Hansen & Ors v Patrick & Ors [2012] QSC 45

[3] By the further amended statement of claim[1] the plaintiffs' claims are advanced on the basis of breach of fiduciary duty, alternatively damages for misleading and deceptive conduct under the Trade Practices Act 1974, alternatively deceit or alternatively negligent misrepresentation.

[4] The defendants rely upon clauses contained in the Share Sale Agreement and in the Unit Sale Agreement that were entered into between the relevant parties. The clause is relevantly identical in each agreement and in paragraph 28A of the further amended defence and counterclaim of the defendants[2] the clause is pleaded:

15.1.1 is the entire agreement and understanding between the Parties on everything connected with the subject matter of this Agreement; and

15.1.2 supersedes any prior agreement or understanding on anything connected with that subject matter.

15.2 Each Party has entered into this Agreement without relying on any representation by any other Party or any person purporting to represent that party."

[5] The pleadings the plaintiffs take issue with are found at 28D to 28I of the defence[3]. The relevant paragraphs plead:

"28D. By entering to the Share Sale Agreement including the provisions of Clause 15 referred to above, the First Plaintiff represented to the Defendants that the First Plaintiff would not seek to rely upon any representations alleged to have been made (which are denied) as the basis of any claim for damages or otherwise.

28E. The Defendants relied upon the representation referred to in the preceding paragraph when entering into the Share Sale Agreement. Had such representation not been made the Defendants would not have entered into the Share Sale Agreement upon the terms contained therein. Accordingly, the First Plaintiff is estopped from purporting to maintain any claim or action based upon any alleged representations (which are denied).

28F. By entering into the Unit Sale Agreement including the provisions of Clause 15 referred to above, the Second Plaintiff represented to the Defendants that the Second Plaintiff would not seek to rely upon any representations alleged to have been made (which are denied) as the basis of any claim for damages or otherwise.

28G. The Defendants relied upon the representation referred to in the preceding paragraphs when entering to the Unit Sale Agreement and had such representation not been made the Defendants would not have entered into the Unit Sale Agreement upon the terms contained therein. Accordingly, the Second Plaintiff is estopped from purporting to maintain any claim or action based upon any alleged representations (which are denied).

28H. (a) the Second Plaintiff is a corporation for the purposes of Section 52 of the Trade Practices Act 1974;

(b) by entering to the Share Sale Agreement containing the provisions of clause 15 referred to above the Second Plaintiff represented to the Defendants that the Second Plaintiff would not purport to rely upon any representations made by the Defendants.

(c) Such representation was made in trade or commerce.

(i) as to the state of the Second Plaintiff's mind at the time of making the representation, and/or

(e) When the Second Plaintiff entered into the Unit Sale Agreement the Second Plaintiff did not have any reasonable grounds for making the representation referred to in (b) above.

(f) The representation referred to in (b) above was misleading or deceptive or likely to mislead or deceive.

28I. In the circumstances, the representation pleaded in paragraph 28H(b) constitutes a contravention of Section 52 of the Trade Practices Act 1974 in that it is misleading or deceptive or likely to mislead or deceive."

[6] It may be observed that clauses such as the clause 15 relied upon by the defendants have been the subject of consideration by Courts in the context of claims made for misleading and deceptive conduct pursuant to the Trade Practices Act 1974. In Byers & Ors v Dorotea Pty Ltd[4] Pincus J held that such a clause[5] could not be relied upon as an exclusion clause as it was ineffective against a claim made under the Trade Practices Act[6]. His Honour's discussion of clauses such as that relied upon by the defendants here is interesting, it is clear from his Honour's reasons that but for some decisions or suggestions in some judgments in this State, his Honour would have been minded to hold that such clauses were ineffective to protect defendants when sued in other causes of action.

[7] In Henjo Investments Pty Ltd & Ors v Collins Marrickville Pty Ltd[7] the Full Court of the Federal Court held that "exclusion clauses" such as Clause 15 relied upon by the defendants in this case were ineffective in the circumstances of a claim that otherwise might successfully be pursued under the Trade Practices Act.[8] These authorities persuade me that in the event the plaintiffs can make out a claim for misleading and deceptive conduct in breach of the Trade Practices Act 1974 then the defence of the defendants, in so far as it relies upon the pleaded clause, and for that matter the counterclaim, will fall away.

[8] The defendants in their outline relied upon the proposition that the clauses in question were representational and also capable of amounting to a contractual promise that the plaintiffs would not sue.[9]

[9] Relying upon these authorities the defendants submit that grounds for striking the pleadings out could not be shown applying the test in General Steel Industries Inc. v The Commissioner for Railways (NSW)[10] with the result that the defendants contended the plaintiff's application should fail and that the action should proceed to trial on the pleadings.

[10] The plaintiffs made their application relying upon UCPR 171. In submissions before me, and in the written outline of argument, Mr Savage SC pointed out that the defendants do not plead any detriment or loss consequent upon any breach of the representation they assert flows from clause 15. The only reference to damages or loss is found in the counterclaim where the defendants' counterclaim for damages in "any amount which the defendants are adjudged to be liable to pay to the second plaintiff". As I understood the submission by the plaintiffs, the contention was that the defence and the counterclaim had a tendency to be prejudicial delay a fair trial of the proceedings. In other words that it was "embarrassing" resorting to terminology used in former rules of Court.

[11] The authorities in the Federal Court of Australia dealing with clauses indistinguishable from clause 15 in this case which I have referred indicate that they are ineffective as a defence to a claim founded upon section 52 (or cognate provisions) of the Trade Practices Act 1974. The paragraphs of the defence set out above are directed to defending against the plaintiffs' claim and ultimately are relied upon to set up a basis for a claim for relief for alleged breach of the Trade Practices Act but nowhere in the defence do the defendants claim detriment. It is difficult to see how the detriment resulting in damages or loss can be made out in the circumstances. If the plaintiffs' claim is successful then the defendants will be liable. If it is unsuccessful, the defendants will be entitled to compensation for any costs.

[12] Some further observations might be made. The cases relied upon by the defendants do not address or concern clauses such as clause 15 nor circumstances comparable to this case.[11] Moreover if fraud (deceit) inducing the contract can be made out then the terms of the contract purporting to exclude or modify liability will be ineffective.[12] At best clause 15.2 serves as a potential basis for a factual enquiry going to reliance which is a different matter altogether.

[13] The paragraphs of the defence complained of by the plaintiffs go nowhere. In effective as a defence and unaccompanied by a claim of detriment leading to the loss and damage they create a mirage of an issue with obvious capacity to frustrate a fair trial. I'm persuaded that the impugned paragraphs should be struck out. It follows that the counterclaim should also be struck out.

[14] The plaintiffs in correspondence put to the defendants their complaint in relation to the paragraphs of the defence and the counterclaim and the defendants in correspondence refuted the plaintiff's contentions and complaint that the pleading ought to be rectified.[13]

1. That paragraphs 28D to 28I of the defence and the entirety of the counterclaim of the further amended defence and counterclaim of the defendants filed on 14 July 2011 be struck out.

2. That the defendants pay the plaintiffs' costs of and incidental to the application to be assessed.

[3] The plaintiffs also take issue with the entirety of the counterclaim.

[4] (1986) 69 ALR 517.

[5] See 69 ALR 715 at 723 l 1-7.

[6] See 69 ALR 715 at 725 l 21-28.

[7] [1988] FCA 40; (1988) 79 ALR 83.

[8] See for example the Reasons of Lockhart J at 79 ALR pgs. 97-99 in the discussion of Special Conditions 6 and 7. It is worth noting that those clauses are found in his Honour's Reasons at pg 78 and are materially indistinguishable from clause 15.

[9] See for example Futuretronics International Pty Ltd v Gadzhis [1992] VicRp 63; [1992] 2 VR 217 per Ormiston J at 240 & 241. The defendants also relied upon some observations by Martin J in Lancini Properties v Savils (Qld) Pty Ltd & Anor [2009] QSC 323 at [95] and [100]-[103].

[10] [1964] HCA 69; (1964) 112 CLR 125 at 129-30.

[11] See for example the words Martin J considered in Lancini Properties Pty Ltd v Savills (Qld) Pty Ltd & Anor [2009] QSC 323 at [88]. Further the judgment of Ormiston J in Futuretronics International Pty Ltd v Gadzhis [1992] VicRp 63; [1992] 2 VR 217 concerned the general proposition of whether and with what consequence a contract can imply upon us amounting to a representation.

[12] See Balkin & Davis, "Law of Torts", 4th Ed, LexisNexis at [23.25].

[13] See exhibits A and B to the affidavit of Gregory Noel Humphreys filed 8 August 2011.