Procedure - Supreme Court procedure - Tasmania - Jurisdiction and generally - Stay of proceedings - Leave of the court required to initiate proceedings against a court appointed liquidator - Test to be applied for a grant of leave.

Re Siromath Pty Ltd (1991) 9 ACLC 1580; Re Siromath Pty Ltd (No 3) (1991) 25 NSWLR 25; Boulton v Nathan Nominees Pty Ltd & Anor [1992] HCA 28; (1992) 10 ACLC 1,102; Sydlow Pty Ltd (In Liquidation) v T G Kotselas Pty Ltd & Ors [1996] FCA 1384; (1996) 65 FCR 234; Re Maidstone Palace of Varieties (1909) 2 Ch 283; O'Brien v Smolonogou (1983) 53 ALR 107; Ramage & Anor v Sharp, Phillips & Jones as Trustees of Geraldton Lodge No 321 United Ancient Order of Druids & Ors (1993) ATPR 41,27, referred to.

Judgment Number: [2005] TASSC 64

MICHAEL BAXTER AND OTHERS v BARRY KENNETH HAMILTON

1 On the 4 April 2005, the plaintiffs commenced proceedings by writ against the defendant alleging conduct in breach of the Fair Trading Act 1990, s14, and seeking damages. On 12 April 2005, the defendant filed a conditional appearance. On 22 April, the defendant filed an interlocutory application. By that application he sought an order that the plaintiffs' writ be set aside. On 27 May 2005, the plaintiffs filed an interlocutory application by which they sought leave to commence the proceedings already begun against the defendant. Both applications came on for hearing together on 15 June 2005.

2 For the purpose of these applications, counsel for the plaintiffs sought to rely on affidavits sworn by:

3 Counsel for the defendant made no objection to my having regard to them, save that he pointed out that he was instructed that his client's solicitors had no record of receiving a letter dated 3 June 2003 apparently addressed to them, this being annexure G to Mr Baxter's affidavit.

4 For the purpose of the applications, counsel for the defendant relied on the affidavits sworn or affirmed by:

5 The defendant was appointed the liquidator of a solicitors' mortgage fund by an order of the Federal Court on 13 December 2001. One of the loans under his control as a result of that order was one made to Wribass Pty Ltd ("Wribass") which was secured over a property at Shearwater known as Lot 1 Club Drive ("the property"). That property was actually registered in the name of Wribass Finance Company Pty Ltd ("the company"). As at the date of the court order Wribass Pty Ltd was in default under its loan.

6 As part of his role to wind up the mortgage fund, the defendant appointed a real estate agent to sell the property. In or about July 2002 the company introduced the plaintiffs as a potential buyer for the property to the defendant's agent. On 9 July 2002, a contract of sale was entered into between the company and the plaintiffs ("the contract"). The sale price was $85,750. The contract was due for completion on or about 29 July 2002. The defendant refused to discharge the mortgage over the title to the property to enable the contract to be completed.

7 On 10 June 2003, a liquidator was appointed by the Court in respect of the company. On 14 July 2003, that liquidator disclaimed the contract.

8 On 12 June 2003, using his powers of sale as mortgagee, the defendant entered into a contract to sell the property to a third party for $380,000. That contract was subsequently completed.

The plaintiffs' case in the substantive proceedings

9 The plaintiffs alleged that an agent of the defendant made representations to them prior to the contract being entered into. They alleged that the agent made representations to the effect that:

* the contract should be in the name of Wribass as vendor rather than that of the mortgagee;

* the contract should be signed by Wribass and the purchasers; and

* the defendant would provide a discharge of the mortgage to give effect to the contract.

10 The first two representations were said to have been made directly. The third was said to have arisen by implication from the first two, from the instructions given by the defendant to a real estate agent to sell the property and from the lack of comment from the defendant to the effect he would not provide a discharge of mortgage.

11 The plaintiffs also alleged that the defendant failed to give notice of his intention to sell elsewhere and to give the plaintiffs an opportunity to negotiate with him about the matter.

The defendant's case in the substantive proceedings

12 The defendant had, by reason of the way in which these proceedings had been advanced, filed no defence at this stage.

Defendant's interlocutory application to set aside the plaintiffs' writ

13 The defendant's application to set aside the writ was made pursuant to the Supreme Court Rules 2000, r168(4), consequent upon the filing of his conditional appearance. It was contended that the plaintiffs required the leave of a court having appropriate jurisdiction before instituting proceedings, the need for leave not being derived from any statutory provision but from a general principle allowing a court to control its own processes. It was not contended that the lack of leave rendered the plaintiffs' proceedings a nullity; simply that they were procedurally irregular and ought be stayed in the absence of leave. There was no argument that, were leave required, this Court was a court with appropriate jurisdiction to give it.

14 The defendant submitted that the only cause of action pleaded by the plaintiffs was alleged misleading or deceptive conduct of the defendant. The defendant was a liquidator appointed by a court pursuant to the Corporations Act 2001, s601EE ("the Act"). At all times he was an officer of that court. Every step taken by him was in his role as that court-appointed officer and he was being sued in that capacity. The defendant submitted that in those circumstances the only process open to the plaintiffs, if they wished to complain about the liquidator's conduct, was to take an action in the winding up under the Act or seek leave to take the proceedings they had in fact initiated.

15 No authority of a Tasmanian court was cited to support the proposition put by counsel for the defendant that leave was required. However, a number of New South Wales authorities were.

16 The first of those was Re Siromath Pty Ltd (1991) 9 ACLC 1580, a decision of McLelland J in the New South Wales Supreme Court which dealt with proceedings against a court-appointed liquidator. His Honour said at 1,581 and 1,582:

"They are, as I have said, applications to restrain the prosecution of proceedings in another court in which, inter alia, substantive relief is sought personally against two officers of this Court in respect of alleged acts done by them in the discharge of their duties as such officers ...

It is well established that at least unless the Court's leave has been obtained, the Court 'will not allow its officer to be subject to an action in another court with reference to his conduct in the discharge of the duties of his office, whether right or wrong. The proper remedy for anyone aggrieved by his conduct is to apply to the Court in the action in which he was appointed.' (See Re Maidstone Palace of Varieties (1909) 2 Ch 283 at 286 applying Aston v Heron [1834] EngR 631; (1834) 2 My & K 390; 39 ER 993; cf Re Hutton (1969) 2 Ch 201.)"

17 In Re Siromath Pty Ltd (No 3) (1991) 25 NSWLR 25, a further decision of McLelland J in the same proceedings, his Honour examined in more detail, starting at 28, the authorities to which he had made reference in the first Siromath decision. His Honour then went on to conclude at 29:

"The control by the court over the circumstances in which, and the extent to which, its own officers are to be subjected to personal pecuniary liability in respect of their activities in the course of the performance of their official duties falls clearly within the concept of the protection by the court of its own processes: cf the passage already cited from Aston."

18 In Boulton v Nathan Nominees Pty Ltd & Anor [1992] HCA 28; (1992) 10 ACLC 1,102, another decision of McLelland J, it was held (see the headnote, par1, 1,102):

"1 Proceedings cannot properly be brought against a Court-appointed liquidator personally except by application in the winding up proceedings themselves or pursuant to leave of the Court granted in an application made in the winding up proceedings (Re Siromath Pty Ltd [1991] NTSC 15; (1991) 9 ACLC, 1,580 and Re Siromath Pty Ltd (No 3) [1991] NTSC 15; (1991) 9 ACLC 1,587 referred to)."

19 Sydlow Pty Ltd (In Liquidation) v T G Kotselas Pty Ltd & Ors [1996] FCA 1384; (1996) 65 FCR 234 was a decision of Tamberlin J in the General Division of the Federal Court of Australia. The court held at 235 that:

"(1) An application for leave to file a cross-claim against the liquidator personally can be made to a Court other than the Court in which the winding-up order was made. (241C-D)

Action Engineering Pty Ltd v Campbell [1991] FCA 469; (1991) 31 FCR 1, applied.

(2) The discretionary power of the Court to grant leave must be exercised having regard to all the circumstances of the particular case and bearing in mind the need to protect the integrity of its process. In order to obtain leave it is not necessary to establish a prima facie case. (242B)

Re Maidstone Palace of Varieties Ltd; Blair v Maidstone Palace of Varieties Ltd [1909] 2 Ch 283, applied."

"It is well settled law that courts administering laws with respect to bodies corporate will not allow their officers to be subject to an action in another court which is based on the conduct of such an officer in the discharge of duties of the office, whether right or wrong. It is said that the proper remedy is to apply to the court in the proceedings in which the court officer was appointed, and that if any wrong has been done by the officer, that court will grant the appropriate remedies. There is no right to sue such an officer in another court, without the sanction of the court, which appointed the officer. See Re Maidstone Palace of Varieties Ltd (1909) 2 Ch 283 at 286; Re Hutton (a bankrupt) [1969] 2 Ch 201 and Aston v Heron (1834) 2 My and K 390; [1834] EngR 631; 39 ER 993.

The Court, when administering the Law, is concerned to ensure that the winding up is implemented in a timely and efficient manner, so as to produce optimum results for all persons interested in the winding up. In order to achieve this result, the Court must protect the integrity of the winding up under its supervision and control, by taking appropriate steps to prevent any proceedings or conduct which will wrongfully impede that process. One way in which this can be carried out is to require the grant of leave by the Court in respect of an action against an official liquidator, so that the Court can satisfy itself that there is no wrongful interference with the process. Such interference may arise where, for example, proceedings are initiated or continued without any legal basis or prospect of success or for an improper or collateral purpose. This appears to be the principle which underlies the established requirement that leave is necessary in order to sanction proceedings against an official liquidator."

20 In effect, Tamberlin J followed the line of authority ending with the Siromath cases as to the issue of whether leave was required before a court-appointed liquidator could be sued. He went on further to deal with the issue of leave itself. He said, at 242:

"The discretionary power of the Court to grant leave must be exercised having regard to all the circumstances of the particular cases and bearing in mind the need to protect the integrity of its process. It does not necessarily follow that, in order to obtain leave, a prima facie case must be demonstrated. There is no specific threshold appropriate in all cases, however there must be more than mere assertion. The Court's discretion may be exercised on many grounds, including, but not limited to, the sufficiency of the evidence adduced, as to the prospects of success of the action on the application for leave."

21 Counsel for the plaintiffs submitted that the Act provided a detailed framework for dealing with corporations. In particular, s471B provided that proceedings cannot be commenced or continued against a corporation in liquidation, or in respect of its property, without the leave of the Court. Further, s1321 provided that a person aggrieved by any act, omission or decision of a liquidator may appeal to the Court in respect of such act, omission or decision. Nowhere, he argued, was there any requirement that the leave of the Court must be sought before proceedings such as the present are brought against a liquidator. It is perhaps worthy of note that s1321 appears to be very much a provision by which the right to review the actions of a court-appointed liquidator is being reserved to the Court.

22 Counsel further submitted that the defendant's argument was wholly based on a line of decisions of single judges in New South Wales beginning with the first Siromath matter. He argued that that case relied on the decision in Maidstone (supra) which he said did not support the conclusion reached by McLelland J. In Maidstone, the court dealt with a situation where a receiver of a company had been appointed in two separate courts in two separate proceedings. Both, however, involved arguments about the property of a company being wound up. Neville J said at 286:

"It appears to me that a dispute of that kind is one which, as is shewn by Aston v Heron [1834] EngR 631; 2 My & K 390, the Court will deal with itself, and that it will not allow its officer to be subject to an action in another Court with reference to his conduct in the discharge of the duties of his office, whether right or wrong. The proper remedy for any one aggrieved by his conduct is to apply to this Court in the action in which he was appointed. If any wrong has been done by the officer, the Court will no doubt see that justice is done, but no one has a right to sue such an officer in another Court without the sanction of this Court."

23 Counsel argued that the essence of this decision was that a party had to prove a debt, that this was a back door attempt to prove in receivership, and that the court was simply acting to avoid a multiplicity of claims. With respect, nowhere in the reasons of Neville J is that logic apparent. The words set out above from his judgment, in my view, very clearly reflect what his rationale was.

24 Counsel then referred to another decision to which McLelland J referred in the first Siromath case_._ This was In Re Hutton (A Bankrupt), Mediterranean Machine Operations Ltd v Haigh and Ors [1969] 2 Ch 201. He submitted that McLelland J also relied on this case. That is not strictly correct. In Re Siromath Pty Ltd (supra), his Honour said at the end of the passage quoted "cf Re Hutton (1969) 2 Ch 210". That is, compare it.

25 The other case referred to by McLelland J was Aston v Herron (supra) . There is no doubt in that case that the court considered the difference, when dealing with an attack against an officer of the court, between an attack on that officer's conduct in performing his duties and an attack which went to the heart of his right to perform the duties at all. The court took the view that where it was a case of the former, the court could, in its discretion, allow the attack to be dealt with in another court, but where it went to the latter, the court had to intervene to, in effect, protect the integrity of its orders.

26 Counsel for the plaintiffs argued that while it was clear that in an appropriate case a court would intervene to protect its officer, what had happened in the Siromath cases and subsequent cases which relied on them was that McLelland J had gone too far in reliance on cases which preceded Siromath, in saying that "it was well established that ...". He had, in effect, misrepresented the decisions of the courts in Maidstone, Heron and Hutton.

27 In the present case, counsel argued this was not a case where there was any challenge to the underlying authority of the liquidator. It was a challenge to his conduct as liquidator.

28 Counsel moved on to refer to the decision of Mullins J in McDonald v Dare [2001] QSC 405 where, at par25, her Honour said in passing, the issue not having to be decided in that case:

"Another problem with the Supreme Court proceeding is that as it seeks relief against the respondents for alleged breaches of duty arising in the course of performing their duties as liquidators, the leave of the court is required before such a proceeding is commenced: Sydlow Pty Ltd (in liquidation) v TG Kotselas Pty Ltd [1996] FCA 1384; (1996) 65 FCR 234, 241 and Mamone v Pantzer [2001] NSWSC 26; (2001) 36 ACSR 743, 746. Before the plaintiffs seek to serve the claim and statement of claim in the Supreme Court proceeding, leave should be sought nunc pro tunc in respect of commencing the Supreme Court proceeding."

29 Counsel then referred to Sydlow's case. He argued that Tamberlin J appeared to use the words of McLelland J in the opening sentences under the heading "Reasons" at 240. However, he then appeared to resile from the position there stated when he went on to say what he did at 241, parsE and F. The statements appearing at those paragraphs, counsel argued, went against the suggestion that leave was required as a matter of course. In that case, the consideration was the impact on the winding up. He further argued that sat with the Siromath decisions in that the court in those matters was acting to prevent an encroachment by American courts on the jurisdiction of an Australian court.

30 With respect, I must agree with the submission of counsel for the defendant that counsel for the plaintiffs is attempting to draw a somewhat artificial distinction between the cases that preceded Siromath and the decision of McLelland J in the Siromath cases. He is also, in my view, confusing the question of whether leave is required with that of should leave be granted. The matters he has raised go more to the second question than the first. Clearly the accepted position in New South Wales when dealing with actions against liquidators in the course of their role is that they are officers of the court and leave is required before proceedings may be commenced against them. Having regard to the comment by Mullins J in McDonald v Dare, that would also appear to be the accepted position in Queensland.

31 What I am being asked to do by counsel for the plaintiffs is ignore all of that and without any basis in what I might describe as positive authority, find in his client's favour on the basis of a rather tortuous attempt to undermine the New South Wales authorities.

32 I am satisfied that the weight of authority supports the proposition that leave is required, as asserted by counsel for the defendant, and I so find. The plaintiffs in this case should have obtained the leave of a court of appropriate jurisdiction before they instituted the present proceedings. There is no argument from counsel for the defendant that this Court is an appropriate court to grant leave and that the Court may grant leave retrospectively to remedy the defect created.

33 At this stage there is no need to consider the defendant's consequential application for a stay since that will depend on the outcome of the plaintiffs' application for leave.

34 In respect of their application for leave, counsel for the plaintiffs relied on the passage already quoted from the judgment of Tamberlin J in Sydlow's case at 242. He submitted that while there must be something which moved the Court to exercise its discretion to grant leave, the plaintiffs were not required to prove they had a case on the balance of probabilities - only that there was an issue to be tried and the claim was not frivolous. He submitted that I did not need to consider the prospects of the success of the plaintiffs' claim.

35 He submitted that in dealing with a case of misleading and deceptive conduct under the Fair Trading Act, s14, the Court must consider that was a section of broad import and that the conduct complained of needed to be assessed globally. The Court would be required to look at the entire chain of events. There were sufficient facts in the affidavit material of Mr Hamilton, Mr Baxter and Mr Rockliff to show:

* the liquidator had instructed a real estate agent to sell;

* the liquidator's agent had made direct representations to the plaintiffs via the real estate agent;

* those representations went to the allegations in pars8(a) and (b) of the statement of claim;

* there was a representation as to the discharge of the mortgage arising by implication; and

* there was silence or lack of comment by Mr Newman about the activities of the liquidator.

36 All of these matters should be looked at to assess the nature of the liquidator's conduct which the plaintiffs asserted was misleading and deceptive. The authorities in relation to the Trade Practices Act 1974, s52, were, he said, relevant to this issue.

37 Counsel also pointed to a number of other matters, namely:

* the allegations in pars9 and 10 of the statement of claim which he said were not contentious;

* the allegation in par11 to the effect that no notice was given;

* that there was, in fact, a contract on foot with Wribass;

* that the liquidator was the holder of a mortgage;

* that damage was suffered by the plaintiffs in reliance on the representations made to it through the agent and by implication in that they did not look for alternative property or seek to negotiate with the defendant and they lost the opportunity to develop the property; and

* the information sought from Mr Rockliff as to the reasonableness of the price.

38 He submitted that it was not for me to assess the merits of the case because that was a matter for the trial judge. Unless I was persuaded that the plaintiffs' claim on the face of it was manifestly hopeless, then leave ought be granted. He also submitted that the claim did not relate to property, the subject of the liquidation, because it was a claim against the liquidator himself and it could not affect the orderly conduct of the liquidation. There was a cogent cause of action and sufficient evidentiary material to satisfy me the claim was not frivolous.

39 Counsel for the parties appeared to be in agreement that, having regard to the statements in Sydlow Pty Ltd (in liquidation) (supra) at 242, Mamone v Pantzer (supra) at 748 and Re Zakrzewski [2000] FCA 1187; (2000) 178 ALR 694 at 704, the plaintiffs must show, if not a prima facie case, then at least that the claim had sufficient merit and that it was unlikely leave would be granted where the claim was spurious or vexatious or manifestly groundless.

40 Counsel for the defendant argued that the plaintiffs' claim was indeed manifestly untenable and hence should not be allowed to proceed. He submitted that the case had no reasonable prospect of success. He did not assert that the litigation would materially affect the liquidation in the sense that it would hold it up. Counsel for the defendant raised two main arguments.

41 The first related to the characterisation of the conduct of the liquidator. Counsel submitted that the plaintiffs' sole cause of action was that the defendant had engaged in misleading or deceptive conduct contrary to the Fair Trading Act, s14. That section provided that "A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive." Counsel submitted that the plaintiffs' statement of claim did not formally contain a pleading to the effect that the liquidator's conduct amounted to acting in trade or commerce. Further, there were no facts or circumstances pleaded which may support that inference. Even if it were implied in the pleadings that it was alleged the defendant's conduct was in the course of his acting "in trade or commerce", having regard to the meaning of that phrase, the allegation was unsustainable in law or fact.

42 Counsel referred to Concrete Constructions (NSW) Pty Ltd v Nelson [1990] HCA 17; (1990) 169 CLR 594 where, at 602, their Honours Mason CJ, Deane, Dawson and Gaudron JJ canvassed the arguments as to the meaning of the phrase "in trade or commerce" in the Trade Practices Act 1974 (Cth), s52. At 604 their Honours said:

"What the section is concerned with is the conduct of a corporation towards persons, be they consumers or not, with whom it (or those whose interests it represents or is seeking to promote) has or may have dealings in the course of those activities or transactions which, of their nature, bear a trading or commercial character. ... In some areas, the dividing line between what is and what is not conduct 'in trade or commerce' may be less clear and may require the identification of what imports a trading or commercial character to an activity which is not, without more, of that character."

At 614, Toohey J noted another issue in relation to how the phrase should be interpreted. He said:

"Even taking such a broad view of s.52(1), the preposition 'in' clearly operates by way of limitation. The question is not whether the conduct engaged in was in connection with trade or commerce or in relation to trade or commerce."

43 Counsel referred to O'Brien v Smolonogou (1983) 53 ALR 107. That was a case where a person who owned land decided to sell off some of it and advertised it. He then spoke to potential buyers by telephone about the sale and made certain representations which ultimately proved to be untrue. The issue was whether they were false and misleading under the trade practices legislation and whether they had been made during conduct "in trade or commerce". Their Honours said at 113:

"In the present case, it cannot be suggested that the lands acquired by the appellants became trading stock ... . Nor is it a case where the taxpayer's activities amounted to more than the mere realisation of a capital asset and constituted the carrying on of land development ... . The land itself was not used for any business activity: it was not used for farming or grazing.

It follows, in our opinion, that the only possible feature of the case which could conceivably be relied upon to suggest that the impugned conduct occurred in trade or commerce was the resort by the appellants to a newspaper as a medium of public advertisement of the land and the use made by the parties of the telephone for the purpose of conducting negotiations. It is true, as the learned Judge observed, that the use of such facilities is common practice in the conduct of trade or commerce. It is also true, as Mason, J observed in Whitfords Beach, supra, (at 537) that there is ambiguity in the adjectives 'business', 'commercial' and 'trading' which 'have about them a chameleon-like hue, readily adapting themselves to their surroundings'. As his Honour said, in some contexts, phrases such as 'business deal' and 'operation of business' may signify a transaction entered into by a person in the course of carrying on a business; in other contexts they 'denote a transaction which is business or commercial in character' (at 537). The same may be said of 'commercial' or 'trading'. But, in our view, the mere use, by a person not acting in the course of carrying on a business, of facilities commonly employed in commercial transactions, cannot transform a dealing which lacks any business character into something done in trade or commerce."

44 Counsel then referred to the case of Ramage & Anor v Sharp, Phillips & Jones as Trustees of Geraldton Lodge No 321 United Ancient Order of Druids & Ors [1993] FCA 521; (1993) ATPR 41,275. At 41,280, Seaman J said:

"Trade or commerce are ordinary terms with a variety of shades and meanings but commonly denote operations of a commercial character: In re Ku-ring-gai Co-operative Building Society (No 12) Ltd (1978-1979) ATPR ?40-094 at 17,926; [1978] FCA 50; (1978-1979) 22 ALR 621 at 625.

In my view, the transaction was more than the mere realisation of a capital asset ... ."

45 These last two cases recognised that there were differences in conduct and that there may be cases where the realisation of a capital asset did not constitute conduct "in trade or commerce".

46 An examination of the conduct of the defendant showed that he was at all times carrying out a process ordered by the Court, his fiduciary obligation was to the investors in the fund he was appointed to wind up and he could make no profit for himself from any sale. Counsel submitted that that winding up process was initiated by a court order and required the defendant to realise securities, return funds to investors and terminate loans. It was submitted that because of the nature of the role of the liquidator, he could not be said to be acting in trade or commerce. He was simply carrying out his court-ordered functions. By reason of that, any claim against him of the nature now brought, simply could not be maintained.

47 Counsel's second submission was that, even if the activities of the liquidator could be said to be conduct in trade or commerce, the facts alleged to be such conduct could not amount to misleading or deceptive conduct.

48 He referred firstly to the representations alleged in pars8(a) and (b) of the statement of claim. He submitted that on no interpretation, even if made, could they be said to be misleading or deceptive. At the relevant time, the company was the registered proprietor of the land; neither of the Wribass entities was in liquidation; the defendant had no direct connection with either or any control over the activities of the companies; and the purchasers were introduced by them to the agent. If the statements were made in the circumstances alleged, there was nothing particularly controversial about them. The registered proprietor was perfectly entitled to sign a contract in its name to sell the property.

49 As to the representation alleged in par8(c) of the statement of claim, counsel submitted that it was impossible to make the leap from (a) and (b) to (c). There was no allegation the defendant's agent said to anyone that if the company signed this particular contract of sale, the defendant would discharge the mortgage to allow it to be completed. Further, it cannot be argued that because the defendant, personally or by his agent, did not say at some unspecified point that he would not discharge the mortgage, it can be inferred he represented he would.

50 Counsel referred to par12 of the statement of claim. There it was alleged that the representations in par8, coupled with the alleged failure of the defendant to give notice of his intention to sell elsewhere and to allow the plaintiffs to negotiate as to a sale price or otherwise, constituted misleading and deceptive conduct. He submitted that there were no facts or circumstances pleaded or evidence to suggest any obligation to give such notice or indeed to negotiate. In fact, he said that the defendant's duty primarily was to the investors in the fund he was winding up.

51 While it is not my role at this stage of the proceedings to make definitive findings of fact, and counsel have agreed that while many matters are not in dispute, others are, some matters appear obvious from correspondence which is annexed to the affidavits filed. One is that however they came by the information, the plaintiffs' solicitors were on notice as to problems with the transaction and the reasons for it, at least as early as October 2002. Two letters which demonstrate this are:

* Letter from the plaintiffs' solicitors to the real estate agent dated 10 October 2002 in which it was said:

"... also advise that I understand meetings are underway in Hobart today in an attempt to resolve the impasse that the Vendor has with his Mortgagees".

* Letter from the solicitors for the company to the plaintiffs' solicitors dated 14 October 2002 in which it was said:

"As you are aware there is a difficulty with the Mortgagee approving the discharge of the mortgage to enable this sale to complete.

I had a meeting with the liquidator of the Piggott Wood and Baker Mortgage Fund last Thursday. Arising out of that it seems to me that if I can provide some evidence to suggest that this price is the best price that is achievable then the liquidator will allow the sale to complete."

52 There were a number of letters over the next several months between the plaintiffs' and the company's solicitors during which a notice to complete was given to the company by the plaintiffs. By a letter of 17 April 2003 from the solicitors for the company to the plaintiffs' solicitors after those solicitors threatened legal proceedings for specific performance, the company's solicitors made it clear they simply could not, not would not, complete the contract. In the penultimate paragraph they said:

"It seems to me that if the Mortgagee can be convinced that the sale price is an appropriate price (and there may be some merit in the view that the sale price is substantially low) then the sale can complete. You might want to contact Messrs Toomey Maning & Co direct as Solicitors for the Liquidator ...".

53 In a further letter of 12 May 2003, the solicitors for the company said to the plaintiffs' solicitors:

"As you know the liquidator will not agree to a discharge of the ... mortgage on the basis that the consideration for the sale of the land is manifestly inadequate."

54 It is plain from the correspondence that the plaintiffs either did know, or ought to have known, as early as October 2002 that the defendant was not prepared to discharge the mortgage to allow their contract to complete, and that the reason for this was the inadequacy of the price. I am unable to see in those circumstances how the plaintiffs, in circumstances where there was no apparent impediment to their contacting the defendant or his solicitors directly to discuss the problem, can somehow allege that the defendant's failure to proactively contact them instead can amount to misleading and deceptive conduct. As counsel for the defendant pointed out, there was no obligation to do so pleaded, nor were there any facts or circumstances pleaded which might have supported such an allegation.

55 The plaintiffs also alleged that they relied on the defendant's conduct to their detriment. However, the correspondence demonstrates they knew of another offer at least in May 2003, but again apparently did nothing. They could have approached the liquidator direct or through his solicitors. It was suggested they should. They did nothing. It cannot be said they were denied an opportunity. It was there but they did not avail themselves of it.

56 Counsel for the plaintiffs, in reply to the first submission about the meaning of "in trade or commerce", submitted that the defendant was a professional liquidator, that was his trade, and in instructing an agent to sell the property, he was engaging in that trade. He referred to the decision of Ku-Ring-Gai Co-operative Building Society (No 12) (1978 - [1978] FCA 50; 1979) 22 ALR 621. That case dealt with the activities of certain building societies which lent only to members and whose activities were not conducted for the purpose of making financial profits, but to assist in the provision of finance to enable the acquisition of dwellings under government supervision. Counsel referred to the words of Deane J at 648 - 649 where he said:

"The terms 'trade' and 'commerce' are not terms of art. They are expressions of fact and terms of common knowledge. While the particular instances that may fall within them will depend upon the varying phrases of development of trade, commerce and commercial communication, the terms are clearly of the widest import ... . They are not restricted to dealings or communications which can properly be described as being at arm's length in the sense that they are within open markets or between strangers or have a dominant objective of profit-making. They are not restricted to dealings or communications which can properly be described as being at arm's length in the sense that they are within open markets or between strangers or have a dominant objective of profit-making."

57 Counsel for the plaintiffs sought to diminish the effect of any statements quoted from Concrete Constructions (NSW) Pty Limited v Nelson (supra) and O'Brien v Smolonogou (supra) cases by reference to the facts on which each was based. The first, he said, related to the consideration of activities between two employees of one company. While there can be no doubt about that, it does not in any way diminish the force of the decision in the present context. Clearly their Honours considered the principles governing the impact of the Trade Practices Act (Cth), s52, generally. As to O'Brien's case, counsel simply submitted that there was a substantially different factual scenario dealt with there. He did not go further to say what it was or why it should impact on the matter as he submitted. The facts were indeed different to the present case. However, again the court discussed the principles relating to a consideration of what could be deceptive and misleading conduct for the purposes of the Trade Practices Act (Cth).

58 Counsel for the plaintiffs submitted that the issue of whether the defendant was acting in trade or commerce could only be dealt with after the Court had heard much more material about the activities of the defendant, that this was not material that was readily apparent, and that there would need to be a full hearing to determine the matter. He submitted that nothing turned on the apparent conflict between the defendant and Mr Baxter about when the plaintiffs became aware the sale was not proceeding, that is, whether it was May, June or July. He submitted that the fact that the plaintiffs might have been aware two months before they pleaded they were does not change the loss suffered. Whether there was anything stopping the plaintiffs dealing with the liquidator direct was a matter for trial.

59 He also submitted again it was not for the Court on this application to determine whether the plaintiffs had a strong or weak case - only to assess whether it was manifestly hopeless. He argued that if there were sufficient prospects of success, the plaintiffs should be allowed to proceed. He also submitted that if indeed the pleadings were defective, then striking out which was effectively what the defendant was asking the Court to do, was too drastic a step where any defect was easily rectifiable.

60 The Court, having determined that leave was required by the plaintiffs before they could bring the present proceedings against the defendant, is being asked to exercise its discretion in favour of the plaintiffs to allow the defect resulting from their failure to obtain leave to be rectified. As counsel for the plaintiffs pointed out, there must be something to move the Court to exercise that discretion.

61 I am mindful that to refuse leave to the plaintiffs at this early stage of the proceedings will have the effect of bringing the proceedings to an end. I am conscious that may seem a drastic step. However, in my view it is the only one open to the Court in these proceedings.

62 The Court has before it a significant amount of material relating to the dealings involving these parties. While counsel have agreed that it is not my role to determine the merits of the substantive claim by the plaintiffs, I do have to determine whether it has any chance of success. To make a determination as to whether the claim is manifestly hopeless or groundless requires no less. Counsel for the plaintiffs has argued that to determine the issues counsel for the defendant has raised, I would need to resolve a number of factual disputes between the parties. He argued that there was insufficient material before me to enable me to do that and, even if there were, I should not, at this stage of the proceedings, be attempting to resolve factual disputes.

63 With respect, I disagree with the approach he propounds. The plaintiffs have pleaded one cause of action. There are essential elements for them to prove to succeed with that. If the Court were of the view that neither those elements nor any facts or circumstances from which it could be said they could arise were pleaded, there is no cause of action. Counsel for the plaintiffs is clearly suggesting that if I am of the view that the pleadings are defective, that does not matter because they can be fixed. It would appear to me, however, that no amount of further material or amendments to pleadings is likely to help the plaintiffs get over hurdles they face in these proceedings.

64 I will deal firstly with the role of the liquidator and whether it can be said he acted in trade or commerce. He was appointed by court order. By that order the solicitors' mortgage business was to be wound up and he was given certain powers under the Act. He was also empowered, amongst other things, to take control of assets, to convert property into money and to distribute proceeds of the winding up. His remuneration was specifically provided for. Further, par2(c) specifically provided that "the exercise by the Liquidator of the powers conferred by these orders is subject to the control of the Court, and ...". There can be little argument that were the liquidator, in these circumstances, to facilitate a sale of an asset of the mortgage fund at a value significantly lower than he was able to obtain in the market, he would be the subject of criticism in the winding up and may very well be the subject of a complaint by an investor.

65 It must be accepted that Mr Hamilton's business or trade is that of a liquidator. Acting as a liquidator is what he does for a living. As such he oversees the winding up of entities which includes taking control of their assets and, if necessary, converting property into money for distribution to the beneficiaries in the winding up. When he discharges a mortgage as he was asked to do here, it is a function of his winding up role. Where a property is sold as part of any winding up process, he personally receives no payment either by way of profit or remuneration. The sale of a property is simply incidental to the winding up process.

66 The cases canvassed by each counsel on the interpretation of the words "in trade or commerce" make it clear that each case must be determined on its particular facts, subject to certain general principles.

67 I am of the view that on no interpretation of the conduct of the defendant could it be said he was acting in trade or commerce and in those circumstances a fundamental part of the plaintiffs' cause of action does not exist.

68 If I were found to be wrong in respect of that issue, then the question of whether the conduct alleged could amount to misleading or deceptive conduct has to be examined. There was a significant amount of material which was not contentious. The company was the registered proprietor of the property, the defendant was not a party to the contract, he was not the liquidator of the company or Wribass, neither of those companies was in liquidation at the time the contract was entered into, and the company introduced the plaintiffs as purchasers. In those circumstances the company was quite entitled, as it did, to enter into the contract. If indeed the defendant's agent confirmed that could be done, he was doing nothing more than confirming the obvious. It could not, on any interpretation, be said he was misleading or deceiving the plaintiffs in some way.

69 There was no allegation the defendant, either himself or by any agent of his, at any time directly represented to the plaintiffs that he would discharge the mortgage to enable the contract to be completed. At the very best it is alleged such a representation can be inferred from conduct and the lack of it. The conduct relied on, apart from the direct representations, was that the defendant instructed the agent in the first place to market the property and "the lack of any comment by the Defendant, either through Mr Neuman or otherwise, that the Defendant would not provide a discharge of the said mortgage".

70 Again, even if the defendant instructed a real estate agent to market the property, that cannot be construed as a representation to sell it to a person at a price which potentially did not represent the best interests of investors in the mortgage fund. As to the alleged lack of comment, to infer that could amount to a representation in the circumstances existing here that the liquidator would provide a discharge, is, with respect, just too far fetched. That is particularly so having regard to my earlier references to correspondence and the state of the plaintiffs' solicitor's knowledge of problems with this transaction and the reasons for them. While it may not be my role to make determinative findings on significant questions of fact, for the purpose of this application I cannot ignore what is obvious from that correspondence. That is:

* the company had its own solicitors who at all times acted for the company. They did not act or purport to act for, or speak for, the defendant;

* the plaintiffs at all times had their own solicitors;

* as early as 10 October 2002, the plaintiffs' solicitors were aware of a problem between the vendor and the mortgagee such that completion could not be effected (see annexure C to affidavit of Christopher Groves);

* as at that date the plaintiffs had only recently signed an amended contract disclosing the correct names of the purchasers;

* at or about 14 October 2002, the solicitors for the company advised the plaintiffs' solicitors, "As you are aware there is a difficulty with the Mortgagee approving the discharge of the mortgage to enable this sale to complete."

71 It would be virtually impossible to characterise the conduct of the liquidator or lack of it in the circumstances of this case as misleading or deceptive conduct.

72 I am satisfied that the plaintiffs' case in this matter is so manifestly hopeless in all the circumstances that it is not appropriate they be granted leave. Their application for leave will be dismissed.

73 Counsel for the defendant has applied for an order that the proceedings initiated by the plaintiffs be permanently stayed in the absence of leave. Counsel for the plaintiffs did not address me as to what the appropriate order should be in the event of his application being dismissed. In the circumstances I will hear counsel about any consequential orders to be made.