[2005] VCAT 306

1. The application by the Second Respondent pursuant to S.75 of the Act is dismissed.

2. Costs reserved.

1 This matter comes before me by way of an application pursuant to S.75 of the Victorian Civil and Administrative Tribunal Act 1998 ("the Act"). An application has been made by Perpetual Nominees Limited as custodian of the Colonial First State Income Fund ("Perpetual"). Pursuant to S.75 of the Act, it seeks to dismiss or strike out the proceeding brought against it by Arrow International Australia Pty Ltd ("Arrow"). The first respondent, Indevelco Pty Ltd ("Indevelco") took no part in the application. Perpetual was represented by Mr N Frenkel of Counsel and Arrow by Mr B Miller of Counsel. Each made oral submissions, and spoke to written submissions which were particularly helpful. No oral evidence was called, but reference was made to various documents.

2 The following factual matters are set out solely in order to provide the context in which this application was made. No evidence as to the merits of the matter was adduced and I make no findings in relation to same. This factual background is set out so as to assist in the understanding of the arguments and of the ultimate decision.

3 This claim is centred upon a building dispute. It is a claim by a builder (Arrow) against an owner, (Indevelco), and the owner's financier (Perpetual). On 30 July 2000, Arrow and Indevelco entered into a building contract ("the Building Contract") in respect of an apartment building in Francis Street, Yarraville. A special condition in the Building Contract made it conditional upon the execution of a Building Contract Tie in Deed ("the Tripartite Deed"); an executed Addendum to the Building Contract Tie in Deed ("the Addendum") or similar deed acceptable to Arrow; approval of Arrow by Perpetual; and approval of finance for the project. On 13 December 2002, all parties entered into the Tripartite Deed. Clause 2.11 of that Deed sets out how payment shall be made, which, in essence, is that, at the end of each month, Arrow shall invoice Indevelco for work done; Indevelco shall arrange for a Quantity Surveyor acceptable to Perpetual to certify the invoice; and, upon agreement being reached between Arrow and the Quantity Surveyor as to any discrepancies, Perpetual shall transfer to Arrow's bank account the funds required to pay the invoice.

4 Such procedures are specifically said to be subject to Clause 2.9 of the Tripartite Deed, which states that nothing in the Deed or anything Perpetual does imposes any obligation on it under or in respect to the Building Contract, unless Perpetual expressly assumes Indevelco's obligations under the Building Contract.

5 A dispute has arisen between Arrow and Indevelco. Leaving aside a claim based on quantum meruit, Arrow is claiming against Indevelco the sum of $440,501.00 being, in essence, monies owing to it as a result of Indevelco's alleged failure to observe the terms of the Building Contract. Alternatively, Arrow is claiming that sum against Perpetual pursuant to Clause 2.11 of the Tripartite Deed or by way of damages pursuant to S.82 of the Trade Practices Act 1974 (CTH) ("TPA") and S.159 of the Fair Trading Act 1999 (Vic) ("FTA"). Declarations are also sought in relation to these matters, both in relation to a requirement to transfer funds pursuant to Clause 2.11 of the Tripartite Deed, and in relation to alleged contraventions of the legislation referred to above.

6 In accordance with Clause 2.11, Perpetual made thirteen payments into Arrow's bank accounts, these totalling in excess of $4 million dollars. By a letter dated 3 November 2003 from Perpetual to Arrow, Perpetual acknowledged that it had paid into Arrow's account an amount less than a payment certified by the Quantity Surveyor. In addition to that acknowledgement, the letter stated that Perpetual would endeavour to pay the shortfall as soon as possible and, in the interim, requested that Arrow's default letter be issued to it (Perpetual).

7 The Addendum sets out the payment arrangements referred to above and ultimately incorporated in the Tripartite Deed. It was agreed that the Addendum would not be executed as a deed at the time of the signing of the Building Contract, but would be incorporated into the Tripartite Deed. The Addendum was initialled by representatives of Arrow and Indevelco in July 2002, and, as stated, the Tripartite Deed was ultimately executed by Arrow, Indevelco and Perpetual in December 2002.

8 As I understand it, the case brought by Arrow against Perpetual is brought on two bases. These are:

(i) Pursuant to contract. It is alleged that Perpetual has assumed a primary obligation to make payments pursuant to the Tripartite Deed (described by Arrow as a "collateral contract") or it has expressly assumed Indevelco's obligations pursuant to the provisions of the Tripartite Deed, and in particular paragraph 2.9 thereof.

(ii) Pursuant to fair trading legislation and based upon misleading and deceptive conduct in the form of untrue representations. It is alleged that there has been contravention of the provisions of the TPA and FTA.

9 One slightly unusual aspect of this application is that I am asked to consider amended points of claim which have not yet been formally filed and served. Thus, submissions addressed both the original points of claim and the amended points of claim. It was conceded by Mr Frenkel that the amended points of claim contain greater detail and were an improvement on the original, but nevertheless the proceeding should still be dismissed or struck out. Essentially it was submitted that no amount of improvement or further pleading could save the claim from dismissal or striking out. Nevertheless, it is a slightly unusual situation to be asked to deal with an application pursuant to S.75 on the basis of proposed points of claim in addition to existing ones. However, as it was the wish of the parties that this be done and bearing in mind that this is not a court of pleadings, I shall approach the matter on that basis.

10 Secondly, I raised the issue of the jurisdiction of this Tribunal to deal with matters under the TPA. As is often said, this Tribunal is a creature of statute. Its jurisdiction is found in the Act and in the enabling enactments. Arguments concerning whether or not the provisions of the TPA enable this Tribunal to hear matters under it take one into the issue of whether or not this Tribunal is a court. As I understand the situation as outlined by Mr Miller on behalf of Arrow, and in response to my queries, Arrow is considering its position in relation to reliance upon the TPA and I shall make no ruling in relation to it at this stage.

11 I shall not set out the submissions advanced on behalf of the parties in detail, but shall summarise them. The case advanced by Mr Frenkel on behalf of Perpetual could be so summarised as follows.

12 Reliance is placed upon S.75(a). The complaint should be dismissed because it is doomed to fail and is not curable by amendment.

13 The obligations of Perpetual as set out in paragraph 2.11 of the Tripartite Deed are purely procedural. They are expressly subject to the provisions of Clause 2.9. Perpetual has no obligations pursuant to the Building Contract unless it expressly assumes Indevelco's obligations, which it has not done. Arrow's right to be paid is a right pursuant to the Building Contract, and Perpetual is not a party to that contract. It is not a matter of evidence. It is a matter of contract law.

14 Further, it is not reasonably arguable that Perpetual is effectively the guarantor of Indevelco, as is alleged in paragraph 21 of the amended points of claim. The express assumption of Indevelco's obligations by Perpetual, as required by Clause 2.9, simply has not happened. Clause 2.9 of the Tripartite Deed is thus a complete answer to Arrow's claim for breach of contract. Further, the provisions relating to default contained in Clause 2.5(b)(i)(B) of the Tripartite Deed, which also refer to Perpetual's assumption of obligations under the Building Contract, fit in with Clause 2.9.

15 The letter of 3 November 2003 is not an express assumption by Perpetual of Indevelco's obligations. It is noted that the word "endeavour" is used in relation to the payment of any shortfall. There is not even an implied assumption of obligations, much less an express assumption. The letter does no more than point to the procedural clauses. Similarly, the making of payments by Perpetual into Arrow's bank account does not mean that there has been any assumption by Perpetual of Indevelco's liabilities and responsibilities. It is the procedure required pursuant to the Tripartite Deed. These are not matters for trial and they do not depend upon further evidence or the credit of witnesses. The issue depends purely upon contractual interpretation, and the claim is simply not open on the pleaded basis. In relation to both points of claim and amended points of claim, the claim is misconceived, lacking in substance, obviously hopeless, bound to fail, and cannot be cured by amendment.

16 In relation to the claim pursuant to the FTA, it is to be remembered that, if a pleading or part of a pleading before the Tribunal is plainly defective, the proceeding or part of it may be dismissed or struck out pursuant to S.75, and reference is made to Barbon v West Homes Australia Pty Ltd (2002) VSC 405.

17 Reference is also made to cases such as Arms v WSA Online Limited (2003) FCA 835 and Pioneer Electronics Australia Pty Ltd v Edge Technology Pty Ltd (1999) FAC 142. A claim based on S.9 of the FTA must adequately demonstrate the falsity of representations and must identify how it is said that the representations were false at the time that they were made. As was said in Pioneer at paragraph 7:-

"In a case such as this, a cause of action for misleading and deceptive conduct is not established unless the statement of claim sets out the circumstances which gave the representation its misleading and deceptive character at the time it was made. It should be borne in mind that the mere non-fulfilment of a statement as to a future matter does not establish that that statement was relevantly misleading and deceptive. If that non-fulfilment is to be relied upon as part of the circumstances which rendered the statement misleading and deceptive, such an inference must be specifically pleaded along with the facts and merits relied on to support the inference ...".

18 It cannot be said in the present case, despite the fact that it has been pleaded, that Arrow was induced to enter into the Building Contract by the promise of Perpetual to make payment for the works as set out in the Tripartite Deed. Arrow's further and better particulars of points of claim dated 23 July 2004 refer to discussions between Arrow and Indevelco in July 2002 when the Building Contract was executed, but Perpetual's alleged promise to make payment to Arrow was, according to those further and better particulars, formalised in writing and contained in the Tripartite Deed dated 13 December 2002. Nowhere in the material, including the affidavit of Mr Vinod Perera on behalf of Arrow, is it said that Perpetual agreed to the matters being discussed between Arrow and Indevelco in July 2002. Paragraph 25 of the amended points of claim alleges conversations in July 2002 involving representatives of Perpetual, but does not identify any such representatives and the allegation is not consistent with the evidence, including affidavit evidence, otherwise available. The same paragraph includes reference to the Building Contract to which Perpetual was not a party.

19 In summary, there exists no arguable case on behalf of Arrow against Perpetual and the claim should be dismissed or, alternatively, struck out.

20 The submissions of Mr Miller on behalf of Arrow could be summarised as follows.

21 A claim should not be struck out if a deficiency can be cured by amendment. The original points of claim, insofar as reliance was placed upon the FTA, may not have contained sufficient information, but the amended points of claim cure that defect.

22 Arrow puts its case against Perpetual in two fundamental ways. Firstly, the claim is based in contract, and various paragraphs of the amended points of claim, as listed in the written submissions on behalf of Arrow, identify how the claim is put.

23 The Tripartite Deed as executed by the parties is more than procedural in relation to payment, and imposes contractual obligations.

24 It is apparent from the affidavit of Mr Perera and the exhibits thereto that Perpetual was involved in the negotiations at the time of the execution of the Building Contract; that Indevelco was obtaining Perpetual's approval at that time; and that the Addendum was in fact referred to Perpetual's solicitors at that time. Further, the fact that Perpetual made substantial progress payments to Arrow demonstrates that Perpetual considered that it had an obligation to make such payments.

25 In addition, Perpetual has expressly assumed the obligations of Indevelco. It has done this by making the payments. It was of benefit to Arrow to have Perpetual agreeing to make the payments and was the reason why Arrow entered into the Tripartite Deed. Clause 2.11 gave Arrow the security of knowing payments would be made once they were certified. By its conduct in so paying, Perpetual expressly assumed Indevelco's obligations.

26 That Perpetual considered that it had such an obligation is made clear by the letter of 3 November 2003, in which it acknowledged that it was discharging the obligation of Indevelco and asked that any default letter be sent to it.

27 The word "expressly" receives some attention in "Words and Phrases Legally Defined", third edition, at page 206. Reference is there made to two authorities, namely Chorlton v Lings (1868) LR 4 CP 374 and Whitehouse v Pickett (1908) AC 357. These could be summarised as saying that the word "expressly" means "plainly, clearly or the like". No form of words is needed, but something should be said or done that conveys an intention. Bearing these authorities in mind, the clearest evidence that there has been an express assumption of the obligations of Indevelco by Perpetual, or, alternatively, the assumption of a primary obligation under the Tripartite Deed by Perpetual, is the fact that it made payments to Arrow over a twelve month period.

28 Secondly, the claim is based upon misleading and deceptive conduct pursuant to the FTA. Again, the written submissions refer to the relevant paragraphs of the amended points of claim. The claim has been repleaded in that document.

29 The representations relied upon were made prior to the signing of the Building Contract and not at the time of the signing of the Tripartite Deed. The affidavit of Mr Perera makes this clear. It is apparent that Perpetual was involved prior to the execution of the Building Contract, as were its solicitors.

30 There are a considerable number of authorities in relation to the striking out or dismissing of a claim without it having been heard on its merits, and in circumstances of the kind envisaged in S.75. The onus is on the person making the application to show that the pleading discloses no reasonable cause of action - see Winterton Constructions Pty Ltd v Hambros Australia Ltd [1991] FCA 171; (1991) 101 ALR 363. As was stated in Whim Creek Consolidated NL v Colgan [1989] FCA 261; (1989) 88 ALR 83, the court should not strike out a pleading unless it is shown that the case put forward in the pleading is so clearly untenable it cannot possibly succeed, and it is a jurisdiction that should only be used sparingly and in a very clear case - see Ngo v State of New South Wales [1996] HCA 17; (1996) 137 ALR 40.

31 Arrow has a sound case against Perpetual in both contract and in misleading and deceptive conduct, and it should be permitted to proceed against Perpetual.

32 There have been a number of decisions of the courts generally and of this Tribunal in relation to the principles which operate when applying a provision such as S.75 of the Act. In relation to this Tribunal, these were summarised by Deputy President McKenzie in Norman v Australian Red Cross Society (1998) 14 VAR 243. One such principle is that, for a dismissal or strike out application to succeed, the proceeding must be obviously hopeless, obviously unsustainable in fact or in law, on no reasonable view justify relief, or be bound to fail. This is consistent with the approach adopted by the courts over the years. As was stated by Dixon J in Dey v Victorian Railways Commissioners (1949) 78 CLR 62:-

"The application is really made to the inherent jurisdiction of the court to stop the abuse of its process when it is employed for groundless claims. 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 ...".

33 As stated, this approach has been adopted in the courts for many years, and there are many decisions, including those to which Mr Miller referred, in which statements of similar principle have been made. I shall not list those cases here. Suffice to say that, obviously, it will be the approach which I also adopt.

34 Whether or not a burden of proof in the strict sense exists in proceedings before this Tribunal, I am also of the view that the party making an application such as this is required to induce in my mind a state of satisfaction that the claim is obviously hopeless, unsustainable, and bound to fail, and that it is "very clear indeed" that this is so.

35 In arriving at my decision, I have considered both the original points of claim and, as requested, the amended points of claim even though these have not been formally filed and served.

36 In my opinion, the application pursuant to S.75 fails. Whilst I make no comment concerning the strengths and weaknesses of the various propositions advanced on behalf of Arrow, I am not satisfied that its claim is obviously hopeless, obviously unsustainable in fact or in law, can on no reasonable view justify relief, or is bound to fail. That it should be dismissed or struck out is not clear to me, much less "very clear indeed".

37 I have arrived at this conclusion for the following reasons:-

(i) Arrow has been able to point to some evidence which it may call concerning awareness on the part of Perpetual of the negotiations between Arrow and Indevelco in July 2002, and of the fact that such negotiations either directly, inferentially, or prospectively involved Perpetual. It is alleged that there will be evidence that, for example, the Addendum was forwarded to Perpetual's solicitors for its amendment and approval. It is alleged in the amended points of claim and in the affidavit of Mr Perera that, in July 2002, there were negotiations involving Arrow, Indevelco and Perpetual.

(ii) Whilst Perpetual was not a signatory to the Building Contract, it is alleged that the arrangement was that the Addendum, which sets out the payment process referred to and which has on it space for execution by Perpetual, would be signed at the time of the signing of the Building Contract. It is alleged by Mr Perera in his affidavit that, whilst the Addendum was initialled only by representatives of Arrow and Indevelco, it was agreed that it would not be executed as a Deed at that time, but would be incorporated into the Tripartite Deed to be signed by representatives of Arrow, Indevelco and Perpetual. It is alleged that this was subsequently done. It is further alleged - and there seems no real dispute concerning this - that Perpetual then made substantial payments pursuant to the arrangement that was in place.

(iii) It is argued that, by reason of these matters, Perpetual assumed the obligations of Indevelco to make payments, or felt itself contractually bound to make such payments. Contract law is not simple. Whilst, as stated by Dixon J in Dey, the fact that a transaction is intricate may not disentitle the court to examine the 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, in my opinion Arrow's argument, assuming it is based on the evidence allegedly available, is not obviously hopeless, unsustainable in fact or in law, or bound to fail.

(iv) Further, Arrow is arguing that there was an express assumption by Perpetual of Indevelco's obligations under the Building Contract within the meaning of Clause 2.9. Apart from the payments made, reference is also made to the letter of 3 November 2003. Doubtless, should the matter be litigated, there will be argument as to the meaning and effect of that letter. There will be argument as to the meaning of the word "expressly" in Clauses 2.5 and 2.9 of the Tripartite Deed. There will be argument as to the legal effect of the payments made. However, I cannot be satisfied that Arrow's claim in this regard, again based on the evidence which it alleges it will have available, is obviously hopeless, obviously unsustainable in fact or in law, and is bound to fail.

(v) Accordingly, insofar as Arrow's claim is founded upon contract, it is not "very clear indeed" to me that the proceeding is vexatious, an abuse of process, or otherwise falls within S.75(1). I am not satisfied that it is obviously hopeless or otherwise falls within the criteria referred to in Norman's case.

(vi) Turning to the claim insofar as it is based upon misleading and deceptive conduct, I am of a similar view. Arrow alleges that Perpetual was involved in negotiations prior to the execution of the Building Contract and alleges that, at the time of and/or before Arrow entered into the Building Contract, Perpetual represented that it would make payment to Arrow in respect of the works. Apart from arguments based upon the various documents, Arrow pleads that there were conversations between its representatives, representatives of Indevelco, and representatives of Perpetual. Currently, the affidavit of Mr Perera could be described as somewhat ambiguous in this regard, as paragraph 8 of his affidavit does not make it entirely clear as to which parties were agreeing as to the arrangements for the execution of the Tripartite Deed. However, he is clearly alleging that Perpetual's solicitors were involved prior to the execution of the Building Contract.

(vii) In any event, in my view the amended points of claim disclose an arguable cause of action founded on misleading and deceptive conduct on the part of Perpetual. Whether or not there is ultimately any request for further and better particulars of the amended points of claim, as currently pleaded they disclose a cause of action based both upon contract and upon misleading and deceptive conduct.

38 On the basis of the available material, the claim cannot be said to be obviously hopeless, unsustainable in fact or in law, or be bound to fail. It is not "very clear indeed", so as to justify the summary intervention of the Tribunal in order to prevent Arrow from submitting its case for determination.

39 As earlier stated, I have based my conclusions upon the amended points of claim in addition to the original points of claim, having been requested so to do and there being no argument concerning this. I am specifically making no ruling in relation to the TPA, and the above discussion concerning misleading and deceptive conduct is specifically confined to the FTA.

40 In summary, the application by Perpetual pursuant to S.75 of the Act is dismissed.