L. Grollo Darwin Management Pty Ltd & Anor v Victor Plaster Products Pty Ltd & Anor [1978] FCA 36

and VICTOR PLASTER PRODUCTS PTY. LTD. and AUSTRALIAN GYPSUM LIMITED

SMITHERS, ST, JOHN and FISHER JJ. 29 MAY 1978 MELBOURNE

(a) to provide that the stay of this action applies to the

(b) by discharging the order that the appellants pay to the respondents the costs of obtaining the ex parte order dated 4 October 1977.

The appellants be at liberty to file and deliver an amended statement of claim within fourteen days of this date.

Whether or not the appellants file an amended statement of claim the respondents be at liberty to take steps under the Rules either to apply to strike out the statement of claim or to demur

The respondents shall pay to the appellants one half of their costs of and incidental to this

Both parties to have liberty to apply on seven days notice to a single Judge of the Court as they may

IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY No. VG112 of 1977

ON_APPEAL FROM A SINGLE JUDGE OF THE _ FEDERAL COURT OF AUSTRALIA

VICTOR PLASTER PRODUCTS PTY. LTD. and AUSTRALIAN GYPSUM LIMITED

This is an appeal against certain orders which were made by Mr. Justice Northrop on 15 November 1977 upon an application by the respondents, by summons dated 29 September 1977, seeking orders that the statement of claim delivered by the appellant be struck out and that the action be dismissed or stayed. The learned Judge took the view that the action was frivolous and vexatious within the meaning of Order 26 Rule 18 of the High Court Rules and vexatious and oppressive within the meahing of Order 63 Rule 2 and thereupon made orders as follows:

2. That the defendants' costs of the summons dated 29 September 1977 be taxed and paid by the plaintiffs.

3. That the defendants' costs of obtaining an order made on the 4th October 1977 be taxed and paid by the plaintiffs.

The appellants (plaintiffs) appeal against each of those orders. The respondents (defendants) did not cross-appeal, but submitted that this Court should be satisfied that the statement of claim disclosed

It was correctly contended that if the Court were so satisfied that factor would materially support the orders of the learned Judge. But we are not satisfied that it is clearly demonstrated not only that the statement of claim is defective in the sense that in its present form the respondents should not be required to plead to it, but that it also fails to disclose a cause of action in a fundamental sense namely, that it is apparent on its face that the claim made is insupportable in law and not curable by amendment. Unless it is so disclosed the plaintiff ought not be denied access to the customary tribunal which deals with actions of the kind he brings, cf. per Barwick C.J. in

General Steel Industries Inc. v. Commissioner for Railways (N.S.W.) (1964) 112 CLR at 129. Although it would be safe to say that the appell-.

ants' action is one of the first,if not the first, of its

kind to be brought, it is clear that this court is the "customary tribunal" to deal with such actions. The action is brought pursuant to s,82 of the Trade Practices Act 1974 in respect of an alleged contra-

vention of s.52 of that Act. The critical provisions of the statement of claim ere:-

. In MayO75, the plaintiff L. Grollo & Co. Pty. Ltd. (hereinafter called "Grollo') and a Company styled Wincope (Australia) Pty. Ltd. entered into a contract with the Darwin Reconstruction Commission for the design, construction and completion of 400 houses in Darwin, Australia (hereinafter called "the said site").

6. Grollo engaged a Company styled Reign Plumbing Pty. Ltd. (hereinafter called "Reign Plumbing") to do certain of the plumbing work for and in respect of the said site (hereinafter called "the said sub-contract"),

the defendants, alternatively one or other of them entered into a contract with Reign Plumbing to supply it with certain quantities of goods necessary for its use in its performance of works the subject of the said sub-contract (hereinafter called "the said contract"),

8. In or about the end of June 1976 the Plaintiffs alternatively one of them entered into an arrangement with the defendants alternatively one of them whereby the first-named plaintiff would pay the July, 1976 account of Reign Plumbing but being only for goods supplied during the month of July 1976, by the defendants or one of them to Reign Plumbing for its use at the said site but in any event not in an amount in excess of $35,000.00 on certain terms and conditions

(4) That the defendants acknowledged that neither plaintiffs were under any legal obligation to do so.

(41) That such arrangement in no way varied or modified the said contract.

(iii) That by so arranging there was no agreement By the plaintiffs or either of them to take over or assume the obligations liabilities or debts of Reign Plumbing.

(iv) That upon payment of the said July account of Reign Plumbing with the defendants and each of them they and each of them had no cause of action whatsoever against the Plaintiffs or either of then.

(v) 'The plaintiffs would not be invoiced or charged for any other goods supplied by the defendants or either of them to Reign Plumbing.

9. Pursuant to the said arrangement the first-named plaintiff paid to the defendants alternatively one of them the sum of $34,938.49 which was the amount of Reign Plumbing's July 1976 account with the defendants alternatively one of them,

wrongfully sought to charge the plaintiffs for goods supplied to Reign Plumbing other than in the month of

Various invoices and statements of the 'defendants may be inspected at the office of the plaintiffs' solicitors upon prior

Companies Ordinance 1963-1973 of Northern Territory against the first-named plaintiff claiming payment of $25,411.67 "being the amount due for goods sold, supplied and delivered during the months of September and October 1976", but same was withdrawn after the first-named plaintiff commenced proceedings in the Supreme Court of Victoria being proceedings 1977 No. 133 seeking an injunction and an undertaking by the solicitors for the second-named defendant was accepted in the terms of that undertaking.

On or about the 7th day of June, 1977, the first-named defendant purported to serve a notice against the first-named plaintiff claiming payment of $59,778.22 being the

by letter dated the 21st July,1977, confirmed that such notice was not being proceeded with by

Qn the 7th day of June, 1977, the first~-named defendant issued a writ out of the Supreme Court of the Northern Territory against the first-named plaintiff claiming payment of the sum of $59,778.22 for goods delivered "over various periods of time up to January, 1977."

trade and commerce, engage in conduct which was mis-

and deceptive within the meaning of s.52 of 5 of the said Act in that it entered into

the said arrangement with the plaintiffs or one of them when at all times they or alternatively one

of them had no intention whatsoever of observing or keeping the said arrangement so made.

12. As a result of the matters alleged in paragraph 11 hereof the plaintiffs alternatively one of them have suffered loss and damage by an act of the

defendants alternatively one of them which was done in contravention of the said s.52 of the said Act.

Particulars of Loss and Damage These will be supplied prior to trial.

1. That the Court adjudge and declare that the Defendants or one of them have violated s.52 of the said Act,

It issaid that it is a startling proposition that it is a breach of s.52 to enter into an arrangement in trade and commerce having no intention whatsoever of observing or keeping that arrangement. It is also said that loss or damage could not be said to flow from conduct of the kind alleged unless it were damage in excess of or in some special way of a different nature from damage flowing from mere breach of the arrangement in

There is force in these comments, but for present purposes the question is not whether the statement of claim discloses a cause of action with good propsects of success but whether it is of such a nature that it can be said of it, for instance that it is:-

" 'go0 obviously untenable that it cannot possibly succeed'; 'manifestly groundless'; 'so manifestly faulty that it does not admit of argument'; 'discloses a case which the Court is satisfied cannot succeed'; 'under no possibility can there be a good cause of action'; 'be manifest that to allow them (the pleadings} to stand would involve useless expense',

At times the test has been put as high as saying that the case must be so plain and obvious that the Court can say at once that the statement of claim, even if proved, cannot succeed; or 'so

menifest on the view of the pleadings, merely reading through them that it is a case that does

not admit of reasonable argument': 'so to speak apparent at a glance'," per Barwick C.J.in General Steel Industries Inc. v, Commissioner

It may well be within the range of misleading and deceptive conduct, in certain circumstances, to enter into an arrangement having no intention to observe the obligations undertaken therein. Whether misleading or deceptive communication of the relevant intention or the factor of reliance upon some implied representation of such intention or some other factors would be essential elements in any cause of action based upon s.52 are questions to be determined. However, the general allegation in paragraph 11 is that the conduct described was misleading and deceptive and committed in trade and commerce, and that in paragraph 12 is that the plaintiff suffered damage as the result of that conduct. Thus the statement of claim is in terms wide enough to comprehend every element reasonably

necessary to constitute an arguable cause of action under s.52. (cf.

the High Court decision Hornsby Building Information Centre Pty. Ltd.

& Anor. v. Sydney Building Information Centre Ltd, delivered on 19 April 1978)

Accordingly we are of the same opinion as the learned Judge that it is not appropriate to dismiss or stay the action on

the groynd that the statement of claim discloses no reasonable cause of action. But that does not mean that the statement of claim is

such that the respondents should have been required to plead to it. In this respect it is enough to say that it is not for the appellants to require the respondents to speculate as to what is comprehended within the general allegations made in the statement of claim or what are the circumstances alleged to give to the facts alleged

the quality of being misleading or deceptive. Merely to enter into an arrangement which creates legal obligations, which it is seen from other parts of the statement of claim the arrangement sued

on is alleged to do, whilst having no intention to carry out such obligations is not per se misleading or deceptive conduct. So far as appears from those bare facts each or either party may have been satisfied to do business on the ground that the other undertook

the legal obligations which were created without reference to the intention of the other in relation to the performance of those obligations. Moreover a party is not necessarily misled or deceived 4f legal obligations are undertaken by another in circumstances that that party does not intend to perform them. But this is all that the statement of claim does allege. It says merely that the conduct alleged was misleading or deceptive within the meaning of

5.52 of the Act "in that" the defendants entered into the arrange- ment when they or one of them had no intention of observing or keeping it. There is no allegation offacts essential to give to that conduct the alleged quality of being misleading or deceptive.

In the absence thereof the statement of claim is defective and the re-

spondents cannot reasonably be required to deliver a defence.

The defect, however, is not the kind of defect which gives rise to the exercise of the Court's jurisdiction under Order 26 Rule 18 and Order 63 Rule 2. It is the kind of defect which unless cured by amendment could be fatal to the statement of claim, but at

the interlocutory stage before defence is delivered an amendment or

leave to amend on terms would seem appropriate. But this step

was not taken on the hearing of the respondents! application under appeal because the action was stayed for the reason that the learned Judge formed the conclusion that this action in the Federal Court was commenced as a basis for an attempt to stay or delay the hearing of the action instituted in the Northern Territory in June 1977 whereby the respondent Victor Plaster Products Pty. Ltd. claimed against the first appellant the price of goods alleged to have

The first appellant's initial response to the Northern Territory action was to enter an unconditional appearance in the Supreme Court of the Northern Territory. However, on 11 October 1977 that appellant applied successfully in that Supreme Court for leave to withdraw that appearance and to enter a conditional appearance. By that time the appellants! action in this Court had been commenced, Relying upon that circumstance the first appellant on 11 October 1977 applied also for a stay of the proceedings in the Northern Territory

The ground of this latter application was that the goods in respect of which the action in the Northern Territory was brought were goods supplied not to the appellants or either of them but were goods supplied by the respondent Victor Plaster Products Pty. Ltd. to Reign Plumbing Pty. Ltd. after July 1976, and accordingly were goods in respect of which the respondents had agreed to make no claim against the appellants. It was contended that in view of the institution of the action in this Court the relevant issues could and should be determined in that action and that the

action in the Supreme Court of the Northern Territory should be ste ps om this 'nop pe.

It is to be observed that it was equally clear that if

' the respondent Victor Plaster Products Pty. Ltd. succeeded in the action in the Northern Territory that would have had a decisive effect on the appellants'proceedings in this Court so far at any rate as

they concern their claim against Victor Plaster Products Pty. Ltd. But nevertheless an order was made that the action in the Northern

It was a reasonable inference that the appellants were alert to the fact that by taking proceedings in this Court it might be possible to induce the Supreme Court of the Northern Territory to stay the action in that Court.

His Honour did not expressly so state but it would seem that he was not satisfied that the action in this Court was so brought as an action to be genuinely pursued. It was on this basis that his Honour concluded that the action was frivolous and vexatious and vexatious and oppressive within the meaning of Order 26 Rule 18 and Order 63 Rule 2 respectively. He took the view that if the action in this Court were stayed it was likely that the stay in the Northern Territory would be lifted and the action in that Court would proceed. He said:

"filpropose to order that this action being No. VG.62 of 1977 be stayed to enable Victor Plaster Products Pty. Ltd. to prosecute its claim against L. Grollo Darwin Management Pty. Ltd." It seems that his Honour's intentions and expectations in this respect were realised because the stay of the action

in the Northern Territory was lifted and that action is now

proceeding. It is our view that the conduct of the appellants in using the proceedings in this court as a ground for seeking to stay the action in the Supreme Court of the Northern Territory did not give rise to the inference that the proceedings in this Court were not instituted as proceedings intended to be genuinely pursued. Accordingly it is difficult to conclude that those proceedings were frivolous

and vexatious or vexatious and oppressive within the meaning of

the Rules of Court referred to above. But it was clear in the proceedings before the learned Judge that a central issue

Territory is whether the goods in question were sold and delivered

to the first appellant or to Reign Plumbing Pty. Ltd. It was

only if the first appellant succeeded on this issue that its claim

under s.52 of the Trade Practices Act would arise. As matters

stood therefore there was a duplicity of proceedings in relation to the question whether the goods in question were supplied to the first appellant. In these circumstances a discretion arose in the

learned Judge to decide whether it was in the interests of justice that one of the actions should proceed before the other and if he considered that the action of the Northern Territory should proceed before the action in this Court and that a stay of this action was appropriate for that purpose, then he had jurisdiction so to order. See Driller v, Smail[19687WR 396 at 403 and L. Grollo & Co, Pty. Ltd. v. Swanson Bros. Pty. Ltd, & Ors. (a decision of the Australian Industrial Court, B. No. 144 of 1976, delivered on 15th October 1976).

This was the view that the learned Judge took. He said:

"Irrespective of the outcome of the Northern Territory proceedings the plaintiffs in the Federal Court proceedings will be able, if so

It is our view that these considerations adequately justified a stay of the hearing of the action in this Court and it is our view that the stay in this respect should be continued, We agree that it is entirely desirable that the hearing of the action in the Northern Territory should precede the hearing of the action in this Court. It was commenced before the action in this Court, it is based upon an uncomplicated cause of action with clear issues and its termination is likely to have a decisive effect on the total litigation. There is no certainty that the appellants will succeed in effectively amending the statement of claim and if they do the proceedings will be of complicated nature possibly

However, we do not think it necessary to stay the proceedings in this Court other than the hearing. In so deciding we take into account the principles enunciated by Barwick C.J.

in General Steel Industries Inc. v. The Commissioner for Railways (N.S.W.) supra at pp. 128-130.

The appellants also appeal against the order of Northrop J. that they pay the costs of an order obtained ex parte on 4 October 1977, upon the application of the re- spondents to extend the time for filing a defence. The circumstances in which the application was made are set out in the affidavit of John Dale Collins of 4th October 1977. He deposes to the fact that a letter had on the previous

day been received from the appellants! solicitors drawing attention to the fact that the defences were overdue and indicating that if they were not received by noon on the

4th inst. they had instructions to proceed in default. Subsequent to receipt of the letter Collins made a number of unsuccessful attempts to contact the appellants' solicitors

by telephone for the purpose of requesting that the threat

to proceed by default be deferred pending hearing of the respondents' summons seeking dismissal or a stay of proceedings. A summons seeking an extension and supported by the abovementioned affidavit was heard on that day in chambers. The order sought extending the time was made and the question of costs of the application reserved. At the time of hearing argument on the respondents' summons for dismissal or stay the trial Judge

heard argument on the question of costs of the earlier application.

He ordered that the appellants pay the costs reserved by the earlier

The learned Judge did not indicate the arguments which were put before him or the reasons which prompted him to make the order. Nor is there any indication that the relevant Rules of Court were drawn to his attention. It is a reasonable

assumption that they were not referred to because neither

party directed our attention to these rules on the hearing of the appeal. We are of the opinion that an application of the relevant rules can in the circumstances only lead to the conclusion that the respondents should not have their

We turn to the relevant rules of the Court which are the High Court Rules. Order 71 Rule 1 to the extent relevant provides that "Subject... to these Rules, the costs of and incidental to all proceedings... are in the discretion of the Court or a Justice." This discretion, however, is expressly restricted in the case of the applications to enlarge or abridge time, Order 60 Rule 6(3) as relevant provides that:

"When the time for delivering a pleading... is or has been fixed or limited by these Rules... the costs of an application to extend that time... shall be borne by the party making the application, unless the Court or a Justice otherwise orders."

Insofar as that rule enables the Court or a Justice to

order otherwise, i.e. to order that the party making an application

be awarded his costs a further restriction is to be found in Order 71 Rule 69(3). This provides as follows:

be allowed unless the party taking out the summons has previously applied to the opposite party to consent to a sufficient extension of time and the opposite party has not consented, or the taxing officer considers there was a good reason for not making the application."

obviously relates back to Order 60 Rule 7 which provides that time may be enlarged by consent without application to a Court or

There are thus a number of difficulties which stand in the way of upholding the learned Judge's order for costs. In the first instance there is a prima facie rule that costs of an application for extension of time shall be borne by the party making the application (Order 60 Rule 6(3)). The costs of the application to be borne by the applicant in these circumstances would be not only his own costs but also of the other party to the application. In the present circumstances the applicatior being

ex parte there was no party whose costs the applicant should pay. They are thus left prima facie with the obligation to pay their

Not only is it extremely unlikely, that in the circumstance of the other party not being before the Court to oppose the application, that the Court would "otherwise order", but there does appear to be a positive bar to an order to be found in Order 71 Rule 69(3). This bar exists if the applicant has not first applied to the other side to consent to an extension,

The only evidence before the Court is contained in the abovementioned affidavit and does not sufficiently establish an application for

consent and a failure by the opposite party to consent.

The other provision which permits the awarding of costs in

favour of the applicant and against the opposite party in circumstances where no application for consent has been made is if "the taxing officer considers there was good reason for not making the application". This reference to the taxing officer is curious in that it appears to remove this circumstance as a relevant matter for consideration by the Judge. It is doubly curious when it is noted that under Order 71 Rule 69(1) it is the costs of an application for consent to an extension and not the costs of an application for an extension (as in Order 71 Rule 69 (3)) which is left to the discretion of the taxing officer. This contrasts with the provision in counterpart rules elsewhere which provide that the costs of the application for an extension and not merely of the application for consent to an extensionis in the discretion of the taxing officer, °

It thus appears at least probable that the Rules contemplated that a Judge shall not direct payment of costs of an application for extension unless there has been an attempt to obtain the extension by consent which has been rebuffed. Alternatively such an application and rebuff would be a@ very relevant matter in determining whether to depart from the prima facie situation in Order 60 Rule 6(3). A fortiori the costs of an order obtained ex parte should not be directed to

be paid by the opposite party where there has been no request and rebuff. We would therefore allow the appeal against this

So far as costs of the hearing before Northrop J. are concerned it should be observed that the relevant application was launched by the respondents in circumstances in which the appellants were pressing for a defence, It was clear on examinaticn of the statement of claim that the respondents should not have been required to deliver a defence, the statement of claim being ina defective form. Having regard to the view that the defects in the statement of claim might be curable the appropriate course was to give leave to the appellants to make amendments if they were so advised. In view of the fact that the learned Judge regarded it as appropriate to stay the whole action such leave was not granted. The application of the respondents was provoked by the unsatisfactory nature of the statement of claim. Had the matter been dealt with along the lines suggested and the sufficiency of the statement of claim been the only matter in issue it would have been appropriate that the appeliants should bear the costs of the proceedings before the learned Judge. But the issue as to whether the proceedings should be stayed on other ground led to a determination of the application with reference thereto. We are satisfied that a stay of the hearing was and is appropriate although matters preliminary thereto may be permitted to proceed. On the whole however we think that the order made by

the learned Judge that the appellants should pay the costs of the

So far as costs of this appeal are concerned it is to be observed that the appellants have achieved a partial lifting of the stay, leave to amend the statement of claim and relief from the order for costs in respect of the application made by the respondents for an extension of the time for filing a defence.

• The partial relief in respect of the stay is rather of a machinery

nature than something going to the substance of the order staying the action. The appellants also have the satisfaction of being relieved from what was in substance a finding that this action appeared to be an abuse of the processes of this Court. Nevertheless the situation of this litigation is in substance not changed by the orders made in this appeal. It is our vew therefore that the appellants should have half of the costs of the appeal. Leave to amend the statement of claim is not strictly necessary as the appellants as such have leave under the Rules

of the Court. The relief against the order for costs is a

4. That the appeal be allowed, order of Northrop J. varied as follows :- (a) to provide that the stay of this action applies to the hearing of the action and not the proceedings including pleadings preliminary to the hearing;

(b) by discharging the order that the appellants pay to the respondents the costs of obtaining the ex parte order dated 4 October 1977.

2. The appellants be at liberty to file and deliver an amended statement of claim within fourteen days of this

3. Whether or not the appellants file an amended statement of claim the respondents be at liberty

The respondents shall pay to the appellants one half of their costs of and incidental to this appeal.

Both parties to have liberty to apply on seven days notice to a single Judge of the Court as they may be advised.

• I certify that this and the | 7 ~ | preceding pages are a true copy of t}

Reasons for Juugment herein of bie Home ur Mr. Justice Smithers , Stohr and Fi cRer~