exceptional caution more important than in a case where the ultimate outcome turns upon the resolution of some disputed issue or issues of fact.” (at 603)

Finally, in Munnings v Australian Government Solicitor (1994) 68 ALJR 169 (at 171), Dawson J spoke of the “great caution” which a court must exercise before summarily terminating an action, and his Honour’s decision and reasoning were upheld by the Full High Court (1994) 68 ALJR 429.

Of course, the learned trial Judge was familiar with, and referred to, the “heavy burden” assumed by an applicant for summary dismissal. Apparently he applied the test that it had to be “very clear indeed” that ABI would fail on a final hearing or that ABI’s claim did not represent a “real and genuine controversy”.

With respect to his Honour, we do not think that the passage from Lonrho Plc v Fayed (No 2) [1992] 1 WLR 1 (at 5) set out earlier at p 23 of these reasons and distinguished by his Honour, is in fact distinguishable from the approach taken in the High Court cases to which we have referred. In that case, the defendants moved for the statement of claim to be struck out, invoking the grounds, relevantly, that it was “scandalous, frivolous or vexatious” or that it was “otherwise an abuse of the process of the court” (RSC Ord 18 r 19(1) (b), (d)) and the inherent jurisdiction of the Court. The “rule grounds” are almost identical to those on which the trial Judge proceeded in the present case.

Millett J cited Lawrance v Lord Norreys (1890) 15 App Cas 210 in which Lord Herschell said (at 219) that the inherent jurisdiction to dismiss an action as an abuse of process of the court should be “very sparingly exercised, and only in very exceptional cases” and that its exercise would not be justified “merely because the story told in the pleadings was highly improbable”. Millett J said (at 5G):

“If the defendant assumes the heavy burden of demonstrating that the claim is bound to fail, he will not be allowed to conduct a mini-trial on the affidavits.”

His Lordship also referred (at 5) with approval to the following passage from the judgment of Danckwerts LJ in Wenlock v Moloney [1965] 1 WLR 1238 (at 1244):

“ ... this summary jurisdiction of the court was never intended to be exercised by a minute and protracted examination of the documents and facts of the case, in order to see whether the plaintiff really has a cause of action. To do that is to usurp the position of the trial judge, and to produce a trial of the case in chambers, on affidavits only, without discovery and without oral evidence tested by cross-examination in the ordinary way. This seems to me to be an abuse of the inherent power of the court and not a proper exercise of that power.”

With respect, we think that these various passages and that set out above at p 23 are consistent with the approach taken in Australian courts and are applicable to a motion for summary dismissal under O 20 subr 2 (1) (b) and (c). The passages from Wenlock v Moloney and Lonrho were followed by Eames J, correctly in our view, in Kew Cottage & St Nicholas Parents Association Inc v The Minister for Health and Community Services (unreported, Supreme Court of Victoria, No 5269 of 1995, 18 August 1995). A proceeding should not be dismissed summarily merely on the ground that it appears at the early stage of the hearing of the motion brought for that purpose, to advance a highly implausible claim which will very probably fail.

Application of legal principles to present case

It was not in dispute that if the evidence of Mr Roberts were accepted, the motion for summary dismissal should be dismissed. His Honour became convinced that the pleaded representations and agreement had not been made. But ABI had not had the benefit of discovery of documents or of cross-examination. The learned trial Judge reached conclusions adverse to Mr Roberts’ account as a result of

(1) his analysis of the correspondence,

(2) the lack of documentary support for ABI’s case including the lack of comprehensiveness of a note made on 4 November 1996 by Mr Roberts in relation to the meeting of that date,

(3) the sale by ABI of the Darwin plant and equipment,

(4) the absence of complaint by ABI until it commenced the proceeding below on 13 June 1997,

(5) the failure, without explanation, of Messrs Webb and Dudurovic to swear affidavits in opposition to the motion, and

(6) the adverse inference which his Honour drew from the late service of Mr Roberts’ affidavit.

(1) We simply cannot agree that the correspondence makes it inevitable that ABI will fail on a final hearing. We readily accept that in the existing state of the evidence, ABI faces very great difficulties. But with the benefit of discovery, cross-examination and further affidavit evidence ABI could possibly succeed.

(2) His Honour observed that Mr Roberts made a one page note relating to the meeting of 4 November. The note referred to numerous topics which were discussed but made no reference to the question of the takeover of ABI’s leases. The note did, however, state:

“Equipment - mechanism of exit - out of Australia or into Stramit.”

His Honour observed that to this extent the note supported Mr Roberts’ evidence that there was discussion about disposition of ABI’s equipment to Stramit. We do not think that the omission of any mention of the takeover of the leases is of such evidentiary force as to compel a conclusion that discussion of that topic did not take place. But if it did, we would be left with a note which partly supported and partly did not support ABI’s claim. Such an equivocal document would scarcely give rise to an inference supporting summary dismissal.

(3) ABI’s sale of the Darwin plant and equipment is not inconsistent with the existence of the supposed arrangement as put forward in Mr Roberts’ evidence, as distinct from the arrangement as pleaded in the statement of claim. Although other branches were mentioned by name as being included in the arrangement, Darwin was not; there are references to the arrangement as relating to “Queensland”; and, most importantly, Mr Roberts’ evidence of the conversation on 24 October 1996 is that he told Mr Thomson that Darwin was excluded from the supply arrangement because “the Darwin operation was operated by TRC under a form of joint venture”. If this uncontradicted evidence were to be accepted on a final hearing, it might be concluded that ABI was to be at liberty to sell its plant and equipment in Darwin.

(4) The absence of complaint by ABI until June 1997 when Stramit was applying pressure to obtain payment of the June 1997 account, while calling for explanation on a final hearing, might yet be explained. The issue was not directly raised by any affidavit to which Mr Roberts’ affidavit replied. The evidence does not show what happened in relation to either the branch premises occupied by ABI or its manufacturing plant and equipment at its Queensland outlets from the end of 1996 down to the commencement of proceedings in June 1997. On a final hearing, when the issue is fully explored, the present lack of evidence as to an explanation for the lack of complaint might not be persuasive.

(5) It was open to ABI to think that it would suffice to prevent summary dismissal if it put on an affidavit by Mr Roberts substantiating its case. With respect, his Honour’s reasoning in the present respect seems to us to have placed an untoward onus on ABI. It amounts to saying that ABI should have understood that the affidavits filed in support of the motion raised major obstacles for the case pleaded by it and cast a burden on it of putting forward strong countervailing evidence. But we think that this approach is not appropriate in the context of a motion for summary dismissal.

(6) We have dealt with this matter earlier.

In summary, his Honour decided the motion by reference to what he saw, based on the evidence before him, as a high degree of improbability of ABI’s succeeding, but we do not think that this was a sufficient basis on which to dismiss an application summarily. The material on which Stramit relied did not exclude the possibility that the representations alleged by ABI were made or the contract entered into: if it did, it could hardly be relevant, after all, that no other witness confirmed Mr Roberts’ evidence on the motion. The material did not, therefore, establish that there was no real question to be tried. The most that could be said was that ABI faced significant, perhaps formidable difficulties: not that its case was untenable, hopeless or futile.

It may be that ABI will fail on a final hearing. If so, it will be said by Stramit and Mr Thomson with the benefit of hindsight that justice would have been better served if it had failed at the earlier stage. But would it? At present it cannot be known what the result on a final hearing will be. Stramit and Mr Thomson would have succeeded in securing a dismissal without ABI’s claim having been heard and without ABI’s having had the benefit of discovery or cross-examination. That is an apparent injustice to ABI. In order to avoid it, Stramit and Mr Thomson, like any respondent facing what he or she believes to be a spurious claim, are required to suffer some delay and inconvenience in the interest of the greater good of ensuring that an injustice is not done or reasonably perceived to have been done.

CONCLUSION

The appeal will be allowed with costs and the orders of the trial Judge made on 1 August 1997 will be set aside. In lieu of those orders it will be ordered that the respondents’ motion brought by notice of motion filed on 27 June 1997 in proceeding No QG 70 of 1997 be dismissed and that the respondents pay the costs of the applicant in that proceeding of that motion.

I certify that this and the preceding thirty (30) pages are a true copy of the Reasons for Judgment herein of the Court.

Associate:

Dated: 1 December 1997

Counsel for the Appellant:	Mr G A Thompson

Solicitor for the Appellant:	Dunhill Madden Butler

Counsel for the Respondents:	Mr R G Bain QC

Solicitor for the Respondents:	Clayton Utz

Date of Hearing:	7 November 1997

Date of Judgment:	1 December 1997

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